American stock markets fell this afternoon after manufacturing in the world’s largest economy contracted for a fifth month in a row.
More than £220bn was wiped of the value of artificial intelligence giant Nvidia, as its shares dropped by nearly 8pc, helping to pull down the index of 30 leading US chipmakers by 6.5pc. It came less than a week after its quarterly financial results and forecasts disappointed investors, despite its sales doubling.
The Nasdaq Composite fell 2.4pc, the S&P 500 fell 1.4pc and the Dow Jones Industrial Average fell 1pc.
August manufacturing data from the Institute for Supply Management (ISM) pointed to ongoing challenges in the sector, which has now been in contraction for 21 out of the past 22 months.
The institute’s purchasing managers’ index (PMI) data gave a reading of 47.2 in August, up marginally from the 46.8 percent recorded in July. Anything below 50 indicates contraction.
“Demand remains subdued, as companies show an unwillingness to invest in capital and inventory due to current federal monetary policy and election uncertainty,” said Timothy Fiore of the ISM.
Worries about a slowing US economy helped send stocks on a scary summertime swoon early last month, but financial markets later rebounded on hopes that the Federal Reserve could pull off a soft landing for the economy.
Sam Stovall, chief investment strategist at CFRA Research, said that the today’s market reaction is “just speculation about the Fed. If there is any kind of economic weakness, investors believe the Fed will respond by lowering interest rates more aggressively.”
After jacking its main interest rate to a two-decade high to beat high inflation, the Fed looks set to ease interest rates later this month in hopes of easing conditions for the economy and avoiding a recession.
Many traders are anticipating the Fed will deliver a full percentage point of cuts to interest rates this year, which is a “recession-sized” amount, according to a Bank of America Global Research report.
The fall in share prices came as traders await a number of labour market reports due during the week, ahead of Friday’s non-farm payrolls data for August.
The jobs market has come under greater scrutiny, after July’s report hinted at a greater-than-expected slowdown, that consequently sparked a global selloff in riskier assets.
On Friday, closely watched US jobs data is expected to influence the Federal Reserve’s take on the American economy and when it will start lowering interest rates. The move will have repercussions through global markets.
Stephen Innes, analyst at SPI Asset Management, warned that Friday’s data “is shaping up to be a significant litmus test”.
He said: “A stronger-than-expected payroll number, paired with a lower unemployment rate, could inject some much-needed confidence into the market, signaling that growth risks might be easing, at least for now.
“If the report disappoints, especially if it pushes the unemployment rate higher, we could quickly see growth concerns flare up again.”
Analysts cautioned investors that September is typically a poor month for US stocks. Sam North, of investment platform eToro, said: “September has historically been a challenging month for US stocks. Between 1928 and 2023, the S&P 500’s return in September is -1.17pc on average.”
Read the latest updates below.
06:39 PM BST
Signing off…
Thanks for joining us on the Markets blog today. We’ll be back in the morning but you can catch up on all our latest business stories here.
06:20 PM BST
Fraud protection plan to be watered down, report says
Plans to reimburse fraud victims by up to £415,000 look set to be dramatically watered down, amid pressure from ministers and fintech firms.
The FT said that the maximum fraud payout will now be set at £85,000, citing Treasury insiders who had called the planned level “a disaster waiting to happen”.
The Payment Systems Regulator ins introducing a new fruit regime on Oct 8, which will require banks to pay back almost all victims of “Authorised Push Payment”, which cost consumers £460m last year.
Yesterday, The Telegraph reported that banks will be handed new powers to freeze payments for up to four days under new fraud prevention rules.
05:54 PM BST
Nvidia falls by 8pc in US chip rout
Aritificial intelligence giant Nvidia fell by as much as 8.4pc on Wall Street today, less than a week after putting out forecast-beating results.
Investors have reacted unfavourably to the chipmaker’s quarterly results, which showed doubled sales to a record $30bn (£22.8bn).
However, Nvidia’s forecasts for future growth were weaker than expected.
Shares are currently down 7.4pc, pulling down the Philadelphia Semiconductor Sector, of 30 leading US chip companies, by 6.3pc.
05:39 PM BST
Global shares fall after US traders return from a long weekend
Global shares fell today with Wall Street weighing them down while US Treasury yields fell amid concerns about manufacturing data.
The MSCI World index is down 1.3pc.
Oil prices sank on expectations of an imminent deal to resolve a dispute that has halted Libyan production and exports following a UN brokered meeting between rival factions, pushing Brent prices to their lowest in 2024.
Investors are also waiting for Friday’s August US jobs report, which is expected to help determine whether the Fed cuts rates by a quarter point of a half percentage point on Sept 18.
Robert Pavlik, senior portfolio manager at Dakota Wealth, said:
Investors are wondering are we heading into a recession quicker than was thought or does the Fed have this under control with rate cuts going forward …
People haven’t been able to express their nervousness because they haven’t been in the office. Now they’re back at work and it all comes to a head on the first day of trading.
Adding to volatility was the fact that many investors were back from summer vacations and a long weekend as US markets were closed for the Labor Day holiday yesterday.
05:26 PM BST
European shares fall as US data rekindles growth worries
Europe stocks fell today in their worst session in nearly a month, as US manufacturing data brought concerns about a slowdown in global growth back to the forefront.
The pan-European Stoxx 600 index, which includes some of Britain’s biggest companies, dropped 1pc, with Germany’s Dax slipping 0.9pc from record highs. Stocks in France, Spain and Italy dropped between 0.9pc and 1.3pc.
Declines began this morniong, and increased after US manufacturing data pointed to still-subdued factory activity, increasing jitters over the strength of the world’s largest economy.
All the major European indexes notched their worst day since the global equity selloff in early August that was also sparked by resurgent worries about a US recession.
Analysts at Danske Bank said:
Over the summer, market focus has turned from concerns about persistently high US inflation, that would force the [Federal Reserve] to keep rates restrictive, to fears over a slowdown in the US economy.
Sharescould struggle for momentum before Friday’s US non-farm payrolls data, a crucial data point as investors assess the possible size of an expected Fed rate cut in September. Key economic data for euro zone countries is also due this week.
The European Central Bank (ECB) is also expected to ease policy this month, though many policymakers have reiterated the need for caution and data-dependency.
“We expect a less aggressive cutting cycle by the ECB compared to Fed due to limited slack in the labour market, more persistent inflation and a lower starting point,” Danske Bank analysts wrote in a note.
05:14 PM BST
US manufacturing sluggishness ‘may herald steeper rate cuts’
Today’s poor US manufacturing figures could herald bigger rate cuts, a leading accountancy firm has said.
George Lagarias, chief economist at Forvis Mazars, said:
We would not be too worried about today’s retrenchment. September and October are traditionally the weakest months in the year for equities, so some profit taking, especially after such a strong August is to be expected.
We suspect that today’s moves are more seasonal than anything.
And the manufacturing data only confirms the sluggishness we have been seeing in the past few months. If anything, manufacturing weakness may herald steeper rate cuts, which would be welcome by markets.
05:00 PM BST
Oil prices slump amid US and China growth worries
Oil prices slumped more than four percent and stock markets retreated Tuesday as worries about growth in China and the United States weighed on sentiment.
A stream of indicators, including the latest manufacturing data, has highlighted weakness in the world’s two largest economies.
Trade Nation analyst David Morrison said:
It seems that the oil market is indicating a lack of confidence in the global economic outlook, not only due to the downturn in China, but also from increasing uncertainty about the pace of any slowdown across the US.
With oil producers reluctant to cut output – and the Opec oil cartel and its allies have even been considering boosting production – oil prices have been on a downward trend.
Fawad Razaqzada, market analyst at City Index, said:
The fact that recent data shows no signs of any acceleration in import demand in China, Europe or North America points to a situation where the oil market is not going to be as tight as expected a few months ago.
Oil prices fell even further – with Brent oil, the main international contract, falling under $74 per barrel to its lowest point this year – after US manufacturing data came in below forecasts.
While the August reading of the ISM manufacturing survey improved somewhat from July, and will boost the prospects for a faster pace of US interest-rate cuts set to begin this month, investors have recently become worried that the Federal Reserve may have waited too long and the economy may tip into recession.
04:52 PM BST
FTSE closes down
The FTSE 100 closed down this afternoon by 0.8pc.
The biggest riser was easyJet, down 2.7pc, follow by retailer B&M, up 2.2pc.
At the other end of the blue-chip index, Rightmove fell 6.8pc, followed by mining company Fresnillo, down 5.6pc.
The FTSE 250 aslo fell 0.8pc.
The top riser was Rolex dealer Watches of Switzerland, up 6.3pc, followed by Wag Payments, up 4.1pc.
The biggest faller was Hochschild Mining, down 5.4pc, followed by TBC Bank, down 4.9pc.
04:45 PM BST
Investors should ‘step back’ and not worry about normal September losses, suggests analyst
Investors should not worry too much about “challenging” September stock market losses, an analyst has suggested. Sam North, market analyst at investment platform eToro, told The Telegraph:
The market’s sensitivity to unfavourable data is evident, but it’s important to take a step back and recognise what a strong year it has been so far. Equities are trading at near all-time highs, and another dip might actually be welcomed by some market participants as a buying opportunity.
“Looking ahead, the non-farm payroll report this Friday will likely have a more significant impact on market sentiment, along with the next CPI [inflation] release just before the [interest rate] announcement on September 18.
Additionally, it’s worth remembering that September has historically been a challenging month for US stocks. Between 1928 and 2023, the S&P 500’s return in September is -1.17pc on average. Given that investors already expect a slowdown, the markets don’t need additional reasons to be cautious during this month.
04:42 PM BST
John Lewis plots new £80m housing development despite plans to refocus on retail
John Lewis is pushing ahead with a new £80m rental housing scheme despite vowing to “unashamedly” focus on retail. Hannah Boland reports:
The partnership has submitted a planning application to convert a former warehouse in Reading into a new 215-flat development made up of one, two and three-bed homes. The project is the partnership’s third foray into the property market, following two similar schemes in London.
The planning submission comes despite John Lewis signalling it would no longer be prioritising property development after changing strategy to refocus on retail.
Under chairman Dame Sharon White, John Lewis had been seeking to diversify away from retail. Dame Sharon, who steps down later this month, set a target for the partnership to make 40pc of profits in areas outside of the high street by 2030, earmarking housing and financial services as key areas of focus.
However, the partnership ditched the target in March. John Lewis said the economic environment had changed “so dramatically” that plans to diversify were now a longer-term project. Instead, executives promised a “relentless focus” on retail.
The strategy shift comes as a new chairman is set to take over the partnership after Dame Sharon’s five-year term. Jason Tarry, the former UK boss of Tesco, will assume the role later this month.
Read the full story…
04:20 PM BST
UK stocks fall
Britishs tocks have fallen this afternoon, despite starting in positive territory during the first two hours of trading this motning. Both the FTSE 100 and 250 are down around 0.8pc.
The decline is echoed on the continent, where Germany’s Dax is down 1pc, and France’s Cac 40 is down a similar amount.
03:57 PM BST
US stock market fall ‘doesn’t come as a surprise’, says analyst
A September fall on Wall Street should not surprise us, according to Axel Rudolph, senior technical analyst at online trading platform IG. He said:
Historically, the US stock markets tends to end in negative territory in September; the return of US traders after Labor Day and a drop in US indices thus doesn’t come as a surprise.
US stock indices drop by over a percentage point as traders return from their extended Labor Day weekend and US ISM manufacturing data disappoints.
It shows the 21st monthly contraction in US factory activity in the last 22 periods, underscoring the impact of high interest rates.
US employment data culminating in non-farm payrolls on Friday might add to the mix and add further pressure to indices which tend to decline in September.
03:53 PM BST
Euro zone bond yields fall as some investors move out of stocks
Euro zone bond yields fell today as cautious investors moved out of stocks, with mixed US manufacturing survey data doing little to lift the downbeat mood.
Germany’s 10-year yield, the bloc’s benchmark, fell to 2.268pc, after hitting a one-month high of 2.349pc on Monday. Yields fall as prices rise, and vice versa.
03:51 PM BST
Dollar strengthens as traders eye week of data for the world’s largest economy
The dollar dropped against the euro and the pound as traders braced for a data-heavy week, including Friday’s US payrolls report that will could shape the path of interest rate cut from the Federal Reserve.
Investor focus this week will squarely be on the US payrolls data after Fed chairman Jerome Powell last month endorsed an imminent start to interest rate cuts in a nod to concern over a softening in the labour market.
Economists surveyed by Reuters expect an increase of 165,000 US jobs in August, up from a rise of 114,000 in July.
Ahead of that, job openings data on Wednesday and the jobless claims report on Thursday will be in the spotlight.
03:46 PM BST
US manufacturing contraction not substantially worse than expected, say economists
The contraction in US manufacturing activity in August was not “substantially worse than expected”, economists at High Frequency Economics have said.
The latest industry survey data, which have caused a sell-off on Wall Street this afternoon, show that the decline in the manufacturing sector continued into a fifth consecutive month in August, as demand remained weak.
The August data point to ongoing challenges in the US manufacturing sector, which has now been in contraction territory for 21 out of the past 22 months.
One survey respondent in the chemical products sector said they had seen a “noticeable slowdown in business activity.”
“Previous optimism about future growth has been dashed,” they added.
Another respondent in the computer and electronic products sector said their business outlook was “good” amid an ongoing recovery.
03:37 PM BST
Wall Street stocks push downwards after weak manufacturing data
US stocks are continuing to push down during trading this afternoon following a disappointing start to a week full of updates on the economy.
The S&P 500 is 1.3pc lower, coming off a winning week that had carried it to the cusp of its all-time high. The Dow Jones Industrial Average is down 1.2pc, from its own record set on Friday before Monday’s Labor Day holiday. The Nasdaq Composite is 1.9pc lower.
Treasury yields were also sinking in the bond market after a report showed US manufacturing shrank again in August, as it continues to wilt under the weight of high interest rates. Manufacturing has been contracting for most of the past two years, and its performance for August was worse than economists expected.
Worries about a slowing US economy helped send stocks on a scary summertime swoon early last month, but financial markets later rebounded on hopes that the Federal Reserve could pull off a perfect landing for the economy.
After jacking its main interest rate to a two-decade high to slow the economy enough to stifle high inflation, the Fed looks set to ease interest rates later this month in hopes of avoiding a recession.
Other reports later this week that could show how much help the economy needs, including updates on the number of job openings US employers were advertising at the end of July and how strong American services businesses grew last month.
The week’s highlight will likely arrive on Friday, when a report will show how many jobs US employers created during August.
The jobs report has once again become the main event for the stock market each month, taking over from updates on inflation, according to analysts at Bank of America.
Many traders are anticipating the Fed will deliver a full percentage point of cuts to interest rates this year, which is a “recession-sized” amount, Gonzalo Asis and other economists and strategists wrote in a BofA Global Research report.
03:33 PM BST
Turkey submits request to join Brics nations
Turkey has submitted a request to join the Brics group of major emerging market economies, a spokesman for President Recep Tayyip Erdogan’s government has said.
Omer Celik, spokesman for the ruling Justice and Development Party (AKP), said: “Our president has many times stated that we want to become a Brics member.
“The process is now under way.”
The Brics group of nations include Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates.
With that, I will head off for the day and leave you in the capable hands of Alex Singleton.
03:22 PM BST
Traders increase bets on steeper US interest rate cuts
Traders are raising their bets on the Federal Reserve announcing a heftier cut to interest rates later this month after weak US manufacturing figures.
Money markets indicate there is a 33pc chance of a half a percentage point rate cut being announced by the Fed in a little over two weeks, compared to a 25pc chance given on Friday. Markets were closed on Monday for Labor Day.
The Fed is priced in to announce at least a quarter of a percentage point cut in borrowing costs from their present range of 5.5pc to 5.25pc – their highest level since 2001.
Analysts have warned that weakening factory output in the US “don’t bode well for growth”:
Falling backlogs and new orders firmly in contractionary territory don’t bode well for growth, and sequential weakness in the employment sub-index might – around the edges – lower the “whisper” estimate ahead of Friday’s payrolls report. https://t.co/zRG11NfyUd pic.twitter.com/B5adWye4yN
— Karl Schamotta (@Karl_Schamotta) September 3, 2024
🇺🇸 Gloomy business managers: @ISM #Manufacturing still in contraction in August (nearly 2 years).
⛔️ISM Manufacturing 🔼0.4pt to 47.2
⛔️New Orders 44.6 (🔽2.8pt)
⛔️Production 44.8 (🔽1.1pt)
⛔️Employment 46 (🔼2.6pt)
⛔️Backlogs 43.6 (🔼1.9pt)
🆒Inflation 54 (+1.1pt) pic.twitter.com/t5ab764ybw— Gregory Daco (@GregDaco) September 3, 2024
03:12 PM BST
US manufacturing slumps to lowest level since first Covid lockdown
The US manufacturing sector suffered its worst month since the onset of the pandemic in 2020, new data show, raising concerns that the world’s largest economy could yet be heading for a recession.
The Institute for Supply Management’s Manufacturing PMI – which is separate to S&P Global’s measure detailed below – gave a reading of 47.2 in August, up marginally from the 46.8 percent recorded in July.
However, its measure of production slid for a fifth month to the lowest level since May 2020, while new orders showed bookings shrinking to a 15-month low.
Stock markets plunged sharply following the release, with the Dow Jones Industrial Average and S&P 500 down 1.1pc and the Nasdaq Composite falling 1.5pc.
Timothy R Fiore, chair of the ISM Manufacturing Business Survey Committee, said: “Demand remains subdued, as companies show an unwillingness to invest in capital and inventory due to current federal monetary policy and election uncertainty.”
02:56 PM BST
US factory output falls for first time in seven months
US factory output decreased for the first time in seven months during August as sales continued to fall amid increasing reports of weakening demand, a closely watched survey has shown.
The S&P Global US Manufacturing PMI have a reading of 47.9 in August, down from 49.6 in July and below the 50 mark separating growth from contraction for the second consecutive month.
Manufacturers revealed a reduction in employment, while new export orders were down for the third month running.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said:
A further downward lurch in the PMI points to the manufacturing sector acting as an increased drag on the economy midway through the third quarter.
Forwardlooking indicators suggest this drag could intensify in the coming months.
Slower than expected sales are causing warehouses to fill with unsold stock, and a dearth of new orders has prompted factories to cut production for the first time since January.
Producers are also reducing payroll numbers for the first time this year and buying fewer inputs amid concerns about excess capacity.
02:40 PM BST
Oil falls below $75 a barrel for first time this year
Oil prices have dropped to their lowest level this year amid doubts over demand from the US and China.
Brent crude, the international benchmark, fell below $75 a barrel for the first time since December, wiping out gains that saw it rise above $91 in April.
It comes as traders nervously await economic data from the US this week, which will indicate how steeply the Federal Reserve could cut interest rates later this month.
Meanwhile, oil prices have been hit by weak data from manufacturers and the property sector in China, stoking fears about demand in the world’s second largest economy.
02:35 PM BST
Wall Street stocks slump ahead of jobs data
US stock markets fell as trading began ahead of a week of crucial economic data culminating in a jobs report that could signal how big a cut to interest rates can be expected by Americans.
The Dow Jones Industrial Average dropped by 0.4pc to 41,387.39, the S&P 500 declined by 0.7pc to 5,610.13 and the tech-heavy Nasdaq Composite sank 1.1pc to 17,515.04 at the opening bell.
02:27 PM BST
Iron ore prices fall amid China demand fears
Iron ore prices have slumped further after their biggest daily drop in three months amid concerns about China’s steel market.
The metal dropped as much as 2.7pc following its 4.2pc fall on Monday after disappointing Chinese manufacturing and property data.
Goldman Sachs analysts said to clients that the situation for iron ore prices is “challenging” despite it climbing above $100 a ton last week before the underwhelming Chinese data, which has raised concerns about demand from the world’s second largest economy.
02:10 PM BST
Britain has ‘pent up demand’ for City deals, say lawyers
After official figures showed the number of mergers and acquisitions (M&A) in Britain plunged by 35pc in June to just 93, Caroline Rae of Herbert Smith Freehills said:
The levels of UK M&A activity during the second quarter of 2024 are disappointing but not a surprise given the political uncertainty in the UK caused by the general election.
However, we are cautiously optimistic that activity will pick up towards the end of the year as uncertainty over the economic outlook eases.
Whilst the road ahead will continue to be challenging with interest rates and valuation gaps, the pent up demand for M&A remains, particularly from corporates who are looking at transactions to accelerate growth and achieve business transformation and can’t wait around for perfect conditions.
01:50 PM BST
Demand for UK debt not a confidence vote in Government, say analysts
On the surface, record levels of demand for UK gilts look like a boost for Chancellor Rachel Reeves, who has pledged to “get to grips with the public finances” and plug a £22bn blackhole in the public finances, writes Melissa Lawford.
However, analysts warned that the figures were not representative of a vote of confidence in the Government.
Althea Spinozzi, head of fixed income strategy at Saxo Bank, said: “I completely dismiss that idea. We know that fiscal spending will continue to be high.”
Instead, investors are betting that the rate offered on the bonds will offer good value, as the Bank of England continues to cut interest rates, Ms Spinozzi said.
The high levels of demand will have little impact on government borrowing costs, as these are determined primarily by Bank Rate expectations, said Megum Muhic, vice president at RBC Capital Markets.
“It is expectations on what the Bank of England will do that drives 95pc of government borrowing costs,” he said.
01:48 PM BST
Race to buy British debt as pensioners die younger
A drop in pensioner life expectancy since Covid drove record demand for Labour’s first government bond sale, as funds race to buy more short-term debt.
The UK raked in a record £110bn of orders in Labour’s first government bond sale, the highest level of demand ever recorded in proportion to the size of the sale, according to analysis by Bloomberg.
The sale was of a 15-year gilt that will mature in January 2040, paying an interest rate of 4.375pc, and raised £8bn for the Debt Management Office (DMO).
Megum Muhic, vice president at RBC Capital Markets, said the high demand was driven by falling life expectancies in retirement, which means UK pension funds are racing to buy 15-year bonds, instead of the 25-year bonds.
Between 2015 and the end of 2023, the average life expectancy for a man aged 65 dropped from 23 years to 21.5, while for women it fell from 25.5 years to less than 24, according to the Institute and Faculty of Actuaries.
Around half of this drop off has occurred since the pandemic, but the trend began before Covid.
Mr Muhic said: “Pension funds are very big buyers of long-dated gilts and their average liabilities have been getting shorter as average life expectancies (in retirement) have been getting shorter.”
As pensioner life expectancies shrink, pension fund demand for more short-term debt has been growing.
“It is a big shift going on. There are a lot more buyers in this sector, their focus has shifted from 25-year [bonds],” Mr Muhic said.
01:28 PM BST
Dry cleaners Johnson brushes up sales
Dry cleaners Johnson Service Group has cheered a jump in sales over the first half of the year, as it expanded its luxury hotel services operations with a deal to buy a rival.
Bosses at the textile rental and cleaning business hailed a “strong” performance as it also reported a significant rise in profits.
Shares in the London-listed group were down 0.4pc despite revenues growing by 13.5pc to £244.1m for the first half of 2024.
Organic revenues rose by 5.7pc as it also benefited from acquisitions.
Johnson said sales volumes increased across its hotel, restaurant and catering arm despite “unseasonably poor weather” in the second quarter.
Meanwhile, workwear trade “remained stable” during the half-year, with the company pointing towards improving sales momentum from new and existing customers.
The company reported that pre-tax profits grew by 38.5pc to £18.5m for the six-month period, as it also confirmed it has acquired competitor Empire Linen Services for £20.6m.
12:58 PM BST
Reeves confirms plan to cap corporation tax at 25pc
Chancellor Rachel Reeves has confirmed the Government will be capping corporation tax at 25pc, as part of a “tax roadmap for business” which will be set out at the Budget.
During Treasury questions, Ms Reeves told the Commons:
Investment is at the heart of this Government’s growth mission, alongside stability and reform, with robust fiscal rules and respect for economic institutions, the Government is building the confidence needed to deliver private sector investment.
It is vital also that the tax system supports growth, and that’s why today I can confirm that at the Budget the Government will be outlining a tax roadmap for business, to offer the certainty that encourages investment and gives business the confidence to grow, including our commitment to cap corporation tax at 25pc for the duration of this Parliament, and to retain full expensing.
MPs also raised concerns about cuts to the winter fuel allowance, with one saying that 90pc of pensioners in Devon and Cornwall will be affected by the partial scrapping of the benefit.
Steve Darling, Liberal Democrat MP for Torbay said that in his constituency in Devon that 21,000 pensioners will be impacted by the cut.
In response, the Chancellor said that the Government was working with charities and local authorities to encourage pensioners who are entitled to the pension credit benefit to apply to do so, adding: “I want to ensure that the lowest income pensioners get the support that they are entitled to.”
12:46 PM BST
Oil prices slump amid doubts over China demand
Oil prices have retreated to their lowest level in a month amid fears over China’s struggling economy according to analysts.
Global benchmark Brent crude shed more than 2.3pc to less than $76 a barrel, having dropped by 1.6pc on Monday.
A stream of indicators, including the latest on manufacturing, has highlighted weakness in the Chinese economy, the world’s second largest after the United States.
John Evans, analyst at oil broker PVM, said that China’s “only plan for recovery seems to be in exporting its way out of economic doldrums”.
He added: “Yet external demand flounders in the face of a global economy that on the whole is sputtering at best.”
12:30 PM BST
Ban smartphones and tablets for toddlers, parents urged
Health authorities in Sweden have urged parents to ban all screen time for two-year-olds and limit teenagers to just three hours a day.
Our senior technology reporter Matthew Field has the details:
The new screen time guidelines, set by the nation’s Public Health Agency, come amid widespread global concerns about the effects of TV, tablet and smartphone usage on children.
Swedish officials warned of a “sleep crisis” among teenagers and said phones and tablets should be kept out of bedrooms.
Jakob Forssmed, Sweden’s public health minister, said: “For too long, smartphones and other screens have been allowed to enter every aspect of our children’s lives.”
Read on for the screentime guidelines.
Click here to view this content.
12:05 PM BST
Former VW boss goes on trial over dieselgate scandal
Former Volkswagen chief executive Martin Winterkorn appeared in court on Tuesday on fraud charges over the so-called dieselgate scandal, nine years after the German carmaker was found to have rigged emissions tests.
Mr Winterkorn, who was toppled from the helm of the company in September 2015 after it emerged that millions of Volkswagen cars had been manipulated to pass environmental standards, became a figurehead of the scandal, the biggest in the company’s history.
Today marked the start of the 77-year-old’s criminal trial, the culmination of a case more than five years in the making.
The trial comes as the future of Volkswagen’s German locations is in question, as the carmaker looks for billions of euros in savings at its namesake brand.
Mr Winterkorn was tight-lipped entering court in the central city of Braunschweig in a dark-blue suit but told reporters he was “doing very well”.
The criminal charges against him include fraud, market manipulation and unlawful false testimony before a parliamentary committee.
He is also alleged to have failed to inform the capital market in good time about the mass manipulation of diesel engines in 2015.
Via his lawyer, Mr Winterkorn denied the charges against him.
11:46 AM BST
Wall Street on track to fall ahead of jobs figures
US stock indexes were lower in premarket trading ahead of a series of economic data reports due throughout the week that could influence the extent of interest rate cuts by the Federal Reserve this year.
The blue-chip Dow Jones Industrial Average and the benchmark S&P 500 recovered from early August’s losses and ended higher on Friday, notching their fourth-straight month in gains, after data pointed to a robust economy and moderating price pressures.
The Dow is at a record high and the S&P 500 is within 1pc of its own milestone as markets enter into what has been a historically weak month for the main indexes on average.
Traders continue to scour for reassuring signs about the economy, with the release of the monthly ISM manufacturing survey due later.
A number of jobs market numbers will also be published this week, ahead of Friday’s non-farm payrolls figure for August.
In premarket trading, the Dow Jones Industrial Average and the S&P 500 were down 0.5pc, while the Nasdaq 100 dropped 0.8pc.
11:26 AM BST
UK bond sale attracts record-equalling demand
Britain attracted a record-equalling level of demand from investors for government bonds today in a vote of confidence in the UK economy despite Labour’s claims of the worst economic inheritance since the Second World War.
The UK Debt Management Office received more than £110bn of orders for its sale of £8bn of bonds – known as gilts – which mature in 2040, with a yield of 4.375pc.
The record-matching demand comes in the first bond sold via banks since Labour’s election victory.
It comes despite Labour claims of a dire economic inheritance, with one Cabinet minister suggesting that Labour was forced to cut winter fuel payments for millions of pensioners to prevent a run on the pound.
11:13 AM BST
Pound slips after strongest rally in 10 months
The pound edged lower against the dollar as investors booked some profits from sterling’s largest monthly rally in 10 months ahead of a US jobs market figures later this week.
Data on Tuesday showed summery weather in August helped boost UK consumer spending, as shoppers splashed out on food and drink, although this did little to support the pound.
Sterling, which gained 2.1pc in August in its strongest monthly increase since November 2023, was down 0.2pc against the dollar at $1.312, some 1.2pc below last week’s two-year high of $1.327.
The euro flat against the pound at 84.2p, having hit a one-month low late last week.
Barclays said on Tuesday consumer spending on its credit and debit cards rose by 1pc year-on-year in August, bucking two months of decline.
A separate survey from the British Retail Consortium also showed spending in shops increased by 1pc in annual terms in August.
The pound is by far the best performing major currency against the dollar this year, having risen by 3.1pc so far, compared with a 0.2pc rise in the euro, the runner-up, and the Norwegian crown, whose 4.5pc decline so far has overtaken the 3.6pc fall in the Japanese yen.
The principal driver is the expectation among traders that UK rates will take a lot longer to meaningfully fall than those in the euro zone or the United States.
10:52 AM BST
Gas prices fall amid large stockpiles
Gas prices in Europe have fallen as large stockpiles eased concerns about potential disruption to supplies.
Dutch front-month futures, the continent’s benchmark, were down as much as 3pc following a decline of 3.1pc on Monday.
It comes as underground storage facilities were 92pc full ahead of the winter season.
Prices fell despite plans for maintenance works at several of Norway’s facilities, which have decreased supplies this week.
Dutch front-month futures were last down 2.2pc to less than €38 per megawatt hour.
10:40 AM BST
Deal-making slumps as City prepares for tax-raising Budget
Deal-making has slumped to the lowest level since the first lockdown in 2020, official figures show, in a blow to Labour as the City braces for the Chancellor to raise taxes in her Budget next month.
Our economics reporter Melissa Lawford has the details:
The number of mergers and acquisitions (M&A) in June, just before the general election, plunged by 35pc in a month to just 93, according to the Office for National Statistics (ONS).
This was a sharp drop of 45pc year-on-year and the lowest monthly total since May 2020, when the Covid pandemic hammered transactions.
High borrowing costs and market uncertainty have hit activity, with the total number of deals between April and June falling by 17pc to 385, compared to the first three months of the year
Sam Fuller, a managing director at Houlihan Lokey’s Consumer Group, an M&A adviser, warned that Chancellor Rachel Reeves’ upcoming October Budget, which is expected to include major tax rises, will likely be a further blow.
Mr Fuller said: “The upcoming Budget is feeling increasingly seismic and will almost certainly impact M&A activity levels.
“Changes in corporate and capital gains tax rates, in particular, could impact company valuations and seller incentives, meanwhile an increased tax burden will further hurt an already struggling consumer economy.”
The value of domestic deals (made by UK companies acquiring other UK companies) plunged to £2.6bn, down by £1bn compared to the start of the year.
While the number of acquisitions of UK companies by foreign firms rose slightly, the total value of these deals fell from £5.6bn to £5bn compared to the start of the year.
In the second quarter of 2024 there were 385 mergers and acquisition (M&A) in total, fewer than the 463 seen in the first three months of the year.
The monthly total fell from 148 in April 2024 to 144 in May and 93 in June.
Read more ➡️ https://t.co/uDX6MosRaU pic.twitter.com/0OWl2XQ3FE
— Office for National Statistics (ONS) (@ONS) September 3, 2024
10:24 AM BST
London PR offices covered in red paint by Palestine protesters
The offices of a London PR company have been targeted by Palestine activists over its work for Israeli defence business Elbit Systems.
Campaigners for Palestine Action were videoed chanting “from the river to the sea” outside the entrance to APCO Worldwide’s offices on the Strand in London.
Red paint was sprayed across the premises using repurposed fire extinguishers before three activists attached themselves to each other using a lock on device within a suitcase.
APCO Worldwide has been contacted for comment.
BREAKING: Palestine Action blockade and drench the London offices of APCO Worldwide.
APCO are paid lobbyists for Israel’s biggest arms firm, Elbit Systems.
They work to secure government contracts for weapons which are “battle-tested” on Palestinians. pic.twitter.com/vys7GmNkPa
— Palestine Action (@Pal_action) September 3, 2024
10:09 AM BST
Mexican billionaire increases stake in BT by £160m
The Mexican telecoms billionaire Carlos Slim has increased his stake in BT weeks after roughly £1bn was wiped off its market value after Sky struck a broadband deal with one of the telecoms giant’s biggest rivals.
Mr Slim’s family investment trust increased its stake in the former monopoly from 3.2pc to 4.3pc, increasing the value of his stake by about £160m to around £603m.
The 84-year-old tycoon, who is worth $93bn (£72.4bn), in June disclosed the initial £400m stake in the FTSE 100 group. He is now the company’s fifth largest shareholder.
BT shares were up 0.7pc.
09:44 AM BST
UK in line for nine new offshore wind farms
Britain is in line for nine new offshore wind farms after the Government’s latest renewables auction, but campaigners fear it may still fall short of clean power targets.
The nine new projects compare to none last year, and include what will be Europe’s largest and second largest wind farm projects – Hornsea 3 and Hornsea 4 off the Yorkshire coast.
They are part of a new wave of green power projects including onshore wind and solar farms, which officials said will generate enough power for 11m homes.
Energy Secretary Ed Miliband said the auction had got the offshore industry “back on its feet”, adding that the projects are “essential to give energy security to families across the country”.
The projects were announced as part of this year’s Contracts for Difference (CfD) auction, a process started in 2015 as the Government’s mechanism for making sure renewable energy schemes are built.
Because clean projects can be expensive, developers bid to secure a guaranteed rate – or strike price – their project will get for every megawatt hour (MWh) of energy it produces in the coming years.
If the price of electricity on the open market dips below that, subsidies will kick in to top up payments to companies. If the price is higher, companies have to pay back the difference.
09:25 AM BST
Turkish inflation drops to 52pc
Turkey’s annual inflation rate slowed further in August to 52pc after reaching 61.8pc in July, official data showed on Tuesday.
The central bank began to raise interest rates last year in an effort to battle soaring prices, after President Recep Tayyip Erdogan dropped his opposition to orthodox monetary policy.
Turkey’s annual inflation rate reached a decades-long high of 85pc in October 2022.
It fell to 38.2pc in June 2023 before rising again. It reached 75pc in May this year but started to fall in June.
The biggest price rises in August were in education, at 120.8pc, housing at 101.5pc, and hotels and restaurants at 67.7pc, according to the Turkish statistics institute.
A central bank survey of investors has forecast that inflation would reach 43.3pc by late 2024.
The government avoided raising the minimum wage in July in efforts to tame inflation. It had raised it in the previous two years.
09:02 AM BST
Rolls-Royce tops FTSE 100 as Cathay Pacific engine problems fixed
The FTSE 100 has risen after a recovery in aerospace and defence stocks as Cathay Pacific announced it is due to resume full flights by the weekend.
The UK’s blue-chip stock index was up as much as 0.2pc after kicking off September on a dull note, while the domestically-focused midcap FTSE 250 gained 0.3pc.
Rolls-Royce rose 4.3pc to recover nearly all of Monday’s steep losses as Hong Kong’s Cathay Pacific Airways said three of its planes powered by the engine maker went through successful repairs and all of the jets were expected to resume operation by Saturday.
This boosted the aerospace and defence index roseas much as 2.2pc, after logging its steepest one-day decline since November 2022 on Monday.
Ashtead Group climbed as much as 5pc to the top of the FTSE 100 after the equipment rental company said it expects full-year results in line with previous expectations.
Hikma Pharmaceuticals rose as much as 3pc after Berenberg upgraded the British drugmaker’s shares to “buy” from “hold”.
Watches of Switzerland Group jumped as much as 11.3pc to the top of the FTSE 250 after the company said it is on track to deliver its full-year forecast.
08:41 AM BST
Rolls Royce shares bounce back as Cathay Pacific to resume flights
Rolls-Royce has rebounded in early trading after Hong Kong’s flagship carrier said it was on course to resume full operations by the weekend.
Cathay Pacific has said it must replace 15 parts after it temporarily grounded its fleet of A350 aircraft for inspections following the discovery of problems with its Rolls-Royce engines.
The airline cancelled at least 34 round-trip flights and said it was conducting “precautionary” inspections across its 48-strong fleet after a “first of its type” engine component failure forced a flight to Zurich to turn back on Monday.
Cathay said three of the 48 Rolls-Royce-powered planes it had inspected had already gone through successful repairs and all of the jets were expected to resume operation by Saturday.
Rolls-Royce saw £2.7bn knocked off its stock market value on Monday as Cathay said “a number of aircraft will be out of service for several days”. Its shares have rebounded 4.4pc in early trading.
08:31 AM BST
China to launch anti-dumping investigation into Canadian canola
China said it would launch an anti-dumping probe into Canadian canola and chemical products in an apparent retaliation for Ottawa’s new restrictions on imports of Chinese electric vehicles (EVs).
Canadian Prime Minister Justin Trudeau last month announced tariffs of 100pc on Chinese EVs, accusing Beijing of “not playing by the same rules as other countries” in areas like environmental and labour standards.
The US and the EU have also respectively slapped tariffs of 100pc and 36pc on Chinese EVs, arguing that Beijing unfairly subsidises domestic producers whose products then flood foreign markets and undercut local competitors.
China has repeatedly criticised the imposition of levies and launched a series of its own investigations in response.
Its commerce ministry said in an online statement that it “will initiate an anti-dumping investigation into canola imported from Canada, in accordance with the law”.
The ministry said domestic industries had recently reported that Canadian canola exports to China “have increased significantly”, reaching $3.5bn in 2023 while prices “have continued to fall”.
08:04 AM BST
UK markets rise ahead of jobs figures
Stock markets in London rose at the open ahead of US jobs figures which could indicate how steeply the Federal Reserve cuts interest rates.
The FTSE 100 rose 0.2pc to 8,379.50 while the midcap FTSE 250 gained 0.2pc to 21,011.41.
07:58 AM BST
Rolex dealer expects recovery in luxury market
Rolex retailer Watches of Switzerland is confident of boosting sales and profitability over the full year as it said the luxury market continues to recover.
The UK’s biggest retailer for Rolex and Omega watches said trading in the first 18 weeks of its new financial year was in line with expectations.
It added the company remains on track for sales to grow by up to 12pc to around £1.7bn over 2024-25, and for an improvement in profit margins.
Watches of Switzerland said: “Over the period, we have seen continued stabilisation of the UK market in both luxury watches and jewellery following a period of challenging macroeconomic conditions in the prior financial year.”
07:49 AM BST
Rolls-Royce ‘committed to working closely’ with airline over engine issues
Rolls-Royce said in a statement it was aware of the incident that caused Cathay Pacific to ground its fleet of Airbus A350 jets.
The engine maker said it was committed to working closely with Cathay Pacific, Airbus and authorities conducting an investigation. The company said:
In the meantime, Rolls-Royce notes the airline’s statements that it has launched a precautionary inspection of its fleet; and also that, to the extent that any components need replacing, spare parts have been secured and the replacement can be completed whilst the engine is on-wing.
As well as providing support and guidance to Cathay Pacific, Rolls-Royce will also keep other airlines that operate Trent XWB-97 engines fully informed of any relevant developments as appropriate.
Cathay Pacific has not specified which engine component failed, but the carrier said it was the “first of its type to suffer such failure on any A350 aircraft worldwide”.
The incident involved a problem with a fuel nozzle inside a XWB-97 engine, the Rolls-Royce model used on the A350-1000, according to Reuters.
Experts say such problems are rare but, barring a deeper flaw, generally raise fewer alarms than the failure of one of the major rotating parts such as a turbine blade. However, any widespread further inspections could be disruptive to airlines.
Airbus said in a statement it was in contact with Rolls-Royce and Cathay Pacific and offering “full technical support”.
07:40 AM BST
Retail sales growth slows ahead of energy bill increase
Fragile consumer confidence saw retail sales rise by 1pc on the year in August as nervousness grows ahead of next month’s energy bill increase and Labour’s first budget.
The figure was well below last August’s growth of 4.1pc and below the 12-month average of 1.2pc, according to the British Retail Consortium (BRC)-KPMG Retail Sales Monitor.
Food sales were up 2.9pc year on year over the three months to August, against growth of 8.2pc for the same period last year, and below the 12-month average growth of 5pc.
Non-food sales were down 1.7pc year on year over the quarter against a decline of 0.2pc last year. In-store non-food sales were down 2.8pc over the quarter on last year against growth of 1.3pc last August.
BRC chief executive Helen Dickinson said:
Sales growth picked up in August, particularly for food as people came together to host barbecue and picnic gatherings for family and friends, and for summer clothing, health and beauty products as people prepared for trips away and summer social events.
While computing did well as university students made the most of summer discounting and readied themselves for the new academic year, other back-to-school related sales were weaker than normal as some families opted for second-hand purchases.
Following a difficult summer for much of retail, and the possible weakening of consumer spending as energy bills rise come October, many will be waiting for the Chancellor’s Autumn Budget before finalising their investment strategies.
07:30 AM BST
Airlines carry record number of passengers
Ryanair broke its monthly passenger record in August as the summer holiday season hit its peak.
The Irish airline carried 20.5m passengers during the month, an increase of 8pc and taking its total number of “guests” so far this year to 192m, which is also an increase of 8pc on the same time in 2023.
Rival discount carrier Wizz Air also had a record month, carrying 6.2m passengers during August.
07:30 AM BST
Flights grounded after Rolls-Royce engine problem
Hong Kong’s flagship carrier has temporarily grounded its fleet of A350 aircraft for inspections after it discovered problems with its Rolls-Royce engines.
Cathay Pacific cancelled 24 flights and said it was conducting “precautionary” inspections across its 48-strong fleet after a “first of its type” engine component failure forced a flight to Zurich to turn back on Monday.
Rolls-Royce saw £2.7bn knocked off its stock market value on Monday as Cathay said “a number of aircraft will be out of service for several days”.
Eight of Cathay’s nine flights from Hong Kong to Singapore on Tuesday were axed, according to the airline’s website. Flights to Bangkok, Tokyo, Taipei and Osaka were cancelled as well.
“This component was the first of its type to suffer such failure on any A350 aircraft worldwide,” the airline said.
A precautionary fleet-wide inspection found a number of the same engine components that needed to be replaced, according to Cathay.
Tokyo-based Japan Airlines (JAL), which has five A350-1000s that are all less than a year old, said it had asked Rolls-Royce for more information and had not stopped A350 flights in the meantime.
“If the engine manufacturer takes any further action, we will respond accordingly,” a JAL spokesman said.
07:18 AM BST
Good morning
Thanks for joining me. Hong Kong’s Cathay Pacific Airways is inspecting all of its Airbus A350 jets after the in-flight failure of a Rolls-Royce engine part.
Cathay Pacific cancelled 24 return flights to give it time to inspect its fleet of 48 Rolls-Royce powered A350s after a part failed on one of its A350-1000 widebody planes minutes after take-off from Hong Kong.
5 things to start your day
1) Force workers to retire later to ‘reduce misery’ in Britain, Reeves told | Report suggests raising the state pension age to 68 could save the Exchequer £6.1bn
2) Paris and New York far ahead of London in race back to the office | Concerns over UK productivity as capital struggles to shake off home working culture
3) How a crack in the German economy is fuelling the rise of the far Right | Upsurge in support for anti-immigrant populists maps on to pre-unification divisions
4) Andrew Orlowski: Ed Miliband’s silence on nuclear power is deafening | Energy Secretary’s nuclear foot dragging is steering us towards a catastrophic precipice
5) Ben Marlow: Get ready for another wave of strikes now that Starmer has caved | A policy of complete appeasement on pay deals has the unions licking their lips
What happened overnight
Asian shares traded mixed as investors looked ahead to a key report on US employment set for release later in the week.
Japan’s benchmark Nikkei 225 rose 0.2pc in morning trading to 38,787.80, while Australia’s S&P/ASX 200 fell less than 0.1pc to 8,102.70.
South Korea’s Kospi added 0.2pc to 2,687.14 after a report showed consumer inflation slowed in August to the weakest in more than three years at 2pc, supporting expectations of an easing of monetary policy.
That move could come as soon as next month, according to analysts.
Hong Kong’s Hang Seng added nearly 0.1pc to 17,706.67, while the Shanghai Composite edged down 0.2pc to 2,805.74.
US markets were closed on Monday for the Labour Day public holiday. Futures for the S&P 500 index were down 0.1pc, while those for the tech-laden Nasdaq 100 were flat.
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