Closing post
Time to recap…
The US economy expanded at a solid pace in the third quarter of the year, new data has confirmed.
US gross domestic product increased at a 2.8% annualized pace in July-September, the second estimate of the figures from the Bureau of Economic Analysis showed today. Analysts said it showed America’s economy was ‘motoring’ along.But policymakers fear that new tariffs imposed by Donald Trump could hit growth at home and abroad.
Price pressures seem to be picking up a little in the US, with the PCE inflation measure rising to 2.3% in the year to October.
Coffee prices are certainly rising – they have jumped to their highest level in almost 50 years today, with analysts blaming fears of supply shortages.
There have been some jitters on the French stock market, on concerns that the Paris government could be brought down by a row over a belt-tightening draft budget.
Elsewhere:
Updated
#UPDATE The price of Arabica coffee hit its highest level since 1977 on Wednesday, approaching a record high as drought in top producer Brazil this year hits supplies ➡️ https://t.co/mZEaW2uVMx pic.twitter.com/7TKhxZYEIJ
— AFP News Agency (@AFP) November 27, 2024
Arabica coffee prices hit highest in nearly half a century
Wholesale coffee prices have hit their highest level in around half a century today.
World arabica coffee price benchmarks climbed to their highest since 1977 on the ICE exchange today, Reuters reports, at $3.21 per lb (£2.53/lb).
Reuters attributes the rally to farmers in Brazil still reluctant to sell, speculators piling in, and talk of panic buying amongst the trade.
A coffee expert at one of the world’s top agricultural trade houses explained:
“Brazil farmers are not interested in selling, the trade has no cash and can’t sell or put on new hedges, and speculators will certainly not sell, so there are not many sellers.”
Analysts at Saxo Bank said coffee prices were rising due to “sustained worries about Brazil’s 2025 output after trees were hurt by a long drought earlier this year”.
There are also concerns that next year’s harvest could suffer from the long dry and hot period that affected arabica coffee crops earlier this year, analysts at Rabobank explained.
Arabica is the high-end variety favored for specialty brews. The price of robusta coffee, used to price the cheaper coffee variety typically used in instant coffee blends, has risen by almost 5% today, to the highest since the start of October.
US PCE inflation measure ticks up
The US central bank’s favourite inflation measure has risen.
The PCE price index rose by 2.3% in the year to October, up from 2.1% in September to match August’s reading.
Stripping out food and energy, and core PCE rose to 2.8% from 2.7%.
The Federal Reserve favours PCE as a good measure of inflationary pressures in the US economy, so Fed policymakers may be concerned to see prices rising faster than its 2% inflation target.
Updated
The increase in US GDP in the last quarter was due to increases in consumer spending, exports, federal government spending, and business investment.
The BEA reports:
The increase in consumer spending reflected increases in both goods and services. Within goods, the leading contributors to the increase were other nondurable goods (led by prescription drugs) and motor vehicles and parts (led by used light trucks). Within services, the leading contributor to the increase was health care (both outpatient services and hospitals).
The increase in exports primarily reflected an increase in goods (led by capital goods, excluding automotive).
The increase in federal government spending primarily reflected an increase in defense spending.
The increase in business investment primarily reflected an increase in equipment (led by information processing equipment as well as transportation equipment).
The increase in imports primarily reflected an increase in goods (led by capital goods, excluding automotive).
Get details about how the U.S. economy performed in the third quarter of 2024 by reading our latest blog:
— BEA News (@BEA_News) November 27, 2024
https://t.co/UKQzMJah2g pic.twitter.com/wIhTRyhsyj
There’s a subdued start to trading on Wall Street, where the Dow Jones industrial average has gained 75 points, or 0.17%, to 44,935 points.
There’s more action among small company stocks, though, lifting the Russell 2000 index by 1%.
Rouble hits lowest since March 2022
The Russian rouble has lurched to its lowest level since the early days of the full-scale invasion of Ukraine.
The rouble has plunged by over 7.3% today to 113 roubles to the dollar, its weakest level since mid-March 2022.
The latest drop came just days after the US introduced sanctions against Gazprombank, Russia’s third-largest bank, which played a key role in processing payments for the remaining Russian natural gas exports to Europe.
My colleague Pjotr Sauer reports:
Earlier rounds of sanctions had spared Russian gas because Europe’s economy was so dependent on it, but it is now far less reliant on Russian supplies. The Gazprombank sanctions raise the prospect of a further decrease in gas revenues and foreign currency for Moscow.
The rouble’s weakening threatens to erode Russians’ purchasing power by increasing the cost of imported goods and could further increase inflation.
The country is already contending with runaway inflation, which could climb to 8.5% this year – twice the Central Bank’s target.
Updated
US unemployment claims remained low last week.
There were 213,000 new initial claims for jobless support last week, a drop of 2,000 compared with the previous week.
Today’s US GDP report shows that disposable personal incomes kept rising in the last quarter, despite inflation taking a bite out of pay packets.
The Bureau of Economic Activity says:
Disposable personal income increased $122.9 billion, or 2.3 percent, in the third quarter, a downward revision of $43.1 billion from the previous estimate. Real disposable personal income increased 0.8 percent, a downward revision of 0.8 percentage point.
US economy "clearly motoring" after 2.8% growth in Q3
Today’s US GDP report looks to be good news for Donald Trump – suggesting he will take control of an economy in good shape.
Lindsay James, investment strategist at Quilter Investors, says:
“The US economy is clearly motoring. The second reading of Q3 annualised US real GDP growth has come in at 2.8%, in line with expectations and following 3% growth delivered in Q2, and 1.6% seen in Q1.
“Rising real wages, falling interest rates and likely falling taxes and deregulation are all factors that are usually good news for stocks, and markets are already performing strongly in factoring in the better than expected growth.
“US GDP has defied expectations throughout 2024, having been helped along by numerous factors. Consumer confidence levels, which have been consistently dreadful and would have indicated otherwise, do not seem to have deterred spending. Instead, US consumers continued with purchases, if more selectively in lower income households, which has played a significant role in boosting the economy.
“While growth has proven unexpectedly strong this year, looking ahead, Trump’s Cabinet picks combined with a set of economic policies that are substantially un-tested in modern developed world economies mean that the range of outcomes for 2025 is wide. Nonetheless, expectations for the US economy are now much higher than they were, reflected by stock market gains of around 30% year to date.
“With an impending sugar high from Donald Trump on the horizon, the US economy should continue to grow at a similar rate. However, it will take some time for the true nature and impact of the president-elect’s policies to materialise.
As covered in the introduction, Bank of England deputy governor Clare Lombardelli have warned that the president-elect’s proposed trade tariff would pose a risk to economic growth in countries including the UK.
Updated
US durable goods rise, less than forecast
Orders for durable goods at US factories rose last month, but by less than expected.
Orders for durable goods – tangible products that can be stored or inventoried and that have an average life of at least three years – increased by 0.2% in October, less than the 0.5% expected.
That follows a 0.4% fall in September – possibly a sign that customers are getting orders in before new tariffs are imposed on imports?
Excluding transportation equipment, new orders increased 0.1%. Excluding defense products, new orders increased 0.4%.
US growth confirmed at 2.8%/year
A flurry of US economic data has just been released, as statistics bodies clear the decks ahead of the Thanksgiving holiday tomorrow.
First of all, we have confirmation that the US economy grew faster than European rivals in the last quarter.
US GDP is estimated to have risen by an annualised rate of 2.8% in July-September, the same as was estimated last month. That’s the equivalent of 0.7% growth quarter-on-quarter, much faster than the UK’s 0.1% growth, and the 0.4% recorded in the eurozone.
The U.S. economy grew at a 2.8% annualized rate in Q3, the same rate estimated a month ago.#GDP
— BEA News (@BEA_News) November 27, 2024
On trade, the US trade deficit has narrowed – to $99.1bn in October, down $9.6bn from the $108.7bn deficit recorded in September.
Imports fell faster than exports:
Exports of goods for October were $168.7bn, $5.6bn less than September exports.
Imports of goods for October were $267.8bn, $15.2bn less than September imports.
Trade tariffs make it harder to keep prices low, IKEA executive says
New US tariffs could push up the cost of furniture at IKEA.
The chief financial officer of the world’s biggest furniture retailer has told Reuters that the proposed tariffs would make it harder for IKEA to keep prices low.
Juvencio Maeztu explained that some 30% of IKEA products are sourced from Asian countries including China, with 70% coming from Europe, adding:
“For us, trade barriers around the world, whether it is from one country or another country, are limiting the possibilities to make things more affordable for the many people.
“We will keep working with governments and with our supply chain to try to mitigate the impact and to hope to secure affordability.”
Donald Trump’s threat of a 25% tariff on Canadian imports could push Canada into recession, fears Rogier Quaedvlieg, senior US Economist at ABN AMRO.
Quaedvlieg told clients today:
From the perspective of Canada and Mexico, the tariffs are a hard blow. Exports to the US account for 74 and 80% of all exports of Canada and Mexico, and 20 and 26% of total GDP.
Tariffs in the first Trump administration led to a percentage decrease in real consumption of about half the magnitude of the tariff percentage. This very conservative estimate gives a GDP hit of 2.5 and 3.25% to Canada and Mexico, enough to push at least Canada into a recession. Second order effects on dependent industries would amplify the impact.
The countries reacted with shock to the announcement of such a strong measure. Canada seemed to try and appease President Trump, while Mexico threatened retaliatory tariffs. China on the other hand reacted mildly, seeing their promised 60% tariff downgraded to a mere 10%, although there is nothing to suggest that this proposal would replace the universal tariff touted during the elections.
Trump’s tariff plan will send prices ‘through the roof’, warn US firms
Manufacturers across the US are bracing for disruption from Donald Trump’s planned new tariffs – and warning their customers could be hit – my colleague Callum Jones reports:
Donald Trump set the business and political world alight late on Monday. The incoming president said he would impose a 25% tariff on goods from Mexico and Canada and hit China with more levies on day one of his term.
“This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!” he wrote on Truth Social.
Scott Harris has been here before. Eight years ago Catoctin Creek, the Virginia whiskey distillery he runs with his wife, Becky, was generating 11% of its sales in Europe – and expecting to more than double its business there the next year. Then the trade war kicked in.
After Trump imposed steep tariffs on foreign steel and aluminum, the European Union hit back with retaliatory duties, including 25% on American whiskey. “That 11% went to zero,” recalled Harris.
While that initial wave of tariffs was repealed, today Catoctin Creek has “no meaningful business” left in Europe, he said. “A few thousand dollars, but nothing to speak of.”
Trump’s return to power sets the stage for a new trade war. The president-elect campaigned on a pledge to impose sweeping tariffs in a bid to revitalize the US economy. Officials in key markets are already considering if, and how, they would retaliate.
Back in Paris, shares in French financial companies are continuing to fall – amid worries that PM Michel Barnier’s government could be brought down by a row over a belt-tightening draft budget.
Insurance group AXA are down 5%, with bank Société Générale losing 3.5%.
Yesterday, Barnier warned that France could face fiscal calamity should lawmakers decide to topple his government over a budget dispute.
He told French broadcaster TF1 that “There’s likely to be a serious storm and serious turbulence on the financial markets” if the government were to collapse.
French bond prices are pretty flat, though. But with German bond price rising, the spread between Paris and Berlin’s borrowing costs has widened to a 12-year high:
Bob Savage of BNY says:
The French markets today are back to worrying about the risk of another election. The coalition government is stuck with 2025 budget battles and cracks in support with the National Rally far-right pushing back.
There are broader implications about political risks everywhere. First is that in 2024, the voters have kicked on incumbents -signaling frustration over cost of living and national interests. Second is that deficits built up from pandemic responses are now problematic as debt servicing and austerity plans clash against fragmented coalitions.
Setting what is most important in the years to come is the role of political leaders – and the best way forward will be to lead with growth but spending more money will not work in the same way it did during 2020. The problems of current policy and future policies show up most clearly not in FX or Equities but in Bonds. The risk premium for French debt is an example and a lesson for other governments.
Updated
Wizz Air executive fined for trading during closed periods
Britain’s financial regulator has fined the former chief supply chain officer of budget airline Wizz Air Holding over £125,000 for trading company shares when he wasn’t allowed to.
András Sebők breached City rules by trading Wizz Air shares in the restricted 30-day period leading up to the firm’s financial results announcements, the FA says, and also didn’t notify the FCA and Wizz Air of his personal trades within the required 3 business days.
The trading took place between April 2019 and November 2020, when Sebők made 115 trades in Wizz Air shares, worth over £4m in total.
This is the first time the FCA has fined a person discharging managerial responsibility (PDMR) for trading company shares during closed periods, under Article 19(11) of the Market Abuse Regulations (MAR), it says.
Updated
Pets at Home boss Lyssa McGowan has broken ranks on the implications of cost rises linked to the government’s budget - saying they won’t necessarily lead to price rises.
McGowan said Pets at Home’s bill from the changes to National Insurance and the minimum wage would mean £18m in extra costs for the specialist retailer, but this was in line additional cost from the increase in the minimum wage last year, which the chain had been able to absorb through various efficiencies helped by new technology.
“We absorbed that [£18m] and kept costs flat,” McGowan said, adding that the company had no plans to change its strategy because of the budget measures.
“£18m, some of which was unexpected, is a lot of money but like all retailers we are looking at all avenues to ameliorate that. It is not a given at all that we will have to put up prices.”
She said she was feeling “confident and optimistic” about the run up to Christmas despite a “subdued consumer” environment, as households were turning to Pets at Home’s own-label pet food, for example, as a way to save money helping the business grow in a flat market.
She said shoppers were still prepared to buy treats - with the group’s premium pet advent calendars quickly selling out, for example - but were being careful in many other areas. Pet food has seen high levels of price inflation in recent years, and McGowan said prices had now flattened, but not come down.
In addition a surge in the number of pets in the UK has now flattened out, with the number of pets stabilising, so that Pets at Home is signing up 15,000 kittens and puppies a year to its loyalty scheme, half the level during the height of the pandemic pet boom.
Pets at Home’s share price dived 13% this morning, as the retailer warned that the subdued consumer environment would continue into the spring, hitting annual profits. Analysts at Peel Hunt trimmed £10m off their forecast, taking it down to £135m.
Updated
Here’s Susannah Streeter, head of money and markets at Hargreaves Lansdown, on Aston Martin’s cash call:
Aston Martin might be known for its association with James Bond, but there’s no secret agent in sight to pull it out of its latest scrape. Instead, it’s gone cap in hand to investors to raise money by issuing new shares after posting another profit warning, just months after flagging difficulties in September.
The company has hit another troublesome speed bump, with production slowed down by supply chain issues, affecting deliveries of its super-high end Valiant models. This is coming on top of a deceleration of demand in China, a crucial market for the luxury car maker.’’
Trump’s tariffs will lead to higher prices in the shops, and weaker currencies for Canada, China and Mexico, explains Holger Schmieding, chief economist at Berenberg Bank.
Schmieding says
Taken at face value, such tariffs could raise the level of US consumer prices by c1% within a year if we assume that producers and distributors can pass on roughly 70% of higher import prices to consumers at a time of buoyant domestic demand. However, a depreciation of the Canadian, Mexican and Chinese currencies relative to the US dollar will likely absorb a significant part of that impact, perhaps up to half as a back-of-the envelope guess.
Trump’s tariff statement is probably merely the opening salvo of a series of tariff threats. But interestingly, he has tied his announcement of extra tariffs on the top three exporters to the US to specific complaints about immigration and drug trafficking. That seems to open the door for negotiations.
If the three countries do his bidding on immigration and drugs control to some extent, the tariffs may not be fully imposed or be partly rescinded again afterwards.
The Chinese yuan, Mexican peso and Canadian dollar all fell yesterday, with the latter hitting a four-year low against the US dollar.
Aston Marton shares drop after cash call and warning on profits
Shares in luxury car market Aston Marton have hit a two-year low in London this morning, after it tapped its investors for more cash and cut its profit forecast.
Aston, which has been hit by softening demand in China, has raised £111m by issuing new shares worth 100p each – a near-8% discount to last night’s close of 107.9p.
It also raised £100m through new debt, and plans to use its new funds to invest in “future growth opportunities” and on its electrification strategy.
Aston also warned shareholders last night that it has suffered delays in the delivery of its ultra-exclusive luxury car, Valiant, which cos £2m each.
While deliveries are still on track to start before the end of 2024, Aston now only expects to deliver around half of the 38 Valiant models by the end of the year, havng previously expected to get the majority into customers’ hands. This will reduce operating profits to £270m-£280m, down from £285m previously expected.
This morning, Aston’s shares have dropped as low as 98.1p, the weakest since October 2022, before recovering slightly to 102.4p (-5%).
Lawrence Stroll, executive chairman of Aston Martin – who rescued the company in 2000 – insists it can deliver “long-term value” to shareholders, as it enters 2025 with “a stronger and more resilient balance sheet”.
But, shares are down roughly 97% since its stock market float in 2018….
Updated
The London stock market has suffered another blow this morning, with the news that food delivery company Just Eat Takeaway is to delist.
Just Eat is also listed on the Amsterdam stock market, where the company is headquartered, and said the delisting resulted from restarting a review into where its shares should be listed.
Citing the “administrative burden, complexity and costs associated with the disclosure and regulatory requirements of maintaining the LSE listing” as its reasons for the decision, Just Eat said it was also because of low liquidity and trading volumes of its shares on the London market.
The French stock exchange, the Cac 40, has dropped to its lowest level since the market wobble of early August.
The Cac 40 is down 0.8% at a three-month low, led by bank stocks, and exporters such as Renault (-2.1%) and STMicroelectronics (-1.7%).
Back in the UK, the competition watchdog has reported that loyalty card pricing at UK supermarkets is not always the cheapest option for consumers.
In a new report, the Competition and Markets Authority (CMA) has found that loyalty prices do offer “genuine savings”; after analysing 50,000 loyalty-priced products, it found 92% offered savings on the usual price.
Customers can make savings of up to 25% by buying loyalty priced products, according to the CMA. But it stressed that while they offer “legitimate” discounts, supermarket customers could still find cheaper alternative options by shopping around.
George Lusty, interim executive director of consumer protection, explains:
“We know many people don’t trust loyalty card prices, which is why we did a deep dive to get to the bottom of whether supermarkets were treating shoppers fairly.
“After analysing tens of thousands of products, we found that almost all the loyalty prices reviewed offered genuine savings against the usual price – a fact we hope reassures shoppers throughout the UK.
“While these discounts are legitimate, our review has shown that loyalty prices aren’t always the cheapest option, so shopping around is still key.”
US tariffs would also have an impact on American consumers.
Economists at Deutsche Bank have calculated that if Trump’s threatened tariffs were fully implemented, US core PCE inflation for 2025 could increase from 2.6% to 3.7%.
Before Trump’s victory the assumption was for 2.3% inflation in 2025.
Share have rallied in China today, on hopes that Beijing may roll out new stimulus measures to protect its economy from Trump’s tariffs.
The CSI 300 index has rallied by 1.75%, while stocks in Shenzhen are up over 2%.
Vis Nayar, chief investment officer at Eastspring Investments in Singapore, explains:
“With the potential threat of tariff hikes in 2025, it’s likely China’s policymakers would come up with further stimulus packages to counter downward economic growth pressure from domestic cyclical weakness and increased external uncertainty.
There remains plenty of scope for China to surprise the markets.”
Budget airline easyJet has swelled its profits, despite the turmoil in the Middle East hitting demand.
EasyJet has reported a pre-tax profit of £602m for the year to 30 September, £170m than the previous year.
This earnings surge was driven by strong demand over the summer; easyJet had made a loss of £350m in the six months to 31 March, as conflict in the Middle East led to flight cancellations, extra costs and revenues.
Outgoing CEO Johan Lundgren, says:
“This strong performance - resulting in a 34% increase in our annual profits - reflects the effectiveness and execution of our strategy as well as continued popularity of our flights and holidays. It also represents a significant step towards our goal of sustainably generating over £1 billion annual profit before tax.
Profits were also lifted by charges for cabin bags and “leisure bundles”; last week, easyJet was one of five airlines fined in Spain for charging passengers for hand luggage and seat reservations….
Lighthizer protegé named as US trade representative
Overnight, Donald Trump has picked a protegé of Robert Lighthizer, his trade representative in the first Trump administration, to lead trade policy in Trump 2.0.
Jamieson Greer, an attorney, will serve as the next US trade representative, Trump announced ovenight, and will be tasked with reining in the trade deficit and opening up “export markets everywhere”.
Greer, 44, served as chief of staff to Lighthizer, who designed Trump’s original tariffs on some $370bn worth of Chinese imports, and also renegotiated the North American free trade deal with Canada and Mexico.
Lighthizer, an arch protectionist and sometime free-trade skeptic, blasted “globalists” and other ideological free-traders in his recent book, “No Trade Is Free”.
Kathleen Brooks, research director at XTB, says:
Trump has made more picks for his cabinet, including the trade representative, Jamieson Greer. He was a protégé of the tariff tzar in Trump’s first term as president, Robert Lighthizer, and he is seen as trade hawk. This suggests that tariffs will be at the heart of Trump’s trade agenda.
However, it is worth noting that as trade representative, Greer’s office will be overshadowed by the US Treasury. The new Treasury secretary, Scott Bessent, is moderate on tariffs, and has espoused free trade ideals in the past. This suggests that Trump’s tariff talk may be more bark than bite, although Greer’s appointment is a nod to the trade hawks in his team.
Updated
Policymakers count cost of Trump tariffs
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
A day after Donald Trump announced plans for fresh tariffs on Canada, Mexico and China, policymakers around the world are digesting the consequences of “Tariff Man” Trump returning to the White House.
A deputy governor at the Bank of England, Clare Lombardelli, has warned that the president-elect’s proposed trade tariff would pose a risk to economic growth in countries including the UK.
Speaking to the Financial Times, Lombardelli explained that Trump’s trade policies could hit growth in the short term, while long-term productivity also suffers from increased trade frictions.
She says:
“I don’t want to speculate on the specifics but we know barriers to trade are not a good thing, whether they are tariffs or regulatory or others.
“Whether you are an economic historian, an economic theorist or a data-driven economist, the impact is clear in terms of its direction. In terms of its size, that depends on the circumstances.”
Trump rattled the financial markets yesterday by announcing he would impose 25% tariffs on Canada and Mexico, and an extra 10% on China, in a crackdown on immigration and drugs.
Trade experts fear that Trump could spark a global trade war, if other countries retaliate with their own tariffs in response.
Keith Rockwell, a former director at the World Trade Organization, explained:
“The United States exports hundreds of billions of dollars worth of goods to these countries. Anyone who expects that they will stand pat and not retaliate has not been paying attention.”
Trump’s proposed tariffs are likely to push up inflation in the US, as importers will pass the higher costs onto consumers – and possibly add a bit more on top!
But they could have a deflationary impact on other countries; China, for example, could reroute shipments to Europe rather than the US, cutting prices to support its sales.
They also pose a political dilemma for the UK – should it try to align with the US, to avoid being hit by tariffs too, or try to get closer to the EU?
Simon Sutcliffe, Customs & Excise Duty Partner at accountancy firm Blick Rothenberg, says the US hasn’t considered such a protectionist trade policy since the 1930s with the Smoot-Hawley Act – which ended up fuelling the Great Depression.
Sutcliffe says Sir Keir Starmer faces a dilemma:
One of the biggest stumbling blocks in the UK’s trading relationship with the EU is the control and administration surrounding the movement of food products. Moving closer to the EU may allow development of a consistent and streamlined food policy which would reduce trade red tape and extra charges.”
“However, aligning with the US would undermine that attempt, as the EU would be exceptionally resistant to allow US originating food products to ‘seep’ into its marketplace, resulting in the administrative burden on food movements being cemented in for longer.”
“But ‘Refusing’ the US may result in UK exporters being subject to US tariffs on their products. The US is the largest individual trading partner of the UK trading with roughly 30% of our total exports going to the US and the US exporting 10% of its goods to the UK, so any tariffs would have a big impact on UK trade.”
Also coming up today
We’ll get a full-body health check on the US economy today, with a flurry of economic data – from GDP to trade and jobless claims – being rushed out ahead of the Thanksgiving holiday tomorrow.
The agenda
9.30am GMT: GfK survey of German consumer confidence
Noon GMT: US weekly mortgage approvals data
1.30pm GMT: US Q3 GDP report (second reading)
1.30pm GMT: US durable goods orders for October
1.30pm GMT: US weekly jobless claims data
1.30pm GMT: US trade balance for October
3pm GMT: US PCE inflation measure for October
Updated
