Former Strictly Come Dancing professional Giovanni Pernice has thanked...
Wall Street’s main indexes opened lower on Tuesday as investors grew cautious ahead of the Federal Reserve’s last interest rate decision of the year tomorrow.
There is now more than a 70% chance that the Fed will cut rates by another 25 basis points, meaning the interest rate would fall to 4.5% from its current level of 4.75%.
It came as US retail sales increased in November as consumer spending picked up more than expected after a lull amid bad weather, while industrial output slipped by 0.1%, after a 0.4% drop the month before. Analysts had expected a rise of 0.3%.
Mining and utilities production both declined, by 0.9% and 1.3% respectively. Manufacturers fared better, recording 0.2% growth in output although this was also worse than expected, and came after a downwardly revised fall of 0.7% in October.
The FTSE 100 (^FTSE) and European stocks were mixed during the session as new data showed that UK job vacancies fell to their lowest level in three years in the wake of Rachel Reeves’s first budget. But it also came as pay growth across Britain picked up.
The number of job vacancies in the UK fell by 31,000 to a three-year low of 796,000 in November, according to the Office for National Statistics (ONS). Hiring fell to 818,000 in the UK in the three months to November.
Regular pay grew at a faster-than-expected annual pace of 5.2% between August and October, the ONS said. This was up from 4.9% for regular earnings in the three months to September, and 4.4% for total earnings, suggesting an acceleration in pay growth this autumn.
Manufacturing workers saw the largest pay rises, again, with average pay up by 6.0%. Meanwhile, the unemployment rate came in unchanged at 4.3%.
Liz McKeown, director of statistics at the ONS, said: “After slowing steadily for over a year, growth in pay excluding bonuses increased slightly in the latest period, driven by stronger growth in private sector pay. Pay growth including bonuses increased by more, but this reflects previous figures being affected by the one-off payments made to some public sector employees in 2023.
“The number of people on payrolls grew slightly in October, but we have seen annual growth rates continue to slow, showing a consistent trend with our latest jobs data from employers. The number of job vacancies has also fallen again, though the total remains a little above where it was before the pandemic.”
London’s benchmark index was 0.7% lower by the end of the session
Germany’s DAX (^GDAXI) dipped 0.4% and the CAC (^FCHI) in Paris headed 0.1% up as traders digest the news of German government failure and upcoming February snap elections, which would present major headwinds for the stock market.
Wall Street opened in the red in New York ahead of the US Fed interest rate decision tomorrow.
The pound was 0.2% up against the US dollar (GBPUSD=X) at 1.2709
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Are there any major UK companies ripe for takeover bids in 2025?
UK takeovers have surged this year, with bidders targeting larger companies, according to data provided by AJ Bell (AJB.L).
The investment platform found there had been £49bn worth of successful bids in 2024, up from £17.2bn in 2023. The average value of these deals was £1.07bn, which was nearly three times higher than the £390m average in 2023.
Dan Coatsworth, investment analyst at AJ Bell (AJB.L), said: “A bounty of unloved or underappreciated companies were swept off their feet, signalling the UK market as being ‘on sale’ and showing there was widespread value on offer.”
Five FTSE 100 (^FTSE) companies received takeover offers in 2024, while 19 firms in the FTSE 250 (^FTMC) received bids.
Industrial output slipped by 0.1% in November, from a 0.4% drop the month before. Analysts had expected a rise of 0.3%.
Mining and utilities production both declined, by 0.9% and 1.3% respectively.
Manufacturers fared better, recording 0.2% growth in output although this was also worse than expected, and came after a downwardly revised fall of 0.7% in October.
Stellantis workers begin two-day protest
Stellantis workers have begun a two-day protest over the company’s plans to shut its electric van factory.
The Unite union is calling for Stellantis to stop plans to shut the Luton factory, which were announced just days before the surprise departure of boss Carlos Tavares.
Unite general secretary Sharon Graham said:
Company insolvencies rise across England and Wales
New data from the Insolvency Service has revealed that there was a 13% to 1,966 increase in registered company insolvencies in England and Wales in November.
On an annual basis, the figure is 12% lower than in November 2023 when 2,243 firms went under.
The Insolvency Service reports that there were 254 compulsory liquidations last month, plus 1,565 creditors’ voluntary liquidations (CVLs), 132 administrations, 14 company voluntary arrangements (CVAs) and one receivership appointment.
David Hudson, restructuring advisory partner at business advisory firm FRP, said:
UK competition watchdog clears Carlsberg’s acquisition of Britvic
Britain’s competition regulator cleared Carlsberg’s deal with soft drinks maker Britvic on Tuesday, saying it would not refer the $4.23 billion transaction for an in-depth probe.
Carlsberg struck a deal to acquire the British soft drinks maker in July, aiming to establish a UK beverage “powerhouse”.
The deal, which is expected to close on Jan. 16, will see the Danish brewer taking over Britvic’s bottling agreement with PepsiCo. Carlsberg already bottles PepsiCo drinks in several markets and sees potential to expand into additional geographies in the future.
Carlsberg and Britvic said in a separate joint statement that all regulatory conditions have been satisfied, including clearances from the European Commission and the UK’s Competition and Markets Authority.
UK borrowing costs jump
The cost of UK government borrowing is on track to reach its highest level in 34 years when compared to Germany.
The difference between UK and German 10-year bond yields, known as the spread, has widened to as much as 228 basis points after the latest official figures showed a surge in wage growth.
If sustained, the spread would be the largest gap between British and German government borrowing costs since the early weeks of German reunification in 1990, surpassing levels reached during the bond market crisis after Liz Truss’s mini-Budget two years ago.
The surge in UK bond yields – the return that the government promises to buyers of its debt – comes after traders slashed bets on the Bank of England reducing borrowing costs next year.
Pound rises after robust UK wage growth data
The pound strengthened against the US dollar (GBPUSD=X) on Tuesday, rising 0.1% to $1.2691, following the release of robust UK labour market data for the three months ending in October.
According to the Office for National Statistics (ONS), regular pay, excluding bonuses, increased by 5.2% in October, up from 4.9% in the previous month, surpassing analysts’ expectations of a 5% rise.
The data is significant as the Bank of England (BoE) closely monitors wage growth when making interest rate decisions, given its direct influence on inflationary pressures, particularly in the UK’s service sector. The BoE has cited wage growth as a key factor in the persistently high inflation environment.
KPMG UK’s chief economist Yael Selfin said that today’s data makes it unlikely that the BoE will move towards an interest rate cut at its upcoming meeting on Thursday, with wage growth remaining strong.
Meanwhile, sterling was also higher against the euro (GBPEUR=X), trading at €1.2103.
Market movers at midday
As we roll into the afternoon, here’s a quick look at what’s been happening in equity markets in London today…
Bunzl was the worst performer on the top-flight index as it said volume growth in the third quarter was expected to continue in the fourth, although deflation was likely to be more persistent than previously anticipated.
The distribution and outsourcing company said this was expected to have a “slight” impact on group adjusted operating profit in 2024, driven by Continental Europe.
Oil giants BP and Shell both gushed lower as oil prices fell.
Capita tumbled as the outsourcer reported an 8% drop in revenue for the 11 months to 30 November due to contract losses. It also said it was lifting its cost savings target to £250m by December 2025 from £160m and plans to increase the use of AI and generative AI.
On the upside, LSE Group was a little firmer after UBS raised its stance on the stock to ‘buy’.
Britvic also gained after Carlsberg’s purchase of the soft drinks maker was given the green light by the UK’s competition regulator.
German business expectations fall
German business expectations fell from 87 to 84.4 from in December, according to new data from the Ifo institute. This measure was worse than expected as businesses have become more worried about the country’s growth outlook.
Ifo president Clemens Fuest told Bloomberg TV that the next German government must prioritise economic growth. He said:
We need to get Britain working again, says Liz Kendall
As vacancies slumped to a three-year low, work and pensions Secretary Liz Kendall said:
Fed likely to pause rate cuts next year
Investors should act with caution and reassess their portfolios as mounting evidence suggests the Federal Reserve will not cut interest rates in the first half of 2025 – even if it does so on Wednesday. The warning comes from Nigel Green, CEO of deVere Group.
Despite market hopes for a Fed rate cut as early as December, recent data reveals that inflation remains a major concern.
The US Consumer Price Index (CPI) for November rose to 2.7% on a 12-month basis, marking an uptick from October, while core inflation sits stubbornly at 3.3%. Such figures underscore that price pressures are far from subdued, despite earlier signs of cooling. The Fed will be hard-pressed to justify loosening monetary policy while inflation regains momentum.
The robust US job market complicates matters further. Unemployment remains near historic lows, and labour market strength typically dissuades policymakers from cutting rates. Wage growth, which fuels consumer spending, could keep inflation elevated well into 2025.
Green said:
What can we expect for pensions in 2025?
As we prepare to wave goodbye to 2024, we can look back on a rollercoaster year for pensions.
One of the year’s major news events was the general election, in which pensions played a key role.
During campaigning, the incumbent Conservatives pledged to introduce the triple lock plus to the state pension, which would have meant pensioners never have to pay tax on their state pension. The new Labour government stopped short of this, but announced it would uphold the triple lock for the remainder of this parliament.
This means that, from April, pensioners can look forward to a 4.1% boost to their state pension, and someone on a full new state pension will see it rise to £230.25 per week – up from £221.20 in 2024/25.
Meanwhile, those on the basic state pension will see the full amount rise to £176.45 per week — up from £169.50 in 2024/25.
This increase will provide a welcome boost to the income of pensioners, particularly in light of the decision to restrict the winter fuel allowance to those on means-tested benefits such as pension credit.
There were 2.2 billion debit card transactions in September, 4.5% more than in September 2023. The total spend of £65 billion was 6% lower than in September 2023.
There were 383 million credit card transactions in September, 8.6% more than in September 2023. The total spend of £21.2 billion was 9.5% higher than in September 2023.
Outstanding balances on credit card accounts have grown by 6.6% over the 12 months to September, and 49.4% of outstanding balances incurred interest compared to 50.1% in September 2023.
There were 2.10 billion debit and credit card transactions in the UK in September, 0.2% more than in September 2023. The total spend of £73 billion was 9.1% lower than in September 2023.
Contactless payments accounted for 65% of all credit card and 77% of all debit card transactions.
There were 1.57 billion contactless card transactions in September, 1% more than the 1.55 billion in September 2023. The total value of contactless transactions was £24.5 billion in September, a 3% increase on £23.8 billion in September 2023.
The number of contactless credit card transactions was 4.3% higher than in September 2023. The number of contactless debit card transactions was 0.5% higher than in September 2023.
Hollywood Bowl warns on national insurance impact
Hollywood Bowl (BOWL.L) has warned of the “significant impact” on the hospitality industry after the Labour government increased employers’ national insurance contributions and threshold levels in October’s budget.
It estimated that the NI cost for an average UK hourly paid team member working 20 hours per week, on national living wage, has increased from just under £400 a year to £1,155.
But the company said it is in a better position than many to mitigate the impact of the changes, which it expects will cost it about £1.2 million on an annualised basis from April.
Stephen Burns, chief executive, said:
Revenues rose 7.1% to a record £230.4m, while adjusted profits fell by 5.2% to £45m. Shares were down more than 7% at the time of writing.
Jobs data reduces BoE rate cut odds
Analysts say the latest figures have reduced the chances of the Bank of England cutting interest rates when it meets this week.
Threadneedle has cut interest rates twice this year as price pressures have eased. However, it is not expected to make a further cut when it meets on Thursday.
Yael Selfin, chief economist at KPMG UK, said:
Meanwhile, James Smith, developed markets economist at ING, said:
Smith noted that the jump in wage growth was entirely down to the private sector.
City traders adjusted their expectations for UK interest rates following the release of the ONS data. Financial markets indicated a mere 7% chance that the Bank of England would reduce rates on Thursday, down from about 15% on Monday.
Interest rates, currently at 4.75%, are expected to fall to about 4.1% by December 2025.
UK pay growth ticks higher
Regular pay grew at a faster-than-expected 5.2% annual pace between August and October, the ONS also said this morning. This was up from 4.9% for regular earnings in the three months to September, and 4.4% for total earnings, suggesting an acceleration in pay growth this autumn.
Manufacturing workers saw the largest rises, with average pay up by 6.0%, while regular earnings rose by 5.4% in the private sector, and by 4.3% in the public sector.
Meanwhile, unemployment remained unchanged at 4.3%.
Liz McKeown, director of statistics at the ONS, said:
UK job vacancies fall to lowest level in three years
UK job vacancies slipped to their lowest level in three years in the wake the budget.
The number of job vacancies fell by 31,000 to a three-year low of 796,000 in November, according to the Office for National Statistics (ONS). Hiring fell to 818,000 in the three months to November.
This figure has been in decline for more than two and a half years, which is equivalent to 29 sets of results from the ONS. This is the longest recorded slump.
Asia and US overnight
Stocks in Asia slipped overnight on interest-rate decisions by major central banks across the globe due later this week.
The Nikkei (^N225) fell 0.2% on the day in Japan, while the Hang Seng (^HSI) dropped 0.5% in Hong Kong. The Shanghai Composite (000001.SS) was 0.7% down by the end of the session.
Before closing in the red, stocks were higher during the session earlier in the day, with MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.2%. The index is set for around a 10% gain for the year, its strongest yearly performance since 2020.
Over in South Korea, the Kospi (^KS11) was down 1.3%, taking its yearly losses to more than 7%, making it Asia’s worst performing market this year.
In currencies, the Australian dollar was little changed at $0.6372. The Japanese yen was fairly steady at 154.07 per dollar, while the offshore yuan traded at 7.2935 per dollar.
Across the pond on Wall Street, the S&P 500 (^GSPC) rose 0.4%, and the tech-heavy Nasdaq (^IXIC) was 1.3% higher. However, the Dow Jones (^DJI) lost 0.3%.
Coming up…
Good morning, and welcome back to our markets live blog. As always, we will be taking a deep dive into what’s moving markets, and all that’s happening across the global economy.
Here’s a quick look at what’s on the agenda for today:
7am: Trading updates: Capita, Bunzl, Hollywood Bowl
7am: UK Unemployment Rate
9am: IFO survey of German investor confidence
10am: EU trade balance for October
1.30pm: US retail sales report for November
3pm: US Business Inventories
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