The FTSE finished lower on Tuesday as public sector net borrowing was higher than expected. Photo: PA/Alamy
European stock markets finished lower on Tuesday, while Wall Street was struggling, as new data showed that UK borrowing rose in October and productivity in Britain had fallen.
In London, the FTSE 100 (^FTSE) closed 0.3% lower as a stronger pound weighed on the index. The CAC (^FCHI) lost 0.3% in Paris, and the Frankfurt DAX (^GDAXI) finished flat.
Across the pond, the S&P 500 (^GSPC) fell 0.3% on the day, and the tech-heavy Nasdaq (^IXIC) was 0.8% lower. The Dow Jones (^DJI) was 0.3% down in New York.
According to the Office for National Statistics (ONS), the £14.9bn ($18.67bn) of public sector net borrowing, excluding banking groups, was higher than both the consensus forecast and the OBR’s March forecast of £13.7bn ($17.18bn).
This was also £4.4bn more than in October 2022, and more than September’s £14.6bn.
It is the second highest October borrowing since monthly records began in 1993, after October 2020 when the pandemic pushed the deficit up to almost £20bn.
However, borrowing so far this financial year is almost £17bn lower than forecast, providing some room for policy changes in Jeremy Hunt's autumn statement on Wednesday afternoon.
The chancellor said: “We met our pledge to halve inflation, but we must keep on supporting the Bank of England to drive inflation down to 2%. That means being responsible with the nation’s finances.
“At my autumn statement tomorrow, I will focus on how we boost business investment and get people back into work to deliver the growth our country needs.”
It came as the ONS also revealed that public sector net debt reached £2.6tn, equivalent to around 97.8% of the UK’s annual gross domestic product (GDP).
This is 2.3 percentage points higher than in October last year and remains at levels last seen in the early 1960s.
Meanwhile, UK productivity declined by 0.1% in the three-month period to September, compared to the previous year, highlighting the weakness of the economy.
Bart van Ark, managing director of The Productivity Institute, said: “Another poor quarterly performance for productivity reinforces our view that Britain is in urgent need of a national agenda to double annual productivity over the next 10 years. We anticipate growth is likely to stall for 2023 on the whole."
Join us again tomorrow for everything on the autumn statement and market reactions,
Thanks!
Pedro Goncalves
What's moving Wall Street?
Investors have their hands full across the pond amid a raft of retail earnings and the ongoing saga of OpenAi. My US colleagues write:
Retail earnings disappointed with shares of companies like Lowe's (LOW), Best Buy (BBY), American Eagle Outfitters (AEO), and Khol's (KSS) dropping on Tuesday as a pullback in consumer spending clouded forecasts and registered a hit to sales.
Looking ahead, eyes will be on Nvidia's quarterly report for an update on the fundamentals behind the AI hype cycle, after the company's stock notched at a record close on Monday. Expectations are high as the chip giant has become the face of the 2023 AI story, after its last earnings spurred a rally in stocks.
Meanwhile, the OpenAI drama is still center stage after Microsoft's (MSFT) CEO hinted he was open to Sam Altman rejoining the ChatGPT maker.
Microsoft's shares were flat in early trading on Tuesday, after ending Monday's session at a record high following its recruitment of the abruptly ousted OpenAI CEO. Wall Street saw the tech giant's move as boosting its AI prospects, which could be buoyed if it ends up benefiting from a threatened exodus of OpenAI employees.
Pedro Goncalves
Palantir secures NHS software contract
Tech giant Palantir (PLTR) has won a £330m contract to handle NHS patient data, it has been confirmed.
The companies, led by Palantir Technologies UK, will provide a new shared software system known as the NHS Federated Data Platform (FDP), which will aim to make it easier for health and care organisations to work together and provide better services to patients.
Palantir will be supported by Accenture, PwC, NECS and Carnall Farrar, NHS England said.
It added that “no company involved in the Federated Data Platform can access health and care data without the explicit permission of the NHS”.
The move comes after concerns were raised about Palantir’s involvement in the deal earlier this summer, when the company was handed a £25 million contract without competition to put in place transition arrangements.
LaToya Harding
Are equity markets set for a correction following a three-week rally
Pierre Veyret, technical analyst at ActivTrades said:
"Not only have markets become less directional since the beginning of the week, but volatility has also decreased, highlighting the current slowdown in risk appetite.”
“The big question in investors’ minds is: are equity markets set for a correction following a three-week rally, or is the current consolidation just a breath before reaching new highs?"
Technically speaking, the scenario of a coming correction prevails, as the price action currently diverges with the RSI indicator, which also already shows a break-out of the bullish dynamic trendline.”
“However, the macro front tells another story. With today’s release of the minutes of the last FOMC meeting and a speech from ECB President Christine Lagarde, investors may also prefer to sit back and wait for further developments on the monetary front before adjusting their exposure to equity markets.”
“The dovish narrative has now been largely priced in, and some investors are starting to think that one cooler-than-expected inflation print cannot be sufficient to reverse market sentiment completely: it will need to be confirmed by central bank officials.”
LaToya Harding
Nvidia set to climb higher
Shares of Nvidia (NVDA) are up 237% year-to-date ahead of its third-quarter earnings release later today.
The chip giant saw stocks closing at a record high of $504.09 (£401.52) on Monday as investors await the latest from the company that has become the face of AI.
Nvidia is expected to report a nearly 173% jump in revenue for the third quarter, according to analysts polled by LSEG, and Wall Street estimates it will forecast a more than 195% rise in revenue for the current quarter, Reuters reports.
Tesco trials 'scan-free' checkouts to save shoppers time
Tesco supermarket store, Warwick, Warwickshire, England, UK
Imagine walking into Tesco (TSCO.L), picking your products and when you’re ready to pay you only approach the till and it immediately calculates your shopping and allows you to pay with no need to scan anything inside the bag. Might sound like a magic trick but it is what Tesco is trialling at one of its west London stores.
Customers at Tesco’s Fulham Reach Express GetGo store can now take items from shelves and “just walk up” to the checkout which will “magically present them with a list of the products they have picked up”.
The new tech means customers don’t have to scan items at self-service tills, allowing for a more “seamless and convenient” shopping experience.
It works by all shelves being weighed, so all shoppers have to do is place an item into their basket or trolley and the system does the work for you.
Shoppers will be asked to check the list of store products presented to them at the till to see if it matches what they have, and then they can pay for the goods.
Unlike other GetGo stores, there is no need to download or use the Tesco Grocery App to take advantage of the scan-free checkouts.
Ricardo Evangelista, senior Analyst and ActivTrades, said:
“The US dollar is on the back foot as European trading gets underway this Tuesday.”
“The greenback has been under pressure following a string of disappointing economic data and last week’s inflation numbers that read below expectations. Against this background, investors have been turning away from the greenback ahead of the release, later in the day, of last month’s FOMC minutes.”
“Traders will scrutinise the minutes closely, hoping to find clues for the timing of the next Fed move, which is now widely assumed to be a cut. Against this background, dovish minutes could bring forward the market’s expectations for when the Fed will begin cutting rates and trigger further dollar weakness.”
LaToya Harding
BoE not keen to cut interest rates anytime soon
Screen grab from Parliament TV of Governor of the Bank of England Andrew Bailey speaking to the Treasury Select committee at the Houses of Parliament, London. Issue date: Tuesday November 21, 2023.
Inflation remains a threat that is being “underestimated” by markets warns the Bank of England, suggesting that it is sensible to keep interest rates where they are.
My colleague Pedro Gonçalves writes...
Financial markets are putting “too much weight” on the latest UK inflation figures and should be concerned about the risk of inflation persistence, the Bank of England’s governor has warned.
Andrew Bailey said the sharp drop in UK inflation in October was “good news” but that market expectations of how fast inflation will fall are too optimistic.
“We are concerned about the potential persistence of inflation as we go through the remainder of the journey down to 2%,” he told the Treasury committee. “And I think the market is underestimating that.”
UK productivity has fallen by 0.1% in the three-month period between July and September, highlighting the weakness of the economy.
UK output per hour worked declined by 0.3%, year-on-year.
Bart van Ark, managing director of The Productivity Institute, said:
“Another poor quarterly performance for productivity reinforces our view that Britain is in urgent need of a national agenda to double annual productivity over the next 10 years. We anticipate growth is likely to stall for 2023 on the whole.
“A combination of the pandemic plus already weak productivity in the decade preceding it has seen the UK stuck in a growth rut of around 0.5% a year on average. The recent downward revision by the Office for National Statistics of productivity growth in the public sector from 0.7% to 0.3% per year over the past decade is adding to the problems on our plate.
“If the country’s productivity performance doesn’t improve, we predict UK GDP growth would drop to less than 1% a year on average over the next decade. This would fall far short of what’s required to bolster businesses and the government’s revenues, which will be needed to invest in living standards and accelerating performance in the private and public sectors.”
LaToya Harding
AO World boosts profit outlook
AO World boasted a half-year profit of £13m on Tuesday and boosted its outlook for the year. It came after the electricals retailer made suffered a £12m loss last year.
The company said it tightly controlled advertising and marketing spending and reduced warehouse costs by 18% to £25.5m.
It upgraded its pre-tax profit guidance to between £28m and £33m, up from previous estimates of around £28m.
Shares initially climbed as much as 6.6% but have since fallen 3% as the company also reported a 12% decline in revenue to £482m in the six months to September.
LaToya Harding
Ofcom fines Shell Energy £1.4m
Poznan, Poland, October 12, 2023: Shell oil petroleum fuel barrels in row concept. Fossil fuel company and petrol industrial containers 3d illustratio
Ofcom has fined Shell Energy £1.4m for failing to tell its broadband customers when their contracts were expiring, or highlighting how much money they could save with a new deal.
Alex Tofts, broadband expert at Broadband Genie, said:
“This hefty fine for Shell Energy is a wake-up call for all providers thinking they can just switch off once they’ve signed up new customers.
“Ofcom introduced end-of-contract notifications three years ago as a way to help the millions of consumers who end up overpaying for their broadband. With typical contracts lasting 18 months or more, it’s easy to forget when your current internet package is expiring, so these advance nudges - by email, text or letter - are vital to stop people sleepwalking onto rolling deals, and increased bills.
“Many households have benefited from this regulation, either through saving money after switching to a cheaper deal or being able to move to a faster package for less.
“Any provider not putting this safety net in place is showing a disregard for consumers, and the fact that well over one in ten of Shell Energy’s customers were affected shows how severe this rules breach was."
LaToya Harding
Tax receipts up almost £24bn
Tax receipts so far this financial year have risen £23.9bn to £457.3bn, according to new data from HM Revenue and Customs (HMRC).
It reported that since April, cash receipts were higher mainly from Income Tax, Capital Gains Tax and National Insurance contributions (NICs) (£11.2bn), VAT (£8.2bn) and business taxes (£7.1bn).
Receipts from Inheritance Tax have totalled £4.6bn for April-October, a rise of £500m compared with last year.
It comes amid speculation that Jeremy Hunt could make cuts to inheritance tax which is paid by fewer than 4% of all estates.
LaToya Harding
UK retailers set to make £8.74bn across Black Friday weekend
Sydney, Australia. 20th November 2023. Black Friday sales have already begun at many retail outlets in Sydney ahead of the official Black Friday on 24th November 2023. Pictured: Superdry. Credit: Richard Milnes/Alamy Live News
Retailers are expected to make £8.74bn over Black Friday weekend this year, according to a new report.
A staggering £2.63m will be spent every minute this Black Friday Weekend
Cyber Monday sales up 6% YoY reaching a total of £3.34bn
£22.67bn is expected to be spent by consumers over the two-week Black Friday period (20 Nov – 1 Dec)
Two-fifths of Brits predicted to make a purchase this Black Friday Weekend
LaToya Harding
How could a stamp duty incentive help the property market?
The latest research by estate agent comparison site GetAgent.co.uk, has looked at what the previous stamp duty holiday did for the property market across England.
The research shows that:
The annual rate of house price growth has slowed to just 0.8%. In contrast, the annual rate of growth seen in September 2021, when the previous stamp duty holiday ended, sat at a heady 11.4%.
During the previous stamp duty holiday (July 2020 to September 2021), the average house price across England climbed by 13.3%. While impressive in itself, GetAgent then compared this rate of growth to the same time period preceding the stamp duty holiday (April 2019 to June 2020).
During this time the average house price across England increased by just 2.5%, meaning the stamp duty holiday helped accelerate house price growth to the tune of 10.8%.
Every region of England saw a higher rate of house price growth during the stamp duty holiday, with the North East topping the table. Across the region, house prices climbed by 18.4% during the stamp duty holiday versus just 0.6% during the same time period prior, a difference of 17.8%.
London saw the lowest rate of house price growth, but at 5.2%, house prices across the capital still increased by 3% more when compared to the same time period prior to the stamp duty holiday.
LaToya Harding
Pound and oil update
British Pound and U.S. dollar banknotes are seen in this illustration taken March 10, 2023. REUTERS/Dado Ruvic/Illustration
The pound (GBPUSD=X) is currently more than 0.25% higher against the US dollar at $1.2530, adding pressure to the FTSE 100 in London. Against the euro, sterling (GBPEUR=X) is also almost 0.3% higher at 1.1451.
Meanwhile, Brent Crude (BZ=F) prices fell in early trade, reversing steep gains made in the past two sessions.
It is down 0.5% at the time of writing, impacting energy stocks.
Investors have turned cautious ahead of an OPEC+ meeting this Sunday when the producer group may discuss deepening supply cuts.
Heavyweight energy stocks lost as much as 1% on London's benchmark index, tracking oil prices.
LaToya Harding
Capita to axe up to 900 jobs
Outsourcing giant Capita has announced it could axe up to 900 jobs in a bid to cut costs.
The company, which runs outsourced IT services for substantial parts of the NHS, is aiming to save £60m a year from the first quarter of next year.
It “continues to trade in line with its expectations” having won contracts worth a total of £2.9bn so far, ahead of its total of £2.6bn for last year.
Capita posted a pre-tax loss of £67.9m for the first six months of the year, compared to £100,000 profit a year prior.
It employs 43,000 people, mostly in the UK but also across Europe, India and South Africa.
Jon Lewis, chief executive, said:
We are, today, announcing the accelerated delivery of the efficiency savings announced in our Half Year Results with a £20m increase in overhead cost reduction to £60m on an annualised basis from Q1 2024.
As part of the organisational review which underpins the programme we are announcing today, we continue to identify further areas of cost efficiency and will pursue these during 2024.
LaToya Harding
Interest payable on debt hits October record
The interest payable on central government debt came in at £7.5bn last month, the highest in any October since monthly records began in April 1997.
This is £1.1bn more than in October last year, and £2.6bn more than the Office for Budget Responsibility (OBR) predicted.
The interest payment on index-linked government debt is linked to the retail prices index measure of inflation.
The ONS said:
The large month-on-month increases in Retail Price Index (RPI) observed since early 2021 have led to substantial increases in debt interest payable, with the largest three months on record occurring in 2022 and 2023.
LaToya Harding
UK borrowing rises in October
Chancellor of the Exchequer Jeremy Hunt leaves BBC Broadcasting House in London, after appearing on the BBC One current affairs programme, Sunday with Laura Kuenssberg. Picture date: Sunday November 19, 2023.
According to the Office for National Statistics (ONS) on Tuesday, the £14.9bn of public sector net borrowing, excluding banking groups, was higher than both the consensus forecast and the OBR’s March forecast of £13.7bn.
This was also £4.4bn more than in October 2022, and more than September’s £14.6bn.
It is the second highest October borrowing since monthly records began in 1993, after October 2020 when the pandemic pushed the deficit up to almost £20bn.
However, borrowing so far this financial year is almost £17bn lower than forecast, providing some room for policy changes in Jeremy Hunt's autumn statement on Wednesday afternoon.
The chancellor said:
“We met our pledge to halve inflation, but we must keep on supporting the Bank of England to drive inflation down to 2%. That means being responsible with the nation’s finances.
“At my Autumn Statement tomorrow, I will focus on how we boost business investment and get people back into work to deliver the growth our country needs.”
It came as the ONS also revealed that public sector net debt reached £2.6tn, equivalent to around 97.8% of the UK’s annual gross domestic product (GDP).
This is 2.3 percentage points higher than in October last year and remains at levels last seen in the early 1960s.
Public sector net borrowing, excluding public sector banks, in October 2023 was £14.9 billion.
£4.4 billion more than in October 2022 and the second highest October borrowing since monthly records began in 1993.
Shares in Asia finished lower overnight despite a rally on Wall Street ahead of the US Thanksgiving holiday.
The Nikkei (^N225) fell 0.1% on the day in Japan, while the Hang Seng (^HSI) finished almost 0.3% lower in Hong Kong as investors locked in profits after recent gains. The Shanghai Composite (000001.SS) was treading water by the end of the session.
It came amid reports of Beijing’s latest stimulus rollout for the property sector.
On Wall Street, the S&P 500 (^GSPC) rose 0.7% on the day, and the tech-heavy Nasdaq (^IXIC) was 1.1% higher, its highest level since April 2022. The Dow Jones (^DJI) was 0.6% up in New York.
Meanwhile the dollar languished near its lowest in two-and-a-half months on expectations that the US Federal Reserve has likely finished raising interest rates.
The yield on the globally influential 10-year US Treasury yields dropped 0.43%.
LaToya Harding
Coming up...
Good morning, and welcome to our live blog where we will be covering the latest news across the global economy and what's moving markets.
Here's a quick look at what's on the agenda for today...
7am: UK public finances for October
7am: Trading announcement: Cranswick, AO World
9am: EU current account
10.15am: Treasury committee to question Bank of England governor Andrew Bailey on inflation and economic data
1.30pm: Canadian inflation rate for October
3pm: US existing Home Sales
Watch: How does inflation affect interest rates?
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