Closing post
Time to recap.
Europe’s manufacturers have suffered a slump in demand last month with “no sign of a recovery”.
The latest poll of purchasing managers across Europe shows there was a faster decline in new factory orders, production, purchasing activity and inventories in November.
There are also problems in UK manufacturing, where the PMI fell to a nine-month low.
Workers at Volkswagen factories in Germany have held a ‘warning strike’, in protest at cutback plans.
The euro has dropped by a cent, after French prime minister Michel Barnier decided to force the social security budget through the lower house of parliament without a final vote, triggering a no-confidence vote within days.
Shares in carmaker Stellantis have slumped 7%, wiping over €2bn off its value, following the surprise departure of chief executive Carlos Tavares last night.
Shares in Intel, though, are up over 3% after the retirement of CEO Pat Gelsinger was announced.
Wealth manager St James’s Place is cutting 500 jobs.
House price inflation in the UK has accelerated, at the fastest rate in over two years.
The Kremlin has argued that Donald Trump’s threat to impose 100% tariffs on Brics economies, if they try to undermine the dollar, would backfire.
Updated
Euro drops as Barnier rams social security budget through parliament
The euro has lost more ground against the US dollar, after French prime minister Michel Barnier announced he would use special constitutional powers to force the social security budget through the lower house of parliament without a final vote.
Barnier told lawmakers:
“We are facing a moment of truth”
The use of article 49.3 of the French Constitution in this way must trigger a no-confidence vote, to be held within 48 hours…
The euro has now lost a whole cent against the US dollar, to $1.0476.
US manufacturing PMI rises
A new healthcheck on US manufacturing shows that the sector pretty much stabilised last month.
Data provider S&P Global reports that optimism at US factories rebounded last month, helped by a stabilising of new orders and a slowdown in rising costs.
This lifted the US manufacturing PMI index up to 49.7 – close to stagnation – from 48.5 in October.
Purchases of raw materials and parts from abroad may have been lifted by the threat of tariffs, with some US producers trying to front-run possible new trade costs.
Chris Williamson, chief business economist at S&P Global Market Intelligence, says:
“The mood among US manufacturers brightened in November, though any feel-good factor has yet to feed through to higher output on the factory floor. “Optimism about the year ahead has improved to a level not beaten in two and a half years, buoyed by the lifting of uncertainty seen in the lead up to the election, as well as the prospect of stronger economic growth and greater protectionism against foreign competition under the new Trump administration in 2025.
“In contrast, current production levels fell for a fourth straight month in November, dropping at a rate not exceeded for nearly one and a half years. The gap between expected future output and actual current output is now the widest seen for a decade if the pandemic is excluded, underscoring the marked divergence between tough current conditions and the mounting expectation of better times to come.
Demand conditions need to improve alongside the improvement in confidence to encourage producers to raise production. However, although export sales continue to fall sharply, we note that November’s fall in overall new orders was the smallest seen over the past five months, hinting that the downturn in domestic demand for goods is easing and could help rev
Intel’s shares have jumped over 2% at the start of trading, following news of CEO Pat Gelsinger’s departure (having dropped aroudn 60% while he was at the helm)
Intel chief Pat Gelsinger retires
Intel’s CEO, Pat Gelsinger, is retiring, after three year stint trying to turn the struggling chip-maker around.
Intel has annouecd that after “a distinguished 40-plus-year career”, Gelsinger stepped down from its board of directors yesterday.
Frank Yeary, independent chair of the board of Intel, says:
“On behalf of the board, I want to thank Pat for his many years of service and dedication to Intel across a long career in technology leadership. Pat spent his formative years at Intel, then returned at a critical time for the company in 2021.
As a leader, Pat helped launch and revitalize process manufacturing by investing in state-of-the-art semiconductor manufacturing, while working tirelessly to drive innovation throughout the company.”
The chipmaker has appointed two interim co-chief executive officers – David Zinsner and Michelle Johnston Holthaus – while a permanent successor is found.
Gelsinger has returned to Intel in early 2021, pledging a turnaround plan under which the company would expand its foundry capacity and manufacture chips for anyone who wanted them.
But Inte’s share price has struggled on his watch. From around $50 in January 2021, it rose to $68 three months later, but has since dropped to arouns $24 today.
He had earlier spent 30 years at Intel, becoming the company’s first chief technology officer, and was the architect of its 80486 processor, which powered many PCs in the 1990s.
Updated
Back in Paris, the stock market has shrugged off its earlier, small, losses, after the. France’s government offered a final-hour concession on its 2025 budget.
Prime Minister Michel Barnier committed to not cutting reimbursements for medicines, caving to yet another key demand from the far-right after crisis talks with Marine Le Pen this morning, Bloomberg reports.
French bond prices have risen a little, pushing down the yield on the debt slightly.
VW union: Management and shareholders should show solidarity
Volkswagen workers launched rolling two-hour strikes today at nine plants across Germany to underscore their resistance to pay cuts and factory closures the company says are necessary to cope with a slack European auto market.
The work stoppages included the company’s base plant at Wolfsburg, where workers rallied against a cost-cutting drive by the automaker’s management in which they face the threat of the company’s first plant closures in its home country.
Chief employee representative Daniela Cavallo has said employees should not shoulder the burden of management failures to develop attractive products and come up with a cheaper, entry-level electric vehicle.
Speaking at a rally in Wolfsburg as employees drummed, whistled and clapped, Cavallo said:
“We demand that all make their contribution – management and the shareholder side as well.”
She said the next round of talks in a week’s time “is likely to set the course – rapprochement or escalation. We are ready for both.”
The so-called warning strikes, a common tactic in German wage negotiations, are taking place as part of talks for a new labor agreement after a mandatory peace period that bars strikes expired on Sunday. The IG Metall industrial union said any job actions beyond those occurring on Monday would be announced later.
Updated
St James’s Place 'to cut 500 jobs'
British wealth manager St James’s Place is cut around 500 jobs in the coming months, Reuters reports.
The cutbacks come as the sector faces intensifying competitive pressures, even as SJP prepares for a possible elevation back to the FTSE 100.
Earlier this year, the company, which employs around 3,200 people, unveiled a cost-cutting plan to save £100m.
A spokesperson for St James’s Place says:
“Our cost reduction plans are focused on simplification and standardisation of processes within the business, but a programme of this size and scale will inevitably impact colleagues.
“We have now begun consulting with colleagues to share our proposal for how this might impact roles, the outcome of which will not be known until next year.”
Updated
Most eurozone bond yields (interest rates) have dropped today, on fears that the region’s economy is weakening.
The slump in manufacturing output last month could put more pressure on the European Central Bank to cut interest rates.
Thus, the yields on German, Spanish and Italian sovereign debt have all dropped, as their prices have risen.
French bonds, though, are flat – which means that the ‘risk-premium’ between Paris and Berlin has swelled.
Eurozone unemployment still low
Despite the troubles in the eurozone economy, unemployment in the bloc remains at a record low.
Data provider eurostat reported this morning that the eurozone unemployment rate was 6.3% in October, stable compared with September, and down from 6.6% in October 2023
Moody’s Analytics’ senior economist Kamil Kovar, says
“October was yet another month when euro zone unemployment defied the skeptics, this time by confirming that the previous decline to 6.3% was not a fluke that will be reversed.
Instead, the continued downward trend in the unemployment rate reflects structural declines in unemployment in Southern Europe that are dominating cyclical increases in Germany and elsewhere. We continue to believe that that the unemployment rate is more likely to tend lower, not higher, in coming quarters.”
There’s a small dip on the French stock market today, due to the shake-up at Stellantis and political upheaval in Paris.
The CAC 40 index has nudged down by 0.5% so far today, having dropped over 1% in early trading.
Stellantis are the top faller, now down 7.3%, with financial stocks, utilities and real estate the worst-performing sectors.
The ongoing row over the French budget is also worrying investors.
Prime minister Michel Barnier is at risk of a no-confidence vote that could bring down his administration, as he struggles to win parliamentary backing for his 2025 budget plan, which includesa social security financing project that will be debated in the lower-house national assembly this afternoon.
AFP newswire explain:
If Barnier fails to find a parliamentary majority backing the measures, he is expected to use executive powers to adopt them without a vote, a procedure called “49.3” after the constitutional article detailing the prerogative.
Such a move, however, would trigger a vote of no confidence that he could survive only if Le Pen’s party abstains, with Barnier having little hope of finding any support from the left of centre.
Updated
Kremlin says Trump threat to BRICS nations over US dollar will backfire
Over in Moscow, the Kremlin has suggested Donald Trump’s push to force Brics countries to keep using the US dollar would backfire.
Asked about Trump’s threat to impose 100% tariffs on Brics members if they challenged the dollar, Kremlin spokesman Dmitry Peskov said the dollar was beginning to lose its appeal as a reserve currency for many countries.
Peskov told reporters:
“More and more countries are switching to the use of national currencies in their trade and foreign economic activities.”
If Washington resorted to “economic force” to compel countries to use the dollar it would backfire, Peskov predicted, adding:
“If the U.S. uses force, as they say economic force, to compel countries to use the dollar it will further strengthen the trend of switching to national currencies (for international trade).”
Protest at DESNZ against Drax subsidies
Climate protesters gathered outside the Department of Energy Security and Net Zero in London this morning, to call for the end to government subsidies for the Drax Power Plant in North Yorkshire.
Protestors from Axe Drax, Biofuelwatch, Climate Resistance, Fossil Free London, Friends of the Earth, Greenpeace and other members of the Stop Burning Trees Coalition donned Christmas jumpers and brought four giant Ents and a Christmas choir to the department.
They presented the department with a Greenpeace petition calling for an end to the subsidies, signed by over 120,000 people.
Drax’s power station in North Yorkshire uses wood pellets to generate electricity; the protestors are unhappy that Drax is logging and sourcing wood from forests in British Columbia, and the Southern US, as well as burning waste wood.
Paul Morozzo, a climate campaigner for Greenpeace UK, says:
“Burning trees to stop climate change is just as ridiculous as it sounds, subsidising Drax is a joke that’s bad enough to go in a cracker, and all of the company’s accounting tricks aren’t making it any funnier.
If we’re going to hold back the climate disaster that’s starting to have impacts all around the world then the government needs to stop subsidising high-cost, high-carbon energy like Drax, and concentrate on cleaner, cheaper, genuinely renewable sources. And just as importantly, we need governments and companies to stop accepting IOUs in place of real carbon cuts, because the climate crisis is here now.”
The drop in British manufacturing output comes as the CBI warns that business activity in the UK is on course to shrink for the first time in more than two years.
The employers’ body has reported that growth expectations among UK companies have taken “a decisive turn for the worse”:
Thames Water appoints chief restructuring officer as it fights nationalisation
Thames Water has appointed a restructuring expert to its board to advise it as the British water company tries to raise more than £6bn to avoid temporary nationalisation.
The company said that Julian Gething has been appointed as chief restructuring officer and will sit on the boards of several companies within its complex corporate structure.
Thames, which supplies water and sewage services to 16 million customers in London and the Thames Valley, said that Gething would not be involved in anything operational, and his appointment would not herald any job cuts within the company.
The British water industry has been under severe pressure for several years as many companies were caught out by rising interest rates, after years of underinvestment in crucial infrastructure. Thames has been the worst affected.
Thames has won approval from its creditors to borrow £3bn, before it tries to raise another £3bn in equity investment to try to turn it around. The talks over the debts are likely to wipe out existing shareholders’ stakes.
Gething has worked for 35 years in restructuring, specialising in situations in which debtors must negotiate over losses. He is a partner at AlixPartners, a consultancy. Thames said that the appointment was supported by its lenders.
UK manufacturing PMI hits nine-month low
Britain’s manufacturing downturn has also worsened!
The latest poll of purchasing managers at UK factories shows that output fell for the first time in seven months, driven by a fall in new orders.
S&P Global’s PMI report also shows that firms cut back their staffing levels, purchasing activity and inventory holdings last month.
Manufacturers found it harder to export; new orders from overseas contracted for the thirty-first month in a row, due to weaker demand from US, China, the EU and the Middle East.
Some firms specifically mentioned weak demad from Germany, especially from its auto industry.
Other companies suggested clients were rethinking their spending decisions following the UK budget at the end of October, which lifted taxes on businesses.
There are also signs that supply chain pressures have risen, due to the Red Sea crisis, border regulatory issues (including Brexit related constraints) and the recent strike at US ports.
This all pulled the UK manufacturing PMI down to 48.0 in November, from 49.9 in October, showing a contraction for the second month running.
Rob Dobson, director at S&P Global Market Intelligence says:
“Conditions in the UK manufacturing sector deteriorated again in November. The headline PMI fell to a nine-month low as concerns surrounding the economic outlook, high costs and weak demand led to lower output, falling orders and cutbacks to purchasing, jobs and inventory holdings.
The export climate also remained bleak, as weaker demand from the US, China and EU led to a further drop in new export business. While companies of all sizes are experiencing a downturn, small companies are the hardest hit, reporting especially marked drops in output, new orders and new export business.
Meanwhile, supply chain worries have intensified as the combination of the Red Sea crisis, port disruptions and border regulation issues led to longer supplier delivery times, input shortages and rising costs. Input price inflation accelerated as a result. With recent budget announcements on labour costs and employer national insurance likely to raise costs further in 2025, and geopolitical tensions heating up notably around the threat of increased global protectionism, manufacturers are left facing an environment of high costs, low demand and raised uncertainty for the foreseeable future.
Warning strikes begin at VW
News that the eurozone manufacturing recession has deepened came as Volkswagen workers across Germany began a walkout.
The “warning strikes”, which usually last a few hours, are a protest against VW’s plans to lay off thousands of people, cut pay and close plants for the first time in its home country.
Thorsten Gröger, the union IG Metall’s lead negotiator with VW, said:
“If need be, it will be the toughest collective bargaining battle Volkswagen has ever seen.”
The union leader accused VW managers of making the situation worse, adding:
“Volkswagen has set fire to our collective agreements.”
Updated
Eurozone manufacturing recession looks endless after latest plunge in activity
The eurozone’s manufacturing recession has deepened, driven by a sharp slowdown in the region’s largest economies.
Data provider S&P Global has reported that the euro area’s manufacturing sector deteriorated at a faster pace during November.
This wasa driven by quicker declines in new factory orders, production, purchasing activity and inventories.
It pulled the HCOB eurozone manufacturing PMI down to a two-month low of 45.2, down from October’s 46.0. Any reading below 50 shows a contraction.
Among eurozone members, Germany recorded the fastest drop in output, Italy’s factory sector shrank at the fastest rate in a year, while France recorded the steepest contraction in 10 months.
Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, says:
“These numbers look terrible. It’s like the eurozone’s manufacturing recession is never going to end. As new orders fell fast and at an accelerated pace, there’s no sign of a recovery anytime soon. According to our nowcast, the manufacturing sector’s output is going to decrease by 0.7% in the fourth quarter compared to the previous quarter. This slump is likely going to drag into next year.
“The downturn is widespread, hitting all of the top three eurozone countries. Germany and France are faring the worst, and Italy is not doing much better. By main industrial grouping, it’s the capital goods sector which is taking the biggest hit. In an interesting development, Spain’s companies in the capital goods sector were able to show accelerated growth. This might be linked to the heavy floods in Spain, where an estimated 100,000 cars were destroyed and need to be replaced. But this boom most probably won’t last.
The report also found that companies continue to trim staffing levels, while firms continued to run down their inventories of materials and finished goods as they continued to destock.
Updated
Stellantis’s Milan-listed shares were just briefly halted from trading in Milan, Reuters, reports, after falling 7.99%.
The pickup in house price growth last month is “unlikely” to have been driven by upcoming stamp duty changes, Nationwide argues, as the majority of mortgage applications commenced before the Budget announcement.
Ouch. Stellantis’s shares are now down 7.3% in Paris.
Carlos Tavares’s resignation comes two months after the departure of Stellantis’s chief financial officer Natalie Knight.
In a research note today, JP Morgan say:
“This sets an unprecedented challenge for investors looking to invest in a firm with such volatility in the management team….
With such a turnaround in the top management team, question marks may be raised as the market will in our view price in no major earnings improvement in FY25.”
Stellantis’s shares are also down on the Milan stock exchange, where they’ve lost 6.6% – after initially not trading when the market opened.
Updated
Stellantis shares drop after CEO's resignation
Shares in car giant Stellantis have dropped at the start of trading, following the surprise resignation of CEO Carlos Tavares last night.
Stellantis’s shares are down 5.5% in Paris, as traders digest the shake-up at the company behind brands including Vauxhall, Fiat, Jeep and Peugeot.
Last night, Stellantis announced that Tavaras would leave “with immedaite effect”, and that the process to appointing the new permanent Chief Executive Officer was “well under way”.
Henri de Castries, Stellantis’s senior independent director, hinted at boardroom tensions last night, saying:
“Stellantis’ success since its creation has been rooted in a perfect alignment between the reference shareholders, the Board and the CEO.
However, in recent weeks different views have emerged which have resulted in the Board and the CEO coming to today’s decision.”
Tavaras departure follows a decline in Stellantis’s financial performance. At the end of October, the world’s fourth-largest carmaker reported a steep fall in sales, which it blamed production delays and flagging demand in Europe.
One person familiar with the situation told the Financial Times:
“[Tavares] was focusing on the short term rather than the group’s longer term and managed to anger everybody in the process.”
House price growth rises: what the experts say
Here’s some reaction to this morning’s Nationwide house price report:
Guy Gittins, CEO of Foxtons:
“After the rate of house price growth slowed in the lead up to the Autumn Budget, the latest figures suggest the market is once again starting to accelerate.
This consistent positivity demonstrates the current strength of the market despite the complications posed by wider economic headwinds. Over the last 12 months we’ve seen a huge increase in new buyer volumes, viewings and offers made and there is a very healthy level of stock currently on the market. So, whilst house prices are climbing, there is certainly a good level of stock for buyers to choose from and the market isn’t overheating due to the usual supply and demand imbalance.
The market traditionally pauses for breath during the festive period, however, we’re seeing a flurry of activity driven by buyers looking to secure stamp duty relief before next April’s deadline. We anticipate the start of next year to be much the same, although those buyers who are looking to take advantage of current stamp duty relief thresholds need to be acting now to stand a chance of completing in time.
Matt Thompson, head of sales at Chesterton:
“November’s property market saw an increasing number of first-time buyers who were and still are motivated to purchase a property before the stamp duty changes in April 2025. This, in addition to high demand from house hunters in general, led to more sales being finalised than in November of last year.
With the current level of buyer activity expected to continue well into the new year, we predict London properties to hold their value or see a gradual value increase of up to 3% over the course of next year.”
Tomer Aboody, director of specialist lender MT Finance:
“Another month of house price growth further indicates the level of confidence in the market which has been evident since the reduction and stability in both mortgage rates and inflation.
“Both sellers and buyers are pushing to transact, as affordability is improving.
“While the Budget is now behind us, its full impact has yet to be felt. However, we are hopeful that this confidence in the market continues, with further rate cuts expected in the new year.”
Jeremy Leaf, north London estate agent:
“In our offices we are seeing prices hardening and stock levels rising, partly because the Budget, though not particularly helpful, was not as bad as many feared either.
“As a result, some pent-up demand was released and buyers are digging a little deeper. That extra choice, as well as broad acceptance that inflation and mortgage rates will not reduce as far and as fast as many expected, has meant caution still prevails. Transaction lengths are extending too, particularly bearing in mind the seasonal distractions so sellers still need to be extra competitive to attract serious attention at this time of year.”
Dollar rallies after Trump's Brics tariff threat
The US dollar is rallying, after Donald Trump warned countries in the Brics bloc that he would impose 100% tariffs if they challenged America’s currency.
Over the weekend, Trump posted that he would impose 100% tariffs on Brics members if they create a new currency to rival the US dollar.
The president-elect declared:
We require a commitment from these Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy.
With fears of a trade war rising, the dollar has gained 0.5% against a basket of major currencies – even though there’s no agreement among Brics members to go it along with their own currency.
This has pushed the pound down by half a cent to $1.2695.
The euro, which is also weighed down by political instability in France, is also half a cent lower at $1.052.
Trump’s comments may be a sign that his administration will favour a stronger dollar.
Jim Reid of Deutsche Bank told clients this morning
As ever with Mr Trump it seems to be a shot across the bows but likely wouldn’t ultimately be great for the US economy if implemented….
it seems to further point to Dollar strength being a theme of the new administration as against Trump 1.0 where initially they tried to talk the Dollar down.
Introduction: "Surprising" acceleration in house price growth
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK house prices growth has “surprisingly” picked up to a two-year high, a new survey this morning shows, despite the recent rise in mortgage rates.
The average prices of a house sold in November rose by 1.2% compared with October, lender Nationwide reports, to £268,144. That’s the largest monthly gain since March 20.
That lifts the annual increase in house prices to 3.7% – the fastest since November 2022, shortly after Liz Truss’s mini-budget - up from 2.4% in October.
House prices are just 1% below the all-time high recorded in the summer of 2022.
Robert Gardner, Nationwide’s chief economist, says the pace of the increase is unexpected:
“The acceleration in house price growth is surprising, since affordability remains stretched by historic standards, with house prices still high relative to average incomes and interest rates well above pre-Covid levels.
Housing market activity has remained “relatively resilient in recent months”, Gardner adds, with mortgage approvals approaching the levels seen before the Covid-19 pandemic.
Gardner adds:
“Solid labour market conditions, with low levels of unemployment and strong income gains, even after taking account of inflation, have helped underpin a steady rise in activity and house prices since the start of the year. Household balance sheets are also in good shape with debt levels at their lowest levels relative to household income since the mid-2000s.
Nationwide also predicts there will be a jump in transactions in the first three months of 2025. as buyers try to seal deals before changes to stamp duty kick in next April.
These surveys from lenders can’t give a perfect measure of the market though; they only track buyers taking out a mortgage, rather than cash buyers. And changes in the ‘mix’ of houses being sold can also distort the data.
The agenda
9am GMT: Eurozone manufacturing PMI report for November
9.30am GMT: UK manufacturing PMI report for November
10am Christine Lagarde speaks at the EIB Group Climate and Environment Advisory Council in Luxembourg
2.45pm GMT: US manufacturing PMI report for November
Updated
