China trade war fears wipe £260bn off world’s biggest companies
More than $338bn (£260bn) has been wiped off the value of the world’s richest companies amid fears that Joe Biden will launch a trade war against China.
The world’s three largest companies - Microsoft, Apple and Nvidia - all fell between 1pc and 6.1pc after trading began on Wall Street.
Technology stocks have plunged after reports that the Biden administration plans tighter import controls on companies that share chip-making technology with China.
The S&P 500 has dropped by 1.1pc, while the tech-heavy Nasdaq Composite plunged by as much as 2.4pc.
Meanwhile the FTSE 100 was down as much as 0.4pc, the Dax in Germany dropped as much as 0.9pc and the Cac 40 in France had dropped as much as 0.7pc.
It follows an unconfirmed report that President Joe Biden is considering using a wide-sweeping regulation, the foreign direct product rule, to further restrict sales of critical chipmaking equipment to China, according to Bloomberg.
The United States has blocked Chinese access to advanced chips and the equipment to make them amid security concerns, and urged its allies to follow suit.
Read the latest updates below.
06:08 PM BST
Signing off...
Thanks for joining us today. We will be back in the morning from around 7am.
In the meantime, do ready Matt Oliver’s report on what the King’s Speech means for business: Labour to launch state-owned Great British Energy in £8.3bn market intervention
06:06 PM BST
Plastic surgery chain Skin collapses amid funding crunch
One of Britain’s largest plastic surgery providers with more than 70 branches across the UK, has collapsed.
Those calling Skin Clinics’ main office number on Tuesday were told it had ceased trading.
The chain said it had “undertaken an extensive process to secure investment to enable it to continue trading but sadly we’ve been unsuccessful”.
The group’s holding company, Hebe Topco, posted a loss of £16.2m in its most recently published accounts, to the end of August 2022, down from £19.3m the year before amid the Covid pandemic. It had net liabilities of £62.4m.
Before the website went down, it said the Birmingham-based company had “the largest network of specialist skin care clinics in the UK”.
Skin Clinics had more than 450 consultants, doctors, nurses and medical practitioners operating across England and Scotland.
06:02 PM BST
Young people risk unemployment under minimum wage overhaul
More than 250,000 young people risk missing out on jobs if an overhaul of the minimum wage by Angela Rayner backfires, experts have warned. Szu Ping Chan and Lucy Burton report:
A radical change to workers rights championed by the Deputy Prime Minister and set out in the King’s Speech includes plans to remove “discriminatory age bands” that mean a lower wage is paid to younger people.
However, industry insiders warned that the plans mean companies will be more likely to hire experienced staff and pass over young workers if they both cost the same.
Michael Kill, the chief executive of the Night Time Industries Association, said: “While aiming to ensure fair compensation for all workers, it may inadvertently deter businesses from hiring 18 to 20-year-olds due to higher wage costs.
“Young workers are vital to our industry, bringing energy and a willingness to learn. However, faced with increased financial burdens, employers might prefer more experienced staff, reducing job opportunities for those entering the workforce.”
05:59 PM BST
France’s EDF faces fresh setback after losing Czech nuclear bid
French state power giant EDF lost a bid to build at least two new nuclear reactors in the Czech Republic on Wednesday, a major blow to Europe’s only nuclear power plant builder at a critical time for the company.
The project, won instead by Korea’s KHNP, would have been the first contract for EDF since Hinkley Point in the UK in 2016, and a vote of confidence after being dogged by delays and soaring costs on projects at home and abroad.
But its recent track record and a gamble on new, untested technology has cost it a significant new project and likely others in the future too.
An EDF source said:
We were counting on this project to give credibility to our offer on a European scale.
But unfortunately the reality of the costs outweighed any political rhetoric, and the message sent to the rest of Europe was not the one we had hoped for.
EDF said in a statement it was ready to relaunch discussions with the Czech government should the preferred bidder process be modified in coming weeks.
05:38 PM BST
Europe’s Stoxx 600 falls for third straight session as tech shares drag
European shares closed lower for a third straight day on Wednesday, with chip stocks sliding as investors remained wary of potential U.S.- China trade tensions, with focus now shifting to the European Central Bank’s upcoming rate decision.
The pan-European Stoxx 600 index closed 0.5pc lower, touching one-week lows with its technology sub-index falling 4.5pc, the biggest single-day drop since December 2022.
Shares of Dutch firm ASML, the biggest supplier of computer chip-making equipment in the world, shed almost 11pc, its largest single-day percentage drop in over four years, driven by concerns that US government pressure could lead to tighter restrictions on its exports to China, overshadowing its second-quarter earnings numbers.
Chris Beauchamp, chief market analyst at IG Group, attributed the fall in chip stocks to “a trifecta of China growth and demand [concerns], the geopolitical situation, and also the fact that these stocks have come quite a way in a very short space [of time].”
05:37 PM BST
‘Defensive’ stocks do well as chip shares drop
Technology stocks across the globe took a hammering today but the defensive stocks that investors flock to during times of economic uncertainty rose.
Rattling global investors, US presidential candidate Donald Trump questioned American support for Taiwan and a report said Washington was mulling tighter curbs on the export of advanced semiconductor technology to China.
Geopolitical risks drove gains in such defensive sectors as healthcare and consumer goods, while stronger-than-expected UK inflation data eased bets of rate cuts from the Bank of England.
The blue-chip FTSE 100 index rose 0.3pc, recovering from losses of as much as 0.4pc earlier in the day.
British consumer prices data showed that inflation held at 2pc, defying forecasts of a slight fall, adding to uncertainty around when the BoE would start its monetary policy easing cycle.
The odds of a rate cut in August dropped to 33pc, from 49pc before the data release.
Tomorrow, UK wages data and retail sales data should be released, which could further sway expectations around the Bank of England’s interest rate decision-making in August.
05:22 PM BST
German property sector cracks show as new building starts tumble
The start of new construction project in Germany starts fell further during the first half of the year, according to new data, indicating stress in the property market of Europe’s largest economy.
New building starts dropped 26pc in the first six months, from a year earlier, based on data from Bulwiengesa, a property consulting and analysis firm.
The data follow a bleak assessment from one of the nation’s biggest landlords, Vonovia chief Rolf Buch, who last week predicted that more property companies would go bust.
For years, low interest rates and a strong economy sustained a boom across the German property sector, which contributes €730bn (£560bn) annually to the nation’s economy, or roughly a fifth of Germany’s output.
That boom ended when rampant inflation forced the European Central Bank to raise borrowing costs. Real-estate financing dried up, deals fizzled, projects stalled, major developers went bust, and some banks teetered.
05:19 PM BST
US stock markets hit by ‘upsetting stir’
Two of Wall Street’s main indexes tumbled this afternoon as fears of heightened trade tensions with China hit tech stocks.
The increasing prospect of a US rate reduction also weighed on the dollar, helping push gold - a haven investment that is priced in the currency - to another record peak.
The tech-heavy Nasdaq has slumped by 1.3pc, as has the broader S&P 500. However, the Dow Jones Industrial Average of 30 leading US companies, such as Coca-Cola, Procter & Gamble and Walmart, is up 0.5pc.
Patrick O’Hare, a market analyst at Briefing.com, said:
A Bloomberg report that the Biden administration is discussing tighter export restrictions for semiconductors and semiconductor equipment going to China has caused an upsetting stir.
The Dow and S&P 500 ended at fresh records on Tuesday.
Gold prices spiked to $2,482.42 per ounce.
05:09 PM BST
Intel defies chipmaker slump amid predictions it would win in a trade war
Shares in Intel rose as much as 8.2pc this afternoon despite a market sell-off of chip companies on fears of a looming trade war with China. The shares are currently up 2.3pc.
Intel has major manufacturing sites in the US, Costa Rica, the EU and Israel. Although it has a manufacturing site in China, it also has factorties in Malasia and Vietnam.
Robert Pavlik, Dakota Wealth Management, said:
Intel is the beneficiary of the comments Trump made about Taiwan.
If Taiwan potentially has to pay for its protection, does that mean China can move in on Taiwan? Intel does have manufacturing capabilities in the US, so it would be the beneficiary.
04:54 PM BST
FTSE 100 closes up
The FTSE 100 closed up 0.3pc this afternoon. The top riser was Burberry, up 4.4pc, followed by hip replacement manufacturer Smith & Nephew, up 2.5pc. The biggest faller was miner Antofagasta, down 6.1pc, followed by Intermediate Capital Group, down 4.7pc.
Meanwhile, the mid-cap FTSE 250 dropped 0.6pc. The top riser was water company Pennon, up 4.1pc, followed by Diversified Energy, up 3.4pc. Biotechnology business Genus was the biggest faller, down 10.8pc, followed by Allianz Technology Trust, down 5pc.
04:46 PM BST
Microsoft decides diversity ‘no longer business critical’, claims sacked manager
Microsoft has decided diversity is “no longer business critical”, a former manager has claimed, after the company sacked two staff working on initiatives focused on inclusivity. Our employment editor Lucy Burton reports:
The tech giant laid off the employees working on its diversity, equity, and inclusion (DEI) initiatives, just four years after it pledged to double the number of black leaders within the company by 2025.
An email sent by one of the sacked workers, seen by Business Insider, said: “True systems-change work associated with DEI programs everywhere are no longer business critical or smart as they were in 2020.”
A spokesman said that the company’s commitments in this area “remain unchanged”.
“Our focus on diversity and inclusion is unwavering and we are holding firm on our expectations, prioritising accountability, and continuing to focus on this work,” he said.
04:36 PM BST
Euro zone yields hug three-week lows
Euro zone yields held firm on Wednesday, heading for their largest weekly decline in a month, a day before a European Central Bank meeting that could offer a signal of where interest rates may go over the rest of this year.
The consensus among market-watchers is there will be no change to ECB monetary policy and euro zone rates will stay at 3.75pc. So the focus will be on what the central bank flags about the outlook for the September meeting.
German 10-year bond yields, the benchmark for the euro zone, were unchanged at 2.425pc, having touched their lowest in three weeks earlier in the day. French 10-year bonds are yielding 3.079pc.
Signs that inflation is slowing around the world, alongside some nervousness about European politics, have helped push yields lower.
The ECB meets on Thursday and is widely expected to hold interest rates steady, while the outlook for future rate cuts will depend on how the economy evolves.
Inflation has dropped since the ECB last met, but has failed to subside in the dominant services sector.
04:26 PM BST
Trade war fears hurt chip stocks around the world
The market’s spotlight is on chip companies this afternoon, which tumbled after a report that Joe Biden is considering severe trade restrictions available if companies like the Netherlands’ ASML and Japan’s Tokyo Electron continue to ship advanced semiconductor technology to China.
The US government has blocked Chinese access to advanced chips and the equipment to make them, citing security concerns, and urged its allies to follow suit.
ASML saw its stock trading in the United States plunge 10.9pc even though it reported sales for the spring that came in at the high end of its forecasted range. Shares of Tokyo Electron, meanwhile, dropped 7.4pc in Tokyo.
Another major chip company, Taiwan Semiconductor Manufacturing Company (TSMC), dropped 2.4pc after former President Donald Trump criticised the self-governed island claimed by Beijing, which the US is obligated by treaty to defend if it is attacked.
“Taiwan should pay us for defense,” Mr Trump said according to a transcript of an interview published by Bloomberg. “Taiwan took our chip business from us, I mean, how stupid are we?”
Reverberations reached chip stocks around the world, including big US players that have been some of Wall Street’s biggest stars this year amid a frenzy around artificial-intelligence technology. Nvidia fell 5pc, Advanced Micro Devices fell 7.3pc, and Broadcom dropped 5pc.
Meanwhile, Britain’s ARM Holdings dropped 7.6pc.
04:18 PM BST
Drug giant J&J jumps 3pc after posting bumper sales
Johnson & Johnson beat estimates for second-quarter profit and revenue in figures released today, driven by strong sales of its drugs, including cancer treatment Darzalex and blockbuster psoriasis drug Stelara.
Stelara has long been a key driver of revenue growth for J&J, with analysts forecasting sales of over $10bn (£7.7bn) this year. But this could fall to about $7 billion in 2025 when as many as six close copies of the drug are due to launch in the US.
Shares of the drug and medical device maker were up nearly 3pc this afternoon.
The New Jersey-based drugmaker said it now expected total 2024 sales of $89.2bn to $89.6bn, compared with its prior forecast of $88.7bn to $89.1bn.
04:12 PM BST
US industrial output beats expectations
US industrial production cooled in June but still exceeded analyst expectations, with manufacturing and utilities output both rising, the Federal Reserve said Wednesday.
Total industrial output rose 0.6pc from the prior month, down slightly from May’s 0.9pc reading.
Analysts expect that a slump in factory output that started in 2022 appears to now be in the rearview mirror.
The US central bank in 2022 rapidly hiked interest rates, lifting the cost of borrowing as it sought to ease demand and tamp down surging inflation.
Rates have remained high, taking a toll on businesses, as policymakers fight sticky inflation.
Oliver Allen, senior US economist at Pantheon Macroeconomics, said:
We doubt that manufacturing will continue to grow as rapidly as it did last quarter, partly because the manufacturing surveys remain so subdued.
A continued manufacturing boom probably requires either much lower interest rates or a more significant recovery in external demand, neither of which is materialising just yet.
04:07 PM BST
Paris Olympics has 1.2m unsold tickets as it struggles to fill large venues
Organisers of the Paris Olympics said today that there were still 1.2m tickets left for the games, mostly for football, basketball and handball.
Team sports such as football have struggled to sell out the large venues chosen for the matches, while organisers are also set to release new more sought-after places for the finals of the swimming and athletics from Thursday.
The Paris Games have set a new record for the total number of tickets sold, with the 8.7 million purchased surpassing the previous high of 8.3 million at the Atlanta Games in 1996.
“More than 60 percent” of tickets have been sold in France, the organisers said.
Organisers faced severe criticism from fans and even some athletes over the cost of tickets when they were first released last year, which undermined the promise of a “people’s Olympics”.
04:02 PM BST
China tests AI companies’ language models to create socialist AI
Chinese government officials are testing artificial intelligence companies’ large language models to ensure their systems “embody core socialist values”, the Financial Times has reported.
The Cyberspace Administration of China has forced large tech companies and AI start-ups to take part in a mandatory government review of their AI models, the report said, citing multiple people involved in the process.
03:59 PM BST
‘Magnificent 7’ likely to give way to ‘Other 493’, claims analyst
Investors in S&P 500 stocks are likely to turn their interest away from the so-called “Magnificent 7” (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) and towards the “Other 493” stocks, an analyst has said.
Chris Beauchamp, chief market analyst at online trading platform IG, said:
While today’s Dow and small-cap gains are but a shadow of recent surges, tech stocks are still firmly out of favour, partly thanks to the selloff in TSMC overnight, and no doubt on some pre-earnings nerves.
The Magnificent 7 are widely expected to give way to the ‘Other 493’ this time around, as investors finally lose some of their enthusiasm for the big names.
03:56 PM BST
Fed getting ‘closer’ to rate cuts, top officials say
Top US Fed officials touted interest rate cuts as getting “closer” today, after taking note of inflation’s improved trajectory and a labour market now in better balance.
Fed governor Christopher Waller and New York Fed president John Williams both spoke of the shortening horizon toward looser monetary policy, with Waller using it in a speech delivered at the Kansas City Fed and Williams voicing it in a Wall Street Journal interview.
Their remarks were the latest in a rush this week of commentary from top Fed officials - including chairman Jerome Powell - to note their increased confidence that the disinflationary trend that began last year is continuing, despite a short-lived bump in inflation earlier this year.
Mr Waller, who in May had said he would need several more months of improved inflation data to convince him that rate cuts would be warranted, said the first monthly drop in the consumer price index in four years reported last week for June “was the second month of very good news.”
He laid out what he saw as three scenarios for how inflation may play out in the months ahead. The two most likely of those, he said, suggest inflation will continue to moderate toward the Fed’s 2pc target in the months ahead, albeit in one scenario more rapidly and consistently than the other. The third and least likely possibility was for inflation to reaccelerate and keep a move to rate cuts on hold.
Still, Waller said, “given that I believe the first two scenarios have the highest probability of occurring, I believe the time to lower the policy rate is drawing closer.”
Mr Williams said:
I feel like the past three months - and I would include in June, based on what we’ve seen - seems to be getting us closer to a disinflationary trend that we’re looking for. I would like to see more data to gain further confidence inflation is moving sustainably towards our 2pc goal. We’ve got a few good months now.
The US central bank is widely expected to keep its benchmark rate unchanged in the 5.25pc-5.5pc range, where it has stayed for the past year, at its next meeting on July 30-31, but markets have fully priced in a cut in September, with two more by year-end solidly reflected in interest rate futures pricing.
03:49 PM BST
Dimon talks of becoming JPMorgan’s chairman after Trump named him potential Treasury Secretary
JP Morgan chief Jamie Dimon has suggested his future is as JPMorgan chairman, a day after Donald Trump named him as a potential US Treasury Secretary.
Mr Dimon told Bloomberg that he could see himself continuing as chairman after he steps down as chief executive.
It followed Donald Trump’s comments published yesterday night that he would consider Mr Dimon for Treasury secretary if he won the November 5 election.
Mr Trump said he would not try ousting Federal Reserve chairman Jerome Powell before the central banker’s term ends.
Mr Powell’s term as chairman expires in 2026 and his seat on the Fed board of governors expires in 2028.
Mr Powell was first appointed to the Fed board of governors by former President Barack Obama, but it was Mr Trump who picked him to lead the central bank, a post Mr Powell assumed in early 2018.
Last year, Trump called Jamie Dimon a “Highly overrated Globalist” on his Truth Social platform.
Mr Dimon, like many other corporate executives, had condemned the January 6, 2021, attack on the US Capitol by Trump supporters who made an unsuccessful attempt to prevent Congress from certifying the results of the 2020 elections that Trump lost to Biden.
However, recently Mr Dimon has praised some of Mr Trump’s positions and policies.
He said: “Take a step back: be honest. He was kind of right about Nato, kind of right on immigration. He grew the economy quite well. Trade tax reform worked. He was right about some of China. He wasn’t wrong about some of these critical issues.”
03:30 PM BST
Nationwide urges shareholders to be patient over Virgin Money takeover
Nationwide has said it could take up to six years to fully absorb Virgin Money, as it promised to address its customer service and IT shortcomings after taking over the rival bank.
The building society defended the £2.9bn takeover to members during its annual general meeting (AGM) today.
Debbie Crosbie, Nationwide’s chief executive, said there had been a “huge amount of careful consideration of both the risks and opportunities” of buying Virgin Money.
But she said the building society was “very confident that the profits will more than cover any costs of integrating the business”.
She also said the bank’s range of credit cards was one of the reason why it decided to buy it.
However, integrating Virgin Money into Nationwide is likely to take several years to complete.
It means that customers of Virgin Money will continue to see the bank as a separate brand, with its own high street branches, for between four and six years.
With that, I will sign off for the day and leave you in the capable hands of Alex Singleton.
03:21 PM BST
Over $338bn wiped off world’s richest companies amid China trade war fears
More than $338bn (£260bn) has been wiped off the value of the world’s richest companies amid fears that Joe Biden will launch a trade war against China.
The world’s three largest companies - Microsoft, Apple and Nvidia - all fell between 1pc and 4.4pc shortly after trading began on Wall Street.
Technology stocks have plunged after reports that the Biden administration plans tighter import controls on companies that share chip-making technology with China.
The S&P 500 has dropped by 1.1pc, while the tech-heavy Nasdaq Composite plunged by as much as 2.4pc.
02:59 PM BST
Oil prices rise amid signs of falling US stockpiles
In the commodities markets, oil prices have rebounded after after a three-day drop amid another decline in US crude stockpiles.
Brent crude, the international benchmark, rose 1.1pc to more than $84 a barrel, while West Texas Intermediate gained 1.6pc to more than $82.
It comes as the American Petroleum Institute reported that US crude stockpiles shrank by 4.4 million barrels last week, according to Bloomberg.
Meanwhile, European gas prices edged higher amid signs of strains on supply.
Dutch front-month futures, the benchmark for the continent, rose as much as 1.5pc as hot weather drove up temperatures from Germany to Spain, increasing demand for air conditioning.
02:38 PM BST
US stocks plunge amid China trade war fears
Wall Street tumbled at the open as declines in major chip and tech stocks were hit by the prospect of fresh US trade restrictions on Chinese chips.
The Dow Jones Industrial Average fell 91.91 points, or 0.2pc, at the open to 40,862.57.
The S&P 500 opened lower by 57.13 points, or 1pc, at 5,610.07, while the Nasdaq Composite dropped 321.15 points, or 1.7pc, to 18,188.19 at the opening bell.
02:14 PM BST
Gold hits record high amid bets on US rate cuts
Gold prices have hit record highs amid increasing expectations that the US Federal Reserve will cut interest rates soon.
Bullion climbed 0.9pc to $2,482,29 an ounce, having risen 1.9pc on Tuesday, as money markets indicate there is a more than 95pc chance that the Fed will reduce borrowing costs at its September meeting.
Bas Kooijman, chief executive of DHF Capital, said:
The increasing expectations for a faster and earlier monetary policy easing could continue to support gold toward new highs.
Rates are expected to keep declining well into next year and could support the market.
In this regard, Federal Reserve Governor Adriana Kugler cautiously expressed optimism on Tuesday, noting that inflation is heading toward the central bank’s 2% target, echoing remarks made by Fed Chair Jerome Powell on Monday.
Additionally, the uncertainty surrounding the upcoming US elections could continue to impact sentiment and could fuel demand for safe-haven assets like gold. As elections approach, investors could increasingly turn to gold to hedge against unforeseen results.
01:55 PM BST
EU court rejects TikTok challenge against new EU digital rules
TikTok has lost an appeal to escape new digital rules that seek to rein in the power of big tech after an EU court rejected its challenge.
The landmark European Union law known as the Digital Markets Act (DMA) entered into force in March with the aim of creating a fairer market.
The European Commission designated six “gatekeepers” under the DMA facing the curbs: Google parent Alphabet, Amazon, Apple, Meta, Microsoft - and TikTok owner ByteDance, the only non-US company.
The decision by the Luxembourg-based General Court is the first judgement on a DMA challenge by big tech, with cases lodged by Apple and Meta still pending.
“The Court dismisses ByteDance’s action,” it said.
China-based ByteDance can appeal against the ruling within two months and 10 days of the decision.
TikTok had insisted it was the “most capable challenger” to entrenched players in the digital sphere, but the court dismissed that argument.
“TikTok had succeeded in increasing its number of users very rapidly and exponentially, reaching, in a short time, half the size of Facebook and of Instagram, and a particularly high engagement rate, with young users in particular, who spent more time on TikTok than on other social networks,” the court said in a statement.
01:40 PM BST
US envoy accuses China of ‘predatory’ industrial policies
The challenges that China presents to the international trading system are growing, a US delegate to the World Trade Organisation (WTO) has said.
David Bisbee, deputy permanent representative of the United States, accused Beijing of “predatory” industrial practices that harm other countries.
The WTO is holding a meeting where China’s trade policies are under review.
Mr Bisbee said: “The PRC has doubled down on its state-led, nonmarket approach to the economy, to the detriment of workers and businesses in the United States and other countries, including emerging and developing economies.”
01:26 PM BST
Portas urges ministers to block Shein listing in Britain
A new campaign backed by television personality Mary Portas has launched an online petition calling on Labour to block fast fashion retailer Shein from listing its shares in London.
China-founded Shein, known for its low-cost tops and dresses, confidentially filed papers with the Financial Conduct Authority early last month, kicking off the process for a potential London listing later in the year.
The move is controversial amid calls for scrutiny of Shein’s labour practices, supply chain and use of an import tax exemption.
Shein has said it is committed to respecting human rights and has a zero-tolerance policy for forced labour.
The “Say No to Shein” campaign wants the government to block Shein’s application to list on the London Stock Exchange until it has completed a thorough investigation into its labour practices, environmental impact and tax arrangements.
British retail consultant Ms Portas said:
Why would we as a country consider embracing a company like Shein onto the London Stock Exchange?
This is a company with allegations of unethical business practices, modern slavery, and violating labour laws. Surely we are better than this?
01:17 PM BST
Global stocks slump amid fears of China trade war
Global stocks have fallen amid fears that the US could launch a trade war with China.
Technology stocks have plunged - with Wall Street expected to open later with sharp losses - after reports that the Biden administration plans tighter import controls on companies that share chip-making technology with China.
The S&P 500 is on track to drop by 1pc and the Nasdaq by 1.6pc at the opening bell in New York.
Meanwhile the FTSE 100 was down 0.1pc, the Dax in Germany was down 0.7pc and the Cac 40 in France had dropped 0.6pc.
It follows an unconfirmed report that President Joe Biden is considering using a wide-sweeping regulation, the foreign direct product rule, to further restrict sales of critical chipmaking equipment to China, according to Bloomberg.
The United States has blocked Chinese access to advanced chips and the equipment to make them amid security concerns, and urged its allies to follow suit.
01:05 PM BST
Wall Street on track for sharp slump amid China tariff fears
Tech stocks in the US have tumbled in premarket trading in New York amid concerns about potentially tougher trade restrictions on Chinese chips.
Wall Street shares are on track to fall sharply when trading begins as megacaps such as Apple, Microsoft and Meta Platforms lost between 1pc and 2pc before the opening bell.
Shares of semiconductor companies also fell, with AI-chip favorite Nvidia sliding 3.5pc and ASML’s US-listing dropping 7.5pc after a report that the Biden administration was considering severe trade restrictions as part of a crackdown on Chinese chips.
Wall Street’s “fear gauge” briefly touched a more than six-week high in early trading, signalling investor unease.
The Dow Jones Industrial Average and the S&P 500 had closed at all-time highs on Tuesday.
In premarket trading, the Dow was down 0.2pc, the S&P 500 had fallen nearly 1pc and the Nasdaq 100 has dropped 1.6pc.
12:55 PM BST
Johnson & Johnson boosted by cancer and psoriasis drugs
Johnson & Johnson revealed better-than-expected profits and revenues as it was driven by strong sales of its drugs.
Shares of the Benylin and Sudafed maker rose 1.4pc in choppy premarket trading amid growth for its cancer treatment Darzalex and blockbuster psoriasis drug Stelara.
Revenue of $22.4bn (£17.2bn) surpassed the consensus estimate of $22.3bn (£17.1bn). Adjusted earnings of $2.82 per share beat analysts’ expectations of $2.70 per share.
Stelara sales rose 3.1pc to $2.9bn, topping analysts’ estimate of $2.8bn. Darzalex sales rose 18.4pc to $2.9bn, in line with analysts’ average estimate.
12:18 PM BST
King’s Speech at a glance: Starmer’s key pledges... and what was missing
King Charles has unveiled Sir Keir Starmer’s blueprint for Britain, with draft laws on planning reform, employment rights and transport.
Border security and renters’ rights will play key role in Prime Minister’s plan for Government.
However, a Lords retirement age absent from list.
Here is everything included in the King’s Speech, along with some notable exceptions.
12:10 PM BST
Labour to ban ‘exploitative’ zero-hours contracts
The Government is pledging to create a new partnership between business, unions and workers with wide-ranging changes to employment rights.
An Employment Rights Bill will be introduced within the first 100 days, as promised by Labour in the run-up to the general election.
Measures will include banning “exploitative” zero-hours contracts, ending policies of fire and re-hire, and making parental leave, sick pay and protection from unfair dismissal available from day one in a job for all workers.
Flexible working will be the default from the first day in a job, while it will be unlawful to sack a woman who has had a baby for six months after she returns to work.
The Bill will also remove “unnecessary” restrictions on trade unions, including the Conservative government’s controversial law aimed at ensuring a minimum level of service during strikes.
Jack Kennedy, senior economist at Indeed, said:
Cracking down on zero-hour contracts was among the top job-related concerns highlighted by almost a quarter (23pc) of people in the UK in Indeed research which ran in the lead-up to the general election, so plans to reform them could signal a move in the right direction for many workers.
Bringing wages in line with the cost of living was another key concern for more than a third (39pc) of workers, among whom almost one in five had seen no change in their salary since the start of the cost of living crisis.
12:05 PM BST
RMT urges Labour to revive HS2 after King’s Speech
Rail union RMT has urged the Government to revive HS2 as it broadly welcomed the King’s Speech.
General Secretary Mick Lynch said:
We welcome today’s announcements specifically around removing restrictions on trade unions, the New Deal for workers and the rolling out of public ownership of our railways.
These achievements are down to pressure from the trade union movement, and we will continue to articulate what is in the best interests of railway workers and working people as a whole. We will also continue to actively engage with the government on the pay issues in our sectors which can be resolved quickly.
Labour has also committed to upgrading rail connectivity in the North. Our belief is that HS2 remains the best option for improving transport links, promoting economic growth and building a modern railway infrastructure, fit for the 21st century.
The Labour Government said it will not reverse Rishi Sunak’s decision to cancel the northern leg of the HS2 rail line, but will improve east to west rail connectivity across the north of England through its High Speed Rail (Crewe to Manchester) Bill.
12:01 PM BST
New body will aim to create highly trained workforce
A new body will bring together businesses, training providers and unions with central and local government to oversee the skills needed for the economy.
Under legislation unveiled as part of the King’s Speech, the Government will establish Skills England to ensure there is a highly trained workforce which meets the country’s needs.
The Skills England Bill will transfer a number of functions from the Institute for Apprenticeships and Technical Education (IfATE) to Skills England.
It is hoped the body will work with the Migration Advisory Committee, the Industrial Strategy Council, alongside union and industry experts, to identify national and local skills needs.
Labour has previously pledged to reform the apprenticeship levy and turn it into a growth and skills levy.
Business groups have repeatedly called for reforms to the existing levy, which is paid by large firms with the aim of creating more apprenticeship places.
11:57 AM BST
Labour to slash planning red tape to build 1.5m new homes
Sir Keir Starmer has vowed to “get Britain building” with sweeping reforms to the planning system announced in the King’s Speech as part of Labour’s drive to deliver 1.5m new homes.
The Government suggested it would consult on “how, not if” projects should take place, with speeding up development seen as key to its mission to boost economic growth.
The Planning and Infrastructure Bill will seek to allow for land to be bought more cheaply for building through reforms to compulsory purchase compensation rules, which was a Labour manifesto pledge.
Owners forced to sell up will be paid “fair but not excessive” compensation to make way for important developments, the Government said.
It would also aim to “streamline” delivery of critical infrastructure by “simplifying the consenting process” in order to boost renewable energy projects and upgrade the national grid.
Labour has said brownfield land should be targeted first under its plans, followed by what it describes as the “grey belt” - low-quality areas such as disused car parks and wasteland on parts of protected land known as the “green belt”.
Chancellor Rachel Reeves set out a raft of proposals last week to build 1.5m new homes over five years across the UK, including by reinstating compulsory housebuilding targets for local councils.
11:53 AM BST
Water bosses to face criminal liability over sewage spills crisis
The Government is bringing in measures to strengthen regulation of the water industry as it attempts to answer public anger over sewage polluting rivers, lakes and seas.
The Water (Special Measures) Bill announced in the King’s Speech includes regulations to make water company bosses face personal criminal liability for breaking laws on water quality, and new powers for regulator Ofwat to ban the payment of bonuses if environmental standards are not met.
It also establishes a new code of conduct for water companies, allowing customers to summon board members and hold executives to account, and will introduce new powers to bring “automatic and severe” fines for transgressions.
And it requires water companies to install real-time monitors at every sewage outlet with data independently scrutinised by the water regulators - although the government announced last year that all of England’s storm overflows are electronically monitored.
The measures, which cover England and Wales, come in response to growing public anger over the degraded state of rivers, lakes and coastal waters, rising bills, and the dividends and bonuses paid out by water companies.
Sewage spills from water infrastructure have contributed to a situation in which no single river in England is considered to be in good overall health, and beauty spots including Windermere in the Lake District have been polluted.
11:49 AM BST
King confirms Labour plan to charge VAT on private school fees
The King confirmed plans set out by Labour to put VAT on private school fees.
That would “enable the funding of 6,500 new teachers”, the King told the House of Lords.
He set out plans to give renters greater protection, including ending no-fault evictions.
And he also confirmed plans to introduce a football regulator and gradually phase out smoking, which were originally introduced under the Conservatives.
11:48 AM BST
King’s Speech: Government to improve employment rights
The King said the Government would “ban exploitative practices” as part of a new package of workers’ rights.
Local leaders will be given powers to take control of buses while train companies will be brought into public ownership.
The King also set out plans for a “clean energy transition” including the establishment of Great British Energy.
He also announced measures to increase the powers of the water regulator.
11:41 AM BST
King: My ministers will get Britain building
The King has begun his speech at the State Opening of Parliament, outlining how “stability will be the cornerstone of my Government’s economic policy”.
His Majesty said the Government will bring forward “bills to strengthen audit and corporarte governance alongside pensions investemt”.
He added the Government will “seek a new partnership with business and working people,” and will be “prioritising wealth creation for all communities”.
The King said: “My ministers will get Britain building including through planning reform”.
His Majesty added the Government “will pursue sustainable growth by encouraging investment in industry, skills and new technologies”.
It will “legislate to introduce a new deal for working people” and believes “greater devolution is... key driver of economic growth”.
11:36 AM BST
Why Britain’s inflation battle is far from over
Interest rate cuts appear unlikely next month after official data showed the pressure still facing families from higher household costs and soaring restaurant bills.
Our economics editor Szu Ping Chan analyses why:
Inflation, as measured by the consumer prices index (CPI), rose by 2pc in the year to June, according to the Office for National Statistics (ONS).
While this was unchanged from May, it was slightly higher than economists predicted.
It was also driven by a number of underlying measures that the Bank of England has warned must fall before it lowers interest rates from their current level of 5.25pc.
These eight charts show why Threadneedle Street’s battle with inflation is far from over.
11:25 AM BST
King to unveil Starmer’s plans for Britain - watch live
King Charles is poised to deliver the King’s Speech after arriving at the Palace of Westminster for the State Opening of Parliament.
He is due to deliver the address at 11.30am, which will feature the Labour government’s policies, including how it will bring about its planning reforms designed to kick start house building.
You can follow his speech in our politics live blog and watch it below:
11:13 AM BST
European Commission criticised for handling of Covid vaccine contracts
Europe’s second-highest court has said the European Commission did not give the public sufficient access to the purchase agreements for Covid vaccines during the pandemic.
The EU signed a number of large contracts to secure vaccines from several pharmaceutical companies at the height of the pandemic in 2020 and 2021.
European Parliament members wanted to examine the contracts to understand the terms and conditions but were only given partial access, while some documents were redacted with the Commission saying that this was done to protect commercial interests and the decision-making process.
MEPs subsequently took their grievances to the Luxembourg-based General Court, which said the Commission had not demonstrated that access to certain clauses would have undermined the commercial interest of the companies involved.
It also said the Commission could have given more insight into declarations by members of the team that negotiated the contracts that they had no conflict of interests.
The court said: “The commission did not take sufficient account of all the relevant circumstances in order to weigh up correctly the interests at issue.”
11:00 AM BST
Bank of England should not delay rate cut despite inflation blow, says think tank
The Bank of England should not delay interest rates after the latest inflation figures were higher than expected, a right-leaning think tank has said.
Andrew Lilico, economics fellow at the Institute of Economic Affairs, warned that policymakers risk doing damage to the economy by waiting too long, saying:
Despite this being a slight surprise (relative to expectations of a fall), the Bank of England should not use this as an excuse not to cut interest rates.
As matters stand, long-term interest rates (as defined by UK 10 year government bond yields) sit at just over 4pc whilst the Bank’s short-term policy rate is 5.25pc.
Thus policy is quite tight relative to the expected long-term norm. What is that tightness seeking to achieve?
Inflation is at target now. Monetary growth has been very low (indeed was negative for a long period). There is no problem for tightness to cure.
The Bank seems overly-concerned by wage data. But wage rises are typically caused by inflation rather than being a cause of it.
Although recent GDP growth has been fairly robust, and there is relatively little evidence of overly-high interest rates creating immediate other economic problems (e.g. mortgage-holder financial distress), the Bank should be cutting rates now rather than waiting.
Monetary policy works with a lag. If the Bank waits until problems are visible, it will have waited too long.
10:44 AM BST
Yen surges amid suspicions of Japanese intervention
The pound is not the only currency having a strong day.
The yen rose sharply after what traders suspect was another intervention from Japanese authorities to prop up the battered currency.
The dollar was last 1.3pc lower against the yen at 156.31, extending its sudden fall against the Japanese currency shortly after the London trading session began.
The pound, surging against the dollar and the euro, was down 0.8pc against the yen at 203.82.
The scale of the fall left markets alert to the possibility of another yen-buying intervention from Tokyo, after authorities had likely done so last week.
Geoff Yu, senior macro strategist at BNY Mellon, said:
Current valuations are still stretched and the yen is still undervalued, so a bit more activism in FX markets from Japan is the way to correct any misalignments.
But we have to wait for an official confirmation.
10:31 AM BST
Eurozone inflation inches lower
Inflation in the eurozone edged down to 2.5pc last month but, like Britain, price rises in services remained persistent.
The consumer prices index for the single currency bloc dropped from an upwardly revised 2.6pc in May.
Prices were pushed higher in services, which rose 1.84 percentage points, followed by food, alcohol & tobacco, up 0.48 percentage points and non-energy industrial goods, up 0.17 percentage points.
The European Central Bank is expected to leave interest rates unchanged tomorrow after announcing a cut in June from 4pc to 3.75pc.
Euro area annual #inflation at 2.5% in June 2024 https://t.co/towUtaDymQ pic.twitter.com/4c5Ke8riga
— EU_Eurostat (@EU_Eurostat) July 17, 2024
10:18 AM BST
Buyout giant CVC plots Telegraph takeover
The investor behind an ambitious expansion of rugby union is preparing a bid for The Telegraph that would make it the first national news outlet owned by a private equity firm.
Our business editor Christopher Williams has the details:
CVC, which manages £164bn and owns stakes in Premiership Rugby and the Six Nations, is lining up for the first round of an auction this week, City sources said.
The plans are not finalised and there is no certainty that CVC will make a firm offer. They revive an interest in The Telegraph that dates back two decades, however.
In the 2004 auction won by the Barclay family, CVC held talks about backing a bid for The Telegraph by Lord Rothermere, the owner of the Daily Mail.
He pulled out of the current auction last week, after judging that the Labour election victory meant his bid would be unlikely to clear regulatory and political hurdles.
Read why such a CVC takeover could stoke nervousness among Telegraph executives.
10:05 AM BST
Amazon workers fail to secure union recognition
A ballot of Amazon workers for union recognition has failed to reach a majority, the GMB has announced.
It said workers at the online giant’s Coventry site voted by 49.5pc in favour of union recognition, falling short of a majority.
An Amazon spokesman said:
We want to thank everyone who voted in this ballot.
Across Amazon, we place enormous value on engaging directly with our employees and having daily conversations with them.
It’s an essential part of our work culture. We value that direct relationship and so do our employees.
This is why we’ve always worked hard to listen to them, act on their feedback, and invest heavily in great pay, benefits and skills development - all in a safe and inclusive workplace with excellent career opportunities. We look forward to continuing on that path with our team in Coventry.
GMB official Stuart Richards said: “Amazon now faces a legal challenge, while the fire lit by workers in Coventry and across the UK is still burning. GMB will carry on the fight for the pay and recognition they deserve.”
09:54 AM BST
House prices rise at faster pace amid rate cut hopes
Average UK house prices increased at a faster pace in May, official figures show, amid hopes at the time for interest rate cuts.
The typical property’s value rose by 2.2pc to £285,000 in the 12 months to May, according to the Office for National Statistics (ONS).
This was an acceleration from 1.3pc growth in April.
Average UK private rents increased by 8.6pc in the 12 months to June, slowing from 8.7pc in May.
Marc von Grundherr, director of estate agent Benham and Reeves, said:
While higher mortgage rates continue to restrict buyer purchasing power at present, it’s only a matter of time before interest rates are cut.
When this does happen, we expect it to act as a significant shot in the arm to the UK property market and the slow but steady performance of recent months should giveaway to an altogether more active market landscape and a stronger rate of house price appreciation.
Verona Frankish, chief executive of Yopa, added: “There’s a great deal of pent up demand on the side of buyers at present and whilst some of this will now be released post-election, we anticipate that the real surge in market activity will come once interest rates start to ease.”
Average UK private rents increased by 8.6% in the year to June 2024, down from 8.7% last month. pic.twitter.com/y4HPvimxgD
— Office for National Statistics (ONS) (@ONS) July 17, 2024
09:41 AM BST
Labour planning reforms ‘may be controversial’ warns minister
Chancellor of the Duchy of Lancaster Pat McFadden has admitted Labour’s planning reforms “may be controversial in some places” but said the party is “on the side of getting things built more quickly”.
Ahead of the King’s Speech later today, Mr McFadden told BBC Radio 4’s Today programme:
We were very clear during the election campaign that we would come out of this on the side of getting things built more quickly.
That may be controversial in some places, I’ve no doubt that it will be.
But it’s reasonable for people to expect that, if we said that during the campaign, it’s what they see when the King’s Speech is published later today.
The Labour MP for Wolverhampton South East added: “It’s a big decision for the country.
“If we do nothing on this, we will continue with a situation where there’s a whole generation of young people for whom the aspiration of owning their own home, or sometimes even renting one at a reasonable price, will continue to be unrealisable.”
09:27 AM BST
Tornado to deliver blow to baby formula sales at Reckitt
Household goods giant Reckitt Benckiser has cautioned over a hit to sales of Mead Johnson baby formula powder after a warehouse in America was struck by a devastating tornado.
The Nurofen-to-Dettol maker said its third party warehouse in Mount Vernon, Indiana, suffered “significant damage” from the tornado last week.
It confirmed that all employees are safe, but said there would be a short-term hit to sales, given the importance of the warehouse for the Mead Johnson Nutrition business, which makes baby formula.
The group confirmed that the site is covered by property damage and business interruption insurance, which it hopes will “largely offset” the knock on effect on earnings.
Reckitt said: “The Mount Vernon warehouse is an important site for the Mead Johnson Nutrition business, containing a mix of raw materials and finished products.
“Whilst Nutrition sales will likely be affected in the short term, we are working closely with all our stakeholders including customers and suppliers, to minimise disruption, by leveraging our global supply chain and managing inventory at our other North American Nutrition warehouses and held by our retail partners.”
Reckitt said it is diverting all inbound deliveries to its other warehousing facilities across the US.
It will update further on the situation at its half year results on July 24. Shares were down 0.5pc.
09:10 AM BST
Pernod to offload Jacob’s Creek wine in premium shift
Pernod Ricard, one of the world’s biggest alcohol companies, is selling a swathe of wine brands so it can focus on more expensive spirits and champagnes.
Our senior business reporter Daniel Woolfson has the latest:
The Paris-headquartered company said it would sell the brands - including supermarket staple Jacob’s Creek, which it has owned since 1989 - to Australian Wine Holdco, the ultimate parent company of brands such as Echo Falls and Hardys.
Pernod Ricard, whose spirits include Bombay Sapphire and Absolut Vodka, said the deal would allow it to focus on more premium brands.
It comes after a turbulent period for the global wine market, which has seen drinkers in many regions switching to beer and spirits. An excess of supply in some regions has caused producers to destroy vines.
However, after a boom in sales during the pandemic, luxury spirits brands are also now struggling amid a global downturn in demand for expensive booze over the last year - particularly in China, where sluggish growth has put the brakes on consumer spending.
Shares in Pernod Ricard have fallen by almost 40pc over the last twelve months, while shares in its nearest rival, the Johnnie Walker owner Diageo are down more than 25pc over the same period.
08:55 AM BST
FTSE 100 falls amid rate cut doubts
UK stocks opened lower after surprisingly strong inflation prompted investors to scale back bets for an August rate cut by the Bank of England.
The blue-chip FTSE 100 index was down 0.2pc, and on track for its third session of losses. The mid-cap FTSE 250 was down 0.3pc.
The consumer prices index showed that inflation held at 2pc, defying forecasts of a slight fall, adding to uncertainty around when the central bank would start its easing cycle.
The odds of an interest rate cut in August dropped to as low as 25pc and were last around 36pc chances from 49pc ahead of data.
Yields on the two-year government bond edged higher while the pound strengthened against the dollar, further dampening market sentiment.
Industrial metals miners led declines, falling as much as 1.5pc and tracking lower prices of most base metals.
Shares of Babcock slipped 4.4pc but have since recovered after the British engineering company missed operating profit estimates.
08:37 AM BST
Pound breaks $1.30 for first time in a year after inflation blow
The pound has risen above $1.30 for the first time in a year after stubborn inflation raised doubts over whether interest rates will be cut next month.
Sterling hit the milestone as it rose 0.2pc against the dollar today following official figures showing that inflation remained at the Bank of England’s 2pc target in June.
While this was unchanged from May, it was slightly higher than predicted by economists.
It was also driven by a number of underlying measures of inflation that Threadneedle Street has warned must fall before they will lower interest rates from their current level of 5.25pc.
Services inflation, a key metric for the Bank policymakers because prices in the sector are closely linked to pay, remained at 5.7pc in the year to June.
As a result, the value of the pound also rose to $1.30 for the first time since July 2023 as traders reduced bets on interest rate cuts next month, with money markets putting the chances at 25pc.
Services inflation had been expected to fall slightly and was in stark contrast to a 1.4pc drop in the price of goods in the year to June, driven by lower clothing and footwear prices.
Grant Fitzner, the ONS’s chief economist, explained why price rises in the services sector remain high but goods prices continue to fall.
He told BBC Radio 4: “If you look at the pattern of inflation, goods prices tend to be more volatile. They move up faster, but they also come down faster.
“Service prices are stickier, and that reflects that hotels or restaurants or other service providers have longer term contracts for services, and also of course, the pay growth we’ve seen over the past year or two also impacts heavily, because services are often quite labour intensive.”
Core inflation, which strips out volatile price movements in food and energy bills, also remained steady at 3.5pc.
Economists warned that inflation was likely to rise in the second half of the year because of the end of a period of falling energy bills.
Yael Selfin, chief UK economist at KPMG, said: “Our latest analysis sees UK inflation potentially rising to a high of 3pc before the end of the year, driven by an expected increase in domestic energy bills in October, with the risk of headline inflation staying above target until autumn next year.”
Monica George Michail, associate economist at NIESR, added the data would prompt the Bank of England “to remain cautious with regards to interest rate cuts”.
She said: “We expect inflation to rise throughout the rest of the year due to base effects, before falling back towards target in early 2025.”
08:29 AM BST
Government borrowing costs rise as inflation holds firm
Looking at the bond markets, the cost of government borrowing has edged higher after the latest inflation figures raised doubts about the prospect of interest rate cuts next month.
The yield on 10-year UK gilts - the return the government promises to buyers of its debt - has risen by two basis points today to 4.07pc.
Meanwhile, the two-year gilt yield, which is more susceptible to changes in interest rates - gained nearly four basis points to 3.98pc.
The two-year gilt yield fell below 4pc on Tuesday for the first time since December last year.
08:23 AM BST
Tycoon in exclusive talks to buy The Body Shop
British tycoon Mike Jatania has been confirmed as being in exclusive talks over a rescue takeover deal for The Body Shop, administrators of the high street beauty chain have confirmed.
The Telegraph reported last week Mr Jatania’s investment firm Aurea was leading a consortium bidding for the stricken retailer,.
The former chief executive of beauty brand Molton Brown, Charles Denton, is being lined up to head the management team.
In a joint statement issued by Aurea and administrators of The Body Shop International, they said it is hoped that a deal can be struck in the “coming weeks”.
The Body Shop fell into administration in early February after previous forecasts for how much funding it would need to keep going proved too low, leading to hundreds of job losses and dozens of store closures.
08:03 AM BST
UK markets fall amid doubts over interest rate cuts
The FTSE 100 opened lower after inflation proved more stubborn than hoped last month, casting doubt over whether the Bank of England will cut interest rates next month.
The UK’s blue chip stock index began the day down 0.2pc to 8,150.61 while the domestically-focused FTSE 250 also fell 0.2pc to 21,172.87.
08:00 AM BST
HSBC names new boss to navigate tensions with China and West
HSBC has named insider Georges Elhedery as its new chief executive as the bank continues to navigate the diplomatic chill between the West and China.
Hannah Boland has the latest:
Mr Elhedery will be moving into the chief executive role from his current post as finance chief in September, succeeding Noel Quinn who is retiring.
HSBC chairman Sir Mark Tucker said Mr Elherdery was “an exceptional leader and banker who cares passionately about the Bank, our customers, and our people”.
“He has a track record of leading through change, driving growth, delivering simplification, containing costs and brings a strong focus on execution.”
It comes after a tense period for HSBC, which has been forced to walk a political tightrope amid strained relations between the UK and China.
HSBC makes more money from customers in Hong Kong than the UK. It faced criticism three years ago for freezing the accounts of a pro-democracy activist from Hong Kong, Ted Hui, and his family who fled to Britain.
07:58 AM BST
Taylor Swift concerts ‘only a small part’ of persistent inflation
Taylor Swift’s concerts were not the main reason services inflation held steady, economists have said, after her Eras Tour swept the UK in June.
Although inflation remains at the Bank of England’s 2pc target, policymakers are unlikely to cut interest rates because of the stability of price rises in services, which covers hospitality, culture and housing.
Paul Dales, chief UK economist at Capital Economics, said the stability of services inflation, which held at steady at 5.7pc, is a “blow” to hopes of interest rate cuts. He said:
By staying at 5.7pc in June, services inflation remained well above the 5.1pc rate in June that the Bank of England forecast back in May.
Admittedly, a lot of that overshoot happened in April and May. And that didn’t stop the BoE from sounding a bit dovish at the subsequent June policy meeting.
Even so, the Bank of England expected services inflation to fall 0.2 percentage points in June, which didn’t happen.
And only some of the stickiness of services inflation in June may be due to the influence of Taylor Swift’s concerts.
They may have been behind some of the large rise in hotels inflation from 7pc to 9.8pc.
But cultural services inflation, which would capture any influence from the ticket prices, dipped from 7.4pc to 7.3pc. As a result, it’s not obvious that the Bank of England can ignore a chunk of the stickiness of services inflation.
07:40 AM BST
Services prices ‘stickier’ than the price of goods, says ONS economist
The official figures show that while price rises in the services sector remain high, goods prices continue to fall.
Grant Fitzner, the ONS’s chief economist, explained why on BBC Radio 4’s Today programme, saying:
If you look at the pattern of inflation, goods prices tend to be more volatile.
They move up faster, but they also come down faster.
Service prices are stickier, and that reflects that hotels or restaurants or other service providers have longer term contracts for services, and also of course, the pay growth we’ve seen over the past year or two also impacts heavily, because services are often quite labour intensive.
07:38 AM BST
Traders cut back bets on August rate cut
Money markets indicate there is a less than 25pc of the Bank of England cutting interest rates next month after inflation held firm at 2pc.
Traders have sharply reduced their betting on a lowering of borrowing costs at the next meeting of the Monetary Policy Committee on August 1.
On Tuesday, the chances of a rate cut stood at about 49pc, down from 51pc at the end of last week.
07:26 AM BST
Inflation ‘honeymoon period’ may not last, warn economists
The “honeymoon period” for inflation may not last as some economists predict it will rise as high as 3pc by the end of the year.
Yael Selfin, chief economist at KPMG UK, said prices could move higher as a result of increasing energy bills in October “with the risk of headline inflation staying above target until autumn next year”.
He said:
Core inflation is on course to stay elevated over the next 12 months, lowering the likelihood of a rate cut in August.
While the impact of high-profile entertainment events on hospitality and recreational services may be fleeting, the Bank of England is likely to pay more attention to elevated pay growth, potentially leading to higher inflation down the line.
07:24 AM BST
August rate cut ‘too close to call’
Economists have been left unsure about an August interest rate cut after the latest set of inflation figures.
Meanwhile, money markets still indicate there is a roughly 50pc chance of a reduction in borrowing costs at the next meeting of the Bank of England’s Monetary Policy Committee.
MHA’s economic adviser Joe Nellis said:
The Bank of England is still concerned that inflation is not yet tamed with the figures for core inflation and service sector inflation both still too high.
Wage inflation at an annual pace of increase at 6pc is helping to alleviate the cost of living crisis but it does create a real dilemma for the Bank of England when they can safely cut interest rates and has made a reduction on 1 August less likely than it appeared a few weeks ago.
It will be a tough call given the growing political and social pressure to take action, but the Bank may yet hold until the autumn.
07:19 AM BST
Rising hotel prices keep inflation steady
Office for National Statistics chief economist Grant Fitzner said:
The inflation rate was unchanged in June.
Hotel prices rose strongly while second-hand car costs fell but by less than this time last year.
However, these were offset by falling clothing prices, with widespread sales driving down their cost.
Meanwhile, the cost of both raw materials and goods leaving factories fell on the month, though factory gate prices remain above where they were a year ago.
07:14 AM BST
Prices remain high for families, says Jones
As inflation held steady at 2pc, Chief Secretary to the Treasury Darren Jones said:
It is welcome that inflation is at target, but we know that for families across Britain prices remain high.
We face the legacy of 14 years of chaos and economic irresponsibility.
That is why this Government is taking the tough decisions now to fix the foundations so we can rebuild Britain and make every part of Britain better off.
07:12 AM BST
Inflation holds firm in blow to hopes for interest rate cuts
Mortgage borrowers grappling with high repayments suffered a blow to their hopes for interest rate cuts after inflation held steady at 2pc last month.
The consumer prices index (CPI) was unchanged from 2pc in May, according to the Office for National Statistics.
Although it remained at its lowest levels since 2021 and at the Bank of England’s target, it was higher than estimates from economists of a drop to 1.9pc.
Significantly, closely watched services inflation, which tracks categories such as hospitality, culture and housing, was unchanged at 5.7pc in June, which was higher than economists’ estimates.
Core inflation, which strips out volatile food and energy prices, also held firm at 3.5pc, which was higher than analyst forecasts.
The Governor of the Bank of England, Andrew Bailey, stressed last month that policymakers need “to be sure that inflation will stay low”, which is why it decided to hold interest rates at 5.25pc “for now”.
Policymakers make their next decision on interest rates in August.
Consumer Prices Index (CPI) grew 2.0% in the year to June 2024, unchanged from the previous month.
Read the release ➡️ https://t.co/xCG9DNmbkX pic.twitter.com/xVbi2oFTel— Office for National Statistics (ONS) (@ONS) July 17, 2024
07:07 AM BST
Good morning
Thanks for joining me. Inflation has held firm at the Bank of England’s 2pc target, official figures show, but there are fresh doubts over hopes for interest rate cuts.
Economists had hoped the figure would fall to 1.9pc and closely watched services inflation was unchanged at 5.7pc.
5 things to start your day
1) Andy Burnham’s Manchester officials sued over £140m skyscraper loans | Labour mayor’s officials accused of ‘distorting’ city’s property market after alleged handouts
2) Rachel Reeves urged to launch £2bn inheritance tax raid on pension pots | Threat comes as Jeremy Hunt’s former chief of staff reveals he considered similar move
3) Musk vows SpaceX and Twitter will flee California over school trans law | Billionaire pledges to move companies to Texas as he ramps up support for Donald Trump
4) ‘Bitcoin inventor’ referred to prosecutors over perjury claims | Computer scientist Craig Wright found to have forged documents and lied to High Court
5) Rupert Lowe: Labour is set to push Britain even further down the road to serfdom | Party’s belief in more state intervention threatens disastrous consequences for Britain
What happened overnight
Stocks and the dollar did little while gold hit a fresh record as expectations for a US interest rate cut played up against the prospect of another Donald Trump presidency.
While Wall Street saw another day of record highs owing to bets on lower borrowing costs and a more market-friendly White House, Asian dealers trod more cautiously as they also kept tabs on a key economic meeting of China’s leaders in Beijing this week.
Equities swung in Asian trade after the Dow posted a second straight record and the S&P 500 pushed to a fresh all-time high.
Tokyo, Hong Kong, Sydney, Singapore, Wellington, Manila and Jakarta rose, while Shanghai, Seoul and Taipei dipped.
Gold pushed to a new record of $2,482.42 an ounce, pushing past its previous record of $2,450.07 reached in May, thanks to rate-cut expectations.
On Wall Street, the S&P 500 gained 0.6pc, closing at 5,667.20, and the Nasdaq Composite gained 0.2pc, reaching 18,509.34. The Dow Jones Industrial Average jumped 1.8pc to reach an all-time closing high of 40,954.48.
The yield on benchmark 10-year US Treasury bonds hit a four-month low on rate cut expectations, falling to 4.163pc, from 4.229pc late on Monday.