US debt ‘set to explode’ under Trump
In This Article:
America’s national debt is “set to explode” under Donald Trump, top bankers at the Institute of International Finance (IIF) have warned.
Analysts at the Washington-based institute said the incoming president’s plan to slash taxes without equal cuts to spending would push US national debt up from around 100pc of GDP today to more than 135pc in a decade’s time.
Inflation is also likely to rise as Mr Trump stokes spending and makes imports more expensive by slapping tariffs on foreign-made goods.
The US national debt already stands at close to $36 trillion (£28 trillion) and the IIF warned debts could reach more than 150pc of GDP if Mr Trump’s tax cuts are more costly than expected for the US treasury.
Mr Trump’s plans include making income from overtime and from tips tax-free. Such policies will stimulate spending, the IIF said, but will also reignite inflation.
The president-elect has said he wants to raise taxes on imported goods, bringing in extra revenue for the treasury and, hopefully, stimulating local manufacturing. However, this too will stoke inflation by making overseas-made goods more expensive.
Such price pressure will likely force the Federal Reserve to abandon its plans to cut interest rates, the IIF predicted, keeping borrowing costs higher for longer.
Analysts said: “Recent rate cuts have been part of the Fed’s strategy to support growth, yet the fiscal expansion under Trump could force the Fed to reconsider this path, particularly if inflationary risks emerge more rapidly than anticipated.”
Long-term borrowing costs have already risen sharply in financial markets in anticipation of higher US debts and higher-for-longer interest rates. The yield on 30-year treasurys, as US bonds are known, has risen from a low of under 4pc in September to more than 4.5pc today.
“The recent spike in the 30-year treasury yield, in particular, signals investor concerns about the sustainability of an expanding debt load and the potential for inflation as fiscal pressures mount,” the IIF said.
Mr Trump has appointed Elon Musk, the billionaire boss of Tesla and SpaceX, to lead a new department of government efficiency, which aims to offset the impact of tax cuts by slashing federal spending. However, neither man has yet outlined a detailed plan for how to cut spending.
Mr Musk has previously said he could save the government $2 trillion. Economists have expressed doubts about how feasible this is. Paul Mortimer-Lee, an independent economist and research fellow at Niesr, has pointed out that cuts on such a scale would wipe out the equivalent of the budget for transport, education, housing, social services, science and the environment, as well as decimating other benefits like Medicare.
US government debt is traditionally seen as a safe haven for global investors, who often move money into the bonds at times of global crisis.
This, and the dollar’s status as the world’s reserve currency, gives the American government more capacity than other nations to borrow heavily.
However, the IIF suggested that Mr Trump’s plans could stretch this unusual capacity for borrowing.
“Higher yields indicate that while investors see the potential for immediate growth, they are increasingly wary of the inflationary pressures and fiscal sustainability issues that could emerge under such an aggressive fiscal policy,” it said.
“The combination of fiscal stimulus, elevated tariffs, and stricter immigration policies is expected to drive inflationary pressures, which may limit the Fed’s ability to maintain an accommodative stance.”
The IIF pointed out that farms, construction and healthcare in the US “rely heavily on immigrant workers” and a crackdown on this group under Mr Trump could “exert additional upward pressure on prices”.
Borrowing costs in Britain, and much of the rest of the world, typically track those in the US, meaning that a rise there threatens to push up interest rates for other nations too.
Read the latest updates below.
06:26 PM GMT
Signing off...
Thanks for joining us today.
Chris Price will be back at around 7am to cover the opening of the London markets tomorrow. In the meantime, do check out our latest business news and analysis here.
06:16 PM GMT
Farmers in Europe launch protests over Mercosur trade deal
European farmers protested in Brussels today against a free trade deal with South American countries, with farmers in France saying they would follow suit from early next week.
Brazil has been pushing to have the EU-Mercosur agreement signed by the end of the month while it holds the presidency of the G20. Advocates of the deal, including the EU’s biggest economy Germany, say it will open up more markets for their exports.
Meanwhile France, the EU’s largest agriculture producer, has been trying to convince other EU members to form a minority bloc against the deal.
Michel Barnier, the French prime minister, said after meeting European Commission president Ursula von der Leyen: “I told the president that France cannot and will not accept this deal under its current terms.”
Farmers say the agreement with the Mercosur bloc that includes Brazil, Argentina, Bolivia, Paraguay and Uruguay will create unfair competition for EU farmers and food makers as it will allow large imports of products that are not bound by the same strict regulation they face in the EU.
About 100 farmers gathered near the EU headquarters with one tractor carrying a banner saying “Stop EU-Mercosur”, and claiming the deal would be bad for the environment and social rights.
05:52 PM GMT
European shares close at three-month low
European shares ended the afternoon on a dour note, with the Stoxx 600 closing at a three-month low despite rising energy shares.
The pan-European index closed down 0.1pc at 501.59 points, its lowest level since Aug 13.
Most national stock indexes also ended lower, with Germany’s Dax losing 0.2pc, while France’s Cac 40 was down 0.1pc.
Heavyweight technology stocks were among the major sub-sector decliners, dropping 1pc, while car manufaturing fell 1pc.
Rate-sensitive real estate stocks were the biggest drag on the index, losing 1.4pc.
Energy stocks, however, added 1.3pc.
European shares have come under pressure recently as investors assessed the likelihood of tariff increases after Trump’s sweeping victory last week.
Daniela Hathorn, senior market analyst at Capital.com, said:
We’re in this scenario where we’re not quite sure where we’re going. Investors are having a little bit of jitters.
05:47 PM GMT
US Fed may need to u-turn on future rate cuts, says analyst
Lindsay James, investment strategist at Quilter Investors, said that today’s US inflation figures were expected, meaning “no nasty surprises for markets”. But she added:
The real quandary for the Federal Reserve is what do they do with rates from this point.
05:44 PM GMT
US inflation progress ‘has started to stall’, warns bank
Progress toward low inflation has slowed in recent months in the US, which could result in fewer interest rate cuts from the Federal Reserve next year.
A report from the US Labor Department on today, which also showed underlying inflation continuing to run a little warmer last month did not change market expectations that the US central bank would deliver a third rate cut in December against the backdrop of a softening jobs market.
But Michael Pugliese, a senior economist at Wells Fargo, said:
Progress on inflation has started to stall.
05:34 PM GMT
Tesla rally ‘overheated’, warns investment firm
Tesla is up another 1pc today in trading, having jumped nearly 15pc in the past week.
But Adam Sarhan, of 50 Park Investments in Florida, told Bloomberg:
The market’s reaction to Trump’s victory has been nothing short of explosive for Tesla, and while there’s certainly potential for benefits under a Trump administration, the current rally seems overheated in the short-term.
Daniel Ives, equities analyst at Wedbush Securities, said:
It’s clear that Musk will have a massive role in the Trump White House with his increasing reach clearly across many federal agencies.
05:26 PM GMT
Musk-endorsed Dogecoin soars
A cryptocurrency endorsed by Elon Musk has soared as the Trump administration prepares to launch a department with a similar name.
Dogecoin rose 9.6pc in trading today to hit its highest value in over three years. It is up 109.5pc over the past five days.
It came as Trump announced the new Department of Government Efficiency, which will work from outside the government to offer the White House “advice and guidance” to “drive large scale structural reform, and create an entrepreneurial approach to Government never seen before”.
Mr Musk will lead it, along with former Republican presidential candidate Vivek Ramaswamy.
05:13 PM GMT
Pound continues to fall in wake of Trump re-election
The pound dropped further this afternoon as traders mull the re-election of Donald Trump and the risk of higher US inflation and interest rates.
The pound dropped 0.2pc against the dollar today - or 2.6pc over the past month.
04:53 PM GMT
FTSE 100 ends the day up
The FTSE 100 closed up 0.1pc, having spent much of the afternoon in negative territory.
The biggest riser was engineering business Smiths Group, up 10.5p, followed by Vodafone, up 3pc.
At the other end of the index, Intermediate Capital Group fell 7.2pc and DCC lost 3.8pc.
Meanwhile, the mid-cap FTSE 250 lost 0.3pc.
The top riser was automotive supplier Dowlais, which rose 6.7pc, followed by Baillie Gifford US Growth Trust, which gained 6.1pc.
04:49 PM GMT
Bitcoin breached $93,000 amid Trump euphoria
Bitcoin struck a record high above $93,000 this afternoon as the world’s biggest cryptocurrency benefited from president-elect Donald Trump’s pledge to ease regulation around digital tokens.
The volatile asset has rocketed more than 30pc in value since Trump won last week’s US presidential election, smashing its record-high on several occasions and breaching $90,000 for the first time Wednesday.
The Republican said during campaigning that he planned to make the United States the “bitcoin and cryptocurrency capital of the world”.
Alexander Londono, market analyst at ActivTrades, said:
The main catalyst for the recent surge on the price of bitcoin is the victory of Donald Trump.
Mr Londono added that the rally “is based on emotions and future expectations, which may or may not become real”.
04:23 PM GMT
Wetherspoons calls time on Spanish lager boom with switch to Italian beer
Wetherspoons is calling time on Spanish lager in its pubs as it prepares to swap out San Miguel for an Italian alternative.
The pub chain will no longer serve San Miguel once current stocks sell out, replacing it on draught later this month with Angelo Poretti, an Italian beer founded in 1877.
Sir Tim Martin, the founder and chairman of JD Wetherspoon, said the decision to change supplier had come after “much thought”, with its long-running contract for San Miguel coming to an end.
He said: “Our relationships with beer suppliers are usually very long term. San Miguel and Birra Poretti are both excellent products, so these choices are not easy.”
Wetherspoons said it would stock Angelo Poretti for the next 10 years. It means the only Spanish branded beers sold by Wetherspoons will be bottles of Estrella Galicia and Madrí.
04:15 PM GMT
Russian growth slows as war fuels inflation
Russia’s growth slowed in the third quarter, official statistics published Wednesday showed, with high inflation caused by the Kremlin’s massive spending on the Ukraine offensive weighing on the economy.
Moscow has militarised Russia’s economy since it launched its full-scale offensive of Ukraine in February 2022, with huge outlays on soldiers and weapons powering its economy, but causing prices in the shops to rise fast.
Growth in the third quarter was 3.1pc year-on-year, the Rosstat federal statistics agency said, down from a rate of 4.1pc in the second quarter.
Inflation, meanwhile, came in at 8.5pc in October, down from 8.6 percent a month earlier, but still well above the state’s official 4pc target.
The Kremlin has boasted of defying the West’s attempts to collapse Russia’s economy through sanctions, pointing to rapid growth since it ordered troops into Ukraine.
Experts say the government’s massive spending on the military campaign that is spurring the economy, leaving many parts of the civilian sector behind.
It came as Russian Energy Minister Sergei Tsivilev said that the ministry believed it was possible to lift restrictions on gasoline exports as fuel prices have been stable.
The RIA news agency said the ministry sent its proposals on gasoline exports restrictions to the government.
“We will lift restrictions on exports now, because everything is stable with prices, the situation on the market is stable, so restrictions can be lifted - they were introduced to stabilise prices on the domestic market,” RIA quoted the minister as saying.
In August Russia extended gasoline export restrictions until the end of the year.
Russia in 2023 produced 43.9 million tons of gasoline and exported about 5.76 million tons, or around 13pc of its production.
The biggest importers of Russian gasoline are mainly African countries, including Nigeria, Libya, Tunisia and the United Arab Emirates.
04:08 PM GMT
UK airports operator sold in £1.5bn deal
The group behind Aberdeen, Glasgow and Southampton airports is being sold in a deal worth more than £1.53bn.
Spanish construction giant Ferrovial and joint venture partner Macquarie agreed to sell AGS Airports to AviAlliance for £900m, while the buyer will also take on £653m in debts.
Each year, more than 10.8m passengers pass through the three airports, which provide connecting services to communities across Scotland the South East.
AviAlliance - wholly owned by Canadian pension investor, the Public Sector Pension Investment Board - will add AGS Airports to its existing portfolio of four airports in Athens, Greece, Dusseldorf and Hamburg in Germany and San Juan in Puerto Rico.
PSP Investments is already a long-standing investor in UK infrastructure projects, including a majority stake in Forth Ports, one of the largest port operators in Scotland and England, as well as rolling-stock giant Angel Trains.
Gerhard Schroeder, managing director of AviAlliance, said: “We are committed to supporting the airports over the long-term to expand their route networks, further improve the passenger experience and implement the airports’ sustainability strategy.”
04:01 PM GMT
FTSE 100 under pressure but the continent drops sharply
The FTSE 100 has lost 0.2pc in trading today, but the pan-European Stoxx 600 has lost 0.6pc. France’s Cac 40 is down 0.7pc as is Germany’s Dax.
Chris Beauchamp, chief market analyst at online trading platform IG, said:
The rise in yields continues to pressure European stocks, but the FTSE 100’s losses pale in comparison to continental Europe.
03:57 PM GMT
German opposition party has no plans to rip up German debt rules, says source
The leader of the German opposition party, the Christian Democratic Union, has no plans to reform the debt brake, a source close to the party leader told Reuters.
Friedrich Merz, who could be Germany’s next chancellor according to opinion polls, had told a radio show last week: “In politics, nothing is ever completely ruled out.”
The debt brake limits the public deficit to 0.35pc of gross domestic product.
03:47 PM GMT
Wall Street ‘a little bit on edge’ as stock prices languish
Wall Street’s main indexes are languishing this afternoon after US inflation ticked up in October.
Consumer prices rose 2.6pc from a year earlier, the Labor Department said Wednesday, up from 2.4pc in September. It was the first rise in annual inflation in seven months.
Ross Mayfield, investment strategist at Baird, said:
The market is already a little bit on edge about the inflationary possibilities for 2025 under a new administration.
Minneapolis Fed President Neel Kashkari said in an interview with Bloomberg TV, that he was confident inflation was headed down.
The S&P 500 was flat, the Dow Jones rose 0.2pc and the Nasdaq lost 0.2pc.
All three major indexes closed lower on yesterday, also pressured by rising US Treasury yields on expectations that President-elect Donald Trump’s policies could exacerbate inflation.
Despite the declines on Tuesday, Wall Street has been largely upbeat over the past few days, expecting Trump’s pro-business stance and possible tax cuts to buoy corporate growth, even as some worries remain over higher tariffs and inflation.
03:34 PM GMT
Bitcoin nears $92,000 in ‘Trump trade’
Bitcoin is on the move again, having surged past an unprecedented $91,000 minutes after breaking $90,000 for the first time in its history.
The crytocurrency was last up 4.5pc to $91,915.03 as investors were spurred by the “fear of missing out” on potential deregulation in the Trump administration.
I am heading off at this stage and my colleague Alex Singleton will make sure you stay informed into the evening.
03:15 PM GMT
The Guardian quits Elon Musk’s ‘toxic’ X after Trump victory
The Guardian is planning to quit Elon Musk’s X in the wake of Donald Trump’s election victory.
In an internal email, Guardian staff were told of plans to stop using the social network as it “becomes ever more toxic”.
Reporters are being told they can remain on the app with their personal profiles, multiple sources said. The newspaper joined the social network in 2007, when it was known as Twitter.
Matthew Field, James Warrington and James Titcomb reveal the details of the email to staff.
02:58 PM GMT
Traders increase bets on rate cuts after US inflation figures
Traders are increasing bets that the Federal Reserve will cut interest rates next month after inflation rose as expected in October.
Money markets indicate there is an 82pc chance that policymakers will reduce the Fed’s key rate by a quarter of a percentage point to a range of 4.25pc to 4.5pc.
It comes after US consumer inflation edged higher last month from 2.4pc to 2.6pc, according to the Labor Department, as economists had expected.
Core inflation, which strips out food and energy prices, was unchanged at 3.3pc, as had been forecast.
02:43 PM GMT
Bitcoin surpasses $90,000 for first time
Bitcoin has hit a new record high after inflation figures came in as expected.
The world’s largest cryptocurrency was up 2.7pc today to $90,346.29 as it is pushed higher by the so-called “Trump trade”.
Speculators are racing to buy the digital asset after the President-elect promised to make the US the “crypto capital of the world”.
02:37 PM GMT
US stocks inch up as inflation pulls no surprises
Wall Street’s main indexes were steady on Wednesday after consumer price inflation data rose exactly as expected and kept the Federal Reserve on track to cut interest rates in December.
The Dow Jones Industrial Average fell 30.5 points, or 0.1pc, at the open to 43,880.46.
The S&P 500 rose 1.8 points, or less than 0.1pc, at the open to 5,985.75​, while the Nasdaq Composite rose 5.1 points, or less than 0.1pc, to 19,286.46.
02:34 PM GMT
US debt ‘set to explode’ under Trump, warn bankers
America’s national debt is “set to explode” under Donald Trump, top bankers at the Institute of International Finance (IIF) have warned.
Analysts at the Washington-based institute said the incoming president’s plan to slash taxes without equal cuts to spending would push US national debt up from around 100pc of GDP today to more than 135pc in a decade’s time.
Inflation is also likely to rise as Mr Trump stokes spending and makes imports more expensive by slapping tariffs on foreign-made goods.
The US national debt already stands at close to $36 trillion (£28 trillion) and the IIF warned debts could reach more than 150pc of GDP if Mr Trump’s tax cuts are more costly than expected for the US treasury.
Mr Trump’s plans include making income from overtime and from tips tax-free. Such policies will stimulate spending, the IIF said, but will also reignite inflation.
The president-elect has said he wants to raise taxes on imported goods, bringing in extra revenue for the treasury and, hopefully, stimulating local manufacturing. However, this too will stoke inflation by making overseas-made goods more expensive.
Such price pressure will likely force the Federal Reserve to abandon its plans to cut interest rates, the IIF predicted, keeping borrowing costs higher for longer.
Analysts said: “Recent rate cuts have been part of the Fed’s strategy to support growth, yet the fiscal expansion under Trump could force the Fed to reconsider this path, particularly if inflationary risks emerge more rapidly than anticipated.”
Long-term borrowing costs have already risen sharply in financial markets in anticipation of higher US debts and higher-for-longer interest rates. The yield on 30-year Treasuries, as US bonds are known, has risen from a low of under 4pc in September to more than 4.5pc today.
“The recent spike in the 30-year treasury yield, in particular, signals investor concerns about the sustainability of an expanding debt load and the potential for inflation as fiscal pressures mount,” the IIF said.
02:20 PM GMT
Government borrowing costs fall after inflation data
The cost of government borrowing has fallen after the latest inflation figures in the US came in exactly as expected.
US Treasury bonds and UK gilts rallied following the data which showed the consumer prices index rose 2.6pc in October.
The yield on 10-year Treasuries - the return the government offers to buyers of its debt - fell by six basis points to 4.37pc, while 10-year UK gilt yields dropped three basis points to 4.47pc.
02:13 PM GMT
Post Office facing ‘commercial challenges’ as it puts up pay
Business minister Gareth Thomas said the Post Office is facing “commercial challenges” and there needs to be “significant cultural change” as it announced plans to close more than 100 branches but double pay for postmasters.
Mr Thomas highlighted the “vital” banking services provided by the Post Office and the importance of postmasters.
Postmasters will get a larger share of revenue and more say in the running of the business as part of a sweeping overhaul announced by chairman Nigel Railton today.
Mr Thomas told the Commons: “But we have to recognise that the Post Office is far from perfect.
“We have seen this from evidence given at the (Post Office Horizon IT) inquiry. It’s clear there needs to be significant cultural change at the Post Office to ensure it genuinely prioritises the needs of postmasters and delivers customers’ needs far into the future.
“It’s also clear more needs to be done to rebuild trust within the business and with the public who depend on their services. It’s no secret too that the business is facing commercial challenges - nearly half of its branches are not profitable or only make a small profit from the Post Office business.
“Postmaster pay hasn’t increased materially for a decade. The company has a high cost base and needs to transform its IT system.”
01:56 PM GMT
Government doing ‘exact opposite of stimulating growth’ says Fuller’s boss
Pub group Fuller’s has revealed a £3m hit from the Budget move to increase employers’ National Insurance contributions and joined the growing list of companies warning over price hikes to offset the impact.
Chiswick-based Fuller, Smith & Turner - which has 5,500 staff - said it would need to raise prices for customers across its hotels and pubs as it faces a significant cost increase.
The group said that together with the planned increase in the minimum wage, which was also announced in the Budget, it will be facing an extra £8m bill next year.
Simon Emeny, chief executive of Fuller’s, said: “We won’t be able to afford to just take the £8m hit to the bottom line, so there will be price increases and it will be inflationary.”
He said it was “too early” to say what impact the Budget blow will have on its investment plans, but said others in the sector were reining in spending as a result, which will lead to some hospitality firms having to cut back on recruitment.
But Mr Emeny stressed: “Our customers want a high level of service so it’s imperative we don’t compromise on that.”
He added: “For a Government that was supposed to be stimulating economic growth, it will do the exact opposite.”
01:42 PM GMT
Wall Street poised to rise after inflation figures
US stock indexes turned positive in premarket trading after inflation figures did little to change expectations for the Federal Reserve’s plans for interest rate cuts.
The Labor Department report showed the consumer prices index rose as expected by 2.6pc in October, up from 2.4pc in September.
Stocks had been lower ahead of the opening bell but after the data the Dow Jones Industrial Average moved up 20 points, or 0.1pc, the S&P 500 rose 5.75 points, or 0.1pc and Nasdaq 100 E-minis edged up nine points, or less than 0.1pc.
Richard Flynn, managing director at Charles Schwab UK, said: “It’s slightly unclear where prices will go from here, as the outlook for coming months has been muddied somewhat by the election.
“Investors will be keeping a close eye on the incoming Trump administration’s plans for tariffs, immigration and tax cuts, and preparing for their resultant impact on inflation.”
01:32 PM GMT
US inflation rises to 2.6pc
US inflation rose as expected ahead of the arrival of the Donald Trump administration.
The consumer prices index rose from 2.4pc in September to 2.6pc in October, according to the Labor Department.
Core inflation, which strips out volatile food and energy prices, remained unchanged as expected at 3.3pc.
01:12 PM GMT
Car finance industry faces ‘substantial threat’ from PPI-style scandal
The car loan industry faces a “substantial threat” from a mis-selling scandal on the scale of PPI, Martin Lewis has claimed.
Banks and other motor finance lenders are bracing for a flood of new claims linked to hidden commissions on loans, prompting the City watchdog to give them longer to deal with the crisis.
The Financial Conduct Authority (FCA) extended the time all lenders have to deal with a deluge of complaints on Wednesday.
Read why the watchdog is now writing to the Supreme Court.
12:57 PM GMT
UK stocks fall ahead of American inflation figures
The main UK stock indexes slipped as traders awaited US inflation data.
The blue-chip FTSE 100 was down 0.1pc, while the FTSE 250 index of midcap companies dipped 0.2pc.
Global stocks were sluggish ahead of the US inflation figures, which are expected to show that consumer prices ticked higher in October.
Traders are currently pricing a 62pc chance of a quarter of a percentage point rate cut by the Federal Reserve in December.
UK and European markets have fluctuated since Donald Trump’s re-election as US president amid concerns about the possibility of a trade war.
In corporate news, Smiths Group rallied 11.3pc, having touched a record high earlier, after the British engineering company upgraded its annual organic revenue outlook following strong demand for its next-generation scanning and explosives detectors.
Babcock jumped 5.1pc after the defence group said it was on track to meet forecasts for the full year as the backdrop of geopolitical instability drives demand for its defence equipment and services.
12:28 PM GMT
Bank of England policymaker pledges to ‘move big’ on interest rate cuts
A policymaker at the Bank of England has said she will “move big” on interest rate cuts when it is clear that persistent pressures on UK inflation have been eliminated.
Catherine Mann, an economist and member of the Bank’s Monetary Policy Committee (MPC), has not yet opted to reduce rates.
She was the only member of the MPC to vote against cutting in August and again in November, taking the base rate down to 4.75pc.
Ms Mann, speaking on the Female Central Bankers panel at the BNP Paribas Global Markets Conference, said she takes an “activist” stance on the nine-member committee.
This is because she believes price rises should not be embedded into the UK economy following a period of high inflation.
Ms Mann said: “Last vote, I chose to hold, as opposed to cut with the rest of the committee, because, in my view, there is outside risk to inflation, already embedded potentially going forward... and in that environment it is important to hold for longer.
“And then, when I have evidence that there has been a removal or sufficient moderation of inflation persistence, then I will move at a bigger step.”
The economist said monetary policy can “have an immediate effect on pricing decisions of firms and an immediate effect on inflation expectations” which she described as “critical” to consider when setting rates. That is why part of my activist strategy is, when I move, I will move big.”
12:14 PM GMT
Buy-now-pay-later giant Klarna to list in US
Klarna, the Swedish buy-now, pay-later business, has confidentially filed for an initial public offering in New York, setting the business up for a potential listing in 2025.
While the final offer price has yet to be determined, bankers expect the financial technology business, which was founded in 2005 by Sebastian Siemiatkowski, to attract a valuation of between $15bn and $20bn.
Investment firm Chrysalis Investments, a UK-listed shareholder in Klarna, last month upped the value of its stake in the business, giving the Swedish company an implied valuation of $14.6bn.
That valuation is still far lower than the $46bn investors, including Japan’s SoftBank, bestowed on Klarna in a 2021 funding round, before it dropped to $6.7bn in a subsequent investment deal a little over a year later.
Technology stocks have been soaring since Donald Trump’s victory in the Presidential race last week. Klarna has invested heavily in the US to expand its business, which allows consumers to split purchases into three chunks with zero interest.
11:59 AM GMT
Pound near three-month lows ahead of US inflation figures
The pound hovered near three-month lows against the dollar after a sharp fall following data that showed inflation was easing in the UK.
Sterling was flat at $1.274 after hitting its lowest since early August at $1.272 on Tuesday.
It followed official figures showing regular pay for British workers grew at its slowest pace in two years in the third quarter, supporting the Bank of England’s confidence that inflation pressures will continue to ease.
The Bank of England last week lowered interest rates for the second time since 2020 and said the Government’s first Budget would lead to higher inflation and economic growth.
Traders are currently pricing in only a 15pc chance of another interest rate cut in December.
Meanwhile, dollar has surged in strength, scaling to a more-than six-month peak against other major currencies, amid bets that incoming US President Donald Trump’s policies on tax and tariffs could spur inflation.
Investors will watch US inflation figures published later today.
The pound was down 0.1pc against the euro, which is worth at 83.4pc.
11:39 AM GMT
Tesla shares rise after Musk named efficiency tsar
Tesla shares rallied higher in premarket trading hours after Elon Musk was appointed to lead Donald Trump’s new Department of Government Efficiency.
The electric car maker was up 2.6pc before the opening bell after closing down 6.2pc on Tuesday.
The company has surged more than 30pc since Mr Trump won the US presidential election after Mr Musk became a prominent supporter and bankroller of the Republican’s campaign to return to the White House.
Overall, US stock indexes were lower as a rise in Treasury bond yields weighed on equities that are sensitive to interest rates.
All the three major Wall Street indexes closed lower on Tuesday, as a strong rally following the US elections lost some steam.
The benchmark US 10-year Treasury yield moved above the 4.4pc level on expectations that the President-elect’s policies could exacerbate inflation.
In premarket trading, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 were all down about 0.2pc.
11:21 AM GMT
Guardian owner appoints former Rothschild banker to board amid Observer sale
The owner of the Guardian has added a Rothschild banker to its 12-strong board for his “specialist financial expertise” as it prepares to consider the sale of The Observer.
Jonathan Paine, a former managing director and senior adviser at Rothschild & Co, has been appointed to the board of the Scott Trust.
He will also join a separate board that oversees the Trust’s £1.3bn endowment, as well as becoming a member of the group’s joint audit committee.
Read how the appointment adds to a ballooning list of Left-wing luminaries holding non-executive positions at the Guardian.
11:03 AM GMT
Thames Water bondholders at war over £3bn rescue deal
Thames Water’s creditors have tried to pour cold water on a £3bn rescue deal as the company battles for survival.
The utility company said creditors holding more than 75pc of its Class A debt - the least risky class of bonds in its debt pile - have agreed to an emergency funding deal.
The group has been at loggerheads with a secondary group of creditors who also hold a portion of Thames Water’s debt - thought to be about £1bn of riskier, Class B bonds.
The Class B bondholders drew up a rival fundraising plan in October, which they say is less expensive than the interest rate put forward by the Class A group, but it was not endorsed by the utility company.
Thames Water still needs its rescue plan to be passed in court though, and is aiming for a December 17 hearing.
A spokesman for Class B bondholders said: “Even with Thames Water having apparently reached 75pc support among its Class A creditors for the Class A proposal, this is only approval of one of the many classes that will have to ultimately vote on the plan.
“In addition, this level of support is only the bare minimum required for the court to even consider granting its approval.
“The court will have to carefully consider matters such as fairness and alternatives when deciding whether to approve the non-consensual plan. The Class B group will continue to press for a better alternative for Thames Water, which we are confident can and should still be implemented.”
10:50 AM GMT
Inflation not yet vanquished, says Bank of England policymaker
The only policymaker at the Bank of England to vote against a cut in interest rates last week has warned that the threat from inflation has not yet been “vanquished”.
Catherine Mann said high services inflation remained “pretty sticky”, while wage growth would also help to send prices higher in the future.
She told BNP Paribas’ Global Markets Conference that an “upside risk” to inflation was already embedded in Britain’s economy meaning she would push her fellow rate setters to hold rates steady for longer until there is evidence of less persistence.
She said: “We have to be worried about upside risks to energy prices. They have come down quite a bit. That is why the headline inflation rates have come down so much.
“If we think about some of the other policy issues that are under consideration in various places, you know, they are more likely to put upward pressure on inflation, rather than downward pressure.”
She added: “For those two reasons I say that inflation has not yet been vanquished.”
10:31 AM GMT
Just Eat finally offloads Grubhub for £5bn discount
Just Eat has sold its US business Grubhub to the food delivery startup Wonder for $650m (£502.5m), more than two years after it announced plans for a sale.
The price tag represents a roughly $6.7bn (£5.2bn) discount, after Just Eat bought Grubhub for $7.3bn (£5.7bn) in 2020, during the pandemic-fuelled boom in delivery companies.
Just Eat founder Jitse Groen said: “The sale of Grubhub to Wonder will increase the cash generation capabilities of Just Eat Takeaway.com and will accelerate our growth.
“This deal delivers the right home for Grubhub and its employees.”
Amsterdam-based Just Eat bought Grubhub in a bid to get access to the US food delivery market, but order numbers have lagged in recent years.
By April 2022, it announced plans to sell the company, amid growth from competitors such as Uber Eats.
Just Eat shares were up 20pc today as investors cheered its success in finally offloading the US business.
10:16 AM GMT
‘Del Boy billionaire’ rescues Homebase from collapse
A retail tycoon nicknamed the “Del Boy billionaire” is on the cusp of a deal to rescue scores of Homebase stores as the DIY chain calls in administrators.
Chris Dawson, who owns and runs The Range homeware outlets, is finalising a takeover that will result in as many as 70 Homebase stores folded into his shopping empire.
The deal with administrators Teneo is expected to preserve nearly 1,600 jobs across the UK. Up to 1,000 frontline and head office staff are at risk of being made redundant, however, unless buyers for the remaining stores can be found.
Read on for details of the complex plans.
10:01 AM GMT
Post Office poised to close more than 100 branches
More than 100 Post Office branches and some 1,000 jobs are at risk under a sweeping overhaul as the group looks to boost postmaster pay by £250m over five years.
The Post Office revealed it is looking to offload 115 directly-owned branches within its 11,500 network, which could see them transferred to retail partners or postmasters, or potentially closed.
Around 1,000 workers are employed across the branches, while the Post Office also confirmed that hundreds of further roles are under threat at its headquarters as it looks to streamline back office operations.
Post Office chairman Nigel Railton said the shake-up will also offer a “new deal for postmasters” by increasing their share of revenue and giving them a greater say in the running of the business as it looks to move on from the Horizon IT scandal that saw hundreds of subpostmasters wrongfully convicted.
The plans, which are subject to government funding, would see average branch pay doubled by 2030, with £120m in additional pay by the end of the first year.
Mr Railton made the announcement at the company’s headquarters in London on Wednesday in a speech to postmasters across the country, as well as retail partners and Post Office staff.
He said: “The Post Office has a 360-year history of public service and today we want to secure that service for the future by learning from past mistakes and moving forward for the benefit of all postmasters.
“We can, and will, restore pride in working for a business with a legacy of service, rather than one of scandal.”
09:46 AM GMT
FTSE 100 rises ahead of US inflation data
The FTSE 100 rose ahead of US inflation figures which will indicate the health of the world’s largest economy as it heads towards the second Donald Trump presidency.
The UK’s blue-chip index rose 0.3pc while the midcap FTSE 250 gained 0.4pc after sharp falls on Tuesday.
The October inflation reading for the US is expected to show headline inflation rose to 2.6pc from 2.4pc in September.
Traders currently see a 62.4pc chance of the Fed cutting interest rates by a quarter of a percentage point in December, compared to a more than 84pc chance seen a month ago.
Interest rate expectations have shifted recently as markets continue to price in the impact of Mr Trump’s expected policies of lower taxes and trade tariffs, that are viewed as inflationary.
Mohit Kumar, chief Europe economist at Jefferies, said: “Market action is still dominated by post election moves.
“Trump recent picks for key posts have been hawks who are likely to pursue the ‘America first’ policy.
“This is raising concerns over the growth impact in Europe and China. It is also raising concerns over inflation as tariffs and counter tariffs would likely lead to lower growth and higher inflation.”
08:42 AM GMT
Fury as Angela Rayner takes control of Kent ‘garden town’ plan
Angela Rayner has been accused of undermining local democracy after taking control of plans for a new “garden town” development in Kent.
The Housing Secretary last week blocked Swale Borough Council from deciding on controversial plans to build 8,400 homes near Sittingbourne.
Planning officers were meant to vote on proposals last Thursday but received a letter three hours before the town meeting notifying them that Ms Rayner had instead taken control of the process.
Read how councillors were “totally gobsmacked” by Labour’s intervention.
08:26 AM GMT
Supreme Court urged to make quick decision on motor finance mis-selling scandal
The financial watchdog will write to the Supreme Court asking it to make a quick decision on whether it will allow lenders to appeal to a crucial ruling that has triggered a motor finance mis-selling scandal.
The Financial Conduct Authority said it would consult on extending the time that companies have to respond to complaints after the shock judgment last month.
A ruling from the Court of Appeal said it was unlawful for car salesmen to receive a commission from banks providing motor finance, without obtaining the customer’s informed consent.
It wiped billions off the value of banks and forced several lenders to pause loans, with car dealerships told to urgently revise their sales practices to avoid a paralysis in the market.
Since that judgment, the FCA said it has undertaken extensive industry engagement and found that firms are likely to receive a high volume of complaints.
The FCA said: “Motor finance firms are likely to receive a high volume of complaints in response to the recent Court of Appeal judgment.
“Any complaint extension would allow them time to consider how these might be efficiently and effectively handled.
“This would help prevent disorderly, inconsistent and inefficient outcomes for consumers making complaints, motor finance firms and the market.”
08:05 AM GMT
UK markets rebound from global sell-off
The FTSE 100 opened higher after it was caught in a sharp sell-off on Tuesday amid fears about the impact of Donald Trump’s impending presidency.
The UK’s blue-chip index gained 0.1pc to 8,030.45 while the midcap FTSE 250 was up 0.1pc to 20,444.62.
07:49 AM GMT
Musk appointed by Trump to lead new efficiency department
Elon Musk has been appointed to lead Donald Trump’s new Department of Government Efficiency aimed at cutting back bureaucracy in the US government.
The billionaire Tesla boss will co-run DOGE – which coincides with the name of his favourite cryptocurrency Dogecoin – alongside Vivek Ramaswamy, a Trump ally and fellow entrepreneur.
Mr Musk said his appointment to the role “will send shockwaves through the system, and anyone involved in Government waste, which is a lot of people”.
Josh White reveals why Mr Trump hailed the new department as “potentially the Manhattan Project of our time”.
07:42 AM GMT
Thames Water secures creditor backing for £3bn rescue plan
Thames Water has got support from three-quarters of its creditors for an emergency funding deal which would throw a £3bn lifeline for the struggling company.
The utility provider said that creditors holding more than 75pc of its Class A debt - the least risky class of bonds in its debt pile - agreed to the deal.
The 75pc threshold is significant because it is the minimum amount needed for the plan to be approved by a UK court, but Thames Water still needs it to be approved, and is aiming for a December 17 court date.
Thames Water said in a statement that reaching the three-quarters mark represents “an important milestone in implementing” the funding deal.
The plan would see Thames Water initially get £1.5bn, which comes with an annual interest rate of 9.75pc, which the company says will tide it over until October 2025.
07:40 AM GMT
Tax rises ‘too much to bear’, warns JD Sports boss
Upcoming tax rises will be “too much to bear” for Britain’s businesses, the boss of JD Sports has warned, as industry grapples with the impending increases in costs announced in the Budget.
Andrew Higginson, who is chairman of high street chin as well as the British Retail Consortium, said that consumers face “significant inflation” unless Chancellor Rachel Reeves agrees to gradually phase in her £40bn of tax increases.
He said the impending 6.7pc increase in the National Living Wage to £12.21 per hour from April would be negated by retailers being forced to put up prices.
Companies are preparing for a £25bn increase in employer National Insurance contributions, which will rise from 13.8pc to 15pc.
Mr Higginson told BBC Radio 4’s Today programme: “I think it’s the scale of all of the increases that have come at once.
“You’ve seen a bill for retail across National Insurance, minimum wage, the changes to rates which means rates are going up despite the fact we were promised that rates would be coming down for retail, you’re seeing a £5bn a year hit and there’s only two ways to deal with that.
“One is to cut back on investment, cut back on recruitment, cut back on headcount, cut back on jobs.
“Secondly, to put up prices and the one thing that will guarantee is that we will see inflation in retail prices coming from the things that were announced.”
He added: “It is all very well giving people a 6.5pc pay rise through the national minimum wage but if at the same time inflation goes through the roof, it’s not a real increase, is it?”
He said: “I’m guaranteeing you today that if these go through as they are without any sort of feathering, we are going to see significant inflation in prices.
“The cumulative effect of all these changes is too much for industry to bear in the sense of them being able to get on and invest and grow.”
07:34 AM GMT
Good morning
Thanks for joining me. We begin the day with a warning from retailers that impending tax increases will be “too much to bear” and will cause “significant inflation” unless they are phased in gradually.
Andrew Higginson, chairman of JD Sports and the British Retail Consortium, said that hitting retailers with all the changes in the Budget at once would mean workers do not receive a “real increase” from the rise in the national minimum wage, as companies would be forced to raise prices to cope.
5 things to start your day
-
M&S overtakes Waitrose as grocer to Middle England | Turnaround efforts given boost as retailer outsells rival ahead of crucial Christmas rush
-
Inheritance tax raid ‘will deliver fatal blow’ to farming | ‘Chicken King’ warns changes to agricultural relief will create food inflation and insecurity
-
Fury as Angela Rayner takes control of Kent ‘garden town’ plan | Residents say Westminster’s seizure of the planning process undermines local democracy
-
Boots website crashes as shoppers flock to ‘biggest ever’ Black Friday sale | Customers left frustrated as pharmacist implements online ‘queuing system’
-
Ambrose Evans-Pritchard: Markets are wrong - Trump is not going to launch roaring inflation in America | President-elect will be wary of price rises having just seen them sink the Democrats’ campaign
What happened overnight
Asian stocks on Wednesday followed Wall Street lower as momentum cooled for the torrid “Trump trade” that swept US markets.
Japan’s benchmark Nikkei 225 slipped 1.7pc to 38,719.60, as wholesale inflation reached its highest level since July of last year.
The corporate goods price index, which measures the price changes of goods traded in the corporate sector, rose 3.4pc in October year-over-year, according to Bank of Japan data. The increase was partly attributed to the decline of the Japanese yen against the U.S. dollar.
South Korea’s Kospi lost 2.6pc to 2,417.16. Samsung Electronics shares fell by 4.5pc, reaching their lowest level in over four years.
Hong Kong’s Hang Seng dropped for a fourth day, declining 0.6pc to 19,721.10. The Shanghai Composite gained 0.3pc to 3,431.82.
Australia’s S&P/ASX 200 fell 0.8pc to 8,193.40.
On Wall Street, the Dow Jones Industrial Average fell 0.9pc, to 43,910.98, the S&P 500 fell 0.3pc, to 5,983.99, and the Nasdaq Composite fell 0.1pc, to 19,281.40.
In the bond market, the yield on benchmark 10-year US Treasury notes rose to 4.440pc from 4.327pc late on Monday.