Recession alarm bells ring for eurozone as Britain bounces back
Britain’s private sector companies ended last year “on a high” just as businesses in the eurozone face a recession, latest survey data show.
Closely-watched purchasing managers indexes (PMIs) compiled by S&P Global show that Britain’s services sector saw the fastest jump in activity in December for six months, beating expectations.
The final composite PMI - covering both manufacturing and services - rose to 52.1 in December, up from 50.7 in November in what was the best performance of all the world’s major economies. A reading above 50 indicates growth.
Tim Moore, economics director at S&P Global Market Intelligence, said the UK service sector “ended last year on a high” amid a recovery in client demand “attributed to hopes of lower borrowing costs and an improving global economic backdrop in 2024”.
Meanwhile, the eurozone could be in recession after a contraction in business activity continued at the end of 2023.
The bloc’s PMI was revised up for December to match November’s 47.6 but it remained below the 50 mark for a seventh month.
That indicated that the economy of the 20-country currency union, which shrank 0.1pc in the third quarter of 2023, likely contracted again last quarter, meeting the technical definition of a recession.
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said the figures were “sounding the recession alarm for the eurozone”.
In a further blow, inflation in the eurozone’s largest economy Germany increased from 3.2pc to 3.7pc in December, while in its second-largest economy France price rises accelerated from 3.5pc to 3.7pc.
Read the latest updates below.
07:17 PM GMT
Signing off
Thanks for joining us. Chris Price will be back in the morning but you can catch up on the latest business stories from The Telegraph here.
05:08 PM GMT
Microsoft keyboard gets first update since 90s
Microsoft’s keyboards are to get their biggest update in 30 years with the addition of a new artificial intelligence button. Matthew Field has the details:
The computer giant said it would be adding the new button to keyboards from later this year.
Tapping the “Copilot” key will bring up a chatbot screen on new Windows laptops, which will respond to written questions or search requests from the user.
Copilot, the name of Microsoft’s AI chatbot, can be used to write emails, generate images or control the PC’s settings, as well as answer questions in plain English.
The dedicated Copilot button will typically replace one of the “CTRL”, although this will vary by laptop brand. It will feature on new laptops running Microsoft’s Windows 11 software.
04:57 PM GMT
FTSE closes in the green
The blue-chip FTSE 100 index was up 0.53pc. Next - which pledged no price rises for the year - was up 5.79pc, leading the risers. It was followed by insurance company Beazley, up 4.27pc. The biggest faller was JD Sports, down a whopping 23pc, followed by chemicals firm Croda International, down 4.4pc.
In the mid-cap FTSE 250, the biggest risers were magazine publisher Future, up 3.7pc, and Diversified Energy Company, up by the same amount. The biggest drops was experienced by Tullow Oil, down 4.64pc, and online advertising company Baltic Classifieds, down 4.19pc.
04:53 PM GMT
Sainsbury's raises wages for 120,000 staff
Workers at Sainsbury’s are to get almost £2,000 extra a year, as it pledged to raise starting salaries to £12 a hour in what it called “single biggest ever investment into colleague pay”. London-based colleagues will get a minimum of £13.15 an hour.
The rises, which will cost the supermarket group £200m, are in addition to £300m of pay rises over the past three years.
The move won the praise of both the Chancellor, Jeremy Hunt, and the shop workers’ union. Mr Hunt said:
It’s great to see Sainsbury’s rewarding hard work with this pay rise.
Bally Auluk, of the USDAW union, said:
The continuing strong working relationship between USDAW & Sainsbury’s has resulted in an inflation busting pay award of over 9pc despite inflation falling and following on from the significant pay increases over the previous couple of years.
04:41 PM GMT
Supermarket says shoplifting is higher than profits
A Dutch supermarket chain says the cost of shoplifting is higher than its annual profits as it warned that theft had increased by 60pc in a year.
Jumbo, the second-largest supermarket group in the Netherlands, said that it is now losing €100m (£86m) a year to shoplifters, but expects its 2023 profits to be below £80m.
The supermarket’s chief executive, Ton van Veen, said that the thefts, which account for 1pc of turnover, are putting staff into “unpleasant situations”. He said:
This is a growing problem and we are appealing to politicians to address this … People are becoming increasingly sophisticated in not paying for products. You sometimes fall over in shock to witness how creative people are to take products without paying.
The company is increasing expenditure on security guards and CCTV.
04:38 PM GMT
Dollar drops as market awaits tomorrow's employment stats
The dollar has dropped today against the pound and euro after hitting two-week highs the day before as investors braced for the release nonfarm payroll data - a bellweather of the US economy - on Friday.
Other statistics released this week have suggested that the world’s economy is doing well, despite high interest rates. The ADP National Employment Report, an independent estimate of private-sector employment and pay, pointed to an increase of 164,000 private-sector jobs last month, the largest monthly increase since August.
Meanwhile, data for new claims for state unemployment benefits dropped by 18,000 for the week ended Dec 30.
Both are better than predictions.
04:30 PM GMT
German emissions drop to 70-year low after Ukraine war spike
German greenhouse gas emissions were at their lowest point since the 1950s last year after a difficult 2022 when Moscow cut off gas supplies via the Nord Stream 1 pipeline and the powerhouse of the eurozone was forced to increase its use of coal.
Germany emitted 673m tonnes of the greenhouse gases last year, 9.8 percent lower than in 2022, according to the think tank Agora Energiewende.
However, some of the cut in emissions was down to the poor performance of the Germany economy, with production in energy-intensive industries dropping.
04:20 PM GMT
Ryanair plans bigger HQ as it forecasts growth
Low-cost airline Ryanair has put in a planning application to expand its Dublin head office. The airline want sto build a 1,82 square foot extension to its Dublin operations room, according to a Bloomberg report, which will enable it to expand its capacity for coordinating flights.
In May, the airline said it had ordered up to 300 Boeing 737 Max jets as it goes for growth.
04:13 PM GMT
Novo Nordisk signs £840m in obesity drug deals
The Danish drug company behind the “miracle” anti-obesity drug Wegovy has announced deals today with two biotech research companies to collaborate on developing next-generation obesity drugs.
The deals, collectively worth £840m, will fund the development of novel treatment for cardiometabolic diseases and obesity.
Novo Nordisk is supporting Omega Therapeutics and Cellarity, both based in the US. Investors looked favourably on the deals, pushing Novo Nordisk’s share price up 3.8pc.
03:59 PM GMT
Ocado slashes cost of houmous and smoothies in major price drop
Online supermarket Ocado has cut the price of 1,700 products by an average of 5pc in its fifth round of cuts since June.
The cost of its own-brand houmous is down from £1.45 to £1.35, while a kids big pack of Innocent Strawberry and Raspberry Smoothies has been cut from £7 to £6.
The cuts are in addition to a price match in which Ocado pledges to match Tesco.com on over 10,00 products.
The retailer, a joint venture between Ocado Group and Marks and Spencer, was ranked as the second most expensive supermarket in a Which? study in November 2023. It found that an average basket of groceries costing £76.66 at Aldi would cost £93.40 in Ocado - but still less than Waitrose’s £97.39.
Hannah Gibson, CEO of Ocado Retail, said:
We know many of our customers will be looking for value this January. So, we’ve started the year by adding even more products to our Big Price Drop. The combination of our range and unrivalled service paired with 1,700 new lower prices means we’re offering the best experience for our customers.
03:44 PM GMT
New figures undermine the likelihood of early interest rate cuts
A string of positive economic figures in Britain, Europe and American suggest that hopes for early interest rate cuts might be overblown.
Michael Hewson, chief market analyst at CMC Markets UK, explains:
Better than expected economic numbers from the euro area today has helped to underpin the euro today ahead of tomorrow’s key inflation numbers for December. Today’s Germany inflation numbers saw inflation in Europe’s biggest economy jump to 3.8pc from 2.3pc in November, prompting a modest reduction in rate cut bets for the early part of this year.
The pound has also held up well after services sector activity in December saw a bigger than expected jump to 53.4 from 50.9 in November, and the best number since the end of Q2 last year. Mortgage approvals data for November also picked up as did consumer credit which would suggest that despite the wider gloom around the UK economy, consumer confidence is improving as inflationary pressures continue to slow.
On the flip side, this resilience could make the Bank of England a little more reluctant to cut rates as quickly as the market is currently pricing.
The US dollar is also continuing to claw back ground after today’s ADP payrolls report for December which saw 164k jobs added, up from 101k in November, while weekly jobless claims slow to 202k from 220k and close to a 3-month low, pushing US yields higher, and undermining market expectations of a the prospect of an early US rate cut.
03:34 PM GMT
Handing over
That’s all from me for today. Alex Singleton will make sure you know everything that’s going on from here.
I’ll leave you with a quick look at wholesale gas markets ahead of a cold snap about to sweep across the UK and Europe.
The benchmark contract across the continent has edged up 0.5pc toward €33 per megawatt hour, while the British equivalent has gained 1.7pc to nearly 83p per therm.
Warmer long-range forecasts by Maxar for February are keeping a lid on price rises despite the likely increase in usage as freezing temperatures are expected to hit the UK over the weekend.
03:26 PM GMT
Tui board pushes for exit from London Stock Exchange
Tui should delist from the London Stock Exchange, the travel company’s board has recommended, after investors pushed for it to concentrate on its listing in Frankfurt.
The holiday operator said it would ask shareholders to make a decision at its annual general meeting on February 13, saying the majority of shareholdings had moved to Germany.
The European travel giant revealed it was first revealed it was considering delisting from London last month.
Tui has been listed on both stock exchanges since 2014 when UK-based Tui Travel, known for its Thomson and First Choice travel agencies, merged with its largest shareholder, German-based Tui AG.
Tui chief financial officer Mathias Kiep said:
Terminating the listing in London would offer clear advantages for investors and the company: Simplification of structures, improvement in liquidity and indexation as well as benefits for the EU ownership of our airlines.
On this basis and after intensive analysis, we recommend that our shareholders vote in favour of the proposed resolution at the upcoming annual general meeting.
However, in the best sense of an annual general meeting, it remains the decision of our shareholders.
03:11 PM GMT
Wilson racket maker to list in New York
The company behind Wilson tennis racket has filed for a stock market listing in New York.
Amer Sports, which also makes Salomon ski boots, reportedly aims to raise more than $1bn (£790m) in the initial public offering (IPO), which could value the business at as much as $10bn (£7.9bn).
03:00 PM GMT
Pepsi and 7up canned from supermarket shelves over ‘unacceptable’ price rises
A supermarket chain has said it will no longer sell Pepsi and 7up in protest against “unacceptable” price rises.
Our reporter Adam Mawardi has the details:
French retail giant Carrefour said it plans to ditch PepsiCo products after repeated price increases despite the cost of living crisis.
Shelves once stocked with PepsiCo drinks will be now accompanied by a note that reads: “We are no longer selling this brand due to unacceptable price increases.”
The grocery giant, which has more than 12,000 stores worldwide, said the signs will only appear in France.
Read how PepsiCo has repeatedly raised the prices of its food and drinks products.
02:45 PM GMT
Mobileye shares plummet amid hit to driverless car tech orders
Mobileye shares plunged by 29pc as markets opened on Wall Street after warning customers have scaled back orders.
The company, spun off from Intel when it listed on the Nasdaq in 2022, has forecast that 2024 revenues will be below estimates.
The autonomous driving tech company expects its customers to pull back on orders as they clear excess stocks.
Mobileye, which is Israel’s most valuable publicly traded company, said full-year revenue for 2024 would come in between $1.83bn and $1.96bn, below the average analyst estimate of $2.58bn.
It also said it anticipates first-quarter revenue will be down about 50pc from a year earlier.
02:36 PM GMT
Wall Street markets mixed after higher-than-expected jobs figures
It was a mixed start on Wall Street as traders digested a jobs report that indicated resilience in the labour market, although wage rises were falling.
The Nasdaq Composite dropped 0.4pc after the opening bell to 14,537.50 but the S&P 500 was little changed at 4,703.54.
Meanwhile, the Dow Jones Industrial Average gained 0.2pc to 37,510.01 after the ADP National Employment report showed US private companies hired more workers than expected in December, pointing to persistent strength in the labour market that should continue to sustain the economy.
02:14 PM GMT
Fewer Americans on jobless benefits
The number of Americans applying for unemployment benefits fell last week as the US jobs market continues to show resilience despite elevated interest rates.
Jobless claims fell to 202,000 for the week ending December 30, down by 18,000 from the previous week, the Labor Department reported.
The four-week average of claims, which evens out some of the week-to-week volatility, fell by 4,750 to 207,750.
Overall, 1.86m Americans were collecting jobless benefits during the week that ended December 23, a decrease of 31,000 from the previous week and the fewest in two months.
Weekly unemployment claims are a proxy for layoffs. They have remained at extraordinarily low levels in the face of high interest rates.
Claims:
1/ Continuing claims fell to their lowest level since mid-Nov.
Using the 2017 seasonal adjustment factors (better, probably), they fell to their lowest level since July. pic.twitter.com/pjFxu52wbQ— Guy Berger (@EconBerger) January 4, 2024
01:56 PM GMT
Boots website has 'biggest ever month of sales'
The Boots app and website reported its best ever month in November as it was boosted by a strong Black Friday, the company has said.
The pharmacy chain said that visits to its shops had also increased during the three months to the end of November, up 7pc on the same period a year earlier.
The biggest increases were for its flagship locations and travel sites, such as in train stations, the business said.
The company released scarce data about its Christmas trading, but hinted that it had been better than a year ago according to “early indications”.
Sales were up 9.8pc in the quarter that ended on November 30, Boots said, as the company captured more market share for the 11th month in a row.
“These excellent results were in part driven by a strong Black Friday period, which saw boots.com achieve its biggest ever month of sales in November and its biggest ever day of sales on Black Friday,” the business said.
01:38 PM GMT
German inflation rises after end of household bills support
German inflation rose in December, preliminary data showed, as the pace of price rises picked up again after months of steady decline.
Consumer prices climbed 3.7pc, up from a reading of 3.2 percent in November, according to the federal statistics agency Destatis.
The last monthly increase in the indicator was recorded in June, although the renewed increase was anticipated by analysts.
A rise in energy prices in December 2023 as compared with the previous year could be put down to government support for household bills at the end of 2022.
Fritzi Koehler-Geib, chief economist at public lender KfW, said the change “makes today’s energy prices appear higher in comparison, even though they have fallen further in recent months”.
Hello from #Germany, where inflation has accelerated again, at least the headline rate. CPI rose to 3.7% in Dec from 3.2% in Nov due to base effect. But Core CPI has fallen further to 3.5% in Dec from 3.8% in Nov. This means that core inflation is once again below headline… pic.twitter.com/tEmIlzwvLZ
— Holger Zschaepitz (@Schuldensuehner) January 4, 2024
01:32 PM GMT
Actions will be taken unless Red Sea attacks stop, says Cameron
Attacks in Red Sea shipping lanes have to stop otherwise international action will be taken, Foreign Secretary Lord Cameron has said.
Major shipping companies are sending vessels around the south of Africa to avoid the danger posed in the vital trade route by Houthi rebels supporting Hamas’ war against Israel.
Lord Cameron told reporters during a trip to Kosovo:
This is illegal. It’s not to do with Gaza, it’s not to do with Israel. This is about the freedom of navigation. This is about the ability of ships to carry their cargo.
The world economy, every economy, will suffer if ships keep coming under attack in this illegal and unacceptable way. And these attacks need to stop or actions will be taken.
01:22 PM GMT
US private sector adds more jobs than expected
Private sector companies in the US added more jobs than expected in December, according to industry figures, although wages continued to cool in a boost for hopes of interest rate cuts soon.
The 164,000 increase in payrolls was ahead of estimates of 125,000 and above the previous month’s downwardly revised total of 101,000, the latest data from the ADP Research Institute showed.
Meanwhile, wages grew at 5.4pc, slowing from 5.6pc a month earlier and continuing a deceleration that began in September 2022.
Nela Richardson, chief economist at ADP, said:
We’re returning to a labor market that’s very much aligned with pre-pandemic hiring.
While wages didn’t drive the recent bout of inflation, now that pay growth has retreated, any risk of a wage-price spiral has all but disappeared.
01:05 PM GMT
Money markets trim bets on interest rate cuts
Traders have toned down their bets on interest rate cuts by the Bank of England after data showed the UK economy was more resilient than previously thought at the end of last year.
Money markets have priced in 138 basis points of cuts from policymakers, compared to 145 the previous day, as strong economic data raises the prospect that inflation may yet prove more persistent.
The change implies markets are shifting their expectations toward five quarter of a percentage point rate cuts this year in the UK, compared to expectations of six at the start of the year.
That would take rates from their 16-year highs of 5.25pc to 4pc by the end of 2024.
Bond markets have slumped as a result, with the yield on the 10-year UK gilt rising six basis points to 3.69pc. Yields move inversely to prices.
12:57 PM GMT
Sunak says election in second half of 2024 is his 'working assumption'
Rishi Sunak said his “working assumption” is the next general election will be held in the second half of 2024.
Speaking to broadcasters on a visit to a youth centre in Mansfield, Nottinghamshire, the Prime Minister said: “So, my working assumption is we’ll have a general election in the second half of this year and in the meantime I’ve got lots that I want to get on with.”
Pressed if he could rule out a May election, he repeated it is his “working assumption” that the vote will be held later in the year.
The pound slipped back slightly following the announcement, but remains up 0.2pc against the dollar at just under $1.27.
Sterling has lost 0.1pc against the euro, which is worth 86p.
Follow the latest on the Prime Minister’s election plans in our politics live blog.
12:30 PM GMT
Two baby formula products recalled over contamination fears
Two baby formula products have been recalled from sale in the UK over concerns they could contain dangerous bacteria.
Our reporter James Warrington has the details:
Consumer goods giant Reckitt Benckiser has recalled several batches of its Nutramigen LGG stage 1 and stage 2 Hypoallergenic Formula powders after warning of potential contamination by Cronobacter sakazakii.
The bacteria most commonly causes symptoms such as fever and diarrhoea but in severe cases could cause sepsis or meningitis, according to the Food Standards Agency.
This could lead to symptoms such as poor feeding, irritability, temperature changes, jaundice and abnormal breathing.
Read what the company said in the recall notice.
12:20 PM GMT
FTSE 100 pay crackdown will drive up taxes, warns think tank
A crackdown on executive pay will make Britain less able to attract top talent and drive up tax bills for the rest of society, a think tank has warned.
FTSE 100 bosses will have earned more than the average UK worker makes in a year by this afternoon, according to new estimates, which the Trades Union Congress (TUC) said shows “obscene levels of pay inequality”.
However, Professor Len Shackleton of the Institute of Economic Affairs, said:
Cracking down on chief executive (CEO) pay would undermine British competitiveness and burden all of us with higher tax bills without even benefitting workers.
The difference between top CEOs and average pay is an obvious feature of a free society where high pay is usually, though admittedly not always, associated with greater responsibilities. A CEO can make, or break, a company and therefore it’s unsurprising they are paid generously.
UK FTSE-100 CEOs are paid roughly in line with their counterparts in other European countries such as Germany and France, though considerably less than equivalents in the USA. In relative terms their pay has not increased significantly in recent years.
Top earners pay stonking amounts in taxes: the top one per cent of all earners in this country pay almost 30 per cent of income tax. If we somehow stopped these people earning large amounts, many of them would leave the country and we would all have to pay higher taxes to compensate.
If FTSE-100 CEO pay was redistributed to workers, it would mean just around £200 a year extra before tax for a company employing 20,000 people.
12:04 PM GMT
Wall Street poised to edge up after poor start to 2024
US stock indexes are on track to rise at the opening bell in a recovery from a grim start to the new year as investors await American jobs figures.
Wall Street stumbled in the first two sessions of 2024, with the benchmark S&P 500 notching its worst two-day performance since late-October as investors booked profits after a blistering rally last year.
Hopes that the Fed could start interest rate cuts this year had driven much of the gains towards the end of 2023.
Traders now see a 72.6pc chance for at least a 25 basis points rate cut in March and a near 96pc probability for May.
Yields edged up on US Treasury bonds, an indicator of interest rate expectations, with the coupon on the benchmark 10-year note climbing to 3.96pc.
Investors now await the ADP National Employment Report due at 1.15pm UK time, ahead of a key jobs report on Friday, both of which could shed some light on the health of the labour market.
In premarket trading, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 were all up about 0.1pc.
11:43 AM GMT
Pound gains as British economy shows resilience
The pound has risen against the dollar after figures showed the UK economy is performing better than expected.
Sterling gained 0.3pc to tip over $1.27 following survey data showing private sector companies in Britain performed the best among major economies at the end of last year.
In a further sign of confidence, consumers took on £2bn of unsecured credit in November, up from £1.4bn the previous month, according to figures from the Bank of England.
11:24 AM GMT
Wall Street cuts outlook for oil prices
Oil prices will end the year lower than previously estimated, according to Wall Street investment giants slashing their outlooks for crude amid surging supplies.
Morgan Stanley has cut its forecasts for Brent crude prices this year by about 9pc to around $77 a barrel, following downgrades by UBS Group and Goldman Sachs in recent weeks.
Analysts expect that US shale drillers in particular will help produce a glut of oil, despite efforts by the Opec cartel to cut supplies.
Martijn Rats, global oil strategist at Morgan Stanley, said:
Looking ahead, we expect a relatively precarious balance in 2024.
Despite low investment in production capacity in recent years, the growth in non-Opec supply is nevertheless set to remain strong.
Among five big Wall Street banks, only Bank of America now anticipates significant gains this year, forecasting an average of $90 a barrel.
Brent crude has gained 0.8pc today to hover just under $79 a barrel, while US-produced West Texas Intermediate has risen 1pc to more than $73.
11:08 AM GMT
First Direct to cut mortgage rates below 4pc
First Direct has announced rate cuts across its fixed-rate repayment mortgage range, with deals below 4pc set to be available from Friday.
The announcement was made following rate cuts from other lenders this week, including HSBC UK and Halifax.
As part of the revamp, First Direct is launching two products at 3.99pc from Friday.
They include a 10-year fixed mortgage for people with a 40pc deposit, with a rate of 3.99pc, reduced by 0.98 percentage points from 4.97pc previously.
Also for people with a 40pc deposit, First Direct will offer a five-year fixed mortgage priced at 3.99pc - a rate which is being reduced by 0.65 percentage points.
The rates will be available to new and existing customers.
10:54 AM GMT
'Shrug of the shoulder' is biggest risk to Labour election win, says Starmer
Sir Keir Starmer has said he is “ready” for a general election in a new year’s speech in south-west England.
However, the Labour leader warned that “the shrug of the shoulder” towards politics is the biggest challenge his party faces.
Sir Keir said:
What really keeps me up at night is a different reaction altogether. The biggest challenge we face, bar none, the shrug of the shoulder.
Because this is the paradox of British politics right now. Everyone agrees we are in a huge mess. Services on their knees, an economy that doesn’t work for working people, even when it grows, let alone when it stagnates like now.
Everyone agrees as well that it has been like this for a while, that Britain needs change, wants change, is crying out for change.
And yet trust in politics is now so low, so degraded, that nobody believes you can make a difference any more.
10:50 AM GMT
Inflation to fall below 2pc by the spring, say economists
The UK economy is set for a spring boost as inflation falls below the Bank of England’s 2pc target, according to economists.
Inflation has fallen faster than expected and wholesale gas and electricity prices have continued to tumble, setting the UK up for “modest, if unspectacular, growth” in the second half of the year, a report by Bloomberg Economics said.
The improved outlook and rapidly falling inflation will give the BOE “ample space to start easing,” UK economists Dan Hanson and Ana Andrade wrote.
The pair expect a first quarter-point rate cut from 5.25pc in May and for the Bank of England to take rates down to 4pc by the end of the year.
Deutsche Bank senior economist, Sanjay Raja, also struck an upbeat note in a blog entitled “eight reasons for some optimism”.
He expects inflation to drop to the 2pc target in April or May and thinks it is “possible” rates could be cut to 4pc be the year end. “A soft landing remains our base case,” he said.
10:29 AM GMT
French inflation ticks up in December
Inflation in the eurozone’s second-largest economy France accelerated in December, official data showed Thursday, with food prices a persistent sore point for consumers.
Prices grew 3.7pc year-on-year last month, statistics authority Insee said in preliminary figures, up from the 3.5pc pace in November.
There had been “acceleration... in the price of energy and services,” Insee said, although price growth slowed for manufactured goods and the closely-watched food items in the consumer basket.
With food inflation still running at 7.1pc last month, many shoppers have been switching to lower-cost alternatives or scouring supermarkets for special offers.
🇪🇺🇫🇷 The disinflation trend looks broadly intact, but core inflation is still running too high in France. Services CPI rebounded slightly in December due to transport prices. One of the reasons why the ECB may need more time, and a March rate cut looks a bit premature. pic.twitter.com/rDM6uVEjND
— Frederik Ducrozet (@fwred) January 4, 2024
10:09 AM GMT
Mortgage approvals rise as lenders cut rates
The number of mortgage approvals in Britain increased by more than expected in November in a sign that the property market is recovering as lenders cut rates, official figures show.
Net mortgage approvals for house purchases rose from 47,900 in October to 50,100 in November, which was the highest since June, according to the latest data from the Bank of England. Economists had expected an increase to 48,800.
In a sign of returning consumer confidence, the amount of unsecured credit by individuals increased to £2bn in November, up from £1.4bn the previous month.
It comes as lenders have been cutting mortgage rates in a battle to win customers amid expectations that the Bank of England will begin cutting borrowing costs this year.
UnitedKingdom Mortgage Approvals at 50.067K https://t.co/xjNGJUUXea pic.twitter.com/utSKnR7LGs
— TRADING ECONOMICS (@tEconomics) January 4, 2024
09:50 AM GMT
UK private sector 'ended 2023 on a high' amid hopes for rate cuts
Britain’s services sector saw the fastest jump in activity in December for six months, beating expectations as firms ended the year in higher spirits.
The S&P Global/CIPS UK services PMI survey showed a reading of 53.4 in December, up from 50.9 in November. Previous estimates had shown a reading of 52.7.
Any score above 50 indicates that the sector is growing.
The final composite PMI - covering both manufacturing and services - rose to 52.1 in December, up from 50.7 in November.
Tim Moore, economics director at S&P Global Market Intelligence, said:
December data indicated that the UK service sector ended last year on a high, with business activity growth accelerating to its fastest for six months as the turnaround in order books gained momentum.
The recovery in client demand was attributed to hopes of lower borrowing costs and an improving global economic backdrop in 2024.
However, many firms continued to cite challenging underlying business conditions due to the stagnating UK economy and strong pressure on margins from rising labour costs.
💥 latest PMIs add to evidence that '#BrexitBritain' is still dodging the #recession now engulfing the euro zone... 👍
Final UK composite output PMI (manufacturing and services) revised up to 52.1 in December.
In contrast, the #euro index remained well below 50, at just 47.6. pic.twitter.com/C6lcoDk13N— Julian Jessop (@julianHjessop) January 4, 2024
09:47 AM GMT
JD Sports nosedives as it blames profit warning on mild weather
JD Sports shares plunged more than a fifth after it slashed its profit forecasts blaming a mild autumn and weaker Christmas spending.
Our retail editor Hannah Boland has the latest:
In an unscheduled trading update, the sportswear retailer said shoppers were “more cautious” on spending over the crucial festive period, meaning it now expected profits of between £915m and £935m for the year to February 3.
It previously said it was on track to hit £1.04bn in profit before tax and adjusted items for the year.
The news wiped out a share price rally which had seen it gain almost 40pc since November.
Read what chief executive Régis Schultz blamed for the downturn.
09:33 AM GMT
Topp Tiles shares floored as homeowners spend less on renovations
Shares in Topps Tiles dropped as the business revealed a dip in revenue, despite earlier warnings from the group.
The firm said that revenue was 4pc lower in the last three months of the calendar year, saying that customers were tightening their belts. Like-for-like sales were down by 7.1pc, the company said.
It comes after years of inflation and increasing interest rates have eaten into the amount of money that homeowners have to splash on doing up their houses.
The company had already flagged that trading during the three months would be hit by what it called “ongoing challenges to discretionary consumer spending”.
But the company’s shareholders were still disheartened by the news, sending shares down by as much as 9pc in early trading, although they later recovered around half of the lost ground.
Bosses said that profits in the current financial year will be “weighted towards the second half,” in part due to higher energy bills in the winter months.
09:11 AM GMT
Eurozone 'already in recession' as economic alarm bells ring
The contraction in eurozone business activity continued at the end of 2023 due to a persistent downturn in the dominant services industry, a closely-watched survey showed, indicating the bloc’s economy is in recession.
HCOB’s Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, was revised up for December to match November’s 47.6 after a preliminary estimate of 47, but it remained below the 50 mark separating growth from contraction for a seventh month.
That indicated that the 20-country currency union, which shrank 0.1pc in the third quarter of 2023, likely contracted again last quarter, meeting the technical definition of a recession.
The services PMI inched up to a five-month high of 48.8 from November’s 48.7.
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said:
It’s not quite recession territory yet for services, but the vibe is far from growth-oriented.
There are a lack of clear signals indicating an imminent return to robust expansion.
The Composite PMI...is sounding the recession alarm for the euro zone though.
08:55 AM GMT
FTSE 100 gains as Next hits record high
UK stocks rose as Next jumped to a record high as the British clothing retailer raised its annual profit outlook.
The blue-chip FTSE 100 was up 0.4pc, recovering from two straight days of losses. The midcap FTSE 250 index added 0.3pc.
Energy shares climbed as much as 1.6pc to hit their highest in more than six weeks after oil prices extended gains amid persisting concerns over Middle Eastern supply disruptions.
Next was the top gainer in the FTSE 100, jumping as much as 5.6pc to an all-time high after the retailer raised its profit forecast for the year ended January 2024, for the fifth time in eight months.
Shares of BP climbed as much as 2pc as the oil and gas company terminated agreement with Equinor to sell power to New York state from their proposed Empire Wind 2 offshore wind farm.
JD Sports Fashion slumped 19.5pc to a two-month low after the sportswear retailer lowered its full-year profit forecast, blaming higher costs, a slowdown in consumer spending and subdued demand amid milder weather.
08:32 AM GMT
Solemn traders pay respects on Japan's first business day of the year
The mood was sombre in Tokyo as the market reopened from the New Year holidays.
There was a moment of silence instead of a celebratory New Year’s ring of the bell after an earthquake on Monday left at least 78 people dead and dozens missing.
Japan is also dealing with the collision of two planes at its main airport in Tokyo, which rattled the nation.
Dark-suited officials bowed their heads in a ceremony that usually features women clad in colourful kimonos.
Tokyo’s benchmark Nikkei 225 index closed lower by 0.5pc, or 175.88 points, to end at 33,288.29, while the broader Topix index gained 0.5pc, or 12.40 points, to 2,378.79.
08:22 AM GMT
Goldman Sachs predicts faster interest rate cuts
The Bank of England will begin cutting interest rates from May, Goldman Sachs has predicted, in a move it says will save households £11bn by the end of next year.
The Wall Street investment bank believes policymakers will begin cutting rates by a quarter of a percentage point every meeting from May in a bid to shore up the economy.
It said the cutting will continue until rates hit 3pc in May 2025.
It predicts the cumulative increase in mortgage payments caused by the Bank raising rates to 16-year highs of 5.25pc will be £19bn by the end of 2025.
This is £11bn less than its previous estimate of an increase of about £30bn, prompting Goldman to upgrade its forecasts for growth in the UK economy from 0.5pc to 0.6pc in 2024 and 1pc to 1.3pc in 2025.
It added the peak increase in mortgage payments will likely be reached in the first half of this year “much sooner than we previously anticipated”.
Money markets are predicting that the Bank of England will begin cutting interest rates from May, with bets implying rates will be cut to 3.75pc by the end of the year.
08:05 AM GMT
FTSE 100 opens higher
The FTSE 100 has opened higher after high street bellweather Next hiked its profit outlook for the fifth time this year and said factory gate prices are “diminishing”.
The UK’s benchmark index gained 0.4pc to 7,714.74 while the FTSE 250 rose 0.3pc to 19,385.63.
07:47 AM GMT
Labour tax cuts could trigger 'another period of austerity', warns IFS chief
Labour may have to consider hiking other taxes or restrict public spending if it puts cutting income tax or national insurance in its election manifesto, as is reportedly under consideration.
Paul Johnson, the director of the Institute for Fiscal Studies, told BBC Radio 4’s Today programme he was “pretty surprised” to hear reports Labour was considering tax cuts.
He said “all of the pressure” was in the direction of spending more to shore up struggling public services, which would require raising more funds for the Exchequer. He said:
What you can do is cut some taxes while increasing other taxes by more, and that may be what the Labour Party are talking about.
But what you can’t do given the state of the public finances, and given that both parties say that they’re focused on getting overall national debt down over the next Parliament, if you really want to do that, then you can’t cut taxes and increase spending.
Indeed, you probably can’t cut taxes and keep spending anywhere near where it is. In other words, if you’re going to cut taxes net, get debt down, then you’re going to have, frankly, another period of austerity on public services.
07:43 AM GMT
SpaceX accused of unlawfully sacking staff over 'embarrassment' Elon Musk
Elon Musk’s Space X has been accused of unlawfully sacking staff over an open letter which called the billionaire a “distraction and embarrassment”.
The rocket and satellite maker has been accused by a US labour agency of letting go eight employees for circulating a letter criticising the company’s founder and chief executive.
The letter sent to SpaceX executives in June 2022 focused on a series of tweets Mr Musk had made since 2020, many of which were sexually suggestive.
The employees claimed Mr Musk’s statements did not align with the company’s policies on diversity and workplace misconduct, and called on SpaceX to condemn them.
SpaceX has a “toxic culture” where harassment is tolerated, particularly against women, according to a statement by the lawyers of one of the sacked employees.
The complaint also accuses SpaceX of interrogating employees about the letter, disparaging the workers who were involved, and threatening to fire workers who engaged in similar activity.
SpaceX did not immediately respond to a request for comment.
07:35 AM GMT
JD Sports issues profit warning after offering more sales promotions
JD Sports has warned that it expects profit to be up to £125m lower this year than previously predicted as it was hit by offering more promotions than had been anticipated.
The company said that cautious consumers, hit by rises in the cost of living, had to be won over by special deals.
It said that pre-tax profit would be between £915m and £935m before adjusted items in the year to early February.
In September it had forecast the same figure to reach around £1.04bn.
Chief executive Regis Schultz said: “Our key markets have seen increased promotional activity during the peak trading season, driven by a more cautious consumer, but we continue to grow market share.”
07:32 AM GMT
Next increases profit outlook for fifth time
Next has hiked its profit outlook for the fifth time this financial year after better than expected festive sales and forecast earnings to increase further over the next 12 months.
The retail giant saw full-price sales jump 5.7pc higher over the nine weeks to December 30, with growth of 10pc in both of the final two weeks before Christmas Day.
It is now forecasting full-year sales to rise by 4pc as it said January trading is also set to be better than expected.
Next upped its profit forecast to £905m for the year to January 27, which would be a 4pc rise on 2022-23, which compares with guidance for £885m given in November.
The group is also predicting a 5pc rise in underlying group pre-tax profits to £960m for 2024-25.
It said: “The consumer environment looks more benign than it has for a number of years, albeit there are some significant uncertainties.”
07:29 AM GMT
Next vows not to raise prices in 'zero inflation' pledge
Next has promised it will not raise prices this year as factory gate prices stabilise for the first time in three years.
The high street bellwether pledged there would be “zero inflation in our selling prices” as it said the cost of selling its own products was diminishing.
The pledge comes despite it expecting to increase its wage bill this year by around £60m, which it will mitigate by increasing its margins by £17m.
In a trading update, the retailer said: “Despite this increase in margin, we do not anticipate that selling prices will increase in the year ahead.
“In fact, without the anticipated margin gain, prices would have fallen marginally as a result of continued reductions in factory gate prices.”
Next increased its full-year profit before tax guidance by £20m to £905m, up 4pc on the previous year.
Next said it would keep selling prices unchanged as it increased its profit forecast ahead of analyst expectations.
The retailer expects pretax profits to rise to £960m in 2025, which was ahead of market predictions of about £930m.
The company said of the £20m increase to this year’s forecast, £17m came from improved sales so far and £3m comes from an upgraded forecast for full price sales in January.
07:23 AM GMT
Good morning
Thanks for joining me. Next has promised it will not increase its selling prices this year as it received a boost from falling prices at the factory gate.
The retailer also increased its profit guidance for the year by £20m to £905m, up 4pc on the previous year.
5 things to start your day
1) Elon Musk’s Chinese rival toppled Tesla – now it’s coming for Britain | BYD’s rising popularity raises fresh fears over China’s carmaking dominance
2) ‘We are losing lots of companies – if we do nothing the UK market will fade away’ | Government must stop chronic undervaluation of British businesses, Peel Hunt warns
3) Airbus plots €1.8bn takeover of French cybersecurity business | Aerospace giant in talks to buy Atos amid growing interest in digital defence
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What happened overnight
Asian stocks slipped, tracking a weak start to 2024 on Wall Street as Japan’s markets reopened.
The mood was sombre in Tokyo as the market reopened from the New Year holidays with a moment of silence instead of a celebratory New Year’s ring of the bell after a major earthquake Monday left at least 77 people dead and dozens missing.
Dark-suited officials bowed their heads in a ceremony that usually features women clad in colorful kimonos. Japan’s benchmark Nikkei 225 closed down 0.5pc to 33,288.29, while the broader Topix index gained 0.5pc to 2,378.79.
Hong Kong’s Hang Seng shed 0.4pc to 16,574.36 and the Shanghai Composite index sank 0.4pc to 2,946.15.
Australia’s S&P/ASX 200 declined 0.4pc to 7,494.10. South Korea’s Kospi declined 0.8pc to 2,586.02. India’s Sensex, however, climbed 0.6pc.
Echoing a red ink day for stock markets in Britain and the eurozone on Wednesday, the S&P 500 lost 0.8pc to 4,704.81.
The Dow Jones Industrial Average of 30 top American companies likewise dropped 0.8pc to 37,430.19. The Nasdaq composite pulled lower with a drop of 1.2pc to 14,592.21.
The yield on the benchmark 10-year US Treasury bonds slipped to 3.91pc from 3.94pc late on Tuesday on a day in which the US Federal Reserve released the minutes of its December interest rate meeting.
While the minutes did not provide direct clues about when rate cuts might commence in the US, they indicated a growing sense that inflation is under control and a growing concern about the risks that “overly restrictive” monetary policy may pose to the world’s largest economy.
Paul Ashworth, Chief North America Economist at Capital Economics, said the minutes “were slightly more dovish that we were expecting – more in line with the message delivered by Fed Chair Jerome Powell in his press conference than the hawkish post-meeting comments from a number of other Fed officials.”
