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The Independent
4 days ago
- Business
- The Independent
Stocks mixed despite GDP surprise amid hot US producer price inflation
The FTSE 100 struggled for direction on Thursday, weighing better-than-expected UK growth figures and a surprise pick-up in producer price inflation across the pond. The FTSE 100 index closed up 12.01 points, 0.1%, at 9,177.24. The FTSE 250 ended down 49.89 points, 0.2%, at 21,801.67, and the AIM All-Share finished 2.17 points higher, 0.3%, at 759.71. In Europe, the CAC 40 in Paris rose 0.7%, while the DAX 40 in Frankfurt advanced 0.8%. The Office for National Statistics said UK gross domestic product (GDP) rose 0.3% in the second quarter from the first, slowing from a 0.7% expansion in the first three months of the year. According to market consensus cited by FXStreet, growth of 0.1% on-quarter had been expected for the three months to June. Deutsche Bank analyst Sanjay Raja said the UK economy found an 'unexpected second wind'. 'The economy expanded by 0.3% on the quarter. But mind the third decimal. Unrounded, UK GDP grew by 0.345% on the quarter – a hair's breadth away from an even stronger surface print. This puts the UK on course to become the second fastest growing economy in the G7 (after claiming the top prize in Q1-25),' Mr Raja said. But Mr Raja noted some areas of disappointment, such as household spending and business investment. On-month, the UK economy rounded off the second quarter with a 0.4% expansion in June, following falls of 0.1% in each of May and April. April's figure was revised upwards from a drop of 0.3% before. Goldman Sachs raised its forecasts for GDP growth in 2025 to 1.4% from 1.2%, above the 1.0% forecast by the Office for Budget Responsibility. Mr Raja said: 'To be sure, the economy is growing. Positive momentum is brewing. 'But animal spirits remain tepid. 'While the Chancellor is poised to focus her budget on improving productivity – a very welcome focus for the UK – Number 11 should also prioritise lifting household and business confidence to sustain the UK's outperformance.' In the US, producer prices shot up at a faster pace than expected in July. The Bureau of Labour Statistics said the producer price inflation rate for July was 3.3%, the fastest 12-month gain since February and nearly a full percentage point up from June's rate of 2.4%. A much tamer acceleration to 2.5% was expected, according to consensus cited by FXStreet. On-month, producer prices rose 0.9% in July from June, the largest monthly rise since January, and topping the consensus of a 0.2% increase. Following a fairly benign consumer inflation print on Tuesday, the figures were seen as dampening hopes for widespread rate cuts later in the year. 'After a string of data pointing to greater odds of a September rate cut, the large upside surprise in producer prices highlights the dilemma the Federal Reserve faces in judging the risks to its dual mandate,' said Matthew Martin, at Oxford Economics. But Veronica Clark, at Citi, said strength in services in both CPI and PPI was concentrated in a few specific components and not indicative of broad-based price pressures. She continues to expect limited signs of persistent inflation and a weakening labour market will have Fed officials cutting rates by 25 basis points in September and each meeting after to a 3% to 3.25% rate. Mr Martin is not so sure. His baseline forecast expects the Federal Reserve to hold off on rate cuts until December, although he accepts 'our near-term outlook for monetary policy is walking a tightrope' that will be shaped by the next employment and price reports. The data saw stock markets ease, giving back a slice of recent gains, the dollar perk up, and bond yields push higher. In New York, the Dow Jones Industrial Average was down 0.4%, the S&P 500 was 0.3% lower, as was the Nasdaq Composite. The pound eased to 1.3541 dollars late on Thursday afternoon in London, compared with 1.3566 dollars at the equities close on Wednesday. The euro ebbed to 1.1650 dollars, lower against 1.1713 dollars. Against the yen, the dollar was trading higher at 147.72 yen compared with 147.24 yen. The yield on the US 10-year Treasury was at 4.28%, widened from 4.23%. The yield on the US 30-year Treasury was 4.87%, stretched from 4.83%. In London, insurance stocks were the flavour of the day with gains for Aviva and Admiral. Aviva, which has more than 33 million customers and operates in more than 16 countries globally, rose 2.5% as it said pre-tax profit surged 30% to £1.27 billion in the first six months of the year from £978 million a year prior. The London-based insurer said operating profit was 22% higher on-year at £1.07 billion from £875 million a year prior. Gross written premiums were 4.7% higher at £6.29 billion from £6.01 billion. It lifted its interim dividend by 10% to 13.1 pence per share from 11.9p. 'With operating profit up 22% (10% ahead of consensus) and the interim dividend up 10% (2% ahead of consensus), Aviva's recent run of success appears to have continued,' Jefferies analyst Philip Kett said. Admiral jumped 5.6% after reporting strong first-half results, led by growth in its motor insurance business, where profits leapt 56% year-on-year. The FTSE 100-listing said pre-tax profit rose 67% to £516.1 million in the six months to June 30 from £309.8 million the year prior. Pre-tax profit from continuing operations jumped 69% to £521.0 million from £307.6 million, beating the £508 million Visible Alpha consensus. 'Another great update from the gift that keeps on giving,' said Bank of America. Centrica climbed 3.4% as it said it had agreed, along with Energy Capital Partners LLP, to buy the Isle of Grain liquefied natural gas terminal in Kent from National Grid for an enterprise value of £1.5 billion. Rolls-Royce rose 2.1% as UBS raised its share price target to 1,375 pence from 1,075p, driven primarily by 'our likely above-management pricing expectations and above-guidance margin assumptions in Civil and Power Systems, where we see further opportunity for turnaround benefits to be realised'. In an upside scenario, UBS sees 2,000p fair value as 'credible'. A barrel of Brent rose to 66.80 dollars late on Thursday afternoon from 65.51 dollars on Wednesday. Gold eased to 3,339.74 dollars an ounce against 3,356.28 dollars. The biggest risers on the FTSE 100 were Admiral, up 192 pence at 3,560p, Centrica, up 5.5p at 167.6p, BAE Systems, up 44.5p at 1,776p, Aviva, up 16.2p at 675.2p and Babcock International, up 21.5p at 988.5p. The biggest fallers on the FTSE 100 were Rio Tinto, down 188p at 4,480.5p, Beazley, down 24p at 776p, Diploma, down 130p at 5,315p, Persimmon, down 26p at 1,103p, and Halma, down 62p at 3,224p. There are no significant events in the local corporate calendar on Friday. The global economic calendar on Friday has US retail sales and industrial production data.
Bloomberg
5 days ago
- Business
- Bloomberg
Pound Extends Recent Winning Streak as UK Growth Beats Estimates
The pound extended its recent outperformance versus major peers as UK growth data came in stronger than expected. Sterling rose 0.1% to $1.3592 on Thursday, its strongest level since July 10. The UK currency has outperformed all Group-of-10 peers over the past week and is on track for a sixth straight gain versus the euro, its longest winning streak in three months.
BBC News
5 days ago
- Business
- BBC News
GDP figures expected to show growth has slowed
Update: Date: 06:00 BST Title: Economists concerned by sluggish UK growth Content: Many economists and politicians are concerned that the UK economy is not growing fast enough. When the Labour government took power in July 2024, it made growth its top priority. The economy had fallen into recession at the end of 2023 but rebounded in the first half of 2024. Since then, growth has been sluggish. Although the economy grew by 0.7% in the first quarter of 2025, it contracted by 0.3% in April - the steepest monthly decline since October 2023 - and shrank by a further 0.1% in May. The strength of the economy affects things like pay increases for workers and the amount of tax the government can raise to pay for services. Update: Date: 05:45 BST Title: What is GDP? Content: The figures due to be published today are for the country's GDP - or Gross Domestic Product. It's a way of measuring all the economic activities of companies, governments, and people in a country. In the UK, new GDP figures are published every month by the Office for National Statistics (ONS). The ONS measures GDP by taking into account the UK's output, its expenditure, and its income, but this can sometimes hide important details on important aspects of living standards like inequality and living standards. Most economists, politicians, and businesses like to see GDP growing steadily - because it means people are spending more, more jobs are being created and more tax is being paid. But last month figures showed GDP had contracted by 0.1% in May, following a 0.3% contraction in April - meaning the economy is shrinking. If GDP falls for two quarters in a row, this is known as a recession, which can lead to pay freezes and job losses. Update: Date: 05:28 BST Title: Figures on economic growth to be published Content: Jen MeierhansBusiness reporter Good morning from the London newsroom. At 07:00 BST, we'll find out if the economy grew or shrank in the second quarter of this year - from April to June. Although the economy grew by 0.7% at the start of this year - better than many had expected - some economists are predicting only a slight increase this time around. We'll bring you the latest figures when they're published, as well as analysis on what this means - for the government, the economy and you.
Yahoo
16-07-2025
- Business
- Yahoo
Rachel Reeves Gets Brutal Reality Check Just Hours After Claiming Labour Is Making 'Progress' On The Economy
Rachel Reeves has been given a stark reminder of the problems facing the UK economy, just hours after claiming the government was making Brits better off. Official figures released by the Office for National Statistics (ONS) revealed that inflation unexpectedly rose last month to 3.6% – its highest point in nearly 18 months. The ONS blamed rising food and transport costs for the rise, which takes the rate of inflation to nearly double the Bank of England's 2% target. The grim news was a brutal reality check for the chancellor, who just hours before had been telling the great and the good that Labour was making 'progress' on fixing the economy. Making her annual Mansion House speech, Reeves said: 'This evening, I want to talk about the progress we have made over the past year – restoring stability, securing investment and delivering reform. 'And I want to talk about the future – the economy we are building, the opportunities we are seizing and the prosperity we are creating.' Reeves went on to say that she was 'proud of how far we have come in a year of government'. 'I know that the changes we have made will transform our economy and our country, she said. 'And I know that you will waste no time in seizing the opportunities that lie ahead – to build a stronger economy, to deliver the renewal of Britain, to make working people in all parts of our country better off.' Less than 12 later, at exactly 7am this morning, the ONS brought the chancellor back down to earth with a bump. Economists had expected June's rate of inflation to remain at 3.4%, so the actual figure of 3.6% was a shock – and yet another blow for Reeves. ONS acting chief economist Richard Heys said: 'Inflation ticked up in June driven mainly by motor fuel prices which fell only slightly, compared with a much larger decrease at this time last year. 'Food price inflation has increased for the third consecutive month to its highest annual rate since February of last year.' Shadow chancellor Mel Stride laid the blame fairly and squarely at Reeves' door. He said: 'This morning's news that inflation remains well above the 2% target is deeply worrying for families. 'Labour's decision to tax jobs and ramp up borrowing is killing growth and stoking inflation – making every day essentials more expensive – and because Labour are too weak to take tough choices on spending, more tax rises are on the way, leaving families facing ever-rising costs.' Reeves said: 'I know working people are still struggling with the cost of living.' She insisted Labour policies like increasing the national minimum wage and free breakfast clubs in schools would make a difference. 'But there is more to do ... to put more money into people's pockets,' she added. With the economy contracting and more tax rises looming, the outlook remains gloomy for the UK – and the chancellor. Cost Of Living Blow For Rachel Reeves As Inflation Soars Blow To Rachel Reeves As Inflation Rises To Highest Level In 10 Months Richard Madeley Mocks Chancellor Rachel Reeves With New Job Title After Inflation Rise
Daily Mail
06-07-2025
- Business
- Daily Mail
ALEX BRUMMER: The folly of Labour wealth taxes
During the run-up to Labour's election a year ago, I had a bruising on-the-air encounter with an LBC radio interviewer. My suggestion was that plans by Rachel Reeves to target wealth would undermine the energy, entrepreneurship and enterprise needed to drive UK growth. The interlocutor insisted it was time we rid ourselves of rich free loaders with little interest in the broader population. The pay gap between those at the top in business and working people has been widening for decades. Tesco boss Ken Murphy picked up £10m last year, which is 431 times that earned by the average worker in the group. As boss of a top FTSE 100 company, everything about Murphy's remuneration is known and explained in ferocious detail in the company's annual report. Research by the London School of Economics shows that the top 1 per cent of taxpayers living in Britain account for 30 per cent of the nation's total income tax take. The targeting of aspiration by Labour is proving an own goal. The outflow of the rich from the UK, some 16,500 people on the last count, harms spending and investment. The elimination of non-domicile privileges began under the Tories. The Chancellor hammered in the last nail. The change is calculated to add £4.2billion to the tax take of the Exchequer in 2026-27 and more in the subsequent two years. She will be fortunate. Rather than stay in the UK and wait for their privileges to vanish, many non-doms already have fled. The current preferred destination is Milan. For the price of £145,000, or equivalent fee to the Italian government, it is possible to circumvent taxes on worldwide income. As wealthy residents depart, property prices in smart central London and sales of luxury goods and services have been punished. The willingness to invest in start-ups, real estate deals, partnerships and trading in Britain is diminished. The City survived Brexit because UK wholesale markets and derivatives trading remained the first choice for European and American dealers. The number of jobs heading towards Europe was far smaller than predicted. When the vice-chairman of Goldman Sachs, Richard Gnodde, was driven offshore this year, one recognised how serious the exits were becoming. Milan, Dubai, Singapore are each growing rich on exiles from investment banks, private equity, and hedge funds. Private plane leasing firm NetJets is doing a roaring trade from billionaires swooping in for a couple of days to complete transactions but leaving before their feet touch the ground. And we wonder why UK posh firms such as Burberry, Smythson and others are having a torrid time. As alluring as soak the rich taxes are to the Angela Rayner wing of the Labour Party, they will not resolve the nation's fiscal problems. Every penny may count in difficult times, but the extra income generated by inheritance tax reforms will be paltry. The dial is going to be shifted by the torrent of wealth, accumulated by baby boomers, as it is released to the next generations. Unfairness in the tax system such as the 'carried interest' loophole exploited by private equity barons should be removed. But the Chancellor and Treasury would do well to recall that there is no group more mobile than the super-rich. Ask Sir Jim Ratcliffe, retailer Sir Philip Green, F1 star Sir Lewis Hamilton et al. They voted with their feet long ago.
