Bessent Says China Tariff Status Quo is Working; UK Inflation at 18-Month High
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Yahoo
25 minutes ago
- Yahoo
Analysis-UK inflation heat puts Bank of England back in the spotlight
By William Schomberg and David Milliken LONDON (Reuters) -British inflation looks set to hit 4% next month, double the Bank of England's target and a level likely to add to nervousness at the central bank about the risk of price growth getting stuck at a stubbornly high rate. Consumer prices climbed by 3.8% in July, data showed on Wednesday, the fastest annual rise for a Group of Seven economy and approaching the BoE's forecast of a 4% peak in September. While below the four-decade high of 11.1% reached in October 2022, when energy prices were surging after Russia's invasion of Ukraine, July's reading was the strongest in 18 months. By comparison, U.S. inflation held at 2.7% in July and in the euro zone it is expected to stay around 2%. British inflation has been above the BoE's 2% target almost constantly since May 2021. Little wonder then that the central bank - which saw its standing fall in the eyes of the public when inflation jumped in 2022 - has suggested that its already gradual run of interest rate reductions might slow, even with the jobs market weakening. That would be a blow to Prime Minister Keir Starmer and finance minister Rachel Reeves who are seeking to speed up Britain's slow-moving economy. They have pointed to the five rate cuts since they came into office as a sign of progress. The BoE's quarter-point cut to its benchmark rate on August 7 was opposed by almost half of its monetary policymakers. One of them, Catherine Mann, pointed in March to research in the United States showing that public attentiveness to inflation doubles when price growth hits 4%. The research, by Oliver Pfaeuti, a University of Texas assistant professor, found the increased U.S. public awareness of inflation "substantially amplified the already inflationary supply shocks and rendered inflation more persistent". Thomas Pugh, chief economist at accountancy firm RSM UK, said inflation at 4% was probably not an automatic trigger for long-lasting economic damage but "there is some pretty good evidence that consumers and businesses are paying a lot more attention to inflation". He noted that September's data would be used to set rail fares and student loan repayments and by some pension schemes. "There is a genuine risk of some higher inflation becoming baked into the system," Pugh said. Many businesses are caught between the burden of rising costs and the risk of losing customers also under strain. Steve Hardeman, managing director of Clevedon Fasteners, which makes rivets and other parts for construction and engineering firms, said his firm had raised prices around five times since 2022 in response to higher electricity bills and labour costs. "We're looking at increasing our prices again because of things that are coming down the line," he said. Nimisha Raja, founder of food manufacturer Nim's, said she had seen a lot of "opportunistic" price rises. She pushed back when one supplier sought to raise the price of courgettes by another 5% after a 30% increase earlier this year. "I said we can't afford to do that because we can't pass this cost on to our customers. And they did back down." BANK OF ENGLAND ON ALERT The BoE has become increasingly alert to the risk of inflation getting stuck too high. But it is counting on a gradual deceleration in wage growth to continue. At around 5% a year, it is down from almost 8% two years ago but remains far above the 3% level that the BoE thinks is consistent with its 2% inflation target. Despite a slowdown in payrolls numbers, some employers are still scrambling to retain staff. The British arm of German supermarket Lidl said last week it would give workers a fifth pay rise in two years, matching an increase at rival Aldi. Many other firms are taking a more cautious approach. Private-sector pay settlements held at 3% in the three months to July and uncertainty about the economy suggest further caution ahead, data firm Brightmine said on Wednesday. Inflation hitting 4% in September was unlikely to affect pay settlements for early 2026, Sheila Attwood, HR insights and data lead at Brightmine, said. But if inflation holds around 4% in the following months, that could have an impact in the spring, she said. The head of a major trade union group responded to Wednesday's inflation figures by saying workers needed immediate pay rises. "The time for action is now," Unite general secretary Sharon Graham said. The BoE has forecast inflation to slow to 3.6% in December and average 2.5% over 2026 before returning to 2% only in the second quarter of 2027. However, the central bank said the risk of higher-than-expected inflationary pressures had risen. Robert Wood, chief UK economist at Pantheon Macroeconomics, expects inflation to be higher than the BoE does at 2.7% in 2026 and close to 2.5% in 2027, in part because he assumes finance minister Reeves will end a car fuel duty freeze and may resort to other tax hikes to stay on track for her budget targets. Wood predicts the BoE has now reached the end of its rate-cutting cycle. For now, however, most economists think the jobs market slowdown will allow for borrowing costs to be lowered further. A Reuters poll of analysts showed most expect a rate cut in November and another in early 2026. "There is always a risk that wages react to higher inflation, but at least this is not 2021," Philip Shaw, chief economist at Investec, said, pointing to a rise in unemployment, more people entering the workforce and no energy price surge. "It may be an environment where the Monetary Policy Committee chooses to be cautious but the labour market currently looks too weak to pose a major, medium-term inflationary threat." (Writing by William Schomberg; Editing by Toby Chopra) Connectez-vous pour accéder à votre portefeuille
Yahoo
37 minutes ago
- Yahoo
Tech, chip stock sell-off continues as AI bubble fears mount
Tech stocks fell for a second day on Wednesday as investors sold off a slew of tech names amid concerns over the sustainability of the AI boom and a recent market rotation away from some of this year's biggest winners. Among the Magnificent Seven Big Tech stocks, Nvidia (NVDA) was down about 0.8%, and Alphabet (GOOGL, GOOG) stock fell about 0.6%. Amazon (AMZN), Apple (AAPL), and Meta (META) shares fell over 1%. Chip stocks Advanced Micro Devices (AMD) and Broadcom (AVGO) dropped more than 2%; Micron (MU) shares plummeted more than 5%. CoreWeave (CRWV), the AI data center company that rents computing power to Microsoft (MSFT) and Meta — making it essentially an AI pure play — also dropped nearly 4%. Palantir (PLTR), a defense tech stock that's seen a major upswing from the AI boom, sank nearly 2%, extending its recent losing streak. The rotation out of AI-linked stocks comes as sentiment soured this week on the market for artificial intelligence, fueled in part by a recent report from the Massachusetts Institute of Technology and commentary from OpenAI CEO Sam Altman. Researchers for MIT's Project NANDA authored a report released this week that said 95% of companies it studied are getting no return on AI. The findings of the report were first detailed by Fortune on Monday. That report followed commentary from OpenAI's Altman shortly after the ChatGPT-maker finished out its latest multibillion-dollar funding round, with the CEO telling reporters that he believes there's an AI bubble, a diversion from his prior characterizations. 'When bubbles happen, smart people get overexcited about a kernel of truth,' he said. 'Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes." DA Davidson analyst Gil Luria likened the changing market sentiment to a pendulum. 'This is really just pendulum swinging back,' he told Yahoo Finance on Wednesday. AI stocks have taken off in recent months after a rocky start to the year. A new, cost-effective AI model from Chinese firm DeepSeek released in January cast doubt on the massive sums of money Big Tech was spending to build out AI infrastructure to power the technology — and sent tech stocks tumbling. Two rounds of earnings updates from some of the biggest AI plays in the market and more clarity on Trump's trade policies have since quelled those fears. Investors applauded recent quarterly reports from Big Tech firms Alphabet, Meta, and Amazon, which surpassed Wall Street's expectations as the companies said AI boosted their underlying businesses. That news overrode the fact that those companies also raised their forecasts for spending on AI infrastructure. 'The AI trade was getting so expensive that all it took was some comment from Sam Altman to make the investment community take some profits off the table,' Luria said. Luria added that 'the reality is that AI still has limited applications' beyond consumers talking to AI chatbots and using the tools as a search engine. Some AI bulls, however, maintain faith in the technology's ability to fuel markets to new highs. 'We are still in the early days of the AI Revolution as the use cases are just starting to massively expand as more companies recognize the value creation being driven by a handful of tech companies led by the Godfather of AI [Nvidia CEO] Jensen [Huang] and Nvidia,' wrote Wedbush analyst Dan Ives in a note to investors Wednesday. He added that 'the tech bull cycle will be well intact at least for another 2-3 years given the trillions being spent on AI.' More will be revealed when leading AI chipmaker Nvidia reports its quarterly earnings results after the bell next week on Aug. 27. Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @ Email her at
Yahoo
37 minutes ago
- Yahoo
Manchester Airport told to 'do more' on drop-off and pick-up fees
A government minister has written to Manchester Airport, raising concerns about its drop-off and collection fees. Oldham West, Chadderton and Royton MP Jim McMahon has called for a full review of signage and the appeals process for those who are fined. It comes after the RAC claimed that Manchester Airport was the most expensive UK airports on a 'cost-per-minute' basis, along with London Luton. Research shared by the company revealed that 11 out of 20 airports increased their drop off charges since last summer. However, drop- off fees at several airports, including Manchester, remain frozen. The current drop-off charge at all of the airport's three terminals is £5 for five minutes, increasing to £6.40 for up to 10 minutes, while those who take up to 30 minutes must pay £25. READ MORE: Prisoner held hand of Gooch gang boss Lee Amos as he clutched chest in agony behind bars, inquest into his death hears READ MORE: Crime scene investigators tape off city shopping centre as man rushed to hospital after attack Manchester Airport has defended its charges on motorists, saying that the five-minute drop-off option gives customers 'flexibility'. Sign up to the MEN Politics newsletter Due North here But Mr McMahon, a Labour MP and government minister, has raised concerns about the approach to drop-off and pick-up charges. He has called for 'more to be done' to make sure there is fairness and transparency for people across the region to use the airport. He said: "Having an international airport - the 3rd busiest in the UK and the busiest outside of London - on our doorstep is fantastic for our borough. "It gives local people great access to places around the world for holidays and business, which goes unmatched in the vast majority of the country. "The money being invested into the Airport City project and the upgrades to terminals 2 & 3 is investment which we support. "However, it is important during this summer holiday season to raise concerns about the approach to charging for drop-off and collections at the airport terminals, and the impact on drivers who find themselves faced with unfair charges." In his letter, the MP calls for a 'full review' of signage approaching the airport, at the terminals, and immediately on arrival, an end to the practice of 'stacking up charges' and a review of the appeals process given that unsuccessful appeals increase penalties further. The minister also asked the airport to publish data on income from the drop-off and collection charges so that there is transparency on how much money is made through duplicate charges and late payments. The Manchester Evening News understands that the airport has responded to Mr McMahon and has been invited him to visit. A Manchester Airport spokesperson said: "Drop-off and pick-up charges help us to manage demand for access to our forecourts, where space is limited, and reduce traffic congestion around the site. "It means that the areas remain efficient even at busy times because people are not staying there for extended periods. "This means people can feel assured that if they wish to use our pick-up or drop-off facilities they will be able to do so quickly and effectively. "There are clear signs in and around the drop-off and pick-up areas that remind people to pay online or over the phone by midnight the day after their visit. "We also offer a completely free drop-off facility next to the nearby JetParks 1 car park. It is served by a 24-hour shuttle bus that runs every few minutes and takes less than six minutes to get to all three terminals."
