Trader bets £2m on biggest interest rate cut in four years

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A trader has placed a £2m bet on the Bank of England cutting interest rates from 5.25pc to 4.75pc in August – Hollie Adams/Bloomberg

A money markets trader has placed a £2m bet on the Bank of England making the biggest interest rate cut in four years next month after inflation fell back to its 2pc target.

The trader would stand to net an £8m profit should policymakers reduce borrowing costs by half a percentage point from 5.25pc to 4.75pc in August, according to Bloomberg News.

However, the wager – placed over two days using so-called Sonia index options – is in stark contrast to market expectations.

Derivatives trades indicate there is a 63pc chance of a quarter of a point interest rate cut to 5pc.

The last time the Bank of England cut interest rates by half a percentage point was in the days after Britain was plunged into the first Covid lockdown in March 2020, when it reduced borrowing costs from 0.75pc to 0.25pc.

Read the latest updates below.


06:05 PM BST

Signing off…

Thanks for joining us today. From around 7am tomorrow, we’ll be covering all the latest in the markets. Do join us then.


05:53 PM BST

European shares advance amid optimism for rate cuts

European shares rose on Thursday amid optimism around US interest rate cuts following soft economic data, while London markets gained as voting began in the UK general election.

The pan-European Stoxx 600 index rose 0.6pc to its highest level for more than a week.

Britain’s FTSE 100 advanced 0.9pc.

Bas van Geffen, at Rabobank in the Netherlands, said:

The UK outcome, widely expected to be a Labour victory, won’t have much impact unless there’s a big upset or surprising outcome, as markets have likely already discounted this.

French stocks advanced for a second day with a 0.8pc rise amid intensified efforts by opponents of France’s National Rally (RN) to prevent the hard-Right party from gaining power.

An opinion poll on Thursday showed RN is expected to fall short of an absolute majority in the second round of a parliamentary election on Sunday.


05:43 PM BST

Peel Hunt shares jump as London market shows ‘tentative signs’ of improvement

Peel Hunt shares rose 5.4pc today after it pointed to an uptick in investment activity in the UK markets and said that its revenues are ahead of where they were at the same time last year.

The London-based investment bank said it had seen “some improvement in the macroeconomic backdrop” in recent months.

That has helped lead to “tentative signs of a pick-up in equity capital markets (ECM) activity,” it said in a trading update.

It said that, as a result, its own investment banking revenues for the first quarter of the financial year are ahead of where they were at the same point in 2023.

Peel Hunt said it has advised clients on “a number of [capital markets] transactions” during the three months to June 30.

That has included acting as global co-ordinator on two initial public offerings carried out on the London Stock Exchange.

One of them was the bumper flotation of computing firm Raspberry Pi, which skyrocketed in value after it started trading last month and was seen as a welcome victory for the UK market.

Peel Hunt said it is also “encouraged by an increase in activity in both our execution services and institutional trading businesses”.

It added: “Consequently, revenues for Q1 FY25 (three months to June 30) are ahead of the equivalent prior year period and in line with market expectations.”


05:31 PM BST

Pound strengthens to its highest level against the dollar for three weeks

The pound is in positive territory and the FTSE 100 finished at its highest level for a week, as traders and investors await the general election result.

Joshua Mahoney, chief market analyst at Scope Markets, said:

European markets are maintaining their upbeat tone as we move through the week, with the FTSE 100 leading the way as the electorate head to the polls.

Coming off the back of a volatile 14-year stint for the Conservative party that saw five Prime Ministers within the past nine years alone, we are seeing the pound strengthen in anticipation of a shift to a stable Labour majority should that come to pass.

Sterling climbed to its higher reading against the dollar for three weeks. The pound was up 0.13pc against the US dollar at $1.276.


05:20 PM BST

Slug & Lettuce slumps to a loss as owner scrambles to refinance £2.2bn debt mountain

Slug & Lettuce swung to a loss last year amid growing debt pressures at its parent company, which is racing to refinance £2.2bn worth of borrowings. Daniel Woolfson reports:

The bar chain, which is owned by Stonegate, fell from a £2.2m profit in 2022 to a £3.1m pre-tax loss in the 12 months to September 2023, new accounts show.

Bosses blamed “the impact of the macroeconomic environment” for revenues falling narrowly from £48.6m to £48.5m.

However, it comes amid broader scrutiny of Stonegate’s debt-fuelled business model.

Under the ownership of private equity firm TDR Capital, Stonegate fell to a £257m loss last year after racking up more than £300m of finance costs.

Read the full story…

A Slug & Lettuce bar in the City of London – Paul Grover


05:06 PM BST

Euro boosted after 200 candidates pull out of French election in bid to defeat National Rally

The euro was handed a boost from news that more than 200 centrist and Left-wing candidates had pulled out of this weekend’s runoff. It rose 0.2pc against the dollar.

President Emmanuel Macron hopes the moves will avoid splintering the anti-National Rally vote after the hard-Right party saw massive gains in the first round.

However, analysts also warn that France – the second-biggest economy in the European Union – could be headed for a period of political deadlock if there is no overall winner in the polls.

Marie-Caroline Le Pen puts a political leaflet in a mailbox as part of her election campaign, today – Jean-Francois Monier/AFP via Getty Images


04:57 PM BST

Footsie closes up

The FTSE 100 rose 0.9pc. The top riser was hip replacement manufacturer Smith & Nephew, up 6.9pc, followed by distribution business Bunzl, up 2.9pc. The biggest faller was Next, down 1.9pc, followed by steam engineering company Spirax, down 1.8pc.

Meanwhile, the FTSE 250 rose 0.3pc. Food manufacturer Bakkavor was the top riser, up 6.1pc, followed by City firm Bridgepoint, up 4.7pc. Storage company Big Yellow fell 3.7pc, followed by the office landlord Workspace Group, down 3.2pc.


04:36 PM BST

Euro zone bond yields tick up as markets pass French debt sale test

Euro zone bond yields edged higher today after dropping yesterday as a French government bond sale passed with little trouble before the final round of the country’s parliamentary elections on Sunday.

Germany’s 10-year bond yield, the benchmark for the euro zone bloc, rose 0.025 percentage points to 2.583pc.

France attracted demand worth 2.59 times the amount raised across four bond sales, slightly higher than its last long-dated auction before President Emmanuel Macron called a snap election and in line with other auctions this year.

It raised €10.5bn (£8.9bn) in total, the top amount it was targeting. France has reduced the amount it is trying to auction during the election period.

The country’s 10-year bond yield showed little reaction and was up 0.035 percentage points at 3.284pc after falling 0.06 percentage points the previous day.

Evelyne Gomez-Liechti, multi-asset strategist at Mizuho, said:

It seems like investors have made out the most from the elections-related cheapening to buy this auction – especially with the two tail risks – far-Left and far-Right absolute majorities now seemingly off the table.


04:23 PM BST

Market favours shake-up at Smith & Nephew

Here’s some more on the news that hip replacement maker Smith & Nephew has jumped 7pc – the highest riser among the FTSE 100 today – after an activist investor revealed it has taken a stake in the group.

Russ Mould, investment director at AJ Bell, said:

Cevian has previously taken positions in UBS, Vodafone and Aviva in an attempt to force change and the case for doing so at Smith & Nephew is presented by a near-40pc decline in the share price over the last five years.

The positive share price reaction to Cevian taking a position in Smith & Nephew demonstrates the market thinks an outside catalyst for a shake-up of the business would be no bad thing …

Cevian is likely to hold management’s feet to the fire and may look for more ambitious targets than set out under the existing improvement plan.

It could also push for a rationalisation of the company’s portfolio, which encompasses sports medicine and wound care alongside orthopaedics.


04:13 PM BST

Airbus wins £1.8bn satellite deal with German military

The German army has awarded Airbus a contract worth €2.1bn (£1.8bn) for next-generation SatcomBw 3 military communications satellites, the European aerospace firm said Thursday.

Michael Schoellhorn, chief executive of Airbus Defence and Space, said:

At a time when Western democracies are challenged and where the European institutional space ecosystem is struggling, we are excited and grateful to develop and build this leading-edge system.


03:59 PM BST

Apple removes 25 VPN apps from its online store in Russia

Apple has removed 25 virtual private network (VPN) applications from its App Store in Russia, the Interfax news agency said on Thursday, as Moscow cracks down on services that help people circumvent online restrictions.

A Russian lawmaker said that Apple had deleted Red Shield VPN, Le VPN, Proton VPN and NordVPN in compliance with orders from communications regulator Roskomnadzor.

VPNs can be used bypass government censors and access content banned by authorities.

Reuters reporters in Moscow confirmed that none of the four VPNs were available for download from the App Store.

The Telegraph has approached Apple for comment.

Under President Vladimir Putin, Russia has put dozens of opposition media websites on blacklists and banned several foreign social media platforms in a crackdown as it tries to control what people can access after Moscow’s 2022 invasion of Ukraine.

This has fostered a cottage industry of freelance programmers and VPN companies working to build stronger tools to evade censors.


03:52 PM BST

Stock markets rise as new data suggests easing inflation in America

World stocks clocked up more record highs this afternoon after US data narrowed the odds on a September Fed interest rate cut, while Europe was on politics watch again as British voters headed to the polls.

Markets were more strongly pricing in US and UK interest rate cuts in September, compared to yesterday.

The July 4 holiday in the United States made for thin trading, amplified as investors sat on their hands to see just how large a majority the Labour Party might get when the UK’s election exit poll and results start coming out tonight.

Michael Metcalfe, head of macro strategy at State Street Global Markets, said:

Having been very negative of sterling for a very long time, institutional investors are actually going into this election quite neutral.

That is partly, he said, because political risk has surged in the likes of France, which holds the second round of its parliamentary elections in three days’ time, and in the United States ahead of its presidential vote in November. He added:

The UK, oddly, has ended up with a neutral position in the middle. Also, I don’t think at any point has the result (of the election) been in any doubt.

The American ISM measure of services activity surprised the markets by sliding to its lowest since mid-2020, suggesting easing inflation, with employment notably weak ahead of the June payrolls report due on Friday.


03:42 PM BST

Russia set to hike interest rates further as Ukraine war fuels inflation

Russia’s central bank chief said today that inflation is running ahead of expectations and hinted the bank was likely to hike interest rates later this month.

Prices have risen fast in Russia since it launched its military offensive on Ukraine in February 2022 and the Kremlin has massively ramped up spending on its army and arms producers.

The surge in public expenditure, combined with record labour shortages in many sectors, has created an inflationary spiral that has gripped the country over the last year.

Elvira Nabiullina, the central bank’s governor, told reporters:

In July the discussion of a rate hike will be on the agenda. I think the main subject of discussion will be the step of the rate hike.

Russia’s key interest rate is currently fixed at 16pc after a series of hikes last year designed to tame price rises and stop a devaluation in the value of the ruble.

But inflation was still running at 8.3 percent on an annual basis in May, far ahead of the bank’s official 4pc target.

Head of the Russian central bank Elvira Nabiullina at the St Petersburg International Economic Forum last month – Sefa Karacan/Anadolu via Getty Images


03:36 PM BST

Chinese electric carmakers commit to European market despite tariffs

Chinese electric car makers Nio and XPeng said today they have no plans to quit the European market after the EU imposed tariffs on Chinese-made electric vehicles (EVs).

The European Union slapped extra provisional duties of up to 38pc on Chinese EV imports because of “unfair” state subsidies, despite Beijing’s warnings the move would unleash a trade war.

XPeng, a Chinese EV firm known for its designer models, said it would remain in the European market despite the tariffs. It added:

As a company with a global vision, XPeng will not change its strategy of exploring overseas markets. We will find ways to minimise the impact on consumers.

XPeng’s rival Nio, with its own high-end models, said it was “closely monitoring” the EU’s decision. It said:

At this stage, Nio maintains the pricing of their current models in its European markets. However, it cannot be ruled out that prices may be adjusted at a later stage as a result of these tariffs being imposed … [We are] fully committed to the European market.

An Xpeng G6 electric car being shown at the Asean Sustainable Energy Week expo in Bangkok yesterday – Rungroj Yongrit/EPA-EFE/Shutterstock


03:34 PM BST

Smith & Nephew leads FTSE 100 as activist investor takes stake

Shares in knee and hip replacement maker Smith & Nephew remain at the top of the FTSE 100 after activist investor Cevian revealed it has taken a stake in the group.

Cevian is now the medical equipment company’s second biggest shareholder after snapping up a 5pc holding, sending shares in Smith & Nephew more than 7pc higher.

Swedish group Cevian is renowned for taking stakes in businesses and then pressing for change and to boost returns to investors.

FTSE 100-listed Smith & Nephew has seen its shares come under pressure since hitting an all-time high in 2020 as it has struggled to grow its profitability in the face of soaring costs and delays to operations following the pandemic.

Friederike Helfer, a partner at Cevian Capital, said:

Smith & Nephew owns fundamentally attractive businesses in structurally growing markets, but the company has not generated shareholder value for many years.

Cevian sees the potential to create significant long-term value by improving the operating performance of the company’s businesses.

We have high expectations for the board and management to realise this potential.

With that I will head off in anticipation of the huge election results day tomorrow. Alex Singleton will keep the updates coming into the evening.


03:17 PM BST

ECB admits some policymakers had doubts about latest rate cut

The European Central Bank has admitted that some of its policymakers felt there was not conclusive enough evidence to begin cutting interest rates in June.

In the minutes of its June meeting, published today, it said “some members” of the Governing Council had reservations about reducing rates amid rising wages and inflation.

ECB president Christine Lagarde had said there was only one dissenting voice among policymakers when she gave her press conference after the reducing deposit rate from its record high of 4pc to 3.75pc.

The ECB said: “At some point, it was necessary to make a judgment call based on the information available, even if that information was less conclusive than might be preferred.”

Christine Lagarde said at her press conference in June that only one member of the Governing Council had opposed the June cut in interest rates – FRIEDEMANN VOGEL/EPA-EFE/Shutterstock


03:03 PM BST

Trader bets £2m on biggest interest rate cut in four years

A money markets trader has placed a £2m bet on the Bank of England making the biggest interest rate cut in four years next month after inflation fell back to its 2pc target.

The trader would stand to net an £8m profit should policymakers reduce borrowing costs by half a percentage point from 5.25pc to 4.75pc in August, according to Bloomberg News.

However, the wager – placed over two days using so-called Sonia index options – is in stark contrast to market expectations.

Derivatives trades indicate there is a 63pc chance of a quarter of a point interest rate cut to 5pc.

The last time the Bank of England cut interest rates by half a percentage point was in the days after Britain was plunged into the first Covid lockdown in March 2020, when it reduced borrowing costs from 0.75pc to 0.25pc.


02:38 PM BST

Barclays offloads German consumer arm under plan to ‘simplify’ bank

Barclays has agreed to sell its German consumer finance arm to an Austrian bank as part of the high street lender’s latest efforts to simplify how the business is run.

The deal will see its Hamburg-based division offloaded to a subsidiary of BAWAG Group, a commercial banking group with customers across Europe and the US.

Barclays’ consumer bank – which offers credit cards, loans and savings to customers in Germany and Austria, and employs about 700 staff – has assets totalling €4.7bn (£4bn).

Barclays did not reveal the price of the deal, but said it would get a “small premium” to the value of its net assets.

It is also expected to release about €4bn (£3.4bn) of risk-weighted assets – meaning the amount of capital a bank must keep in reserve to account for unexpected losses.

The sale follows Barclays unveiling sweeping plans to strip out about £2bn in costs in the coming years and home in on five key divisions going forward.

Barclays has sold its German consumer arm to BAWAG Group – REUTERS/Peter Nicholls


02:25 PM BST

Tech start-ups attack ‘Soviet’ plan to punish foreign flotations

Start-ups have attacked a “Soviet” proposal put forward by the financial industry’s lobby group to penalise UK tech businesses that list overseas.

Our technology editor James Titcomb has the details:

Investors and trade bodies said calls from UK Finance to claw back taxpayer support for start-ups that shift their focus abroad was a “dumb” and “dangerous” idea.

It comes as politicians and regulators consider more forceful attempts to attract companies to the London Stock Exchange (LSE) after a series of defections overseas.

UK Finance said in a paper this week that start-ups should sign up to a “two-way commitment” when receiving government support such as tax credits or funding.

Read what investors said about the plan.


01:57 PM BST

Regulators scrutinise UBS after enforced Credit Suisse takeover

Switzerland’s consumer pricing watchdog has put UBS under observation following its takeover of Credit Suisse, the regulator said on Thursday, amid concerns that the market power of the enlarged lender could lead to higher loan charges.

The supervisor had met with financial market regulator Finma, competition authority ComCo and the Swiss National Bank to discuss consequences of the takeover, it said in a statement.

The meeting laid down the groundwork for necessary cooperation between the different authorities in future, they said.

UBS on Monday said it had completed the merger of its domestic unit with Credit Suisse’s operations in its home market.

UBS had no immediate comment on the decision but a spokesperson pointed to previous statements the bank had made noting that there was plenty of competition within the Swiss banking sector.

UBS has been placed ‘under observation’ by Swiss regulator Finma – REUTERS/Denis Balibouse


01:42 PM BST

Britain’s biggest banks slash rates as election fever triggers mortgage price war

Britain’s biggest lenders have entered a mortgage rates price war as they vie to attract pent-up demand after the election.

Our senior money writer Fran Ivens has the details:

HSBC and Barclays have cut their rates for the second time in two weeks, with the changes coming into effect from July 5.

Barclays has reduced rates by up to 0.7 percentage points although HSBC is yet to give full details of the cuts across its residential range for first-time buyers, movers and those looking to remortgage.

Halifax, Natwest and Santander cut their fixed-rate mortgages earlier in the week with the reductions already in effect. Other lenders are expected to join the race, potentially pushing prices down further.

Read why lenders have some space to reduce their prices.


01:27 PM BST

Oil falls despite hurricane fears

The price of oil has fallen back after hitting a two-month high amid concerns about the arrival of Hurricane Beryl in the US.

Shell, BP and Exxon Mobil evacuated some of their platforms in the Gulf of Mexico this week, helping push up the price of Brent crude, the international benchmark, to more than $87 a barrel.

The storm rumbled towards the Cayman Islands and Mexico today after pummeling Jamaica with winds and rain that caused floods and widespread power outages and leaving at a deadly trail of destruction in several smaller Caribbean islands.

About 73,000 barrels a day of US oil production is withing the projected path of the hurricane.

However, prices have dropped 0.6pc to less than $87 a barrel on what is a thin day of trading as a result of the US Independence Day holiday.


01:06 PM BST

Gas prices edge up amid unplanned outages at plants

Wholesale gas prices have ticked higher after an unplanned halt to output from a plant in Europe’s top producer Norway.

Dutch front-month futures, the continent’s benchmark, gained as much as 2.4pc as flows from the Scandinavian nation were limited by a unscheduled maintenance at its Oseberg gas field.

Network operator Gassco said it was fixing a “compressor failure” at the site.

The decline in output comes as higher temperatures in Europe also push up demand for air conditioning.

The UK’s equivalent gas contract has risen as much as 3pc.


12:48 PM BST

Electric carmakers call for tax breaks as sales go into reverse

Household purchases of electric cars have gone further into reverse in the latest sign of trouble facing the market.

Our industry editor Matt Oliver has the details:

The Society of Motor Manufacturers and Traders (SMMT) on Thursday called for incentives to “re-energise” sales, as figures showed just one in five new electric vehicles (EVs) were bought by consumers in the first half of this year.

That compared to one quarter over the same period in 2023, underlining how the bulk of purchases continue to be made by so-called fleet buyers, such as rental companies.

Mike Hawes, the SMMT chief executive, said: “The private consumer market continues to shrink against a difficult economic backdrop, but with the right policies in place, the next government can re-energise the market and deliver a faster, fairer zero emission transition.”

This chart shows how electric battery vehicles sales are lagging.


12:26 PM BST

Pound rises as Britain votes in election

The pound has risen as the British people go to the polls to vote in the general election.

Sterling was up 0.1pc against a broadly weaker dollar at $1.276 as opinion polls show Labour Party on course for a landslide victory.

Jane Foley, head of FX strategy at Rabobank, said: “If investors carry on believing that significant tax increases are not likely, that the Labour Party wants to stimulate growth by convincing investors to come back to the UK, we could see a moderate rally for the pound.”

Sterling gained 0.5pc on Wednesday after weaker than expected employment and services data sent the dollar lower across the board amid renewed hopes of US interest rate cuts.

The pound has spent most of 2024 down slightly against the dollar – while outperforming other major currencies – but sterling was last up 0.2pc against the dollar this year.

Ms Foley added: “It was also the second best performing G10 currency last year, but you have to bear in mind that in September 2022 it was at its weakest ever, so if you look at sterling now it is not a strong currency but it has recovered from a very low base.”

The pound’s recovery has been underpinned by Britain’s better-than-expected growth in GDP, which rose 0.7pc in the first three months of the year, prompting officials at the Office for National Statistics to declare that the economy was “going gangbusters”.

The Bank of England has also had a cautious attitude to interest rate cuts relative to European peers, keeping rates at 5.25pc since August last year while the European Central Bank, Switzerland, Poland and Sweden have all cut rates.


12:11 PM BST

‘Little hope’ for France house building as property crisis deepens

There is “little hope” for French housebuilders as the property crisis deepens in the wake of Emmanuel Macron’s snap election.

Our economics reporter Melissa Lawford has the details:

Housebuilding plunged at one of the fastest rates on record as signs of recovery in the construction sector evaporated in June.

Residential building activity slumped to 33.7, according to the HCOB France Construction purchasing managers’ index, down from 34.2 in May, as early signs that the downturn was easing came to an abrupt halt.

Norman Liebke, economist at Hamburg Commercial Bank, said: “There’s really little hope for the French construction sector.”

High inflation and high interest rates have battered the French housebuilding sector, which has been in recession since February 2022, but in April and May the sector had been slowly starting to recover ahead of European Central Bank interest rate cuts.

The June drop was the steepest seen since March and the third biggest fall since the initial Covid lockdowns in early 2020. It was the sixteenth biggest drop on record since the data series began in 2000.


11:56 AM BST

Cineworld draws up plans to shut dozens of cinemas

Cineworld is reportedly drawing up plans to close dozens of cinemas as part of a restructure aimed at reviving the struggling chain’s fortunes.

The company is considering closing about a quarter of its roughly 100 British sites under plans which would also see it try to renegotiate rent agreements on about 50 sites, according to Sky News.

Cineworld, which also trades under the Picturehouse brand, filed for hapter 11 bankruptcy protection in the US in 2022 as it grappled with a multi-billion dollar debt pile.

It delisted from the London Stock Exchange in August last year after a collapse in its share price.

Alix Partners, who have reportedly been hired to advise on the restructure, declined to comment.

Cineworld has been contacted for comment.

Cineworld is reportedly preparing plans to close dozens of its cinemas – Matthew Horwood/Getty Images


11:33 AM BST

Bitcoin slumps as Biden ‘seriously considering’ leaving election race

The price of bitcoin prices has slumped amid concerns that Joe Biden could drop out of the US presidential race.

The world’s largest cryptocurrency has fallen by more than 8pc so far this month in the wake of the President’s poor performance in a televised debate with Donald Trump.

It was down 4.5pc today after the New York Times reported that Mr Biden told allies he “knows if he has two more events like that” then he is in a “different place” in the race for the White House.

Investors are preparing fo the possibility that a stronger Democratic contender emerges to make life tougher for Mr Trump, whose agenda favours the crypto industry.

Richard Galvin, co-founder of hedge fund Digital Asset Capital Management, said: “The likelihood of a stronger Democratic candidate replacing Biden who might not be pro-crypto is a factor.”


11:18 AM BST

Threads hits 175m monthly users in first year

Meta’s social media app designed to take on Elon Musk’s X has hit 175m monthly active users just ahead of the first anniversary of its launch.

Mark Zuckerberg confirmed the user numbers for Threads in a post to the platform, adding “what a year”.

Threads was launched in July 2023 as a direct rival to X, formerly known as Twitter, which was in the midst of a substantial overhaul after its takeover by Tesla boss Mr Musk, who dismissed staff, overhauled the verification system and cut back on content moderation as part of his plans to allow “absolute free speech” on the site.

Many users, unnerved by the changes, began searching for an alternative – an opportunity seized by Meta and Mr Zuckerberg.

The launch of Threads came as the two tech bosses were locked in a bitter public spat, with the Tesla and SpaceX chief challenging the Meta founder to a cage fight, but it never took place.

At one point, Mr Musk and X even threatened legal action against Meta over the launch of the new app.

The milestone of 175 million monthly users for Threads is modest in contrast to the biggest social media platforms – Meta’s other big apps, Facebook and Instagram, each have billions of active users.

But Meta executives have suggested their key focus for Threads is not user numbers, with Instagram boss Adam Mosseri telling The Verge last year that he would be “more interested” if the platform became “culturally relevant”.


10:58 AM BST

Why Macron’s devil’s bargain with the hard Left risks disaster for France

A coalition push to block National Rally from winning France’s parliamentary election risks costing the country €200bn.

Our economics editor Szu Ping Chan has this analysis:

The resurgence of Marine Le Pen’s National Rally party (RN) in the French elections has grabbed headlines.

But while investors are focused on the prospect of a hard-Right parliamentary majority after this weekend’s final National Assembly vote, Emmanuel Macron’s decision to align himself with the Left may have more serious implications for the French economy.

Its New Popular Front coalition is a hastily arranged marriage of bickering greens, socialists and communists who are promising to bring in controls on food prices, reinstate the right to retire at 60, significantly raise the minimum wage and increase business taxes.

Read why, if these policies were ever enacted, they would cost the country billions of euros – and risk tipping the French economy into a bigger crisis than ever.

Emmanuel Macron’s snap election has already cost France a quarter of growth, business leaders claim – AURELIEN MORISSARD/POOL/AFP via Getty Images


10:38 AM BST

Bosses lower their inflation expectations, Bank survey shows

The outlook for inflation is slightly lower among company executives, a survey from the Bank of England showed.

Chief financial officers survey in the Bank’s Decision Maker Panel said their expectations for inflation over the next year were 0.1 percentage points lower at 2.8pc in June, compared to May’s prediction.

Similarly, the three-month average fell by 0.1 percentage points to 2.9pc in June.

Inflation fell back to the Bank of England’s 2pc in May.

Financial bosses’ expectations for increases in prices at their own businesses were unchanged at 3.9pc in the three months to June.


10:20 AM BST

EU imposes tariffs of up to 38pc on Chinese electric cars

The European Union has imposed provisional extra duties of up to 38pc on Chinese electric car imports after finding that China’s manufacturers benefit from “unfair subsidisation”.

Coming on top of existing import duties of 10pc, the tariffs will apply from July 5 with a definitive decision due by November.

Talks are ongoing between Brussels and Beijing to try to resolve the issue through dialogue and avert a trade war.

Chinese electric cars face additional EU tariffs of up to 38pc – LILLIAN SUWANRUMPHA/AFP via Getty Images


10:09 AM BST

Government borrowing costs rise ahead of French bond sale

France’s bond yields are edging higher ahead of a potentially testing bond sale later today ahead of the second round of parliamentary voting.

The yield on its 10-year bond, which move inverse to price and are a proxy for government borrowing costs, has ticked up two basis points to 3.27pc.

Investors are considering bids for a €10.5bn (£8.9bn) French bond sale later.

A low level of bids will indicate a lack of appetite for the country’s debt amid concerns about potentially higher spending from the far-Right National Rally if it wins power.

Meanwhile, the yield on the 10-year UK gilt edged up to 4.19pc.


09:55 AM BST

Housebuilding hit by ‘election uncertainty’

The construction sector grew for a fourth month in a row, a key survey has shown, although the industry was held back by a slowdown in housebuilding amid election uncertainty.

The closely-watched S&P Global UK construction PMI gave a reading of 52.2 in June, above the 50 mark separating expansion from contraction but down from 54.7 in May.

The main driver of growth continued to come from commercial activity but housing output fell solidly following a first increase in 19 months during May.

Andrew Harker, economics director at S&P Global, said:

Continued growth of the UK construction sector in June meant that the sector has recorded sustained expansion throughout the second quarter of the year.

While there were signs of a slowdown in the latest survey period, most notably around housing activity, firms indicated that a slowdown in new order growth was in part related to election uncertainty.

We may therefore see trends improve once the election period comes to an end.

Moreover, confidence in the year ahead outlook remained strong and firms increased employment to the largest extent in ten months.


09:42 AM BST

Marston’s hires new chairman as it revamps top team

Pub group Marston’s has named a former director at car dealership Vertu Motors as its new chairman in a move that completes a clean sweep at the top.

Ken Lever is set to join the 1,370-strong chain of pubs as non-executive chairman on July 8, replacing William Rucker.

It comes after the company also hired a new chief executive in January with the appointment of former Merlin Entertainments director Justin Platt following the sudden departure of his predecessor Andrew Andrea after two years in the role.

Marston’s said Mr Lever was an “experienced business leader, having held a number of senior executive and non-executive positions at UK listed firms, across multiple sectors including retail, manufacturing, construction, software and business services”.

He recently retired from the board of Vertu Motors and has previously also acted as non-executive chairman of firms including waste giant Biffa.

Mr Lever is also non-executive chairman at data company Cirata, which was formerly known as WANdisco.

Marston’s, which employs around 10,000 staff, recently posted figures showing a 5.2pc rise in revenues to £428.1m for the half-year to March 30.

Marston’s has named Ken Lever as its new chairman – REUTERS/Darren Staples


09:18 AM BST

Car market has strongest start to the year since pandemic

More than a million new cars have been sold in the UK in the first half of the year for the first time since 2019, industry figures show.

New car registrations rose in June by a modest 1.1pc to reach 179,263 units, according to the Society of Motor Manufacturers and Traders (SMMT), taking the total to 1,006,763 new cars.

However, the total number of registrations is still down by more than 20pc on the same period five years ago, before the pandemic.

SMMT chief executive Mike Hawes said:

The year’s midpoint sees the new car market in its best state since 2021 – but this belies the bigger challenge ahead.

The private consumer market continues to shrink against a difficult economic backdrop, but with the right policies in place, the next government can re-energise the market and deliver a faster, fairer zero emission transition.

All parties are agreed on the need to cut carbon and replacing older fossil fuel based technologies with new electrified powertrains is the essential step to achieving that goal.


09:09 AM BST

Japan stocks close at record high

Tokyo shares closed at all-time highs, tracking records on Wall Street where optimistic global investors drove US tech firms higher.

The benchmark Nikkei 225 index climbed 0.8pc, or 332.89 points, to 40,913.65, topping the previous record seen on March 22.

And the broader Topix index added 0.9pc, or 26.29 points, to 2,898.47, its highest level since 1989.

Thursday’s rally was in line with an advance across Asia, where investors were cheered by fresh data indicating the US labour market was softening, giving the Federal Reserve room to begin cutting interest rates.

The Nikkei marked five straight winning sessions – lifted by the continued strength of US tech shares on the back of falling US bond yields, as well as the yen’s weakness and rising commodity prices.

Tokyo and other major global shares have steadily gained since last year, with the Nikkei surpassing the 40,000 mark for the first time in March.

That came a month after the Nikkei broke the record set in 1989 just before an asset bubble in Japan catastrophically burst.


08:54 AM BST

FTSE 100 rises as voting gets underway in general election

The FTSE 100 climbed as voters go to the polls in the general election.

The blue-chip index was up 0.6pc after logging its best day in nearly two weeks on Wednesday, while the mid-cap FTSE 250 was up 0.3pc.

Victory for Mr Sunak would mean an unprecedented fifth term of Conservative rule. A triumph for Sir Keir would see Labour return to power for the first time in 14 years.

Trading activity in the session is expected to be low as the US markets are closed for Independence Day.

Smith & Nephew jumped 6.7pc to the top of the FTSE 100 after Swedish investment firm Cevian Capital disclosed an about 5pc stake in the company.

Medical equipment and services stocks in general gained as much as 4.9pc as a result.

The car and parts sector climbed as much as 2pc after industry body the SMMT said registration of new cars increased “slightly” in June and crossed the half-year “million motors” mark for the first time since 2019.

Among individual stocks, Barclays gained 1.2pc after the bank said it has agreed to sell its German consumer finance business to BAWAG Group AG for a “small premium to net assets”, payable in cash.


08:34 AM BST

EU pork imports investigation will protect ‘stakeholders,’ says China

A Chinese investigation of pork imports from the European Union will protect the rights and interests of “stakeholders”, its commerce ministry said.

The probe followed a request from domestic industry, ministry spokesperson He Yadong said at a news conference.

The investigation, which began last month, will look into pork and its by-products imported from the European Union after the bloc decided to impose anti-subsidy duties on Chinese electric vehicles.

The provisional EU tariffs were due to take effect on Thursday.


08:24 AM BST

Private buyers purchase fewer new cars, industry figures show

Purchases of new cars by private buyers declined in June compared with the same month last year, preliminary figures show.

The Society of Motor Manufacturers and Traders (SMMT) said the overall new car market grew slightly year-on-year, due to an increase in purchases for fleets owned or leased by businesses or other organisations.

This means more than half a million new cars were registered in the first half of the year for the first time since 2019.

The overall new car market during the first six months of 2024 was up by around 5pc compared with the same period last year.

The market share of pure battery electric new cars remained on a par with last year, at around 16pc to 17pc.

Confirmed figures for June will be published by the SMMT at 9am today.


08:19 AM BST

European markets rise amid British and French elections

Europe’s main stock markets advanced in initial deals as Britain goes to the poll in the landmark general election.

The Paris Cac 40 stocks index added 0.5pc to 7,669.11 points before France’s legislative vote this Sunday.

Frankfurt’s Dax rose 0.2pc to 18,417.54


08:08 AM BST

UK markets mixed as voters go to the polls

The FTSE 100 has opened higher as voters go to the polls in what is expected to be an historic general election.

The UK’s blue chip index gained 0.4pc to 8,206.03 while the midcap FTSE 250 dropped 0.1pc on a thin day of trading as American markets are closed for Independence Day.


08:02 AM BST

German factory orders suffer surprise slump

German manufacturers suffered an unexpected decline in orders last month, official figures show, in a sign that the recovery is faltering in Europe’s largest economy.

Factory orders fell by 1.6pc in May compared to the previous month, according to the Federal Statistical Office.

It was the fifth consecutive monthly decline and shocked analysts, who had predicted growth of 0.5pc.

Germany’s Economy Ministry said:

Together with the recent deterioration in business expectations in the manufacturing sector, the continuing decline in orders points to rather subdued momentum in industry in the coming months.

Orders are only likely to stabilise once global trade continues to recover and demand for industrial products gradually picks up.


07:50 AM BST

Chevrolet-owner faces £115m fine for under estimating emissions

General Motors will pay nearly $146m (£114.6m) in penalties for underestimating emissions produced by its vehicles, federal regulators said.

The American car giant was fined after approximately 5.9m vehicles were found to release more emissions than reported, a National Highway Traffic Safety Administration (NHTSA) spokesman said.

The vehicles in question, with model years between 2012 and 2018, showed more than 10pc higher carbon dioxide emissions in tests, on average, than what GM reported, according to the Environmental Protection Agency (EPA).

Additionally, GM agreed to write off greenhouse gas credits that equate to approximately 50m tons of CO2, the EPA said, with a market value of hundreds of millions of dollars.

GM shares fell 0.5pc on Wednesday on the New York Stock Exchange.

Last year, GM paid the NHTSA a similar penalty of $128m when pick-up trucks sold several year prior failed to meet fuel economy standards.

General Motors has been fined $146m for underestimating emissions – AP Photo/David Zalubowski


07:45 AM BST

McDonald’s limits breakfast sales after bird flu outbreak

McDonald’s fast-food outlets in Australia have cut breakfast service hours as bird flu outbreaks around the country hit egg supplies.

Breakfast orders are stopping at 10.30am instead of midday, the company said, after the Australian authorities said H7 avian influenza has emerged at nearly a dozen poultry farms across Victoria, New South Wales and the Australian Capital Territory.

McDonald’s Australia said:

We are carefully managing (the) supply of eggs due to the current industry challenges.

We are working hard with our suppliers to return this back to normal as soon as possible.

The government said chickens at the infected farms have been “depopulated” – a euphemism for extermination.

Scientists say the bird flu strain is genetically related to viruses detected in Australia’s wild bird population and is not the H5 strain spreading elsewhere in the world.

McDonald’s has cut its breakfast hours as the bird flu outbreak in Australia is expected to hit the supply of eggs – DAVID GRAY/AFP via Getty Images


07:42 AM BST

Pound unchanged as Britain goes to the polls

There are strict limits on what broadcasters are unable to say about the general election now that voting is underway.

If you take a look at the currency markets, traders are also being remarkably well behaved.

The pound is unchanged against the dollar at $1.275 and was flat against the euro, which is worth 84.6p.

Trading will be particularly thin today as US markets are closed for the Independence Day holiday.


07:41 AM BST

French stocks to rebound as Macron fights to block Le Pen

French stocks are poised for a rebound, strategists at a Wall Street bank have said, as Emmanuel Macron battles to stop Marine Le Pen’s nationalists from power.

The Cac 40 in Paris slumped as much as 6.7pc in the days following the French president’s shock decision to call a snap poll amid fears that the far-Right National Rally could win power.

Bond markets also slumped amid concerns that the party would increase government spending as France grapples with national debt at 112pc of GDP.

However, the Cac 40 rebounded by 1.2pc on Wednesday as far-Left and centrist candidates stood down for the second round of voting this weekend, potentially blocking the path for Ms Le Pen’s party to secure an outright majority.

Morgan Stanley strategist Marina Zavolock said that either a hung parliament or National Rally majority would “ultimately be followed by relief rallies in French and wider European equities”.

A majority for National Rally “could result in a rebound like the one seen in Italy assets in 2022 elections”.

They advised investors to buy the dip in European defence, Italian banks, BNP, Saint Gobain and Veolia.


07:31 AM BST

Good morning

Thanks for joining me. French stocks and wider European markets are expected to rally in the coming days after the outcome of the elections in Europe’s second-largest economy.

Morgan Stanley strategists have said that both a hung parliament and a National Rally majority would likely lead to a “relief rally” after the sharp plunge experienced after Emmanuel Macron called the vote last month.

5 things to start your day

1) Royal Mail faces surging debt bill after ‘Czech Sphinx’ takeover | Buyout risks trebling borrowing costs due to the billions being taken on in financing

2) How Italy shook off its ‘basket case’ brand – and stole Britain’s millionaires | Meloni’s Milan is poised to usurp London as a playground for the wealthy

3) Jim Ratcliffe delays launch of electric SUV | Ineos cites weak demand for EVs as it puts car on hold

4) BMW attacks EU tariffs on Chinese electric car imports | Criticism comes amid fears of a tit-for-tat response by Beijing on German exports

5) Matthew Lynn: Home workers’ moral bankruptcy will bring Britain to the brink | Greece’s addition of a sixth working day shows countries can change their fortunes

What happened overnight

Asia stocks hit 27-month highs as lower-than-expected employment figures data narrowed the odds on a September rate cut in the US.

The Independence Day holiday in the United States made for thin trading, as investors waited to see the outcome of the UK election.

Across the English Channel, polls suggested the National Rally (RN) would not win a majority of seats in Sunday’s French election as mainstream parties moved to block the far-Right.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.9pc to reach its highest since April 2022.

Japan’s Nikkei climbed 0.9pc to within spitting distance of its March peak, while the broader Topix clinched all-time highs.

Taiwan’s main index also struck a record led by the tech sector and Taiwan Semiconductor Manufacturing Co (TSMC) which cleared T$1,000 for the first time.

On Wall Street, the S&P 500 rose 0.5pc, to 5,537.02, to set an all-time high for a second straight day and for the 33rd time this year.

The Dow Jones Industrial Average slipped 0.1pc, to 39,308.00, while the Nasdaq Composite added 0.9pc to its record set the day before, closing at 18,188.30. Trading ended early for the day ahead of the Fourth of July holiday.

The yield on benchmark 10-year US Treasury bonds dropped to 4.35pc from 4.44pc late on Tuesday, a notable move for the bond market, and much of the slide came after a report on US services businesses.

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