European stocks found firmer footing on Wednesday amid rising bets of a peak in global interest rates, a downturn in the UK construction sector, and a hiring slowdown in the US.
In London, the FTSE 100 (^FTSE) closed 0.5% higher, with mining stocks providing support and recovering some of Tuesday’s falls.
Industrial metal miners led the gains, climbing 2% as prices of most base metals and iron ore rose. Precious metal miners also jumped more than 1% tracking higher gold prices.
It came as hiring in the American private sector cooled in November, according to the latest ADP report.
It added 103,000 jobs during the month, lower than the 113,000 created in October, and sharply below the expectation of 127,000 new jobs.
Michael Hewson, chief market analyst at CMC Markets UK, said: "European markets saw another positive session yesterday with a new record high for the German DAX, while the FTSE 100 fulfilled its role as the perennial party pooper with another disappointing session and closing lower for the second day in succession,"
"This was mainly due to weakness in metals and energy prices with Brent crude prices (BZ=F) closing at a 5-month low."
Elsewhere, the UK’s construction sector fell sharply for the third month in a row in November as housebuilding slumped.
According to S&P Global, the construction purchasing managers’ index (PMI) fell to 45.5 points, below economists expectations of 46.3. Any reading above 50 indicates growth, whereas below shows a contraction.
The housebuilding index was particularly weak, at 39.2, with civil engineering at 43.5 and the commercial building segment at 48.1.
Blog close and recap
Well that's all folks! Thanks for following along. Be sure to join us again tomorrow when we'll be back for more.
Here's a quick look at some of the top stories today...
Interest rates to remain high, says Andrew Bailey
UK construction sector hit by housebuilding slump
Pound hits three-month high against the euro
TUI considers leaving London Stock Exchange
Ten Entertainment agrees private equity takeover
Oil prices slide 1%
Have a good evening!
Private sector hiring slows in US
Hiring in the US private sector cooled in November, according to the latest industry figures.
It comes as the post-pandemic boom in restaurant and hotel employment has now moderated.
The US private sector added 103,000 jobs during the month, lower than the 113,000 created in October. This was also sharply below the expectation of 127,000 new jobs predicted by Briefing.com.
McDonald's to open another 10,000 restaurants
McDonald’s is looking to open another 10,000 restaurants worldwide by 2027.
In a statement on Wednesday, the world’s largest fast food chain said that it wants to have 50,000 restaurants by 2027, in what would be its fastest period of growth in its history.
Chris Kempczinski, chief executive, said:
We have a clear trajectory for future growth as we continue to build on the brand strength, global footprint and digital ecosystem that have resulted in unparalleled competitive advantages and cemented McDonald’s as one of the world’s leading consumer-facing brands.
Five million families face paying an extra £240 per month on mortgage
Five million families face paying an extra £240 per month on their mortgages by the end of 2026 as cheaper mortgage deals come to an end.
That is on top of the more than five million mortgage holders that have moved to a new fixed-rate deal since interest rates started rising in late 2021 from an ultra-low of 0.1% to the current 5.25%.
A typical mortgage holder coming off a fixed rate between the second quarter of 2023 and the end of 2026 is projected to face a £240 increase in their monthly repayments.
But around 500,000 households could experience a monthly increase of more than £500 by the end of 2024.
Interest rates to remain high, says Bailey
Interest rates are likely to need to remain around current levels even as the full impact of the hikes is yet to filter through to UK households and smaller businesses, the Bank of England warns.
Governor Andrew Bailey said that the overall risk environment remains challenging. He added that the “full impact has yet to be felt” from rates, which stand at 15-year highs of 5.25%.
“The full effect of higher interest rates has yet to come through, posing ongoing challenges to households, businesses and governments, which could be amplified by vulnerabilities in the system of market-based finance,” the BoE's latest report on financial stability said, suggesting more pain ahead.
“Household finances remain stretched by increased living costs and higher interest rates, some of which has yet to be reflected in higher mortgage repayments," the report added.
EU to delay tariffs on UK electric vehicles until 2027
The European Union is set to delay tariffs on electric vehicles that are sold to, or imported from, the UK for three years.
However, EU member states still need to approve the European Commission's proposal.
It comes after carmakers on both sides of the Channel have warned that they were not ready for the change to post-Brexit trade rules planned from January. The UK government has previously called for the rules to be postponed.
The changes were in place to protect the car sector in Europe, but the 10% tariffs were likely to lead to huge costs.
YG shares rise as Blackpink sign new contract
YG Entertainment Inc. (122870.KQ) has confirmed that all four members of K-Pop group Blackpink have renewed their contracts with the agency amid concerns about the band’s split.
The new contract is believed to be among the most lucrative signed by any music group this year.
Shares surged almost 26% on the back of the news, the biggest daily jump since it went public in 2011.
It comes as Blackpink, a four-member K-pop band that debuted in 2016, is now planning a new album and world tour with YG, the agency said in a statement on Wednesday.
The group became the world’s most popular girl band with their songs setting records on the Billboard charts with hits like Shut Down and Pink Venom. They were also the first K-pop headliner at Coachella.
“We are more than thrilled to finally make an official statement that YG will continue the intimate relationship with Blackpink,” YG Entertainment founder Yang Hyun-Suk said in the statement.
“As the group represents YG and K-pop itself, they will certainly endeavour to shine brilliantly in the global music market.”
Pound hits three-month high against the euro
The pound has reached its strongest against the euro (GBPEUR=X) in three months after Germany’s construction and manufacturing sectors slumped.
The euro dipped as much as 0.2% against the pound to 85.54p, its lowest since early September, before recovering.
It comes as German factory orders shrank in October, while its construction sector also fell.
Meanwhile, financial markets are betting that the European Central Bank (ECB) will cut interest rates in 2024, with traders pricing in a reduction by one and a half percentage points.
Jane Foley, head of FX strategy at Rabobank, said: “The market is thinking that the ECB could be cutting rates first, then the Fed and then the Bank of England.”
The pound was also steady against the dollar (GBPUSD=X) at $1.2590.
BoE to launch review into AI risks next year
And sticking with AI...
The Bank of England has said it will review the financial risks posed by artificial intelligence and machine learning in 2024.
In its financial stability report, it said:
Being briefed on the continued adoption of artificial intelligence (AI) and machine learning (ML) in financial services, and potential financial stability implications. The FPC would further consider the financial stability risks of AI and ML in 2024, and alongside other relevant authorities would seek to ensure that the UK financial system is resilient to risks that may arise from widespread adoption of AI and ML.
Meanwhile, governor of the Bank of England, Andrew Bailey, said:
We have to embrace it with our eyes open… If you’re a firm using AI, you have to understand the tool you’re using.
It’s not out of control in the sense of 2001: A Space Odyssey. It’s actually that the thing is so complicated in many of its forms that understanding exactly what the black box delivers is very hard.
How AI could help us move to a four-day work week
Artificial intelligence (AI) is expected to transform our lives, affecting how we access medical care, shop, work and more, my colleague Lydia Smith writes.
Although much of the research into AI has focused on the potential threat of replacement, the incorporation of AI tools into workflows may actually give us a better work-life balance — by allowing businesses to switch to a four-day week.
AI could enable millions of workers to move to a shorter working week by 2033, according to a recent study by thinktank Autonomy.
Projected productivity gains from the introduction of AI could reduce the working week from 40 to 32 hours while maintaining pay. And up to 28% of the workforce — around 8.8 million people in the UK — could benefit from it.
“The integration of AI into the workforce has the potential to pave the way for a four-day work week,” says Natalie Trice, a careers expert. “This is not just about cutting down hours but reimagining productivity.
“If businesses can maintain or even increase their output with AI’s assistance while reducing the time employees need to spend at work, the shift to a shorter work week becomes viable.”
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