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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

FTSE 100 posts third best day of 2023 as bond selloff eases; gas prices jump after Balticconnector pipe leak – as it happened

Inflation United Kingdom United States Kantar US Federal Reserve Deutsche Bank Oil US Treasury
The City of London skyline.
The City of London skyline. Photograph: Vuk Valcic/ZUMA Press Wire/Shutterstock

Afternoon summary

Time for a recap….

UK and European gas prices have jumped, following a leak in an underwater pipeline linking Finland and Estonia on Sunday morning.

The damage to the Balticconnector, across the Gulf of Finland, appears to be caused by “external activity”.

Finland’s president, Sauli Niinistö, said:

It is likely that the damage to both the gas pipeline and the data cable is caused by external activity. What specifically caused the damage is not yet known.

The UK month-ahead gas price is up over 12% at 122p per therm.

European stock markets have rallied, lifted by hopes that the US Federal Reserve may be close to ending its cycle of interest rate increases.

The FTSE 100 index has jumped 1.8%, its third-biggest daily rally of the year.

Bond prices have strengthened, pulling down bond yields, with US Treasuries in demand in a dash for safe-haven assets.

The International Monetary Fund has predicted that the UK will be the slowest-growing G7 economy in 2024, although the forecasts were based on the Bank of England raising interest rates several more times.

The Bank of England has warned that consumers who are taking longer mortgages and spending more on credit cards in an attempt to cover living cost are storing up troubles for the future.

Workers at online giant Amazon are to stage a series of fresh strikes over pay, including on Black Friday, in an ongoing dispute over pay and conditions.

UK grocery inflation has slowed to 11%, the lowest in over a year.

Analysts at Deutsche Bank have predicted that the world could be heading for a repeat of the stagflation of the 1970s, with high inflation, industrial action, and conflict in the Middle East pushing up oil prices.

Cash-strapped Britons are cutting back on eating out and reining in on buying takeaways to save up for the expensive Christmas season splurge.

China’s largest private developer has warned it could default on its international debts, dealing another blow to the country’s embattled property industry.

And… Netflix has added the fewest number of new subscribers last year since launching in the UK a decade ago, as the cost of living crisis and a post-pandemic “reset” in growth among streaming services hit the US company.

The Formula One tycoon Toto Wolff and the petrochemicals empire of billionaire Sir Jim Ratcliffe have taken a share of a £75m dividend from the Mercedes racing team behind Lewis Hamilton.

Mercedes-Benz Grand Prix recorded a jump in revenues in 2022 aided by a bump in sponsorship and its work on the America’s Cup sailing championship, despite a disappointing season on the F1 track.

Revenues at the British company behind the racing team jumped by 24% to £475m in 2022, with pre-tax profits rising to £113m from nearly £72m the year before.

In March, the company approved a £75m dividend to shareholders related to its performance in 2022, up from £55m paid during 2022 based on its 2021 performance, according to accounts filed at Companies House on Tuesday.

FTSE 100 closes up 1.8%

Newsflash: Britain’s blue-chip share index has recorded its third-best day of the year.

The FTSE 100 index has just closed, up 1.8% or 136 points at 7628.21 points, its best rise since September 14.

Almost every member of the index rose today, with Ocado (+6.8%), Anglo American (+5.6%) and Flutter (+5.3%) leading the risers.

The rally came on the back of hopes that America’s central bank might stop raising interest rates soon, following dovish commments from some policymakers.

A recovery in government bond prices, pulling down the yield on US Treasuries today, also helped calm the mood, after last week’s selloff.

Reports that China could launch new stimulus measures also lifted European markets.

Michael Hewson of CMC Markets explains:

The big increase in yields seen in the aftermath of Friday’s payrolls report has disappeared, while stock markets have rebounded in the hope that the fallout from this weekend’s horrific events in Israel will be contained, at least for now.

Consequently, yesterday’s weakness in European markets has been fully reversed with the DAX and FTSE100 both rising to a one week high, despite the IMF lifting its inflation forecast for next year to 5.8%, and downgrading its growth forecast for the global economy to 2.9% from 3%.

The IMF also upgraded its forecasts for this year as well as next year for all the major economies with big downgrades for 2024 for the UK and Germany of -0.4%, while upgrading the US by 0.5%. That said we shouldn’t read too much into these given that the data used by the IMF hasn’t considered the recent changes to UK GDP methodology which were announced by the ONS last month, and as such are probably about as much use as yesterday’s fish and chip paper.

Reports that China is about to embark on a $137bn stimulus package is also adding to the positive mood, however this has an added danger that it could ignite further commodity price inflation, and thus entrench underlying inflation even further. That said the amount being touted is tiny and isn’t likely to move the needle that much however it is an acknowledgment that it might be the start of further piecemeal measures.

Today’s rebound has been broad based with strong gains for miners led by Anglo American, Antofagasta and Rio Tinto, while Asia focussed businesses of Prudential and Standard Chartered Bank are also higher.

Updated

Full story: Undersea pipeline damage 'appears to be deliberate'

The Finnish president has said damage to an undersea gas pipeline and communications cable connecting Finland and Estonia appears to be deliberate, my colleague Jon Henley writes.

“It is likely that the damage to both the gas pipeline and the communication cable is the result of external activity,” Sauli Niinistö said on X, formerly Twitter, on Tuesday. “The cause of the damage is not yet clear; the investigation continues.”

He said Helsinki was “in contact with our allies and partners” and the country was “prepared, and our readiness is good”, adding that the incident had “no effect on our supply security”.

Local media cited unnamed government sources as saying Russian sabotage was suspected, while regional security experts said a Russian survey vessel had recently been observed in the vicinity of the pipeline.

More news from Finland on the Balticconnector pipeline:

World Bank president Ajay Banga has said that the Israel-Gaza conflict is an unnecessary global economic shock that will make it harder for central banks to achieve soft landings in many economies if it spreads.

Speaking to Reuters, at the World Bank/IMF annual meeting in Morocco, Banga said:

“It’s a humanitarian tragedy and it’s an economic shock we don’t need.”

Banga added that central banks were “beginning to feel a little more confident that there was an opportunity for a soft landing, and this just makes it harder.”

NATO secretary general Jens Stoltenberg has said his alliance is sharing information about the damage to the Balticconnector pipeline, and a telecoms cable connecting Finland and Estonia too.

NATO “stands ready” to support its allies, Stoltenberg adds.

Reeves defends opposition to wealth taxes

Rachel Reeves has defended her decision to rule out higher taxes on wealth by arguing that entrepreneurs should have incentives and rewards for investing in Britain, my colleague Richard Partington reports.

Speaking at the Labour party conference in Liverpool at an event in conversation with Jim O’Neil, the crossbench peer and former Goldman Sachs chief economist, she said that Labour did not plan a “wholesale” equalisation of the rates of capital gains taxes with the rates charged on income.

The idea has been promoted by Joe Biden in the US, and had been considered by Rishi Sunak as an option for the UK during his time as chancellor, before it was then dropped.

Labour has been under pressure to adopt the policy to raise more tax revenues for the exchequer to fund public services, while also tackling high levels of inequality.

However, Reeves told O’Neil:

“We don’t plan a wholesale equalisation of income tax and capital gains. We think it is important to create the incentives to invest in UK businesses, to help create businesses, to help grow businesses, and to have preferential tax treatment in doing that.”

Her comments mark the staunchest defence of her policy not to raise taxes on wealth, in an attempt to demonstrate pro-business credentials.

Arguing that Labour would be both pro-business and pro-worker, she said this would involve stronger employment rights and higher minimum wages under a Labour government - including banning zero hours contracts.

“Labour is a proudly pro worker party. It’s how we were created, it’s in our DNA. But we’re also pro business. You cant be pro worker unless your pro the businesses that create jobs and prosperity. I see those things as two sides of the same coin.”

“It’s the securonomics that I speak of. everyone should be able to benefit from that growth and prosperity, including through security at work. Higher wages through real living wage is part of that. There’s a mountain of evidence that greater security at work and better wages leads to more productive workforce.”

Here’s the latest news from the Labour conference:

Finland's president: gas pipeline damage probably caused by external activity

Finland’s president has said the damage that caused the Balticconnector pipeline to be shut on Sunday is probably caused by “external activity”.

In a statement, Sauli Niinistö says that NATO is on hand to help with an investigation into how the connection between Finland and Estonia was damaged, and how a data cable has been harmed too.

He also reassures Finns that their energy security is not affected.

Niinistö says:

The damage to the underwater infrastructure has been taken seriously and its causes have been investigated since Sunday. The political leadership has been closely informed of the situation.

It is likely that the damage to both the gas pipeline and the data cable is caused by external activity. What specifically caused the damage is not yet known.

The investigation will continue in cooperation between Finland and Estonia. We are also in constant contact with our allies and partners. I discussed with NATO Secretary General Jens Stoltenberg today. NATO is ready to assist with the investigation.

Finland’s level of preparedness is good. These events have no impact on our security of supply.

Updated

Swedish journalist Jonas Olsson has more details on the leak in the gas pipeline between Finland and Estonia:

Gas prices jump after reports that pipeline leak was not accidental

Back in the energy sector, gas prices are pushing higher after Swedish and Finnish media reported that Finland’s government is set to say that damage to an underwater gas pipeline was not accidental.

The Balticconnector pipeline runs between Finland and Estonia, across the Gulf of Finland.

It started to leak over the weekend, with operators detecting an unusual drop in pressure at around 2am local time.

The prospect that the damage could be deliberate has pushed the month-ahead European gas benchmark up by almost 16% to €49.75 per megawatt hour, the highest since April.

The Balticonnector pipeline opened in 20202, and is used to send gas between Estonia and Finland, depending on which country is most in need at any point.

Updated

European stock markets are also on track for their best day in around a month.

The Stoxx 600 index, which tracks companies across Europe, is up 1.5% this afternoon, which would be the best day since 14 September.

Reports that China is looking to increase its budget deficit for 2023, as part of a new round of stimulus to help the economy, are lifting shares.

Amazon workers to strike over pay on Black Friday

Amazon is facing the threat of its biggest strike action ever on its busy Black Friday trading day.

The GMB union have just announced four more days of industrrial action at the Amazon warehouse in Coventry, with workers planning to walk out on 7, 8 and 9 November, and on 24 November – which is Black Friday.

The strikes are the latest in a series of industrial action, in a dispute over pay and union rights.

Rachel Fagan, GMB organiser, says:

“These strike dates will bring total days lost to industrial action to nearly 30.

“This is an unprecedented and historic moment with low paid workers taking on one of the world’s most powerful corporations.

“This is our members’ response to the failure of Amazon bosses to listen.

“Coventry is the beating heart of Amazon’s distribution network; strike action here on Black Friday will ripple throughout the company’s UK logistics.

“As Black Friday looms, Amazon must urgently reconsider their priorities or risk strike action causing widespread disruption to customers and the public.”

Yesterday, Amazon announced a pay rise for its staff.

It will raise its minimum starting pay for frontline employees to between £11.80 and £12.50 an hour next week, and again next April to between £12.30 and £13 an hour.

The GMB, though, said Amazon must do better to tackle “poverty pay, unsafe working conditions and workplace surveillance”.

UPDATE: John Boumphrey, Amazon UK’s country manager, has said:

“We have some of the most talented colleagues around and we’re proud to offer them competitive wages and benefits, as well as fantastic opportunities for career development, all in a safe and modern work environment.

“These are just some of the reasons people want to work at Amazon, whether it’s their first job, a seasonal role or an opportunity for them to advance their career.”

Updated

FTSE 100 rallies as bond prices recover

Britain’s stock market is on track for its best day in a month, as investors grow more confident that global interest rate rises may be near peaking.

The FTSE 100 index of blue-chip shares is up by 123 points, or 1.6%, at 7615 points, its highest level in over a week.

Ocado (+6.5%) is leading the charge, with mining companies, banks and property developers also in the top risers.

Almost every member is up, with only engineering firm Spirax-Sarco (-2.5%) and consumer healthcare group Haleon (-0.1%) down.

European stock markets are also rallying, with Germany’s DAX up 1.7%, France’s CAC rising by 1.5% and Italy’s FTSE MIB gaining 1.8%.

The gains come as US bond prices recover, calming nerves in the markets.

Treasury bond yields have dropped away from the 16-year highs set last week, after US central bank officials hinted that the Federal Reserve might not to raise interest rates much higher.

Federal Reserve Vice Chair Philip Jefferson said on Monday that a recent surge in the yields of long-term Treasurys may slow the economy, and prompt him to adjust his approach to monetary policy.

Federal Reserve Bank of Dallas President Lorie Logan made the same point, that the recent surge in long-term Treasury yields may mean less need for the US central bank to raise its benchmark interest rate again.

UK government debt is trading calmly today, after prices recovered yesterday in a dash for safer assets.

Russ Mould, investment director at AJ Bell, says:

“Investors regained their appetite for risk after a troublesome start to the trading week linked to concerns about conflict in the Middle East and how the associated hike in commodity prices could feed through to inflation and interest rates staying higher for longer.

“Triggering the U-turn in the market mood were comments on Monday from Fed Vice Chair Philip Jefferson who implied the US central bank needed to ‘proceed carefully’ with any further rate hikes. This raised hopes in the market that the Fed might not need to lift rates any higher, particularly if higher bond yields were already threatening to act as an anchor on economic activity. Wall Street ended the session on a bright note, setting the tone for a more prosperous day across global markets on Tuesday.

Updated

Over in the US, small business confidence has dipped to a four-month low.

Sentiment among small business owners was hit by continued concerns over inflation and persistent worker shortages, according to the National Federation of Independent Business (NFIB).

NFIB’s Small Business Optimism Index fell by half a point in September to 90.8, which is the 21st month running below the 49-year average of 98.

Bill Dunkelberg, NFIB chief economist, says:

“Owners remain pessimistic about future business conditions, which has contributed to the low optimism they have regarding the economy,”

“Sales growth among small businesses have slowed and the bottom line is being squeezed, leaving owners few options beyond raising selling prices for financial relief.”

Four people, including a former director, appeared in court on Tuesday accused of fraud relating to the collapse of cafe chain Patisserie Valerie, my colleague Tom Ambrose reports.

Christopher Marsh, a former director and chief financial officer, faces a charge of conspiracy to defraud after the chain fell into administration with a £94m black hole in its accounts in 2019.

Marsh, 49, sat side by side with three other co-accused in the dock at Westminster Magistrates’ Court, including his wife Louise Marsh, an accountant.

The popular cake chain’s former number two, financial controller Pritesh Mistry, and financial consultant Nileshkumar Lad also face fraud charges, which they deny.

All four defendants spoke only to confirm their name and addresses, with the case set to be heard at Southwark Crown Court on 7 November.

District judge Daniel Sternberg reiterated an existing order that the co-defendants do not contact each other, apart from husband and wife Christopher and Louise Marsh.

The Serious Fraud Office (SFO) brought fraud charges following an investigation after the company, which ran almost 200 high street cafes in the UK, collapsed in early 2019, which was blamed on “potentially fraudulent” accounting irregularities.

Patisserie Valerie abruptly stopped trading in October 2018 after allegedly discovering financial irregularities, which led to the immediate closure of 70 stores, followed by the loss of 900 jobs across the country.

Updated

Israel’s currency has slipped to a new near-eight year low this morning, despite the central bank’s pledge to stabilise it.

The shekel fell to 3.9544 to the US dollar, taking it slightly below Monday’s lows.

Yesterday, it recovered after the Bank of Israel committed to sell up to $30bn of foreign reserves to support the shekel.

It is now down around 12% so far this year.

UK gas prices highest since June

European gas prices are climbing again today, as the Israel-Hamas war fuels concerns of supply shortages, and the weather turns colder.

The price of UK gas for delivery next month is up almost 10% at 119.6p per therm, the highest since June.

That adds to a jump yesterday after Israel ordered Chevron to halt operations at a major gas field in the eastern Mediterranean for safety reasons.

UKK gas for delivery tomorrow is up around 10% at 105p per therm.

Updated

The Bank of England is monitoring a recent jump in credit card use and 35-year mortgages, saying consumers who are trying to adapt to high interest rates and living costs could face greater debt troubles down the line, my colleague Kalyeena Makortoff reports.

The central bank’s financial policy committee (FPC), which keeps tabs on the health of the UK financial system, also noted an increase in borrowers falling into arrears - albeit from low levels - and expected the number of customers falling behind on their debts to increase further.

Banks have simultaneously started to tighten their lending, amid fears over economic outlook. But overall, the UK banking system was broadly in good health and asset quality remained “relatively stable”, the FPC said.

Since its last report in July, it had seen evidence that some households were increasingly relying on credit cards to make ends meet. That was partly due to the higher cost of borrowing, due to the continued rise in interest rates, and cost of living pressures meant many were having to find other ways to pay for every day purchases.

While the annual rate of credit card spending growth is relatively stable - holding steady at 11.8% - the committee said the trend “could lead to greater debt vulnerability for households in the near-term.”

Prospective home buyers have also been adapting to financial pressures by taking out longer-term mortgages. In total, the proportion of mortgages lasting 35 years or more had increased from 4% to 12% in the second quarter of the year.

The committee said:

“While longer mortgage terms and other forbearance measures could reduce pressures on borrowers in the short term, they could increase debt burdens over the long term,”

However, it assured that the potential risks were “somewhat” offset by rules set by the Financial Conduct Authority (FCA), which require banks to be responsible lenders.

Bank of England warns some asset valuations are stretched

Newsflash: The Bank of England is worried that some risky assets appear overvalued, and could tumble in value if economic growth stumbles.

The Bank’s Financial Policy Committee has warned that more persistent inflation, higher interest rates and geopolitical tensions mean the current risk outlook is challenging.

If inflation proves more persistent, interest rates may need to rise further, it warns, which would weigh on growth.

In its latest Financial Stability report, the FPC says:

Given the impact of higher interest rates, and uncertainties associated with inflation and growth, some risky asset valuations appear stretched.

Stretched risky asset valuations increase the likelihood of a greater correction in prices if downside risks to growth materialise. This would have a direct impact on the cost and availability of finance for corporates globally, and would affect riskier borrowers in particular.

The latest Financial Stability Report

Looking globally, the FPC warns that higher interest rates are making it harder for households and businesses in advanced economies to service and refinance their debts.

It also singles out China’s troubled property sector, saying:

Longstanding vulnerabilities in the Chinese property market have crystallised further, and significant downside risks remain

While in the UK, the FPC warns that household finances remain under pressure, and the full impact of higher interest rates has not yet passed through to all borrowers.

They add:

Owner-occupier arrears are low in historical terms, though there has been a modest increase. Some borrowers facing higher interest rates have taken out mortgages with longer-terms, and a small number have moved to interest only. There has, for example, been a notable increase in the proportion of borrowers taking out mortgages with 35 year or above terms, although this remains a small share of total mortgages.

Such lending will be bound by FCA responsible lending rules requiring lenders to take account of future changes to income and expenditure, such as the borrower retiring, where that is expected to happen during the mortgage term.

But the FPR remains confident that UK banks are in a strong position to support borrowers should they face difficulties servicing their debts.

Updated

Back in Marrakech, the International Monetary Fund has warned that global growth would be hurt by rising oil prices.

IMF chief economist Pierre Gourinchas told reporters that the Fund has noted that oil has increased by around 4% in the last few days, following the conflict between Hamas and Israel.

We see often spikes in energy prices when there is geopolitical instability in the region, Gourinchas points out.

He reiteratess that it is “a little bit too early” to say how much of the move will be sustained, and to assess the wider economic impact of the war.

But, he says, the Fund’s research shows that a 10% increase in oil prices will knock 0.15 percentage points off global economic output in the following year, and increase global inflation by 0.4 percentage points.

Updated

The IMF has also cut its forecast for Russia’s growth next year.

Russia’s GDP is forecast to rise by 1.1% in 2024, down from 1.3% forecast in July.

But Russia’s economy is expected to grow by 2.2% this year (up from 1.5% forecast before), after a 2.1% contraction in 2022.

The IMF has upgraded its forecast for Ukraine this year, to 2% growth rather than a 3% contraction.

This is due to:

“stronger-than-expected domestic demand growth, with firms and households adapting to the war in that country amid sharply declining inflation and stable foreign exchange markets”

IMF: UK faces fairly subdued growth

Q: Might the IMF need to revise its UK growth forecasts up, if interest rates don’t hit 6% as you assumed when drawing up today’s forecasts, our economics editor Larry Elliott asks.

The IMF’s Pierre-Olivier Gourinchas replies that the Fund expects a fairly sharp slowdown in 2023, with UK growth falling from 4.1% last year to just 0.5% in 2023 (a small upward revision from the 0.4% forecast before).

“Fairly weak’” growth is then expected in 2024, at just 0.6% (down from 1%) the worst in the G7. (as flagged earlier).

UK inflation is seen at fairly elevated levels, averaging 7.7% this year.

Gourinchas warns that the Bank of England must keep interest rates (currently 5.25%) high into 2024.

The general perspective on the UK is we have fairly subdued growth, we have falling momentum, a labour market that is cooling, but inflation remains quite persistent.

And that is going to require monetary policy to remain tight for a little while longer, into next year.

Updated

IMF hopes for rapid de-escalation in Israel-Hamas conflict

Q: How serious a risk to the global economy is the war between Israel and Hamas, my colleague Larry Elliott asks the IMF.

Pierre-Olivier Gourinchas, the IMF’s economic counsellor, says the Fund is very saddened by the loss of life we are seeing.

The IMF is monitoring the situation very carefully in terms of economic impact it could have on the region, and beyond, he says.

Gourinchas adds that it is “too early to really assesss what the impact will be”, and points out that the Fund’s latest forecasts were drawn up before the conflict began last weekend.

Gourinchas concludes:

Of course, we all hope for a rapid de-escalation in the conflict and an end to the violence.

The IMF are holding a briefing on their new economic forecasts, in Marrakech, Morocco.

Pierre-Olivier Gourinchas, the IMF’s economic counsellor, is explaining that the Fund has downgraded its growth forecast for the euro area this year to 0.7%, which he calls “a pretty sharp slowdown”.

A modest rebound is forecast in 2024, to 1.2%.

Looking “under the hood”, the IMF sees some continued weakness in Germany, while other countries such as Spain are growing more robustly (+1.7%).

Countries with large manufacturing bases are suffering from high energy costs, Gourinchas adds, while service companies are also seeing a slowdown.

This means European growth will probably enter a “soft patch” for the next year, Gourinchas concludes.

Here are the IMF’s latest growth forecasts for next year:

The IMF says its economic projections are increasingly consistent with a “soft landing” scenario, in which inflation falls without a major downturn in activity.

This is especially true in the United States, the Fund’s Pierre-Olivier Gourinchas says, where unemployment is forecast to only rise to 3.9% by 2025, from 3.6%.

IMF: Global economy is limping, not sprinting

The world economy has shown ‘remarkable’ resilience, given the impact of Covid-19, the Ukraine war, and high inflation, the IMF says in its latesst World Economic Outlook.

Pierre-Olivier Gourinchas, the IMF’s economic counsellor, says:

The global economy continues to recover slowly from the blows of the pandemic, Russia’s invasion of Ukraine, and the cost-of-living crisis. In retrospect, the resilience has been remarkable.

Despite the disruption in energy and food markets caused by the war, and the unprecedented tightening of global monetary conditions to combat decades-high inflation, the global economy has slowed, but not stalled. Yet growth remains slow and uneven, with growing global divergences. The global economy is limping along, not sprinting.

IMF: UK to be slowest-growing G7 next year

Newsflash: The UK is set to be the slowest growing member of the G7 next year, according to (somewhat outdated) forecasts from the International Monetary Fund.

The IMF’s latest World Economic Outlook (WEO predicts that the UK will grow by 0.6% in 2024, down from a previous forecast of 1% growth.

That would leave Britain lagging the US (forecast to grow by 1.5%), Germany (+0.9%), France (+1.3%), Italy (+0.75), Japan (+1%) or Canada (1.6%).

UK GDP is expected to grow by 0.5% this year, a sharp slowdown on the 4.1% growth seen in 2022.

The IMF says:

The decline in [UK] growth reflects tighter monetary policies to curb still-high inflation and lingering impacts of the terms-of-trade shock from high energy prices.

However… that 2024 forecast is based on an interest rate forecast that the IMF says is out of date.

Our economics editor Larry Elliott explains:

When the WEO was being prepared last month, the IMF’s assumption was that the Bank of England’s ceiling for borrowing costs would be 6%.

After Threadneedle Street’s decision to pause raising rates at the September meeting of its monetary policy committee, the IMF now believes the peak will be 5.25% or 5.5%.

Updated

The London stock market has opened sharply higher, as investors regain their appetite for shares as bond yields fall back.

The FTSE 100 index has jumped by 82 points, or 1.1%, to 7,574 points, the highest in a week.

In a reverse of yesterday, oil companies are lagging the market, with Shell down 0.7% and BP off 0.4%.

The FTSE 250 index of medium-sized companies has jumped by 1.5%.

Updated

Kantar’s latest grocery healthcheck shows that German discounters Aldi and Lidl reported strong sales growth of 14.9% and 15.2% respectively while Tesco and Sainsbury’s both enjoyed sales growth above 9%.

Victoria Scholar, head of investment at interactive investor, explains:

Facing an uphill battle against a declining propensity to spend among consumers, the supermarkets have been desperately cutting their prices this year to attract customers through their doors. This has helped to reduce the overall level of supermarket price inflation with some staple foods now falling in price.

The cheaper German discounters have benefitted from shoppers’ increased price sensitivity. Many are desperately seeking out bargains and are trading down to cheaper ranges away from more expensive, branded items.

Nonetheless, some food prices are still rising according to Kantar such as eggs and frozen potato products.”

The unusually warm September weather has boosted sales volumes of ice cream by 27%, Kantar reports.

Late-season barbecue action lifted burger sales by 19%, while dips were up 1%.

Sun cream sales more than doubled compared to August, which was a rather damp month.

Kantar’s Tom Steel adds:

Christmas seemed further away for many with fewer people buying Christmas puddings and seasonal biscuits as volume sales were down by 14% and 29% versus this time last year.

UK grocery inflation falls again as prices of some staple items drop

Shoppers buy products in Asda supermarket in London as UK inflation rises to 10.1% due to rising food prices.

Newsflash: UK grocery inflation has dropped back to its lowest level in over a year, as price pressures have eased.

Prices across grocers were 11% higher than a year ago in September, down from 12.2% in August, data provider Kantar reports.

That’s the lowest level since July 2022, and the seventh monthly decline in a row, since grocery inflation peaked at a record 17.5% in March.

However, it still means food prices are rising faster than average wages (+8.5%), and by over five times the Bank of England’s 2% target for overall consumer price inflation.

Kantar reports that the prices of some staple foods are now dropping, for the first time since last year, with the average price of a pack of butter now 16p less than a year ago.

Supermarkets are also pitching more offers to customers, pulling down prices.

Tom Steel, Kantar’s strategic insight director, says:

Supermarkets are looking at all the different ways they can deliver value at the tills and while the emphasis for some time has been on everyday low prices, the retailers are starting to get the deal stickers out again.

Spending on promotions made up over a quarter of all sales in the latest 12-week period at 26.5%, the highest level since June 2022.

US Treasury bonds see best day since March

The dash for safe-haven assets is helping to pushing down the interest rate on US government bonds today.

The yield on US Treasuries have tumbled in Asia-Pacific trading, in the biggest one-day move since March, as bond prices jumped.

This bond rally suggests that bond investors may be hopeful that US interest rates could be at or near their peak. Fears of further increases triggered a rout in bond prices last week, sending yields to 16-year highs.

Yesterday, Dallas Fed president Lorie Logan said on Monday that the recent rise in long-term U.S. Treasury yields, and tighter financial conditions more generally, could mean less need for the Federal Reserve to raise interest rates further.

Yesterday, European government bonds recovered some ground, after the recent selloff which attracted comparisons with the run-up to the stock market crash of 1987.

Britons cut back on eating out and takeaways to save for festive splurge

Cash-strapped Britons are cutting back on eating out and reining in on buying takeaways to save up for the expensive Christmas season splurge.

The amount spent on going out to restaurants plunged 10.8% month on month in September, a significant slowdown compared with the decline of 5.8% registered in August, according to the latest UK consumer card spending figures from Barclays.

The growth in the amount the public spent on takeaways has also slowed dramatically, from 9.2% in August to 6.5% last month, as 44% of Britons surveyed said they are starting to reduce discretionary spending to pay for Christmas.

Deutsche Bank warns of 1970s-style stagflation risks

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

Could the world be heading for a repeat of the stagflation of the 1970s?

50 years ago, inflation remained stickily over target, industrial action gripped countries such as the UK, energy prices spiked, and there was war in the Middle East.

And today, analysts at Deutsche Bank see certain comparisons. In a research note out this week, Deutsche’s Henry Allen and Cassidy Ainsworth-Grace there are a “striking number of parallels” between the 1970s and our own time:

They write:

Inflation remains above target across the major economies; we have witnessed severe spikes in energy prices over recent years; and there’s been growing industrial unrest.

Over the weekend, the attacks on Israel showed how geopolitical risk can return unexpectedly. And we are also seeing an El Niño event this year, which echoes a similar event in the early 1970s that put upward pressure on food prices.

The biggest single cause of the stagflation of the 70s was the oil shock, when the OAPEC group imposed an oil embargo during the Yom Kippur War.

It sent much of the Western world into recession, and it took many years before price stability returned, Deutsche point out.

Although oil jumped yesterday, after the Israel-Hamas war began, crude prices are still below the $100/barrel mark.

Recent interest rate increases, and the easing of supply chain bottlenecks, could also cool inflation.

But, Allen and Ainsworth-Grace say, there are “very strong” reasons for caution, and to avoid complacency.

Inflation is still above target in every G7 country, and the 1970s showed how unexpected shocks could rapidly send inflation higher once again. History also suggests that the last phase of returning inflation to target is the hardest.

And given inflation has already been above target for the last two years, a fresh inflationary spike could well lead expectations to become unanchored.

Also coming up today

We’ll hear the International Monetary Fund’s view on the global economy this morning, when it releases the latest World Economic Outlook.

European stock markets are set to open higher, with the FTSE 100 forecast to rise by around 50 points or 0.75% to 7541 points.

And there’s a recovery in the bond market, with the yield on US Treasuries falling sharply in early trading.

The agenda

  • 8am BST: Kantar’s grocery inflation report

  • 9am BST: IMF will release the World Economic Outlook (WEO)

  • 9.30am BST: ONS report: The role of labour costs and profits in UK inflation

  • 11am BST: NFIB index of US business optimism

Updated

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