Closing post
Time to wrap up.
Stocks on Wall Street have hit record levels, as investors welcome the choice of Scott Bessent as the next US Treasury secretary.
Both the Dow Jones industrial average and the S&P 500 share index touched new peaks, while the dollar has weakened and bond price haves jumped.
Investors are hopeful that Bessent would take a gradual approach to the introduction of new trade tariffs, and reduce the US budget deficit.
These hopes have pushed down the dollar, giving a lift to the pound and the euro – which would both suffer from a new translatlantic trade war:
Swati Dhingra, an external member of the Bank of England’s rate-setting monetary policy committee, has suggested that inflation could fall if Donald Trump imposes massive US tariffs on Chinese imports.
In the UK, chancellor Rachel Reeves has defended her budget against criticism, telling the Confederation of British Industry’s annual conference that she hasn’t heard alternative suggestions for how she could have got a grip on the public finances.
Reeves also promised that she doesn’t plan to deliver another budget like last month’s, which hit businesses with a jump in taxes.
However, the chair of the CBI has accused the UK government of treating employers as a “cash cow” in last month’s budget, and urged ministers to water down plans for workers’ rights.
Barclays has been fined £40m by the City regulator, over its 2008 rescue financing from Qatar.
The B&Q owner, Kingfisher, has said uncertainty around the UK government’s budget hit consumer spending, and it will pay an extra £31m in taxes after Rachel Reeves’s rise in national insurance.
Thousands of Amazon workers are expected to protest or strike in more than 20 countries during Black Friday to press for better workers’ rights and climate action from the US retailer.
Q: Will you rethink any of the measures in the budget?
Rachel Reeves says she is determined to be the chancellor that puts the public finances on a firm footing.
Sounding like a lady not for turning, the chancellor insists:
We’ve made our decisions. I’ve had lots of feedback on the budget, but what I haven’t heard is any credible alternative to what I did.
Q: Why are you targeting firms who employ a large number of people [by raising employment taxes]?
Rachel Reeves insists she is “not immune to the challenges that businesses face”.
She adds that smaller businesses are protected from the increase in national insurance rates, by the doubling of the employment allowance. That means many small businesses would pay either less or the same in NICs, she says.
Rachel Reeves is now taking questions from the media.
Q: Hasn’t Labour betrayed businesses through your budget, and can you confirm there will be no more tax rises for businesses?
Reeves says businesses and families paid the price when the previous government lost control of the public finances.
She repeats her earlier point that the public finances are now on a firm footing, and that public services must now “live within their means”.
Reeves: We have wiped the slate clean
“We’ll never have to do a budget like that again,” Rachel Reeves tells the CBI’s annual conference.
She also compares the public sector to the way private firms were ran a decade ago, adding that the government has “a lot to learn.”.
Q: Some businesses will feel some of the measures in your budget will not help growth…
Rachel Reeves insists she didn’t have other options to deal with the “huge black hole” in the public finances, ciiting how borrowing is running higher than official forecasts.
Rachel Reeves then tells the CBI that she’s heard a lot of feedback about the budget, but not many suggestions for alternative measures:
The chancellor says, firmly:
What I haven’t heard are many alternatives.
We had to put the public finances on a firm footing, to bring stability back to the economy.
Reeves adds that she has met her promise to address the public finances, and create a “bedrock” of stability that can be built on.
This confirms the Guardian’s story from this morning:
Updated
Reeves: Difficult decisions in budget were needed
Chancellor Rachel Reeves is now speaking at the CBI’s conference.
She talks through the government’s efforts to grow the economy, such as reforming the planning system, ending the effective ban on offshore wind, and a review of the pensions sector.
She then touches on the “pretty dire” inheritance she encountered at the Treasury, which led to the “difficult” decisions in the budget.
Reeves says:
If I hadn’t made those difficult decisions, we wouldn’t have been able to bring the stability back to the economy that is desperately needed.
She compared her job to a new CEO or CCFO taking control of a company, and finding that “quite drastic” action was needed to put it back on a firm footing.
That, Reeves insists, is what she did in last month’s budget, pledging that she won’t need to come back for more.
The rally in US government bonds is gathering pace.
With price rising, the yield (or interest rate) on 10-year Treasury bills has dropped by 11 basis points, from 4.41% to 4.3%. That’s a two-week low.
Falling yields indicates that investors are less nervous about an inflationary surge under the Trump presidency, with Scott Bessent at the controls at the Treasury.
It also reflects the drop in the oil price today, which would ease inflationary pressures.
CBI chair accuses Labour government of treating employers as a ‘cash cow’
The chair of the Confederation of British Industry, Rupert Soames, has accused the UK government of treating employers as a “cash cow” in last month’s budget, and urged ministers to water down plans for workers’ rights.
“It’s been tough on business. In the budget, business has been the cash cow and it’s been milked. Don’t go and whack it,” Soames said at the CBI’s annual conference in Westminster.
He suggested businesses might be prepared to forgive Reeves’s £25bn increase in employer national insurance contributions (NICs), if other policies are tweaked, saying:
“I think they need to see this in the round. And if we can come to a position where business can say, ‘Well OK, the budget was a bit shit but we can live with the rest’, then there’s probably a landing ground we can get to, where the government can retain the confidence of business.”
More here:
BP looking forward to Trump presidency, says CEO Auchincloss
The boss of BP has said he is looking forward to the Donald Trump presidency, saying the Republican leader will help accelerate permitting time for energy projects.
Murray Auchincloss told the Energy Intelligence Forum conference in London today:
“We look forward to the Trump presidency. We think it’s a strong chance to help the U.S. get back to putting construction forward, getting regulatory reform in place, and getting faster permitting and really allowing construction to move forward.
That’s what we’re most hopeful for, because the US has been struggling in that space.
Updated
Small US company stocks are also rallying.
The Russell 2000 index, which tracks smaller firms across America, has jumped 2% to a record high today.
Twenty six of the 30 large US companies who make up the Dow Jones industrial average have risen in the first hour of trading.
Unitedhealth Group are the top riser, up 2.8%, followed by DIY chain Home Depot which has gained 2.1% and construction equipment maker Caterpillar which is up 2%.
"It’s Trump’s world, his cabinet just live in it"
Paul Ashworth, chief North America economist at Capital Economics, suggests we shouldn’t get too carried away with exactly who Donald Trump appoints.
Ashworth tells clients today:
Given the considerable uncertainty surrounding what policies president-elect Donald Trump will enact during his second term, there is a temptation to read a lot into his Cabinet nominations, but we would caution against that.
Following his comprehensive election victory this is Trump’s world, while the rest of us, including his cabinet, just live in it.
We still expect Trump to move relatively quickly next year to impose tariffs and immigration curbs. We don’t expect any major fiscal stimulus. We do expect the coming fiscal cliff to be avoided, with an extension of the original Trump tax cuts, but any tax cuts above and beyond that will be largely offset by spending cuts.
Macy's delays Q3 earnings report, says employee hid at least $132m in expenses
US department store chain Macy’s has given investors a nasty shock.
Macy’s has delayed its Q3 earnings release, which was due tomorrow, as it conducts an internal investigation into an employee who it says hid hundred of millions of dollars of expenses.
Macy’s says that a single employee with responsibility for small package delivery expense accounting intentionally made erroneous accounting accrual entries to hide approximately $132 to $154 million of cumulative delivery expenses.
This took place from the fourth quarter of 2021 until the quarter ending on 2 November this year.
Macy’s adds:
The individual who engaged in this conduct is no longer employed by the company. The investigation has not identified involvement by any other employee.
Macy’s has also reported a 2.4% drop in net sales for the last quarter.
Shares in the company have fallen over 4% in early trading.
Elsewhere in the markets, oil has fallen by 1.5% on hopes of a breakthrough in the Middle East.
Brent crude is down by $1 per barrel to around $74/barrel, after Axios reported that Israel and Lebanon had agreed to the terms of a deal to end the Israel-Hezbollah conflict, citing an unnamed senior U.S. official.
This has also knocked safe-haven assets, with gold down 2%, and silver losing 3%.
Updated
British flying taxi company Vertical Aerospace has agreed a $50m funding deal that will see founder Stephen Fitzpatrick hand over control of the business.
Lender Mudrick Capital, run by American debt investor Jason Mudrick, will hand over $25m, with a guarantee of another $25m either from his funds or from other investors.
The funding will allow Vertical to avoid a cash crunch that threatened to send it into bankruptcy just as it seeks regulatory approval for a flying taxi – with room for four passengers, 100 miles of range and top speeds of 150mph – that it hopes will be able to replace helicopters running on fossil fuels. The aircraft is electric and is a cross between a light plane and a drone, with tilting rotors and the ability to do vertical take-off and landing (VTOL).
Fitzpatrick, whose wealth derives from the Ovo retail energy business, founded Vertical in 2016. The company raised money in a merger with a US cash shell in 2021, but it was on the verge of running out of money, with revenues not expected until 2028 after repeated delays.
About $130m of Mudrick’s previous loans will be converted to equity, while the payment for the rest of the debt will be extended until December 2028, when the company expects to be manufacturing and selling aircraft at scale. Mudrick will hold 71% of the company, while Fitzpatrick’s stake will drop from nearly 75% to 19%.
Fitzpatrick, who will remain on the company’s board, said:
The additional equity and stronger balance sheet will enable us to fund the next phase of our development programme and deliver on our mission to bring the amazing electric aircraft to the skies.
Updated
The S&P 500 index, which covers a wider swathe of the New York stock market than the Dow, is aso at a new high.
Dow hits record high after Bessent gets Treasury nomination
Boom! Shares on Wall Street have hit new all time highs, on relief that President-elect Donald Trump has picked Scott Bessent as his incoming Treasury Secretary.
The Dow Jones industrial average has opened up 324 points, or 0.7%, at 44,621 points.
The broader S&P 500 index has jumped over the 6,000-point mark, up 0.7% to trade at 6,012 points.
And tech stocks are rallying too, lifting the Nasdaq Composite index up by 0.75%.
As explained earlier (see here), Bessent is seen as a market-friendly choice who could dilute some of Trump’s more extreme policies and could take a more gradual approach to the introduction of new tariffs.
This is also lifting bond prices – a sign that fears of an inflation surge under the new Trump administration are easing.
Bob Savage, head of markets strategy and insights at global financial services company BNY, cites Bessett’s 3-3-3 economic plan, saying:
Risk on as markets see bonds rally, USD dip and equites gain on Trump nomination of hedge fund manager Bessent to role of US Treasury Secretary. Bessent pushes 3 arrows for US economy - 3% budget deficit by 2028, 3% GDP and 3 million more oil production a day.
In an interview published on Sunday, Bessent told the Wall Street Journal that both tax and spending cuts were priorities.
David Morrison, senior market analyst at fintech and financial services provider Trade Nation, says there is hope that Bessent will take a ‘gradualist’ approach to tariffs:
There’s relief that Mr Bessent is a known quantity with a strong track record as a successful hedge fund manager, as well as a fiscal hawk.
This ties into the prevailing view that the Trump administration will focus on boosting economic growth, while actively taking measures to cut costs, thereby reducing the fiscal deficit which should reduce the rate of growth in the national debt. Mr Bessent is also in favour of tariffs, although he prefers a gradualist approach which suggests there’s room for negotiation.
You might have thought that the high winds that hit the UK yesterday as Storm Bert passed through would have boosted green energy supply, but no.
According to energy firm Octopus,£20m was spent yesterday on curtailment payments made to wind farms at such times, to encourage them to shut down to prevent grid overload.
Octopus have been calling for this system to be reformed, so that customers to use this currently-wasted energy and benefit from lower wholesale prices.
British utility Octopus CEO says the U.K. spent yesterday ~£20 million paying wind generators not to produce (curtailment was needed due to high wind during a winter storm)
— Javier Blas (@JavierBlas) November 25, 2024
Badenoch won't say if she'd reverse NICs increase
Conservative leader Kemi Badenoch has refused to say whether she would reverse Rachel Reeves’s £25bn increase in employers’ national insurance contributions.
“What I’m not going to do is comment on every bit of micro policy,” Badenoch told business leaders at the CBI’s annual conference, where the tax-raising budget has been much discussed.
Badenoch condemned employer NICs as a “tax on jobs,” but said it was too early in her leadership to set out specific policies.
When pressed on whether she would raise the £25bn of revenue in a different way - or alternatively what public services she would cut - she replied,
“I disagree with the premise of the question. We need to stop looking at everything as if it’s just a ledger, where it’s taxes raised and services delivered.”
She went on to pose the question of whether the planned football regulator is necessary, before adding that she didn’t want to talk about, adjusting “little knobs or levers”.
Badenoch had earlier told business leaders she wants to “rewire the economy,” and accused Labour of what she called an “unprecedented raid on business”.
Capitalism, wealth and profit are not dirty words, Badenoch says
“Capitalism is not a dirty word,” Conservative leader Kemi Badenoch insists.
Nor is “wealth” or “profit”, she adds, but there is a need to explain how these things deliver for the people.
Otherwise, Badenoch warns top business leaders at the CBI, people will think that business leaders are just in it for themselves, with the politicians “in cahoots” with them.
She says:
People who think business is all about greedy fat cats, rather than people who are working hard, entrepreneurs, and those who are making life better for all of us.
Badenoch: Everyday people bear brunt of regulation and tax rises
Badenoch then turns to her party’s principles,
One is “free and fair competition”. Not monopolies, rent-seeking or corporatism, but “genuine competition” where new entrants can come in, and failing competitors change or leave the economy, she explains.
A second is to represent all businesses, big and small. The burden on those small businesses are increasing, Badenoch warns.
She then says that the burden of regulations, and higher national insurance rates, end up falling on the public, as:
It is everyday people who bear the brunt, either in higher prices or lower wages, sometimes both.
Badenoch: Businesses knew we would lose election
It was obvious that the Conservative government had “lost the confidence of business”, Kemi Badenoch continues.
She says she wasn’t surprised that so many business leaders attended Labour’s “prawn cocktail, or smoked salmon” offensive last year.
That’s because businesses thought the Conservative’s didn’t understand their concerns, and that “we were going to lose”, she tells the CBI’s annual conference.
Badenoch says she has been keen to appoint MPs with actual business experience into the key business-facing roles in her shadow cabinet.
Shadow chancellor Mel Stride founded a successful business, which he expanded into the US, before becoming an MP, she says.
While shadow business secretary, Andrew Griffith, has “serious boardroom experience” having worked as a financial analyst and asset manager.
Kemi Badenoch says the previous Conservative government (in which she served) “got things wrong”.
That, she explains, is why she’s speaking to the CBI today as leader of the opposition, not as a government minister.
She says her father, a GP, would tell her that if you get the diagnosis wrong, the treatment won’t work.
And she then accuses the Labour government of “doubling down” on the mistakes of the previous government, combined with an “unpredentented raid on business”.
Today we are all talking about the consequences of the budget, but do not yet know the full consequences of their legislative problem.
Badenoch cites the employment rights bill, which she says is “designed by trade unions”.
Kemi Badenoch then tells the CBI’s annual conference that the UK economy needs to be rewired, so that the vast majority of jobs are productive, and those that aren’t “change”.
She says that when she speaks to members of the public, many think that money comes from government, and that a lot of people don’t understand concept of productivity.
Badenoch tells business leaders:
As business, you will know that some jobs are productive, and others less so.
Badenoch: UK needs growth to tackle record debt levels
Back in London, Conservative leader Kemi Badenoch is starting to give a speech at the CBI’s annual conference.
You can watch it here:
Badenoch says she has spoken to many delegates at the conference about the need to deregulate.
She says she tried to protect firms from regulation when she was business secretary (until the July election).
Badenoch says:
I know it is not government that creates growth, it is business.
Government often needs to get out of the way.
This is a difficult argument to make, she adds, as people want government to solve everything.
Badenoch adds:
If you ever sound hesitant, then they will make you out to be a cruel, unfeeling person, as I have discovered to my own personal cost.
This, she then claims is why the UK national debt is now at record levels, with the country spending more on debt servicing than on health, education or defence.
She insists:
That needs to change, we need growth.
The euro has now gained a whole cent against the US dollar today.
It’s climbed up over $1.05, having dipped below $1.04 on Friday for the first time since October 2022.
There are fears that the euro could be pushed down to parity if the next US administration launches a trade war against Europe, but those concerns seem to be ebbing today…
Updated
Back in London, the CBI’s annual conference has turned to “the future of public-private partnership,” with a panel discussion sponsored by law firm Browne Jacobson.
Browne Jacobson’s banking and finance partner Paul Hill (evidently if you pay for a panel you get a seat on the stage) is arguing we need a new era of public-private partnerships to deliver the government’s plans, including on green energy.
But he argues they need a rebrand, because the last generation of PFI schemes - which the last Labour government used to rebuild schools and hospitals - have such a poor reputation (unfairly, Hill reckons).
He says:
“It really is a toxic subject, and it’s quite interesting when you think that through.
Hill explains:
“The PFI delivered the longest sustained period of investment in public infrastructure in decades”.
He adds:
“If there’s one thing that’s clear is that any future model cannot have any of the words [in] ‘PFI’ in it”.
Jurgen Maier, the former Siemens boss now chair of GB Energy, says he’s optimistic about the prospects for attracting private investment into green energy projects, but, “we need to find some different language: I’m starting to talk about ‘private finance playbooks’”.
BoE's Dhingra: Trump tariffs could be deflationary
Donald Trump imposing massive tariffs on China could drive down global goods price, leading to lower inflation elsewhere around the world including in Britain, a senior Bank of England policymaker has said.
Swati Dhingra, an external member of the Bank’s rate-setting monetary policy committee, said a second Trump presidency imposing a 60% tariff on Chinese goods sold in the US could lead Chinese exporters to cut their prices to ensure they maintained current trade volumes.
Dhingra said:
“It takes a massive amount of demand out of the world market. The way exporters, say in China, would respond to that would be to respond with prices, world prices, as they don’t want to lose market share.”
Speaking at a conference in London on Monday, she said there was uncertainty about what policy the president-elect would carry through from his campaign. Trump had warned before the election earlier this month that he would slap tariffs of up to 60% on Chinese goods and up to 20% on other US trade partners.
A leading expert in global trade, Dhingra said a tariff of up to 60% would have a disinflationary impact for the world economy.
“If there is the kind of big 60% type of tariff increase that’s been proposed, that will have repercussions on to world price and mostly on the downward direction,” she said.
However, if there was a broader “tit-for-tat” trade war where other countries imposed retaliatory tariffs on the US “then we’re in a completely different situation”.
Drawing a comparison with Brexit, Dhingra said Britain leaving the EU had “permanently” raised the price of products in the UK for households. This had a short-term inflation impact, but this had faded as prices stabilised at a higher plateau.
She explained:
“We saw much higher price increases in the UK compared to everywhere else and those pressures have now come off much more quickly as well for the reason they’re not inflationary, they change the price levels, permanently.”
Friday night’s choice of Scott Bessent to be US Treasury Secretary has changed the mood in the markets today, reports Kit Juckes, chief FX strategist at French bank Société Générale.
Juckes reports:
The nomination of Scott Bessent to be US Treasury Secretary has been a catalyst for lower bond yields, higher equity indices and a weaker dollar this morning.
Bessent, the CIO of Soros Fund Management before he set up his own firm in 2015, is perceived to be in favour of pro-growth and deficit-reduction policies, and his nomination was greeted positively by markets worried about the size of the US budget deficit and the inflationary impact of tariffs.
Whether he can help get the US to 3% GDP growth and a 3% budget deficit time will tell, but for now, he has changed the market mood, if nothing else.
Dow futures hit record high as Wall Street welcomes choice of Bessent as Treasury secretary
Wall Street is set to hit a new alltime high when trading begins later today, following the news that Donald Trump has chosen billionaire hedge fund manager Scott Bessent to be the next US Treasury seccretary.
Bessent is seen as a more market-friendly choice than others on the shortlist, who could dilute some of Trump’s more extreme policies and could take a more gradual approach to the introduction of new tariffs.
This has lifted the futures contract on the Dow Jones Industrial Average to a record high this morning, indicating that the Dow could hit a record high when trading begins at 9.30am in New York (2.30pm GMT).
Dow futures hit all-time high as markets laud Trump's Treasury pick https://t.co/VSyw5bUN7R
— Börsenberichte (@BoersenDE) November 25, 2024
Bessent’s selection for the Treasury Secretary role – which has huge influence over US economy and financial markets – followed a battle with another top contender, billionaire investor Howard Lutnick.
Lutnick, who is the chief executive of financial firm Cantor Fitzgerald, has been handed the role of commerce secretary.
Elon Musk offered his backing to Lutnick for the Treasury berth last week, claiming that Bessent was a “business-as-usual choice, whereas Howard Lutnick will actually enact change.”
The financial markets seem to approve of Trump’s choice though.
US government bond prices are rallying today, pushing down the yield, or interest rate, on the debt.
And the dollar has weakened slightly, having hit a six-month high against the pound last week and a two-year high against the euro.
Both bond yields and the dollar had risen in recent weeks, on concerns that a trade war would lift US inflation, leading to higher interest rates.
Gilles Moëc, group chief economist at AXA Investment Managers, says:
The appointment of Scott Bessent – generally seen as a pragmatist – at the Treasury, after the more radical Howard Lutnick at the Department of Commerce, suggests that Donald Trump may not have made a firm decision on how far he wants to dial up the pressure on tariffs.
As many US economists – including mainstream ones – his main bone of contention with Europe is the lack of demand there, which restricts the capacity to build up a mutually beneficial trade relationship. Developing a proper growth strategy in the EU would not necessarily protect Europe fully from the US protectionist temptations, but it could be a more fruitful strategy, down the line, than merely engaging in retaliatory action, even if it is carefully targeted.
The Strategy Team at investment bank Saxo told clients this morning:
Bessent is known as a fiscal hawk who has advised Trump to create a “3-3-3” policy, including cutting the budget deficit by 3% of GDP by 2028, pushing GDP growth to 3% via deregulation and pumping extra 3 million barrels of oil each day. He is also expressed that tariffs should be used more as a negotiating tool and implemented more gradually.
Updated
Microsoft 365 outages reported
Newsflash: Microsoft users are reporting problems using the software giant’s suite of business applications.
According to the Downdetector website, there has been a surge in the number of people reporting problems with Microsoft 365, which includes Outlook.com, OneDrive, Microsoft Teams, and online versions of Office applications such as Word, Excel and Outlook.
Reports peaked just before 10am UK time.
Microsoft’s service status page is currently reporting that “Everything is up and running.”
But independent community website Windows Forum reports that there has indeed been disruption.
In a whirlwind of frustration and confusion, Microsoft 365 services have hit a significant snag, disrupting the workdays of countless office workers. From the early hours of the morning on November 25, reports began flooding in, particularly focused on Outlook, which has become the go-to email client for many companies.
As the sun rose, so did complaints on platforms like Downdetector, painting a vivid picture of an office environment turned chaotic.
Microsoft 365 Outage Locks UK Users Out of Outlook: What You Need to Know https://t.co/A7a56FRcZS
— WindowsForum (@windowsforum) November 25, 2024
Updated
Lombardelli: We'll have to see how firms respond to NICs rise
The deputy governor of the Bank of England has said how companies pass on higher employer national insurance contributions will be influenced by the UK’s current tight labour market.
Clare Lombardelli said the impact on UK inflation from the government’s £25bn increase in employer NICs was “uncertain” because there was a number of ways that companies would respond.
Business leaders have warned that the measure will lead to job losses, weaker wage growth, and firms passing on the costs in the form of higher prices charged to consumers.
Speaking at the Bank of England Watchers’ Conference 2024 at King’s College London today, Lombardelli said:
“We have to see how firms will respond to the fact we do still have a relatively tight labour market.”
On NICs, Lombardelli also said:
“It’s a big policy change and it’ll have a large impact, exactly what that impact will be is uncertain.”
She said the “early conversations” Threadneedle Street was having with companies showed “quite a range of proposed responses” depending on the size of a firm and the sector it was operating in.
In her first speech since her appointment as the Bank’s deputy governor for monetary policy in July, she warned there were risks to persistently high inflation from resilience in wage growth.
While annual wage growth has slowed from a peak of 8.1% in mid-2023 to 4.8% in the three months to September, she said there was some evidence that the “process of wage disinflation may be slowing.”
As covered earlier, Lombardelli added:
“It’s too early to declare victory on inflation. It’s often been said that the last mile may be the hardest, and that’s where we are now.”
Updated
UK household budgets face festive squeeze, Asda warns
Rising inflation may hit UK consumer spending this Christmas, supermarket group Asda has warned.
Asda’s latest Income Tracker shows that household disposable income fell in October for only the second time this year.
Household disposable income decreased by £1.98 in October, Asda reports, due to the pick-up in inflation last month.
This has left the average UK household with £247 per week to spend, after tax and essential purchase such as groceries, electricity, gas, transport costs and mortgage interest payments or rent.
The CEBR thinktank, who produce the Income Tracker on behalf of Asda, predict that households will face “dampened spending power over the festive period”
Sam Miley, managing economist and forecasting lead at Cebr, says:
“October’s reading was only the second time this year that the Income Tracker reading has fallen on the month.”
“This was largely expected, given the increase in the Ofgem price cap that took place at the start of the month, bringing higher energy bills. These increased energy prices will persist over the rest of Q4, leading to slightly dampened spending power over the festive period.”
Across age groups, those aged 30 to 49 experienced the fastest annual rise in the cost of essential spending, which increased by 3.8% to £765 in October.
These households, often made up of younger families with children, face significant essential expenses, including childcare costs, Asda points out.
Rain Newton-Smith: Government has ended instability, but tax rises will hurt businesses
CBI chief executive Rain Newton-Smith has kicked off the business lobby group’s annual conference in Westminster, with the strapline, “Time for Growth”.
She begain by praising the government, for offering more stability and certainty - including by offering a “corporate tax roadmap”; making full expensing permanent; and freeing up more resources for investment by changing the fiscal rules.
Rain-Smith also welcomed the reset of relations with the EU, and ministers’ overtures to China.
She said:
“This government has put us in a strong position by drawing the curtain on a near decade of instability at home.
But the main thrust of Newton-Smith’s address, as well trailed in the press this morning, was an attack on the £25bn tax raid on businesses, announced in the budget.
“What really defines growth is the decisions made in boardrooms up and down the country,” Newton-Smith said, adding:
“It’s CFOs asking, ‘can we afford to invest? Can we afford to expand? Can we afford to take a chance on people? Well after the budget, the answer we’re hearing from so many firms is, ‘not yet’”
She suggested many firms, in particular in retail and hospitality, were now in “damage control,” insisting, “tax rises like this must never again be simply done to business.
Instead, Newton-Smith called for an “elevated partnership,” between government and businesses. She cited three specific areas: long-promised business tax reform, tax breaks for occupational health, and reform of the apprenticeship levy.
Conservative leader Kemi Badenoch and the chancellor, Rachel Reeves, will both address business leaders here in Westminter later.
In a reference to the Guardian’s revelations of sexual misconduct at the lobby group, which sparked an existential crisis, Newton-Smith acknowledged the CBI had travelled a “difficult road”. She was applauded when she said the CBI was, “back in business”.
She also joked about Boris Johnson’s rambling speech here three years ago, saying that today, there will be “hopefully not a Peppa Pig in sight!”.
The pound is holding its earlier gains against the US dollar, after Bank of England policymaker Clare Lombardelli took a cautious tone about future interest rate cuts this morning.
Sterling is still up almost half a cent against the dollat at $1.258, with the greenback still weaker as investors digest the prospect of Scott Bessent becoming the next US Treasury secretary.
Bessent is seen as a less extreme option, who might take a measured approach to tariffs and reining in the US budget deficit. That could mean less inflationary pressure, and thus less risk of higher US interest rates….
German winter recession fears rise as business confidence drops
Over in Germany, business confidence has taken another hit as firms grow more pessimistic about the economic situation, and the outlook for the future.
The Business Climate Index produced by the Ifo institute has fallen to 85.7 points in November, down from 86.5 points in October.
The decline in business morale was mainly due to the poorer assessment of the current situation, although expectations also fell slightly, Ifo said.
Ifo says:
Sentiment among companies in Germany has become gloomier….
The German economy is floundering.
Carsten Brzeski, global head of macro at ING, reckons the drop in confidence is due to restructuring announcements from larger corporates, an escalation of the war in Ukraine and still-weak industrial order books and consumption.
Germany companies also face the threat of new tariffs from the next Trump administration, he points out, which would add to Germany’s economic risks as 10% of German exports go to the US.
Brzeski adds:
All in all, today’s Ifo index adds to the evidence that the German economy remains stuck in stagnation and that after meagre growth in the third quarter, a (technical) winter recession looks likely.
The much-discussed problems with the UK’s employment data are making it harder for the Bank to tell what’s actually happening in the jobs market, Clare Lombardelli points out.
The Bank’s deputy governor also says it’s “uncertain” what impact the increase in employer national insurance contributions will have.
Lombardelli tells the Bank of England Watchers Conference:
We are hampered by the challenges of the quality of data, in particular in the Labour Force Survey.
There have also been recent changes to the costs of employment from the combination of the increase to the National Living Wage, the rise in employer National Insurance Contributions and potentially the changes to workers’ rights. Although the size, timing and interaction of these effects are uncertain.
Clare Lombardelli also cites concerns about inflation in the services sector.
She tells the Bank of England Watchers’ Conference 2024 that services inflation is still above its pre-pandemic average, having been recorded at 5% in October. The Bank expects it to stay around that rate for another few months, she says.
Lombardelli argues that wage rises, rather than profit-seeeking, is fuelling services inflation, saying:
Wages are a material driver of services prices, and the slower-moving nature of services inflation reflects in large part the relatively high ‘stickiness’ of wages compared with other prices…
In principle, higher-than-usual profit margins could also be driving the current elevated services inflation. But we regularly monitor developments in companies’ margins and there is little evidence of that.
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BoE's Lombardelli: Too early to declare victory on inflation
Newsflash: A deputy governor at the Bank of England has warned that it is “too early to declare victory” in the fight against inflation.
Clare Lombardelli has told a conference organised by King’s Business School this morning that inflation has fallen steeply over the past two years. But, she is concerned that there are signs that the process of “wage disinflation” may be slowing, which would keep the cost of living rising faster than the Bank’s target.
She cites data from the Bank’s Decision Maker Panel (DMP) survey, which shows that UK businesses expect to raise pay by between 2% and 4% next year.
Wage growth would need to be around 3% to be consistent with inflation at target, Lombardelli says, suggesting that higher earnings growth would make it harder for the Bank to cut interest rates.
Opening today’s Bank of England Watchers Conference in London, Lombardelli says:
The outlook for wages and services prices is unclear from here.
We need to see more evidence that wage growth and services inflation will continue their journey down to target-consistent rates.
ut there are some signs that the process of wage disinflation may be slowing, as shown in Chart 5, so it’s too early to declare victory on inflation. It’s often been said that the last mile may be the hardest, and that’s where we are now.
In her first speech as Deputy Governor for Monetary Policy, Lombardelli concludes:
The UK economy has made good progress on disinflation. The shocks that drove inflation up have dissipated and inflation has returned to around target.
But the more persistent components of inflation and uncertainties around how the labour market will evolve are cause for concern. So we need careful observation of all the relevant economic data and intelligence as we seek to gradually reduce policy restriction.
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Anglo to sell Australian coal mines to Peabody for up to £3bn
In the mining sector, Anglo American has agreed a deal to sell its remaining coal operations in Australia to US rival Peabody Energy for up to $3.78bn (£3bn).
The sale is part of Anglo’s push to focus on copper and iron ore production, after it fought off a takeover approach from BHP Group earlier this year.
The six-month freeze preventing BHP making another approach expires at the end of this week, although its chair said last month that BHP had “moved on”, and will focus on other growth opportunities instead…
Barclays: We don't accept FCA's findings, but want to end the issue
Barclays has confirmed that it has withdrawn its legal action against the FCA, paving the way for this morning’s fine.
But, the bank also says that it doesn’t accept the FCA’s findings over its Qatari fundraising – but is keen to ‘draw a line’ over the long-running issue.
In a statement just released, Barclays says:
Barclays PLC (“Barclays”) announces that it has agreed with the Financial Conduct Authority (the “FCA”) to withdraw its references to the Upper Tribunal (the “Reference”) of the Decision Notices regarding Barclays and Barclays Bank PLC concerning the 2008 capital raisings, first published by the FCA on 23 September 2022 (the “Decision Notices”).
In view of the time elapsed since the events, Barclays wishes to draw a line under the issues referred to in the Decision Notices and has decided not to contest the Decision Notices further.
Barclays does not accept the findings of the Decision Notices and this has been acknowledged by the FCA.
Notwithstanding the difference of view, Barclays has concluded that the interests of the Bank, its shareholders and other stakeholders are best served by withdrawing the References.
A provision in respect of the financial penalty imposed by the FCA was taken in 2022 and there is no material financial impact on Barclays.
Barclays fined £40m over 2008 Qatari deal
Newsflash: Barclays has been fined £40m by City regulators over allegedly secret payments it made to Qatari investors during the financial crisis 16 years ago.
The Financial Conduct Authority has announced it has fined Barclays £40m “for its failure to disclose certain arrangements with Qatari entities in 2008”, which the regulator says was “reckless and lacked integrity”.
The fine relates to the £322m the bank paid to Qatar in 2008, allegedly in exchange for the gas-rich Gulf state investing £4bn in Barclays, helping save the lender from a UK government bailout.
The fees were seen by critics as a way for Qatar to effectively purchase Barclays shares at a heavily discounted price that was not offered to other investors, when the City was reeling from the financial crisis.
The FCA had provisionally proposed fining Barclays £50m – which the bank was appealing against.
That case had been due to be heard in the Upper Tribunal today, but the FCA says Barclays has now withdrawn its referral.
Steve Smart, joint executive director of enforcement and market oversight at the FCA says:
‘Barclays’ misconduct was serious and meant investors did not have all the information they should have had. However, the events took place over 16 years ago and we recognise that Barclays is a very different organisation today, having implemented change across the business.
‘It is important that listed firms provide investors with the information they need.’
The FCA also says it recognises that this case concerns disclosure decisions made in the context of “very large and complex capital raisings” that took place many years ago under “considerable market pressure” in October 2008 (following the collapse of Lehman Brothers).
Back in 2020, three former Barclays bankers accused of funnelling secret fees to Qatar in exchange for emergency funding at the height of the 2008 financial crisis were been found not guilty of fraud.
The FCA originally revealed it was investigating the controversial fee arrangements back in 2013, but paused its investigation during a criminal trial launched by the Serious Fraud Office (SFO). However, the SFO failed to win a trial against Barclays over the Qatar deal, and the case collapsed in 2018.
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The US dollar is dipping this morning after Donald Trump picked hedge fund manager Scott Bessent to be the next US Treasury secretary.
This has lifted the pound up by almost half a cent, to $1.257, away from last Friday’s six-month low.
The euro, which hit a two-year low last week, is up almost half a cent too, at $1.045.
Jim Reid of Deutsche Bank says markets are reacting constructively to the choice of Bessent. He told clients:
Bessent, a hedge fund CEO, is known to be a fiscal hawk so this should ease some of the more extreme deficit fears as he has advocated a 3% deficit by 2028.
In practise that will be extremely tough but for now the market can be a bit relieved. He is also thought to be less extreme on trade policy than some of his rivals for the job.
CBI chief executive Rain Newton-Smith has spoken to Radio 4’s Today Programme about the group’s concerns over the budget, ahead of today’s conference.
Q: Rachel Reeves will say she’s heard “no alternative” to her plans, what’s your response?
Newton-Smith says the business leaders she’s spoken to have said the decisions made the budget make it harder for them to invest and to hire people.
Business investment growth is weaker because of the decisions taken in the budget, she warns.
Q: If more money for public services is needed, isn’t it fair to raise it from companies making billions of pounds in profits?
Newton-Smith says “no-one is questioning” that tax rises are needed to fund public services.
But the challenge with increased national insurance contributions (NICs) is that hits all businesses before they’ve made a profit, so it leads to “serious” pain on businesses.
The CBI wants the government to “double-down” on measures to help businesses.
That could include reforming business rates to remove pressure on businesses, such as in aviation and hospitality.
The industrial strategy must make it easy for businesses to invest and hire.
Q: Were Labour honest with business in the run-up to the Budget?
The chancellor did talk about the need for tough choices, Newton-Smith points out.
But… lowering the NICs threshold hits businesses offering opportunities to people entering the labour market for the first time, she adds.
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Greggs: Budget tax rises won't slow our expansion
The boss of Britain’s Greggs has pledged that its expansion plans will not be derailed by the new Labour government’s tax raising budget.
Greggs CEO Roisin Currie has told Reuters said that although she supported higher wages, changes to tax thresholds were an unwelcome surprise.
Currie said the measures would increase its annual costs by tens of millions of pounds, but also predicted that any customer price rises likely to only be “pennies”.
Currie says:
“Our shop growth plan, our supply chain investment, none of that changes. We are still absolutely going for growth.”
Currie also ruled out slashing the bonus distributed to employees to cover the costs of the budget, saying the bonus was “absolutely sacred”.
Kingfisher: NICS increase will cost us £31m
DIY chain Kingfisher has blamed the budget for hitting consumer confidence, and revealed that increases to employer national insurance contributions will cost it £31m.
Kingfisher has slightly lowered its earnings guidance this morning, it now expects adjusted pre-tax profits to be between £510m to £540m, down from £510m-£550m previously.
Thierry Garnier, chief executive officer of Kingfisher, says:
“Overall trading in the third quarter was resilient. Improved performance in August and September was offset by the impact of increased consumer uncertainty in the UK and France in October, related to government budgets in both countries.
Garnier adds that “recent political and macroeconomic developments” have layered incremental uncertainty onto the near-term outlook in its markets.
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Reeves to defend her budget to the CBI
Rachel Reeves is expected to tell business leaders that they have offered “no alternatives” to her plans, in a defiant defence of her tax-raising budget today.
Reeves will tell the CBI’s annual conference in Westminster that no one has offered a better solution to the challenging situation left behind by the previous, Conservative government.
“I have heard lots of responses to the government’s first budget but I have heard no alternatives,” she is expected to say.
“We have asked businesses and the wealthiest to contribute more. I know those choices will have an impact. But I stand by those choices as the right choices for our country: investment to fix the NHS and rebuild Britain, while ensuring working people don’t face higher taxes in their payslips.”
Here’s the full story, by our economics editor Heather Stewart.
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Introduction: Budget tax rises will hurt hiring, say bosses
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK businesses are warning today that the tax rises in last month’s budget have put a ‘heavy burden’ on them, putting firms off hiring.
Business leaders are gathering at the Queen Elizabeth II Centre in central London for the Confederation of British Industry (CBI)‘s annual conference. They’ll hear from chancellor Rachel Reeves, and leader of the opposition Kemi Badenoch, after a breakfast with Bank of England (BoE) governor Andrew Bailey.
And the message from the CBI is that Reeves’s first budget will hurt profits, leading to lower investment and growth.
A survey conducted by the CBI after the budget found that nearly two-thirds of firms thought the budget will damage UK investment with half of firms looking to reduce headcount as a result.
CBI CEO Rain Newton-Smith will tell firms today that “tax rises like this must never again simply be done to business.”
She’s expected to say:
“What really defines growth – is the decisions made in boardrooms up and down the country.
It’s CFOs and CEOs asking: can we afford to invest? Can we afford to expand? Can we afford to take a chance on new people?
Well after the Budget, the answer we’re hearing from so many firms is still – not yet.
The rise in National Insurance and the stark lowering of the threshold, caught us all off guard.
Set alongside the expansion and rise of the National Living Wage – which everyone wants to accommodate – and the potential cost of the Employment Rights Bill changes… they put a heavy burden on business.”
She will then warn:
When you hit profits, you hit competitiveness, you hit investment. You hit growth.
Data last Friday showed that the UK private sector is stagnating this month, following the budget at the end of October.
The CBI, which was hit by claims of sexual misconduct and a ‘toxic culture’ last year, is now hoping to have a greater influence over government policy again. Newton-Smith is expected to commend the government for “drawing the curtain on a near decade of instability” but urge them to shift from “consultation to co-design”.
Reeves's budget, at the end of October, included £40bn of tax rises to boost public spending, including £25bn from increasing employer national insurance contributions.
The conference will be wrapped up by CBI president Rupert Soames. Back in February, he told us that the Guardian’s revelations about sexual misconduct at the lobbying group were “an appalling shock” that tipped it into a “near-death experience”.
Soames said the scandal had triggered an existential crisis; today’s conference will be a test of how well his rescue operation is going.
Among the speakers at today’s conference is the US Embassy’s Deputy Chief of Mission, Matthew Palmer, who will discuss the US political situation.
Also coming up
The Bank of England are holding a conference today too, with economists and other ‘watchers’ of the UK central bank – we’ll be watching for any hints on how quickly it will keep cutting interest rates.
Financial markets will be digesting Donald Trump’s nomination of Scott Bessent, a billionaire hedge fund manager, to be the next US Treasury secretary. Bessent is seen as a Wall Street-friendly pick.
The agenda
9am GMT: Bank of England deputy governor Clare Lombardelli speaks at BoE Watchers’ conference
10.05am GMT: Opening keynote address at CBI conference from Rain Newton Smith
Noon GMT:
1.30pm GMT: Conservative leader Kemi Badenoch speaks at CBI’s annual conference
4.10pm GMT: CBI holds fireside chat with ‘senior cabinet minister’ (probably Reeves)
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