Train drivers have called a further week of rolling strikes across England from late January in their long-running dispute with operators over pay.
Members of the Aslef union will strike for 24 hours at each train-operating company on the national railway on different days between Tuesday 30 January and Monday 5 February.
The Aslef general secretary, Mick Whelan, said:
We have given the government every opportunity to come to the table but it has now been a year since we had any contact from the Department for Transport [DfT]. It’s clear they do not want to resolve this dispute.
Many of our members have now not had a single penny increase to their pay in half a decade, during which inflation soared and with it the cost of living. Train drivers didn’t even ask for an increase during the Covid-19 pandemic when they worked throughout as key workers, risking their lives to allow NHS and other workers to travel.
A spokesperson for the Rail Delivery Group, which represents train operators, said:
Nobody wins when strikes impact lives and livelihoods, and they’re particularly difficult to justify at a time when taxpayers are continuing to contribute an extra £54m a week to keep services running post-Covid.
Despite the railway’s huge financial challenge, drivers have been made an offer which would take base salaries to nearly £65,000 for a four-day week without overtime – that is well above the national average and significantly more than many of our passengers that have no option to work from home are paid.
Oil prices are falling on world markets today, after Brent crude leapt through $80 a barrel last Friday following US and UK air strikes against Houthi rebels in Yemen, who have been attacking ships in the Red Sea. Brent is 0.6% lower at $77.80 a barrel while US crude has lost 0.7% to $72.17 a barrel.
A fresh attack on a ship passing through the Red Sea is being investigated by United Kingdom Maritime Trade Operations.
It posted on X, formerly known as Twitter, that it had received reports of an “incident” 95 nautical miles south-east of Aden, Yemen.
It said: “Master reports port side of vessel hit from above by a missile. Authorities are investigating.”
Our other main stories today:
Thank you for reading. My colleague Graeme Wearden will be back tomorrow, reporting from the World Economic Forum in Davos. Stay tuned! – JK
Asda cuts Aptamil prices by 7%
Asda has become the second supermarket to announce that it is reducing the cost of Aptamil baby formula after the French food giant Danone agreed to a 7% price cut to retailers.
Asda also said it will let customers pay for baby formula using their rewards scheme vouchers for the first time, as of today. A total of six Aptamil products across the core range will be reduced in price by an average of 7% (the price cuts can be viewed here).
Last week, Iceland said it would be cutting the cost of Aptamil from 16 January after Danone agreed to reduce the price for its Aptamil powdered formula to retailers by up to 7%.
Kris Comerford, Asda’s chief commercial officer, said:
For many of Asda’s customers, and families nationwide, we understand that buying baby formula is a vital necessity in their weekly shop, which is why we’re taking swift action to pass on falling manufacturing costs to customers before any other retailer. At the same time, we’ve decided to remove exclusions on using Asda Rewards vouchers to pay for baby formula. Whilst we respect the regulations in place regarding the sale of baby formula, we want to do everything we can to help families manage their budget and keep their family fed.
Disruption to Red Sea traffic has worsened, as Qatar, the biggest single user of the route in 2023, paused a number of vessels due to cross through the Bab al-Mandab strait over the weekend.
Alex Froley, LNG market analyst at ICIS, said:
The narrow passage, at the bottom of the Red Sea, has become the centre of global attention over recent weeks after Houthi attacks on shipping crossing the strait, followed by US and UK counter-strikes at the end of last week.
Three laden Qatari tankers that were signalling a course to the Suez Canal cut their speed on Sunday 14 January and started circling off the coast of Oman, east of the strait.
The Al Ghariya, Al Huwaila and Al Nuaman seemed to be waiting to decide whether to head west through the strait into the Red Sea, or instead to divert south to head around Southern Africa to Europe.
The tankers were all likely heading to Europe, possibly to a long-term contract customer of Qatar such as Italy or Poland, or to make a spot delivery to Qatar’s UK terminal position.
Heading down around Africa’s Cape of Good Hope and then back north to Europe would take around 27 days to reach the UK, compared with only 18 via the Red Sea and Suez Canal route. Qatari ships have been seen taking this longer route before, but very rarely.
Eurozone trade surplus surges in November
The eurozone’s trade in goods surplus surged in November, as imports declined more than exports.
The eurozone recorded a €20.3bn surplus in trade in goods with the rest of the world in November, compared with a surplus of €11.1bn in October, and a deficit of €13.8bn in November 2022. Exports fell by 4.7% year-on-year while imports dropped 16.7%, according to Eurostat, the European Commissions’s statistics office.
Intra-euro area trade fell to €227.2bn in November, down by 9.4% from a year earlier.
The seasonally adjusted trade balance also shows an improving surplus of €14.8bn, where exports were up 0.9% on the month while imports fell by 0.6% on the month.
The eurozone exported 2% more to the UK between January and November compared with a year earlier, and imported less from the UK, down 16.8%. As a result, the currency bloc’s trade surplus with the UK rose to €143.5bn from €103.4bn.
An unprecedented medicines shortage in the NHS is endangering lives, pharmacists have said, as unpublished figures reveal that the number of products in short supply has doubled in two years.
A treatment for controlling epileptic seizures was the latest to be added on Wednesday to a UK drugs shortage list that includes treatments for conditions ranging from cancer to schizophrenia and type 2 diabetes.
Causes of the crisis are thought to include the plummeting purchasing value of the pound since the Brexit referendum, which reduces the NHS’s ability to source medicines abroad, and a government policy of taxing manufacturers.
According to Department of Health and Social Care (DHSC) figures provided to the British Generic Manufacturers Association, there were 111 drugs on a shortages list on 30 October last year and 96 on 18 December, with supply notifications issued for a further 10 treatments to NHS providers in the UK since then.
Updated
South West Water has been accused of not being honest with the government about its drought preparations after parts of the country almost ran out of water in 2022, it has emerged.
The Environment Agency told the water industry regulator, Ofwat, that SWW was “not honest” with regulators about the risk a drought posed to the company’s water supplies, and was inadequately prepared for the heatwave.
People in Devon and Cornwall were affected by months of hosepipe bans as reservoirs ran dangerously low during the dry spell two years ago. Three of SWW’s reservoirs fell to record lows during the drought.
The agency said the company showed “complacency” prior to the drought and “a lack of understanding of their own supply system”.
Here is our full story on the fresh wave of rail strikes in England:
And our story on the UK housebuilder Crest Nicholson’s latest profit warning:
Germany on track for first two-year recession
Germany is on track for its first two-year recession since the early 2000s after its economy shrank in 2023 amid the impact of higher energy costs and weaker industrial demand.
The German national statistics office said “multiple crises” affecting the economy had contributed to a 0.3% fall in gross domestic product (GDP) in 2023 from the previous year as higher interest rates and elevated living costs took their toll.
“Despite recent price declines, prices remained high at all stages in the economic process and put a damper on economic growth,” said Ruth Brand, the president of the statistics office, at a press conference in Berlin on Monday.
Train drivers call further strikes in England
Train drivers have called a further week of rolling strikes in England from late January, in the long-running dispute over pay, reports our transport correspondent Gwyn Topham.
Members of the Aslef union will strike for 24 hours at each train operating company on the national railway on different days between Tuesday 30 January and Monday 5 February.
Drivers will also refuse to work overtime throughout the strike period, causing prolonged disruption in parts of the railway that rely on rest day working.
The latest strikes follow a similar week of rolling action in December, after 14 previous days of nationwide stoppages over the 18-month dispute.
Walkouts are likely to stop all trains at affected operators, although there is now the possibility that firms could demand 40% of their timetable runs under the government’s new minimum services levels law.
However, the legislation is untested and rail firms as well as unions have expressed concern about the practicalities and consequences.
The rail strikes will only take place at firms contracted to the Department for Transport in England, but some cross-border services they operate into Scotland and Wales may be affected.
Updated
Oil prices continue to fall on world markets, after Brent crude jumped through $80 a barrel last Friday following air strikes by the US and UK governments against Yemen’s Houthi militia, whose attacks on shipping in the Red Sea pose a threat to world trade.
Brent is down 0.8% at $77.69 a barrel this morning while US crude, which went through $75 last week, is trading 0.9% lower at $72.03 a barrel.
Britain’s “decisive” action in the Red Sea “dealt a blow” to the Houthis, the UK’s defence secretary has said.
In his first major speech, Grant Shapps said “enough was enough” and precision strikes were authorised in response to Houthi attacks because they “chose to ignore” clear warnings.
More on our Middle East live blog:
European shares have turned negative.
The FTSE 100 index in London is trading 0.1% lower at 7,615 while Germany’s Dax and France’s CAC have also slipped 0.1% and the Italian market is trading 0.3% lower.
AJ Bell investment director Russ Mould said:
An escalation of tensions in the Red Sea amid US and UK strikes on Houthi rebels raises the prospect of renewed inflationary pressures as the resulting disruption to global shipping pushes up freight costs. Oil prices continued to bubble but are below the $80 per barrel levels reached last week.
There was some positive news on inflation on Friday thanks to an unexpected contraction in producer price inflation in the US – so called factory gate prices are often a leading indicator for consumer prices so this offers some encouragement.
There was mixed performance and messaging from US banks as the latest earnings season across the Atlantic got underway – with some signs of stress in consumer debt.
The jobs market is often a good barometer of economic conditions as firms hire when they’re feeling confident and retrench when times are tough – so PageGroup becoming the latest recruiter to warn on profit is a slight worry.
This is a mild warning, suggesting the end of last year saw the outlook suffer significant deterioration. Profit is only expected to be slightly below previous guidance but the signs certainly weren’t encouraging in the final quarter of 2023. The company’s decision to let go a good chunk of its own workforce tells its own story.
A modest move higher in PageGroup’s fees for temporary placements, alongside a big drop in fees for permanent positions, suggests companies are looking to retain some flexibility with staffing needs.
Ludovic Subran, chief economist at Allianz, said:
German #GDP fell by -0.3% q/q in Q4 2023, but the previous quarter was revised up to 0.0%. Thanks to the upward revision of Q3, #Germany has managed to avoid a recession in the second half of 2023. Annual GDP growth printed at -0.3% in 2023 vs. 2022 (as expected in our latest…
— Ludovic Subran (@Ludovic_Subran) January 15, 2024
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Carsten Brzeski, global head of macro at ING, said:
Now it’s official. The German economy shrank by 0.3% year-on-year in 2023. What’s worse, however, is that there is no imminent rebound in sight and the economy looks set to go through the first two-year recession since the early 2000s.
The year 2023 was another turbulent one, with the economy in permanent crisis mode. In fact, since 2020, there has been a long list of crises and challenges facing the German economy: supply chain frictions resulting from the pandemic lockdowns and war in Ukraine, an energy crisis, surging inflation, tightening of monetary policy, China’s changing role from being a flourishing export destination to being a rival that needs fewer German products, and several structural shortcomings…
All in all, we expect the current state of stagnation and shallow recession to continue. In fact, the risk that 2024 will be another year of recession is high. We expect the German economy to shrink by 0.3% year-on-year this year. It would be the first time since the early 2000s that Germany has gone through a two-year recession, even though it could prove to be a shallow one.
Updated
Here’s some instant reaction. Oliver Rakau, chief Germany economist at Oxford Economics, tweeted:
The German economy contracted by 0.3% q/q in Q4 based on what @destatis said at its press conference on the annual GDP release and relying on limited data. A touch better then the -0.4% I budgeted, but given the very weak monthly data wouldn't be surprised by small revision. 1/3
— Oliver Rakau (@OliverRakau) January 15, 2024
Claus Vistesen, eurozone economist at Pantheon Macroeconomics, tweeted:
German GDP estimated down 0.1% in 2023, working day-adjusted. That looks like a small increase in Q4 GDP to me, likely due to net trade, but let's see. The December data could still swing the estimate to zero or even a slight fall.
— Claus Vistesen (@ClausVistesen) January 15, 2024
German economy shrinks 0.3% in 2023
Germany’s economy, the largest in Europe, shrank 0.3% last year, in line with economists’ expectations.
According to a preliminary estimate from the Federal Statistical Office (Destatis), the price adjusted gross domestic product (GDP) was 0.3% lower in 2023 than in the previous year. After adjustment for calendar effects, the decline in economic performance amounted to 0.1%. In 2022, the German economy had grown by 1.8%.
Ruth Brand, the statistics office’s president, said:
Overall economic development faltered in Germany in 2023 in an environment that continues to be marked by multiple crises. Despite recent price declines, prices remained high at all stages in the economic process and put a damper on economic growth. Unfavourable financing conditions due to rising interest rates and weaker domestic and foreign demand also took their toll. Therefore, the German economy did not continue its recovery from the sharp economic slump experienced in the pandemic year of 2020.
GDP was 0.7% higher in 2023 than in 2019, the year before the Covid-19 pandemic hit.
Germany also contracted by 0.3% in the final quarter of last year following stagnation in the third quarter, thereby avoiding recession (defined as two consecutive quarters of contraction).
You can read the full report here.
Updated
Oil prices slip; UK to 'wait and see' on strikes against Houthis
Oil prices have just turned negative. Brent crude is slipped 0.15% to $78.17 a barrel while US crude is down 0.2% at $72.52 a barrel.
The UK’s defence secretary said Britain would “wait and see” before launching further strikes against Houthi militia in Yemen. Grant Shapps told Sky News:
Let’s wait and see what happens, because it’s not that we want to be involved in the Red Sea. But ultimately freedom of navigation is an international right that must be protected.
But he said that Britain was keeping a close eye on the situation.
They should be aware that if it doesn’t stop then of course we will then have to take the decisions that need to be taken.
Updated
Crest Nicholson warns on profits again
Crest Nicholson, the UK housebuilder has warned on profits for the third time in six months. This sparked speculation that the company could become a takeover target if its shares continue to fall.
In an unscheduled trading update, the builder warned that full-year adjusted profit before tax would come in at £41m after it identified additional costs. This is far below the previous year’s profit of £137.8m. Its share price dropped 3.7%.
Crest said:
The recent reduction in mortgage rates has provided a more constructive backdrop for house buyers and the wider housing market. Although it is too early to gauge customer behaviour, we have been encouraged by an increase in customer interest levels and inquiries this calendar year.
Anthony Codling, head of European housing and building materials at the investment bank RBC Capital Markets, said:
It has been a tough year for Crest and unfortunately for the group and its investors the bad news continues. In our view if today’s trading update leads to further share price weakness, it could increase the chances of Crest being viewed as an attractive acquisition for another housebuilder.
Crest is due to release its full-year results next week, on 23 January.
Hunter has also looked at the US:
Markets continued their hesitant start to the year as mixed corporate earnings offset a positive slant arising from the latest inflation reading.
The fourth quarter earnings season comes with high expectations, especially given the current impasse between investors and the Federal Reserve on the timing of any interest rate cuts. By the same token, any slight misses look likely to be dealt with harshly, as evidenced by the market reaction to the first batch of earnings at the end of the week.
The banks were caught in these uncertain crosshairs as their updates met with mixed reactions. Bank of America shares fell over 1% following a decline in quarterly profit, while Wells Fargo dipped by more than 3% despite posting higher profit for the period. JP Morgan Chase revealed a drop of 15% but in earnings but shares were relatively unaffected, while Citigroup edged higher after revealing a 10% cut to its workforce and a quarterly loss. Outlook comments maintained that the consumer remains resilient, although there was a concerning trend in increased loan defaults.
More positively, the inflation outlook received a boost as the latest producer price index reading showed an unexpected fall in prices in December.
European stock markets have opened cautiously higher.
The UK’s FTSE 100 index has edged up 9 points to 7,634, a 0.1% gain. Germany’s Dax and France’s CAC are also up 0.1%, while Spain’s Ibex has gained 0.2%, Portugal’s PSI 20 rose 0.5% and the Italian borsa is flat to slightly lower.
Richard Hunter, head of markets at interactive investor, said:
UK markets stayed undecided in opening trade in the absence of any major news and with the likelihood of a lighter trading day given the closure of Wall Street later. A broker upgrade lifted Sainsbury shares after last week’s partially disappointing update, while the banks showed some signs of life despite the lack of a concrete read across from those which reported in the States on Friday.
The fourth quarter reporting season is yet to get into full swing in the UK as yet and in terms of economic releases there are readings on the unemployment and inflation rates to come this week, as well as a retail sales reading which should provide further colour on trading over the festive period. In the meantime, the main indices have been unable to build any momentum so far this year, with the FTSE 100 down by 1.3% and the FTSE 250 already languishing by 2.3%.
Updated
Oil prices nudge higher as traders eye Middle East
Oil prices are heading higher again as traders watch for any supply disruption in the Middle East following US and UK air strikes to stop Houthi militia in Yemen attacking ships in the Red Sea.
Brent crude remains below $80 a barrel, though, after surging through that level on Friday. The global benchmark has advanced 21 cents to $78.50 a barrel, up 0.3%, while US crude is 14 cents ahead at $72.82 a barrel. Both jumped more than 2% last week.
Warren Patterson, head of commodities research at ING, told Reuters:
There are supply risks for the market given in the escalation in the Red Sea.
However, for now we are not seeing any impact on oil supply. And I guess we would need to see significant escalation before that happens.
Yesterday, Houthi militia threatened a “strong and effective response” after the US carried another strike overnight.
Stephen Innes, managing partner of SPI Asset Management, has looked at Taiwan’s election and what it means for the country’s fraught relations with China.
Geopolitically, tension rises following more US airstrikes on Yemen over the weekend, and domestically, President Biden faces challenges in foreign policy on two fronts: the Middle East and Taiwan. Both of these issues could weigh negatively on Consumer Sentiment.
Xi Jinping might be grimacing after Taiwan elected Lai Ching-te for president, marking a third term for the Democratic Progressive Party. Voter turnout was 70%. Lai, who served as vice president since 2020, succeeds Tsai Ing-wen, who stepped aside due to term limits. Lai’s victory is seen as a rebuke to Beijing, as he has been labelled a “troublemaker” by pro-China factions and a supporter of Taiwan’s independence from The Chinese Communist Party.
Lai emphasises the preservation of democracy and is expected to follow Tsai’s approach in deepening Taiwan’s ties with Washington without actively seeking confrontation with Beijing. China may view the election results as a step toward conflict, as Xi Jinping maintains that reunification with Taiwan is a historical inevitability.
Updated
Introduction: UK house prices forecast to rise 3% in 2024; oil prices fall back below $80
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Business and political leaders as well as key players from charities, academia and other organisations are heading to the annual World Economic Forum in the Swiss ski resort of Davos, which will be held under the shadow of global crises.
Over here, UK house prices are forecast to rise 3% this year, beating estimates of a decline, a leading estate agent has said, amid a mortgage pricing war and expectations of Bank of England interest rate cuts.
The surge in oil prices on Friday following US and UK airstrikes against Houthi rebel sites in Yemen was short lived. Houthi rebel attacks on ships in the Red Sea have fuelled fears over disruption to trade.
Brent crude, which rose above $80 last week, is back at $78.32 a barrel this morning while US crude is at $72.63 a barrel.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said:
Friday’s producer price inflation came as a certain relief to inflation worries as the latest data showed an unexpected contraction in the monthly figure. The jump in oil prices, following the US and UK airstrikes in areas in Yemen controlled by the Houthis, which sent the barrel of American crude to past the $75 per barrel level, didn’t last long.
The risks are tilted to the upside as conflict news continues to flow in this Monday. Rishi Sunak will address parliament as his government is ready to intensify strikes on Houthi targets. Yet there is a strong barricade into the $74/75 per barrel level in the US crude and near $80 per barrel level in Brent, as the rising global supply, increasing competition to OPEC and the globally weak economic outlook weigh heavier and convince the bears to sell every geopolitically supported rallies.
China’s central bank left interest rates unchanged today despite expectations of a cut, while pumping more cash into the financial system. The operation resulted in a net 216bn yuan fresh fund injection into the banking system.
The reaction on the Chinese stock market was muted, with the Chinese CSI 300 index edging 0.15% higher.
A weakening Chinese currency has limited the room for the People’s Bank of China to reduce borrowing costs and rate cuts could be postponed until later this year. The yuan has weakened more than 1% against the dollar so far this year.
Economists at Capital Economics said:
We suspect the main reason the PBOC failed to deliver this time is a desire to avoid triggering renewed depreciation pressure on the renminbi.
Economists at ANZ said the central bank might have held off cutting rates as “authorities may be concerned about bank profitability”.
Wall Street is closed for Martin Luther King Day today. The US stock markets ended last week flattish (the S&P 500 and the Nasdaq rose slightly, while the Dow Jones slipped 0.3%).
The Agenda
9am GMT: Germany 2023 GDP growth (forecast: -0.3%, previous: 1.9%)
10am GMT: Eurozone trade for November
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