2023-11-03 15:48

NEW YORK, Nov 3 (Reuters) - Federal Reserve Bank of Richmond President Thomas Barkin said Friday that softer jobs data is moving in the direction desired by central bankers trying to lower inflation, but added he was not yet ready to say what must happen next with the Fed's monetary policy settings. "I'm not going to prejudge, I value the optionality of seeing what we're going to see in the data and in particular, we're going to get two inflation reports between now and the next meeting, and I think that's what's going to matter to me," Barkin said in an interview on CNBC. "We've got a lot of time" before having to decide whether to hike rates again or to continue holding steady on the short-term rate target, he said. Barkin was the first central bank official to weigh in after this week’s Federal Open Market Committee gathering and the release of the October jobs data. On Wednesday the FOMC kept its interest rate target steady at between 5.25% and 5.5% and kept alive the possibility of more increases to bring inflation back to the 2% target. The jobs data Friday suggested the Fed need not rush to hike rates again, with job gains cooling to a 150,000 gain as wage gains moderated and the unemployment rate ticked up slightly to 3.9% from September’s 3.8%. "There's been this disconnect between the data we're seeing and what I'm hearing on the ground," which shows the job market moving into better balance, Barkin said. He said the October hiring data "was welcomed to see that the gradual lessening that we've been expecting is continuing." One factor allowing the Fed to keep rates steady this week has been a tightening in financial conditions led by a surge in bond yields that has boosted real world borrowing costs. But since the Fed met, yields have moved sharply lower. In his television interview, Barkin was not ready to say what that means for monetary policy. "I'd like to think the markets responded to the data," Barkin said of the drop in yields. "What we saw today was data that showed a gradual lessening of the job market," he said, adding "I think that's what those who would like to not see another rate hike would want to see" and that's why market prices have moved as they have. Barkin also cautioned limited Fed power on longer term market prices. "As financial conditions are affecting the economy in a direction that takes us the right way, that helps, but it's not really a policy variable, they’re pretty volatile, we don't control them," he said. https://www.reuters.com/markets/us/feds-barkin-says-there-is-a-lot-time-decide-next-policy-step-2023-11-03/

2023-11-03 15:37

LONDON, Nov 3 (Reuters) - The troubles faced by co-working titan WeWork (WE.N) are darkening the outlook for the world's largest business hubs, where rising office vacancies are already heaping pressure on investors set to refinance big-ticket mortgages next year. Media reports on Wednesday suggested the New-York listed flexible workspace provider - once privately valued at $47 billion - was weighing a petition for bankruptcy next week. Backed by Japan's SoftBank, WeWork aimed to revolutionise the office market by taking long leases on large properties and renting the space to multiple smaller businesses on more flexible, shorter arrangements. But like other landlords, it has struggled to persuade some customers since the pandemic to swap working from home for the office at its 650-plus locations worldwide - a trend that has shaken confidence in the sector. Global office vacancies are expected to climb, hurting rental prospects in cities like New York and London, eight industry executives, investors, lenders and analysts said. Some leveraged property investors could struggle to earn enough rental income to service rising debt costs, they said. "The loss of any tenant, especially during a time of relatively slow office leasing, will have a negative impact on office building cashflows and values," said Moody's Analytics' Commercial Real Estate Industry Practice Lead, Jeffrey Havsy. "This will add to the negative sentiment in the marketplace and make financing harder, especially those buildings that need to refinance in the next 12-18 months," he said. A WeWork spokesperson told Reuters the firm was in talks with landlords to address "high-cost and inflexible lease terms" and was striving to remain in the majority of its locations and markets. The number and volume of real estate loans due for refinancing in 2024 is unclear because many deals are struck privately between borrower and lender, Ed Daubeney, co-head, debt and structured finance, EMEA, at real estate services firm Jones Lang LaSalle, told Reuters. Analysts estimate the global commercial property lending market is around $2 trillion in size, roughly split 50:50 between banks and alternative lenders in the United States and 85:15 in Europe. Several experts contacted by Reuters predicted a year of reckoning for property investors and lenders in 2024, with time running out for those turning a blind eye to assets that would be in breach of key lending terms if revalued today. The value of all global real estate - residential, commercial, and agricultural land - was $379.7 trillion in 2022, Savills said in a report in September, down 2.8% on 2021. TRANSACTION SLUMP Real-estate loan refinancings have already been complicated by a plunge in transactions, which are crucial in tracking changes in asset values. MSCI's Capital Trends report for Europe showed third quarter volumes down 57% on 2022 levels - the lowest since 2010. What's more, the gap between what investors believe assets are worth and what prospective buyers are willing to pay is between 20% and 35% in core office markets - "far worse than the height of the global financial crisis", MSCI said. MSCI said prices in Europe's two largest office markets, Britain and Germany, would have to fall another 13%-15% to bring market liquidity back to its long-run average. Global lenders to UK real estate holding and development companies, which supplied credit risk assessments to data provider Credit Benchmark in October, said those firms were now 9% more likely to default than they estimated 12 months ago. U.S. industrial and office real estate investment trusts (REITs) were seen 35.8% more likely to default, versus expectations a year ago. RE-LETTING WeWork has 3.25 million square feet of space in central London, with a total annual rent roll of 192 million pounds ($234 million), Jefferies said in a September note. Its biggest U.S. markets are New York and California, where it operates 49 and 42 sites respectively, according to WeWork's website. Industry sources said some of its most popular locations could be taken over by rivals at similar rental rates, minimising cashflow issues for landlords. But flexible workspace demand in Britain is still 11% below pre-pandemic levels, the Instant Group's 2023 State of the UK Flex Market report in September showed. Lenders might view the WeWork debacle as a cautionary tale, sources said, potentially requiring borrowers to inject more equity into their properties to reduce the loan-to-value ratio. But such a request could be problematic if the quantum and duration of rental income remain uncertain. London office vacancies have surged to a 30-year high, Jefferies also said in September, with average lease lengths on central London offices sliding to six years from 11.6 years a decade ago, according to BNP Paribas Real Estate. UK property company Helical said it was working on "next steps" for the space at one London property let to WeWork, after recouping rent it had failed to pay via a short-term licence arrangement. Under-occupied urban offices are not only generating lower than expected rental income for owners but some are also ageing rapidly in a world increasingly sensitive to carbon consumption. "We're at a massive turning point in the real estate investment market globally," Jose Pellicer, head of real estate strategy at M&G Real Estate, said. "For the last 20 years, property yields have been higher than financing costs. But a far bigger percentage of a property return is going to have to come from growth in the 2020s." ($1 = 0.9407 euros) ($1 = 0.8214 pounds) https://www.reuters.com/markets/weworks-troubles-darken-outlook-embattled-office-market-2023-11-03/

2023-11-03 13:33

TORONTO, Nov 3 (Reuters) - Canada's economy gained a net 17,500 jobs in October, entirely in part-time work, and the jobless rate rose to 5.7%, Statistics Canada data showed on Friday. Employment in the goods producing sector grew by a net 7,500 jobs, largely in construction. The services sector was up by a net 10,000 positions, mostly in information, culture and recreation, as well as health care and social assistance. STORIES: MARKET REACTION: CAD/ LINK: https://www150.statcan.gc.ca/n1/daily-quotidien/231103/dq231103a-eng.htm?HPA=1 COMMENTS JAMES ORLANDO, SENIOR ECONOMIST AT TD BANK "When the Bank of Canada decided to hold rates at 5% last week, it did so because of a notable slowing in economic momentum. While this has been apparent in reduced consumer spending and a weakening housing market, the labour market left the BoC wanting more. But, given the rise in the unemployment rate and continued weakening in the underlying details, today's report is likely to make the BoC feel more comfortable about its decision to hold." "Looking forward, we are expecting this employment trend to continue, while high rates and persistent inflation make the case for the BoC to remain on hold in December." MICHAEL GREENBERG, SVP AND PORTFOLIO MANAGER, FRANKLIN TEMPLETON INVESTMENT SOLUTIONS The "headline figure is a little lower quality than the number suggests. The key is the unemployment rate ticked up again to 5.7% and that's continuing that march higher from 5% back in the spring so that's clearly weakening and also wage growth, although still at pretty robust levels, came in below expectations." "So I think when we take it all together, still a relatively strong labor market but definitely some slowing trends in there. We look at that plus other economic data....it does suggest some patience from the Bank of Canada and we expect they'll remain on hold." "I think the rate hikes already in the system are going to continue to slow the economy and Canada being probably fairly interest rate sensitive is vulnerable to larger slowdowns at the end of this year or as we go into 2024." "So we'll have to see what that means for the Bank of Canada but our view is they are probably done and the next move, although not imminent, is probably down. But I think they will be patient at holding rates higher for longer." DEREK HOLT, VICE PRESIDENT OF CAPITAL MARKETS ECONOMICS AT SCOTIABANK: "So most of the jobs were part time. There were only a couple of sectors that were noticeably up. So for the most part, it's a generally soft tone. We still stayed on the plus side. In terms of Bank of Canada, we got another set of jobs numbers before their next decision and a lot more data before the December meeting. But at the margin, I don't think this really affects things much either way relative to what's priced." "I would suggest you've got some (growth) weakness extending or straddling the transition from Q3 to Q4. You'd really need to see some strong holiday shopping and end of year activity in order to get a beat on Q4." https://www.reuters.com/markets/view-canada-gains-17500-jobs-october-jobless-rate-rises-57-2023-11-03/

2023-11-03 13:13

NEW YORK, Nov 3 (Reuters) - U.S. job growth slowed more than expected in October in part as strikes by the United Auto Workers (UAW) union against Detroit's "Big Three" car makers depressed manufacturing payrolls, while wage inflation cooled, pointing to an easing in labor market conditions. Nonfarm payrolls increased by 150,000 jobs last month, the Labor Department's Bureau of Labor Statistics (BLS) said in its closely-watched employment report on Friday. Data for September was revised lower to show 297,000 jobs created instead of 336,000 as previously reported. MARKET REACTION: STOCKS: U.S. stock futures (.SPX) rose after the jobs data. BONDS: U.S. Treasury 10-year yield dropped to three-week low after the jobs report, last yield down at 4.543%. FOREX: The dollar index fell 0.7% to 105.34 after the weaker-than-expected jobs report. COMMENTS: RONALD TEMPLE, CHIEF MARKET STRATEGIST, LAZARD, NEW YORK "This is yet another piece of data that suggests the immaculate disinflation. From my view, the Fed rate hike cycle is over and this reaffirms the view that the Fed should not hike rates again. If you look at the new jobs, 150,000 versus 180,000 expected - that is still a strong jobs creation number but more in-line with what the U.S. economy needs relative to population growth and the stable unemployment rates. That is a goldilocks number. This seems like a really positive report from the Fed's perspective." WILL COMPERNOLLE, MACRO STRATEGIST, FHN FINANCIAL, NEW YORK "I think markets are pretty confident now that the Fed really is at the terminal rate and…that is the kind of the final nail in the coffin in terms of market pricing. I wouldn't say that this one data report really says that the economy is slowing going into the fourth quarter, I think there is still a lot of hard economic data that says the economy’s strong, but this is certainly the labor market softening that I think the Fed has been expecting for a while." MATT PALAZZOLO, SENIOR INVESTMENT STRATEGIST, BERNSTEIN PRIVATE WEALTH MANAGEMENT, NEW YORK "Overall the Fed is likely to breathe a sigh of relief this morning that we didn't have another strong payrolls month like we did in September. For October overall, this was a softer report, softer than the consensus. In part, it reflects the auto workers strike but, still downward revisions to prior months and in-line wages should provide some comfort to both the stock and the bond market and we are seeing that so far." "From a policy perspective this gives confidence the Fed remains on hold for the foreseeable future and only really hikes again if growth or inflation accelerate from here. This, given the evidence both in this report and in recent reports - the ISM manufacturing for example - is becoming less likely." "Overall this month and prior revisions to previous months were softer than expected. So it goes beyond just the auto workers strike. To be clear, the labor market is still tight. Anytime we are adding more than 100,000 workers then the labor market is tightening. But absent a re-acceleration to meaningfully higher job gains, I think the Fed is comfortable." "Where we are from here is a steady deceleration in labor market gains and economic activity for the next six to nine months. That should be evidenced in labor market, retail sales and other key monthly high frequency data and that, provided it occurs, should allow for the Fed to stay on hold at current levels." "We think the economy will slow from the current pace. You know, we think GDP next year is going to be close to flat, maybe up 0.5%. So there is going to be a slowdown relative to 2023. If we have a recession, given the strong position that we're coming in from today, the recession should be mild." BRYCE DOTY, SENIOR PORTFOLIO MANAGER, SIT INVESTMENT ASSOCIATES, MINNEAPOLIS, MINNESOTA "While seemingly counter intuitive, weak jobs data is sparking a risk-on mentality. Today's jobs data cements the much-needed relief from Fed rate increases. Credit spreads should continue to ratchet in and bond yields will come down as investors see it as now safe to pile into bonds." BRAD MCMILLAN, CHIEF INVESTMENT OFFICER for COMMONWEALTH FINANCIAL NETWORK, WALTHAM, MASSACHUSETTS "As expected, this employment report came in lower than last month, and lower than expectations. To some extent this was already in the cards, and even at the lower current level, job growth is still reasonably healthy. But in fact, given the strikes in place, the actual numbers adjusted for the strikes are likely better than the report, which means that despite the slowdown, job growth remains healthy overall." "But although we are still in a reasonably good place, when you look at the details, we can see a continued slowdown. The unemployment rate, which is not affected by strikes, rose, and the average work week, which reflects overall labor demand, fell. Worse, the two-month payroll numbers were revised down materially. The real takeaway from this labor report is that while the market is still fairly healthy, the slowdown is real – and may be accelerating." "The good news here is that the slowdown will likely keep the Fed on the sidelines going forward. One of their key concerns has been an overheated economy, especially after last quarter’s GDP growth, and this suggests that problem is going away. Slower growth is still growth, and this jobs report is still in the sweet spot. We do see signs, however, that more weakness may be ahead." JAY HATFIELD, CHIEF EXECUTIVE OFFICER AT INFRASTRUCTURE CAPITAL MANAGEMENT, NEW YORK "It is clearly a weak report. There was a revision to the last month as well. It is consistent with the views of the market that the job market and the economy is decelerating and that's going to keep the Fed on hold and will cause central banks next year to cut rates." "Average hourly earnings were only 0.2% versus up 0.3%. That is super bullish for the Fed being on pause. Most market participants think the U.S. is going to avoid recession. They just didn't want to see overheating growth and then more rate increases." BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN "The employment situation is still good, but no longer great. That's not all bad. It could get worse, though. Only 52% of private industries reported job increases, which is way down from September's 61.4%. There's not a lot of breadth in the markets and there's not a lot of breadth in the job gains anymore." "Wage growth is positive, but nothing too concerning from an inflation perspective. Job gains were decent even with the auto strikes. Back month revisions were substantial as the BLS has consistently overestimated job gains this year, unlike last year where they consistently underestimated the gains. It's a world that's good for bonds, but cloudy at best for equities." PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK "The bottom line is this is a weak report although some of it might be attributed to the (UAW) strike. But hourly wages only grow by 0.2% and the participation rate came down to 62.7%.' "This is a good sign that the labor market is weakening and is playing into the hands of the Fed. This should be bullish for equities." "It probably indicates another pause by the Fed in December, which would signal that the Fed is done raising rates." https://www.reuters.com/markets/us/view-us-jobs-growth-slows-more-than-expected-october-2023-11-03/

2023-11-03 12:45

Nov 3 (Reuters) - Pipeline operator Enbridge (ENB.TO) on Friday beat third-quarter profit estimates, benefiting from transporting higher volumes of oil and other liquids. Low U.S. inventory levels and increased exports as buyers sought alternatives to Russian oil since the Ukraine conflict started last year, have boosted demand for oil that kept pipelines running and lifting profits for oil and gas transportation companies. Calgary, Alberta-based Enbridge moves about 30% of the crude oil produced in North America, and nearly 20% of the natural gas consumed in the United States. "In our Liquids business, we continue to see record utilization across the system, including the Mainline," CEO Gregory Ebel said in a statement. Mainline system transports light and heavy crude oil, natural gas liquids, and refined products from Edmonton, Alberta to various markets in Canada and the U.S. Midwest. Quarterly core profit from company's liquids pipelines rose 15.5% to C$2.25 billion ($1.64 billion) from a year earlier, helped by a over 1% rise in Mainline volumes to 3 million barrels per day (bpd). U.S.-listed shares of Enbridge rose 1.5% in premarket trading. Enbridge is also betting big on U.S. gas. In September, the company announced a $14 billion bid for Dominion Energy's (D.N) three utility assets, to create North America's largest gas utility platform. The deal is expected to close in 2024. "We are confident these acquisitions will strengthen our ongoing dividend growth profile and deliver strong total shareholder returns," CEO Ebel said. The company reaffirmed its annual financial outlook for adjusted earnings before interest, taxes, depreciation, and amortization of C$15.9 billion to C$16.5 billion, and distributable cash flow of C$5.25 to $5.65 per share. It posted an adjusted profit of 62 Canadian cents per share for the quarter ended Sept. 30, compared with the average estimate of 60 Canadian cents per share, according to LSEG data. ($1 = 1.3735 Canadian dollars) https://www.reuters.com/business/energy/pipeline-operator-enbridge-beats-profit-targets-higher-transport-volumes-2023-11-03/

2023-11-03 12:28

Nov 3 (Reuters) - Britain's competition regulator on Friday cleared the Cameco Corp (CCO.TO) and Brookfield Renewable Partners' $7.9 billion deal to acquire nuclear power plant equipment maker Westinghouse Electric. The Competition and Markets Authority (CMA), which had started looking into the deal in August, said it will not refer the merger for a deeper probe. The deal was announced in October last year on the heels of an uptick in interest in nuclear power amid an energy crisis in Europe and soaring crude oil and natural gas prices. https://www.reuters.com/markets/deals/uk-regulator-clears-cameco-brookfield-renewables-79-bln-westinghouse-deal-2023-11-03/