More than half of UK firms planning price rises as confidence falls to two-year low, survey finds – business live

European stock markets have opened higher, with the exception of the FTSE 100 index in London, which is trading some 20 points lower, down 0.2% at 8,205.

Germany’s Dax and Italy’s FTSE MiB are about 0.3% ahead, while France’s CAC has gained nearly 0.7%.

Richard Hunter, head of markets at interactive investor, said:

Investors finally found their footing in the new year, with markets snapping a five-day losing streak as AI [artificial intelligence] resumed its mantle as a major driver.

Microsoft announced on Friday that it would be spending some $80bn on AI-enabled data centres this year, which spilled over into the wider mega tech sector. Nvidia shares added almost 5%, Super Micro Computer advanced by 11%, with some strength also in evidence in the likes of Amazon and Meta Platforms.

However, heightened valuations means that markets will be prone to disappointments this year. The benchmark S&P500 ended 2024 with a gain of 23%, having posted a rise of 24% the previous year. For the Nasdaq the strength has been even more pronounced, with a spike of 29% last year following on from a jump of 43% in 2023.

In the meantime, US markets are subject to another four-day trading week as markets will be closed on Thursday in honour of former president Jimmy Carter, who died at the end of December. On Friday, the first acid test of the year comes in the form of the release of the non-farm payrolls report, where the current consensus is that 150000 jobs will have been added in December, after posting a gain of 227000 in November.

Turning to Asia and the UK, he said:

Asian markets were lower overnight, failing to respond to comments from the Japanese government that it would act to secure economic growth through wage increases and investment. Equally, and despite a report indicating that China’s services economy grew at the fastest rate in several months, the overarching threat of increased tariffs from the new US administration continue to weigh. Sentiment was further dented after President Biden blocked an attempted $15bn bid for US Steel Corp by Nippon Steel, further ratcheting up geopolitical tension.

Markets struggled to make any meaningful progress in the UK at the open, with Unilever and Rolls-Royce among the early fallers after broker downgrades, although for the latter the markdown made little difference to a share price which has risen by 89% over the last year. On the flipside, there was some strength in the shares of Barratt Redrow after a broker upgrade, where a 23% decline in the price in the last year has reflected disappointment across the sector as a whole that the anticipated recovery in housebuilders has failed to materialise.

More on China.

The tightly controlled yuan has weakened to its lowest level in 16 months while China’s blue-chip stock slipped, and has lost 4.1% so far this year. The currency has had a rocky ride, with two weeks to go until Donald Trump becomes US president. He has threatened big US tariffs on Chinese imports.

Chinese authorities have introduced a number of measures to support the yuan, such as swap and relending schemes totalling 800 billion yuan to shore up investor confidence. The threat of US tariffs along with worries about China’s sluggish economic recovery have triggered capital outflows.

The People’s Bank of China could issue more yuan bills in Hong Kong, state-owned news outlet Yicai reported on Monday. Financial News, a central bank publication, said the PBOC has the tools and the experience to respond to the currency’s depreciation.

Charu Chanana, chief investment strategist at Denmark’s Saxo Bank, said:

The decision to allow the yuan to weaken last week has heightened concerns about capital outflows, further dampening investor sentiment.

Preventing a sharp decline of the yuan will be crucial for China’s recovery. Any tactical recovery this year will need more than just stimulus measures, particularly whether China can negotiate a deal with president-elect Trump.

The Shanghai and Shenzhen stock exchanges have held meetings with foreign investors, to assure them they would continue to open up China’s capital markets, the two bourses said on Sunday night.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Confidence among British businesses has plummeted to the lowest levels since ex-prime minister Liz Truss’s mini-budget in September 2022 following the autumn budget’s large tax increases.

A survey of nearly 5,000 firms from the British Chambers of Commerce showed concerns over taxation were the highest since 2017, while confidence about sales over the next 12 months was the lowest since late 2022.

The BCC’s director general Shevaun Haviland said:

The worrying reverberations of the budget are clear to see in our survey data. Businesses confidence has slumped in a pressure cooker of rising costs and taxes.

The chancellor, Rachel Reeves, announced £40bn of tax rises on 30 October, with a big burden on businesses, who will have to pay higher social security charges from April, along with a higher national minimum wage.

While the Bank of England estimates that higher public spending will temporarily boost growth next year, the tax rises are also expected to push up inflation slightly.

The BCC said 55% of firms plan to raise prices, up from 39% the quarter before, while 24% intend to scale back investment, up from 18% previously.

Growth in the UK economy picked up in the first half of 2024 as it recovered from a shallow recession in late 2023, but flatlined in the third quarter. The Bank of England has forecast zero growth for the fourth quarter, and an expansion of 1.5% in 2025.

In China, services growth has risen to a seven-month peak, according to a closely-watched survey.

The Caixin purchasing managers’ index (PMI) rose to 52.2 in December from 51.5 in November, signalling the strongest growth in the service sector since May, as new orders accelerated, despite a fresh fall in exports. Confidence remained upbeat despite higher cost pressures.

However, authorities are struggling to prop up the yuan, which has fallen to a 16-year low amid concerns about the economy and US tariffs.

Chinese stocks slipped on Monday, with the benchmark CSI 300 index down by 0.16%, as the country’s two biggest stock exchanges said they met foreign investors over the weekend.

The Shanghai and Shenzhen stock exchanges both held weekend symposiums with foreign investors “to solicit opinions and suggestions on the recent A-share market situation,” referring to shares from companies in mainland China that trade on the two stock exchanges.

The Shenzhen Composite index fell by nearly 0.4% on Monday, while the SSE Composite (stocks that are traded at the Shanghai Stock Exchange) edged 0.14% lower.

The South Korean Kospi led gains in Asia, rising by 2.3%, despite political turmoil in the country. Police will consider arresting members of the presidential security service if they try to block investigators, in an attempt to execute an arrest warrant for impeached president Yoon Suk Yeol, according to the Yonhap news agency and Reuters.

The Agenda

• 9am GMT: Eurozone HCOB PMI composite and services final for December

• 1pm GMT: Germany inflation for December

• 2.45pm GMT: US S&P Global composite and services PMIs final for December

• 3pm GMT: US Factory Orders for November