Closing summary
The pound has risen by 0.5%, hitting a daily high of $1.2981, boosted by strong economic growth data and the perceived stability offered by UK assets following Labour’s decisive election victory last week.
Sterling is close to a one-year high of $1.2995, touched on 27 July 2023, and approaching the $1.30 level, where it last traded in April 2022.
Britain risks a tech “talent drain” to the US if British pension funds fail to back the sector, according to the co-founder of a UK chipmaker that has announced its sale to Japan’s SoftBank.
Nigel Toon, the co-founder and chief executive of Graphcore, said domestic pension funds were giving inadequate support to private businesses in the UK.
“They’re certainly not investing in private companies here in the UK,” he said. “How can we expect businesses to grow without those pools of capital unless they secure funding from other sources?”
As well as British pension fund investors missing out on the benefits, said Toon, there was a risk that UK tech talent is lured away by foreign investors that have stepped in to provide growth funding. US-based venture capital firms could, for instance, require British startups to move across the Atlantic, the Graphcore boss said.
Our other main stories:
Thank you for reading. Have a fab weekend. We’ll be back on Monday. Take care – JK
The UK justice secretary, Shabana Mahmood, has just announced the release of 1,000 prisoners in an attempt to ease the pressures faced by overcrowded prisons.
James Timpson, now minister of state for prisons since resigning from his chief executive post at Timpson Group earlier this week, has long pushed for reform of prisons. He has made headlines for his radical approach to business including hiring ex-convicts, writes Jonathan Yeboah.
The company was founded in 1865 by William Timpson and has since operated as a family business spanning through five generations. It has long specialised in shoe repairs, and has also expanded into key cutting, watch and phone repairs.
A key Timpson principle has been giving people a second opportunity in life, and it started hiring former prisoners in 2002. Of its 5,600 staff, 10% are ex-offenders.
It does not require its applicants to apply with a CV, rather, they look for “fun, interesting, snappy” people, James has said.
Timpson’s net profit grew by 56% between 2021 and 2023, despite a fall in sales in the midst of the Covid pandemic. Last year, it made profits of £38.3m. The group owns seven subsidiaries which vary from photo printing to dry cleaning to locksmith services.
Branch managers and their teams at Timpson are actively encouraged to offer discounts and even free services to customers. Remarkably, 4% of Timpson’s transactions are done at no charge. “Giving things away is the most profitable thing we do. Customers always remember kindness,” the company asserts.
James Timpson, also the author of the book, The Happiness Index, urges businesses and business leaders to put people at the heart of business.
Carpetright seeks investment to stave off collapse
Carpetright, one of the UK’s biggest flooring retailers, is seeking additional investment to stave off possible collapse after filing a notice of intention to appoint an administrator.
The company confirmed it had filed the notice of intention with the high court to appoint administrators whilst it works to finalise additional investment to secure the long term future of the company.
The move, first reported by the Times, effectively gives the company 10 days protection from creditors whilst sales negotiations continue and Carpetright tries to secure a future for its 272 stores which employ 1,852 people in the UK. Carpetright will continue to trade during this process. PwC has been lined up as possible administrators but has not been appointed.
High court records show that Carpetright, advised by law firm Travers Smith, filed the notice on Friday.
The firm has been struggling in recent months due to the economic downturn which has seen consumers have cut back on spending on furnishings and furniture due to the economic downturn and rising cost of living.
In addition Carpetright suffered a cyberattack which disrupted trade in April and subsequently impacted its plans to restructure.
Kevin Barrett, chief executive of parent firm Nestware Holdings, said:
We remain focussed on securing external investment to ensure as few customers and colleagues are impacted as possible.
They are our main priority and we are taking all appropriate action to make sure they are informed and supported through this process. We have begun promising conversations with interested parties that are moving in the right direction, encouraging us that Carpetright has a viable future.
Germany's Lufthansa cuts 2024 profit target for second time, sending aviation shares lower
Germany’s flagship carrier Lufthansa has slashed its 2024 profit guidance for the second time and warned on profits for the second quarter, sending its shares lower.
Along with other airlines, the company is struggling with high labour and operating costs coupled with weaker revenues per passenger because of pressure on ticket prices.
The share price fell nearly 4% and later traded 2.4% lower, pulling down British Airways owner IAG by 2.8% and Air France-KLM by 2.1%.
Lufthansa said its adjusted earnings before interest and tax fell to €686m in the three months to June, from €1.1bn a year earlier. It reports full second-quarter results on 31 July. It now expects a full-year profit of between €1.4bn and €1.8bn, down from its previous estimate of €2.2bn.
It is launching a turnaround programme affecting Lufthansa and its regional carrier Cityline.
A market-related decline in yields in all traffic regions – especially in Asia – had a negative impact.
Lufthansa Airlines is particularly affected by the challenges posed by the negative market trend and by inefficiencies in the flight operations of Lufthansa and Cityline, also due to delayed aircraft delivery. It is becoming increasingly challenging for Lufthansa Airlines to break even for the full year. To counteract this, a comprehensive turnaround program is being launched.
Airbus launches cost-cutting drive including hiring freeze
Airbus has launched a new cost-cutting drive including a hiring freeze in its planemaking business, following recent cuts in production targets.
Code-named “LEAD!” the new initiative will tackle an increase in unit costs, and address productivity issues, Reuters reported, citing an internal memo to staff.
The shares are up 0.85% today.
Updated
Citigroup profit lifted by 60% jump in investment banking revenue
Citigroup beat Wall Street expectations with quarterly profits, lifted by a 60% jump in investment banking revenue and gains in its services division, sending its shares up 3% before the bell.
The third-largest US lender reported a profit of $3.2bn in the three months to 30 June, up from $2.9bn a year earlier. Revenues rose by 4% to $20.1bn, helped by a $400m gain from the partial sale of Visa stock in May. Investment banking fees hit $853m amid a resurgence in corporate deals.
Chief executive Jane Fraser said:
Our results show the progress we are making in executing our strategy and the benefit of our diversified business model.
The results come two days after US regulators fined Citi $136m for making “insufficient progress” in fixing data management problems discovered in 2020. Citi had already booked the penalties and additional investments related to this in the second quarter.
Fraser is carrying out a sweeping overhaul of the bank’s sprawling businesses in a bid to improve its performance and cut costs.
US producer prices rise moderately in June
Producer prices in the United States rose moderately in June, causing US stock market futures to turn negative briefly as this dampened hopes of interest rate cuts.
The producer price index rose by 0.2% in June from the month before, after being unchanged in May, the Labor Department’s Bureau of Statistics said.
The annual rate picked up to 2.6% from 2.4%.
Wall Street futures dipped slightly on the news, but are now up again, pointing to a broadly flat open in just over half an hour.
Yesterday, a surprise 0.1% dip in consumer prices in June from May, which took the annual rate to 3% from 3.3%, boosted expectations of a September rate cut.
Jerome Powell, chair of the US Federal Reserve, told lawmakers during testimony this week that the inflation environment was improving.
Holding interest rates too high for too long would threaten economic growth and jobs, he told Congress on Tuesday. The US is “no longer an overheated economy”, Powell said, adding that its job market has “cooled considerably” from its surge after the early damage inflicted by the pandemic.
Post Office CEO will step back temporarily to focus on Horizon inquiry
The Post Office chief executive, Nick Read, said he would temporarily step back from the role so that he can give his “entire attention” to the next stage of the Horizon inquiry.
Read wrote in a note to staff that he and the board agreed he should step back over the summer to prepare for the next phase of the inquiry, which will look at current practices at the Post Office, and begins in September.
Deputy chief executive Owen Woodley will take charge of day-to-day activities for the next seven weeks until the end of August, Read said.
The note, sent yesterday, said:
It is vitally important that we demonstrate the changes we have made and give confidence to the inquiry and the country at large that ‘nothing like this could happen again’.
Following a discussion with Nigel [Railton, incoming chair] and the board, we have agreed that I should give my entire attention to the task of preparing the business for Phase 7.
More than 700 subpostmasters were wrongly prosecuted by the Post Office and handed criminal convictions between 1999 and 2015 because the Japanese firm Fujitsu’s faulty Horizon IT system made it look as though money was missing at their branches.
Read succeeded former boss Paula Vennells, who this year forfeited her CBE following public anger over her handling of the Horizon crisis. She testified to the inquiry over three days in May, in a sometimes tearful set of evidence sessions about her conduct.
In February, the business and trade committee of MPs expressed a lack of confidence in Read’s leadership, accusing him of giving misleading evidence.
He has also denied a claim made by former chair of the Post Office Henry Staunton that he had threatened to resign unless he got paid more.
He was “exonerated of all misconduct allegations” following a report into his behaviour earlier this year. The external report, which the Post Office has not released, was said by Staunton to contain allegations about Read’s “conduct and lack of his management of the many governance and compliance issues”.
The Post Office said at the time that the review cleared him of any misconduct claims, and that he had the full backing of the board to continue to lead the business.
Updated
Octavio Marenzi, chief executive of Opimas, a management consultancy focused on global capital markets, said:
JP Morgan’s results showed us two things: First, investment banking and equities trading did really well compared to last year.
Secondly, we see Main Street banking beginning to sputter. Provisions for credit losses were up significantly, showing us that JP Morgan is expecting to see a rough patch in the US economy. Also, there was a big increase in interest expense, which grew far more quickly than interest income. Nevertheless, JP Morgan has navigated a challenging interest rate environment very well.
JPMorgan profit jumps 25% on investment banking fees, Wells Fargo profit dips
A number of big US banks have kicked off the earnings season.
JPMorgan Chase posted a 25% rise in second-quarter profit, lifted by rising investment banking fees and an accounting gain of $8bn from a share exchange deal.
The largest US bank made a profit of $18.15bn in the three months to 30 June, compared with $14.5bn a year earlier. It benefited from a plan to exchange some of its shares in Visa, the world’s biggest payment network.
Wall Street banks have benefited from an increase in companies raising capital in the debt and equity markets, and an uptick in fee income from advising on M&A deals.
However, chief executive Jamie Dimon cautioned:
While market valuations and credit spreads seem to reflect a rather benign economic outlook, we continue to be vigilant about potential tail risks.
These tail risks are the same ones that we have mentioned before. The geopolitical situation remains complex and potentially the most dangerous since World War II — though its outcome and effect on the global economy remain unknown.
Next, there has been some progress bringing inflation down, but there are still multiple inflationary forces in front of us: large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world. Therefore, inflation and interest rates may stay higher than the market expects. And finally, we still do not know the full effects of quantitative tightening on this scale.
The bank’s shares dipped by 0.6% in trading before the opening bell.
Wells Fargo fared less well, reporting lower quarterly profits because of higher deposit costs amid intense competition for customers’ money, sending its shares down by more than 5% in pre-market trading.
The bank’s net income fell to $4.91bn between April and June, from $4.94bn a year earlier.
Net interest income, the difference between what a bank earns on loans and pays out for deposits, slid by 9% to $11.9bn, which was worse than expected. Average deposit costs jumped to 1.84% from 0.71%.
China posts record trade surplus as firms rush to beat tariffs
Here’s our full story on the China trade figures:
China posted a record $99bn (£76.4bn) trade surplus last month amid signs of importers bringing forward orders to beat higher tariffs on goods from the world’s second biggest economy.
The latest official figures from Beijing showed exports growing at their fastest rate in 15 months, while the weakness of China’s domestic economy resulted in falling imports.
The size of China’s trade surplus was far bigger than the $85bn expected by the financial markets and comes at a time of heightened concern in developed countries about Chinese exports.
Higher US tariffs on Chinese-made electric vehicles and other hi-tech products come into force on 1 August, while higher EU import duties on Chinese electric vehicles came into force earlier this month.
Updated
Unilever to cut up to 3,200 jobs in Europe
Unilever intends to cut as many as 3,200 jobs – a third of all office roles in Europe – by the end of next year as part of a major global restructure announced in March.
The FTSE 100 company, which makes well-known consumer products such as Marmite and Dove soap, has come under pressure from shareholders including activist investor Nelson Peltz. It told senior executives about the planned cuts on Wednesday, according to details of a company-wide call shared with the Financial Times.
The job cuts are part of Unilever’s “productivity programme” announced in March that includes up to 7,500 job losses globally. The company employs between 10,000 and 11,000 office-based staff in Europe.
Constantina Tribou, a chief human resources officer, said during the video call, according to the FT:
The expected net impact in roles in Europe between now and the end of 2025 is in the range of 3,000 to 3,200 roles.
In March, the company also announced that it would spin off its ice-cream division as part of an overhaul aimed at saving about €800m (£672m) over the next three years.
At the time, Hein Schumacher, who was appointed as chief executive in January 2023, and took over from Alan Jope last spring, said there would be some job cuts at Unilever’s head office in London, and some at business units in other countries.
Sterling closes in on $1.30 level; stocks extend rally
The pound has risen by 0.4% against the dollar today, hitting a high of $1.2962 and closing in on the $1.30 level.
Sterling last traded at $1.30 more than two years ago. Investors are attracted to the UK currency following Labour’s landslide victory a week ago, amid political instability in France, where Sunday’s elections resulted in a hung parliament.
The pound has also been lifted by strong UK GDP data yesterday combined with a surprise monthly fall in US consumer prices and a lower-than-expected annual inflation rate of 3%. This led to investors pilling on bets of a September interest rate cut from the US Federal Reserve, and dragged the dollar down against major currencies.
Oil prices are rising, with Brent crude up by 0.55% to $85.88 a barrel, on expectations that Fed rate cuts would stimulate demand for crude in the United States, the world’s biggest oil consumer.
European shares have extended their rally, on the back of growing expectations that the Fed will start cutting interest rates soon. The FTSE 100 index in London is 25 points, or 0.3%, ahead at 8,249 while the German Dax has gained 0.37%, the French CAC has climbed 0.66% and Italy’s FTSE MiB rose 0.56%.
Updated
England’s pubs prepare to pull 10m extra pints on Euros final day
Preparations for Sunday’s Euro 2024 final are reaching fever pitch with retailers, pubs and airlines scrambling to meet England fans’ demand for everything from beer and burgers to replica shirts and flights.
Since England’s 2-1 win against the Netherlands on Wednesday, supporters with deep pockets have been scouring the web for flights to Berlin or nearby cities and trying to secure a ticket for the final, the latter said to be changing hands for £2,500.
At home, with the weather gods promising some overdue sunshine, high street retailers including Tesco and Marks & Spencer expect food and drink sales to rocket between now and Sunday as hosts stock up for barbecues and viewing parties.
Fans who prefer a pub atmosphere have rushed to book seats at venues showing the game. In the moments after Ollie Watkins scored the winner on Wednesday evening, the number of reservations processed by the bookings website DesignMyNight soared to 16 a second, compared with the normal rate of 1.4.
‘The new normal’: work from home is here to stay, US data shows
Don’t call it work from home any more, just call it work. According to new data, what once seemed like a pandemic necessity has become the new norm for many Americans.
Every year, the Bureau of Labor Statistics (BLS) releases the results of its American time use survey, which asks Americans how much time they spend doing various activities, from work to leisure.
The most recent survey results, released at the end of June, show that the same percentage of employed people who did at least some remote work in 2023 is the same percentage as those who did remote work in 2022.
In other words, it’s the first stabilization in the data since before the pandemic, when only a small percentage of workers did remote work, and a sign that remote work is here to stay.
Here is our full story on the M25 closure between junctions 10 and 11 from 9pm tonight until 6am on Monday:
Staff and pupils allowed late Monday starts after England play in Euros final
Major supermarkets and business owners across the country are giving staff members a lie-in on Monday to recover from the drama of watching England play Spain in the final of the Euros.
The game starts at 8pm and could last until 11pm if it goes to penalties. In preparation, some companies are offering workers early finishes if they are due to be on shift on the evening of the game, while others are telling employees they can come in late on Monday.
The supermarket chain Lidl, a sponsor of the tournament, said it would open all its stores in England an hour later on Monday so workers could enjoy some post-match celebrations.
Ryan McDonnell, the chief executive of Lidl in Great Britain, said:
We know how much this game means to England fans and we want to ensure that our colleagues have the chance to celebrate such a significant moment in English football history.
Labour cannot build 1.5m homes without cash for affordable housing, providers say
Housing has been in the news a lot this week.
Labour will miss its target of delivering 1.5m new homes this parliament without an emergency cash injection into the affordable housing sector, providers have warned.
Housing associations and councils have written to deputy prime minister, Angela Rayner, saying her promise to deliver “the biggest boost to affordable housing in a generation” will be impossible unless there are urgent interventions to fix the financial pressures providers face.
The warning comes as new figures, shared exclusively with the Guardian, show that housing associations, the biggest developers of social housing, started just 32,705 homes in 2023-24. This is down 30% on the 2022-23 figures.
The letter – signed by the National Housing Federation, which represents 600 housing associations, and the Local Government Association – said that capped income, crippling cuts and soaring costs had decimated providers’ budgets, reducing the amount of homes they could build.
British chipmaker Graphcore bought by Japan’s SoftBank
Here is our full story on SoftBank’s acquisition of Graphcore:
Graphcore, a British chipmaker once seen as a potential competitor to Nvidia, has been bought by Japan’s SoftBank in a deal that secures the company’s future.
The Bristol-based startup’s products are focused on artificial intelligence and it has been acquired by the powerful Japanese tech investor for an undisclosed sum. Last year, Graphcore warned that there was a “material uncertainty” over its survival and that it needed fresh funding by May 2024.
Peter Kyle, the secretary of state for science, innovation and technology, alluded to Graphcore’s problems as he backed the deal, saying it was a “welcome end to the uncertainty that has faced Graphcore and its employees”.
Graphcore is the latest UK tech company to be bought by SoftBank, which acquired the Cambridge-based chip designer Arm for £24bn in 2016.
Steelmakers fire up to swap centuries-old reliance on coal for electric arc furnaces
The warning is to “wait for the snap, crackle and pop” as three glowing electrodes are dropped into an electric arc furnace in Cardiff. What follows sounds like thunder and lightning. It is a human-induced storm in a massive, ceramic-lined cup, holding 140 tonnes of rapidly melting steel.
The plant, owned by Spain’s Celsa, melts scrap steel using high-voltage electrical currents that generate the 1,600C needed to turn the metal to liquid. The glowing steel is then ready to be cast, twisted and crushed into the rods used to reinforce concrete.
The plant’s million tonnes of annual output have been used in projects ranging from buildings such as the Wembley Stadium and Shard, to infrastructure projects including the Elizabeth tube line and Hinkley Point nuclear power station.
The electric arc furnace is a sign of the future for the rest of the UK industry.
Tata Steel, based in Port Talbot, and British Steel, at Scunthorpe, are each planning to switch from polluting blast furnaces to the much greener electric technology. The plans will cut emissions, but also involve thousands of jobs losses, including 2,800 in south Wales.
Pushing for investment
The new Labour government has promised to renegotiate a £500m subsidy, agreed under the Conservatives, for Indian-owned Tata Steel to make the switch and so cut out nearly 2% of the UK’s carbon emissions.
Tata tapped the last iron from one blast furnace hours after voters gave Labour a landslide victory at the general election this month, and plans to close its second furnace in September.
However, the UK’s newly installed business secretary, Jonathan Reynolds, has offered more money in the hope of saving jobs. Labour has pledged another £2.5bn investment in the UK steel industry. A large chunk is expected to go to Tata Steel on top of the £500m already agreed.
Labour summons bosses of worst-performing train operators to meetings
Labour has summoned the bosses of some of the worst-performing train operators, including Avanti West Coast and TransPennine, for meetings next week as it seeks to rapidly reform the railways and reset industrial relations.
The transport secretary, Louise Haigh, will bring in Network Rail route directors to attend all talks with the train companies, signalling the move towards an integrated railway.
After Haigh vowed to “move fast and fix things”, legislation to kickstart Great British Railways is expected to be announced in the king’s speech next week, and officials are beginning work to set up the new structure before the summer parliamentary recess.
Haigh has already met rail union leaders at the Department for Transport as the new government looks to facilitate an end to the long-running rail dispute. Haigh said her meetings with Mick Whelan and Mick Lynch, the general secretaries of Aslef and the RMT respectively, were a departure from “the days of antagonism and gimmicks” and the start of “an era of grownup industrial relations”.
US stock market futures have edged higher, pointing to an open near record levels on Wall Street later.
Before the opening bell, we will get second-quarter results from big US banks -- JPMorgan, Wells Fargo, Citigroup and Bank of New York Mellon are all reporting.
Joshua Mahony, chief market analyst at Scope Markets, said:
European markets are enjoying a strong end to the week, feeding off a weaker US inflation reading than many had anticipated. While the surprise decline for both core and headline CPI initially helped lift all markets, we soon saw a rotation from big tech to more cyclical stocks.
While some will fear the repercussions of a slump in big tech valuations, investors will be encouraged at the prospect of a more broad-based bullish environment for equity markets. Interest rate cuts from the likes of the ECB and the Bank of Canada may have occurred ahead of any Fed reserve easing, but the willingness to further widen that interest rate differential will be questionable given the potential outflows in capital towards the US. With that in mind the recent declines for US core PCE and CPI inflation has helped lift expectations for a September rate cut which in turn bolsters claims of similar action from the other major central banks.
Turning to the Chinese trade data, he said:
Overnight trade data released from China highlighted continued concerns for their major trade partners, with imports slumping by 2.3% over the year to June. This represents a four-month low for Chinese imports, raising concerns over those businesses and economies relying on Chinese consumption.
The notable disparity between exports (8.6%) and imports (-2.3%) does highlight the relative weakness of the Chinese consumer compared to global demand trends. This should come into light once again next week with the latest GDP, retail sales and industrial production data being reported on Monday.
On the US banks, he said:
There are considerable concerns coming into this second quarter earnings season, with FactSet expecting a 10% decline in year-on-year earnings growth for banking stocks in Q2. With traders having grown accustomed to a widening disparity between the strengthening big banks and stuttering regional banks, traders will be hoping that these Wall Street giants can continue to outperform despite predictions of a more difficult environment.
Updated
Pound rises by 0.3%, edging closer to $1.30
The pound continues to rise, edging closer to the $1.30 level. It was last at that level in April 2022.
Sterling is trading 0.3% higher against the dollar at $1.2946, and is up by 0.1% against the euro at €1.1890 – the highest level since August 2022. It has gained about 3% against the euro so far this year, amid political instability in France.
The UK currency has been lifted by stronger-than-expected GDP figures yesterday and investors’ perception of stability and confidence in UK assets, following last week’s decisive Labour election victory.
At the same time, the dollar weakened, after a surprise fall in US consumer prices last month, which prompted traders to increase bets on a September interest rate cut.
The pound is the only developed market currency that has gained against the dollar this year.
It has also been boosted by hawkish comments from the Bank of England’s chief economist this week.
Huw Pill said recent economic data pointed towards some “upside risks to my assessment of inflation persistence,” suggesting that he is not yet convinced by the case for an August interest rate cut.
First King Charles red post box unveiled
The first red post box to bear the cypher of King Charles was unveiled today.
The new box has been installed on the high street in Great Cambourne in central England. Local school children got to post the first letters, to the king about their interest in the environment.
The mail pillar box bears the king’s cypher, the monogram that appears on government buildings which consists of the initials ‘C’ and ‘R’ for Charles and Rex, the Latin word for king, alongside a depiction of the crown.
The first post box was introduced in the 1850s, and there are abut 115,000 in operation today. Their age can be discovered by the royal cypher they bear. The oldest dates back to the reign of Queen Victoria, Charles’ great-great-great grandmother.
Updated
French politics remain in the spotlight in an otherwise light data week for the eurozone economy. Last Sunday’s elections in France resulted a hung parliament.
A strong performance by Nouveau Front Populaire (NFP) came as a surprise. This hastily assembled alliance of left-wing parties unexpectedly won with 188 seats, though it fell far short of an overall majority of 289 seats. President Emmanuel Macron’s centrist coalition, Ensemble (ENS), also beat expectations winning 161 seats, well ahead of the sub-100 seats suggested by some polls, and Marine Le Pen’s Rassemblement National (RN) came third with 142 seats – far from the absolute majority that looked possible after strong results in the first round.
Ricardo Amaro, lead economist at Oxford Economics, said:
France’s election resulted in a hung parliament as we expected, though the strong performance from the left-wing alliance came as a surprise. A minority left wing government is now a possibility, but their more radical proposals would likely be blocked in parliament.
We see two other alternatives. President Emmanuel Macron’s group could try to form a grand coalition of moderate left and right parties. Otherwise, Macron could try to appoint a technocratic caretaker prime minister. Neither of these scenarios are easy nor look to be politically sustainable. Moreover, all three are likely to result in policy paralysis, leaving the prospects for France’s government very uncertain.
Uncertainty is also a feature of EU politics. Next European parliament’s vote on retaining Ursula von der Leyen at the helm of the European Commission is on a knife-edge. If she loses the vote, a new candidate will need to be found, though no credible alternatives have emerged so far.
The EU council is likely to confirm next week that France is to be put into the so-called excessive deficit procedure, along with Italy and five other EU countries. This will oblige the new French government to come up with a credible medium-term adjustment path by September that would slash the fiscal deficit below 3% from 5.4% in 2023. But a divided Assembly will find it hard to agree on politically difficult spending cuts, meaning France is more likely to pose an early challenge to the new EU fiscal rules than to noticeably improve its fiscal outlook.
Third M25 weekend closure starts tonight, affecting euro fans
Drivers are being warned to expect delays as a planned M25 closure starts tonight.
This is the third of five weekend closures of the M25, which encircles London. as part of a £317m project to improve Junction 10.
The AA said many major roads in the south east will be “incredibly busy,” as National Highways shuts the motorway between Junctions 10 and 11 in Surrey from 9pm on Friday to 6am on Monday. Drivers will be directed along a diversion route on A-roads.
Many of those travelling to and from the UK’s two busiest airports, Heathrow and Gatwick, will be affected.
The closure could also disrupt many journeys to Dover by England football supporters embarking on cross-Channel trips before driving to Berlin for Sunday’s Euro 2024 final.
AA patrol of the year Chris Wood said:
With many football fans changing their plans following England’s victory over Holland, it’s likely to be incredibly busy in and around London.
We advise drivers to plan their journey accordingly, avoiding the west side of the M25 if possible, and to check ferry and tunnel operators’ websites for updates before setting off.
There were fears of severe congestion on diversion routes ahead of the first two planned M25 closures in March and May, but many drivers followed advice to avoid the area.
National Highways senior project manager Jonathan Wade said:
The previous two closures have gone well, with significant progress being made during both. We would urge all drivers to follow the official diversion route as this is the best chance of reaching your destination in good time. Please ignore your satnavs and follow our diversion route instead.
National Highways is concerned that satnavs could direct some drivers on to minor roads after leaving the M25, creating gridlock in residential areas.
Shutting the motorway this weekend will enable the construction of a new bridge near Junction 10. The project, due to be completed in summer 2025, will increase the number of lanes at the junction, which is one of the country’s busiest and most dangerous motorway junctions. The final two weekend closures as part of the project will take place later this year.
Between 4,000 and 6,000 vehicles normally use the M25 between Junctions 9 and 11 in each direction every hour from 10am until 9pm at weekends.
FTSE 100 hits one-week high, European shares at one-month high
European shares are rising again, with the FTSE 100 index hitting a one-week high, as investors were cheered by a surprise fall in US inflation, boosting bets of an interest rate cut in September.
The FTE 100 climbed 32 points, or 0.4%, to 8,255 this morning. The German Dax rose 0.25%, the French CAC edged nearly 0.2% higher and Italy’s FTSE MiB climbed by 0.5%.
The pan-European Stoxx 600 index rose as much as 0.3% to 521.41, the highest level since mid-June, led by gains in the telecoms sector.
China exports grow at fastest rate in 15 months, as firms frontload orders ahead of tariffs
China’s exports grew at their fastest rate in 15 months in June, boosted by sales of cars, household electronics and semiconductors, while imports unexpectedly declined amid weak domestic demand.
This suggests manufacturers are rushing through orders ahead of tariffs expected from a growing number of trade partners including the EU. There have been calls for further stimulus measures from the government as the $18.6 trillion economy struggles to get back on its fee.
Exports grew by 8.6% year-on-year in June to $307.8bn and over the first half of 2024, China’s exports totalled $1.7tn, up by 3.6% year-on-year.
Auto exports rose by 18.9% in terms of value in the first half, and by 25.3% in volumes, amid lower export prices. Household electronics sales climbed by 14.8% in value terms, but showed even faster volume growth of 24.9%.
Semiconductor exports grew by 21.6% year-on-year in terms of value, and by 9.5% in terms of volume.
Lynn Song, chief economist for Greater China at ING, said:
While the growth level does not appear too high at first glance, this has been stronger than most market participants were expecting at the start of the year…
There still could be some frontloading effect before auto tariffs from the EU and US come into play, but tariffs could lead to a slowdown in auto exports towards the end of the year…
Strong semiconductor export growth shows that China’s self-sufficiency push in tech and its pivot towards hi-tech manufacturing is starting to pay some dividends. China has been a major player in both the export and import of semiconductors as it gears up for the AI race.
Exports to Vietnam, Malaysia and other Asian countries were strong, and to Latin America, especially Brazil.
In contrast, shipments to key developed markets were lacklustre, with exports to the US (1.5%), EU (-2.6%), Japan (-6.3%) and Korea (-3.7%) all a drag on export growth.
On the import side, with sluggish domestic demand there were with sharp declines in soybean (-19.8%), vegetable oil (-34.1%), and grain (-16.4%) imports. The continued drag from the property market pulled down down steel (-7.0%) and timber (-5.1%) imports. As China’s domestic car industry produces more competitive products, its auto imports have also contracted sharply, falling by 13.9%, Song noted.
The net impact of June’s data of higher exports and slower imports translated to a higher trade surplus of $99.1bn. China’s trade surplus in the first half of the year was $434.9bn, up from $400.7bn a year earlier.
Song said:
Heading towards the second half of the year, incoming tariffs and moderating growth in other global economies could start to weigh on export growth, but a supportive base effect will likely keep year-on-year export levels in mid-high single digit growth for most months.
We expect a smaller boost to growth from net exports in the second half of the year, though if imports continue to disappoint this contribution to GDP growth may remain solid in the coming quarters.
Updated
Oil prices rise but Brent headed for weekly dip
Oil prices are rising today after signs of easing inflationary pressures in the United States, the world’s biggest oil consumer, although Brent crude, the global benchmark, is on track for a weekly decline.
Brent crude futures rose by 51 cents, or 0.6%, to $85.91 a barrel. US West Texas intermediate crude futures climbed by 59 cents, or 0.7%, to $83.21 a barrel.
Both contracts also gained in the past two days, but Brent is poised for a drop of around 1% this week following four weekly gains.
US crude stocks have declined. The US Energy Information Administration reported on Wednesday that inventories fell by 3.4m barrels to 445.1m barrels last week, which was more than analysts had expected.
Yesterday, a bigger-than-expected drop in US inflation to 3% in June boosted expectations of interest rate cuts, which would help boost fuel consumption.
Yeap Jung Rong, market strategist at IG, told Reuters:
Cooling US inflation numbers may support the case for the Fed to kickstart its policy easing process earlier rather than later, but it also adds to the series of downside surprises in US economic data, which points to a clear weakening of the US economy.
Daniela Sabin Hathorn, senior market analyst at the investment firm Capital.com, said:
The British pound has maintained its bullish bias since the UK election build-up. The fact that the election seemed so easy and straightforward has given investors a vote of confidence in UK assets, especially at a time when there is quite a bit of political instability worldwide. That’s not to say that the new Labour government will not face challenges up ahead, but for now, the political landscape seems a lot calmer than France.
Sterling-dollar has also been taking advantage of a weaker US dollar. The pair has been building the gains day after day.
Introduction: Pound hovers near one-year high; Japan's SoftBank buys UK chipmaker Graphcore
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The pound is hovering near a one-year high following yesterday’s stronger-than-expected GDP data, which showed the UK economy returned to growth in May with a 0.4% expansion. At the same time, US inflation came in lower than expected, falling to an annual rate of 3% in June from 3.3% in May, fuelling hopes of a September interest rate cut and driving the dollar lower.
Sterling hit a peak of $1.2947 yesterday, the highest level since late July 2023, and is approaching the $1.30 mark. This morning, it is up by a smidgen to $1.2911.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said:
In the UK, the pound was already bid yesterday morning after stronger-than-expected growth data helped traders scale back the expectation of an August cut from 70% to a coin toss. Combined with rising hawkish voices at the Bank of England, waning political risks and softening US dollar, we could see cable make an attempt on the $1.30 level. But the fact that the BoE hawks cry louder doesn’t mean that the doves are not around…
Japan’s SoftBank has bought the British artificial intelligence chipmaker Graphcore for an undisclosed sum, ending long-running speculation over the company’s future.
Once touted as a rival to US chipmaker Nvidia, which has seen its own valuation rocket thanks to booming demand for AI computer chips, Graphcore has struggled to secure the investment needed to compete.
Graphcore was valued at $2.77bn at the end of 2020, but the company’s losses widened and it said last October that it needed more cash. It slashed its workforce by a fifth to 494 staff, and shut down operations in Norway, Japan, and South Korea.
The Agenda
Noon: Bank of England quarterly bulletin
1.30pm BST: US producer prices for June
3pm BST: US Michigan consumer sentiment for July (forecast: 68.5)
Updated
