Brexit was 'a historic error', ex-US Treasury Secretary claims

Brexit Day celebrations on January 31, 2020 - Jeff J Mitchell/Getty Images
Brexit Day celebrations on January 31, 2020 - Jeff J Mitchell/Getty Images

Brexit will go down in history as a “historic error” that fuelled inflation, former US Treasury Secretary Larry Summers has said.

The influential economist slammed the UK’s departure from the European Union as a mistake that hampered international competitiveness and labour supply.

He also warned that the UK will likely face a recession within the next two years.

Mr Summers told BBC Radio 4’s Today Programme: “Brexit will be remembered as a historic economic error that reduced the competitiveness of the UK economy, put downward pressure on the pound and upward pressure on prices, limited import goods and limited in some ways the supply of labour.

“All of which contributed to higher inflation.”

The UK has the highest rate of inflation among the G7 nations, with consumer price growth remaining much higher than forecasters had expected at 8.7pc in April.

“The UK economic policy has been substantially flawed for some years,” Mr Summers said.

The former Treasury secretary, who has held some of the world’s most influential economics positions, also criticised policymakers at the Bank of England for Britain’s high inflation.

The UK’s troubles had been “reinforced by very ill-judged monetary policies that were substantially too expansionary for too long”, he said.

06:32 PM

Signing off

That’s all from us. We’ll be back tomorrow morning with the latest. Until then, here’s why Putin no longer has the money or the kit to sustain a high-tech modern war, according to Ambrose Evans-Pritchard...

06:30 PM

Goldman Sachs to make further cuts amid 'tougher environment'

Goldman Sachs is preparing to make its third round of job cuts in a year as the Wall Street lender continues cost-cutting measures.

“We are now embarking on additional targeted action with our headcount,” chief operating officer John Waldron said Thursday at a conference hosted by AllianceBernstein Holding LP. “We are preparing for a tougher environment.”

The layoffs are expected to impact less than 250 people, Bloomberg reported.

Goldman Sachs eliminated hundreds of jobs last September, followed by about 3,200 roles announced in January. The bank has also reduced bonuses and launched a sweeping review of spending in an attempt to rein in costs.

Goldman Sachs is preparing to make its third round of job cuts as the Wall Street lender continues cost-cutting measures. - REUTERS/Mike Blake
Goldman Sachs is preparing to make its third round of job cuts as the Wall Street lender continues cost-cutting measures. - REUTERS/Mike Blake

05:59 PM

Driving test examiners prepare to strike again over pay

Learner drivers face continued disruption as examiners across 258 test centres in England, Scotland and Wales announce further pay strikes.

Public and Commercial Services (PCS) union members will walkout for five days on June 15, 16, 19, 22 and 23.

Employees of the Driver and Vehicle Standards Agency (DVSA), which is part of the Department for Transport, have participated in rolling regional action since last year in a dispute over pay, pensions and jobs.

An estimated £2.8m has been lost in revenue as a result of strikes, which has forced drivers to cancel their tests, according to PCS.

General secretary Mark Serwotka said: “Our hard-working members, and the people they serve every day, know they deserve better.

“Until ministers put some money on the table, PCS members will continue to take targeted action throughout the summer.”

05:27 PM

FTSE 100 delivers positive start to June

The FTSE 100 has ended in the green, rising 0.59pc to close at 7,490.27.

The internationally-focused index climbed as progress on the US debt ceiling bill spurred risk appetite among investors.

Industrial metal miners also lifted the commodity-heavy index, which grew 2.1pc as base metal prices rose.

The mid-cap FTSE 250 index also closed up 0.56pc at 18,827.76.

The bumper performance comes after the FTSE 100 fell by 5.4pc over March as investors reacted to inflationary pressures, rising interest rates and concerns over a slowing global economy.

05:12 PM

The Pentagon to buy Starlink satellites for Ukraine's military

The announcement comes after Mr Musk last year threatened to pull the key battlefield communications system unless the Pentagon started paying for Starlink services. - DANIEL SLIM/AFP via Getty Images
The announcement comes after Mr Musk last year threatened to pull the key battlefield communications system unless the Pentagon started paying for Starlink services. - DANIEL SLIM/AFP via Getty Images

The Pentagon has struck a deal with Elon Musk’s Starlink to provide satellite internet services for Ukraine’s military.

The US Department of Defense said it will now pay for Starlink’s terminals which have been used to maintain high-speed internet connections in Ukraine following Russia’s invasion.

The internet system, made-up of a mega-constellation of around 2,000 satellites, has allowed Ukrainian troops to operate drones, receive military intelligence and communicate on the front line.

The announcement comes after Mr Musk last year threatened to pull the key battlefield communications system unless the Pentagon started paying for Starlink services.

The Pentagon said:

“We continue to work with a range of global partners to ensure Ukraine has the resilient satellite and communication capabilities they need,”

“Satellite communications constitute a vital layer in Ukraine’s overall communications network and the department contracts with Starlink for services of this type.”

The SpaceX founder rushed to offer Starlink terminals in the wake of Vladimir Putin’s invasion, however later warned US authorities that it could not continue funding the satellite services indefinitely.

Last October, Mr Musk claimed that funding the operation had cost SpaceX “$80 million and will exceed $100 million by the end of the year”.

Earlier this year, SpaceX restricted Ukraine’s military use of its Starlink system and accused of the country of “weaponising” its technology.

04:24 PM

World's biggest miner admits to underpaying staff since 2010

Australian mining group BHP has admitted to underpaying nearly 29,000 workers for 13 years.

The world’s largest miner said that around 28,500 current and former employees across its Australian operations received less holiday pay than they were entitled to.

A preliminary internal review conducted by BHP also found that 400 workers in Port Hedland are entitled to additional allowances “due to an error with the employment entity in their contract”.

The company expects that fixing these errors will cost $280m (£223.6m) before tax.

Geraldine Slattery, BHP’s Australian president, said:

We are sorry to all current and former employees impacted by these errors. This is not good enough and falls short of the standards we expect at BHP. We are working to rectify and remediate these issues, with interest, as quickly as possible.

The company expects that fixing these errors will cost $280m (£223.6m) before tax. - Philip Gostelow/Bloomberg
The company expects that fixing these errors will cost $280m (£223.6m) before tax. - Philip Gostelow/Bloomberg

03:48 PM

Mark Zuckerberg unveils new Quest 3 ahead of Apple headset launch

Facebook-owner Meta has unveiled the group’s new virtual reality headset, days before tech Apple is expected to launch its own.

In a post shared on Instagram, chief executive Mark Zuckerberg revealed the Quest 3 will be the “first mainstream headset with high-res color mixed reality”, combining augmeted and virtual reality elements.

Meta currently dominates the market for AR/VR devices, with a nearly 80pc share of the 8.8m headsets sold in 2022, according to market research firm IDC.

Apple is expected to unveil its first mixed reality device at its world wide developers conference next week.

03:31 PM

Handing over

That’s all from me today. Adam Mawardi will take things from here.

I leave you with data on US manufacturing, showing it is not only the UK have a tough time:

03:25 PM

JPMorgan to shut 21 First Republic Bank branches

JPMorgan Chase will shut 21 branches of First Republic Bank by the end of the year as it integrates the failed lender into its operations, a JPMorgan spokesman has reportedly confirmed.

The locations account for about a quarter of First Republic’s 84 branches across eight states.

The lender, which was the largest to collapse since the 2008 financial crisis, was seized by regulators in May and sold to JPMorgan.

“These locations have relatively low transaction volumes and are generally within a short drive from another First Republic office,” the spokesman told Reuters.

JPMorgan will close 21 First Republic Bank branches by the end of the year - Justin Sullivan/Getty Images
JPMorgan will close 21 First Republic Bank branches by the end of the year - Justin Sullivan/Getty Images

03:15 PM

AI rally stalls as software firm disappoints

The rapid rally in tech stocks benefiting from artificial intelligence has stalled as a disappointing outlook from sparked a selloff in AI-exposed stocks.

AI software firm fell more than 18pc, extending Wednesday’s drop of 9pc on a disappointing sales outlook.

However, the stock remains up on the year by just under 200pc.

Nvidia declined 5.7pc Wednesday after surging over 30pc in three days, after the chipmaker briefly reached a $1trn market cap earlier this week.  Its shares have rebounded 2.8pc in early trading today.

Wall Street has been obsessed with everything AI this year, with Nvidia’s blowout revenue forecast adding fuel to the frenzied rally.

But lofty valuations — which investor Cathie Wood says it’s “priced ahead of the curve” — are a reason for caution in the still nascent industry.

Ed Yardeni, chief investment strategist at Yardeni Research, said: “While technology sector stock prices may be due for a short-term breather after their impressive performance this year, we’d continue to expect the sector’s forward earnings to be revised higher over the longer term as widespread AI spending ramps up and as the semiconductor cycle heads up.”

The Nvidia logo on a chip on display at their headquarters in Taipei, Taiwan - REUTERS/Ann Wang
The Nvidia logo on a chip on display at their headquarters in Taipei, Taiwan - REUTERS/Ann Wang

03:01 PM

Companies which forced vote on CBI's future barred from meeting

Dozens of the UK’s biggest companies that helped push for a vote on the future of the scandal-hit Confederation of British Industry (CBI) will not be allowed to participate in that vote, it has emerged.

Businesses which were part of the membership exodus that forced the CBI to set out a new future have told the PA news agency they have not received invitations to next week’s crunch meeting.

The CBI said current members - including those who have suspended their memberships - are invited to the meeting, but those who resigned are not.

CBI members are set to vote on Tuesday, June 6, on a prospectus which the organisation hopes can draw a line under the biggest crisis in its history.

It proposes a new-look board and a series of cultural changes which will be put to members for a vote on the day.

The CBI had already promised to make changes following a series of allegations, but did not promise a major overhaul until dozens of companies said they no longer wanted to be part of the organisation.

CBI director-general Rain Newton-Smith - Darren Staples/Bloomberg
CBI director-general Rain Newton-Smith - Darren Staples/Bloomberg

02:47 PM

Musk stayed off Twitter for whole of China visit

Elon Musk did not send any tweets while he was in China for his first visit since the pandemic.

Up till the early hours of May 30, the Twitter chief executive had tweeted every single day in 2023 — often multiple times.

His silence in China marked the billionaire’s longest hiatus from the platform since June 2022, when he was in the midst of buying Twitter and taking it private.

Many foreign social media platforms are banned in China, including Twitter and Facebook, although they are widely accessed over virtual private networks, or VPNs.

Mr Musk, who also runs Tesla, met with Chinese government officials and local business leaders during his visit, and said the interests of China and the US were intertwined.

He said that Tesla opposed decoupling from China and is willing to keep expanding in the country, according to a government statement.

His private jet departed Shanghai on Thursday morning, local time. He quickly started tweeting about SpaceX, another one of his companies:

02:35 PM

Wall Street slumps after strong jobs figures

Wall Street’s main indexes eked out gains at the open on optimism sparked by passage of a bill by lawmakers to suspend the nation’s debt ceiling, while dismal earnings from Salesforce kept gains in check.

The Dow Jones Industrial Average rose 0.1pc at the open to 32,929.85, while the S&P 500 opened higher 0.1pc at 4,183.03.

The Nasdaq Composite gained 0.1pc to 12,944.46 at the opening bell.

02:31 PM

Musk's concludes whirlwind China trip after talks with vice premier

Tesla boss Elon Musk has departed Shanghai, wrapping up a two-day trip to China in which he met senior Chinese government officials including the highest-ranking vice premier.

Photos and a video of Musk’s visit late Wednesday to Tesla’s Shanghai factory - the automaker’s biggest production hub - showed him holding up a “Giga Shanghai” sign, flanked by hundreds of staff including Tom Zhu, head of global manufacturing.

The video released by Tesla showed  Mr Musk praising employees for “overcoming so many difficulties and challenges” and making a heart sign with his hands.

Earlier in the trip, Musk met with China’s foreign, commerce and industry ministers in Beijing and dined with the chairman of battery supplier Contemporary Amperex Technology (CATL) .

He also reportedly met with Chinese Vice Premier Ding Xuexiang on Wednesday. Mr Ding is the sixth highest-ranked leader in the Politburo Standing Committee, the top governing body led by President Xi Jinping.

Elon Musk poses for a group photo at the Shanghai gigafactory - Tesla
Elon Musk poses for a group photo at the Shanghai gigafactory - Tesla

01:53 PM

Water supplier Pennon blames loss on household efficiency drive

Water supplier Pennon Group has sunk to a loss after being hammered by soaring power costs, extreme weather, and telling households to use less for baths, cleaning and gardening.

Pennon, which owns the recently combined South West Water and Bristol Water, said it swung to a statutory pre-tax loss of £8.5m in the year to April, from a profit of £128m last year.

It comes as suppliers are under mounting pressure from regulators and the public to reduce sewage spills and modernise networks.

Pennon’s group chief executive Susan Davy said:

This has been an extraordinary year for Pennon in which extreme weather patterns have tested our operational resilience.

At the same time, inflationary pressures have proven our financial resilience.

The supplier blamed its shrinking profit on inflation, which it said has driven up power costs.

It also said it was partly because of “lower customer demand as a result of continued water efficiency promotion”, meaning the knock-on impact of encouraging households to use less water and save money.

01:34 PM

Wage growth slows even as US adds more jobs

The US economy added 278,000 jobs last month, according to data from ADP, but a slowdown in wage growth may add to expectations that the US Federal Reserve will pause its series of interest rate increases.

The jobs numbers were way ahead of economists’ forecasts of 170,000, but job changers saw a gain of 12.1pc,
down a full percentage point from April.

For job stayers, the increase was 6.5pc in May, down from 6.7pc.

Nela Richardson, chief economist at ADP, said:

This is the second month we’ve seen a full percentage point decline in pay growth for job changers.

Pay growth is slowing substantially, and wage-driven inflation may be less of a concern for the economy despite robust hiring.

The data comes a day before the US releases its official non-farms payroll report.

01:11 PM

European gas prices fall further

Gas prices have slipped by 9.5pc today as the glut of supply continues in Europe’s energy market.

Dutch front-month futures, the continent’s pricing benchmark, have fallen below $24.50 per megawatt hour.

The price of European gas has plummeted by 68pc this year as the impact of Putin’s energy war dissipates in the wake of his invasion of Ukraine.

12:48 PM

Supermarkets cut diesel prices after competition watchdog raises concerns

Supermarkets and other major retailers have sped up diesel price cuts after the competition watchdog said it would look more closely at the market, according to the RAC.

The average price of a litre of diesel has fallen by 7.44p to 151.02pc since the Competition and Markets Authority (CMA) updated its road fuel market study on May 15 saying average supermarket margins in 2022 had increased compared to 2019.

While the four big supermarkets were selling unleaded for around 143p a litre for the whole of April, the average price of diesel at their sites remained stubbornly high, only being reduced by 10p a litre (161.4p to 151.02p) in the month prior to the CMA announcement.

The gap between the average prices of a litre of petrol and diesel at supermarkets was 9p on May 15, yet by Monday this difference had shrunk to just 2.5p.

RAC fuel spokesman Simon Williams said:

Since the Competition and Markets Authority’s made its announcement about supermarkets increasing their margins compared to three years ago and said they will be formally interviewing bosses, it appears the rate at which the price of diesel has fallen has sped up.

Even today, with 27p having come off the average price of supermarket diesel since the start of the year, diesel drivers are continuing to get a poor deal. For two straight months it has cost retailers less to buy diesel on the wholesale market than it has petrol, yet they continue to charge more for diesel at the pumps.

12:12 PM

US markets on course to rise at opening bell

Wall Street is expected to open higher after the House of Representatives passed a bill to suspend the US debt ceiling.

The bill to suspend the $31.4trn debt ceiling on Wednesday passed with majority support from both Democrats and Republicans and will now head to the Senate, which must enact the measure before a Monday deadline, when the government is expected to run out of money to pay its bills.

In pre-market trading the Dow Jones Industrial Average was up 0.1pc, while the broad-based S&P 500 had risen 0.2pc.

Futures on the Nasdaq 100 were up 0.1pc.

However, things could change before the market opens if there is any surprise from the ADP National Employment Report, which is expected to show private payrolls likely increased by 170,000 jobs in May, after 296,000 additions in April.

11:58 AM

Why Britain’s electric cars risk driving into a ‘massive black hole’

The Government is pushing drivers to go electric to meet its net zero targets – yet as it solves one problem, another moves into view.

Senior economics reporter Eir Nolsøe explains more:

Fuel duty currently earns the Exchequer £24.3bn a year, which is equivalent to nearly 2.3pc of the total tax take. When other taxes on car ownership are included, the total earned from drivers rises to £32bn.

Killing off the combustion engine means missing out on these revenues as the electricity used to charge up electric cars is not taxed in the same way as petrol or diesel.

The looming loss of fuel duty means the Treasury will face a “massive black hole” – a £10bn budget deficit – by the early 2030s, according to new analysis by the Resolution Foundation.

The Government must find a way to fill the black hole and quickly – or else other taxes will need to rise or spending be cut.

These three charts illustrate the problems facing ministers.

Fuel duty
Fuel duty

11:35 AM

Oil inches higher amid China manufacturing hopes

Oil has edged slightly higher after a run of declines amid expanding factory activity in China and progress on a US debt-deal.

Brent crude, the international benchmark, has gained 0.1pc to head toward $73 a barrel.

US-produced West Texas Intermediate advanced above $68 a barrel after losing around 6pc over the previous two sessions.

A private survey showed a slight expansion of Chinese manufacturing activity in May, a surprise improvement that contradicted official data.

In the US, the House of Representatives passed debt-limit legislation, sending the measure to the Senate for what is expected to be a formality of approval to avoid a default.

Traders will now be looking ahead to an Opec+ meeting over the weekend in Vienna to discuss the group’s production policy.

11:12 AM

Pound edges up against the dollar

The pound has gained against the dollar as markets increasingly expect a pause from the US Federal Reserve on interest rates, while the Bank of England is expected to continue its programme of hikes.

Sterling was last up 0.1pc verses the greenback to $1.24.

However, it has lost 0.1pc against the euro, which is worth just less than 87p, after data showed inflation across the continent fell by more than expected to 6.1pc.

10:55 AM

Mortgage lending and repayments slump

Mortgage approvals across the UK fell unexpectedly, according to the Bank of England, as borrowers repaid debt at an historically slow pace after soaring interest rates increased the cost of serving loans.

Lenders authorized 48,700 home loans in April, down sharply from the 51,500 approved in March, the figures showed. Economists had expected 53,300.

The effective rate on new mortgages rose five basis points to 4.46pc in April, closing in on the threshold of 5pc the Bank of England has identified as painful to consumers.

The outlook for approvals looks poor after a shock inflation reading in May fuelled bets that the Bank will increase rates again to a potential peak of 5.5pc by the end of the year.

That is starting to push up the cost of mortgages, while lenders are pulling cheap mortgage deals off the market.

Nationwide Building Society today said house prices resumed their decline in May and warned of increasing headwinds facing the property market.

Households repaid £1.4bn of mortgage debt in April, the weakest month on record excluding the pandemic.

Mortgage approvals unexpectedly fell in April, according to the Bank of England - Jason Alden/Bloomberg
Mortgage approvals unexpectedly fell in April, according to the Bank of England - Jason Alden/Bloomberg

10:42 AM

Asos relegated from FTSE 250

Asos, the British online fashion pioneer valued at more than £7bn just over two years ago, has been relegated from the FTSE 250 of mid-sized companies.

It shares fell 3pc to a 12-year low of 333p in early trading, giving it a market value of about £400ms, following the quarterly reshuffle by FTSE Russell. It will move to the FTSE SmallCap index on June 16.

The company, like rival Boohoo, grew rapidly as 20-somethings around the world snapped up its fast fashion, and demand surged again during the pandemic when high street rivals were closed.

But it has been hit by supply chain issues, high product returns, increased competition and a cost-of-living squeeze. Earlier this month it posted a first-half loss of £87.4m.

British Land was the only company relegated from the FTSE 100 index in the June quarterly review, FTSE Russell said. It will be replaced by engineering group IMI.

10:26 AM

Eurozone inflation cools faster than expected as UK left further behind

Eurozone inflation eased more than expected last month, with core prices also slowing in a sign that Britain is being left behind.

Inflation in the 20 nations sharing the euro eased to 6.1pc in May from 7pc in April, below economists’ expectations for 6.3pc.

Core inflation, which excludes volatile food and fuel prices and which has played an increasing role in the ECB’s policy deliberations, fell to 5.3pc from 5.6pc, coming well under expectations for 5.5pc.

It comes as core inflation unexpectedly increased in the UK to 6.8pc in April, its highest level since 1992.

European Central Bank president Christine Lagarde insisted “inflation is too high and it is set to remain so for too long” in an attempt to remove any suggestions there may be a pause in interest rate increases.

She added: “That is why we have hiked rates at our fastest pace ever – and we have made clear that we still have ground to cover to bring interest rates to sufficiently restrictive levels.”

The ECB has raised base rates by a combined 375 basis points to 3.25pc over the past year to combat runaway prices and has essentially committed to another 25 basis point hike on June 15 given high underlying price pressures.

10:12 AM

Risk of AI 'Terminator scenario' is 'close to zero' says Oxford professor

The probability of a “Terminator scenario” caused by artificial intelligence is “close to zero”, a University of Oxford professor has said.

Sandra Wachter, professor of technology and regulation, called a letter released by the San Francisco-based Centre for AI Safety - which warned that the technology could wipe out humanity - a “publicity stunt”.

The letter, which warns that the risks should be treated with the same urgency as pandemics or nuclear war, was signed by dozens of experts including artificial intelligence (AI) pioneers.

Prime Minister Rishi Sunak retweeted the Centre for AI Safety’s statement on Wednesday, saying the Government is “looking very carefully” at it.

Professor Wachter said the risk raised in letter is “science fiction fantasy” and she compared it to the film The Terminator. She added:

There are risks, there are serious risks, but it’s not the risks that are getting all of the attention at the moment.

What we see with this new open letter is a science fiction fantasy that distracts from the issue right here right now. The issues around bias, discrimination and the environmental impact.

It’s a publicity stunt. It will attract funding. Let’s focus on people’s jobs being replaced. These things are being completely sidelined by the Terminator scenario.

10:00 AM

'Softening demand' hurting UK manufacturers

After S&P Global’s latest UK manufacturing data, KPMG’s UK head of industrial products Glynn Bellamy said:

Softening demand continues to impact manufacturing output.

Destocking is also playing a role, as supply chain concerns and lead times ease.

Lower demand has been partially offset by reducing input costs including energy, but inflation and interest rates remain high in relative terms.

It is important that manufacturers use their recent high cost experiences to drive through further operational improvement and make the investments needed for UK plc to reduce its exposure to energy shocks, remain competitive and benefit from the expected medium term recovery - albeit in the context of an increasingly competitive global market.

09:41 AM

Downturn deepens for UK manufacturing

The downturn in UK manufacturing worsened last month as weak domestic demand hit the market, according to a closely-watched survey.

The S&P Global / CIPS UK Manufacturing Purchasing Managers’ Index (PMI) fell to a four-month low of 47.1 in May, down from 47.8 in April but above the flash estimate of 46.9. Any figure below 50 indicates a contraction.

New export orders fell for the sixteenth consecutive month in May, as overseas demand for UK manufactured products
remained lacklustre.

09:25 AM

French credit rating risk 'could be wakeup call for markets'

France is at risk of a downgrade in its credit rating amid concerns about “weakness” in the public finances of Emmanuel Macron’s government.

Ministers are bracing for a decision from S&P Global this Friday amid concerns that the President’s government tends to spend its way out of any crisis.

France’s Covid recovery plan delivered €100bn in extra outlays, while measures to mitigate surging energy prices could cost around €40bn and only be fully phased out over the next two years.

Ratings companies fear Mr Macron’s approach may now be endangered by politics after violent protests over pension reform. His failure to build alliances over raising the retirement age has crystallised opposition in parliament and among unions.

Fitch downgraded France in April, while Scope Ratings put a negative outlook on its assessment last week with the country’s net debt supply on track for an annual record, according to Natixis strategists.

Adam Kurpiel, rates strategist at Societe Generale, said: “We and the rating agencies have been highlighting the weakness in France’s public finances for some time.”

He added the risk of a downgrade Friday “could be a wakeup call for the markets.”

Investors are already showing some signs of caution, with the premium that French bond yields offer over Germany widening by 15 basis points since January. The equivalent metric for Italy, which has much higher borrowing costs, has remained stable over the same period.

ING’s France economist Charlotte de Montpellier said: “A revision of a rating is not a big deal, but it really shows that the economic outlook is darkening and that the public finance situation is not bright.

“The risks that existed before are a bit more visible right now.”

Emmanuel Macron's France faces a decision on its credit rating on Friday - MICHAL CIZEK/AFP via Getty Images
Emmanuel Macron's France faces a decision on its credit rating on Friday - MICHAL CIZEK/AFP via Getty Images

09:08 AM

World's biggest stablecoin recovers £16bn lost in crypto crisis

The world’s biggest so-called stablecoin has recovered all of the roughly $20bn (£16.1bn) in market value it lost following the collapse of algorithmic rival TerraUSD a little over a year ago.

The circulating supply of Tether’s USDT - the world’s most actively-traded digital asset - topped the previous record of $83.2bn, set in May 2022, according to a live tracker published by British Virgin Islands-based company.

The company’s stablecoin is pegged at one-to-one with the dollar, and maintains that value by supporting it with reserves of cash and cash-equivalent assets.

USDT’s recovery is a testament to the dominant role it plays in crypto as a means for conducting transactions and storing value.

The stablecoin’s circulation dropped about 20pc in the second quarter of last year as Terra’s collapse destablised crypto markets, kickstarting a period filled with bankruptcies, high-profile scandals and a plunge in most cryptocurrencies’ prices.

08:37 AM

FTSE 100 gains amid hopes Fed will pause rate rises

The FTSE 100 has edged up, tracking an improvement in global mood as investors were relieved that the US debt ceiling bill successfully passed through the House of Representatives.

The blue-chip index was up 0.5pc as hopes of the Federal Reserve pausing rate increases further soothed the mood.

The mid-cap FTSE 250 has managed a 0.3pc gain, weighed down by a 11.1pc drop in Dr Martens as it also posted a slump in annual profit, citing higher investments to tackle supply chain and operational snags.

AstraZeneca added 0.7pc after the drug maker said a combination of its cancer drug Lynparza and abiraterone has been approved in the U.S. for the treatment of a type of prostate cancer.

The broader healthcare sector rose 0.4pc.

Pennon Group slid as much as 2.3pc after posting a sharp drop in annual profit due to extreme weather patterns and increased costs.

08:18 AM

British Land demoted from FTSE 100

After more than 20 years, British Land’s time in the prestigious FTSE 100 index is coming to an end, falling victim to the turmoil rising interest rates are causing in the commercial property market.

The company, whose City of London tenants include UBS and TP ICAP Group, will be demoted to the FTSE 250 index and replaced by engineering company IMI Plc, according to a statement from London Stock Exchange Group Plc’s FTSE Russell unit.

It also means Ocado, whose shares have fallen as the cost-of-living crisis squeezes its customers, has narrowly avoided demotion.

Shares in British Land have fallen 35pc over the past year, reducing the group’s market value to £3.2bn, down from a peak of £9bn in 2015.

08:13 AM

BAE Systems begins £500m share buyback programme

BAE Systems has confirmed it will begin its third batch of share buybacks aimed at boosting returns for shareholders.

The defence giant will repurchase up to £500m of shares by July 24 next year, having completed two previous programmes in November last year and on May 16.

BAE Systems - Jon Super
BAE Systems - Jon Super

08:07 AM

Markets open higher after US debt deal

The FTSE 100 has opened higher after the House of Representatives approved plans to temporarily remove the US debt ceiling, removing the risk of a default on the debts of the world’s largest economy.

The blue-chip index climbed 0.4pc to 7,476.82 while the midcap FTSE 250 lifted 0.1pc to 18,738.07.

07:53 AM

'Renewed fall in house prices is likely,' warn economists

Andrew Wishart, senior property economist at Capital Economics, issued a warning for the property market as mortgage rates head higher amid expectations of interest rates hitting 5.5pc by the end of the year. He said:

We suspect that the stabilisation in prices over the last couple of months will soon give way to renewed falls.

The stabilisation in house prices was always fragile given affordability is still very stretched by historical standards.

The upward revision in interest rate expectations due to stronger-than-expected inflation in April means that the average mortgage rate will jump from around 4.3pc to over 5pc imminently and to around 5.7pc by early 2024.

That is the same level as last autumn which suggests a renewed fall in house prices is likely. We think that prices will eventually drop by a further 8pc on top of the 4pc decline to date.

07:46 AM

AutoTrader profits fall as listings shrink

Online car marketplace Auto Trader reported lower annual profits amid ongoing shortages of new motors.

The group reported a 2pc decrease in pre-tax profits to £293.6m for the year to March 31, while revenues jumped 16pc to £500.2m and were 9pc higher in its core Auto Trader business.

It said soaring demand saw cars sell faster than at any time since its flotation eight years ago, which held back the number of vehicles listed on Auto Trader.

The car market was also impacted by a year of severe supply woes, which saw the group’s listings for new cars drop to 25,000 on average from 29,000 the previous year.

Used car stock increased 3pc over the year, but was still 35,000 cars lower than pre-pandemic levels, with the new car supply issues leading to a jump in demand for used vehicles.

07:39 AM

Dr Martens tops £1bn in revenue

Boot and shoe seller Dr Martens has said that it has surpassed revenues of £1bn for the first time, but reported a significant drop in profits.

The company said its profit had been hit by slower revenue growth, investment in new shops and a multimillion-pound hit from issues at a Los Angeles warehouse.

Pre-tax profit dropped 26pc to £159.4m, the business said, while revenue was up 10pc to just over £1bn.

Dr Martens - REUTERS/Jason Cairnduff
Dr Martens - REUTERS/Jason Cairnduff

07:36 AM

'The rest of 2023 now looks uncertain'

The property market has firmly blamed inflation for the downturn in house prices last month.

Rohit Kohli, director at Romsey-based mortgage broker The Mortgage Stop, said: “May was a solid month overall but, after the latest inflation data, ended on a mad note. The rest of 2023 now looks uncertain”

Kundan Bhaduri, director of London-based property developer The Kushman Group, said: “May was moving along nicely until last week’s inflation data rattled the mortgage market, prompting lenders to withdraw and increase rates across the board.”

James Forrester, managing director of Birmingham estate agent Barrows and Forrester, said: “The market has continued to tread water where the current rate of house price growth is concerned and with a further hike to interest rates likely this month, we can expect this subdued performance to remain over the coming months.”

However, not everyone was doom and gloom.

Matt Thompson, head of sales at Chestertons, said: “May was a positive month for sellers as we witnessed an evident increase in buyer enquiries and actual offers being made.

“This boost in activity has been the avalanche effect of the month of March marking the beginning of spring, which is known as the busiest season and sees more house hunters entering the market throughout April and May.”

07:24 AM

Housing market faces 'relatively soft landing'

Despite the concern about interest rates impacting mortgage costs, the outlook for the property market remains a fairly positive one for Nationwide.

Chief economist Robert Gardner added:

Nevertheless, in our view a relatively soft landing remains the most likely outcome since labour market conditions remain solid and household balance sheets appear in relatively good shape.

While activity is likely to remain subdued in the near term, healthy rates of nominal income growth, together with modestly lower house prices, should help to improve housing affordability over time, especially if mortgage rates moderate once Bank Rate peaks.

07:23 AM

House price drop deepens in May

House prices have slumped 3.4pc over the last year as expected increases in interest rates weigh on the market.

The sharp decline from a 2.7pc annual fall in April comes as the Bank of England is forecast to raise interest rates to 5.5pc by the end of the year, amid rising core inflation in the UK.

House prices unexpectedly fell for the eighth time in nine months in May, throwing doubts on the stability of the property market.

Property prices edged down 0.1pc compared with April, according to the lender Nationwide, with the average property now worth £260,736.

Prices had ticked up by 0.4pc in April after seven consecutive months of decline previously and are down 4pc compared with the most recent peak in August 2022.

After releasing the latest house price data, Nationwide’s chief economist Robert Gardner said:

Following tentative signs of improvement in April, annual house price growth softened again in May, falling back to -3.4pc (from -2.7pc in April).

However, this largely reflects base effects with prices broadly flat over the month after taking account of seasonal effects. Average prices remain 4pc below their August 2022 peak.

Recent Bank of England data had shown some signs of recovery in housing market activity, although the number of mortgages approved for house purchase in March was still around 20pc below pre-pandemic levels.

Moreover, headwinds to the housing market look set to strengthen in the near term.

While consumer price inflation did slow in April, it was a much smaller decline than most analysts had expected.

As a result, investors’ expectations for the future path of Bank Rate increased noticeably in late May, suggesting it could peak at c5.5pc, well above the 4.5pc peak that was priced in around late March. Furthermore, rates are also projected to remain higher for longer.

If maintained, this is likely to exert renewed upward pressure on mortgage rates, which had been trending down after spiking in the wake of the mini-Budget in September last year.

07:14 AM

Good morning

The annual fall in house prices worsened last month as the Bank of England is expected to increase interest rates over the course of the year.

Prices had slumped 3.4pc annually in May, compared to a fall of 2.7pc in April, according to Nationwide.

Property prices edged down 0.1pc last month compared with April, with the average property now worth £260,736.

5 things to start your day

1) Tories demand Rishi Sunak scraps ‘morally wrong’ inheritance tax | The Telegraph launches campaign to abolish the death duty

2) Inside the fight for life at Britain’s ‘voice of business’ | Scandal-hit CBI is fighting for survival in the wake of allegations of sexual assault

3) Sunak to discuss AI pact with Biden amid ‘extinction risk’ warnings | Attitudes in the White House are split over fears regulation could weaken US competition

4) Britain braces for recession as higher rates squeeze mortgage holders | Persistent inflation to leave Britain as the only major economy to suffer negative growth across 2023

5) House sales plunge to lowest level since Covid viewing ban | Slump reflects sharp increase in mortgage rates since September’s mini-Budget

What happened overnight

The House of Representatives has overwhelmingly voted to suspend the debt ceiling limit, averting a catastrophic default and allowing Joe Biden to breathe a sigh of relief.

The deal – hammered out by the US president and the Republican House Speaker Kevin McCarthy – will now move to the Senate, where it is virtually certain to be approved.

Asian benchmarks were mostly higher after the approval of the debt ceiling and budget cuts package, avoiding a default crisis.

But the enthusiasm was muted by worries about the Chinese economy after disappointing recent data on a recovery in the world’s second largest economy, and a key driver of regional growth.

Japan’s benchmark Nikkei 225 rose 0.3pc to 30,976.43. Australia’s S&P/ASX 200 gained 0.3pc to 7,109.40.

South Korea’s Kospi quickly lost early gains to dip 0.4pc to 2,567.86. Hong Kong’s Hang Seng jumped 0.8% to 18,381.63, while the Shanghai Composite added 0.4pc to 3,216.86.

Wall Street stocks retreated Wednesday as markets awaited the congressional vote. The Dow Jones Industrial Average finished down 0.4pc at 34,908.27.

The broad-based S&P 500 shed 0.6pc to 4,179.83, while the tech-rich Nasdaq Composite Index also dropped 0.6pc to 12,935.29.