Britain will fall into recession by the end of this year or early next year, a top City investment chief has predicted, following the bond market turmoil.
Luke Hickmore, investment director at asset manager Abrdn, said the "real surprise" of rising core inflation in Britain's economy would force the Bank of England into action on interest rates.
This in turn will lead to surging mortgage costs, which will put people's incomes "under a lot of pressure", he warned.
The prediction comes days after the IMF forecast that the UK will no longer suffer a recession this year.
Government borrowing costs have surged since data on Wednesday showed core inflation in the UK economy, which strips out volatile food and energy prices, increased to its highest level in 31 years to 6.8pc in April.
Markets are pricing in that the Bank of England could raise rates as high as 5.5pc by the end of the year, which has suppressed bond prices and sent the cost of Government borrowing surging.
Mr Hickmore told BBC Radio 4's Today programme: "We could see inflation stay higher for longer and the Bank of England are going to put rates up even higher than they are at the moment.
"The market for Government debt needs to reflect that and it's brought all prices down. It's been a pretty tumultuous two or three days.
"This higher interest rate profile from the Bank of England, higher mortgage rates and still high inflation it is going to be increasingly hard to avoid a recession.
"I don't think it will be a really hard recession but we will feel it and people's incomes are going to come under a lot of pressure from those higher mortgage rates.
"I think [recession] could be toward the end of this year or the beginning of next year."
That's all from us. We'll be back next week with the latest. Enjoy the long weekend!
Skadden orders City lawyers back to office four days a week
US law firm Skadden is requiring City lawyers to work from the office at least four days a week.
The New York based firm previously required lawyers to be in offices between Tuesday through Thursday, Bloomberg Law reported.
Lawyers will now be required to come into the office from Monday until Thursday, leaving Friday as a flexible working day.
The modified hybrid working policy applies to all of Skadden's offices globally, including London, Legal Cheek reported.
A Skadden spokesman said:
By affording attorneys the flexibility to work remotely on Fridays and during specified periods throughout the year, our modified hybrid work model will harness the best aspects of remote-working while fuelling innovation and professional development through more frequent in-person collaboration.
It comes after the world's largest money manager BlackRock ordered staff back to the office, becoming the latest City player to ditch home working...
Whitbread explores sale of Beefeater and other restaurant chains
Whitbread is laying the groundwork for a sale of part of its £700m pub and restaurant arm in a move that could place its Beefeater steakhouse chain on the chopping block.
Chief business correspondent Oliver Gill has more
The FTSE 100 hospitality giant is understood to have hired advisers to explore options for the division, which also houses the Brewers Fayre pub chain, amid concerns that poor food and drink sales are weighing on the wider business.
The move marks the latest chapter in the sell-off of the one-time brewer as bosses focus on repeating the UK success of its flagship hotel chain Premier Inn, in Germany.
Sources said that discussions are at a preliminary stage and may not result in the business being offloaded. They insisted that only a "small part" of Whitbread’s food and drink operations was under consideration.
Total shareholders reject climate activist resolution as protestors clash with police
French energy company TotalEnergies shareholders have rejected calls to take greater action against climate change, as police clashed with protestors disrupting its annual general meeting in Paris.
Climate group Follow This and 17 institutional investors with over 1 trillion euros under management filed an activist resolution requesting that TotalEnergies commit to steeper absolute emissions cuts by 2030 rather than intensity targets that can fall as the energy company adds renewable assets.
The resolution urged the company to align its carbon emission goals with the Paris climate agreement. However, the motion was defeated after only securing the support of 33.44pc of shareholders.
Mark van Baal, chief executive of Follow This, praised the vote as a "great outcome". He said: "One-third of investors say Total needs to decrease emissions by 2030 and that they can't hide behind their customers by saying Scope 3 emissions are not the company's responsibility," he said.
It came as police sprayed teargas to force protestors back from the meeting in central Paris.
French police fired tear gas at climate protesters trying to block the annual shareholder meeting of oil giant TotalEnergies. The multinational giant has been under fire from NGOs and environmental activists, who have criticized its human rights abuses in African countries. pic.twitter.com/QmCmqojiLu
— red. (@redstreamnet) May 26, 2023
FTSE 100 closes in the green
The FTSE 100 has entered the long weekend in the green, rising 0.74pc to closes at 7,627.20.
The commodities-heavy index was lifted by mining stocks tracking higher metal prices, while share prices in global miner Rio Tinto rose 3.5pc following a brokerage update.
The broader industrial metals mining sector increasing 1.37pc over the day.
However, the blue-chip index has failed to reverse its losses during a turbulent week of trading as the new data revealed far higher levels of inflation. The FTSE 100 has fallen by 1.67pc in the past five days.
The FTSE 250 closed 0.25pc lower at 18,794.09.
Online estate agent Purplebricks receives rival takeover offer from major shareholder
Online estate agent Purplebricks has received a new takeover offer, a week after announcing plans to sell its business to rival property portal Strike for £1.
The property firm has received a rival bid from investor Lecram Holdings, a major shareholder which previously criticised the group's leadership and has repeatedly called for restructuring of upper level management.
The takeover propsal values Purplebricks at the price of 0.5p per share.
However, Purplebricks said it does not recommend Lecram's offer to shareholders. The company said:
The board does not currently consider that the Proposal reflects an improvement on the proposed sale of business and assets to Strike Limited, particularly as regards anticipated return to shareholders and certainty for the Company's other stakeholders.
Lecram must make a firm offer or retract its proposal by a deadline of June 23.
Purplebricks' share price increased by 40.93pc today.
Debt ceiling negotiations continued into the night, says Republican Kevin McCarthy
Republican negotiators have "made progress" on reaching an agreement with the White House on raising the debt ceiling, according to House speaker Kevin McCarthy.
“We worked into the night. I thought we made progress,” McCarthy said as he entered the Capitol. “I thought we made progress today.”
McCarthy said he hasn’t spoke with President Joe Biden in the last 24 hours, Bloomberg reported.
President Joe Biden and the Republican speaker hope to strike a deal over the long weekend. Any agreement would need to be a political compromise, with support from both Democrats and Republicans to pass the divided Congress.
Right, that's it from me. As ever, I'll leave you with my colleague Adam Mawardi as you head toward the weekend.
As posted here earlier, US inflation came in higher than expected according to the US Federal Reserve's preferred measure of price rises.
Excluding food and energy, the so-called core personal consumption expenditures (PCE) index increased 0.4pc in April from the prior month and 4.7pc compared to a year earlier, exceeding projections.
However, the chart below, showing the three months average, indicates why markets in the US have not moved in the same way they did in the UK following the higher than expected core inflation numbers earlier this week:
Another high reading for core PCE inflation, up 4.7% at an annual rate in April--and a 4.3% annual rate over the last three months, continuing its sideways move.
But, under the hood it looks a little better as noisy items and imputations drove a lot of the extra high reading. pic.twitter.com/PdkUNH0mbv
— Jason Furman (@jasonfurman) May 26, 2023
US faces fresh threat over AAA credit rating amid unresolved debt ceiling talks
The US has been set a fresh ultimatum to maintain its AAA credit rating as talks over the US debt limit remain unresolved.
Moody’s has said the US Treasury must meet a mid-June payment of interest on Treasuries if it is to maintain its top grade.
It is the second such warning this week after Fitch Ratings, one of the three biggest ratings agencies in the world, placed the US's AAA status on negative watch because of “brinkmanship over the debt ceiling”.
The warnings comes despite fresh hopes that a deal can be agreed between President Joe Biden and Republican Congressmen led by Speaker Kevin McCarthy.
The US could default as soon as June 1 unless an agreement is reached to raise the limit on the nation’s debt ceiling above $31.4trn.
Treasury Secretary Janet Yellen warned that without a deal "the odds of reaching June 15th, while being able to pay all of our bills, is quite low". About $2bn in interest payments are due that day.
William Foster, a senior vice president at Moody's, said "that's a really important date for us," adding that while the interest payment is relatively small, "if it was missed, that’s a default. We'd downgrade the rating by one notch from AAA to AA1".
Boost for savers amid new bank deals
Savers are being offered a boost as some banks unveiled new deals today
First Direct is launching a one-year fixed-rate savings account with a rate of 4.6pc AER (annual equivalent rate), from Tuesday May 30.
The deal is only available to First Direct customers with a 1st account current account. The bank is currently offering £175 cash to switch to its current account, subject to terms and conditions.
Customers can save any amount between £2,000 and £1m in the new savings account, and can open multiple fixed-rate savings accounts if they wish to. The account must be opened by phone, First Direct said.
Financial information website Moneyfacts said it is possible for savers to find fixed-rate savings deals above 5pc.
Shawbrook launched a one-year fixed-rate bond on Friday, paying 5.06pc AER and a one-year fixed-rate Isa at 4.43pc AER.
It has also increased rates to 3.55pc AER for its easy access Isa and 3.75pc AER for its easy access account.
Tesla accused of ignoring customer complaints over autopilot safety
Tesla has been hit by claims it is ignoring customer concerns about potentially lethal flaws with its Autopilot driver assistance system after a data leak.
Senior technology reporter Matthew Field has the details:
Thousands of files shared by whistleblowers with German newspaper Handlesblatt detail Tesla's handling of crash investigations, in which customers claimed their cars are "simply too dangerous for the road".
The drivers named in the leaks and contacted by the newspaper accused Tesla of brushing off their concerns about its Autopilot technology.
It is alleged that employees are given strict guidelines over how to reply to complaints, with some drivers claiming that Tesla workers were urged to avoid written communication to "offer as little attack surface as possible", Handelsbatt said.
The Autopilot software, launched in 2015, is a set of driver assistance and safety tools that include automatic cruise control, lane guidance and automatic braking.
This graphic details where Tesla has had troubles with its vehicles.
Lazard names new chief executive
Lazard has named Peter Orszag to succeed chief executive Ken Jacobs as the financial advisory firm grapples with an industrywide slump in dealmaking that is expected to last at least until the end of the year.
Mr Orszag, who currently leads Lazard's advisory business, will take the top job on October 1, confirming reports last week that Mr Jacobs was planning to step down and become executive chairman after almost 14 years as boss.
The recent drought in dealmaking has weighed on the firm's profits and shares. Lazard posted a surprise loss for the first quarter and in April announced plans to reduce its workforce by 10pc this year, predicting the slowdown in the mergers-and-acquisitions advisory business will continue throughout 2023.
Mr Orszag, 54, joined Lazard in 2016 from Citigroup after stints working in government.
US markets rise after opening bell
Wall Street shares have made gains amid speculation that the White House and senior Republicans are close to a deal on the US debt ceiling.
The Dow Jones Industrial Average climbed 0.2pc to 32,840.92 as the broad-based S&P 500 also lifted 0.2pc to 4,160.55.
The tech heavy Nasdaq Composite rose by 0.3pc to 12,741.12, even as the latest data showed inflation rising in the US.
Oil rises amid hopes for US debt agreement
Oil has moved higher and stayed on track for a modest weekly gain as investors monitored progress in talks to avoid a US default.
Brent crude, the international benchmark, has climbed by 1pc to hit $77 a barrel as Republican and White House negotiators moved closer to an agreement to raise the $31.4trn debt limit.
US-produced West Texas Intermediate traded 1.2pc higher toward $73 a barrel after slumping more than 3pc on Thursday.
Crude has still sunk about 10pc this year as the lacklustre economic recovery in top importer China and an aggressive monetary tightening campaign by the US Federal Reserve pressured prices.
Boots owner to cut 500 jobs
The US-owner of Boots has said it will cut 504 staff from its corporate workforce as it shifts the business toward patient care.
Walgreens Boots Alliance said it would reduce its staff levels by around 10pc - although none of the workers affected will be based in stores, smaller warehouses or call centres.
Spokesman Fraser Engerman said: "As we continue to transform our business into a consumer-centric healthcare company, we are focused on aligning our structure and streamlining our operations to best serve our patients and customers."
Dollar strengthens as US inflation rises
The pound pulled back some of its earlier gains after the latest US inflation data, showing prices accelerated in April.
Sterling had been up 0.6pc to nearly $1.24 but has reduced its gains to 0.4pc as markets take into account the possibility of more US Federal Reserve interest rate rises to combat inflation.
The yield on two-year US Treasuries, which are sensitive to interest rate movements, has increased five basis points to 4.8pc.
Is inflation stalling at a 4-5% rate?
Core PCE data says yes.
😬The year-over-year change in core PCE accelerated to 4.7%
😬and the year-over-year change in core PCE services (ex-housing) stayed at 4.6%
Way too high for the Fed. pic.twitter.com/B6uJfUVasJ
— Callie Cox (@callieabost) May 26, 2023
US inflation picks up speed
The US Federal Reserve's preferred measure of inflation increased last month.
The personal consumption expenditures price index, rose a faster-than-expected 4.4pc in April, according to the Commerce Department.
Meanwhile, core inflation, which strips out volatile elements like food and energy, made an annual increase of 4.7pc in April, higher than estimates of 4.6pc.
— Ole S Hansen (@Ole_S_Hansen) May 26, 2023
Major insurers quit net zero initiative
Three of Europe's largest insurance firms have quit an industry group tasked with pricing climate change risks amid what its parent organisation has dubbed "political attacks".
Allianz, AXA and SCOR have become the latest insurers to leave the Net-Zero Insurance Alliance (NZIA) following accusations from some US Republicans that they are violating competition laws.
Japan's SOMPO Holdings, a major Asian insurer, also appears to have left the body, which is part of the Glasgow Financial Alliance for Net Zero created by former Bank of England governor Mark Carney ahead of the Cop 26 UN climate summit held in Glasgow in 2021.
The exodus has raised questions about the viability of the NZIA, after some Republican politicians mounted a campaign against financial institutions collaborating to try and rein in carbon emissions.
A spokesman for the organisation said: "These political attacks are now interfering with insurers' independent efforts to price climate risk, which will harm policyholders, main street investors and local economies."
According to the NZIA website, it now has 23 members including Aviva, Lloyd's of London and Tokio Marine Holdings.
UK faces recession, economists predict
Interest rates will rise to 5.25pc and stay there until the second half of 2024, according to prominent economists, as the Bank of England is forced to act to tackle rising core inflation.
Capital Economics also thinks the efforts to quash inflation will lead to a recession in the UK. The prediction comes two days after the IMF said it no longer forecasts such a downturn in Britain this year.
Chief UK economist Paul Dales said:
We now think that rates need to rise to 5.25pc to create the weakness to quash inflation.
Recently, the Bank of England, the OBR, the IMF and most other economists have taken recessions out of their forecasts.
We're keeping a recession in ours, albeit a bit later, as we think some economic weakness is needed to cut domestic inflation.
In response to the realisation that rates will be higher for longer, recessions may creep back into other forecasts.
US markets await inflation data
Wall Street is expecting a boost at the opening bell amid progress in the US debt ceiling talks - although inflation data due at 1.30pm UK time may change all that.
Investors are awaiting the Commerce Department's personal consumption expenditures (PCE) price index figures for April, considered to be the Federal Reserve's preferred inflation gauge.
Meanwhile, after several rounds of negotiations, President Joe Biden and top congressional Republican Kevin McCarthy are closing in on a deal to raise the government's $31.4trn debt limit for two years, while capping spending on most items.
The S&P 500 index and the Dow Jones Industrial Average are on course for their worst weekly performance in over two months as debt ceiling talks have been dragging on in Washington even as the June 1 deadline looms large.
The Dow has fallen for five straight sessions.
In premarket trading, the Dow and the S&P 500 were up 0.2pc, while the Nasdaq 100 was 0.4pc higher.
Meta promises it will not use advertisers' data to gain advantage over them
Meta has promised to put in place measures to stop it gaining a competitive advantage from data it receives from businesses advertising on Facebook after competition regulators raised concerns.
The social media giant told the Competition and Markets Authority (CMA) it would remedy the situation, which would allow it to develop and improve its own products in competition with its advertisers.
The regulator said the promise came after it launched an inquiry two years ago which found that Meta was able to use data from its advertisers against them.
The CMA gave the example of data "derived from users' engagement with ads on Facebook" which could "provide Meta with knowledge as to whether a user is interested in a particular product".
Meta is by some distance the largest supplier of digital display adverts in the UK, earning between £4b and £5bn in this country alone in 2021, the regulator said.
More than 10m advertisers actively use its services across the world.
CMA executive director of enforcement Michael Grenfell said the regulator is now "consulting on these commitments which we believe, at this stage, will address our concerns".
Credit Suisse ordered to pay £749m to former Georgia prime minister
Credit Suisse has been ordered by a Singapore court to pay $926m (£749m) to the billionaire former prime minister of Georgia in a final blow for the bank before its takeover by UBS.
Singapore-based Credit Suisse Trust breached its duty to Bidzina Ivanishvili, Georgia's richest man, in failing to safeguard the trust assets, according to a judgment today.
The court assessed his damages at $926m, minus deductions for an earlier $79.4m settlement, although the amount could be subject to change "so as to ensure there is no double recovery".
This follows a decision by a Bermuda court last year to award Mr Ivanishvili more than $600m in damages in the case.
The ruling marks another major setback for Credit Suisse after a conviction for money-laundering in Switzerland and a raft of other scandals that undermined investor confidence in the bank.
The bank had to accept a government-brokered takeover by larger rival UBS, which is expected to close soon, following the banking crisis in March.
UK Government borrowing costs higher than Greece
While all the world is fretting over a potential default in the US, the country at the centre of Europe's debt crisis a decade ago is staging a remarkable rebound.
Greece's election results this week have spurred so much optimism among investors that they are now willing to grab the nation’s bonds for much lower yields than they get in Italy and the UK, and similar to those on US Treasuries.
The junk-rated bonds have posted the only rally in the developed world this week, taking the benchmark 10-year yield down to 3.9pc.
That is half-a-percentage point lower than the rate paid by investment-grade rated Italian bonds, a gap never seen before.
Britain's 10-year gilts have risen toward 4.4pc, levels last seen following Liz Truss's ill-fated mini-Budget.
Government borrowing costs settle at Truss-era highs
There has not been too much action in the gilts market today following the turmoil of the last couple of days - but they remain exceptionally high.
This week, UK government borrowing rates have shot to their highest since the bond-market meltdown last September after then-Prime Minister Liz Truss' damaging budget plans.
Interest rates in Britain have already risen to their highest in 16 years, at 4.5pc, and are now expected to end this year at 5.5pc, marking a stark turnaround from just one week ago, when money markets showed traders expected a peak of 4.8pc by November.
Benchmark 10-year gilt yields have fallen back slightly by a single basis point to around 4.35pc but risen nearly 70 basis points in May alone. Two-year bonds are down a single point to 4.49pc.
Gilts are trading at their largest premium to 10-year US Treasuries in over 14 years, reflecting the greater degree of risk investors attach to UK government debt right now, even in light of the tussle over the US government's borrowing limit.
Worryingly the UK's 10Y sovereign yield is now is now the highest in the G7. This didn't even happen during the #minibudget in late 2022. On one level this reinforces Sunak/Hunt concerns at the time over inflation & juicing demand, but for this to happen on their watch is awkward pic.twitter.com/SHQa6jj1m2
— Simon French (@shjfrench) May 26, 2023
Revolution Beauty reveals loss as auditors look again at its books
Revolution Beauty's auditors have revealed it made a loss in a past financial year having previously stated it made a £22m profit.
The retailer's shares have been suspended since September after it was unable to get auditors to sign off on its books for the previous financial year.
Today it finally published these figures for the year ending February 2022 showing it made around £23m less in profits than it had previously reported, with the caveat from auditors about whether the business can continue trading as a "going concern".
In a report released in January, Revolution Beauty said that it had encountered a series of problems.
For instance it found that the business had sold product worth £9.6m in February 2022, just before the financial year ended, that should not have been counted towards revenue.
There were also problems with an acquisition, and unusual loans that had been extended to distributors to encourage sales.
Its long-delayed results, showed that it had made an adjusted ebitda loss of around £800,000 - a measure of profits.
Chairman Derek Zissman said: "Whilst these results are significantly below that forecast by the previous management team to the market, they nevertheless reflect a robust business with a strong brand, loyal following, and significant potential in terms of both sales and profitability."
Pound makes gains amid hopes for US debt talks
The pound has risen after data showed UK retail sales volumes rose at their fastest pace in nearly two years, as renewed consumer confidence helped offset the sting of high inflation and rates.
Sterling was last up 0.3pc against the dollar and heading in the direction of $1.24 after data showed retail sales volumes increased by 0.5pc last month.
Between February and April, retail sales rose 0.8pc from the previous three months, the biggest such increase since the three months to August 2021, according to data from the Office for National Statistics.
The pound has fallen by 1.9pc in May, heading for its first monthly decline since February, largely due to a recent swell in investor demand for the safe-haven US dollar.
Markets have remained concerned about the possibility of a "catastrophic" US default on its debts but the mood has been lifted by indications that President Joe Biden and top Republican Congressman Kevin McCarthy are close to a deal.
Against the euro, sterling has gained 0.2pc, making a euro worth less than 87p.
JPMorgan to cut 1,000 staff at First Republic Bank
JPMorgan Chase will cut about 1,000 staff from First Republic Bank following its takeover of the failed lender.
The biggest US bank on Thursday offered full-time or transitional roles to almost 85pc of the nearly 7,000 employees still working at the bank when it collapsed, while the rest were told they would not get offers, according to Bloomberg.
A JPMorgan spokesman said:
Since our acquisition of First Republic on May 1, we've been transparent with their employees and kept our promise to update them on their employment status within 30 days.
We recognise that they have been under stress and uncertainty since March and hope that today will bring clarity and closure.
First Republic said in late April it would cut as much as 25pc of its workforce, one of a series of actions intended to
bolster the troubled bank and reassure investors.
JPMorgan, which had 296,877 employees at the end of March, won a government-led auction for First Republic after the lender was swept up in the crisis of confidence in the banking sector following the collapse of Silicon Valley Bank.
Asos shares jump after £75m cash injection
Asos shares have gained ground after the British online retailer raised £75m in equity to support a turnaround plan.
Existing shareholders Aktieselskabet and Camelot Capital Partners participated in the capital increase, Asos revealed.
The stock rose as much as 8.9pc and but has fallen back to trade 0.3pc higher.
The company's operating losses widened in its first half as Asos tried to cut inventory and excessive discounting.
Chief executive Jose Antonio Ramos Calamonte is seeking to convince investors that his plan will return the business to profit. Like other online-only retailers, Asos has been hit hard by rising return rates.
Asos was for many years a stock market darling amid rising sales and profits. Now the company is one of the most-shorted UK stocks as investors bet the equity has further to fall.
A separate offering of as much as £5m in shares for retail investors remains open.
Asda owners 'to announce £10bn EG Group petrol stations merger'
The owners of Asda and petrol stations giant EG Group are reportedly poised to announce a £10bn merger of the companies' operations in Britain.
Britain's third-largest grocer and EG are both owned by brothers Zuber and Mohsin Issa and private equity group TDR Capital.
Combining the two businesses would create a behemoth with 170,000 employees and annual revenues of close to £30bn.
The Issa brothers are expected to announce the tie-up today, according to Sky News.
Victoria Scholar, head of investment at Interactive Investor said:
Asda is currently the third largest UK supermarket by market share according to Kantar with 13.9pc of the market, having enjoyed a boost during the cost-of-living crisis thanks to its Just Essentials range which has resonated with the increasing number of price sensitive consumers.
A deal with EG Group would create a supermarket, convenience store and petrol forecourt giant with annual revenues of almost £30bn, expanding Asda's footprint in this highly competitive market.
Port of Dover hit by delays amid half-term getaway
The Port of Dover is another focal point for the half-term getaway as thousands of people embark on cross-Channel ferry trips.
Ferry operator DFDS said shortly before 8.30am that there was a wait of around an hour at border control for travellers in cars, while coach traffic was "free-flowing".
This comes after coach passengers at the Kent port suffered delays of several hours ahead of the Easter school holidays.
The RAC estimated that drivers across the UK will embark on 19.2m leisure car trips between Friday and Monday as people make the most of the bank holiday weekend.
Meanwhile, transport data company Inrix warned that journeys on some stretches of the M25 will take up to three times longer than normal.
They include clockwise from Junction 23 for Hatfield to Junction 28 for Chelmsford, and anticlockwise towards the Dartford Crossing.
Long delays are also expected on the M5 in Somerset and the M6 in Cheshire and Greater Manchester.
Flight cancellations not linked to strikes, BA insists
British Airways said where possible cancellations have been focused on routes with several daily flights, enabling passengers to rebook at alternative times.
Heathrow insisted the problem was not related to a strike by security officers at Terminal 5.
A British Airways spokeswoman said:
While the vast majority of our flights continue to operate today, we have cancelled some of our short-haul flights from Heathrow due to the knock-on effect of a technical issue that we experienced yesterday.
We've apologised to customers whose flights have been affected and offered them the option to rebook to an alternative flight with us or another carrier, or request a refund.
BA cancels short-haul flights from Heathrow
Half-term holiday plans for thousands of families have been thrown into disarray after British Airways cancelled at least 42 more flights today due to the impact of an IT failure.
Most of the affected flights were on short-haul routes to and from Heathrow Airport on what was expected to be the busiest day for UK air travel since before the coronavirus pandemic.
The chaos was caused by planes and crew being out of position after an IT problem caused around 80 flights to be grounded on Thursday.
Around 16,000 passengers have been affected by the cancellations.
There were also widespread delays to other flights, and some passengers were unable to check in online.
Gas prices on track for eighth straight weekly loss
European natural gas prices have dropped even further in their longest run of weekly losses since 2007, with demand proving stubborn to return as the economy shows few signs of a meaningful recovery.
Benchmark futures tumbled as much as 4.7pc to below €25 per megawatt hour at one point this morning, putting prices on course to end an eighth consecutive week with a loss.
It extends this year's slump to more than 67pc in a blow to Vladimir Putin's efforts to fight an energy war with the Europe to fund his war in Ukraine.
The dramatic fall comes as industries struggle to increase production amid persistent inflation and a gloomy economic backdrop.
The extended slump has raised concerns that some demand for gas might now be permanently lost or substituted after last year's record prices hit manufacturers particularly hard.
Fuller-than-average gas storage levels, mild weather and an abundance of liquefied natural gas have also lowered demand, raising questions about how much lower prices can go before producers start curbing their output.
Dutch front-month futures, Europe's benchmark, were last down 1.3pc to just over €25 per megawatt hour.
Retail sales growth and US debt ceiling hopes boost markets
UK stocks advanced after data showed retail sales unexpectedly rose in April, highlighting resilience in consumer spending despite elevated inflation.
Markets were also boosted by apparent progress in the US debt ceiling talks, with President Joe Biden and top congressional Republican Kevin McCarthy closing in on a deal.
The blue-chip FTSE 100 has risen 0.5pc, but was set to record its worst week in over a month as an unexpected rise in UK core inflation and the US debt ceiling uncertainties strained markets.
Retail sales volumes rose 0.5pc in April after a 1.2pc fall in March. The sales volumes over the three months to April grew by the most since mid-2021, as per an official report.
The broader retail sector added 0.2pc, led by shares of Asos, while the pound added 0.2pc against the dollar after the data.
Rio Tinto has jumped 3.8pc after brokerage Morgan Stanley turned bullish on the miner.
AstraZeneca has added 1pc after the drugmaker said a combination of its cancer drugs when added to chemotherapy showed positive results in a late-stage trial in patients with advanced or recurrent endometrial cancer.
The FTSE 250 also added 0.1pc.
Government must not 'sabotage' retail growth amid inflation battle
The British Retail Consortium (BRC) has urged the Government not to "sabotage" momentum in the retail sector, as official data showed sales grew 0.5pc in April.
There are concerns that rising sales could fuel price rises, with the UK's core inflation rising to its highest level in 31 years last month.
BRC chief executive Helen Dickinson said:
Sales should improve further as we enter the summer months, especially with inflation starting to ease and consumer confidence slowly stabilising.
Government must ensure it does not sabotage this momentum by adding cost pressures onto retailers from new policies, as these will mainly serve to push prices back up for people up and down the country.
FTSE 100 jumps at the open
The FTSE 100 has risen at the open amid increasing hopes of an imminent deal on the US debt ceiling.
The blue chip index has climbed 0.5pc to 7,609.52 while the domestically-focused FTSE 250 has fallen 0.4pc.
Hunt happy for rates to rise, even if it means UK recession
Chancellor Jeremy Hunt has backed interest rate increases being used to calm soaring inflation even if they increase the risk of pushing the UK into recession.
Mr Hunt insisted that the "only path to sustainable growth" is to bring down the high prices behind the cost-of-living crisis.
The Bank of England has been increasing interest rates as one measure to tackle inflation, but markets predict they could rise as high as 5.5pc this year from the where 4.5pc they currently stand.
Though down from 10.1pc, inflation remains stubbornly high at 8.7pc, with core inflation at its highest since 1992 and food remaining alarmingly expensive.
Mr Hunt told Sky News that prioritising measures to slow rising prices was necessary even if rate hikes damage the UK's gross domestic product, or GDP, a measure of the size of the economy.
Asked if he was comfortable with the Bank acting to bring down inflation even if it could precipitate a recession, Mr Hunt said:
Yes, because in the end inflation is a source of instability. If we want to have prosperity, to grow the economy, to reduce the risk of recession, we have to support the Bank of England in the difficult decisions that they take.
I have to do something else, which is to make sure the decisions that I take as Chancellor, very difficult decisions to balance the books so that the markets, the world, can see that Britain is a country that pays its way - all these things mean that monetary policy at the Bank of England (and) fiscal policy by the Chancellor are aligned.
Retail sales have 'positive momentum,' says PwC
The "trajectory remains positive" for retailers, according to PwC, after data showed retail sales increased by 0.5pc in April, following a 1.2pc decline in March.
In a note sent out this morning, the auditor said:
Following the wash out of March's worse-than-expected retail sales, shoppers staged a comeback to high streets in April.
With inflation still stubbornly high, consumers are still getting less for their money compared with last year: while sales values grew by 7pc excluding petrol, volumes are still 2.7pc lower than last April.
However, some of the slowdown in energy price inflation seems to have made it back to the high street, with almost every other measure of retail sales in positive territory.
March's slowdown was a result of specific factors, as predicted, and all of these have reversed: grocery sales volumes normalised as fresh food shortages dissipated and shoppers stocked up for family gatherings over Easter and early May's bank holidays; while fashion, accessories and beauty showed a marked improvement as dryer and warmer weather encouraged sales of new season’s ranges.
Overall, the trajectory remains positive, with the best quarterly improvement in retail sales volumes since August 2021. This echoes the latest measures of consumer sentiment, which has been improving continuously since last Autumn.
With this month's sales likely to be helped by the Coronation and additional bank holidays, we expect the positive momentum to continue in the short term. However retailers will be hoping that the current green shoots are not dampened by higher interest rates or other macroeconomic challenges over the summer.
Price of food will be 'defining issue' of cost-of-living crisis
Accenture's retail strategy & consulting lead Kelly Askew said the defining issue for retail sales in the months ahead will be the price of food. He said:
The boost in trading from the Easter holidays will have brought spring cheer to retailers, and the sector will be hoping that these positive sales continue as we move into the warmer months.
Despite this week's fall in UK inflation, the defining issue of this cost of living crisis remains the price of food.
It continues to weigh on both consumers and businesses, as retailers continue to grapple with how much of their own rising costs to pass on to customers.
Increasing wages 'offsetting cost-of-living squeeze', says Premier Miton
Following the increase in retail sales in April, Premier Miton fund manager Emma Mogford said:
The pickup in retail sales in April will be welcomed by UK retailers.
Increasing wages are offsetting some of the cost-of-living squeeze, which is helping to make consumers feel better off.
However, any increase in unemployment later in the year could dampen confidence once more.
Supermarket sales rise despite high food prices, says ONS
As retail sales increased 0.5pc in April, Office for National Statistics chief economist Grant Fitzner said:
Retail sales grew, partially rebounding from poor weather affected March, with jewellers, sports retailers and department stores all having a good month.
Despite continued high food prices, supermarkets also recovered from the fall in March.
However, these were partly offset by a drop in the amount of fuel sold, despite prices also dropping.
Shopper spending adds to Bank of England's concerns
The boost in UK retail sales in April comes as shoppers took the chance to get out after heavy rain kept people home the month before - but the rising figure provides another headache for the Bank of England.
The volume of goods sold in stores and online climbed 0.5pc from March, when sales fell 1.2pc, a figure that was revised weaker by the Office for National Statistics (ONS).
Sales rose for every category tracked by the ONS except for fuel and household goods. Sales volumes in the three months through April rose 0.8pc, the strongest since August 2021.
The rebound puts further pressure on the Bank of England to raise interest rates as it attempts to bring down a stubbornly high inflation rate, which stands at 8.7pc.
Strong consumer spending can fuel inflation and Britons have already received a boost this week from Ofgem's lowering of the energy price cap from July, which will give households a £426 saving on typical annual gas and electric bills.
Retail sales grow as shoppers shrug off inflation worries
UK retailers saw sales return to growth last month as jewellers, sports retailers and department stores all reported stronger trade, according to official figures.
The Office for National Statistics revealed that retail sales volumes increased by 0.5pc last month, following a fall of 1.2pc in March.
Economists had only predicted an increase of 0.3pc for the month.
The rebound indicates consumers are surprisingly resilient in the face of a cost-of-living squeeze, with sales gaining in three of the past four months.
— Office for National Statistics (ONS) (@ONS) May 26, 2023
UK Government borrowing costs highest in G7
Just to put the concerns about the bond markets into context, the yield on ten-year debt rose by almost 0.2 percentage points on Thursday to 4.37pc, putting it above Italy's rate of 4.35pc.
It is the first time British yields have topped the G7 group of advanced economies since the dawn of the financial crisis in 2007.
Simon Foy, Adam Mawardi and Alexa Phillips explain more here.
City investment giant Abrdn is predicting the UK will fall into recession after all following the bond market turmoil.
Government borrowing costs have surged since data on Wednesday showed core inflation in the UK economy, which strips out volatile food and energy prices, increased to its highest level in 31 years to 6.8pc in April.
Abrdn investment director Luke Hickmore said a higher interest rate outlook would impact people's mortgage costs leading to a recession "toward the end of this year or the beginning of next year".
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2) Bond markets thrown into chaos as new mortgage shock looms | Lenders raise interest rates after borrowing costs hit highest in G7
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4) Why Elon Musk is trying to create a new Fox News on Twitter | Ron DeSantis' rocky campaign launch marks the latest pivot in the platform's transformation
5) Britain needs to build an extra 250,000 houses just for migrants, say analysts | Record immigration and fewer new builds risk pushing the housing crisis to new depths
What happened overnight
Asian markets were mixed Friday as a deadline loomed for Congress to reach a deal on the U.S. government debt or face a potentially calamitous default.
Tokyo and Seoul rose while Shanghai and Sydney fell. Hong Kong was closed for a holiday.
Tech company shares rose in Asia, too, where Tokyo's Nikkei 225 gained 0.7pc to 31,019.61. In Seoul, the Kospi climbed 0.2pc to 2,559.91, helped by a 2pc rise in the share price for Samsung Electronics, South Korea's biggest company.
The Shanghai Composite index edged 0.1pc lower to 3,196.89, while the S&P/ASX 200 in Sydney added less than 0.1pc, to 7,142.60.
Wall Street ended sharply higher on Thursday after a blowout forecast from Nvidia sent the chipmaker's stock soaring and fueled a rally in AI-related companies, while investors watched for signs of progress in US debt ceiling talks.
The S&P 500 climbed 0.9pc to end the session at 4,151.28 points.
The Nasdaq Composite surged 1.7pc to 12,698.09 points, while the Dow Jones Industrial Average declined 0.1pc to 32,764.65 points.
Meanwhile, policy sensitive two-year Treasury yields hit their highest since March as investors continued to demand a premium on securities seen most at risk of non-payment if the government exhausts its borrowing capacity.