BAILEY SIGNALS UK ON TRACK FOR RATE CUTS AS US GRAPPLES WITH STUBBORN INFLATION
Andrew Bailey has signalled UK interest rates remain on course to fall in the coming months amid growing fears that stubborn inflation will force the US to delay rate cuts.
The Bank of England Governor said he saw “strong evidence” that inflation was continuing to come down in the UK, despite the resilience of the British jobs market.
He said at the International Monetary Fund (IMF) spring meetings in Washington: “Our judgement with interest rates is how much do we need to see now to be confident of the process?”
Mr Bailey’s comments came as the chairman of the US Federal Reserve raised doubts over its ability to reduce rates this year, warning that borrowing costs were likely to remain higher for longer because of persistent inflation.
Speaking at an event in Washington DC on Tuesday, Jerome Powell said: “The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence.”
Jerome Powell said higher borrowing rates needed “further time to work” because of the strong US economy.
Mr Powell vowed to maintain rates at their current range of 5.25pc to 5.5pc for “as long as needed”.
The comments from the two central bank chiefs will fuel speculation that the Bank of England will cut before the Federal Reserve.
Mr Bailey said the factors driving inflation, which is expected on Wednesday to have eased to 3.1pc in March, from 3.4pc in February, were very different in the UK and Europe compared with the US.
He said: “I think there’s more demand-led inflation pressure in the US than we’re seeing. So I think the inflation dynamics are different.”
Jeremy Hunt, the Chancellor, told Bloomberg during a visit to New York he believed the period of high inflation in the UK was now “well and truly behind us”.
Mr Bailey’s comments came after stock markets had closed in Europe, where fears about delays to US rate cuts and worries about conflict between Israel and Iran and triggered a steep sell-off.
The FTSE 100 suffered its worst day in nine months, tumbling 1.82pc. European markets also suffered falls of more than 1pc.
Hopes of multiple rate cuts in the US this year, which would fuel global growth, have faded after a string of strong economic data.
The IMF on Tuesday said financial markets had become too complacent about the speed and magnitude of expected rate cuts, noting that investors had already been forced to pare back expectations this year.
The IMF said: “In economies still experiencing persistent and above-target inflation, central banks should not prematurely ease to avoid having to backpedal later.”
US inflation stood at 3.5pc in March, up from 3.2pc the prior month and higher than economists had forecast.
High interest rates weigh down shares as companies’ borrowing costs rise and the cost of capital increases, while equities also have to compete with higher returns on other investments such as bonds or cash.
Trevor Greetham, head of multi asset at Royal London, said investors were “swinging between concern over a broadening Middle East conflict and worries that stronger US growth and/or higher core inflation could make it difficult for central banks to cut interest rates as much as previously hoped.”
Markets began the day on the backfoot after Israel’s army chief General Herzi Halevi said the country had no choice but to respond to Tehran’s barrage of more than 300 missiles.
Brent crude oil, the international benchmark, briefly rose above $90 a barrel before falling back again as action from Israel was not forthcoming.
Warren Patterson, head of commodities strategy for ING, said the prospect of a response against Iran by Tel Aviv “means that this uncertainty and tension will linger for quite some time”.
Heightened tensions prompted EasyJet to scrap flights to Israel for the whole of the summer season. Services that had been scheduled to resume on Sunday now won’t operate until the start of the winter timetable in October.
Speaking at the IMF event, Mr Bailey said the global economy remained resilient despite the geopolitical stability.
He said: “I think we’re seeing very encouraging signs. I think we’re seeing resilience in activity in the world economy, but we’re seeing disinflation.”
However, he warned that “fragmentation” remained a “serious problem” as he urged politicians to support free trade.
The Governor said: ”I recognise that the experiences we’ve had means that we need to diversify to get more resilience in our trade and our international connections, but it doesn’t mean we give up free trade.”
Read the latest updates below.
06:31 PM BST
Signing off...
That’s it for today on the markets blog. Do join us again in the morning but I’ll leave you with a story from Tim Wallace:
The Bank of England relied on an inflation forecast based on a pencil drawing, a former official has said.
Andy Haldane, the Bank’s former chief economist who worked in Threadneedle Street from 1989 to 2021, said an early forecast used by the central bank was based on a sketch done by a former governor.
Writing in the Financial Times, Mr Haldane said: “In the early years of inflation targeting in the UK, the then head of forecasting at the Bank of England entered my room clutching a piece of paper.
“On it were two lines: the inflation forecast produced painstakingly by his team over the preceding weeks, and an alternative inflation projection hand-drawn in pencil by the then governor. Only the latter ‘forecast’ ever saw the light of day.”
The Bank of England began targeting a set rate of inflation in 1992, under then-governor Robin Leigh-Pemberton. He was succeeded by Eddie George in 1993 who ran the Bank for a decade. Mr Haldane did not indicate which governor he was referring to.
The revelation that hand drawn projections were used in the early days comes amid intense scrutiny of the Bank’s forecasting abilities, following a damning report published last week by former Federal Reserve chairman Ben Bernanke.
06:26 PM BST
Andrew Bailey: ‘strong evidence’ that inflation is coming down
The Governor of the Bank of England has given an interview this evening at an IMF meeting saying there was “strong evidence” that inflation is coming down, signalling that the Bank of England is still on track to cut rates.
On the so-called “soft landing” that people wish for, he said: “We always want to see the landings before we judge them”.
He also emphasised the importance of the free movement of goods amid growing pressure to rely less on Chinese exports. “I’m a very strong supporter from free trade”, he said, before saying that while diversification is needed, we shouldn’t give up on free trade.
06:22 PM BST
Chapel Down boosted by bumper harvest
A top English wine producer has reported rising profits as consumers treated themselves to a more expensive bottle of wine despite cost-of-living pressures.
Andrew Carter, chief executive, told CityAM that demand for wine was strong as people took pleasure from small luxuries. “We believe at a price point of £30 that we’re far more accessible to the majority of consumers” than other luxury purchases, he said.
Chapel Down said revenue was up 15pc to £17.2m and profit up 16pc to £1.9m. It said that it had benefited from a record harvest that meant it could produce more bottles.
05:01 PM BST
Footsie closes down
The Footsie dropped after Israel’s army chief vowed a response to Iran’s attack on his country.
The FTSE 100 lost 1.8pc. The biggest riser was chemicals company Croda International, down 1.3pc, followed by hip replacement manufacturer Smith & Nephew, up 0.4pc. The biggest faller was Ocado, down 5.8pc, followed by pensions firm Phoenix, down 5.7pc.
The FTSE 250 dropped by a matching amount. The biggest riser was Plus500, up 2.4pc, followed by Harbour Energy, up 1.8pc. Dr Martens fell 29.9pc, the biggest drop in the index today, followed by Auction Technology, down 15.6pc.
04:52 PM BST
easyJet cancels all summer flights to Israel
We reported this morning that EasyJet has scrapped flights to Israel for the whole of the summer season. Our transport industry editor Christopher Jasper has more:
The discount carrier cited uncertainty surrounding the “evolving situation” in the Middle East for the decision and plans to redeploy planes freed up on other routes. Customers with bookings for Tel Aviv are being offered options including a refund.
EasyJet had resumed flights to Israel only on March 25 after halting them following the Hamas attacks. The Luton-based airline also paused services to Jordan until next winter.
British Airways is continuing to operate to Tel Aviv, while Wizz Air resumed flights on Tuesday after two days of cancellations.
Virgin Atlantic Airways halted services to the city following the Hamas incursions and had said before the Iranian bombardment that they wouldn’t restart until September.
BA is meanwhile continuing to reroute its flights to Asia to avoid airspace in the Middle East that’s either closed or deemed potentially unsafe. The carrier declined to say which destinations are affected.
Virgin, however, has returned to its normal flight paths over Iraq for services to India that had been diverting hundred miles to the south over Saudi Arabia and the Gulf, adding around half an hour to trips between London Heathrow and Delhi, Mumbai and Bangalore. Aircraft will fly at a minimum altitude of 32,000 feet over Iraq.
The company said: “Our flight routings are subject to continual security assessment and operate in line with UK, US and local regulations.”
Neither BA nor Virgin overfly Iran.
04:46 PM BST
Treasury appoints first female boss of bonds issuer
The Treasury has appointed the first-ever female boss of the Debt Management Office (DMO), the body responsible for selling hundreds of billions of pounds of government debt every year.
Jessica Pulay will oversee planned government debt sales of £265.3bn in the current financial year, one of the biggest amounts on record.
Ms Pulay, 57, joined the organisation in 2015 from the European Bank for Reconstruction and Development. Her early career included roles at Morgan Stanley, Goldman Sachs and Deutsche Bank.
Jeremy Hunt, the Chancellor, said: “She brings with her over three decades worth of relevant experience, is highly regarded in the market, and the appointment provides strong continuity to a critical government function as the DMO looks to the future.”
Ms Pulay will succeed Sir Robert Stheeman who is retiring at the end of June after 21 years heading the DMO.
04:24 PM BST
Robert Walters shares tumble as hiring drought continues
Global recruitment company Robert Walters said companies were rapidly cutting back on new hires, sending its shares tumbling by 5pc. Melissa Lawford has the details:
A “challenging” start to the year meant profits before tax slumped by £21m in the first three months of 2024, the business warned in a trading update on Tuesday.
Its share price dropped by 5pc after the news and was down by 18pc since the start of the year.
It has more than halved since the peak of the pandemic labour market crisis at the start of 2022, as economic uncertainty means businesses are increasingly delaying hiring staff.
Robert Walters’ first quarter global fee income totalled £81.3m, down from £102.4m a year earlier. This was a drop of 16pc after adjustments for currency exchange rates.
In the UK, which makes up around a sixth of its business, fee income slumped by 20pc.
Toby Fowlston, the chief executive, warned that a slowdown in the jobs market would continue to dampen income in the months ahead.
Mr Fowlston said: “In line with the latter part of 2023, overall trading conditions remained challenging during the first quarter of 2024.
“Although certain macro-economic indicators, such as inflation, continue to moderate in some markets, the general environment remains one where client and candidate confidence is at low levels, which we expect to continue to be a headwind to fee income growth in the near-term.”
04:21 PM BST
China grows faster than expected amid fears Beijing is flooding West with artificially cheap goods
China’s economy grew faster than expected in the first quarter of the year amid fears it is flooding the West with heavily subsidised, low-cost solar panels and electric cars. Tim Wallace reports:
GDP grew by 1.6pc from January to March, according to official figures, meaning the world’s second-largest economy is now 5.3pc bigger than it was a year ago.
Manufacturing led the surge, with output up 6.7pc on the year while investment in industry boomed by 9.9pc.
Exports rose by almost 5pc on the year, with international sales of mechanical and electrical goods up 6.8pc.
It comes amid British, American and European concerns over Beijing’s subsidies to favoured factories, which allows China to export artificially cheap products worldwide.
Britain this week launched a review into Chinese steel, as the country considers replacing EU “anti-dumping” measures, which sought to impose a tax on products which are heavily subsidised in China, and undercutting European producers.
Economists expect China to keep supporting manufacturing regardless, as politicians try to offset the crunch in property markets by propping up other growth industries.
Neil Shearing at Capital Economics said industrial output has climbed by 25pc since 2019.
“Policymakers in Beijing are still wedded to an investment-led growth model,” he said.
“With the property sector in crisis they have sought to channel more resources to industry instead, particularly to areas such as high-end electronics, batteries and electric vehicles that Beijing sees as strategically important. This increase in supply is now being shipped overseas.”
04:18 PM BST
Steel giant should remain in American hands, says US Treasury Secretary
Janet Yellen said today that she accepted President Joe Biden’s view that US Steel should remain in American hands for the benefit of American workers and the country, in stark contrast to Britain, which relies on foreign investors.
The US Treasury Secretary told a news conference that she could not discuss a review of the proposed $14.9bn acquisition of U.S Steel by Japan’s Nippon Steel by the Committee on Foreign Investment in the United States. But she said:
I certainly accept the president’s view, which he has stated, that the company should remain in American hands. He hasn’t said specifically that it’s a matter of national security, but one that has to do with the good of the workers and the country.
04:12 PM BST
Morgan Stanley delivers bumper profits as it predicts merger boom
Morgan Stanley’s first-quarter profit beat estimates on Tuesday, fueled by a resurgence in investment banking and growth in wealth management, sending shares up 3.7pc.
Investment banking revenue climbed 16pc from a year earlier.
“It was an excellent quarter all around,” Chris Kotowski, an analyst at Oppenheimer, wrote in a note. The bank achieved a “near-perfect print” like rival Goldman Sachs did on Monday, Mr Kotowski added.
Morgan Stanley reported profit of $2.02 per share, sailing past analysts’ average estimate of $1.66, according to LSEG data. Total revenue rose to $15.14bn (£12.16bn) compared with $14.5bn a year earlier.
“We saw building momentum in investment banking, both in our M&A and underwriting pipelines across corporate and financial sponsor clients,” chief executive Ted Pick told investors on Tuesday. He expects a “multi-year M&A cycle” to begin now and last 3 to 5 years.
04:07 PM BST
Trump tariff plan would create a ‘lose-lose’ situation, warns WTO boss
The head of the World Trade Organisation has warned that the 10pc import tariffs proposed by Donald Trump would result in a “tit for tat approach” and a “lose-lose” situation, according to Reuters.
Ngozi Okonjo-Iweala said the plan would “upend the stability and predictability of trade”.
03:56 PM BST
ScottishPower to pay compensation after breaching the energy price cap
ScottishPower is handing over £1.5m in refunds and compensation after breaching the energy price cap by overcharging nearly 1,700 customers during the height of the energy crisis and in the years before.
Ofcom said that the energy supplier had charged a group of direct debit customers a higher rate intended only for those who pay manually.
The regulator said Scottish Power agreed to pay an average of £294 to each affected customer, half of which is compensation. In addition, ScottishPower is to pay £1m to an Ofgem fund that benefits charities supporting vulnerable customers.
Dan Norton, Ofgem’s Deputy Director for Price Protection, said:
The last few years have been challenging enough for energy customers facing increasing cost of living pressures, without the additional hardship of being overcharged. The price cap is there to protect consumers, and we take seriously any breaches of the safeguards we have put in place.
ScottishPower said that, on discovering the error, it took “swift corrective action and the compensation package agreed with Ofgem show both how seriously we take this matter and our commitment to making it right”.
03:02 PM BST
FTSE suffers worst fall in over a year as US rate cut bets pushed back
The FTSE 100 has suffered its sharpest drop in more than a year as more strong economic data in the US added to expectations that interest rate cuts will be delayed.
Factory output in the United States increased in March at a rate in line with expectations, as manufacturing and mining logged gains, according to the Federal Reserve.
Industrial production was up 0.4pc in March, holding steady from February’s revised figure, the Fed said in a statement.
In particular, manufacturing output gained 0.5pc last month, hovering at 0.8pc above the level a year earlier, in a sign that the US economy is proving resilient, potentially fuelling inflation if interest rates are cut.
Shortly afterwards, the FTSE 100 deepened its declines, dropping by 2.1pc in its steepest decline since March last year.
02:35 PM BST
Wall Street mixed as trading begins
The Dow and the S&P 500 opened higher despite the Middle East turmoil, with health insurers leading the charge following upbeat results from industry major UnitedHealth.
The Dow Jones Industrial Average rose 257.11 points, or 0.7pc, at the open to 37,992.22.
The S&P 500 opened higher by 2.77 points, or 0.1pc, at 5,064.59, while the Nasdaq Composite dropped 28.64 points, or 0.2pc, to 15,856.38 at the opening bell.
02:19 PM BST
Rising oil prices could keep interest rates higher, warns IMF
Rising tensions in the Middle East will force central banks to delay interest rate cuts if Iran’s attack on Israel unleashes higher oil prices and a fresh wave of inflation, the International Monetary Fund has warned.
Our economics editor Szu Ping Chan in Washington has the latest:
The IMF said geopolitical risks were one of four big threats facing the economy that could lead to higher oil prices and increased shipping costs.
While the Fund’s latest global economic healthcheck was completed before Tehran’s missile and drone attack was launched this weekend, it warned that higher oil prices would push up inflation and lower growth.
“Geopolitical shocks could complicate the ongoing disinflation process and delay central bank policy easing, with negative effects on global economic growth,” the IMF said in its latest World Economic Outlook.
“The conflict in Gaza and Israel could escalate further into the wider region. Continued attacks in the Red Sea and the ongoing war in Ukraine risk generating additional supply shocks adverse to the global recovery, with spikes in food, energy, and transportation costs.”
While oil markets have so far remained subdued in the wake of the attack, the IMF outlined a scenario where an escalation of conflict in the Middle East resulted in a 15pc surge in oil prices and higher shipping costs.
The IMF said global headline inflation in this scenarion would increase by close to 0.7 percentage points in 2024 and keep inflation above target in many advanced economies in 2025.
It warned that in this scenario, interest rates would need to be higher to keep a lid on inflation, which would weigh on growth.
“The hit to purchasing power and tighter monetary policy lower global activity by as much as 0.4 percent by 2025,” the IMF said.
02:15 PM BST
Treasury hires next Debt Management Office boss
The Treasury has appointed Jessica Pulay as the next chief executive of the Debt Management Office (DMO), responsible for selling hundreds of billions of pounds of government debt every year.
Ms Pulay will succeed Robert Stheeman who is retiring after 21 years heading the DMO.
She will oversee planned gilt sales of £265.3bn in the current 2024/25 financial year, one of the heaviest issuance remits on record.
Ms Pulay, 57, joined the DMO as co-head of policy and markets in 2015. Previously she worked at the European Bank for Reconstruction and Development for 16 years and was deputy head of funding. Her early career included roles at Morgan Stanley, Goldman Sachs and Deutsche Bank.
She is chair of the Wallace Collection, an art gallery in central London, and was made a CBE in December. She is a board member of the International Finance Facility for Immunisation, an organisation that raises funds for vaccination programmes.
02:03 PM BST
British workforce growth driven entirely by migrant labour, says IMF
Britain’s economic prospects have been downgraded by the International Monetary Fund (IMF) for the second time in three months as it warned the country had become dependent on foreign-born workers for growth.
Our economics editor Szu Ping Chan in Washington, and deputy economics editor Tim Wallace, have the story:
The fund said that the UK is at risk of becoming trapped in a prolonged period of weak growth and stubborn inflation, as it warned of zero growth this year once increases in the population are taken into account.
IMF analysis showed Britain’s workforce had been powered entirely by immigrant labour since 2019.
It came as official figures show that the number of workforce dropouts claiming long-term sickness had surged to a fresh record high.
More than 2.8m people now say they are too ill to work, the highest number since records were first collected by the Office for National Statistics (ONS).
Read how the IMF downgraded its forecasts for UK growth for the next two years.
01:44 PM BST
B&M sales rise as shoppers seek discount deals
Discount retailer B&M has revealed its sales jumped by a tenth over the past year, as cost-conscious shoppers continued to hunt for deals.
The chain, which sells everything from household furniture and DIY products to cupboard staples and clothing, said it had a “relentless” focus on low prices for everyday products.
B&M European Value Retail, which also incorporates Heron Foods and B&M in France, said group revenues increased by 10.1pc to £5.5bn in the year to the end of March, compared with the previous year.
This was driven by a higher volume of sales and revenues increasing on a like-for-like basis, meaning it excludes newer stores which skew the comparison.
Revenue growth also benefited from an extra week of trading including in the financial year, as well as Easter being celebrated earlier in the year.
In the UK, sales at B&M hit £4.4bn, which was 3.7pc higher than the previous year on a like-for-like basis, driven by customers buying more products.
B&M opened 47 new stores across the UK last year as it continued its rapid expansion across the country.
01:34 PM BST
Wall Street’s ‘Fear Gauge’ spikes amid Iran-Israel tensions
Wall Street is on high alert for potential swings in stock markets after Israel vowed to respond to Iran’s unprecedented attack at the weekend.
US stock markets are expected to open higher despite a global sell-off in equities after top Israeli military officials said their country had no choice but to respond to Tehran’s barrage of more than 300 missiles.
However American analysts are preparing for sharp changes, with Wall Street’s so-called ‘Fear Gauge’ — the Chicago Board Options Exchange Volatility Index — shooting up by more than a quarter over Friday and Monday to the highest since late October, several weeks after the initial Hamas attack on Israel.
01:11 PM BST
PwC to investigate ‘false allegations’ over collapse of Chinese property titan
PwC is planning to investigate an anonymous letter containing “false allegations” over how the firm “turned a blind eye” to its audit of Chinese property giant Evergrande.
Our reporter Adam Mawardi has the details:
The Big Four accountancy firm has rejected accusations that senior figures committed failures while auditing the world’s most indebted property developer, which filed for bankruptcy last year.
The letter, written in Chinese and entitled “Who brought PwC into the fire pit of Evergrande?”, claims to have been signed by some unnamed partners at the firm.
PwC Hong Kong said: “We believe the letter contains inaccurate statements and false allegations concerning PwC and certain of our partners. The inaccurate statements and false allegations could tarnish PwC’s reputation and infringe our legal rights.”
“Our firm is treating this incident with high priority and is taking a series of appropriate measures and will fully investigate this matter.”
Read the anonymous letter’s claims.
12:38 PM BST
Bank of America boosted by stock trading despite turmoil
Bank of America revealed its trading revenues performed better than expected in the first three months of the year.
The second-largest US bank enjoyed a 15pc jump in revenue from equities trading to $1.9bn despite high interest rates and geopolitical tensions.
It managed to make $6.7bn during the quarter, at the top of analysts’ net-income estimates.
Chief executive Brian Moynihan said: “Bank of America’s sales and trading businesses continued their strong 2023 momentum this quarter, reporting the best first quarter in over a decade.”
Meanwhile, Bank of America’s non-interest expenses soared 6.2pc from a year earlier to $17.2bn.
Met interest income, a key source of revenue for the bank, fell 2.9pc to $14bn in the first quarter of this year.
12:18 PM BST
Traders ‘shaky’ amid Israel-Iran tensions
The “extent of the retaliation” by Israel will be key to what happens next for markets, according to analysts.
Global stocks have sunk after Israel’s army chief vowed a response to Iran’s attack on his country, with sentiment also dented by diminishing US interest-rate cut hopes and mixed earnings.
Matthew Ryan, head of market strategy at financial services firm Ebury, said: “The key for markets will now be the extent of the retaliation.”
Joshua Mahony, an analyst at Scope Markets, added: “Sentiment is shaky at best right now with heightened geopolitical tensions in the Middle East, coming alongside increased concerns that the Federal Reserve may opt to maintain interest rates at the current levels for some time yet.”
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “The ongoing uncertainty has left its mark on stocks across the globe, with the effect of fear being compounded by a mixed start to earnings season.”
11:57 AM BST
Wall Street on track to fall
US stock markets are largely on track to edge lower when trading begins later as investors remain wary of the conflict in the Middle East.
Wall Street closed sharply lower on Monday as stocks were pressured by a jump in Treasury yields and concerns about the rising geopolitical tensions between Iran and Israel.
The yield on the 10-year government bond last stood at 4.65pc, a day after data showed US retail sales increased more than expected in March amid a surge in receipts at online retailers.
This was further evidence that the economy had ended the first quarter on solid ground, dampening hopes for interest rate cuts.
Traders are no longer fully pricing in a Fed rate cut before November.
Meanwhile, Israelis awaited word on how Prime Minister Benjamin Netanyahu would respond to Iran’s first-ever direct attack, as international pressure for restraint grew over fears the conflict could escalate.
In premarket trading, the Dow Jones Industrial Average was up 0.3pc but the S&P 500 and Nasdaq 100 were down 0.1pc .
11:34 AM BST
Twitter may charge users to post, says Musk
X, the social media platform formerly known as Twitter, is planning to start charging all new users a “small fee” in order to interact with posts, its owner Elon Musk has said.
The Tesla and Space X boss said charging new users to post, like and reply was the “only way” to stop fake or bot accounts on the platform.
Last year, X, formerly known as Twitter, launched a pilot scheme in New Zealand and the Philippines which required new users to pay a one dollar a year subscription in order to access key features.
Mr Musk’s comments suggest that trial is to now be rolled out more widely. He said:
He later added: “The onslaught of fake accounts also uses up the available namespace, so many good handles are taken as a result.”
In a further reply to another account which questioned the approach, Mr Musk said the fee could only be in place for the first three months after a new user joins the platform.
The billionaire said eradicating fake and bot accounts was a key priority for him when taking over the platform in late 2022. However, many users have since reported seeing an increase in spam content, in part due to Mr Musk’s substantial cutbacks to staff, including the firm’s content moderation team.
11:18 AM BST
EasyJet cancels flights to Israel until October
EasyJet has suspended flights to Israel until October 27 after Israel pledged to “respond” to Iran’s attack over the weekend.
A spokesman for the budget airline said:
As a result of the continued evolving situation in Israel, easyJet has now taken the decision to suspend its flights to Tel Aviv for the remainder of the summer season.
Customers booked to fly on this route up to this date are being offered options including a full refund.
11:14 AM BST
Israel-Iran conflict could push petrol prices above 150p, warns RAC
Average petrol prices have risen by nearly 8p per litre so far this year, figures show, as oil prices tick higher amid the conflict in the Middle East.
A 1.6p increase over the past week has brought the average price of a litre of petrol at UK forecourts to a five-month high of 148.5p, according to Government data.
That is compared with 140.8p at the start of the year. There has not been a sharper weekly rise since August 2023.
Average pump prices for diesel have increased to 157.5p, which is the most expensive level since November 2023.
RAC fuel price spokesman Simon Williams said:
This year is proving to be another tough one for drivers.
Both petrol and diesel are now the most expensive they’ve been since November last year, which is bad for households, businesses and the economy, especially as we know there is a close link between fuel prices and inflation.
With increased tensions in the Middle East, the cost of oil is only likely to go up which could push petrol well above 150p a litre.
11:06 AM BST
New Bank of England deputy pledges ‘shake up’ of inflation forecasting
The incoming Deputy Governor of the Bank of England has pledged to improve the institution’s economic forecasting after a review by a former Federal Reserve chairman found “significant shortcomings” in the practice.
Clare Lombardelli, who begins in her new role in July, told MPs today that she could “absolutely” assure them that there will be “a shakeup in response” to the withering assessment led by former Federal Reserve chairman Ben Bernanke.
The US central banker said that there had been “deficiencies” in Threadneedle Street’s ability to predict the impact of economic shocks such as Russia’s invasion of Ukraine.
Mr Bernanke warned the accuracy of the Bank’s predictions had “deteriorated significantly” in the wake of the pandemic.
Ms Lombardelli, a former Treasury official, told the Treasury Select Committee:
There’s a huge amount that we can all learn from what’s happened over the last couple of years.
It’s been an extraordinary period and extraordinarily painful.
10:53 AM BST
Microsoft pumps £1.2bn into Abu Dhabi AI business
Microsoft is investing $1.5bn (£1.2bn) in an Abu Dhabi-based artificial intelligence business as tech giants deepen their ties to the UAE.
Our senior technology reporter Matthew Field has the details:
The software behemoth has struck a deal with G42, which is backed by the Gulf state’s powerful national security advisor Sheikh Tahnoon bin Zayd al Nahyan, taking a stake in the Middle East business and securing a board seat for Microsoft president Brad Smith.
The tie-up comes after Microsoft secured approval from officials in Washington DC and the UAE government, Judson Althoff, Microsoft’s chief commercial officer said.
“Microsoft and G42 will work closely together to elevate the security and compliance framework of their joint international infrastructure,” he said, in a binding agreement developed in “close consultation” with the US government.
G42 has agreed to sever its links to China, tearing out some Chinese equipment and divesting from businesses, after US officials raised concerns over its historic ties.
This will allow G42 to continue to access crucial US-made technologies, such as powerful AI microchips, Bloomberg reported.
Peng Xiao, G42’s chief executive, previously announced the company’s intention to cut its Chinese ties.
10:37 AM BST
Gas prices rise amid risk of Middle East conflict
Wholesale gas prices have risen amid fears that an Israeli retaliation to the attack by Iran at the weekend could spark a wider conflict in the Middle East.
Europe’s benchmark contract jumped as much as 6.6pc as traders re-evaluated the outlook for Europe’s energy supplies.
Prices had fallen by 30pc since the start of the year after a mild winter meant that stockpiles were left relatively full.
However, gas prices have now clawed back those losses.
The UK equivalent contract has gained as much as 6.9pc today.
10:28 AM BST
Fire engulfs Copenhagen’s historic stock exchange
A huge fire has devastated Copenhagen’s 17th century former stock exchange toppling the historic building’s landmark spire in front of horrified witnesses.
The 54-metre (180-foot) spire disappeared into flames at the Borsen building, which has been undergoing renovation.
The spire snapped and crashed down onto the street below. Dramatic photographs and video showed huge plumes of black smoke emerging from the building.
The Borsen building, commissioned by King Christian IV and built between 1619 and 1640, is one of Copenhagen’s best known landmarks.
“Terrifying images from Borsen this morning. 400 years of Danish cultural heritage going up in flames,” Culture Minister Jakob Engel-Schmidt wrote in a post to X, the former Twitter.
The images recalled the disaster at Notre Dame Cathedral in Paris, almost five years ago to the day when its spire was also destroyed by a fire.
“This is our Notre Dame, it is our national treasure,” said Elisabeth Moltke, a 45-year-old Copenhagen resident, who watched the blaze. Others could not hold back tears as they watched the devastation.
10:13 AM BST
Chip maker Alphawave hit by shift away from China
Shares in the most valuable semiconductor company listed on the London Stock Exchange have plunged after it announced it would miss its sales forecast for the year.
Alphawave IP, the Anglo-Canadian microchip designer, plunged by 31.3pc after it said revenues would reach about $318m to $323m, which is below the original outlook for the year of between $340m to $360m.
Bosses also warned that underlying profits would fall, blaming its accelerated transition away from China, and changes in expected returns from long-term contracts in “advanced nodes”.
Alphawave’s shares have plunged nearly 75pc since it went public on the London Stock Exchange in May 2021, a deal that initially valued the chip designer at £3bn.
The company, which is chaired by US tech executive John Lofton Holt, develops and licences designs for “chiplets”, tiny elements of microchips that can be combined to create faster and more efficient computer or data centre processors.
Last year it was forced to suspend its shares after auditors delayed issuing its final accounts.
09:52 AM BST
Global shares hit by Israeli warning against Iran
Stocks around the world have fallen amid growing fears of a wider war in the Middle East after Israel’s army chief vowed a response to Iran’s unprecedented attack on his country at the weekend.
European shares dropped to a six-week low, with the STOXX 600 - which includes stocks from across the continent - down 1.5pc.
Equity indexes in Germany, France, Italy and Spain had all shed between 1.3pc and 1.7pc.
Traders were on edge as the world awaited Israel’s response to Iran’s first-ever direct attack against the country as international pressure for restraint grew on fears of a widening conflict in the Middle East.
In Asian trading overnight, the Shanghai Composite index lost 1.7pc to 3,007.07 even though the Chinese government reported that the economy grew at a surprisingly fast 5.3pc annual rate in the first quarter of the year. In quarterly terms it expanded at a 1.6pc pace.
The Hang Seng in Hong Kong lost 2.1pc to 16,248.97. Tokyo’s Nikkei 225 fell 1.9pc to 38,471.20
09:40 AM BST
DS Smith agrees to £7.8bn takeover by US rival
UK packaging giant DS Smith has agreed a £7.8bn takeover by a US rival after the suitor emerged victorious in a bidding battle for the company.
Under the all-share deal, Memphis-based International Paper will own around 66.3pc of the combined group, with FTSE 100 listed DS Smith owning the remaining 33.7pc.
It comes after International Paper muscled in on a £5.1bn deal between DS Smith and London-listed rival Mondi, that was agreed in principle last month.
International Paper will also seek a secondary listing of its shares on the London Stock Exchange following the takeover, which values each DS Smith share at 415p.
But it warned over back office job cuts across the combined workforce, with around 400 roles so far earmarked as being at risk, though this is subject to a review.
It said this was around 0.6pc of the combined workforce worldwide and would focus on “corporate, head office and senior management positions across its and DS Smith’s respective businesses”.
Most roles impacted would be across corporate and administrative departments and come as part of aims to save at least £413m in “synergies” after the acquisition.
The companies did not say how many jobs were likely to go in the UK or specifically across DS Smith’s operations.
DS Smith has 4,750 staff in the UK and 30,000 worldwide, while International Paper has about 40,000 employees globally, of which 33,000 are based in the US.
09:33 AM BST
FTSE 100 entirely in the red
As I write, every single company on the FTSE 100 is in the red today amid a global stocks sell-off triggered by the tensions in the Middle East.
The UK’s blue-chip index is down 1.5pc while the FTSE 250 is down 1.6pc.
Shares of Dr Martens have now plunged 29.8pc after the bootmaker named a new chief exective and flagged a challenging fiscal 2025 amid weak US demand.
Superdry was last down 18.8pc after the retailer launched a turnaround plan that would involve restructuring of its UK property estate and retail cost base, along with an equity raise that would take the company private.
09:24 AM BST
Bank of England will be ‘emboldened’ by rising unemployment, says economist
Rob Wood, chief UK economist at Pantheon Macroeconomics, said the rising unemployment rate and fall in those on payrolls will “embolden” Bank of England policymakers to look at interest rate cuts.
Unemployment hit a six-month high of 4.2pc in the three months to February, according to the Office for National Statistics, while more timely data from HM Revenue & Customs revealed that the number of workers on payrolls fell by 67,000, or 0.2pc, to 30.3 million in March.
This is the biggest drop since the quarter to November 2020 at the height of the pandemic, although the figures are estimates and subject to revision.
Mr Wood said:
There is solid evidence the labour market slowed markedly in March.
Rate setters will take note. Wages lag labour market slack, so these figures will likely embolden the Monetary Policy Committee to begin cutting interest rates this summer.
He said the stronger-than-expected wage figures complicate the picture, with rises in earnings expected to be pushed higher by this month’s near-10pc rise in the national living wage.
“Solid earnings growth in February will, we think, mean rate setters want to wait until June before lowering interest rates, so they can see the post-minimum wage hike data,” he said.
09:12 AM BST
Wise slumps as transaction numbers fall short
Wise shares suffered their sharpest drop in nearly a year after it revealed transaction volumes that were lower than analysts expected.
The money transfer business slumped by as much as 12pc after transaction volumes grew by 15pc in the fourth quarter to £30.6bn, compared to estimates of £32.12bn.
Citi analyst Pavan Daswani said it was a “weak set of results” after shares rallied by 51pc since October amid a wider recovery in the fintech sector.
Wise co-founder and chief executive Kristo Käärmann said: “Our continued customer growth laps strong results and tells us that the investments that we’re making are meeting real needs, giving me confidence that we’re progressing well on our mission.”
08:58 AM BST
Long-term sickness surges to record high as labour crisis deepens
The number of workforce dropouts claiming to suffer long-term sickness has surged to a record high as Britain’s labour crisis deepens.
Our deputy economics editor Tim Wallace has the details:
More than 2.8 million people say they are too ill to work, the highest number since records were first collected by the Office for National Statistics (ONS).
In total, 9.4 million people aged between 16 and 64-years old are economically inactive – neither in work, nor looking for work – according to the ONS, with long-term sickness the most common reason for inactivity. That is the highest number since 2012, in the aftermath of the financial crisis.
At the same time the jobs figures risk complicating the Bank of England’s plans to cut interest rates after pay growth proved stubbornly high.
Average regular earnings in the three months to February were up by 6pc on the year. This represents a slowdown from the previous pace, but shows wages are growing more quickly than economists had anticipated.
Read how Britain has become “an international outlier”.
08:40 AM BST
Pound falls amid Middle East tensions
The pound stayed at a five month low against the dollar as investors rushed to the safe haven US currency amid the rising Middle East tensions.
Sterling was last down 0.1pc against the dollar at $1.244 , and flat against the euro, which is worth 85p.
08:27 AM BST
FTSE plunges as Israel vows retaliation against Iran
The FTSE 100 has plunged after Israel vowed to respond to Iran’s unprecedented attack at the weekend.
The UK’s flagship stock index dropped as much as 1.5pc as trading began in London after top Israeli military officials said their country had no choice but to respond to Tehran’s barrage of more than 300 missiles.
The FTSE 250 is down 1.4pc, while the Dax in Germany has fallen 1.4pc and Cac 40 in France has dropped 1.5pc amid fears the rising tensions in the Middle East could disrupt global supply chains.
Brent crude oil has climbed back above $90 a barrel after it hit a six week high last week and despite Foreign Secretary Lord Cameron and US President Joe Biden urging restraint from Israel.
08:14 AM BST
Dr Martens shares plummet after profit warning
Boot maker Dr Martens stumbled heavily as trading began after warning that profits will fall next year.
The retailer’s shares plunged by 25pc after it said it expects revenues to decline in its 2025 financial year and pre-tax earnings to be as little as a third of this year’s level.
It warned that USA wholesale revenue is anticipated to be down year-on-year by a double-digit percentage while it also battles inflating costs.
Chief executive Kenny Wilson said:
The FY25 outlook is challenging, and the whole organisation is focused on our action plan to reignite boots demand, particularly in the USA, our largest market.
The nature of USA wholesale is that when customers gain confidence in the market we will see a significant improvement in our business performance, but we are not assuming that this occurs in FY25.
We have built an operating cost base in anticipation of a larger business, however with revenues weaker we are currently seeing significant deleverage through to earnings.
Against this backdrop, we will be laser-focused on driving cost efficiencies where possible. We also have a number of ongoing investment projects which will deliver results in outer years.
08:06 AM BST
UK markets plunge at the open
UK stock markets dropped steeply as trading began after the latest jobs figures raised doubts about interest rate cuts - and amid the rising tensions in the Middle East.
The FTSE 100 has sunk 1.3pc to 7,860.63 while the midcap FTSE 250 has fallen 1.2pc to 19,473.11.
08:01 AM BST
Pay growth ‘remains a key barrier’ to rate cuts, warns PwC
After the latest jobs data, Jake Finney, economist at PwC UK, said:
The latest data suggests the UK labour market continues to cool, albeit at a gradual pace considering the strain the economy has been under over the past few years. The unemployment-to-vacancies ratio, a key measure for the Bank of England, ticked up to 1.6 in the three months to February 2024 as unemployment increased and vacancies fell further.
One lasting aftereffect of recent economic crises has been rising economic inactivity. There are now around 850,000 additional working-age people out of work, who are no longer seeking work or are unable to start work, than before the pandemic began. We expect this is being driven primarily by higher levels of long-term sickness amongst both younger and older workers.
Pay growth has also remained at stubbornly high levels, though it continues to moderate as the labour market cools. High pay growth remains a key barrier to base rate cuts as the Bank of England expects it is contributing to inflation persistence. However, the one upside is that households could see significant real wage growth on an annual basis this year for the first time since 2021.
07:46 AM BST
Superdry founder to delist retailer from stock exchange
Superdry has announced it plans to delist from the London Stock Exchange as the troubled fashion chain launched a restructuring plan and an equity raise.
It said it would be forced to enter into administration if it did not go ahead with the plans.
The company is looking to raise up to £10m through an equity raise, meaning through the sale of new shares, which will be fully insured by its founder and chief executive Julian Dunkerton.
Superdry said it wants to delist from the London markets as a result of the plans, which need to be implemented “away from the heightened exposure of public markets”.
Mr Dunkerton said the proposals mean “putting the business on the right footing to secure its long-term future following a period of unprecedented challenges”.
07:33 AM BST
Real earnings growth highest in more than two years, says ONS
Liz McKeown, the director of economic statistics at the Office for National Statistics, said:
Recent trends of falling vacancy numbers and slow earnings growth have continued this month albeit at a reduced pace.
But with the rate of inflation also slowing, real earnings growth has increased and is now at its highest rate in nearly two and a half years.
At the same time, we are now seeing tentative signs that the jobs market is beginning to cool, with both a fall in the headline employment rate from our survey and a drop in the total number of people on payrolls from HMRC data.
However, we would recommend caution when looking at the size of the fall in headline employment, as previously highlighted lower sample sizes mean there is greater volatility in quarterly changes than was the case.
07:26 AM BST
Long-term sickness hits record high
The number of people out of work due to long-term sickness has hit a record high, official figures show.
There were 9.4m people economically inactive in the three months to February, according to the Office for National Statistics, which is the highest since 2012.
Of those, 2.83m said long-term sickness is the reason they are out of work.
07:17 AM BST
Unemployment rises in sign economy slowing
The rate of UK unemployment rose to 4.2pc in the three months to February in a boost to hopes of interest rate cuts.
The jobless rate was up from 3.9pc in the previous three months, the Office for National Statistics said, and was also higher than the 4pc forecast.
The Bank of England has long said that it is looking closely at the labour market for signs that it is cooling, which would give policymakers the confidence to begin cutting interest rates.
07:11 AM BST
Wages rise faster than expected in fresh inflation risk
Wages grew faster than expected, official figures show, in a potential risk to inflation.
UK average regular earnings growth eased back to 6pc in the three months to February, according to the Office for National Statistics, compared to 6.1pc in the three months to January.
However, it grew faster than the 5.8pc expected by economists.
Real pay also lifted 2.1pc after taking inflation into account, rising at its fastest since September 2021.
07:02 AM BST
Oil rises as Israel vows to respond to Iran attack
Oil prices have risen after Israel vowed to respond to Iran’s unprecedented attack at the weekend.
Brent crude, the global benchmark, has climbed 0.6pc in early trading towards $91 a barrel after top Israeli military officials said their country had no choice but to respond to Tehran’s barrage of more than 300 missiles.
Israel’s military chief of staff Herzi Halevi said the country would respond. He provided no details.
The jump in the price of oil comes after it hit a six week high last week and despite Foreign Secretary Lord Cameron and US President Joe Biden urging restraint.
Warren Patterson, head of commodities strategy for ING, said the possibility of a direct response from Israel “means that this uncertainty and tension will linger for quite some time”.
He added: “The more escalation we see, the more likely we are to see oil supply from the region impacted.”
Brent crude had eased 35 cents to $90.10 per barrel on Monday but has risen significantly this year.
The jump in oil prices has been raising worries about a knock-on effect on inflation, which has remained stubbornly high.
After cooling solidly last year, inflation has consistently come in above forecasts in each month so far of 2024.
06:59 AM BST
Good morning
Thanks for joining me. Brent crude oil has risen towards $91 a barrel after Israel said it would be forced to respond to Iran’s attack on the country at the weekend.
The vow comes despite Europe and the US urging restraint after deeming Tehran’s attack on Saturday a “failure”.
5 things to start your day
1) Elon Musk to cut 14,000 Tesla jobs amid electric car slowdown | Billionaire says 10pc reduction ‘must be done’ after first fall in sales in four years
2) Trump’s Truth Social suffers $700m slump after issuing new shares | App’s value tumbles 15pc as former president begins criminal trial
3) New York threatens London’s fintech dominance, says Revolut UK chief | The City risks losing talent to the US just as investors regain confidence
4) All new smart meters to have surge pricing function under government plans | Households would be charged more as demand rises under ‘time of use’ tariffs
5) Nike on the back foot as shoppers flock to Adidas for Sunak’s favourite trainers | Demand for Sambas sees German sportswear giant outpace its rival
What happened overnight
Asian shares skidded Tuesday following a slump on Wall Street after higher yields in the US bond market cranked up pressure on stocks.
The Shanghai Composite index lost 1.4pc to 3,013.84 even though the Chinese government reported that the economy grew at a faster-than-forecast annual rate of 5.3pc in the first quarter of the year. In quarterly terms it expanded at a 1.6pc pace.
The Hang Seng in Hong Kong lost 1.9pc to 16,279.66.
Tokyo’s Nikkei 225 fell 2.1pc to 38,402.59 as the dollar continued to gain against the Japanese yen, hitting fresh 34-year highs. By midday the dollar was trading at 154.33 yen, up from 154.27 yen.
Wall Street closed sharply lower on Monday amid rising US Treasury yields as simmering tensions in the Middle East helped curb investor risk appetite.
Meanwhile US retail sales data for March blew past analyst expectations, providing the latest evidence in the case for the resilience of the American consumer but also suggesting the Fed could hold off on cutting interest rates for longer than previously anticipated.
The three major US stock indexes reversed initial gains to extend Friday’s sell-off.
The Dow Jones Industrial Average fell 0.65pc, to 37,735.11, the S&P 500 lost 1.20pc, to 5,061.82, and the Nasdaq Composite dropped 1.79pc, to 15,885.02.
2024-04-16T17:34:26Z dg43tfdfdgfd