Closing summary
The Bank of Canada has cut interest rates by a quarter point, becoming the first G-7 nation to lower borrowing costs in the current cycle. The European Central Bank is expected to follow suit tomorrow.
Business activity in the eurozone grew at the fastest rate in a year, while inflation cooled in May -- welcome news for the European Central Bank, which meets tomorrow and is widely expected to cut interest rates by a quarter point.
By contrast, the UK services sector lost some momentum last month, as business activity and new orders eased from 11-month highs in April. That said, job growth and business confidence improved slightly.
On a brighter note, there was a substantial cooling in the rate of UK firms’ input cost inflation, which fell to its weakest level since February 2021. This fed through to prices charged by businesses, which rose at the slowest rate in more than three years.
Economic activity in the US services sector returned to growth in May after contracting marginally in April for the first time since December 2022, as just reported.
The UK shadow chancellor, Rachel Reeves, has accused Rishi Sunak of lying after it emerged that a senior Treasury official warned Tory ministers not to say civil servants were behind their claim that a Labour government would increase taxes by £2,000.
The prime minister made the claim throughout his ITV head-to-head debate with Keir Starmer, saying “independent Treasury officials” had costed Labour’s policies “and they amount to a £2,000 tax rise for everyone”.
In a letter to the Labour party on Monday, James Bowler, the Treasury permanent secretary, said ministers had been told not to suggest civil servants had produced the figure at the heart of the Tory attack.
India’s stock market recovered somewhat following yesterday’s sell-off, caused by uncertainty over the country’s next government and its policies.
Narendra Modi’s ruling Bharatiya Janata party has lost its parliamentary majority, dealing an unexpected blow to the Indian prime minister and forcing him to negotiate with coalition partners in order to return to power. He has been meeting key allies at his official residence. India’s main stock indices, the Nify 50 and the BSE Sensex, both rose more than 3%, after sliding close to 6% yesterday.
The Indian rupee ticked up to 83.37 per dollar, probably aided by intervention from the central bank after the currency fell the most in over a year yesterday.
European stock markets are trading modestly higher. The UK’s FTSE 100 index is 13 points ahead at 8,245 while Germany’s Dax has gained 0.9%, France’s CAC is almost 1% higher and Italy’s FTSE MiB rose almost 0.9%.
Thank you for reading. We’ll be back tomorrow. Bye! – JK
Updated
US services sector returns to growth
Economic activity in the US services sector returned to growth in May after contracting marginally in April for the first time since December 2022, according to the nation’s purchasing and supply executives in the latest services Report On Business from the Institute for Supply Management.
The headline reading was 53.8 in May, up from 49.4 in April. The 50 mark divides expansion from contraction.
Anthony Nieves of ISM said:
Survey respondents indicated that overall business is increasing, with growth rates continuing to vary by company and industry. Employment challenges remain, primarily attributed to difficulties in backfilling positions and controlling labor expenses. The majority of respondents indicate that inflation and the current interest rates are an impediment to improving business conditions.
Business Activity Index at 61.2
New Orders Index at 54.1
Employment Index at 47.1
Supplier Deliveries Index at 52.7
