Rates to plunge to 2.75pc next year, says HSBC
The Bank of England could cut interest rates to 2.75pc next year, analysts have suggested, amid growing confidence that the worst of Britain’s inflationary crisis is over.
Policymakers are likely to cut interest rates at November’s meeting of the Monetary Policy Committee (MPC) and then again at every meeting next year from February, according to analysts from HSBC.
It follows a decision by the Bank of England’s MPC earlier this week to keep rates on hold at 5pc.
The Bank Rate had surged as high as 5.25pc following a series of rises over the past few years to try keep a lid on inflation. Last month, the Bank of England cut interest rates for the first time in four years.
The analysts at HSBC said: “Part of the slightly better medium-term growth outlook reflects monetary policy.
“With most indicators pointing to a cooling in the labour market, we and BoE have become more confident that the worst of the inflation pressures - and the risk of them becoming entrenched - is behind us. Given this, the current policy rate looks some way above neutral.”
They said the latest statement from the Monetary Policy Committee suggested that rate setters were not in “the mood to move quickly”.
However, the analysts said: “Given our own forecast that CPI inflation will rise back to 2.9pc by January next year (perhaps a touch above the Bank of England’s expectation), it might be February before the MPC has sufficient confidence for back-to-back rate cuts taking Bank Rate to 2.75pc in December next year.”
HSBC suggested rates would then remain on hold throughout 2026.
Read the latest updates below.
07:23 PM BST
Signing off...
Thanks for joining us today.
The Markets blog will be back on Monday morning, but you can keep up to date over the weekend with business news and analysis from The Telegraph here.
07:23 PM BST
Murdoch family up bid for Rightmove to £5.9bn
The Murdoch family’s Australian property business has boosted its offer for Britain’s Rightmove in a deal worth nearly £5.9bn.
REA Group has improved its bid to nearly 750p a share, according to the Financial Times. The fresh approach was 7pc higher than its original offer Rightmove, which was rejected earlier this month.
The continued pursuit comes as News Corp, which owns REA, seeks to further diversify its business beyond media as patriarch Rupert Murdoch hands over the reins to his eldest son, Lachlan.
Rightmove rejected the initial approach as “opportunistic” and some investors have also spoken out to criticise the structure of the offer, which is based on a mix of cash and shares in the combined group.
Iain McCombie, a fund manager at Baillie Gifford, told an event for private investors last week: “Rightmove is the cheapest property portal in the world by a margin. REA Group noticed that and made a bid. We’re not going to sell that cheaply because it is a unique business and has a dominance there in this market”.
Sean Kealy, an analyst at Panmure Liberum, said earlier this month the Murdochs would have to pay a premium of 60pc to be successful, which would value Rightmove at roughly £7.1bn.
Under the City’s takeover code, REA has until September 30 to make a firm offer or walk away.
REA and Rightmove were approached for comment.
Melbourne-based REA, which has a market value of A$26bn (£13bn), owns a number of property brands including realestate.com. News Corp has a controlling stake in the company.
News Corp was previously in discussions to sell its US real estate business, Move Inc, in a deal worth a reported $3bn (£2.3bn), but the talks fell through.
That prompted calls from activist investor Starboard Value for the Murdochs to spin off REA. Starboard this month stepped up its assault, submitting a proposal that would end the family’s control of News Corp.
It comes as the Murdoch family’s 93-year-old patriarch tries to alter the terms of a trust to hand sole control to Lachlan. However, this has triggered a backlash from his other children, with a courtroom battle over the matter currently playing out behind closed doors in a courtroom in Nevada.
06:07 PM BST
IMF’s Lagarde ‘shocked’ by Germans’ enthusiastic use of cash
Christine Lagarde has said she was “shocked” by Germans’ enthusiastic use of cash when she moved to Frankfurt to head the European Central Bank. Tim Wallace reports:
“I was shocked when I moved to Frankfurt to see how much was paid in banknotes. You had better have a big wallet, because a lot is paid in banknotes,” she said.
“The citizens are attached to banknotes. You go to Sweden or to the Netherlands and you can hardly pay with a banknote - they send you off, bring your phone, don’t you have another way to pay?”
The ECB President is looking into creating a central bank digital currency, but said citizens are worried about the privacy of the system.
“The main concern people have is privacy - Big Brother is going to see where I spend my money,” she told an audience at the International Monetary Fund in Washington.
“You know what, there are a few Big Brothers when you use your bank account or when you use other devices who know where you are spending your money, know what you are interested in and will send you instantly all those ads and nice proposals.
“But the concern about the state - the assumption is the central bank will communicate all information collected to the state - will be privy to how you spend your money is something that is very very critical for citizens.”
In her lecture to the IMF, Ms Lagarde warned that the inflation shock may not be a one-off.
“If we enter an era where inflation is more volatile and monetary policy transmission more uncertain, maintaining this deep anchor for price formation will be essential,” she said, referring to the expectation among households and businesses that central banks will always raise interest rates to crush inflation.
She also compared the 2020s to the 1920s, citing similarities including pandemics, a reversal of globalisation, and rapid technological progress.
But she also raised the hope that central banks have learned their lesson from that era and should be able to avoid the “series of wrong turns” which tipped much of the world into the Great Depression.
05:48 PM BST
US Fed governor says bold rate cut not signal of ‘falling behind’
The Federal Reserve’s big interest rate cut this week is not a sign that the US economy is “falling behind,” Fed governor Christopher Waller said in an interview this afternoon.
He told CNBC:
It’s not about reacting to, or falling behind or anything like that. I do not believe we’re behind.
Mr Waller was responding to arguments that the central bank should not do a half percentage point rate cut - instead opting for a smaller reduction - as this would be a sign of economic weakness.
Citing a speech he made earlier this year, Mr Waller stressed that the Fed could cut rates even if the economy was doing fine.
“And that’s the position we’re in,” he said, noting that inflation is cooling while the labour market remains solid.
05:23 PM BST
Central banks face ‘difficult balancing act’, says IMF
Central banks face a “difficult balancing act” as they start lowering interest rates around the world in the face of falling inflation, the head of the IMF said at an event this afternoon.
Central banks on both sides of the Atlantic have cut rates this year, with the US Federal Reserve reducing its key lending rate by half a percentage point earlier this week in a bid to boost demand, following in the footsteps of the European Central Bank (ECB).
But as they do so they must tread carefully, International Monetary Fund boss Kristalina Georgieva said at an event with ECB president Christine Lagarde in Washington.
Ms Georgieva said:
Central banks face a difficult balancing act. They must ensure that inflation sustainably returns to target and remains there, while avoiding the risk of excessively tight policies.
While clearly weaker than we would have wanted, economic activity has been remarkably resilient, While inflation is retreating, rates are going down. Recession appears to be unlikely.
The ECB has cut rates twice this year, while the Bank of England voted on Thursday to leave rates unchanged after just one cut, as UK inflation remained above-target.
Ms Lagarde said that the ECB’s “determined policy actions have successfully kept inflation expectations anchored,” adding that inflation remains on track to hit its two percent target in the middle of next year.
“But is the uncertainty gone? No, there is still plenty of that around,” she said.
05:10 PM BST
Gold hits record high as stock markets plunge
Gold hit an all-time high this afternoon but stock markets on both sides of the Atlantic dropped.
Investors turned to the safe-haven metal after the US began a cycle of interest-rate cuts.
Gold is currently at $2,621 an ounce, up 1.1pc today. The price has risen 36pc over the past year.
The metal becomes a more attractive store of wealth when interest rates are lower, because gold does not pay interest or dividends.
But Fawad Razaqzada, market analyst at City Index, said that foreign policy is also boosting gold:
Geopolitical risks, such as ongoing conflicts in Gaza, Ukraine, and elsewhere, will ensure to sustain gold’s safe-haven demand.
The rise in gold comes on a difficult day for stock markets.
US and European stock markets retreated following a record-filled rally that was triggered by the interest rate cut.
The sell-off came as JPMorgan boss Jamie Dimon voiced sceptism over the Fed’s hopes for a so-called “soft landing”. He said:
I am a little more sceptical than other people. I give it lower odds. I hope its true, but I’m also more sceptical that inflation is going to go away so easily, not because it hasn’t come down - it has - and it can come down more.
Kathleen Brooks, of trading platform XTB, told The Telegraph:
Jamie Dimon saying that he is sceptical of the soft landing theory hasn’t helped sentiment.
Also, Nvidia and other tech stocks are barometers of market sentiment these days and they have led the sell off in the US which has infiltrated sentiment to UK stocks.
The Dow and the broad-based S&P 500 index tumbled following records the previous day in the wake of the Federal Reserve’s rate reduction and pledge of further cuts as inflation cools.
The S&P 500 and Nasdaq are currently down 0.4pc, while the Dow is down 0.2pc.
Meanwhile, nearly £25bn was wiped off the value of the FTSE 100 after it fell 1.2pc. The mid-cap FTSE 250 fell 1.6pc. On the Continent, Germany’s Dax lost 1.4pc and France’s Cac 40 dropped 1.5pc.
Susannah Streeter, of broker Hargreaves Lansdown, said:
It’s a downbeat end to the week for the FTSE 100. The blue-chip index has ended lower, dragged back by pessimistic consumers and more hawkish comments about the direction of interest rates.
Retailers were on the back foot with investors assessing it could be tougher going ahead after the GfK’s Consumer Confidence Barometer fell further into negative territory last month.
Catherine Mann, a key policymaker at the Bank of England also warned that persistent inflationary pressures may mean borrowing costs will have to stay elevated for longer, adding to negative sentiment.
04:58 PM BST
FTSE 100 drops over 1pc
The UK’s benchmark FTSE 100 stock index slipped on Friday, registering weekly declines, after hotter-than-expected retail sales data from the economy. However, a rise in the British pound pressured export-oriented companies.
The FTSE 100 fell 1.2pc, while the more domestically-focussed midcap index lost 1.6pc. Both indexes marked weekly losses and their biggest one-day fall in almost seven weeks.
British retail sales rose by a stronger-than-expected 1pc in August, beating forecasts for a monthly rise of 0.4pc and growth in July was revised up, data showed.
The data provided an extra boost to the pound’s upbeat trend, which has risen to its highest level against the dollar since 2022 this week after the Federal Reserve cut rates by half a percentage point, while the Bank of England kept rates on hold at its meeting on Thursday.
Friday’s declines were broad based, with all major sector indexes trading in the red, led by a 5pc drop in the “personal goods” index - made up of companies such as Watches of Switzerland, Dr Martens and Burberry.
Precious metal miners were the only outliers, gaining 0.2pc after gold prices soared above the $2,600 level for the first time, extending a rally boosted by bets for further US interest rate cuts, and tensions in the Middle East.
04:53 PM BST
Stock market stuck in Groundhog Day repeat of 1990s dot-com bubble, says investment bank
The stock market is stuck in a repeat of the 1990s dot-com bubble, a leading US investment bank has suggested.
America’s S&P 5000 has jumped nearly 30pc over the past year amid high expections that artificial intelligence will fuel the future profits of big technology firms such as Nvidia and Microsoft.
But in a note to clients, Barry Bannister, chief equity strategy as Stifel, said:
It takes one generation to forget the dangers of a bubble, and it is Groundhog Day versus the 1990s Tech Bubble.
Just as countries that go rogue become almost uninvestable, investors caught in the grips of a speculative fever become almost unanalysable.
Bloomberg reported that Mr Bannister believes that the S&P 500 index will plunge to the “very low” 5,000s by the end of the year, suggesting around a 13pc decline.
Groundhog Day is a 1993 movie in which a weatherman becomes trapped in a time loop.
04:44 PM BST
Wall Street slides as market mulls motivations for Fed cut
Wall Street slid this afternoon from yesterday’s record highs as the market knuckled down to the start of a rate reducing cycle that began with a mid-week jumbo cut by the US Federal Reserve.
With the long-awaited decision made, markets mulled the motivations for the move, which Fed chairman Jerome Powell indicated should be seen as safeguarding a resilient economy, rather than an emergency response to weaker jobs data.
All three major US stock indexes posted early losses but have still set a course to log weekly gains thanks to all-time highs hit on Thursday as buyers piled in to riskier assets.
Marija Veitmane, head of equity research at State Street Global Markets, said:
What Chairman Powell said was that they’re carefully watching the labour market, and if it slows too much they’re prepared to act.
Powell also said that he doesn’t see the labour market as inflationary - that’s a positive message for risky assets.
The blue-chip Dow Jones Industrial Average fell 0.1pc, the S&P 500 shed 0.4pc and the Nasdaq Composite fell 0.5pc.
Some volatility is expected during the day, as options and futures linked to indexes and individual stocks are set to expire simultaneously, in an event called “triple witching” that falls on the third Friday of the last month of the quarter.
04:30 PM BST
Dollar rises after Japan leaves rates unchanged
The dollar strengthened this afternoon against the yen after the Bank of Japan left interest rates unchanged and indicated that it was not in a hurry to hike them again.
The Bank of Japan could afford to spend time eyeing the fallout from global economic uncertainties, its governor, Kazuo Ueda, said.
The BOJ had kept rates steady at 0.25pc as widely expected.
The dollar rose 1.06pc to 144.14 yen, after hitting its highest level in a little over two weeks. The euro and pound also rose almost as much against the yen.
04:08 PM BST
Gold hits record highs above $2,600
Gold has hit a record high this afternoon, in the aftermath of the Fed’s decision to cut interest rates. The safe-haven metal, which does not generate interest or dividends, can seem more appealing when interest rates are low.
Gold is currently trading at just below $2,617 an ounce.
Axel Rudolph, senior technical analyst at online trading platform IG, said:
The gold price continues to surge and added another percent to this week’s gains with it trading in new record highs around the $2,615 per troy ounce mark. The oil price slid slightly, however, following its 6pc gains from its September multi-year lows.
Next week’s economic calendar is on the light side, beginning on Monday with UK and US manufacturing and services PMIs [purchasing managers’ index] and culminating with Friday’s Fed preferred PCE [personal consumption expenditures] inflation gauge.”
04:04 PM BST
Construction giant ISG in administration with around 2,400 redundancies
Construction group ISG, which was in the middle of numerous government projects including work to prisons, has collapsed into administration in the UK.
The majority of its 2,400 employees have been made redundant after the UK business appointed joint administrators at EY, with trading stopping immediately.
The construction services company had been trying to find a buyer but failed to secure a suitable rescue deal, EY said.
The London-based business employs about 2,400 people across its UK business, the majority of whom will be made redundant with immediate effect.
Around 200 employees will initially be kept on to assist the administrators in winding down the business.
ISG is involved in 69 central government projects totalling more than £1 billion, including work on prisons for the Ministry of Justice, data analysts Barbour ABI said.
A spokesperson for the Government said:
We have implemented our detailed contingency plans and affected departments are working to ensure sites are safe and secure.
04:01 PM BST
Novo Nordisk shares drop on disappointing obesity pill data
Novo Nordisk’s shares fell nearly 6pc today after results from a trial of the Danish drugmaker’s experimental obesity pill monlunabant came in below market expectations.
The company announced headline results from its trial of monlunabant, an experimental drug it acquired as part of its billion-dollar purchase of Canadian biotech company Inversago Pharmaceuticals last year.
The company said at its capital markets day in March that it expected the drug could achieve weight loss of 15pc of body weight, on par with its mega-blockbuster obesity injection Wegovy.
But in the headline trial results released today, the once-daily pill resulted in only 6.5pc weight loss after 16 weeks.
Novo Nordisk shares are down 5.9pc.
That weight loss is “not what optimists are looking for”, Nordnet analysts said. “Competition is intensifying. Investors are getting more cautious about the potential.”
Despite the lower than expected weight loss, Novo Nordisk said that based on the results of the trial, it will initiate a larger trial to further investigate dosage of the medication and the safety profile of the drug “over a longer duration in a global population”. It expects to begin that trial next year.
03:42 PM BST
US Fed governor says ‘possible’ soft landing will not occur
The US economy is not out of the woods yet and could still see a rise in unemployment, a Federal Reserve governor wrote in a paper published today.
The US central bank cut its key lending rate by half a percentage point earlier this week in its first reduction for more than four years, sharply lowering borrowing costs in a bid to boost the economy and support the cooling labor market.
But despite recent progress, there is still reason to be cautious about the world’s largest economy, Fed governor Christopher Waller wrote in a paper co-authored with Andrew Figura, a senior economist at the bank.
“The labour market is not fully back to where it was prior to the pandemic, and inflation remains significantly” above the Fed’s long-term inflation target of 2pc, they wrote.
“As a result, it is possible that a soft landing will not occur,” they added, referring to a scenario where inflation eases to target with only a “noticeably smaller increase in unemployment than has occurred in previous recessions.”
But despite this warning, Mr Waller and Mr Figura said most forecasters still expected a soft landing, with only a “modest” rise in the unemployment rate.
“Clearly, they also believe that a soft landing in the labour market is possible,” they added.
03:32 PM BST
Wall Street drifts near its records Nike sprints higher
Wall Street has dipped afternoon, and US stocks are drifting after they leaped to records yesterday during a worldwide rally.
Kim Forrest, chief investment officer of Bokeh Capital Partners, said:
It is Friday, and after this week of all time highs on just about every index, it wouldn’t surprise me that both investors and traders are taking a break.
The S&P 500 is down 0.3pc, the Dow Jones Industrial Average is down 0.2pc and the Nasdaq Composite is down 0.4pc.
FedEx dragged on the market with a drop of 14pc after its profit and revenue for the latest quarter fell short of analysts’ expectations. It said American customers sent fewer packages through priority services, while it had to contend with higher wages for workers and other costs. FedEx also cut its forecast for revenue growth for its financial year.
Helping to offset that is Nike, which jumped as much as 8.7pc after it named Elliott Hill as its chief executive. Mr Hill, 60, had spent more than three decades at Nike in various leadership positions before retiring in 2020.
03:21 PM BST
Trump Media plummets to new low
Shares of Donald Trump’s social media company slumped to their lowest level ever after Wall Street opened this afternoon. Today is the first day that the former US president, the biggest shareholder, is free to sell his stake in the company behind the Truth Social platform.
Shares of Trump Media tumbled almost 7pc, putting the value of the company at less than £2.25bn. Trump owns more than half of it.
Trump and other insiders in the company have been unable to cash in on the highly volatile stock due standard lock-up agreements that prevent big stakeholders from selling stakes for a set period after a company becomes publicly traded. Trump Media began trading publicly in March.
One week ago, the company’s shares jumped nearly 12pc after Trump said he wouldn’t sell shares when the lock-up period lifted. The stock dipped more than 10pc following the debate earlier this month between Trump and the Democrats’ nominee, Vice President Kamala Harris.
In mid-July, shares climbed more than 31[c in the first day of trading following the first assassination attempt on Trump.
Trump Media is now worth considerably less than several months ago. When the company made its debut on the Nasdaq in March, shares hit a high of $79.38.
03:09 PM BST
DFS investors pinning hopes on upholstery recovery after profit warnings
Investors will be hoping to hear some reassurance from furniture giant DFS after the chain warned its profits are being squeezed by shipping delays and record low levels of demand among sofa-buyers.
The London-listed business will report its full-year financial results on Wednesday.
It comes after the chain has lowered its profit expectations twice this year as economic conditions turned out to be tougher than it had expected.
In its last update in June, DFS said it was anticipating underlying pre-tax profits for the year to the end of June to be up to £12m lower than the prior year, when it generated just over £30m.
This decline was partly blamed on it being unable to deliver as many orders to customers thanks to disruption in the Red Sea.
DFS said the delayed deliveries were worth about £12-14m, and were expected to be pushed back into the 2025 financial year.
Meanwhile, the furniture seller has also warned over softer demand for upholstery with buyers holding back on making more expensive purchases.
But shareholders could be hoping for signs of recovery in the market, with consumers benefiting from a sharp drop in inflation and interest rates starting to come down.
The group is expecting revenues for the year to total between £995m and £1bn, following a series of downgrades from an initial forecast of up to £1.1bn.
03:03 PM BST
Stock markets fall after Fed-fuelled rally
US and European stock markets have retreated today following a rally triggered by a jumbo US interest rate cut this week.
In New York, the Dow Jones Industrial Average of 30 leading American companies and the broad-based S&P500 index opened in the red following records the previous day.
It comes in the wake of the Federal Reserve’s half a percentage point rate reduction and pledge of further cuts as inflation cools.
“Some profit-taking as we end the week is to be expected” following the rallies, said Kathleen Brooks, research director at trading platform XTB.
There had been fears the move could signal officials were worried about the economy and were behind the curve in easing policy.
But new figures yesterday showing jobless claims at their lowest since May suggested the United States was heading for a soft landing, rather than recession.
The FTSE 100, Germany’s Dax and France’s Cac 40 are all down 1.2pc.
The S&P 500 is down 0.4pc, the Dow is down 0.2pc and the Nasdaq is down 0.3pc.
02:57 PM BST
Revitalise the FTSE by copying Swedish or Chile state pension, says think tank
The FTSE could be given a shot in the arm were Britain to copy the state pension system used in Sweden or Chile, according to a new paper by the Adam Smith Institute.
The free-market think tank argues that working people should be given a choice of approved funds into which they could invest state pension contributions while working. The pensions would be backed by a “safety net”. The paper says:
Instead of using a pay-as-you-go system in which today’s pensions are funded by today’s taxpayers, a system vulnerable to demographic changes, people pay into funds that ultimately supply their pensions in retirement.
They choose between approved providers and receive regular notification of their fund’s current worth. They can switch between providers at set intervals.
Madsen Pirie, the author, told The Telegraph:
This would create massive investment funds to boost the market, and would free government from the future burden of supplying unfunded pensions at massive cost to taxpayers.
It would push a wall of money onto the stock exchange, giving it just the boost it needs at a challenging time. It’s a win-win policy he pointed out, without any losers.
The paper says that, in Chile, “around half of the assets under private management are reinvested domestically”.
02:39 PM BST
Microsoft strikes deal to reopen nuclear plant to power AI
A closed nuclear plant in Pennsylvania is to reopen after Microsoft signed a deal to buy the power it generates.
The Three Mile Island nuclear plant closed in 2019 after owner Constellation Energy concluded that running it was no longer economic. But it will reopen in 2028 after Microsoft agreed to buy its output for over two decades.
Constellation is investing $1.6bn to upgrade the plant.
This will be the first ever restart of a nuclear power plant in the US after shutting, and shows how utilities are benefiting from a massive surge in demand from data-centre operators looking to ride a boom in artificial intelligence.
Three Mile Island is also the location of a reactor, under different ownership, that was shut down 45 years ago after a partial nuclear meltdown caused the most significant commercial nuclear accident in American history.
Constellation Energy shares have shot up 15pc this afternoon on the news.
02:23 PM BST
Wall Street set for subdued open after rate cut-fuelled rally
Wall Street’s main indexes are said to be set for a muted open on Friday after a rally in the previous session that was sparked by a jumbo interest rate cut by the Federal Reserve.
The S&P 500 notched its eighth working day of gains out of nine on Thursday and closed at an all-time high, breaching its mid-July milestone. The blue-chip Dow also notched a record high and settled above the psychological level of 42,000 points.
All three major indexes are on track for weekly gains of over 1pc, with the benchmark set to buck the historical trend of September being weaker for US equities on average.
Jay Hatfield, portfolio manager at InfraCap, said:
All you had [this week] was the Fed. The Fed’s over. The rest of the world decided to buy the U.S. market and also bid up their markets ... and now this is the fade.
The most bullish thing that can happen after such a big run is a stall.
02:06 PM BST
Handing over
Thanks for joining this morning. I’m now handing over to my colleague Alex Singleton to see you through the afternoon.
02:04 PM BST
‘More is more’ on rate cuts, says HSBC
In a report where HSBC suggests the Bank of England could look to cut rates at every meeting next year, analysts have some interesting conclusions:
“UK GDP may have flatlined in recent readings, and sentiment may not be great ahead of the Budget. But there has been better news on inflation, and we now think the BoE will be able to cut by another 100bp by the end of 2025 versus our previous forecast, helping to lift growth, particularly in 2026.
“If we are right, there is a risk that this amount of easing proves excessively stimulatory, and the BoE has to stop or even reverse course. For now, though, more is more.”
01:36 PM BST
Debt hits 100pc of national income for first time since 1960s
Public debt as a share of the economy has hit 100pc for the first time since the 1960s, in a psychologically important moment that underscores the challenge facing the Chancellor ahead of her October 30 fiscal statement, Szu Ping Chan reports.
Official figures showed public borrowing is £6.2bn higher than expected this year, with debt now equalling the size of the economy.
The Office for National Statistics (ONS) said the increase was driven in August by “higher spending on public services”, including pay and benefits, with the government borrowing £13.7bn in August to plug the gap between taxes and spending.
This is higher than the £11.2bn forecast by the Office for Budget Responsibility (OBR), the government’s tax and spending watchdog, and represents the third highest August borrowing since monthly records began in January 1993.
“Higher-than-expected borrowing continues to be driven by departmental spending ... which is £8.5bn above forecast,” the OBR said on Friday. It brings the total borrowed so far this year to £64.1bn, £6.2bn more than the £57.8bn forecast by the OBR back in March.
01:04 PM BST
South Yorkshire to host Britain’s first mini-nuclear reactor factory
A US energy giant has chosen South Yorkshire to host a landmark £1.5bn factory building the next generation of nuclear reactors in a major boost for the region, Jonathan Leake and Matt Oliver report.
Holtec, a privately owned nuclear company headquartered in Florida, is looking at sites across the county including around the city of Doncaster, where Energy Secretary Ed Miliband has his constituency.
If built, the £1.5bn factory could create up to 3,000 high-tech jobs to produce the components for small modular reactors (SMRs), the technology which could become the backbone of the UK’s planned nuclear revival.
The firm, which specialises in nuclear energy, has been searching for suitable sites with rival options in the West Midlands, Cumbria and Teesside considered.
12:24 PM BST
Yen slides as BOJ Governor says no rush to raise rates
The yen has taken a tumble on signs that the Bank of Japan will not be racing to raise interest rates again.
The currency was down by as much as 1.1pc against the dollar after Governor Kazuo Ueda said the BOJ would continue rate rises if economic and inflation trends moved in line with its outlook.
However, he said that upside risks to inflation from the yen’s weakness were easing.
It follows the BOJ opting to keep interest rates unchanged on Friday, following increases in March and July.
12:03 PM BST
Heathrow Express strikes to take place next week
Union bosses have said workers on the Heathrow Express train line will go on strike next week, after they voted not to accept a pay offer.
RMT said workers would be staging a 48-hour walkout from Monday, following a “strong mandate for action”.
RMT General Secretary Mike Lynch said: “Our members at Heathrow Express have made their position clear with a strong mandate for action. They are determined to secure fair pay and better working conditions.
“Heathrow Express management must now recognise the serious concerns of the workforce and return to the table with a meaningful offer.”
The RMT said the union was open to further negotiations. Heathrow Express said train schedules would not be affected by the strike action, with “no disruption” to services.
11:44 AM BST
Dr Martens shares hit record low on investor sale
Dr Martens has fallen to a record low on the London markets, after it emerged that an unnamed investor had sold 70m shares.
The British bootmaker shares were down almost 16pc on Friday. The 70m share sale took place via Goldman Sachs, with shares sold at a discount price.
It means shares in Dr Martens are now around 85pc lower than their IPO price in 2021. The company has been struggling with its US business, which is its largest market.
In April, it suggested profits could fall as much as two thirds in the worst case scenario. Dr Martens chief executive Kenny Wilson announced he was leaving the company and was replaced by Dr Martens’ chief brand officer, Ije Nwokorie.
11:23 AM BST
‘It’s not going to get better any time soon’
11:04 AM BST
2024’s August borrowing ‘third highest on record’ after pandemic years
The Office for National Statistics have some charts showing today’s official borrowing figures in context.
Public sector net borrowing excluding public sector banks was £13.7 billion in August 2024, £3.3 billion more than in August 2023 and the third highest August borrowing on record, behind 2020 and 2021.
Read more ➡️ https://t.co/TZURmjBKXB pic.twitter.com/K8CN79gvPp— Office for National Statistics (ONS) (@ONS) September 20, 2024
10:46 AM BST
BoE’s Mann explains why she voted to keep rates on hold
Catherine Mann has given more detail on why she decided to vote to keep BoE rates on hold in Lithuania this morning. In her speech, she said:
“Why was it not good policy for me to vote to hike at this September meeting, to get back to the August stance, if I thought that was the appropriate level for Bank Rate?”
In fact, in August, I did contemplate a cut at that meeting, as the bite from housing costs was becoming deeper and more widespread but was dissuaded by the balance of factors already mentioned, as well as a generalized easing in global conditions that affected UK rates too.”
If I had voted to hike in the meeting just past only to cut sometime soon hence, this would be the ‘boogie-dance’ with policy rates that I eschewed in my Lamfalussy speech in February 2023.”
10:30 AM BST
Jim Ratcliffe forced to halt production of Ineos Grenadier
Elsewhere, overnight, Industry Editor Matt Oliver reported on Sir Jim Ratcliffe’s car company being forced to halt production as the supplier of a crucial component used in its vehicles battles possible bankruptcy.
Ineos Automotive, part of the billionaire’s chemicals empire, said it had temporarily stopped making Grenadier SUVs and Quartermaster pickup trucks at its factory in Hambach, France, due to a “critical component shortage”.
Lynn Calder, chief executive, said the holdup was due to the supplier of the crucial car parts facing a “pre-insolvency situation”.
“It’s a trim part but one that we can’t sell the car without,” she told Automotive News Europe.
The company has not identified the part and Ms Calder declined to name the supplier. But production might not resume until late this year or early 2025, she warned.
10:18 AM BST
BoE rate setter taking ‘guarded view’ on cutting rates
Bank of England policymaker Catherine Mann has said she is taking a “guarded view” on multiple interest rate cuts in the coming months.
In a speech due to be delivered in Lithuania today, Ms Mann said:
“While agreeing with the majority for a hold at the meeting just concluded, I have a guarded view on initiating a cutting cycle.
“A risk management assessment implies that it is better, under inflation uncertainty, to remain restrictive for longer, until right tail risks to the inflation process dissipate, and then to cut more aggressively.”
Ms Mann sits on the Monetary Policy Committee which this week voted to keep interest rates at 5pc.
10:00 AM BST
Two-year mortgage rates falling amid ‘optimistic’ mood for house market
Two-year mortgage deals are looking more competitive for buyers, amid growing expectations that the Bank of England will cut interest rates again this year.
Rates of shorter term deals are now falling faster than those for longer terms for the first time in two years, according to data from Moneyfacts. Santander this week started offering a two-year deal of less than 4pc, while other lenders including HSBC, NatWest and Virgin Money have also cut rates over the past week.
The moves come amid growing expectations that the Bank of England will be able to lower interest rates further in the coming months. The Bank of England cut rates for the first time in four years last month. The markets are still expecting two more cuts before the end of the year.
The hopes were boosted earlier this week, when official figures showed prices, as measured by the Consumer Prices Index (CPI), rose by 2.2pc in the year to August. This was unchanegd from July.
Rightmove’s Matt Smith said: “We’re still expecting two rate cuts before the end of the year, and home-movers should continue to see a downward trend in mortgage rates this side of Christmas.
“Overall, I think there’s an optimistic mood about where we’re heading, and lowering mortgage rates is supporting the increased home-moving activity we’re seeing right now, particularly against last year.”
09:43 AM BST
Debt record ‘a familiar sight’
Tim Wallace, the Telegraph’s deputy economics editor, has more on the borrowing figures here:
If the news that debt has hit 100pc of GDP looks familiar, that is because the ONS has reported this before - only to revise the fact away when it gets its hands on more data.
In June of 2023, for instance, the national debt was thought to have grown larger than the economy. The same was claimed in 2020 amid plunging GDP and ballooning debt.
But the calculation relies on both debt and on GDP, each of which is revised as more data comes in. So a growth spurt in the economy can bring the ratio down, and on other occasions it turns out the Government spent less than initially thought, or tax receipts came in higher than was first estimated.
09:28 AM BST
City grandees call for politicians to issue message of hope
City grandees and influential economists have urged the Chancellor to give a message of hope after consumer confidence sunk in September.
GfK’s consumer confidence measure fell by seven points to -20 in September, new figures revealed this morning.
Sir Philip Hampton, the former chairman of Royal Bank of Scotland, GSK and Sainsbury’s, told The Telegraph: “The more politicians are gloomy of course the more these sort of animal instincts are going to be constrained.
“I do think that there’s a job of political leadership to remind people that innovation, discovery and change can happen even within a very financially constrained Government.”
09:10 AM BST
German economy minister offers to help VW to avoid site closures
The German economy minister Robert Habeck has offered to help Volkswagen to avoid site closures.
Speaking during a visit to the company’s factory in Emden, Mr Habeck said the Government could help by sending the right market signals, including making it more attractive to switch to electric cars.
However, he said there were some limits to what the Government could do, telling reporters: “A large part of the tasks have to be dealt with by Volkswagen itself. This is the company’s job.”
It comes after the German media reported that Volkswagen was considering axing as many as 30,000 jobs to cope with the slowdown in the car market.
The company is considering closing some of its German factories for the first time in history, with Manager Magazin, a leading German business publication, suggesting 30,000 roles could go.
A spokesman for the company earlier this week said: “We do not confirm the figure. One thing is clear: Volkswagen has to reduce its costs at its German sites.
“This is the only way the brand can offer attractively priced vehicles and still make enough money for future investments.
“How we will achieve this goal together with the employee representatives is part of the upcoming talks.”
08:49 AM BST
Nike hires veteran as new chief exec to revive sales
Overnight, sportswear giant Nike announced long-time executive Elliott Hill would be rejoining the company as CEO as it scrambles to stage a turnaround.
The company said Mr Hill would be succeeding John Donahoe as president and chief executive, sending shares up 8pc in after-hours trading.
Mr Hill retired from Nike in 2020, having previously been with the business for 32 years. In his last role, he had led all commercial and market operations for the Nike and Jordan brands.
He is poised to take over on October 14
It comes as the latest bid by Nike to revive sales, following months of waning demand among shoppers. Analysts have attributed the decline to the lack of new innovative products being released by Nike.
In June, shares slumped by a fifth as it warned sales were likely to fall this year by a mid-single digit percentage.
08:31 AM BST
Thames Water confirms talks to extend funding options
Thames Water has this morning confirmed it is in talks to extend its funding options, amid a race to avoid nationalisation.
The troubled utility giant said it was exploring options for extending its liquidity runway, with creditors drawing up a rescue package.
It comes after news of the talks emerged last night, with the Telegraph reporting that Thames Water was seeking to delay repayments until after Ofwat’s decision on how much the utility can increase bills by over the next five years. This is expected to come in January and is set to be critical in whether Britain’s biggest water company will be able to raise fresh funds or not.
A source close to the company told the newspaper: “This is about trying to push back the loans as they fall due to extend our liquidity runway.”
It comes amid growing concerns that Thames Water is heading for nationalisation. The move is thought to be almost inevitable if Thames Water fails to secure fresh investment as it struggles under the weight of a £16bn debt pile.
08:06 AM BST
Debt rising to 100pc of GDP
Debt at the end of August 2024 was provisionally estimated at 100.0% of GDP, 4.3 percentage points higher than at the same point last year and remains at levels last seen in the early 1960s.https://t.co/F5EnA5dx40 pic.twitter.com/WQotfKqoCC
— Fraser Munro (@Fraser_ONS_PSF) September 20, 2024
07:57 AM BST
Customers flock to shops after sunny weather
Britain’s high streets received a boost last month after warmer weather and end-of-season sales drew in more customers.
Retail sales were up 1pc in August, according to new figures from the Office for National Statistics, compared to a 0.7pc rise in July.
For the three months to August, sales were up 1.2pc versus the three-month period to May.
It came despite growing concerns over consumer spending. Separate data this morning suggested families were feeling more anxious about their finances and the economy.
Figures from GfK revealed that consumer confidence plunged by seven points to -20 in September. Concerns have been mounting that Rachel Reeves and Sir Keir Starmer are talking Britain into a downturn.
Phil Monkhouse, UK Country Manager at global financial services firm Ebury, said: “Retailers have enjoyed another bumper month in retail sales, with August seeing a 1.0pc uptick amid warmer weather and end-of-season sales.
“Consumers seem to be finding their footing, bolstered by the Bank of England’s first rate cut since 2020, which has eased mortgage pressures and sparked renewed confidence in the UK’s economic outlook.
“With summer now over, retailers will now need to focus on sustaining growth ahead of the autumnal weather threatening future footfall.
“Alongside utilising the back-to-school season, agile strategies to meet consumer demand and adopting hedging strategies to protect against international disruptions will help businesses navigate any challenges in the months ahead.”
07:47 AM BST
Treasury repeats warning over ‘difficult decisions’ amid borrowing overshoot
Separately, new figures have come out this morning on public borrowing, showing the deficit came in at £64.1bn between April and August this year.
It meant UK borrowing overshot forecasts by more than £6bn over the summer.
Darren Jones, chief secretary to the Treasury, said:
“When we came into office, we inherited an economy that wasn’t working for working people. Today’s data shows the highest August borrowing on record, outside the pandemic.
”Debt is 100pc of GDP, the highest level since the 1960s. Because of the £22bn black hole in our public finances we have inherited this year alone, we are now taking the tough decisions now to fix the foundations of our economy, so we can rebuild Britain and make every part of the country better off.”
07:36 AM BST
Customers treating themselves to ‘little luxuries’
Reacting to the ONS retail sales figures this morning, Oliver Vernon-Harcourt, head of retail at Deloitte, said:
“The late arrival of sunshine and the busy agenda of sporting events in August gave a much-needed lift to UK retail sales, with consumers spending more on summer clothing ranges and food for outdoor socialising.
“The first cut in interest rates in four years last month saw a rebound in the property market, which might have led to the growth in sales of household goods.
“While many consumers remain cautious and are opting out of purchasing big ticket or luxury items, some are still treating themselves by spending on little luxuries, resulting in a boost in sales of small discretionary items in personal care and in premium food categories.”
07:26 AM BST
Good morning
Official figures have revealed a rise in retail sales in August, despite fears of waning consumer confidence.
5 things to start your day
1) Confidence slumps amid concerns Labour is talking Britain into recession | Families feeling less upbeat as ‘gloomy politicians’ reiterate warnings about the economy
2) South Yorkshire to host Britain’s first mini-nuclear reactor factory | Major boost for region as Holtec unveils preferred location for £1.5bn project
3) Thames Water seeks to delay billions in debt repayments in scramble to avoid nationalisation | The troubled utility giant is in last-ditch talks with lenders to extend its cash runway beyond next May
4) Amazon criticised by Business Secretary for ordering staff back to the office | Workers should be judged on output not time sat at their desk, says Jonathan Reynolds
5) Jim Ratcliffe forced to halt production of Ineos Grenadier | Billionaire’s car company suspends manufacturing amid ‘critical component shortage’
What happened overnight
Asian shares extended their rally on Friday, bathing in the afterglow of an outsized interest rate cut in the United States, while the yen edged higher as the Bank of Japan held rates steady and stayed upbeat on the economy
Japan’s Nikkei share average pared early gains amid a firmer yen on Friday, after the Bank of Japan kept its interest rates unchanged, as expected, and also upgraded its assessment on consumption.
The Nikkei share average rose 1.8pc to 37,834.09 early in the afternoon session, after entering the midday recess up 2.1pc.
The yen strengthened against the dollar to be about 0.3pc stronger at 142.16, as of 3.36 BST, after initially shrugging off the policy decision, which came when stock and bond markets were in the trading break.
Benchmark 10-year Japanese government bond futures declined 0.08 yen to 144.58 yen. Cash bonds had yet to trade following the BOJ announcement..
In China, the central bank kept its benchmark lending rates on hold, countering expectations for a move lower. Chinese shares were an outlier in the region, with blue chips down 0.3pc. The onshore yuan strengthened to the highest in nearly 16 months, leading to intervention by state banks to prevent it from appreciating too fast.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.7pc to the highest in two months, tracking overnight gains on Wall Street. The index was headed for a weekly gain of 2.5pc.
Wall Street stocks soared to fresh records last night as markets cheered the Federal Reserve’s move to aggressively cut interest rates to protect the labour market.
The Dow Jones Industrial Average gained 1.3pc to 42,025.19, its first close above 42,000.
The S&P 500 also shot to an all-time high, surging 1.7pc to 5,713.64, while the tech-rich Nasdaq Composite index jumped 2.5pc to 18,013.98.
In the bond market, the yield on benchmark 10-year US Treasury notes rose to 3.72pc from 3.70pc late on Wednesday.
