Afternoon summary
Time to recap
Gold has hit a record high, before slipping back this afternoon, as markets turned a little jittery.
The bullion price jumped to $2,111 per ounce, having already hit an alltime high on Friday night.
Analysts said gold was benefitting from expectations that US interest rates could be cut as early as spring 2024, which has weakened the US dollar.
John Reade, market strategist for Europe and Asia at the World Gold Council, says:
Today’s move appears to be technical in nature, considering the price action and some conversations with market participants. It appears some traders had been caught out by the move on Friday and were short gold and consequently bought the open in Asia. This triggered stop-loss buying from other traders including those short gold via options lifting gold to a new all-time high of about $2135/oz. Once this buying was completed, gold drifted lower.
“The longer-term story, that of strong central bank gold buying, probably had nothing to do with this morning’s quick move. Gold has performed well over the past fortnight as the US dollar has weakened and traders started to price a lot more cuts from the US Federal Reserve into the interest rate curve. In addition, geopolitical tensions including the Israel-Hamas conflict have contributed to the recent rally in the gold price, especially at the start of November.
“Short-term moves like this morning aside, by far the most important financial market drivers of gold will be the direction of the US dollar and the amount of cuts that traders price into the US interest rate market.”
Elsewhere in the markets, bitcoin climbed to a 20-month high over $42,000, as speculation in cryptocurrencies gathers pace.
Traders cited the prospect of 2024 rate cuts, and speculation that US regulators could approve a bitcoin exchange-traded fund (ETF), which could push moe money into crypto.
In other news today….
UK homeowners with a mortgage faced the highest personal rate of cost inflation in the year to September as interest rates hit people’s disposable income, new data from the Office for National Statistics shows.
Almost one in 10 UK households failed to pay a major bill in the month to 10 November, the highest level recorded since April 2020.
The Barclay family has repaid the nearly £1.2 billion that it owed to Lloyds Bank, opening up its chance to transfer control of the Telegraph newspaper to an Abu Dhabi-backed fund.
Jeremy Hunt has blamed Brexit for more than half a decade of political instability that has undermined business investment in the UK, as he sought to defend tax cuts paid for by public sector austerity to drive up economic growth.
Hunt was speaking after the Resolution Foundation showed that British workers are missing out on £10,700 a year after more than a decade of weak economic growth and high inequality.
A Guardian investigation has shown that the UK’s most hazardous nuclear site, Sellafield, has been hacked into by cyber groups closely linked to Russia and China.
Spotify is cutting almost 1,600 jobs as the music streaming service blamed a slowing economy and higher borrowing costs in the latest round of redundancies at big tech companies.
Average house prices in the UK will fall by 1% next year as competition increases among sellers, Britain’s biggest property website, Rightmove, has forecast.
Rail passengers around Great Britain continue to face disruption this week, with train drivers striking on four separate days in different parts of the network and refusing to work overtime throughout.
US factory orders fall
Ouch. US manufacturers were hit by a drop in orders in October.
US factory orders fell by 3.6% month-on-month in October, the Census Bureau reports, or by $21.8bn to $576.8bn. That follows two months of gains, and is larger than the 3% drop which was expected.
Orders for durable goods (long-lasting equipment and machinery) fell more sharply, by 5.4%.
🚨Factory Orders MoM -3.6% (Forecast -3%, Previous 2.8%, Revised 2.3%)
— HaiKhuu (@HaiKhuuTrading) December 4, 2023
Durable Goods Revised -5.4% (Forecast -5.4%, Previous -5.4%)
Core Durable Goods Revised 0% (Forecast -, Previous 0.0%) pic.twitter.com/7qbdzdc87z
This may be another signal that the US economy is weakening at the end of this year, as global demand deteriorates, just as the Federal Reserve tries to pull off a soft landing….
Back in the financial markets, Wall Street has opened in the red at the start of a busy week of economic data.
The S&P 500 index of US stocks dropped 0.8%, or 36 points, at the open to 4,558 points, while the tech-focused Nasdaq has lost 1%.
Investors are anxious that US economic data due this week may undermine, rather than reinforce, hopes that America’s interest rates have peaked.
Friday’s US employment report is eagerly awaited, as is the JOLTS survey of job vacancies due tomorrow and the weekly jobless claims data on Thursday.
Sellafield nuclear site hacked by groups linked to Russia and China
The UK’s most hazardous nuclear site, Sellafield, has been hacked into by cyber groups closely linked to Russia and China, the Guardian can reveal.
My colleagues Anna Isaac and Alex Lawson report:
The astonishing disclosure and its potential effects have been consistently covered up by senior staff at the vast nuclear waste and decommissioning site, the investigation has found.
The Guardian has discovered that the authorities do not know exactly when the IT systems were first compromised. But sources said breaches were first detected as far back as 2015, when experts realised sleeper malware – software that can lurk and be used to spy or attack systems – had been embedded in Sellafield’s computer networks.
It is still not known if the malware has been eradicated. It may mean some of Sellafield’s most sensitive activities, such as moving radioactive waste, monitoring for leaks of dangerous material and checking for fires, have been compromised.
Sources suggest it is likely foreign hackers have accessed the highest echelons of confidential material at the site, which sprawls across 6 sq km (two sq miles) on the Cumbrian coast and is one of the most hazardous in the world.
The full extent of any data loss and any ongoing risks to systems was made harder to quantify by Sellafield’s failure to alert nuclear regulators for several years, sources said.
The revelations have emerged in Nuclear Leaks, a year-long Guardian investigation into cyber hacking, radioactive contamination and toxic workplace culture at Sellafield.
This is the first report in a project, Nuclear Leaks, a year-long Guardian investigation into cyber hacking, radioactive contamination and toxic workplace culture at Sellafield. https://t.co/gR7FDM9vby
— Anna Isaac (@Annaisaac) December 4, 2023
And here are more details of Sellafield, which is Europe’s most toxic nuclear site, on the Cumbrian coast:
Updated
Haldane: New chancellor should split Treasury
Back at the Resolution Foundation’s conference into its Economy 2030 Inquiry, former Bank of England chief economist Andy Haldane has called for the Treasury to be split in two.
In what looks to be advice the Labour party if it wins power in the next election, Haldane says the ‘new chancellor’ should divide the Treasury into two parts – one focused on financial mattter, and the other on the economy.
Haldane, who left the Bank in June 2021 warning that inflation was rising, says the economic wing should be sighted in Darlington, and led by “a top economist” (suggestions welcome…).
My colleague Richard Partington has the details:
Former BOE chief economist Andy Haldane - in what could be seen as a direct pitch to Labour - says "the new chancellor" should split the Treasury in two. Into a finance function and an economic function.
— Richard Partington (@RJPartington) December 4, 2023
The CEO of @theRSAorg compares such a step toGordon Brown giving away power in 1997 to the BOE. "The most powerful thing that a powerful person can do is to give away power"
— Richard Partington (@RJPartington) December 4, 2023
"We need similar degrees of boldness and audacity now from the new chancellor, whoever she or he may be"
Haldane says the economy department should be placed in Darlington. With a new minister.
— Richard Partington (@RJPartington) December 4, 2023
A triumvirate of ministers - PM, finance and economy - should lead on economic strategy. Supported by a new US-style council of economic advisers led by a top economist
Jeremy Hunt earlier today dismissed this policy suggestion. He said the problem was that ultimately power resides with the Treasury. "You don't want the department responsible for growth to have to negotiate for its budget every year with the Treasury"
— Richard Partington (@RJPartington) December 4, 2023
Bitcoin at 20-month high over $42,000
Bitcoin has continued its climb today, and has traded over $42,000 for the first time since last April.
Victoria Scholar, head of investment at interactive investor, says the “crypto winter” seems to be thawing (just as the UK enters a chilly patch), with bitcoin up over 50% in the last six months.
However, bitcoin is still some way shy of its record high of almost $69,000, set in November 2021.
She explains:
A combination of growing expectations for SEC approval for a bitcoin ETF, a more dovish outlook for the Fed and the countdown to next year’s bitcoin halving have provided a tailwind to the most widely traded cryptocurrency.
Other cryptos are also staging gains like XRP, Litecoin, Bitcoin cash and Ethereum which is up almost 3% today and over 20% in the past month. The crypto winter is thawing with positive price action coming back into play since the lows around a year ago. However there’s still a long way to go to retest the pandemic fuelled highs from 2021.”
Lloyds Bank has said it has received the £1.2bn it was owed by the Barclay family today.
This means Lloyds will play no further role in determining the ownership of the Telegraph group.
Lloyds says:
We are always keen to work constructively with customers who get into difficulty with their repayments to reach an amicable solution. We’d like to thank all parties for their role in reaching this point.”
Lloyds received the money after the Barclays agreed a deal with Abu Dhabi-backed RedBird IMI, which have lent them funds in return for a deal where they could take control of the Telegraph and Spectator.
But the British government blocked the transfer of the assets to RedBird IMI on Friday, while it investigates whether any takeover would have an impact on freedom of expression under the new owner.
Lloyds had been conducting an auction for the Telegraph Group after seizing it in June, when the Barclays were unable to repay their debts to the bank.
Updated
ONS: One in four cannot cope with 25% drop in income
The ONS have also warned that lone parents with dependent children are among those more likely to be hurt by the cost-of-living squeeze.
Renters, disabled people, and households with a Black, African, Caribbean, or Black British head are also among those who are least financially resilient, the statistics body says.
It has found that 27% of households have reported that they did not have enough savings to cover a 25% fall in household employment income.
But the risk is not spread evenly, the ONS reports:
The households that were most likely to report this, and therefore the least financially resilient, were lone parents with dependent children (55%), renters (48%), households with a Black, African, Caribbean, or Black British head (53%), households where the head had a routine or semi-routine occupation (46%), and households where the head had a limiting disability or longstanding illness (34%).
Updated
Reuters are reporting that electronics manufacturer Foxconn has halted production of iPhones at its factory near Chennai in India, due to heavy rain.
Foxconn has “yet to decide” whether to resume production on Tuesday, they add.
FOXCONN HALTS PRODUCTION OF APPLE IPHONES AT FACILITY NEAR INDIA'S CHENNAI DUE TO HEAVY RAINS || FOXCONN YET TO DECIDE WHETHER TO RESUME IPHONE PRODUCTION ON TUESDAY - SOURCES
— RedboxGlobal (@RedboxWire) December 4, 2023
Cyclone Michaung has already caused some flooding in Chennai, according to newspaper The Hindu, causing trains to be cancelled and prompting a holiday to be declared for all courts in the city.
As well as lifting inflation for mortgage-holders (see earlier post), higher interest rates are likely to lead to more loan defaults.
Credit rating agency S&P Global has forecast a further rise in U.S. and European default rates next year, following the rapid increase in global interest rates.
It says the key risks for 2024 are an extended period of high real-interest-rate levels, deeper than expected recessions taking hold, or that property markets in major economies start to buckle significantly.
In a new report, they say:
“Defaults will likely rise further, to 5% in the U.S. and 3.75% in Europe, above their long-term historical trends.”
“We expect see additional credit deterioration in 2024, largely at lower end of ratings scale, where close to 40% of credits are at risk of downgrades”.
In better news for mortgage holders, the average rate on fixed-term loans has dropped again today.
Data provider Moneyfacts reports that:
The average 2-year fixed residential mortgage rate today is 6.03%. This is down from an average rate of 6.04% on the previous working day.
The average 5-year fixed residential mortgage rate today is 5.64%. This is down from an average rate of 5.65% on the previous working day.
Full story: Spotify cuts almost 1,600 jobs amid rising costs
Spotify is cutting almost 1,600 jobs as the music streaming service blamed a slowing economy and higher borrowing costs in the latest round of redundancies at big tech companies.
Daniel Ek, Spotify’s billionaire founder and chief executive, revealed that the company had decided to cut 17% of its workforce, the third and steepest round of redundancies of 2023.
Ek told employees they would receive a calendar invitation “within the next two hours from HR for a one-on-one conversation” if they were affected by the cuts, in a message to staff published on Spotify’s website on Monday. More here.
Motoring body the RAC has criticised UK fuel retailers for failing to pass on the full benefits of cheaper petrol and diesel to drivers.
Its Fuel Watch shows that the average price of petrol fell by 7.5p a litre to November 146.95p. However, the RAC believes that this is still 10p more per litre than it should be, with the average retailer margin per litre of petrol now 17p – well above the long-term average of 7p.
Drivers are now paying an average of £80.62 to fill a typical 55-litre petrol family car – £5 more than they should be, says the RAC.
The price of diesel fell by 7p in November to 154.40p, but this is said to be an ‘overcharge’ of 5p per litre, and means filling a 55-litre car is around £2.50 more expensive than it should be at £84.92.
Updated
UK mortgage borrowers, and those with children, face higher inflation
UK homeowners with a mortgage have been hit by a higher rate of personal inflation than renters, new statistics show, as rising interest rates pushed up repayment costs.
The Office for National Statistics has reported that the average owner occupiers still paying for their house experienced an annual inflation rate of 9.3% in September.
That is 2.1 percentage points higher than the rate experienced by private renters and was primarily because of mortgage interest payments, the ONS says.
It’s latest household cost index, which measures of how changing costs affect different subsets of the UK population, has also found that those of working age experienced a higher inflation rate (8.3%) than retired households (whose costs rose by 7.8% over the last year).
Households with children experienced a higher annual inflation rate of 8.4% in September 2023, compared with 8.1% for households without children.
Overall, UK household costs, as measured by the Household Costs Index (HCI), rose 8.2% in the 12 months to September 2023, the ONS says.
And it claims there was “little difference in annual inflation rates for high- and low-income households”, which were 8.3% and 8.2%, respectively in September 2023.
[However, poorer households may not have any spare resources to cover this increase]
The HCI’s are weighted to reflect spending habits. Poorer households spend a greater share on essentials like food and energy, while wealthier ones spend more on mortgages, which grew more expensive as UK interest rates hit 15-year highs.
Our first quarterly Household Costs Indices (HCIs), UK: January 2022 to September 2023 article gives an insight into inflation as experienced by different types of households and most closely reflects their lived experience.
— Office for National Statistics (ONS) (@ONS) December 4, 2023
➡️ https://t.co/oE1TlXIFDo pic.twitter.com/u3XzrVIWQw
Updated
Jeremy Hunt, chancellor of the exchequer, then takes the stage at Resolution Foundation’s event on the need for a new economic strategy for Britain.
And he gets a reminder of political mortality, with Zanny Minton Beddoes, editor-in-chief of The Economist, introducing Hunt as “at least for the moment” the man in charge of sorting out the UK economy.
Hunt presses for a clarification, can’t we say “subject to the next election”?
“Subject to the next election, blah blah blah”, Minton Beddoes concedes.
But then she asks Hunt for his view of why the UK is in such a mess – how much blame should the government take?
Hunt replies that it’s wrong to take the view that the UK has been an outlier.
We were been hit by the worst financial crisis since the second world war, he points out, adding that since 2010 the UK has grown faster than Spain, Portugal, France, Italy, the Netherlands, Austria, Germany and Japan.
Hunt says:
It’s absolutely right to say ‘why have we all fallen into this low-growth paradigm and what can we do to get out of it?’
But I don’t think this is something we are uniquely in a bad situation with respect to.
This is affecting all westen nations, and you have to have a plan to get out of it.
Q: We have been doing significantly worse, though, if you look at living standards over the last 15 years. Is there anything, with hindsight, you’d have done differently?
Hunt prefers to talk about what he’s doing now. He says productivity is the key to raising living standards, and points to his decision in the autumn statement to make ‘full expensing’ permanent (allowing businesses to offset investment against their tax bills).
That will help lift business investment by £20bn a year, Hunt says, closing half of the gap between the UK and France, Germany and the US.
The chancellor then claims that the UK has the most untapped potential to become the most prosperous 21st century economy.
Why? Partly because the UK’s introspection, and also because the UK’s potential in technology and innovation.
Q: But what’s your growth strategy?
Hunt says he wants to improve productivity, by increasing business investment
Secondly, you need a very clear view as to where the UK’s competitive advantage lies. Outside the US, it has the best higher education sector, and the best financial sector, he says.
He says it needs to focus on innovation, to create a world-beating technology sector and a new Silicon Valley.
Our Politics Live blog has more coverage, here:
Here are some more highlights from Resolution Foundation’s report into the UK economy.
It shows that the UK is the second-biggest services exporter in the UK, after the US, but ahead of Germany and France:
1⃣ Britain is the second biggest services exporter in the world, behind only the USA.
— Resolution Foundation (@resfoundation) December 4, 2023
We should play to our strengths 💪 pic.twitter.com/VVsiKgAFCX
But here’s the damage caused by over a decade of relative economic decline:
We're enow on to the first presentation of today's #EndingStagnation Conference - a (condensed!) summary of the 300-page report from RF Chief Exec @TorstenBell. Britain’s problem, he says, is that we’re over a decade into relative economic decline... 🧵 pic.twitter.com/moGt1TmXAc
— Resolution Foundation (@resfoundation) December 4, 2023
Productivity growth has been half the rate seen across other advanced economies. Wages have flatlined as a result, costing the average worker £10,700 a year in lost pay growth. pic.twitter.com/E0SKOjqvHo
— Resolution Foundation (@resfoundation) December 4, 2023
Productivity growth has been half the rate seen across other advanced economies. Wages have flatlined as a result, costing the average worker £10,700 a year in lost pay growth. pic.twitter.com/E0SKOjqvHo
— Resolution Foundation (@resfoundation) December 4, 2023
Back in the crypto market, Bitcoin is still trading at an 18-month high.
Bitcoin is up over 7%, and has traded as high as $41,800, the highest since April 2022.
Rania Gule, market analyst at broker XS.com, say the prospect of bitcoin exchange-traded fund winning approval (as has been oft-rumoured) is one factor:
The cryptocurrency market is now eagerly anticipating the impact of both Fear of Missing Out (FOMO) and Fear, Uncertainty, and Doubt (FUD) regarding the expected approval dates for the Exchange-Traded Fund (ETF).
I believe developments in the Bitcoin ETF will influence the current upward trend, pushing it towards $50,000. This is especially true with signs of slowing inflation, and investors gaining confidence that the Federal Reserve has concluded its series of interest rate hikes. Attention has shifted to expectations of potential interest rate cuts next year, supporting the current rise in global markets.
Resolution Foundation’s Torsten Bell then shows the impact of the UK’s wage stagnation since the financial crisis of 2008.
He shows a graph showing that French middle-income households are now 9% richer than middle- income British households. German households are 20% richer.
Most people think of those countries as ones we’re similar too, but we are not any more.
Low growth + high inequality = a toxic combination for low-and-middle income Britain, says @TorstenBell. Low-income families in the UK are 27% poorer than their French and German counterparts (we've included Italy in this chart to make us feel a little better, Torsten adds...) pic.twitter.com/NPwb1jRkQP
— Resolution Foundation (@resfoundation) December 4, 2023
The squeeze is worse for low-income households, Bell says.
The typical poor French and German household is 27% richer than its UK counterpart, or about £4,500 per year.
That’s why many families struggled to cope with the cost of living crisis, as they didn’t have any spare money to cover the jump in prices of essential goods.
Updated
Resolution Foundation conference on UK economy underway
An all-day conference on ending Britain’s economic stagnation, organised by the Resolution Foundation, is starting now in Londons QE II centre.
It’s the culmination of three year’s work into the UK’s slow growth and high inequality, which is “proving toxic for low- and middle-income Britain”, they warn (costing British workers over £10,000 a year).
Resolution’s chief executive, Torsten Bell, begins by telling the audience one of the key lessons he learned when he was special adviser to Alistair Darling, the former chancellor who sadly died last week.
Bell says Darling taught him that “economic policy isn’t some abstract game”.
It’s not about your fancy charts…. it’s not about your theories. It’s about the bread and butter of people’s lives.
In 2008, in the financial crisis, Darling’s first thought was always about ordinary people who wouldn’t be able to into the shops and do their weekly shopping if their bank failed, says Bell.
He adds that he can see several people at today’s conference who were “thrown out of meetings” with chancellor Darling for “abstract discussion of fiscal rules”, because he wanted it to stop.
Out today: the Final Report of The Economy 2030 Inquiry, our hugely ambitious three-year project with @CEP_LSE, funded by @NuffieldFound - which we're launching with an all-day conference! Attendees are grabbing copies of the report and getting ready for our great line up of… pic.twitter.com/7pDv7SnRZc
— Resolution Foundation (@resfoundation) December 4, 2023
Stay tuned: we're getting ready to kick off our Ending Stagnation final Economy 2030 report conference at 9.30 am... and the final report books are in place! Remember you can watch along live here: https://t.co/pmnZq7kW0h… pic.twitter.com/I2uunqlkPf
— Resolution Foundation (@resfoundation) December 4, 2023
Updated
Average house prices in the UK will fall by 1% next year as competition increases among sellers, Britain’s biggest property website has forecast.
Sellers were likely to have to price more competitively to secure a buyer in 2024, while mortgage rates would settle down though “remain elevated”, said Rightmove.
A year ago, Rightmove predicted that average asking prices would fall by 2% in 2023. On Monday, the company said the average was 1.3% lower than in 2022 as the property market continued to contend with significantly higher mortgage costs and a cost of living crisis that refused to go away.
The website records asking prices rather than the actual one properties are sold for. It said it was predicting that these would typically be 1% lower nationally by the end of 2024.
The market was continuing its transition to “more normal levels” of activity after the busy post-pandemic period, it added. More here.
In London, the stock market has opened lower, failing to follow gold’s lead.
The FTSE 100 index down 39 points or 0.5% at 7490 points, having ended at a six-week high on Friday.
Mining stocks are among the big fallers on the blue-chip index, with Anglo American down 3%, although the biggest faller is gambling group Flutter (-3.5%).
Small rival 888 Holdings, which owns William Hill, is up 13% though, leading the FTSE 250 index of medium-sized firms, after the Sunday Times reported it had been the target of a £700m approach from gambling tech provider Playtech.
Victoria Scholar, head of investment at interactive investor, comments:
The M&A speculation has skyrocketed shares in William Hill’s parent company today which is trading up by around 13%. 888 currently has a market cap or around £355 million, sharpy below the reported offer price from Playtech.
Shares in 888 have had a tough time this year, shedding over 20% year-on-year even after today’s surge and 50% in the past five years, highlighting the potential for an opportunistic takeover. Playtech is not the only party reported to be interested - in November, the Financial Times reported that US betting group DraftKings was also eyeing up a bid for 888 over the summer.
888 has suffered a series of setbacks lately with a profit warning in September, UK regulatory headwinds amid a clampdown on player safety, and a series of C-suite changes including the departure of its former CEO in January which sent shares tumbling at the time.”
Key event
It’s worth keeping an eye on gold, says market strategist Bill Blain of Shard Capital, after it hit its record high this morning.
Blain says:
Gold has hit new record dollar levels – reflecting not just current uncertainty, but also the de-dollarisation narrative and it’s attractions as an inflation and market hedge, and long-term value.
He argues there are very good reasons to include gold as part of a diversified asset portfolio, especially in uncertain times.
He writes:
Let’s get the “desirability” and emotional aspects out the way. I am told a significant influence on the price of gold is the weather – a good monsoon in India means farmers buy more bangles for their daughters’ weddings from the gold souks. It is beautiful. It is lustrous. It is unblemished. It is Gold. Always believe in… Gold! There will always be demand for gold for personal adornment – which is pretty much irrelevant when it comes to its proposition as an investment asset.
As an investment in its own right gold performs well; over the last 50 years Gold prices have risen over 3000%, compared to a 3500% gain in the S&P 500. However, in periods of financial instability gold outperforms stocks – notably over the past 20-years even though the prices of financial assets were artificially juiced by the effects of zero interest rates! In terms of risk, companies come and go, but Gold is forever. If the world remains unstable – and no reason to think it won’t – then gold should be front and centre on your radar – no matter how archaic you consider it.
Victoria Scholar, Head of Investment at interactive investor, points out that Spotify’s share price has more than doubled this year – but that hasn’t prevented today’s job cuts,
She writes:
“Spotify is planning to reduce its total headcount by approximately 17% across the company, equivalent to around 1,500 positions, having already laid off 6% of its staff in January. The digital music service said it wants to right size its costs in order to achieve its financial goals.
In October, Spotify reported improving financials - better than expected monthly active users and subscribers as well as its first quarterly profit since 2021. In an expensive move, it has been investing heavily in the expansion of its podcast business. Plus it has been grappling with ‘dramatically’ slowing economic growth, a weak consumer backdrop and ballooning costs.
Shares in Spotify could open higher today, extending this year’s sharp rebound with the stock up over 120% year-to-date.
However shares are still trading substantially lower than their covid-era highs after a painful period for price action between the 2021 highs and the lows at the start of this year after the 2022 ‘tech-wreck’.”
Spotify staff will learn quickly today if they are in the 17% of staff losing their jobs.
CEO Daniel Ek said in his message to staff this morning:
If you are an impacted employee, you will receive a calendar invite within the next two hours from HR for a one-on-one conversation.
These meetings will take place before the end of the day tomorrow.
Those losing their jobs will receive an average of five month’s pay as severance (although the precise amount will depend on local notice period requirements and employee tenure), plus all unused vacation will be paid out too.
Spotify to cut headcount by 17%
Many “smart, talented and hard-working people” are to lose their jobs at Spotify, as the music streaming company cuts its workforce for the third time this year.
CEO and founder Daniel Ek has decided to slash Spotify’s total headcount by 17%, as he takes “a substantial action” to bring down costs.
That will affect about 1,600 posts.
Ek told staff this morning that Spotify is not immune to the impact of slowing economic growth and more expensive capital.
So as part of Spotify’s push to drive profitability and growth, one in six staff will lose their jobs as Ek tries to become “right-sized for the challenges ahead”.
He told staff this morning:
I recognize this will impact a number of individuals who have made valuable contributions. To be blunt, many smart, talented and hard-working people will be departing us.
Spotify also announced 600 job cuts back in January, when it admitted it had expanded too quickly during the Covid-19 pandemic and been too slow to cut cost.
In June, it cut 200 jobs from its podcast unit, as Spotify restructured its business after years of heavy investment.
Today, Ek insists that Spotify’s cost structure is still too big.
He told staff that he understands the job cuts announced today will be “incredibly painful for our team”, before reminding them of how the company expanded when capital was much cheaper in the pandemic:
To understand this decision, I think it is important to assess Spotify with a clear, objective lens. In 2020 and 2021, we took advantage of the opportunity presented by lower-cost capital and invested significantly in team expansion, content enhancement, marketing, and new verticals.
These investments generally worked, contributing to Spotify’s increased output and the platform’s robust growth this past year.
However, we now find ourselves in a very different environment.
Updated
In the eurozone economy, Germany’s trade performance has deteriorated again.
German exports fell by 0.2% in October compared with the previous month, dashing hopes of a 1.1% rise.
Geeman imports contracted too, down 1.2% compared with September.
On an annual basis, statistics office Destatis estimates that exports decreased by 8.1% and imports fell by 16.3% compared with October 2022.
Im Oktober 2023 sind die deutschen #Exporte gegenüber September 2023 voraussichtlich um 0,2 % und die #Importe um 1,2 % gesunken. Im Vergleich zum Vorjahresmonat Oktober 2022 sanken die Exporte um 8,1 % und die Importe um 16,3 %. Mehr zum #Außenhandel: https://t.co/BHGUjcKrfG pic.twitter.com/CZg67wYoMQ
— Statistisches Bundesamt (@destatis) December 4, 2023
Investors don’t appear to be listening to the warnings coming from central bankers that it’s too early to cut interest rates. Or they don’t believe them.
As well as the weakening US dollar, we’ve seen bond prices rally over the six weeks or so, pushing down bond yields.
The market is pricing in earlier and more aggressive cuts from the central banks and inflation appears set on a path lower, says Mohit Kumar, chief economist europe at investment bank Jefferies.
That’s despite efforts on both sides of the Atlantic to push back against this narrative.
Las Friday, Federal Reserve chairman Jerome Powell insisted it would be “premature to conclude with confidence” that interest rates have now peaked, or to speculate on when they might be cut.
Some analysts are predicting that gold could continue to push higher, adding to the record high of $2,111/ounce set this morning
UOB’s Head of Markets Strategy, Global Economics and Markets Research, Heng Koon How, told CNBC:
“The anticipated retreat in both the USD and interest rates across 2024 are key positive drivers for gold,”
He estimated that gold prices could reach up to $2,200 by the end of 2024.
Everett Millman, chief market analyst at Gainesville Coins, also sees more short-term gains, saying:
“Gold has had a Santa Claus rally and I expect that to continue until the end of this year.
Full story: Bitcoin over $40,000
Although bitcoin isn’t yet at a record high, today’s surge takes it to the highest level since April 2022.
Bitcoin has broken above $40,000 for the first time this year as it – like gold – rides a wave of enthusiasm about U.S. interest rate cuts.
The world’s biggest cryptocurrency is currently trading at $41,455, up almost 7% since Friday night, as the crypto market continues to emerge from the downturn that began last summer.
A 50% rally since mid-October has “seemed to mark a decisive shift away from the bearishness of 2022 and early 2023,” said Justin d’Anethan - head of business development for Asia-Pacific at Keyrock, a digital assets market making firm.
He said evidence of institutional buying through November showed a new leg of interest and that although reversals ahead are not inconceivable, lows hit around $16,000 a year ago “probably marked the bottom”.
Some traders are also anticipating the imminent approval of U.S.-stockmarket traded bitcoin funds, Reuters adds:
A spot bitcoin ETF could allow previously wary investors access to crypto via the stock market, ushering a new wave of capital into the sector.
Introduction: Gold at all-time high on rate cut hopes
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
Gold has climbed to a record high for the second session in a row, as investors flock to the traditional safe haven asset amid hopes of interest rate cuts in the months ahead.
The gold price has hit $2,111.39 per ounce, taking it over the record set on Friday night and further above the previous record set in August 2020.
Gold has strengthened amid hopes that the cycle of interest rate increases over the last couple of years has now ended, and that central banks will turn their attention to cutting borrowing costs in 2024.
That has led to a weaker US dollar, which pushes up the gold price (as it’s priced in dollars).
As this chart shows, gold has climbed pretty steadily since the start of October, when it was changing hands at $1,820 per ounce.
Crypto assets are also on a charge, with bitcoin hitting $40,000 for the first time this year today, with some traders betting the US Federal Reserve could start cutting US interest rates next spring.
Kyle Rodda, senior financial market analyst at Capital.com, explains:
Markets are piling in on bets of Fed rate cuts next year, possibly as soon as March. That pushed gold and Bitcoin to critical levels, with the former busting to record highs and the latter hitting $US40,000 for the first time since May 2022.
Gold’s move boasted all the hallmarks of a technical melt-up, as the break of previous all-time highs set off stops and buy orders.
Gold hits new all-time high pic.twitter.com/nAckjfdVsH
— Simon Brown (@SimonPB) December 4, 2023
A lower interest rate environment would favour gold, which doesn’t generate a yield (unlike bonds, equities or current cash savings accounts).
Also coming up today
The UK economy will be under the microscope, as the Resolution Foundation thinktank holds an all-day event examining a better economic strategy for the country.
The UK has great strengths, but we're 15 years into a period of stagnation.
— Resolution Foundation (@resfoundation) December 2, 2023
It's time for a new economic strategy.
On Monday, we'll be launching the final report of the Economy 2030 Inquiry, with @CEP_LSE and funded by @NuffieldFound.
Online tickets ➡️ https://t.co/GjcuxLTaIY pic.twitter.com/U7rFZxci3w
Its work has shown that British workers are missing out on £10,700 a year after more than a decade of weak economic growth and high inequality.
Resolution will hear from Labour leader Sir Keir Starmer, who is expected to warn that he would not “turn on the spending taps” if he wins the next election
The Guardian reports this morning that Starmer will say:
“Anyone who expects an incoming Labour government to quickly turn on the spending taps is going to be disappointed … It’s already clear that the decisions the government are taking, not to mention their record over the past 13 years, will constrain what a future Labour government can do.”
“This parliament is on track to be the first in modern history where living standards in this country have actually contracted. Household income growth is down by 3.1% and Britain is worse off.
“This isn’t living standards rising too slowly or unequal concentrations of wealth and opportunity. This is Britain going backwards. This is worse than the 1970s, worse than the recessions of the 1980s and 1990s, and worse even than the great crash of 2008.”
The agenda
7am GMT: German trade balane statistics for October
9.30am GMT: Resolution Foundation holds event examining UK economy in 2030
2pm GMT: ECB president Christine Lagarde gives a speech at the Académie des Sciences Morales et Politique’s conference in Paris
3pm GMT: US factory orders for October
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