Closing summary
Global shares have continued the rally seen in recent days, cheered by optimism over US interest rate cuts (sparked by weaker US data and remarks by Fed chief Jerome Powell on Tuesday).
As the UK goes to the polls, the FTSE 100 index has gained 1%, or 82 points, to 8253. It is the biggest riser among the main European stock markets today, followed by France, up 0.8%, Italy, up 0.7% and Germany, up 0.4%. US markets are closed for a national holiday.
The pound is steady as we await the outcome of the UK’s general election, with exit polls at 1pm. It is trading at $1.2748 against the dollar, and at €1.1807 against the euro.
There are hopes that political wrangling in France to stop Marine Le Pen’s far-right National Rally winning an outright majority in parliament can succeed, after more than 200 candidates pulled out of Sunday’s legislative election runoff to avoid splitting the anti-far-right vote.
France’s prime minister Gabriel Attal said yesterday: “We can avoid an absolute majority for the far right,” adding that 90% of candidates from President Emmanuel Macron’s centrist camp had quit three-way races if they were in third with an RN candidate ahead of them.
The UK’s construction sector continued to expand in June, although it lost some momentum amid a fresh fall in housebuilding, according to a survey.
In stark contrast, construction in the eurozone remains mired in recession, according to a separate survey. Construction activity shrank at a faster rate last month, with German companies posting the biggest slump.
Our other main stories:
Thank you for reading. I’ll be back at 6am tomorrow. Bye! – JK
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Energy commodity trading in muted reaction to prospect of Labour victory
The muted market reaction to the prospect of a Labour party victory in the UK’s general election is evident even in energy commodity markets today, where traders are not expecting to be caught out by any surprises.
“Election results look quite certain,” one trader told the Guardian. “Commodity traders won’t be working past 5pm.”
The potential for Labour’s manifesto points to translate into price movements appears limited, according to Robbie Jackson-Stroud, an analyst at commodities data provider ICIS.
Jackson-Stroud said that any policies designed to spur the development and construction of new energy capacity requires time to agree upon at a policy level, as well as planning and then construction.
He added that “cost constraints in the current climate are the driver of investment in renewable capacity, and a change of party does not shift that.”
But the commodity market’s underwhelming response to a potential Labour government has had one exception: the UK’s market for carbon credits. Traders have placed record bets that the price of UK carbon allowances, known as UKAs, would rise on the basis that a future Labour government would bring in tougher climate policies making it more expensive to pollute.
“UKA prices have already rallied on expectation of improved green policies and the possibility that the UK’s carbon market may link with the EU market under a Labour government,” the trader said.
The benchmark UKA price climbed to highs of £50 a tonne in the weeks after the election was announced, from lows of £31 a tonne earlier this year. On Thursday the price reached an intra-day high of £46.30 a tonne.
The 4.2% drop in the Novo Nordisk share price this week has wiped nearly £15bn off its market value, reducing it to £370bn.
The success of its weight loss treatments has turned it into Denmark’s, and Europe’s, most valuable company.
Deutsche Bank analyst Emmanuel Papadakis has also looked at the eye study.
Whilst the paper in question does indeed suggest some correlation with a rare ocular event, the quality of the evidence is very low, the error bars are very wide, we note the lack of prior identification suggests this would be a relatively rare issue (far rarer than stats in this paper would imply…) and the worst case scenario would likely be a further update to the label warning section – hardly a game-changer.
As an aside, we also remain relaxed on the pricing outlook, within the context of the damage that has already been done by the IRA [Inflation Reduction Act].
Updated
Shares in Novo Nordisk, and US rival Eli Lilly, have also come under pressure after Joe Biden attacked the company’s pricing for weight loss drugs this week.
The companies are charging “unconscionably high prices” that are above those paid in other countries, Biden wrote in an editorial with Vermont Senator Bernie Sanders published in USA Today on Tuesday.
If “pharmaceutical companies refuse to substantially lower prescription drug prices in our country and end their greed, we will do everything within our power to end it for them,” they wrote.
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Novo Nordisk shares fall 4.2% after eye study
Shares in Novo Nordisk, the maker of the bestselling diabetes and weight loss injections Ozempic and Wegovy, have fallen more than 4% this week, after a study suggested that there could be a link between those treatments and vision loss.
The shares are down 4.2% so far this week, but have somewhat recovered to trade 0.8% higher today.
People who have been prescribed a weight-loss injection could be at a higher risk of developing an eye condition which can lead to blindness, the study found.
The study, published yesterday, found that people with diabetes who were prescribed semaglutide, most commonly known under the brand names Wegovy and Ozempic, were more than four times more likely to be diagnosed with an eye condition known as non-arteritic anterior ischemic optic neuropathy (naion).
Naion is a disorder in which the arteries which supply blood to the optic nerve in the eye become blocked. The condition can lead to loss of eyesight due to the optic nerve being deprived of oxygen and subsequently damaged. There is no known treatment for the condition, which affects 10 out of 100,000 people in the general population.
Jakob Westh Christensen, market analyst at eToro said
Considering that over 50% of Novo Nordisk’s sales are attributed to these two blockbuster drugs and with a promising projected growth trajectory, any significant issues with the drugs could pose a threat to earnings and stock prices. However, the relatively minor market reaction indicates that investors are not overly concerned about this initial study.
With a high valuation at nearly 40 times pprice/earnings, it is evident that the market has great expectations for Novo Nordisk’s earnings growth in the year ahead. This growth is largely based on their GLP-1 diabetes and weight-loss treatments, which are currently under scrutiny. This growth journey is supported by yet another uplift to management’s 2024 outlook in connection with Q1-results, which now expects operating profit to grow 22-30%.
However, it is important to note that this study is relatively small and has limited statistical power. The findings do not prove that the medications caused the eye complications, which are commonly associated with diabetes. To establish any connection properly, a much larger study must be conducted.
As retail investors who hold Novo Nordisk stock, it is advisable to monitor this situation closely. Any significant threat to these highly successful drugs would constitute a significant setback to Novo Nordisk’s growth journey.
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Russ Mould at AJ Bell has also looked at the medical equipment maker Smith & Nephew, Andy Murray’s artificial hipmaker, which is leading FTSE 100 gains here in London. The shares jumped more than 8% after the activist investor Cevian Capital, a Swedish investment firm, disclosed a stake of around 5%.
Activist investors often circle a struggling company so the news Sweden’s Cevian has taken a stake in medical devices firm Smith & Nephew shouldn’t come as a huge surprise.
Cevian has previously taken positions in UBS, Vodafone and Aviva in an attempt to force change and the case for doing so at Smith & Nephew is presented by a near-40% decline in the share price over the last five years.
Ian Cowie, columnist at the Sunday Times and interactive investor, said on X:
Bargain Britain: Activist Investor Cevian Takes Stake in Smith & Nephew, Andy Murray’s artificial hip-maker. Share price jumps for joy! https://t.co/MdiYfDwi4F
— Ian Cowie (@iancowie) July 4, 2024
The positive share price reaction to Cevian taking a position in Smith & Nephew demonstrates the market thinks an outside catalyst for a shake-up of the business would be no bad thing.
The company was severely affected by the pandemic as elective procedures like hip and knee replacements were cancelled, reducing demand for its orthopaedic products. Lockdown also hit the company’s supply chain, as it did for many businesses.
However, its post-Covid recovery has been faltering and an improvement plan announced in 2022 has not yet resulted in a material improvement in earnings and profitability. This hasn’t been helped by a weak showing in the US market.
Cevian is likely to hold management’s feet to the fire and may look for more ambitious targets than set out under the existing improvement plan. It could also push for a rationalisation of the company’s portfolio, which encompasses sports medicine and wound care alongside orthopaedics.
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Russ Mould, investment director at the stockbroker AJ Bell, has looked at today’s market moves.
The FTSE 100 index has gained 80 points to 8251, up nearly 1% on the day, while European shares are also pushing higher. France’s CAC has climbed 0.8% ahead of the second round of elections on Sunday.
The FTSE 100 made a strong start on election day but its gains had far more to do with events on the other side of the Atlantic. Broad-based gains across the index followed weak jobs data from the US and a soft reading from the country’s services sector.
This was taken as an indication the Federal Reserve may start cutting interest rates sooner rather than later, with the labour market closely watched by Jerome Powell and his colleagues.
The dollar fell which, along with the shifting rate expectations, helped power Asian markets to big gains, with one broad-based Asian index reaching its highest level in more than two years. Dominant regional name Taiwan Semiconductor Manufacturing Company traded above one thousand Taiwanese dollars for the first time.
Closer to home, there was some relief that mainstream parties appeared to be mounting a concerted effort to thwart the far-right Rassemblement National’s hopes of gaining a majority in the French parliament.
Daniela Sabin Hathorn, senior market analyst at the trading platform Capital.com, said if we get a government change after 14 years of Tory leadership as suggested by opinion polls, “the market reaction is likely to be slightly muted given the outcome is mostly priced in”.
The majority of the momentum will come from investors’ perception that the Labour Party can keep to its pledge to keep a lid on public spending and manage the national debt while putting the country back on the path towards stable economic growth. In particular, the plans to increase the supply of housing could benefit FTSE 100-listed housing stocks (Persimmon, Taylor Wimpey, Berkeley Group, etc.).
Turning to the pound, she said:
Barring any surprises which could bring volatility to markets, the pound may attempt to build on the pre-election rally of the last two days. But it is likely that it encounters resistance up ahead, especially as the focus remains on the Bank of England and its policy mandate, which has given no clear signs of when it will be able to start cutting rates. Markets are hopeful of a September start, but ongoing concerns about wage pressures in the services sector are keeping the central bank from making a move just yet.
How these policy expectations evolve will likely have a bigger impact on the pound in the coming weeks than the election. Overall, the momentum in UK assets should not change much after the UK general election if things go as planned. As we’ve seen from the political turmoil in France, the less political friction there is the better the market will react.
There is no denying that a new government will face significant challenges up ahead and that can weigh on UK assets further down the line, but for now, a seemingly calm election should anchor UK stocks and keep the pound relatively calm.
UK employers scale back expected wage growth, Bank of England says
Employers in the UK expect their wage bills to grow more slowly over the coming 12 months, according to a survey that should give the Bank of England more confidence to cut interest rates in the next few months.
The central bank’s own Decision Maker Panel survey showed anticipated year-ahead wage growth fell by 0.3 percentage points to 4.2% in the three months to June.
It was the lowest reading since the survey started in May 2022.
The official measure of earnings growth has been too high for policymakers’ liking, and also fed into stubbornly high services inflation. But this survey suggests that wage growth could cool in the coming months.
EU trade chief: no basis for China to retaliate to new EV tariffs
There is no basis for China to retaliate, as the European Union prepares to impose fresh tariffs of up to 37.6% on imports of electric vehicles made in China, EU trade chief Valdis Dombrovskis said today, in an interview with Bloomberg News.
The EU tariffs, which range between 17.4% and 37.6%, will apply from tomorrow, according to EU officials. They are aimed at stemming what European Commission president Ursula von der Leyen has described as a flood of cheap Chinese-made EVs built with state subsidies.
However, there is a four-month window during which the duties are only provisional and intense talks are expected to continue between the two sides. At the end of the period, the Commission, the EU’s executive arm, could impose “definite duties” that typically apply for five years, on which EU members would vote.
Dombrovskis said:
Our aim is to… ensure fair competition and level playing field. Therefore, once again, we do not see any basis for retaliation.
Those talks with China are ongoing and indeed should a mutually beneficial solution emerge, we can also find ways not to apply at the end of the day the tariffs.
The provisional rates are almost exactly those announced by the Commission on 12 June.
Beijing said at the time that it would take “all necessary measures” to safeguard China’s interests. These could include retaliatory tariffs on exports to China of European products such as cognac and pork.
Germany’s Volkswagen, Europe’s biggest carmaker, is opposed to the tariffs. It said:
The timing of the EU Commission’s decision is detrimental to the current weak demand for BEVs [battery electric vehicles] in Germany and Europe.
The negative effects of this decision outweigh any benefits for the European and especially the German automotive industry. The Volkswagen Group is confidently accepting growing international competition, including from China, and sees this as an opportunity – this also benefits our customers.
The owner of the Jeep, Fiat and Vauxhall brands, Stellantis, has also come out against the proposed tariffs. Its chief executive, Carlos Tavares, has criticised the duties and said the world’s fourth biggest carmaker preferred to “fight to stay competitive”.
The Shanghai-based electric carmaker Nio said:
At this stage, Nio maintains the pricing of its current models in its European markets. however, it cannot be ruled out that prices may be adjusted at a later stage as a result of these tariffs being imposed.
Despite these developments, Nio is fully committed to the European market: we believe in fostering competition and consumer interest, and we hope to reach a resolution with the EU before definitive measures are enforced in November.
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Penalise startups that take state aid then list abroad, says UK Finance
The British banking sector has called for the next government to penalise startups that take state aid and then list abroad amid concerns about young companies choosing foreign stock exchanges over London.
UK Finance suggested subsidies and tax breaks could be clawed back, arguing in a paper published this week that companies that receive government help should have “a two-way commitment”.
British businesspeople and City grandees have warned for several years that London’s stock market is in decline relative to other exchanges, notably in the US, where some fast-growing companies have said it is easier to attract investments.
Recent departures from the London Stock Exchange have included the building materials company CRH, the betting company Flutter and the plumbing products company Ferguson. However, perhaps most galling for the LSE was the failure to attract the huge stock market flotation of the Cambridge-headquartered chip designer Arm, which plumped for New York despite the personal lobbying of Rishi Sunak.
Pound steady as UK votes; global stocks extend rally on US rate cut hopes
The pound is steady, as voters head to the polls across the UK.
World stocks have extended the rally seen in recent days, as weak US data and remarks from US Federal Reserve chief Jerome Powell on Tuesday fuelled hopes of interest rate cuts from the Fed. Markets are now pricing in a 74% probability of a reduction in September, up from 65%.
There were fresh record highs on the tech-heavy Nasdaq and the wider S&P 500 on Wall Street last night, as chipmaker Nvidia and electric carmaker Tesla notched up further strong gains.
Asia-Pacific shares rose nearly 1% to reach their highest level since April 2022.
Over here, the FTSE 100 index is 62 points or 0.77% ahead at 8,233. The German market is 0.3% ahead while the French and Italian indices have climbed around 0.7% each.
Trading is thin today with US markets closed for a holiday, and investors holding back as they want to see how large a majority the Labour party might get in the UK, with exit polls coming out at 10pm BST.
Opinion polls have for months pointed to a landslide victory for Labour, and it has been priced in by financial markets. The pound is up 0.1% against the dollar at $1.2753, and a smidgen lower against the euro at €1.1808.
Michael Metcalfe, head of macro strategy at State Street Global Markets, said:
Having been very negative of sterling for a very long time, institutional investors are actually going into this election quite neutral.
Political risk has soared in France, which holds the second round of elections on Sunday and where political wrangling is underway to try and stop Marine Le Pen’s far-right National Rally party getting a majority in parliament; also in the United States ahead of its presidential vote in November.
Metcalfe said
The UK, oddly, has ended up with a neutral position in the middle. Also, I don’t think at any. point has the result [of the election] been in an doubt.
Updated
Eurozone construction shrinks at faster rate
In stark contrast, construction in the eurozone remains mired in recession, according to a separate survey. Construction activity shrank at a faster rate last month, with German companies posting the biggest slump.
The PMI from Hamburg Commercial Bank dropped to 41.8 in June from 42.9 in May, signalling a marked contraction in output across the construction sector. The rate of decline was the second-strongest since mid-2020, surpassed only by that seen in January.
German firms faced the greatest decline in performance, even though the contraction in output eased to the least marked since August 2023.
At the same time, bigger reductions were observed in the French and Italian construction sectors, with the former seeing its sharpest fall in output since March, and the latter posting its strongest drop in nearly two years. Employment levels fell further as companies laid off workers.
Tariq Kamal Chaudhry, economist at Hamburg Commercial Bank, said:
The eurozone construction sector is stuck in a recession with no clear path to recovery. The setbacks in the three largest economies in the zone—Germany, France, and Italy—have been particularly severe this month.
Subsector activity shows that residential construction remains the weakest, though there was a slight softening in the pace of decline compared to the previous month. The most significant negative correction from May occurred in civil engineering activity.
Inflation is slowly but surely cooling down. Since the peak in July 2021, input price pressures in the eurozone’s construction sector have been on a downward trend, which continued in June. Further reductions in price growth are likely as demand in the construction sector remains extremely weak. Additionally, subcontractor prices rose at a slower rate, although they are still growing moderately.
He said the outlook “offers little encouragement” and that weakening inflationary pressures alone won’t do -- interest rate cuts are needed from the European Central Bank.
However, caution currently prevails at the ECB, and according to HCOB Economics, only one additional interest rate cut is expected well into 2025. This is insufficient to make a significant impact. Therefore, it is understandable that the expectations of surveyed constructors remain in contraction territory.
Updated
UK construction grows despite fall in housing
The UK’s construction sector continued to expand in June, although it lost some momentum amid a fresh fall in housebuilding, according to a survey.
A slower rise in new orders was also recorded, in some cases linked to election uncertainty, but the pace of job creation picked up. Meanwhile, the rate of firms’ input cost inflation accelerated from May, but remained muted.
The headline S&P Global UK construction purchasing managers’ index (PMI) fell to 52.2 from 54.7 in May, but remained above the 50 no-change mark that separates expansion from contraction for the fourth month running.
The main driver of growth continued to come from commercial activity, which increased markedly again in June. That said, the rate of expansion softened from May’s two-year high. Civil engineering activity also slowed.
The only area to record a drop in activity was housing, where output fell again following the first increase in 19 months during May.
Andrew Harker, economics director at S&P Global Market Intelligence, said:
Continued growth of the UK construction sector in June meant that the sector has recorded sustained expansion throughout the second quarter of the year. While there were signs of a slowdown in the latest survey period, most notably around housing activity, firms indicated that a slowdown in new order growth was in part related to election uncertainty. We may therefore see trends improve once the election period comes to an end.
Moreover, confidence in the year ahead outlook remained strong and firms increased employment to the largest extent in ten months.
In terms of inflation, there remains little sign of cost pressures picking up to any great extent, encouraging firms to expand purchasing activity. Supply-chain conditions also remained favourable.
Electric car sales grow 'robustly' in June
The UK new car market has hit the half-year million motors mark for the first time in five years, after new car registrations rose in June by a modest 1.1% to reach 179,263 vehicles, according to new figures published by the Society of Motor Manufacturers and Traders (SMMT).
As a result, 1,006,763 new cars have been sold so far this year, up 6% year-on-year but still down 20.7% on 2019, before the Covid-19 pandemic.
June’s market growth was driven primarily by the fleet sector, where uptake rose by 14.2%, while demand from private buyers fell for the ninth consecutive month, down 15.3%.
Demand for electric vehicles grew “robustly” in June, with plug-in hybrid volumes up by 30% to reach a 9.3% market share, while hybrid electric vehicles rose by 27.2% to take 14.9% of the market.
Both powertrains also outpaced battery electric vehicle growth, which rose by 7.4% and took its highest monthly share this year, accounting for 19% of all new vehicle registrations.
Mike Hawes, the SMMT’s chief executive, said:
The year’s midpoint sees the new car market in its best state since 2021 – but this belies the bigger challenge ahead. The private consumer market continues to shrink against a difficult economic backdrop, but with the right policies in place, the next government can re-energise the market and deliver a faster, fairer zero emission transition.
All parties are agreed on the need to cut carbon and replacing older fossil fuel based technologies with new electrified powertrains is the essential step to achieving that goal.
Smith & Nephew top FTSE 100 riser as Cevian builds stake
The artificial hips and knees maker Smith & Nephew is the top riser on the FTSE 100 index this morning, climbing more than 6%, after the Swedish investment firm Cevian Capital, known as an activist investor, disclosed a stake of about 5% in the company.
Barclays shares gained 1.6% after the British bank said it had agreed to sell its German consumer finance business to Germany’s BAWAG Group for a “small premium to net assets” in cash.
As the UK heads to the polls in parliamentary elections that could end 14 years of Conservatives in government and see Labour leader Keir Starmer installed as prime minister, Gervais Williams, head of equities at the London fund manager Premier Miton, has looked at what this may mean for the economy. He told Reuters:
Both parties are quite similar in economic policies. There will be some change, but most of it is continuity when you compare with what’s happening in France or Germany.
The UK is actually an island of economic stability relative to the other elections going on around.
Trading activity is expected to be muted because US markets are closed for Independence Day.
Updated
Here is our full story on new car sales in the UK:
Carmakers have sold more than a million cars in the UK in the first half of the year for the first time since before the coronavirus pandemic as the sector gradually recovers from years of turmoil.
Preliminary data from the Society of Motor Manufacturers and Traders, the UK industry’s lobby group, suggested that the industry would sell about 2m cars over the year, also for the first time since 2019.
Mike Hawes, the SMMT’s chief executive, said that 2m sales for the year would be “a bit below par” but that the recovery was a relief for the industry after years of struggles.
However, the growth was “almost entirely business and fleet sales” rather than private buyers, he told BBC Radio 4’s Today programme. “Given that most people buy with some kind of finance, with inflation high and interest rates high, it has made the cost of purchase more expensive.”
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Over 20,000 Tesco staff to share £30m from share schemes
More than 20,000 Tesco staff, mainly shopfloor workers in stores and distribution centres, will share in a windfall profit of more than £30m after share savings schemes have matured.
The windfall is created by the strong growth of the Tesco share price, which was £3.06 earlier this week. Those who joined the schemes are able to buy shares at a discounted price of just £1.88 or £1.98 each and either hold on to them, or sell them and make a profit on each share.
A Tesco shopfloor worker who invested the average £68 a month for the last five years stands to pocket around £6,640 from their £4,080 investment, a profit of £2,560, Tesco said.
The news comes just weeks after Tesco’s chief executive Ken Murphy came under fire for his near-£10m annual pay package.
Emma Taylor, Tesco’s chief people officer, said:
It’s great news that more than 20,000 colleagues will benefit this year from our share schemes. This is just one of the many benefits available to our colleagues, and the strong performance of the schemes this year is a reflection of their hard work and the brilliant job that they do serving our customers every day.
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FTSE 100 opens higher as UK heads to the polls
The FTSE 100 index has opened about 50 points higher at 8,222, a 0.6% gain, as millions across the UK head to the polls. The ballot boxes close at 10pm this evening.
Other major European stock markets are also making further gains, partly on the back of optimism about US rate cuts in recent days, and hopes that a majority for Marine Le Pen’s far right party can be avoid in the second round of elections in France on Sunday.
The German Dax is trading 0.4% higher, while the French CAC rose 0.7% and Italy’s FTSE MiB gained 0.5%. The US markets are closed today for Independence Day.
Derren Nathan, head of equity research at Hargreaves Lansdown, said:
Opinion polls are suggesting one of the biggest landslides the nation has ever seen for Labour, but they have been wrong before.
In a shortened trading session ahead of today’s 4 July celebrations, investors have been digesting weak jobs data in the US. Private payroll growth came in at 150,000 for June, below analyst forecasts. And weekly jobless claims continued their upwards journey for the ninth week in a row. All eyes will now be on tomorrow’s non-farm payroll numbers.
There was also weak data from the US services sector with the US ISM Services PMI falling 5 points sequentially in June to 48.8, way short of the 52.5 consensus expectation. Perhaps no surprise that 10-year Treasury yields lost 8 basis points to 4.355%.
Conversely, the improving outlook for a Fed rate cut helped US equities breach new records, with the tech-based Nasdaq Composite up 0.9% to 18.188.30 and the broader S&P 500 climbing by 0.5% to 5,537.02 last night.
Microchipmaker Nvidia resumed its upwards trajectory, climbing 4.6% after some recent profit taking. And Tesla rose by a further 6.5% following the previous day’s 10.2% gain that was triggered by better than forecast vehicle deliveries. With the shares up over 40% in the last month, expectations are riding high ahead of earnings season.
Brent Crude has given up some of yesterday’s gains, reflecting the weak US economic data, and is trading 0.8% lower. But the global benchmark still sits at close to $87 a barrel, supported by a sharp fall in US oil inventories, and concerns that Hurricane Beryl could disrupt production in the Gulf of Mexico.
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Hawes explained that the more common electric vehicles become, the more their price is going to come down, but there are limits – batteries are more expensive than in a traditional petrol or diesel car.
As you develop these vehicles at scale, you can drive down these costs to a certain extent, but the raw materials, in particular, the battery is a lot more expensive. Of an electric vehicle that battery is about 40% of total cost of the car.
The Red Sea disruption has added to cost pressures along with Russia’s war in Ukraine, he said.
A number of our vehicles that are sold in the UK come from Asia. They’re no longer going through the Suez [canal]. They’re going around the Cape. That adds two to three weeks in terms of transit and back again. And obviously that adds cost. So that’s just yet another strain.
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How is demand for electric vehicles holding up, SMMT chief Mike Hawes was asked earlier.
He said it was “OK” – adding that it will take time for electric cars to get into the mass market, and that the journey will be bumpy.
It was OK in June, but what we have seen is something of a plateau flattening out. When these vehicles were first on the market, there really was high demand for them, because those were the early adopters. We need to get that from the early adopter phase into the mass market. That is never going to be smooth. So the manufacturers are doing all they can to stimulate that demand with really attractive deals. But given the economic conditions and the fact that these are still vehicles that are more expensive than petrol and diesel cars that preceded them, there is still something of a challenge.
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Introduction: UK new car sales hit 1m in first half for first time since 2019
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
It’s general election day in the UK. Voting has now begun and polling stations will be open until 10pm. Polling suggests it could bring an end to 14 years of the Conservative party in government, and lead to Labour opposition leader Keir Starmer being installed in Downing Street as the new prime minister. You can read more on our main election blog here:
New car sales in the UK grew by 5% year on year in June, according to preliminary data from the industry body, the Society of Motor Manufacturers & Traders.
It means that the number of new cars leaving forecourts has exceeded 1m in the first half of the year, the first time since 2019 it has passed that milestone.
Mike Hawes, the SMMT’s chief executive, said on BBC radio 4’s Today programme:
It’s kind of a relief to get there. We know we’re clearly heading for around 2m new car sales this year, which is a bit below par. But obviously things are changing in terms of the number of vehicles potentially being bought. But to get there, given all the difficulties we’ve had over the last five years and indeed beyond that, it’s a real boost for the industry.
It’s almost entirely business and fleet sales. There’s a number of reasons behind that. Obviously the backdrop of the economic conditions isn’t great, and households are on a squeeze. And most people, private buyers, tend to buy through finance with inflation high and interest rates high, it’s made the cost of purchase more expensive.
But the carrot has been for the businesses, the incentives, the company car tax that is there for the fleet and the business buyer, has stimulated demand, especially for electrified vehicles. So that’s what’s really driving the growth.
The market share of pure battery electric new cars remained on a par with last year, at around 16-17%. Final figures for June will be published by the SMMT at 9am.
In Germany, factory orders fell unexpectedly in May, declining by 1.6% on the previous month. Economists had expected a rise of 0.5%.
The minutes of the US Federal Reserve’s June meeting showed that policymakers acknowledged the US economy appeared to be slowing and that “price pressures were diminishing”. But they still opted for a wait-and-see approach before committing to interest rate cuts, according to minutes of the 11-12 June session.
The minutes, which were released last night, noted a weak May reading in the consumer price index as one among “a number of developments in the product and labor markets” that supported a view that inflation was falling.
Wage growth had slowed, some officials noted, while others pointed to price cutting among major retailers and reports from their own business contacts that “pricing power had declined.”
However, policymakers concluded that more time and data was needed before they could decide on a rate cut.
Officials “did not expect that it would be appropriate to lower the target range for the federal funds rate until additional information had emerged to give them greater confidence that inflation was moving sustainably toward” the 2% target, the minutes said.
The Agenda
9am BST: UK SMMT new car sales for June
8.30am BST: Eurozone, France, Germany, Italy construction PMIs for June
9.30am BST: UK S&P Global construction PMI for June
12.30pm BST: ECB monetary policy meeting accounts
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