Foreign investor that loaded Thames Water with debt takes control of UK gas network
The former owner of Thames Water is to take full control of Britain’s gas network in a £700m deal.
Australian investment giant Macquarie is to buy the 20pc of Britain’s National Gas that it does not already own, handing it full control of a piece of critical national infrastructure.
Macquarie is best known in the UK for buying Thames Water in 2006 in conjunction with a string of offshore pension funds. It has drawn heavy criticism for loading up the water company with debt during its ownership.
Under Macquarie’s watch, Thames’ debts rose four-fold from £2.3bn to £10bn in 2017. At the same time, £2.7bn in dividends were paid out to shareholders.
The heavy debts built up during this period have been blamed for Thames’ current financial crisis, which has left it teetering on the brink of possible nationalisation. The company’s debts currently stand at more than £18bn.
Macquarie sold its interest in Thames more than seven years ago. The asset manager has in the past said dividend payouts during its ownership were “in line with listed UK water utility companies” and pointed out that Thames maintained “an investment grade credit rating.”
The full takeover of National Grid is expected to be completed by the first quarter next year, subject to approval by regulators.
National Gas owns and operates Britain’s 7,660 km national gas transmission system. It also owns and maintains more than six million domestic, industrial and commercial gas meters in Britain.
The gas network was privatised during the Thatcher administration, initially as part of British Gas. In 2002, it merged with National Grid, which has been selling its stake as it refocuses on electricity.
Will Price, head of utilities for Macquarie, said: “This transaction underlines our commitment to National Gas and the critical role – which was emphasised again this month by both the Electricity System Operator and Ofgem – we believe its infrastructure will continue to play as the UK delivers its ambitious energy security and decarbonisation goals.”
The purchase comes at an uncertain time for the future of Britain’s gas sector as politicians look for ways to cut carbon emissions.
Last year, Sir John Armitt, chairman of the National Infrastructure Commission, urged the Government to stop the supply of natural gas to buildings by 2050 if the UK is to hit its climate targets.
In its manifesto, Labour pledged to decarbonise Britain’s electricity system, though it plans to maintain some gas power stations in reserve.
Read the latest updates below.
06:31 PM BST
Signing off...
Thanks for joining us on the Markets blog.
We will be back on Monday morning, but I’ll leave you with news that Emmanuel Macron assured business leaders including Elon Musk that France would not descend into chaos just hours before saboteurs brought the country’s rail network to a standstill.
06:17 PM BST
British mid-cap stocks close at over two-year high on earnings optimism
British mid-cap stocks rallied to their strongest finish in more than two years on Friday, helped by a slew of upbeat company earnings reports and a rebound on Wall Street following benign US inflation data.
The FTSE 250 index of domestically oriented UK stocks closed up 2.3pc at its highest level since March 2022.
The global mood improved as tech shares bounced back on Wall Street and a largely in-line US inflation report kept intact bets for a September interest rate cut by the Federal Reserve.
Meanwhile, the Bank of England’s first interest rate cut since 2020 hangs in the balance next week after recent higher-than-expected British services prices data, with traders pricing in a 50pc chance of a quarter-point rate cut on August 1.
Boosting mid-cap stocks, Drax Group surged nearly 14pc after the power generator posted higher first-half profit and said it expected annual profit to be at the top-end of market expectations.
Babcock International climbed 8.6pc after the defence engineering company maintained its full-year forecast, while Jupiter Fund Management rose 6.8pc after the company reported forecast-beating profit.
05:42 PM BST
Virgin Atlantic to charge passengers up to £24 a flight in new green levy
Virgin Atlantic will impose a fee of up to £24 per flight as part of new green levy aimed at covering the costs of using sustainable aviation fuel (SAF). Christopher Jasper reports:
The £24 charge will be levied on the carrier’s upper class premium tickets, with travellers paying an £8 fee in economy and £12 in premium economy, the company said on Friday.
The green levies, which Virgin says are equivalent to about 1pc of ticket prices, will result in an extra £32 charge for a family of four flying in the cheapest seats from London to Florida or New York, climbing to £96 in the front of the plane.
Virgin, owned by Sir Richard Branson, said the levies will be applied with immediate effect for bookings on flights from January next year.
They will only apply to flights outbound from the UK.
The company said the fees will help meet costs associated with a government requirement for flights to be powered by at least 10pc SAF by 2030, as well as expenses from the UK emissions trading scheme.
05:40 PM BST
London markets end week on a high as NatWest helps lift FTSE 100
London markets have ended the week on an optimistic note with the FTSE 100 clawing back earlier losses to reach a fresh one-month high.
The UK’s top share index was lifted higher with NatWest shares making significant strides following its half-year earnings update.
The index closed up 1.2pc.
Joshua Mahony, chief market analyst for Scope Markets, said the FTSE 100 index was “pushing sharply higher thanks in part to a 7% spike in NatWest shares”.
“However, the strength seen throughout the UK index has been relatively well distributed, with mining, energy, banking, healthcare, and industrial stocks all enjoying a strong end to the week.”
Kathleen Brooks, research director for XTB, said NatWest’s results could be seen as a “reflection on the UK economy, and they are sign that the UK economy remains resilient even in the face of high interest rates”.
The bank reported higher-than-expected earnings and also upgraded its revenue and profitability outlook for the year.
05:37 PM BST
European shares end higher as earnings barrage impresses
European shares closed higher on Friday, boosted by strong rises across several sectors including luxury, while global markets remained stable after data showed an improving U.S. inflation picture.
The pan-European Stoxx 600 index closed 0.8pc higher after hitting a more than two-month low yesterday, logging a marginal weekly advance of about 0.5pc.
EssilorLuxottica jumped 7.4pc after the Ray-Ban maker’s boss said Facebook-owner Meta had told him it might take a stake in the company, while Hermes rose 3.4pc after slightly beating second-quarter sales expectations.
A gauge of 10 of Europe’s biggest luxury names advanced 2.9oc, logging its biggest single-day jump in six months.
Construction and materials led gains amongst the major Stoxx sectors, adding 1.7pc.
Meanwhile global markets remained sanguine after data showed US prices rose moderately in June, underscoring an improving inflation environment that potentially positions the Federal Reserve to begin cutting interest rates in September.
France’s Cac 40 rose 1.2pc, while Germany’s Dax was up 0.7pc.
05:08 PM BST
Ted Baker preparing to shut all UK stores within weeks
Ted Baker could disappear from British high streets as the struggling fashion chain plans to shut all its stores within weeks.
The business behind the fashion brand’s UK shops, No Ordinary Designer Label Limited, fell into administration in March.
It has since shut 15 shops in the UK, resulting in about 245 staff being made redundant.
Staff working at the remaining stores have been told that they will lose their jobs when the shops are shut within three weeks, as first reported in the Sun newspaper.
It is understood that the plans have not yet been finalised despite the message to employees.
Ted Baker had 46 UK stores and employed around 975 people prior to the insolvency.
Authentic Brands, the US-based firm behind Juicy Couture and Reebok, is still the owner of Ted Baker’s intellectual property.
It was hoping to find a new partner to run the Ted Baker retail and online business in the UK and Europe.
The collapse of the UK stores could mark the end of its position on high streets, after being founded in 1988 by Ray Kelvin and recognised for its patterned and floral clothing.
However, the brand is currently still sold through department stores and retailers such as John Lewis and House of Fraser.
05:03 PM BST
FTSE closes up
The FTSE 100 closed up today, rising an encouraging 1.2pc. The top riser was NatWest, up 7pc, followed by Anglo American, up 5.1pc.
A the other end of the blue-chip index, warehouse owner Segro dropped 1.7pc, followed by Rightmove, which closed down 1.4pc.
Meanwhile, the FTSE 250 rose 2.3pc. The top riser was power generation business Drax, up 14pc, followed by defence company Babcock, up 8.7pc.
Electronic component maker DiscoverIE was the biggest faller, down 3pc, followed by Bellevue Healthcare Trust, down 2.5pc.
04:59 PM BST
Readers comment on Labour’s claim of an unexpected black hole
04:53 PM BST
Index trackers save investors nearly £80bn in fees
Investors in UK and European indexes have saved nearly £80bn through investing in index funds since 2011, as active fund managers feel the heat.
Date from Vanguard - known for popularising index funds - estimate that that investors in European-domiciled funds have saved £77.4bn incosts since 2011.
The effect of index funds has also been to put downward pressure on the fees for active investments.
Vanguard said that the average expense ratio as of the end of 2023 was 1.05pc for active funds compared to 0.21pc for index funds.
Stephen Lawrence, head of indexing research at Vanguard, said:
Index funds have vastly improved outcomes for investors. One of their main benefits is low fees, which has a strong historical correlation with better-than-average fund performance.
They have also introduced significant competitive price pressure to the industry, benefitting all investors.
04:28 PM BST
Chinese EV battery giant CATL posts jump in profits
The world’s leading maker of electric vehicle batteries, China’s CATL, on Friday reported a 13.4pc jump in second quarter profits despite a battery price war weighing on sales.
Founded in 2011 in the eastern coastal Chinese city of Ningde, CATL produces more than a third of the electric vehicle batteries sold worldwide.
They are used in models from a long line of foreign manufacturers including Mercedes, BMW, VW, Tesla, Toyota, Honda and Hyundai.
In the April-June quarter, CATL’s net profit rose 13.4 percent year-on-year to 12.35bn yuan (£1.3bn).
A drop in the cost of raw materials used to make batteries has triggered a price war among players in the sector.
During the same period, CATL’s sales fell by 13.2 percent year-on-year, to 87bn yuan.
CATL is building its second European factory in Hungary after launching its first one in Germany in January 2023.
04:22 PM BST
Former Thames Water owner to take full control of Britain’s gas network
Macquarie Asset Management will buy out the 20pc of Britain’s National Gas that it does already own, the investment company said on Friday.
The purchase from National Grid is expected to be completed by the first quarter next year, subject to regulatory approval.
The FT has reported that the deal is worth roughly £700m.
National Gas owns and operates Britain’s 7,660 km national gas transmission system. It also owns and maintains more than six million domestic, industrial and commercial gas meters in Britain.
Will Price, head of utilities for Macquarie, said:
This transaction underlines our commitment to National Gas and the critical role – which was emphasised again this month by both the Electricity System Operator and Ofgem – we believe its infrastructure will continue to play as the UK delivers its ambitious energy security and decarbonisation goals.
Macquarie is best known in the UK for its ownership of Thames Water until 2017.
04:09 PM BST
Dollar treads water after tame US inflation report
The dollar eased fractionally after the release of tame US inflation data that is unlikely to deflect the Federal Reserve from cutting rates in the coming months.
The core personal consumption expenditures (PCE) price index was unchanged at 2.6pc in June, although analysts had expected it to fall to 2.5pc.
Steve Englander, head of G10 foreign exchange research at Standard Chartered Bank, said:
The number was good enough. It wasn’t a home run but, compared to yesterday, markets said “yep nothing to worry about here, it doesn’t really derail September and they weren’t going to cut in July anyway. So life goes on.”
The dollar is flat against the pound and down 0.06pc against the euro.
04:01 PM BST
Analysts turn negative on Nestle shares as customers trade down
Analysts covering Nestle are turning pessimistic on Nestle’s stock, leaving the Swiss food giant with its most negative consensus rating for four years.
A consensus rating is the average of multiple analysts ratings for one stock.
Its rating now sits below rivals Danone, Cadbury owner Mondaelez and PepsiCo.
Deutsche Bank, UBS and Berenberg all cut their ratings this week, Bloomberg reported, with a UBS report saying Nestle faces poor sales growth of Nespresso and a slowdown in its pet care business.
03:48 PM BST
Small caps rise amid strengthening predictions of a ‘soft landing’
Some investors are looking to smaller US companies for future growth on the theory that the Big Tech firms that have propelled Wall Street higher are now overpriced.
In trading today, America’s Russell 2000 index of small caps is up 1.5pc, contributing to the 43pc growth over the past five years.
The index is set for its third straight week of gains, if trends hold. The stocks are seen as more economically sensitive than so-called blue chip stocks, and could particularly if the US Fed can curb inflation without damaging growth.
Rick Meckler, partner at Cherry Lane Investments, said:
You’ve got a pretty nice report [on inflation, out today] here that further emboldens the soft landing narrative.
03:38 PM BST
World stock markets climb as US inflation rate drops
Thanks to my colleague Chris Price for keeping us all updated so far today. I’m Alex Singleton, taking over for the next few hours.
Major stock markets are mainly up today as traders welcomed data showing US inflation is slowing, firming expectations for the US Federal Reserve to start cutting interest rates in September.
Wall Street’s three main indexes are all up at the end of a volatile week during which tech stocks and other sectors were rocked by disappointing earnings.
The S&P 500 is up 0.9pc, the tech-heavy Nasdaq Composite is up 0.7pc and the Dow Jones Industrial Average, which represents 30 leading US companies, is up 1.3pc.
The postivity is also seen the side of the Atlantic, with the FTSE 100 up 1.2pc and the FTSE 250 up 1.9pc.
MSCI’s gauge of world stock prices is up 0.7pc.
03:31 PM BST
Wall Street short seller charged with fraud
Short seller Andrew Left has been charged with multiple counts of securities fraud alleging that he was part of a $16m (£12.4m) stock market manipulation scheme.
The Department of Justice said that Mr Left, a prominent commentator on US TV channels including CNBC and Fox Business, has been charged with one count of engaging in a securities fraud scheme.
He also faces 17 counts of securities fraud, and one count of making false statements to federal investigators.
As a short seller, Mr Left would make money betting stocks would fall.
In a statement, the Department of Justice said: “As alleged, Left knowingly exploited his ability to move stock prices by targeting stocks popular with retail investors and posting recommendations on social media to manipulate the market and make fast, easy money.”
The Justice Department alleged that he conducted business under the name Citron Research, which had a website that published investment recommendations. It claimed he published research on companies ranging from Tesla and GameStop to Grand Canyon Education and Peloton.
If convicted, Mr Left faces a maximum penalty of 25 years in prison on the securities fraud scheme count, 20 years in prison on each securities fraud count, and five years in prison on the false statements count.
03:21 PM BST
August rate cut ‘on a knife-edge’ say economists
The Bank of England’s next decision on interest rates sits on a “knife-edge”, experts have said, as borrowers wait to see if costs will be cut for the first time since the pandemic.
Economists are split over whether the Bank’s policymakers will decide it is the right time to reduce rates on Thursday.
The UK’s base rate has been held at 5.25pc since August last year as part of the central bank’s task to put a lid on unruly inflation.
James Smith, developed market economist for ING, said it will be a “close call” but he expects a majority of policymakers to vote in favour of a 0.25 percentage point rate cut on Thursday.
Sanjay Raja, senior economist for Deutsche Bank, also predicted that rates will be cut to 5pc but stressed it will be a “delicate balance”.
On the other hand, Andrew Goodwin, chief UK economist at Oxford Economics, said he thinks the MPC could hold rates at 5.25pc for another month.
This is partly because financial markets are leaning towards a September cut, and the Bank may want to avoid “surprising” investors.
“The MPC hasn’t gone against the market consensus since November 2021,” Mr Goodwin said.
02:59 PM BST
British Gas owner racks up 1.4m complaints as profits hit £1bn
British Gas received 1.4m complaints from angry billpayers over the past 18 months, new figures show, as concerns over the energy giant’s customer service rumble on.
Our energy editor Jonathan Leake has the details:
The backlash against the gas and electricity supplier emerged as part of its latest results, which revealed half-year profits of more than £1bn for its parent company Centrica.
It generated the cash despite 411,000 complaints between January and June this year, which were in addition to a further 1m grievances in 2023.
The growing number of complaints prompted Centrica to recruit 700 new customer service employees last November, although it has not been enough to stem the flow.
This chart shows the gulf in customer satisfaction.
02:39 PM BST
UK borrowing costs drop amid bets on interest rate cuts
Short-term UK government borrowing costs have fallen to their lowest level in six months after key US inflation figures threw up no surprises and cemented bets on a September rate cut in America.
The two-year UK gilt yield, which is sensitive to the interest rate outlook, fell more than six basis points to 3.85pc - its lowest point since January.
The two-year US Treasury bond yield fell five basis points to 4.38pc while the 10-year yield dropped by about the same amount to 4.08pc.
02:36 PM BST
US stocks rebound as rate cut bets remain intact
Wall Street’s main indexes opened higher in a recovery from the week’s pummeling after a key inflation reading kept rate-cut bets intact.
The Nasdaq Composite gained 150.22 points, or 0.9pc, to 17,331.95 at the opening bell as most megacap tech and chip stocks bounced back from a rout earlier in the week.
The Dow Jones Industrial Average rose 205.79 points, or 0.5pc, at the open to 40,140.86.
The S&P 500 opened higher by 34.45 points, or 0.6pc, at 5,433.67.
02:19 PM BST
US inflation figures ‘strengthen case for September rate cut’
Paul Ashworth, chief North America economist at Capital Economics, said the latest core PCE inflation data “strengthen case for September rate cut”.
Analysts are lining up to hail the figures as proof that inflation is declining sustainably in the US:
US June PCE: On a three month annualized pace topline inflation increased 1.5% (2.5% on the 12mo) and is up 2.3% in the core (2.6% on the 12mo). This implies that a forward-looking central banker should have the confidence that inflation is well along the way to the 2% target,… pic.twitter.com/eyTx6Bi5L8
— Joseph Brusuelas (@joebrusuelas) July 26, 2024
📊Reassuring forward-looking #inflation dynamics!
#Fed policymakers should focus on the road ahead instead of the rearview mirror
✅Headline inflation
⤵️3-month 1.5%
⤵️6-month 3.0%
⤵️12-month 2.5%
✅Core PCE inflation
⤵️3-month 2.3%
⤴️ 6-month 3.4%
↔️12-month 2.6% pic.twitter.com/3oQAOrybxS— Gregory Daco (@GregDaco) July 26, 2024
Fed funds futures see no chance of a July rate cut and nearly 100% chance of a September cut https://t.co/3wrexi6D9W pic.twitter.com/PPDmcPWsLB
— David Wessel (@davidmwessel) July 26, 2024
02:03 PM BST
FTSE surges as traders bet on September interest rate cut
Stock markets have rebounded from the sharp sell-off earlier this week after a key measure of US inflation held firm and cemented bets on interest rate cuts.
The FTSE 100 was up 1pc while stocks on Wall Street were poised to lurch higher after the US personal consumption expenditures (PCE) price index came in largely as expected. The FTSE 250 was up 1.5pc.
After coming through the data release relatively unscathed, traders have cemented bets that the US Federal Reserve will begin cutting interest rates in September, which is now priced into the market.
Although the US is expected to hold rates steady next week, money markets indicate there is a 45pc chance that the Bank of England will cut rates at its next meeting on August 1.
Failing that, there is a 89pc chance it will reduce borrowing costs in September, with a rate cut priced in by its November meeting.
Stock markets suffered a brutal sell-off on Wednesday and Thursday amid doubts about the boom in AI companies.
01:45 PM BST
Wall Street on track to open higher as US inflation steady
US stock index futures extended gains as US inflation data kept bets for an interest-rate cut by September intact.
The personal consumption expenditures (PCE) price index - the US Federal Reserve’s preferred inflation metric - fell slightly less than expected to 2.5pc in June.
Core PCE, which excludes the volatile food and energy components, rose 2.6pc in June - the same rate as May.
In premarket trading, the Dow Jones Industrial Average was up 243 points, or 0.6pc, the S&P 500 gained 42.5 points, or 0.8pc, and Nasdaq 100 was up 203 points, or 1.1pc.
01:42 PM BST
Pound holds gains as US inflation steady
The pound remained 0.1pc higher against the dollar after US PCE figures came in higher than expected.
Traders marginally reduced bets on interest rate cuts but not enough to significantly change the outlook.
The US Federal Reserve is still expected to cut interest rates in September, with the Bank of England given an 89pc chance of doing so by then.
Analysts said the higher than expected core PCE reading - unchanged at 2.6pc - would not deter the Fed from cutting interest rates in September.
Not so BREAKING! US Core #PCE #inflation came in at 2.6%, slightly above expectations, which is not such a big surprise as PCE data from yesterday's #GDP report revealed a similar picture.
Overall level comfortable enough for the #FederalReserve to start cutting rates! pic.twitter.com/t60afeY5Xc— jeroen blokland (@jsblokland) July 26, 2024
🇺🇸Easing #inflation in June👏
✅Headline PCE prices: 0.1% m/m
✅Core PCE prices: +0.2% m/m
🎯Moving toward #Fed's 2% target:
⤵️Headline inflation -0.1pt to 2.5%: low since Feb '21
↔️Core inflation flat at 2.6%: low since March '21 pic.twitter.com/5TXhDZC6TY— Gregory Daco (@GregDaco) July 26, 2024
No huge market reaction to the stickier-than-expected inflation reading:
🔷 2yr yields are ticking down 2bps, dragging the US Dollar $DXY down a handful of pips as well.
🔷 Indices are flat
🔷 Gold is ticking up a couple points— Matt Weller CFA, CMT (@MWellerFX) July 26, 2024
01:31 PM BST
US inflation reading holds steady
A key measure of US inflation was unchanged last month in a potential blow to hopes that the Federal Reserve will begin cutting interest rates in the near future.
The core personal consumption expenditures (PCE) price index was unchanged at 2.6pc In June.
Analysts had expected the reading to fall to 2.5pc.
The headline PCE fell less than expected from 2.6pc in May to 2.5pc in June.
June PCE #inflation +2.5% year/year vs. +2.4% est. & +2.6% prior … core +2.6% vs. +2.5% est. & +2.6% prior pic.twitter.com/8tSOIfcxER
— Liz Ann Sonders (@LizAnnSonders) July 26, 2024
01:21 PM BST
Bond markets steady ahead of US inflation figures
The debt market has calmed ahead of key US inflation figures which could indicate when the Federal Reserve will begin cutting interest rates.
Two year US Treasury yields, which are sensitive to changes in the interest rate outlook, were little changed at 4.44pc after falling to a five month-low of 4.34pc on Thursday. The UK two-year gilt yield was flat at 3.92pc.
Meanwhile, 10-year US Treasury yields were steady at 4.25pc, with the UK 10-year bond yield at 4.13pc.
That could all change shortly when the US core personal consumption expenditures (PCE) price index is published.
It will be the last piece of major economic data before the Federal Reserve’s next policy meeting on July 31.
It is expected to fall slightly from 2.6pc to 2.5pc.
Althea Spinozzi, head of fixed income strategy at Saxo Bank, said:
If Friday’s PCE data shows that the Fed is nearing its 2pc inflation target, the bond market could react positively, potentially pushing 10-year yields below 4.18pc.
Conversely, if the data does not support this, yields may continue to rise.
01:10 PM BST
Banks and National Crime Agency launch ‘dirty money’ crackdown
Barclays, NatWest and Lloyds are among seven banks to share customer data with the National Crime Agency (NCA) in the largest project of its kind worldwide to tackle criminal gangs, money laundering and “dirty money” flowing through Britain.
The NCA said the project went live in May and included voluntary data sharing deals with Santander, TSB, Metro Bank and Starling Bank.
It said it had already identified eight new crime networks that might be exploiting the financial system.
Britain has ramped up efforts to tackle economic crime, which MPs say costs the economy up to around £350bn each year.
Russia’s 2022 invasion of Ukraine shone a spotlight on how kleptocrats and criminals used Britain as a haven to launder, hide and spend “dirty money”.
Adrian Searle, director of the NCA’s National Economic Crime Centre, told Reuters that three crime networks had been passed to the NCA’s intelligence division for further investigation.
The project has also uncovered new intelligence linked to 10 of the agency’s biggest investigations. He did not divulge details.
12:54 PM BST
Virgin Media O2 sales hit by iPhone 15 apathy
Virgin Media O2 (VMO2) has warned of a sales slowdown amid tepid demand for smartphones such as the iPhone 15.
Our reporter James Warrington has the details:
The telecoms giant posted revenues of £2.7bn in the second quarter, a decline of 4.1pc on the same period last year. This was driven by a slump in revenues from handsets as consumers shunned the latest gadgets.
Bosses said Britons were holding on to their mobile phones for longer amid a squeeze on household budgets.
They also pointed to lacklustre demand for the iPhone 15, which was released last year but offered little by way of new features.
It comes amid a tough backdrop for telecoms providers.
12:41 PM BST
Wall Street poised for rebound amid rate cut hopes
US stock markets are on track to open higher as megacap tech and chip stocks are expected to bounced back from their drubbing earlier this week.
Megacap tech stocks including Apple, Nvidia, Alphabet, Microsoft, Meta Platforms, Amazon and Tesla were up between 0.7pc and 2.2pc in premarket trading earlier.
Chip stocks also rebounded, with Intel, Broadcom, Qualcomm, Micron Technology and Arm Holdings up around 2pc each.
Investors have dumped megacap tech stocks in the past few weeks, with disappointing earnings from Alphabet and Tesla sparking a sharp selloff in the so-called “Magnificent Seven” on Wednesday.
It set up the S&P 500 and the Nasdaq for their second straight weekly decline.
However, the much-awaited personal consumption expenditures (PCE) price index data - the Fed’s preferred inflation gauge - could change the fortunes of Wall Street if it boosts hopes of interest rate cuts.
In premarket trading, the Dow Jones Industrial Average was up 0.6pc, the S&P 500 was up 0.8pc and the Nasdaq 100 had gained 1.1pc.
12:11 PM BST
Supermarkets investigated over fake discount fears
Supermarkets are under fresh scrutiny over claims they are advertising fake discount prices, as the UK watchdog seeks to clamp down on attempts to mislead shoppers.
Our retail editor Hannah Boland has the details:
The Competition & Markets Authority (CMA) has confirmed plans to launch a fresh investigation into how supermarkets use “was/now” prices.
These promotions suggest shoppers are getting a better deal now than they would if they had bought a product earlier.
However, the watchdog said there were questions over what the “regular” price was for that product and if customers were genuinely making a saving.
The CMA said it will be reviewing these promotions.
Read how it comes amid a wider review into supermarket loyalty schemes.
11:52 AM BST
Russia forced into bumper interest rate rise as Putin’s regime battles surging inflation
Russia’s central bank has raised interest rates for the first time this year amid surging inflation caused by Vladimir Putin’s war in Ukraine.
The Bank of Russia lifted borrowing costs from 16pc to 18pc and policymakers indicated that they “will consider the necessity of a further key rate increase at its upcoming meetings”.
It comes as prices grow faster than its 4pc inflation target - double the rate of the Bank of England and other major central banks.
Food inflation rose to 12.3pc in June, up from 8.3pc in May, as unexpected frosts destroyed crops and fuel costs increased as oil refineries were repaired after attacks by Ukrainian drones.
The Bank of Russia said:
For inflation to begin decreasing again, monetary policy needs to be tightened further.
Returning inflation to the target requires considerably tighter monetary conditions than presumed earlier.
11:36 AM BST
Olympic train sabotage inflicts ‘maximum damage’ while avoiding loss of life
The French prime minister has pledged to “find and punish” those responsible after the country’s high-speed national rail network was “paralysed” by sabotage attacks ahead of this evening’s opening ceremony of the Paris Olympics.
Our transport industry editor Christopher Jasper has this analysis on the assault:
The nature of the attacks on the France’s intercity high-speed rail service suggests that the perpetrators had a good working knowledge of the railway and were most likely seeking to cause maximum disruption while avoiding any loss of human life.
The attacks came in the early hours, when no trains were running on the high-speed network, known as TGV, and were carried out in such a way that control centres would have become immediately aware of the damage and shut down the system.
Lineside equipment and signal boxes were among the apparatus targeted, with bundles of cables appearing to have been burned or severed.
Had the perpetrators struck during the morning rush and employed acts of sabotage that could not have been so easily detected remotely – such as parking vehicles across the line – the outcome might have been very different.
John Keefe, public affairs director at Eurotunnel owner Getlink, said that on the modern railway damage to signalling, overhead wires and other equipment is immediately obvious, generally allowing trains to be safely stopped.
There appears to have been no attempt to sabotage the Channel Tunnel, and Eurotunnel’s vehicle shuttles are unaffected by the disruption further south, he said.
Follow the latest on the sabotage attacks here.
11:22 AM BST
Oil prices fall amid weakening Chinese demand
Oil prices have fallen amid doubts over demand from China.
Brent crude oil, the international benchmark, fell 0.5pc to less than $82 a barrel, leaving prices little changed this week.
US-produced West Texas Intermediate was down 0.6pc to less than $78 despite data showing a decline in American stockpiles for a fourth week in a row.
It comes amid concerns about energy demand in China, after investors were unimpressed by measures announced this week designed to stimulate the economy.
11:04 AM BST
Hunt: Trust in Labour will ‘evaporate’ as they prepare to make tax rises
Jeremy Hunt said trust in the new Labour government will “evaporate” after the head of the IFS said its claim to be surprised about the state of the public finances was not “credible”.
The shadow chancellor said:
Labour’s claims are nothing but a fabrication - the books have been wide open since the OBR was set up 14 years ago.
They show an economy that has turned the corner and a deficit one-third of that left behind by Labour - and not this nonsense the Chancellor is peddling.
The reality is she does not want to take the difficult decisions on pay, productivity or welfare reform that would have meant we could live within our means and is laying the ground for tax rises.
After Labour promised 50 times not to do this, they will find trust in the new government evaporates sooner than they expect.
10:49 AM BST
BASF hit by weaker chemicals demand in China and North America
German chemicals giant BASF said profits declined sharply in the second quarter amid weaker demand in the Chinese and American markets.
The supplier of chemicals for the automotive, agriculture and construction sectors, said it had booked a net profit of €430m (£362.7m), down 14pc on the same quarter a year earlier.
Group revenues declined by nearly 7pc to €16.1bn.
BASF said “lower prices in all segments” were “the main driver of this development”, in addition to “negative currency effects”.
Chemicals prices have declined in recent months against a backdrop of weaker global demand and a manufacturing slowdown in several key markets.
Sales in China fell by 5.3pc in the second quarter, while those in North America plunged by 11pc, BASF said.
10:33 AM BST
Co-operative Bank profits slump ahead of Coventry Building Society takeover
The Co-operative Bank has revealed shrinking profits but hailed 2024 as a “landmark” year as it prepares to return to mutual ownership through its merger with Coventry Building Society.
The banking group said it generated lower income and sustained higher costs, as pre-tax profits for the first six months of the year fell to £24.2m, less than half the £61.8m reported this time last year.
It came as the impact of higher borrowing costs begins to wear off for the UK’s high street banks, which had been benefiting from charging more for loans.
Co-op Bank also said that its business expenses increased by 6pc compared with the year prior, driven partly by staff wage rises and higher levels of customer fraud remediation, which doubled to £12.5m.
It flagged a slight uptick in the level of borrowers falling into arrears on repayments thanks to higher living costs and interest rates, but stressed that the level remained low.
Meanwhile, the lender said 2024 would be a “landmark year” as it hailed the completion of its transformation plan which included reducing staff and a £100m IT simplification programme which helped it return to a profit.
It is expecting to complete a £780m deal to be bought by rival lender Coventry Building Society in early 2025.
But merging the two banking firms could take several years as part of a major operation that will create a group with millions of customers and about £89 billion worth of assets.
10:15 AM BST
Pound rises as traders reduce rate cut bets
The pound has risen against the dollar as traders row back bets on the Bank of England cutting interest rates next month.
Sterling was up 0.1pc to $1.287 after falling by 0.4pc on Thursday from $1.29 to $1.286.
Traders had ramped up bets on policymakers cutting rates in August to as high as a 56pc probability after data in the US indicated the Fed would likely cut rates in September.
However, money markets have pulled back today, putting the chances of a summer rate cut at 44pc, while the odds of a reduction in borrowing costs by September stands at 86pc.
09:58 AM BST
NatWest spent £24m on advertising shelved retail share sale
NatWest has revealed it spent £24m on shelved Tory government plans for a retail share sale in the bank as it also reported a 16pc fall in half-year earnings.
The taxpayer-backed lender’s bill for the “Tell Sid”-style campaign comes after it was forced to pay for advertising and preparations for the share sale, which had been due to launch in the summer before the surprise July 4 General Election announcement.
The new Labour Government has not yet confirmed whether it plans to rekindle the share sale plans.
NatWest chief executive Paul Thwaite said he would expect any announcement about a potential share sale to come in the Government’s next fiscal event, although he stressed it was a decision to be made by the Treasury.
He said:
The reality is that the policy for any retail share sale is usually set out during fiscal events.
The new government hasn’t had one.
We would expect it to follow in the next fiscal event.
Details of the costs were revealed in NatWest’s first half figures showing a 16pc fall in pre-tax operating profits to £3bn for the six months to June 30, although this was better than feared and the bank upgraded some of its key performance measures for the year.
09:41 AM BST
Explained: Labour’s growth strategy
09:33 AM BST
China stocks steady amid doubts over economic recovery
China stocks closed up slightly after four days of declines, but overall sentiment remained low as investors worried about a slow economic recovery and lack of big stimulus.
China reported weaker-than-expected economic growth earlier this month, while investors were disappointed by the third plenum, an event held every five years that has set economic strategy ever since Deng Xiaoping embraced capitalist roadsters in 1978.
Concerns about China’s economic recovery lingered even after authorities said on Thursday that Beijing would allocate 300 billion yuan (£32.2bn) in ultra-long treasury bonds to support a programme of equipment upgrades and consumer goods trade-ins.
At the close, the Shanghai Composite index was up 0.1pc at 2,890.90, while the blue-chip CSI300 index was up 0.3pc, although its financial sector sub-index was down 0.9pc.
The Hang Seng index in Hong Kong was up 16.34 points or 0.1pc at 17,021.31. All ended the week lower.
09:19 AM BST
Gas prices rise in fragile market
The price of wholesale gas has risen in a sign that the market remains fragile despite falling demand for the fuel.
Dutch front-month futures, the European pricing benchmark, rose as much as 2.7pc, putting it on track for a slight weekly gain.
Prices have zig zagged as Europe has become more reliant on global supplies of liquified natural gas after shifting away from pipeline supplies from Russia.
However, flows from top supplier Norway have steadied and production has resumed at key US facilities after disruption caused by Hurricane Beryl.
08:58 AM BST
UK markets rise ahead of US inflation figures
UK stocks have gained in early trading amid an uptick in commodity prices, while investors awaited key US inflation data.
The blue-chip FTSE 100 index was up 0.6pc, while the mid-cap FTSE 250 gained 0.3pc.
Personal goods shares rose 1.8pc after French luxury goods company Hermes reported a 13pc rise in second-quarter sales on Thursday.
Energy stocks gained as much as 1.2pc as oil prices rose slightly. Heavyweight oil giants BP and Shell rose as much as 1.3pc and 1.4pc respectively.
Later, investors will look at the US personal consumption expenditure (PCE) numbers for June, which are the Federal Reserve’s preferred measure of inflation and could shed more light on potential interest rate cuts.
In London, Man Group jumped as much as 3.1pc after the hedge fund posted a rise in assets under management to a record $178.2bn (£138.5bn) in the six months to end-June, beating analysts’ expectations.
NatWest gained as much as 9.1pc to top the FTSE 100 after the bank’s first-half pre-tax operating profit fell by a less than expected 16pc to £3bn.
Drax jumped as much as 16pc to the top of the FTSE 250 after the power generator posted higher first-half profit and said it expects annual profit to be at the top-end of market expectations.
08:54 AM BST
Drax profits fuelled by burning forests
Controversial energy group Drax has revealed a jump in profits off the back of its controversial wood-fired power generation which burns would from forests.
Our energy editor Jonathan Leake has the latest:
Drax’s half-yearly results show pre-tax profits hit £515m, which was a 23pc increase on the same period last year.
The company’s key asset is its power station in Yorkshire, which generated around 6pc of the country’s electricity in 2023 by burning 6.4m tonnes of wood, mostly imported from the US. That equates to roughly 27m trees.
It means the plant is among the UK’s largest sources of CO2 - but Drax argues that because this is generated by burning trees it is effectively “carbon neutral”. It plans to install carbon capture units to prevent that CO2 reaching the air.
However such technology comes at a price for taxpayers - last year government subsidies to Drax amounted to £587m - on top of £617 in 2022.
Drax Group chief executive Will Gardiner said: “Drax has delivered a strong operational performance, playing an important role supporting the UK energy system with dispatchable, renewable power, keeping the lights on for millions of homes and businesses, while supporting thousands of jobs throughout our supply chain.
“As well as celebrating 50 years of operations in 2024, we are excited about the opportunities for Drax Power Station, including bioenergy with carbon capture and storage (BECCS). Both the National Grid ESO and the UK’s Climate Change Committee have recently reiterated that BECCS is important for the UK to achieve its decarbonisation goals.”
08:29 AM BST
Big tax rises ‘pretty difficult’ after Labour manifesto pledges, says IFS
Labour has painted itself into a corner over its options to raise taxes, according to the head of the Institute of Fiscal Studies.
Paul Johnson told BBC Radio 4’s Today programme:
If you look at the words in the manifesto, the most striking words are ‘we will not raise taxes on working people’.
If you take that at face value then there are really almost no taxes that you can increase.
More specifically they have ruled out increases in the rate of corporation tax, they have ruled out increases in most aspects of national insurance, VAT and income tax - and of course those are the biggest taxes.
That may mean that they don’t feel constrained to change some allowances and thresholds and so on, and there is clearly some money that you can get from other taxes like capital gains tax and inheritance tax, where I think you could expect to see some changes.
But big tax increases, given the constraints that they have put on themselves, aren’t impossible but they will be pretty difficult.
08:20 AM BST
Supermarket profit margins ‘nothing short of outrageous’ says RAC
After the competition watchdog revealed in a report that drivers are still paying too much for their fuel, RAC head of policy Simon Williams said:
This, the third report from the CMA, contains many findings that we feared. To see that drivers have paid £1.6bn more than they should have in the last year is nothing short of outrageous, especially when so many are dependent on their vehicles. Drivers have every right to feel ripped off, especially knowing there is virtually no market competition between retailers.
The report is, once again, confirmation of what we have known and been campaigning against for many years. Our analysis has long shown that even accounting for retailers’ increased operating costs, margins on fuel are at extremely questionable levels.
The CMA couldn’t be any clearer about what needs to happen. We have already written to the new energy secretary, urging him to implement its recommendations as quickly as possible. This means greater transparency of fuel prices from all retailers and, most importantly of all, a price monitoring body that can take decisive action on retailers whenever drivers are overcharged. This can’t happen soon enough.
08:15 AM BST
Labour’s claim of surprise black hole not ‘credible’ says IFS chief
Labour’s claim to have been surprised that it faces a huge black hole in the public finances is not credible, according to the head of an influential think tank.
Rachel Reeves is preparing to unveil a £19bn black hole in the public finances as she builds up to an autumn tax raid.
An early assessment from the audit has identified roughly £19bn in “excess pressures” for the 2024-25 financial year alone, Whitehall sources said.
However, Paul Johnson, director of the Institute of Fiscal Studies, said the Chancellor should not feel “any sense of surprise” that the public finances are in a poor state.
Asked whether it is credible to say that the hole in the public finances was a surprise, he told BBC Radio 4’s Today programme:
I don’t think it’s really very credible at all.
In terms of the scale of the problems facing public services, lots of individuals and organisations have pointed out that public services are performing considerably worse than they were pre-Covid.
They are performing worse than they were back in 2010. We have seen that Birmingham and other local authorities have been going bust, we know what the waiting lists are in the NHS.
We have always known that public sector pay is a long way behind private sector pay in terms of what has happened in recent years so there shouldn’t really be any sense of surprise that there is a big issue here.
The choice is, as ever, do you want the public services to be as good as they are, better than they are, or are you willing to see them get worse?
08:04 AM BST
UK markets mixed at the open
The FTSE 100 has opened higher amid increased hopes of interest rate cuts in Britain this summer.
The UK’s blue chip index gained 0.4pc to 8,215.16 at the open while the midcap FTSE 250 fell 0.1pc to 20,862.46.
07:45 AM BST
Drivers ‘paying too much’ as supermarkets double profit margins on fuel
Drivers are still paying too much for their fuel, with retail margins “significantly” above historic levels, according to the competition watchdog.
The Competition and Markets Authority (CMA) said that a year after criticising the market for failing customers, it has found little progress.
It said that retailers’ fuel margins - the difference between what they pay for their fuel and the price they sell it at - are “still significantly above historic levels”.
Increases in fuel margins cost drivers more than £1.6bn in 2023 alone, with supermarkets’ fuel margins roughly double what they were in 2019.
CMA chief executive Sarah Cardell said:
Last year we found that competition in the road fuel market was failing consumers, and published proposals that would revitalise competition amongst fuel retailers.
One year on and drivers are still paying too much. We want to work with government to put in place our recommendation of a real-time fuel finder scheme to kick-start competition among retailers.
This will put the power in the hands of drivers who can compare fuel prices wherever they are, sparking greater competition.
07:27 AM BST
NatWest agrees mortgage deal with Metro Bank as profits fall less than expected
NatWest has revealed half-year profits fell by less than feared as it announced a deal to buy a £2.5bn mortgage portfolio from rival Metro Bank.
The taxpayer-backed lender reported a 16pc fall in pre-tax operating profits to £3bn for the six months to June 30.
Despite the fall, the result was better than the £2.6bn most analysts had expected.
NatWest also announced it had agreed to buy around £2.5bn worth of residential mortgages from Metro Bank for £2.4bn in cash, which will see it add around 10,000 borrowers to the group.
Paul Thwaite, chief executive of NatWest, said:
The positive momentum and progress in the first half reflect the ambition across the bank to deliver its full potential.
Our customers are beginning to feel more confident, with activity increasing and asset quality remaining strong, and we are well-positioned to help unlock growth across the UK through our unrivalled regional network.
07:26 AM BST
Mercedes profits plunge amid waning electric car sales
Mercedes profits plunged in the second quarter of the year amid a sharp drop in sales of its electric vehicles.
Underlying adjusted earnings fell by 28pc to €2.8bn (£2.3bn) as it reported lower sales volumes.
It sold 45,843 battery electric cars during the three months to June, which was a drop of 25pc compared to the same period last year.
Electric vehicle sales were down 17pc over the first half of the year to 93,364.
It said in its results: “The pace of the ramp-up of electric vehicles slowed in key markets.”
It added that this had been partially a result of the end of the environmental bonus for electric vehicles in Germany, which was brought to an end in December.
The company also slightly lowered its carmaking margin outlook to 10pc to 11pc from 11pc to 12pc.
07:23 AM BST
Good morning
Thanks for joining me. We begin with a look at Mercedes latest results, showing profits plunged as it suffered a sharp drop in electric vehicle sales.
Underlying adjusted earnings dropped by 28pc in the second quarter as it reported that battery electric car sales fell by a quarter.
5 things to start your day
1) Labour to unveil £19bn black hole as Reeves plots tax raid | Chancellor expected to blame pressures on NHS, prisons and schools for funding gap
2) Parcel deliverer Evri to take on Royal Mail after £2.7bn takeover by US fund | Investment firm to take on UK postal service with injection of fresh funding into parcel business
3) Miliband picks leading Brexit critic as GB Energy chairman | Energy Secretary recruits former Siemens executive to speed up Britain’s offshore wind generation
4) NHS spending rules risk depriving Britain of new medicine, warns AstraZeneca boss | Sir Pascal Soriot criticises spending watchdog’s decision to block life-extending breast cancer drug
5) Ben Marlow: Revolut is finally a bank – now it has to start acting like one | Nik Storonsky must prove his company can act as a mature institution that can be trusted with large deposits
What happened overnight
Shares were mostly higher in Asia as markets rebounded from the heavy sell-off on Thursday.
The gains followed a split on Wall Street, where general stocks and other formerly downtrodden areas of the market rose while superstar Big Tech stocks gave back more of their stellar gains.
Tokyo’s Nikkei 225 index was up 0.1pc at 37,904.30, after sinking 3.3pc the day before amid heavy sell-offs in many markets.
Tokyo’s core consumer price index rose 2.2pc in July, rising for the third straight month to its highest level in four months, adding to expectations that the Bank of Japan may raise its near-zero benchmark interest rate at a policy meeting next week.
Hong Kong’s Hang Seng edged 0.2pc higher, to 17,036.63, while the Shanghai Composite index slipped 0.2pc to 2,881.62.
Australia’s S&P/ASX 200 surged 0.8pc to 7,923.30, while the Kospi in Seoul added 0.7pc to 2,730.68.
Taiwan’s Taiex sank 3.3pc as it reopened after markets there were closed Thursday due to a typhoon. It was catching up with the retreat Wednesday, which was the S&P 500’s worst loss since 2022. Taiwan Semiconductor Manufacturing Corp. plunged 5.6pc, tracking declines in Big Tech companies.
In Bangkok, the SET rose 1.1pc, while India’s Sensex gained 0.8pc.
On Wall Street, smaller stocks and other formerly downtrodden areas of the market rose up while superstar Big Tech stocks gave back more of their stellar gains.
The S&P 500 dropped 0.5pc, closing at 5,399.22, following its slide from the day before, which was its worst since 2022.
The Dow Jones Industrial Average of 30 leading US companies rose 0.2pc, while the Nasdaq Composite sank 0.9pc. Meanwhile, the Russell 2000 of smaller companies climbed 1.3pc.
In the bond market, the yield on benchmark 10-year Treasury bonds dropped to 4.24pc from 4.28pc late on Wednesday.