US economy has now recovered all 8.7m jobs lost during recession
Osborne agrees with IMF that UK must be alert to housing debt
European stocks head for six-year highs
Bond yields in Italy, Spain and Ireland fall to fresh record lows
Back in the UK, the flotation parade continues with the AA's announcement that it will list on the stock exchange. The share sale will value the breakdown service at about £1.39bn. The deal takes the form of a management "buy-in" with a new top team installed under executive chairman Bob Mackenzie, the former boss of National Car Parks and Green Flag. Ten big investors have been lined up to buy more than £930m of shares. The deal will leave Acromas, the private equity group that owns the AA, with 31% of the company but it will make the rest of the stake available to other investors.
Acromas secured the backing of the big investors despite waning appetite for this year's rush of IPOs and criticism of its flotation of Saga, the AA's sister company.
My colleague Dominic Rushe reports from New York on the US jobs figures. Here is an excerpt:
The US added 217,000 new jobs in May, the fourth month in a row that the country has added over 200,000 new jobs and the most robust pace of change since 1999, the Commerce Department said on Friday. The unemployment rate stayed unchanged at 6.3%.
The closely watched jobs report is the first since the Commerce Department cut its estimate of economic growth in the US late last month, triggering fears of an economic slowdown.
Jobs day interactive: the return to pre-recession levels. http://t.co/oVZAMp9AZg pic.twitter.com/MfJ2KJgceZ
The FTSE 100 index is now trading 0.4% higher, or nearly 30 points, at 6840.62. Germany's Dax is 36.60 points, or 0.37%, ahead, at 9984.43 while France's CAC has gained 24.26 points, or 0.5%, to 4572.99.
US Treasuries rose after the data, pushing the yield on the 10-year note to 2.56%. This increased the premium over the equivalent German Bund to 124 basis points the highest since October 2005, according to Reuters data.
May marked the fourth month of job growth in the US as the labour market bounced back from a lull seen during the winter months, and is seen as an important milestone in the American economy's recovery. Employment has increased by 8.8m since hitting a trough in February 2010.
The US Labor Department said the US economy has now recovered all the 8.7m jobs lost during the recession.
US non-farm payrolls are bang in line with expectations: the figures show 217,000 new jobs were created in the US in May, compared with 282,000 in April and 203,000 in March. The unemployment rate stayed at 6.3%, a 5 1/2 year low.
At Thursday's annual meeting of security services group G4S, security guards violently removed more than a dozen protesting shareholders. You can watch the video here. My colleague Rupert Neate reported:
Protesters, who bought shares in the firm in order to attend the meeting, were dragged out of the conference room in the Excel Centre, London, on Thursday after speaking out about its role supplying Israeli prisons and the death of an Angolan man while he was being deported by G4S guards.
Moodys has just published its analysis of Thursdays policy announcements by the ECB. You can view the full report here.
Overall, we think the measures are marginally credit positive for corporates and sovereigns, but broadly neutral (with positives and negatives) for banks. And while the economic impact of these actions is likely to be limited, their greatest significance of is the signal they send about ECBs willingness to adopt new policy measures.
Labour has responded to the IMF report.
Ed Balls MP, Labour's shadow chancellor, said:
The IMF is right to warn of the risks from an imbalanced housing market where housing demand is outstripping supply. But the Chancellor cannot simply pass the buck to the Bank of England, which has rightly said that it cannot build a single home.
We have repeatedly called for action on housing supply and a Help to Build scheme alongside a reformed Help to Buy. Unless George Osborne finally acts the danger is that the Bank of England will be forced to raise interest rates prematurely.
Some more comments from Christine Lagarde in full. She gave a press conference at the Treasury in Whitehall earlier.
She said that the news coming out of the UK recently has been "pretty much all good". She also praised the UK's deficit reduction, saying that "considerable work has been done" since George Osborne became chancellor.
We have recommended that some macro-prudential measures be considered by the UK authorities and that this be done with a view to addressing not so much house prices but financial risk.
We also believe it should be done in a gradual, flexible way because the authorities need to assess whether those measures work, how they work.
IMF head Christine Lagarde ruled herself out of the race for the presidency of the European Commission. Here is her response in full.
I'm not a candidate and the reason I'm not a candidate is that I have a job. It's a job that I happen to think is rather important at the moment, which the United Kingdom was kind enough to support me for at the time, which I have to do and which I intend to complete.
As my young son would have said: 'Mum when you start something you've got to finish the job'.
... But there are questions over this year's IMF report, given that last year its chief economist warned George Osborne that he was "playing with fire" with his fiscal policy.
The IMF has called on the Bank of England to stand ready to rein in the housing market, in particular household debt. It also said interest rates should be raised first before action is taken to unwind the Bank's quantitative easing programme.
Here are the two key pars from the IMF report:
Voilà. RT @ElodieLamer: IMF #Lagarde says she's not a candidate for the presidency of the @EU_Commission.
Given IMF so wrong last year when warning UK gov "playing with fire", is it's UK report this year more credible? http://t.co/qaF3BDupD5
Be assured your caring Chancellor is NOT listening as IMF warns him over housing bubble. Party before people - again http://t.co/uStCTqI2rP
Stuff on housing from paragraph 9 onwards. The IMF says:
Macroprudential policies should be the first line of defense against financial risks from the housing market. The objective of macroprudential policy is to address systemic financial risks, not house price growth. Some measures have already been taken. In particular, the Funding for Lending Scheme has been refocused towards businesses, with emphasis on SME loans, while household lending is no longer eligible for additional borrowing allowances. Underwriting standards for owner-occupier mortgages have been tightened to ensure better borrower protection. But in an environment where expectations of capital gains can quickly drive up household indebtednessand thus systemic risk for financial institutionsmore policy action is warranted.
Here is the IMF's full annual appraisal of the UK economy.
That concludes the press conference with IMF head Christine Lagarde.
Back to productivity. Lagarde says:
Low productivity is not specific to England. Canada is another case in point. It is pretty hard to understand the rationale and the causes behind it.
Lagarde is asked whether rising inequality would hinder growth around the world.
Rising inequalities do not support sustainable growth.
Asked about whether she would want the EU Commission president job, Lagarde says she has a job and will serve her term as IMF head.
There has been a lot of speculation Reuters reported two days ago that German Chancellor Angela Merkel has asked France whether it would be willing to put forward Lagarde as president of the European Commission, citing two French sources briefed on the exchanges.
Lagarde is asked whether she agrees with the chancellor that the UK economy is firing on all cylinders. She replies:
The export cylinder is the one that could fire a little more strongly... The other two consumption and on the investment front, not just public investment but private investment as well the numbers rising.
Lagarde admits that the IMF underestimated the strong rebound in the UK economy, but adds that they were not alone.
Housing is the second big risk to the UK recovery, the IMF judges. "Macro-prudential measures will suffice" to rein in the housing market, Lagarde says.
Clearly it is something that needs to be watched.
Lagarde addresses the risk from low productivity growth first.
We very much hope productivity will increase as we see investment pick up.
The durability of the recovery hinges on productivity growth, which remains well below historic norms. Accelerating productivity growth would spur investment and output, while allowing real wage increases without triggering inflation. If productivity continues to be flat, however, growth will eventually stall.
The Q&A has started at the Treasury. IMF head Christine Lagarde has been asked how big a risk the UK housing market is to the economic recovery.
You can watch Christine Lagarde's press conference at the Treasury live here.
To recap, George Osborne conceded this morning that a housing bubble remains a threat to the recovery following comments by the International Monetary Fund (IMF) in its annual appraisal of the UK economy.
The chancellor said on BBC Radio 4 he agreed with IMF head Christine Lagarde's conclusion that Britain must keep a close eye on rising house prices and indebtedness. Here is our full story.
IMF view of UK risks pic.twitter.com/66UG5HdG18
The IMF report on the UK is out. While it acknowledges that the economy has "rebounded strongly and growth is becoming more balanced," it highlights the housing market, and productivity growth that is "well below historic norms," as key risks.
The fund said:
House price inflation is particularly high in London, and is becoming more widespread. So far, there are few of the typical signs of a credit-led bubble. Nonetheless, a steady increase in the size of new mortgages compared with borrower incomes suggests that households are gradually becoming more vulnerable to income and interest rate shocks.
Time for a look at the markets. European stocks are edging up to hit fresh six-year highs and index futures suggest Wall Street could set a new record, ahead of key US jobs figures. The FTSE Eurofirst 300 is on course for its best close since January 2008 while futures indicate the S&P 500 will add 1 point to Thursday's record close of 1,940.5.
Non-farm payrolls, out at 1.30pm BST, are expected to show that 215,000 to 218,000 new jobs were created in May.
Expectations of an interest rate hike have increased among Britons even though their expectations of higher inflation have receded. The Bank of England's quarterly inflation attitudes survey found that 42% of people expect a rate rise over the next 12 months, the highest proportion since May 2011.
At the same time, inflation expectations over the next year have fallen to 2.6%, the lowest since February to 2010.
In Rome, Pope Francis has sacked the entire board of the Vatican's financial watchdog, as part of efforts to reform the city state's banking practices following a corruption scandal and amid reports of infighting among the "old guard".
The Italian five-person board of the Financial Intelligence Authority were due to see their terms expire in 2016. The pope replaced them with four international experts from Italy, Singapore, Switzerland and the US. The Vatican said the new directors include Juan Zarate, a former national security adviser to US President George Bush, and Joseph Pillay, a civil servant and adviser to the president of Singapore.
Britain's trade deficit widened in April because of weaker chemicals and manufacturing exports, official figures show. The Office for National Statistics said the deficit in trade in goods grew to an estimated £8.9bn from £8.3bn in March. It said its figures were an estimate owing to an omission in its calculations, which overlooked £700m of oil exports to the European Union.
Including Britain's surplus in trade in services, the overall trade deficit widened to an estimated £1.8bn from £1.1bn in March.
Turning back to corporate news, Game Digital, the videogame seller, has priced its flotation at a lower range in the latest sign of investor fatigue on initial public offerings, my colleague Sean Farrell reports.
The company, which was rescued from bankruptcy two years ago, will sell shares at 200p a share, valuing it at £340m. On Thursday, Game Digital proposed a range of 200p to 2012p to investors as it priced the flotation.
This year has been one of the busiest ever for the IPO market after a long period in the doldrums, with investors nvestors have bought new shares in search of companies with good growth prospects as the economy recovers.
Hours before IMF head Christine Lagarde will present the fund's annual assessment of the UK economy, the chancellor, George Osborne, said he agreed with her conclusion that Britain must keep a close eye on rising house prices and indebtedness.
House prices are rising at their fastest rate since the start of the financial crisis, prompting Bank of England governor Mark Carney to describe the housing market as the greatest domestic risk to Britain's financial stability.
I agree with Christine Lagarde that we need to be alert to the build-up of debt in the housing market. We need to be alert when we see house prices rising.
I have given the Bank of England tools to do the job, and they should not hesitate to use those tools if they see these developments turning into a risk to the British economy.
Following her presentation at the Treasury this morning, the IMF's head Christine Lagarde is due to speak at the London School of Economics tonight. She's giving the Amartya Sen Lecture speaking on the theme of "empowerment" from 6.30-8pm BST. The event is open to LSE staff and students (and the media), but not the public.
It is notable that there was very strong growth in vision, where sales were up 47% year-on-year. This was clearly boosted by a number of people upgrading their TVs to enjoy the football World Cup to the maximum. This tends to happen before any extended, major sporting event. There will also be a boost to spending from people buying World Cup souvenirs, England replica shirts etc. Also people tend to spend more on food and drink, as well as on takeaways during the tournament, as well as on takeaways, to fully enjoy the matches at home. The better England do and the more games they play, the bigger the potential beneficial impact to retail sales. And if England do well, it could give a small, temporary boost to consumer confidence, although this is already elevated at the moment.
However, some of this spending will be diverted from what would have been spent on other items. And if England crash out in the group stage, there will be a lot of England paraphernalia available at reduced prices in bargain bins! The fact that all of the England games take place in the evening or at night will lessen the negative impact on productivity that comes from people stopping work to watch the matches.
Analysts at Daiwa have digested Thursday's ECB action.
While no magic bullet for the woes of the euro area, this package clearly has its merits. It should at least provide some incentive to increase bank lending. It should also help to contain the episodic short-term bank funding pressures due to excess liquidity from previous LTROs draining from the system. And the rate cuts should help to decouple euro-denominated interest rates from those of dollars over coming quarters as the markets move to price in Fed tightening.
Moreover, the ECB now looks to have gone as far as it can possibly go before launching a conventional QE programme of purchases of a wide range of assets including sovereign bonds. That of course would be a far more powerful measure. But until we see a further deterioration in the economic outlook, this bazooka will remain in the locker.
Meanwhile, bond yields in troubled eurozone countries have hit fresh record lows, amid relief over the ECB's stimulus measures announced on Thursday. Italy's 10-year bond yield opened 8 basis points lower, hitting a new record low of 2.87%. Spain's 10-year yield dropped 7 bps to a fresh low of 2.76% and Ireland's yield also fell 7 bps, to a record low of 2.51%.
European stocks have got off to a good start, rounding off a good week the eighth consecutive week of gains. Germany's Dax and France's CAC have edged up 0.1% while Spain's Ibex and Italy's FTSE MiB have opened 0.4% higher.
In London, the FTSE 100 index has gained 0.2%, or over 16 points, to 6829.20. Shares in British Gas owner Centrica rose 2.2%, amid rumours of a bid from the Middle East. The Daily Mail cited "gossip" that Qatari investors had approached shareholders with an offer to buy "big lines of stock" before launching a full-scale bid.
Good morning, and welcome to our rolling coverage of events across the financial markets, the global economy, the eurozone and business.
The International Monetary Fund is set to make a U-turn and largely abandon its criticism of Britain's economic strategy. The fund has done its annual economic inspection and will present its initial findings this morning at 11.30am BST. Christine Lagarde, the IMF's managing director, will do the presentation herself in the UK Treasury, in front of an audience that includes the chancellor. Last year, her deputy, David Lipton, presented the report.