Eurozone manufacturing recession deepens; Stellantis shares fall after CEO’s resignation – as it happened

Time to recap.

Europe’s manufacturers have suffered a slump in demand last month with “no sign of a recovery”.

The latest poll of purchasing managers across Europe shows there was a faster decline in new factory orders, production, purchasing activity and inventories in November.

There are also problems in UK manufacturing, where the PMI fell to a nine-month low.

Workers at Volkswagen factories in Germany have held a ‘warning strike’, in protest at cutback plans.

The euro has dropped by a cent, after French prime minister Michel Barnier decided to force the social security budget through the lower house of parliament without a final vote, triggering a no-confidence vote within days.

Shares in carmaker Stellantis have slumped 7%, wiping over €2bn off its value, following the surprise departure of chief executive Carlos Tavares last night.

Shares in Intel, though, are up over 3% after the retirement of CEO Pat Gelsinger was announced.

Wealth manager St James’s Place is cutting 500 jobs.

House price inflation in the UK has accelerated, at the fastest rate in over two years.

The Kremlin has argued that Donald Trump’s threat to impose 100% tariffs on Brics economies, if they try to undermine the dollar, would backfire.

The euro has lost more ground against the US dollar, after French prime minister Michel Barnier announced he would use special constitutional powers to force the social security budget through the lower house of parliament without a final vote.

Barnier told lawmakers:

“We are facing a moment of truth”

The use of article 49.3 of the French Constitution in this way must trigger a no-confidence vote, to be held within 48 hours…

The euro has now lost a whole cent against the US dollar, to $1.0476.

A new healthcheck on US manufacturing shows that the sector pretty much stabilised last month.

Data provider S&P Global reports that optimism at US factories rebounded last month, helped by a stabilising of new orders and a slowdown in rising costs.

This lifted the US manufacturing PMI index up to 49.7 – close to stagnation – from 48.5 in October.

Purchases of raw materials and parts from abroad may have been lifted by the threat of tariffs, with some US producers trying to front-run possible new trade costs.

Chris Williamson, chief business economist at S&P Global Market Intelligence, says:

“The mood among US manufacturers brightened in November, though any feel-good factor has yet to feed through to higher output on the factory floor. “Optimism about the year ahead has improved to a level not beaten in two and a half years, buoyed by the lifting of uncertainty seen in the lead up to the election, as well as the prospect of stronger economic growth and greater protectionism against foreign competition under the new Trump administration in 2025.

“In contrast, current production levels fell for a fourth straight month in November, dropping at a rate not exceeded for nearly one and a half years. The gap between expected future output and actual current output is now the widest seen for a decade if the pandemic is excluded, underscoring the marked divergence between tough current conditions and the mounting expectation of better times to come.

Demand conditions need to improve alongside the improvement in confidence to encourage producers to raise production. However, although export sales continue to fall sharply, we note that November’s fall in overall new orders was the smallest seen over the past five months, hinting that the downturn in domestic demand for goods is easing and could help rev

Intel’s CEO, Pat Gelsinger, is retiring, after three year stint trying to turn the struggling chip-maker around.

Intel has annouecd that after “a distinguished 40-plus-year career”, Gelsinger stepped down from its board of directors yesterday.

Frank Yeary, independent chair of the board of Intel, says:

“On behalf of the board, I want to thank Pat for his many years of service and dedication to Intel across a long career in technology leadership. Pat spent his formative years at Intel, then returned at a critical time for the company in 2021.

As a leader, Pat helped launch and revitalize process manufacturing by investing in state-of-the-art semiconductor manufacturing, while working tirelessly to drive innovation throughout the company.”

The chipmaker has appointed two interim co-chief executive officers – David Zinsner and Michelle Johnston Holthaus – while a permanent successor is found.

Gelsinger has returned to Intel in early 2021, pledging a turnaround plan under which the company would expand its foundry capacity and manufacture chips for anyone who wanted them.

But Inte’s share price has struggled on his watch. From around $50 in January 2021, it rose to $68 three months later, but has since dropped to arouns $24 today.

He had earlier spent 30 years at Intel, becoming the company’s first chief technology officer, and was the architect of its 80486 processor, which powered many PCs in the 1990s.

Volkswagen workers launched rolling two-hour strikes today at nine plants across Germany to underscore their resistance to pay cuts and factory closures the company says are necessary to cope with a slack European auto market.

The work stoppages included the company’s base plant at Wolfsburg, where workers rallied against a cost-cutting drive by the automaker’s management in which they face the threat of the company’s first plant closures in its home country.

Chief employee representative Daniela Cavallo has said employees should not shoulder the burden of management failures to develop attractive products and come up with a cheaper, entry-level electric vehicle.

Speaking at a rally in Wolfsburg as employees drummed, whistled and clapped, Cavallo said:

“We demand that all make their contribution – management and the shareholder side as well.”

She said the next round of talks in a week’s time “is likely to set the course – rapprochement or escalation. We are ready for both.”

The so-called warning strikes, a common tactic in German wage negotiations, are taking place as part of talks for a new labor agreement after a mandatory peace period that bars strikes expired on Sunday. The IG Metall industrial union said any job actions beyond those occurring on Monday would be announced later.

British wealth manager St James’s Place is cut around 500 jobs in the coming months, Reuters reports.

The cutbacks come as the sector faces intensifying competitive pressures, even as SJP prepares for a possible elevation back to the FTSE 100.

Earlier this year, the company, which employs around 3,200 people, unveiled a cost-cutting plan to save £100m.

A spokesperson for St James’s Place says:

“Our cost reduction plans are focused on simplification and standardisation of processes within the business, but a programme of this size and scale will inevitably impact colleagues.

“We have now begun consulting with colleagues to share our proposal for how this might impact roles, the outcome of which will not be known until next year.”

Despite the troubles in the eurozone economy, unemployment in the bloc remains at a record low.

Data provider eurostat reported this morning that the eurozone unemployment rate was 6.3% in October, stable compared with September, and down from 6.6% in October 2023

Moody’s Analytics’ senior economist Kamil Kovar, says

“October was yet another month when euro zone unemployment defied the skeptics, this time by confirming that the previous decline to 6.3% was not a fluke that will be reversed.

Instead, the continued downward trend in the unemployment rate reflects structural declines in unemployment in Southern Europe that are dominating cyclical increases in Germany and elsewhere. We continue to believe that that the unemployment rate is more likely to tend lower, not higher, in coming quarters.”

Over in Moscow, the Kremlin has suggested Donald Trump’s push to force Brics countries to keep using the US dollar would backfire.

Asked about Trump’s threat to impose 100% tariffs on Brics members if they challenged the dollar, Kremlin spokesman Dmitry Peskov said the dollar was beginning to lose its appeal as a reserve currency for many countries.

Peskov told reporters:

“More and more countries are switching to the use of national currencies in their trade and foreign economic activities.”

If Washington resorted to “economic force” to compel countries to use the dollar it would backfire, Peskov predicted, adding:

“If the U.S. uses force, as they say economic force, to compel countries to use the dollar it will further strengthen the trend of switching to national currencies (for international trade).”

Climate protesters gathered outside the Department of Energy Security and Net Zero in London this morning, to call for the end to government subsidies for the Drax Power Plant in North Yorkshire.

Protestors from Axe Drax, Biofuelwatch, Climate Resistance, Fossil Free London, Friends of the Earth, Greenpeace and other members of the Stop Burning Trees Coalition donned Christmas jumpers and brought four giant Ents and a Christmas choir to the department.

They presented the department with a Greenpeace petition calling for an end to the subsidies, signed by over 120,000 people.

Drax’s power station in North Yorkshire uses wood pellets to generate electricity; the protestors are unhappy that Drax is logging and sourcing wood from forests in British Columbia, and the Southern US, as well as burning waste wood.

Paul Morozzo, a climate campaigner for Greenpeace UK, says:

“Burning trees to stop climate change is just as ridiculous as it sounds, subsidising Drax is a joke that’s bad enough to go in a cracker, and all of the company’s accounting tricks aren’t making it any funnier.

If we’re going to hold back the climate disaster that’s starting to have impacts all around the world then the government needs to stop subsidising high-cost, high-carbon energy like Drax, and concentrate on cleaner, cheaper, genuinely renewable sources. And just as importantly, we need governments and companies to stop accepting IOUs in place of real carbon cuts, because the climate crisis is here now.”

Thames Water appoints chief restructuring officer as it fights nationalisation

Jasper Jolly

Thames Water has appointed a restructuring expert to its board to advise it as the British water company tries to raise more than £6bn to avoid temporary nationalisation.

The company said that Julian Gething has been appointed as chief restructuring officer and will sit on the boards of several companies within its complex corporate structure.

Thames, which supplies water and sewage services to 16 million customers in London and the Thames Valley, said that Gething would not be involved in anything operational, and his appointment would not herald any job cuts within the company.

The British water industry has been under severe pressure for several years as many companies were caught out by rising interest rates, after years of underinvestment in crucial infrastructure. Thames has been the worst affected.

Thames has won approval from its creditors to borrow £3bn, before it tries to raise another £3bn in equity investment to try to turn it around. The talks over the debts are likely to wipe out existing shareholders’ stakes.

Gething has worked for 35 years in restructuring, specialising in situations in which debtors must negotiate over losses. He is a partner at AlixPartners, a consultancy. Thames said that the appointment was supported by its lenders.

Britain’s manufacturing downturn has also worsened!

The latest poll of purchasing managers at UK factories shows that output fell for the first time in seven months, driven by a fall in new orders.

S&P Global’s PMI report also shows that firms cut back their staffing levels, purchasing activity and inventory holdings last month.

Manufacturers found it harder to export; new orders from overseas contracted for the thirty-first month in a row, due to weaker demand from US, China, the EU and the Middle East.

Some firms specifically mentioned weak demad from Germany, especially from its auto industry.

Other companies suggested clients were rethinking their spending decisions following the UK budget at the end of October, which lifted taxes on businesses.

There are also signs that supply chain pressures have risen, due to the Red Sea crisis, border regulatory issues (including Brexit related constraints) and the recent strike at US ports.

This all pulled the UK manufacturing PMI down to 48.0 in November, from 49.9 in October, showing a contraction for the second month running.

Rob Dobson, director at S&P Global Market Intelligence says:

“Conditions in the UK manufacturing sector deteriorated again in November. The headline PMI fell to a nine-month low as concerns surrounding the economic outlook, high costs and weak demand led to lower output, falling orders and cutbacks to purchasing, jobs and inventory holdings.

The export climate also remained bleak, as weaker demand from the US, China and EU led to a further drop in new export business. While companies of all sizes are experiencing a downturn, small companies are the hardest hit, reporting especially marked drops in output, new orders and new export business.

Meanwhile, supply chain worries have intensified as the combination of the Red Sea crisis, port disruptions and border regulation issues led to longer supplier delivery times, input shortages and rising costs. Input price inflation accelerated as a result. With recent budget announcements on labour costs and employer national insurance likely to raise costs further in 2025, and geopolitical tensions heating up notably around the threat of increased global protectionism, manufacturers are left facing an environment of high costs, low demand and raised uncertainty for the foreseeable future.

News that the eurozone manufacturing recession has deepened came as Volkswagen workers across Germany began a walkout.

The “warning strikes”, which usually last a few hours, are a protest against VW’s plans to lay off thousands of people, cut pay and close plants for the first time in its home country.

Thorsten Gröger, the union IG Metall’s lead negotiator with VW, said:

“If need be, it will be the toughest collective bargaining battle Volkswagen has ever seen.”

The union leader accused VW managers of making the situation worse, adding:

“Volkswagen has set fire to our collective agreements.”