Time to wrap up after quite a busy week.

Here’s today’s main stories:

Goodnight, and best wishes for the weekend. GW

Stocks in London have closed at a new pandemic high.

The blue-chip FTSE 100 ended the day 24 points higher at 7304, its highest close since the start of the market crash in February 2020.

Travel and hospitality stocks led the risers, on hopes that Pfizer’s experimental antiviral pill, paxlovid, could help avoid future lockdowns and pandemic restrictions.

IAG, which owns British Airways, jumped 6% to 180p, followed by jet-engine maker Rolls-Royce which gained 5.8%.

Conference organiser Informa (+5.6%), engineering firm Melrose (+4.3%) and broadcaster ITV (+3.3%) also rallied.

On the FTSE 250 index, cruise operator Carnival jumped 9.5% and ticketing firm Trainline gained 7.3%, on optimism of a pick-up in travel bookings.

Danni Hewson, AJ Bell financial analyst, says:

“More records fell across the pond with those travel operators boosting the S&P 500, particularly the cruise sector which relies on trade from older travellers who might still have been a little wary despite the vaccination programme roll outs. Pfizer’s antiviral is making headlines across the globe and it and a similar treatment from MSD could well be game changers for a world still a little wobbly and uncertain about what the future will hold as colder weather rushes in.

“The week has been tumultuous, it’s delivered surprises, both to delight and dismay. Earnings have held up despite rising prices and supply chain log jams, plus in the US jobs and more jobs are back on the menu. Next week there’s plenty more data to dig into from the latest US inflation numbers to a look at how the UK economy performed once the long summer holidays came to an end and normal service was just about resumed.”

President Joe Biden has welcomed the jump in job creation last month.

Today is “another great day for our economic recovery.” Biden declared, after seeing 531,000 jobs added in October, and more gains in September and August than previously thought.

Speaking from the White House, Biden says:

“America is getting back to work. Our economy is starting to work for more Americans,”

The president credits the economic plan introduced earlier this year, and the successful vaccine deployment, for the ‘historically strong’ jobs recovery. He also welcomes the substantial fall in unemployment among Hispanic Americans.

[as flagged earlier, the US has added 18m jobs since the record losses in April 2020, but is still over 4m shy of pre-pandemic level]

President Biden also said on Friday that the United States has secured millions of doses of Pfizer experimental antiviral pill for Covid-19, which the company says can cut hospitalisations and deaths by nearly 90%

“If authorized by the FDA we may soon have pills that treat the virus in those who become infected,” Biden said.

“We’ve already secured millions of doses. The therapy would be another tool in our toolbox to protect people from the worst outcomes of Covid.”

Our US Politics Liveblog has full coverage, with the US House of Representatives is expected to vote on the social policy and climate-change bill and a bipartisan infrastructure bill that form the centerpiece of Biden’s legislative agenda.

US employers added a solid 531,000 jobs in October as the American economy appeared to withstand the impact of coronavirus and continued its recovery.

The strong number provides a boost to Joe Biden, whose presidency has been battered by political setbacks in recent months as it struggles to enact his domestic agenda and suffered a major defeat in the race for governor of Virginia.

October’s job growth outpaced the 450,000 new jobs economists had predicted from the job market, mitigating fears of slow growth in the jobs sector after far fewer jobs were added in September than was expected.

The boost in jobs was expected after Covid cases and hospitalization rates declined in October.

The rise has meant a continued decrease in the unemployment rate, which was 4.6% in October. The decrease in unemployment was mostly seen among white and Hispanic workers, while the Black and Asian unemployment rate has remained unchanged. The Black unemployment rate stands at 7.9% – more than 3% higher than the white unemployment rate of 4.2%.

The New York Stock Exchange has opened at a new record high, as October’s strong jobs report boost the markets.

The Dow Jones industrial average, the broader S&P 500 and the tech-focused Nasdaq all hit new highs in early trading

• Dow: up 277 points or 0.77% at 36,401
• S&P 500: up 33 points or 0.7% at 4,713
• Nasdaq Composite: up 91 points or 0.6% at 16,031

The pick-up in job creation is boosting market confidence in the recovery.

Ben Laidler, global markets strategist at the multi-asset investment platform eToro, says:

The US jobs market bounced back sharply last month, setting up the economy for a strong rebound into the end of the year and validating the Fed’s move to taper its bond buying programme this week.

The US economy saw 531,000 new jobs last month, above expectations and well up from the prior month’s negative surprise of 194,000 jobs. Gains were broad-based, led by re-opening sectors like hospitality and leisure, and left the economy around 5m jobs short of pre-pandemic levels. The unemployment rate fell to 4.6%, whilst wage growth accelerated to a strong 4.9% growth.

A rebounding jobs market will boost the GDP and earnings growth outlook and validate the Fed’s slow march to hiking interest rates. This is a positive combination for markets.

This chart from Heather Long of the Washington Post shows the jobs recovery since April 2020:

There is one disappointment in an otherwise strong report: the labor force participation rate didn’t rise last month.

That measure, which tracks the number of Americans employed or looking for a job – stuck at 61.6% in October.

Mohamed A El-Erian, chief economic adviser at Allianz SE, calls it a ‘notable’ disappointment.

Liz Young, head of investment strategy at finance company SoFi, tweets that the report is generally a ‘major improvement’.

There were “notable job gains in leisure and hospitality, in professional and business services, in manufacturing, and in transportation and warehousing”, says the report.

Employment in leisure and hospitality increased by 164,000, as bars and restaurants continued to hire staff. But, this sector is still missing 1.4m jobs since February 2020.

Professional and business services added 100,000 jobs in October, including a gain of 41,000 in temporary help services

Employment in manufacturing increased by 60,000 in October, led by a gain in motor vehicles and parts (+28,000) – a sector where semiconductor shortages have been hampering firms.

Employment in transportation and warehousing increased by 54,000 in October and is 149,000 above its February 2020 level – reflecting the shift in the economy since the pandemic.

But employment in public education declined over the month, down 43,000 in local government education and by 22,000 in state government education.

Just in: America’s economy created 531,000 jobs in October, more than expected, as hiring picks up.

That’s better than the 450,000 jobs that economists forecast, in a welcome sign that the labor market is continuing to recover as Covid-19 cases fall.

The US unemployment rate also fallen, to 4.6% from September’s 4.8%.

And in further good news, more jobs were created over the summer than previously thought.

In what looks like a solid jobs report, September’s non-farm payroll has been revised higher to show 312,00 new gains, up from the 194,000 first reported.

And August’s jobs report has also been revised, to 483,000 from 366,000 jobs previously.

More details and reaction to follow...

The Suez Canal is lifting its transit tolls by 6%, after a year of record revenue as demand for the critical waterway has surged as lockdown lifted.

The Suez Canal Authority announced the move yesterday. It will begin next February, adding to the costs within already-stretched global supply chains. Cruise ships and LNG ships will be excluded from the increase.

The Authority cited ‘global economic conditions’, and forecasts that trade and global growth are expected to keep recovering. That will mean more demand for the shortest maritime route to Asia from Europe.

It said:

The International Monetary Fund (IMF) and the World Trade Organization (WTO) are also expecting continued growth in world trade traffic and rise in the demand for maritime transport at rates of 6.7% and 4.7% respectively, in 2022, thereby predicting continued high levels of the freights and good profits for shipping companies.

Bloomberg adds:

The Suez Canal, which made headlines this spring when the Ever Given container ship got stuck in the waterway, posted record revenue of $5.8 billion for the year ended June thanks to strong demand for goods from consumers hunkered down at home during the pandemic.

The wild moves in the foreign exchange and bond markets yesterday after the Bank of England’s meeting does not reflect very well on the BoE or its governor.

For a contrast, look at America’s central bank chief Jerome Powell. On Wednesday he announced the Federal Reserve will cut the amount of money pumped into the system each month through its bond-purchase programme, due to rising inflation and improvements in the jobs market.

This tapering had been well-telegraphed for months, with Powell repeatedly explaining the progress which the Fed was looking for.

So rather than a repeat of the ‘taper tantrum’ of 2013, the bond market took Wednesday’s move calmly, the dollar merely dipped, and equities on Wall Street hit fresh record highs.

Neil Wilson of Markets.com points out that “a key part of the central banker role is communication”. So there’s no relief for the pound today amid the Bank of England’s ‘mess’, he writes:

Loose – in retrospect - remarks over recent weeks led the market to expect an interest rate rise yesterday, only to be confounded by not just a failure to deliver on that but an apparent indifference to the fact that policy was so poorly communicated.

Yesterday, Bailey told Bloomberg that it wasn’t the Bank’s job to guide the markets on interest rates - which may leave investors more flummoxed about how to interpret future comments.

Wilson adds that it feels that the Bank of England has lost credibility.

It seems like the BoE thinks ‘we’ll say something and the market can make of it what it likes, that’s not our business”. To a degree, that’s true. You can’t account for what others make of your statements. But you can be a lot more careful about those statements in the full knowledge that the market will read something into them since you are the governor of the Bank of England and not just anybody.

There were several opportunities in recent weeks to lean against the aggressive market pricing, to gently nudge the market in the right direction, but the governor elected not to do that.

The feeling is now that the BoE under Bailey has lost credibility and we will not be able to read as much into his remarks as we have done. This is not a good situation for a central banker to be in. I leave you with this, among the listed candidate requirements from the BoE’s job spec for Governor: “The ability to communicate with authority and credibility internally, to Parliament, the media, the markets and the wider public.”

Chris Weston of brokers Pepperstone says the BoE pushed back against rate hike expectations in a “far cruder manner” than other central banks such as the European Central Bank and the Reserve Bank of Australia.

Instead, it has injected ‘a degree of uncertainty’ into the markets about how future MPC meetings will play out. That could make the pound more volatile in the run-up to December’s meeting, Weston adds.

It’s worth noting that many City economists didn’t forecast a hike yesterday -- but a lot of investors in the financial markets clearly thought they’d been guided to expect one.

Sterling is continuing to swoon after the Bank of England left rates unchanged yesterday, wrongfooting many investors.

The pound has dropped by 0.7 of a cent, or 0.5% today, to $1.343 – adding to Thursday’s heavy losses of almost two cents.

It started falling again around 8am, and kept dropping since Andrew Bailey’s Today Programme interview, where the governor stuck to a cautious tone on interest rates.

This puts sterling at its lowest level against the dollar since late September (when it hit the weakest levels this year).

Jeremy Thomson-Cook, chief economist at international business payments firm Equals Money, says the pound ‘tumbled through a trap door’ on Thursday:

Sterling fell across the board yesterday as the Bank of England defied market expectations and stood pat on rates. The press conference that followed up the decision was an object lesson in confirming that the recent pull higher in rates was too much, too soon, and while rates will rise, we now think the earliest opportunity for them to do so would be February. Three policymakers need to change their minds for the decision to hike to be in the majority; we don’t see that happening this year.

The delay allows for many things but chiefly data on how the labour market has developed post-furlough and for further insights as to how energy prices develop through the winter.

For sterling, the decision was akin to a trap door through which the pound tumbled. We have pointed out for many weeks now that these rate expectations were really the only thing holding the pound up and with them either gone or severely weakened GBP is looking for what else can support it.

In a winter of Covid-19, Brexit supply and legal issues, higher energy costs and an uncertain employment outlook there’s not too much to be banging the drum on sterling for. It will still likely outperform the euro in the coming weeks but those looking for strong material gains against the USD may have to reappraise their thinking

Bank of England governor Andrew Bailey says he’s ‘very sorry’ that households are being hit by rising inflation.

Asked whether people won’t feel much better off this winter, he tells the Today programme:

Inflation is clearly something that bites on people’s real household income.

They will feel that. I’m sure they’re already feeling that, in terms of prices going up.

I am very sorry that’s happening. None of us want to see that happen.

[Reminder: As flagged here, the Bank predicts real labour incomes (ie, adjusted for inflation) after tax will fall in 2022 and 2023. That means a two-year wage squeeze on households]

Having left interest rates on hold at just 0.1% yesterday, Bailey points to the global factors such as supply chain disruption which have pushed up goods prices.

We want to see those cause of inflation tackled as soon as possible, so we can return to a world of stable inflation and down at the Bank’s 2% target, he says.

Q: We’re not going back to the 70s?

Bailey wraps up the interview by insisting we’re not returning to the 1970s, that was a ‘very different era’ (he was still at school).

For background: retail price inflation hit around 25% in 1975. UK consumer price inflation is currently expected to hit 5% next year, which would be the highest since 2011.

Andrew Bailey won’t say how long inflation would have to stay high to no longer be “transitory”.

Judging when inflation is transitory is a judgement, he tells the Today Programme. A key measure is whether it is embedded into wage negotiations, he says (people demand higher pay to cover rising prices).

Energy prices, particularly gas, are the biggest single cause of the greater inflationary pressure we’re seeing.

We think, based on a lot of evidence from the past, that these shocks are temporary.

Q: But how sure are you? We now have net zero targets around the world - how will they affect how you think about energy?

Bailey say a range of factors are pushing up gas - such as stronger demand in economies in Asia.

But he suggests that the energy transition is also pushing up gas prices, as power producers shift away from coal.

Bailey says that it is reasonable to think that economies will transition from high-polluting hydrocarbons (such as coal), through greater use of less polluting hydrocarbons, on the path to hopefully a more renewable economy.

It is possible that some of what we’re seeing with gas prices at the moment is already climate change starting to have an effect, if there is a switch out of coal, which obviously we want to see.

It’s possible it’s part of the story.

If so, that could lead to a ‘level change’ in prices (ie, they’d remain permanently higher).

Q: Have you bottled this decision because you’re not as independent as you should be? The government wants to run the economy hot - your job is to take the punchbowl away, and you haven’t.

Andrew Bailey says the Bank does expect interest rates to rise (and said as much yesterday).

But it didn’t hike yesterday, because it doesn’t know the impact of the end of the furlough scheme in September.

The labour market looks tight, but the missing piece of evidence is what has happened to unemployment since the furlough scheme finished, Bailey explains.

[The Bank will see two labour market reports before its next MPC meeting in mid-December]

Bailey says the Bank will be looking at measure of activity (employment and unemployment) as well as earnings for signs of wage pressure.

Let me assure you. We won’t bottle this.

Q: So if unemployment is higher than you expect, rates won’t go up?

It’ll be an important piece of evidence, but not the only one, Bailey says.

The return of the international super-rich to London amid the easing of coronavirus pandemic restrictions has fuelled the highest annual growth in property prices in the capital’s most expensive district since 2015.

Average home prices in “prime central London” – which stretches from Chelsea to Camden and Notting Hill to Westminster – have risen by almost 7% since the start of the year, according to research by the estate agent Knight Frank.

It said prices had risen consecutively each month for the past six months “something last achieved before the Brexit referendum in 2016”.

More here:

UK house prices have hit a record high, according to lender Halifax.

British house prices rose by 0.9% in October, the fourth monthly increase in a row. It takes the average house price on its index to over £270,000, with price up 8.1% in the last year.

Russell Galley, managing director at Halifax, said demand for larger homes following the move to homeworking is still driving the market:

“One of the key drivers of activity in the housing market over the past 18 months has been the race for space, with buyers seeking larger properties, often further from urban centres.

Combined with temporary measures such as the cut to Stamp Duty, this has helped push the average property price up to an all-time high of £270,027. Since April 2020, the first full month of lockdown, the value of the average property has soared by £31,516 (13.2%).

“First-time buyers, supported by parental deposits, improved mortgage access and low borrowing costs, have also helped to drive price growth in recent months.

First-time buyer annual house price inflation (+9.2%) is now at a five-month high, and has pushed ahead of the equivalent measure for homemovers
(+8.1%).

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The UK is facing a painful cost of living squeeze after the Bank of England predicted that inflation will peak at 5% early next year, the highest in a decade.

Under the Bank’s new forecasts, released yesterday, wages after tax will not keep pace with inflation over the next two years - a blow to households across the country.

Real post-tax labour incomes are expected to fall by 1.25% in 2022, and by another 0.75% in 2023, worse than previously expected -- with the energy crunch and supply chain disruption driving up prices.

Bank of England governor Andrew Bailey has warned that people are already feeling the impact of rising prices, telling the BBC.

“I’m very sorry that’s happening,”

“None of us want to see that happen.”

Bailey acknowledged that people are already feeling the impact of recent price rises:

Inflation is clearly something that bites on people’s household income. I’m sure they’re already feeling that in terms of prices that are going up.”

More here: Bank of England ‘sorry’ for rising cost of living

The governor will be discussing the issue on Radio 4’s Today programme this morning.

This squeeze undermines the government’s claims to be building a high-wage economy, as the jump in wholesale energy costs and supply chain frictions continue to hit businesses and households.

Controlling inflation is the Bank’s job - but Bailey argues that lifting interest rates won’t get more gas into the pipes, or more semiconductor chips to manufacturers, for example.

Yesterday the Bank surprised the markets by leaving interest rates on hold - startling some investors, sending the pound plunging by almost two cents yesterday.

Bailey was among those voting to leave borrowing costs at 0.1% - despite having previously suggested the Bank would have to act over inflation.

The confusion risks undermining the Bank’s credibility - as communicating to the markets is another crucial part of its remit.

As Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson Investors, put it:

It had seemed in recent weeks that the Governor and Chief Economist were going out of their way to make sure that there was to be no surprise if interest rates rose.

Former governor, Mark Carney, was labelled the ‘unreliable boyfriend’ over his confusing communication, and there is a risk that the new governor inherits this moniker following his public statements ahead of today’s announcement. After taking time to seemingly warn markets about potential lift off, it may be particularly perplexing for many that the Bank then chose to push against markets that had priced in a steeper path for interest rates.

However, the Bank pointed to its estimates that such a path would take inflation back below target by the end of the forecast period, something that markets seem less convinced of given the inflation outlook being expressed by 10-year breakeven rates.

The agenda

• 7am GMT: Halifax house price index for October
• 8.10am GMT: BoE governor Andrew Bailey interview on the Today Programme
• 8.30am GMT: Eurozone construction PMI for
• 10am GMT: Eurozone retail sales for September
• 12.30pm GMT: US Non-Farm Payroll jobs report for October