Tech bubble fears spark $160bn Nvidia slump
In This Article:
Hundreds of billions of dollars have been wiped from the stocks of global chipmakers after a key supplier to the industry warned of a slow recovery in the market, despite booming demand for artificial intelligence (AI) technology.
Shares in Dutch technology business ASML, which manufactures advanced lithography machines used by the world’s chipmakers, plunged by 15pc after it published its results a day early, blaming a technical error.
In the announcement, ASML warned that it did not expect its sales to recover until 2025. “It now appears the recovery is more gradual than previously expected. This is expected to continue in 2025,” said Christophe Fouquet, ASML’s chief executive.
The warning sent shockwaves through the company’s peers. ASML, which is listed in Amsterdam and New York, is seen as a bellwether of the microchip sector, with its advanced machines used to develop the world’s most powerful semiconductors.
Shares in Nvidia, the world’s second most valuable company worth $3.2 trillion (￡2.45 trillion), dropped by more than 5pc, wiping roughly $160bn from its market capitalisation. Shares in Arm, the British semiconductor design company, fell by 7pc.
Semiconductor stocks have been riding high on hopes of a glut of sales fuelled by interest in AI technology.
However, while these cutting-edge microchips remain in high demand, the wider sector has experienced tepid sales, with weaker demand for consumer technology and electric vehicles, which rely on mass-produced semiconductor chips.
“While there continue to be strong developments and upside potential in AI, other market segments are taking longer to recover,” Mr Fouquet said.
ASML said it expected total net sales in 2025 of between €30bn and €35bn, at the lower end of Wall Street expectations.
Read the latest updates below.
06:33 PM BST
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We will be back on the Markets blog tomorrow morning but do keep up with all our latest business news, analysis and comment over the weekend here.
06:03 PM BST
Semiconductor stocks hit by supplier warning
Semiconductor stocks have slumped after a warning from a crucial supplier, ASML. The pan-European STOXX 600 index ended 0.8pc lower, while tech stocks plunged 6.5pc. It marked the sector’s biggest one-day drop since October 2020.
The euro zone blue-chip index slid 1.8pc, its biggest one-day drop in over two months.
05:31 PM BST
Sales drop at LVMH after China slowdown
Sales have slipped at luxury giant LVMH after it was hit by a slowdown in demand for designer bags from China.
LVMH, which owns brands including Louis Vuitton and Dior, said revenues in its crucial fashion and leather goods division fell for the first time since 2020, down 5pc in the third quarter.
It came despite both the designer brands enjoying “high visibility over the summer with the Paris 2024 Olympic and Paralympic Games”. LVMH had been a sponsor of both events.
Concerns have been growing over the luxury market, amid a slowdown in spending among Chinese consumers. The Chinese government last month unveiled a package of measures in an attempt to revive the economy.
05:02 PM BST
BBC News to cut 155 jobs to ‘balance the books’
The BBC will cut a further 155 jobs from its news operations as the corporation tries to shore up its balance sheet amid growing pressure on the licence fee.
In a memo to staff, Deborah Turness, the chief executive of BBC News, said the cuts would deliver a saving of ￡24m, or 4pc of its current budget.
It forms part of a broader cost-cutting strategy aimed at slashing 500 roles from across the broadcaster by March 2026.
The BBC previously set out plans to strip ￡500m from its annual budget to plug a black hole in its finances.
Earlier this year, Tim Davie, the BBC’s director general, warned a further ￡200m of savings would need to be found amid uncertainty over the future of the licence fee funding model.
In the memo, Ms Turness said: “Like all parts of the BBC, News and Current Affairs needs to contribute to those savings to balance the books and secure future reinvestment.”
04:39 PM BST
Losses mount at Fenwick amid ‘challenging’ conditions
Department store chain Fenwick warned over a “challenging backdrop” after it posted a loss of ￡38m for the year to January.
The company, which closed its Bond Street store earlier this year, said revenues were down at ￡180m compared to ￡193m a year earlier.
Fenwick blamed the cost-of-living crisis, which it said weighed on shoppers, as well as heavy discounting by its rival stores for the sales slump.
It comes just weeks after it emerged that Nigel Blow would no longer be taking over as chief executive of Fenwick, following controversy over his former employer Harrods.
Speaking to the Telegraph earlier this month, Mr Blow said Fenwick had rescinded his job offer, claiming this was connected to sexual abuse claims against former Harrods owner Mr Fayed.
Mr Blow said he had “absolutely no knowledge of anything relating to this alleged behaviour”. There is no suggestion of any wrongdoing on the part of Mr Blow, who left Harrods in 2007.
At the time, a Fenwick spokesman said: “Nigel Blow has informed us that he will no longer be taking up this position.”
04:11 PM BST
Nando’s chicken billionaires to fund Observer takeover
The billionaire dynasty behind the Nando’s chicken chain has lined up to fund the controversial takeover of The Observer newspaper by the former BBC News director James Harding.
Yellowwoods, the private investment vehicle of South Africa’s Enthoven family, is preparing to pump millions of pounds into Mr Harding’s media venture Tortoise, alongside an international group of backers, according to insiders.
The Enthovens are already investors in Tortoise, which is in negotiations to acquire Guardian Media Group’s Sunday title.
03:48 PM BST
Apple shares jump amid AI iPhone hopes
Shares in Apple have jumped 2.7pc to an intra-day high as hopes mount over the rollout of artificial-intelligence-powered iPhones.
Apple last month unveiled its latest iPhones, the iPhone 16, which includes AI tools, such as finding reviews and menus when pointing the camera at a restaurant, or identifying animals and plants.
The phones will use AI chips that can run software more quickly - known as Apple Intelligence. They also feature a dedicated camera button for taking photos.
Investment banking firm Evercore ISI said: “Bearish investors remain focused on the Chinese smartphone market, but we think the risk here is overstated and can be offset by growth in developing markets and a strong upgrade cycle in the US where our survey work points to strong upgrade demand, driven in part by AI.”
03:31 PM BST
Bitcoin surges to highest level in three months
Bitcoin has surged past $67,000 to hit its highest level since July amid falling oil prices.
The drop in the price of oil is easing concerns about inflation, which has also led to a rally in bond markets today.
Here are a few charts showing the sharp jump, and with that I’ll wish you a good day and hand you over to Hannah Boland, who will keep the live updates coming.
03:11 PM BST
Trump hands Scottish golf course ￡5m loan as losses double
Donald Trump loaned almost ￡5m to one of his Scottish golf courses last year as losses nearly doubled, new accounts show.
Trump International Golf Club Scotland, which operates an 18-hole resort in Aberdeenshire and is building a second golf course nearby, received a ￡4.7m interest free loan from DJT Holdings, its parent company owned by the former US president.
The arrangement came as losses at the company jumped from ￡738,000 in 2022 to ￡1.4m in the year to December 2023.
Read how the move comes as the former US president continues the development of a second Aberdeenshire links course.
02:48 PM BST
Bonds rally amid lower oil prices
Debt markets have rallied after the fall in oil prices today, which have eased concerns about a resurgence in inflation.
The yield on 10-year UK gilts, which moves inversely to its price, was down six basis points to 4.18pc from 4.24pc, which was around its highest level since July.
US Treasury bond yields were down five basis points to 4.05pc.
It comes as oil plunged more than 5pc towards $73 a barrel amid forecasts from the IEA for a glut of supplies next year.
Lower oil prices ease pressure on motorists as it usually leads to lower petrol prices on forecourts, reducing the rate of inflation.
02:36 PM BST
US stocks mixed amid major company earnings
Wall Street’s main indexes were mixed after quarterly results from companies such as Goldman Sachs, Citi, UnitedHealth and Bank of America.
The Dow Jones Industrial Average fell 148.47 points, or 0.3pc, to 42,916.75, the S&P 500 gained 5.04 points, or 0.1pc, to 5,864.89, and the Nasdaq Composite gained 32.39 points, or 0.2pc, to 18,535.07.
02:22 PM BST
Scottish energy giant ‘rebuffs takeover approach’
Scottish energy giant SSE has rejected a takeover approach by Portugal’s main power company, according to reports.
A merger with EDP would have created one of Europe’s largest utility businesses, with a combined market value of $44bn.
EDP made the approach for SSE in the summer before being rebuffed in June, according to Reuters.
Shares in SSE rose 1.7pc after the report, while EDP shares rose 1.4pc on Lisbon’s stock exchange.
EDP declined to comment to Reuters, while SSE said it does not comment on market speculation.
01:57 PM BST
Boots owner to close 1,200 US stores
Boots has posted stronger sales as its parent company revealed mass store closures across the US.
US-based owner Walgreen Boots Alliance said it will shut 1,200 US stores over the next three years after losses widened for the past year.
Annual operating losses more than doubled to $14.1bn for the year to August as it was hit heavily by an impairment charge linked to its VillageMD business.
It is in addition to a raft of recent store closures across Boots, which has almost completed a programme of roughly 300 closures across the UK.
The pharmacy and retail business will have around 1,900 stores after the closures are completed.
Boots UK revealed that total sales grew by 2.3pc over the fourth quarter as it was affected by its shrinking store estate.
However, this represented an improvement on 1.6pc growth in the previous quarter.
Managing director of Boots UK and ROI Seb James, who will step down next month, hailed the latest performance as “a strong set of results”.
01:41 PM BST
Citi revenues rise as it presses ahead with axing of 20,000 jobs
Citigroup traders recorded their best third-quarter performance in at least a decade as the investment bank presses ahead with a turnaround that will cost 20,000 jobs over two years.
Revenue from the Wall Street behemoth’s markets division climbed 1pc to $4.8bn (￡3.7bn) in the third quarter, helping its total revenues edged up 1pc to $20.3bn (￡15.5bn).
However, Citigroup’s net income for the third quarter dipped 9pc to $3.2bn or $1.51 a share.
The bank announced in January that it would cut 10pc of its workforce as it tries to strip out costs.
Citi chief executive Jane Fraser said: “In a pivotal year, this quarter contains multiple proof points that we are moving in the right direction and that our strategy is gaining traction, including positive operating leverage for each of our businesses, share gains and fee growth.
“While we continue making substantial investments in our number one priority—our transformation— the efficiencies gained from our simplification and other efforts drove a 2pc reduction in expenses.
“We built on our long history of innovation by launching a new cross-border payments capability with Mastercard and a $25bn private credit partnership with Apollo, while we continued to attract top talent to our firm.”
01:18 PM BST
Boeing to raise $25bn in stocks and debt
Boeing aims to raise up to $25bn (￡19.1bn) through a stock and debt offering designed to shore up its balance sheet after a year of scandals and strikes.
The planemaker has filed papers with the US markets regulator and entered into a $10bn credit agreement amid the crippling walkouts and upcoming debt payments.
The manufacturer has come under strain following a slump in production of its best-selling 737 MAX jet after a door panel blowout during an Alaska Airlines flight earlier this year.
It was not clear when and how much Boeing will raise via the stock offering, but analysts and investors expect the company to raise money before the year-end as debt maturities loom.
Boeing said in a statement it had not drawn on the new $10bn credit facility or its existing credit revolver.
“These are two prudent steps to support the company’s access to liquidity,” Boeing said.
01:02 PM BST
Britain records biggest jump in male worklessness in G7
More men have given up on work in Britain than in any other G7 nation, new analysis shows, fuelling fears about the scale of the worklessness crisis.
The proportion of working age men participating in the labour force has plunged from a record high of 84pc in 2009 to 80.9pc this year, according to the Organisation for Economic Co-Operation and Development (OECD).
The 3.1 percentage point drop is the biggest out of the Group of Seven nations.
These charts show how Britain compares to the rest of the world.
12:39 PM BST
Goldman Sachs profits surge as investment banking bounces back
Goldman Sachs pre-tax profits surged by 45pc amid surging fees from its investment banking.
The Wall Street giant said earnings hit nearly $4bn (￡3.1bn) in the third quarter of the year, up from $2.8bn a year ago, amid a revival in deal making.
Investment banking fees rose by 20pc to $1.9bn, “driven by leveraged finance and investment-grade activity”.
Net revenues rose by 7pc to $12.7bn, which was well ahead of analyst estimates of $11.8bn.
The bank joined JPMorgan Chase, which also gained from an investment banking revival, as corporate clients became more confident in the economic outlook.
Goldman Sachs chairman and chief executive David Solomon said: “Our performance demonstrates the strength of our world-class franchise in an improving operating environment.
“We continue to lean into our strengths – exceptional talent, execution capabilities and risk management expertise – allowing us to effectively serve our clients against a complex backdrop and deliver for shareholders.”
12:29 PM BST
Vauxhall owner hauls staff back to the office in effort to reverse sales slump
The owner of Vauxhall has ordered staff back into the office, becoming the latest big business to reverse pandemic-era work-from-home rules.
Stellantis, which also owns Fiat, Citro?n and Peugeot, said the “pragmatic” change will require employees to come to the office at least three days a week on average – and potentially all week if they are working on urgent projects.
Previously, Stellantis had agreed to let staff work remotely 70pc of the time. The company told auto engineers to return earlier this year, but the drive has now been extended to include research and development teams and several other roles.
Read what its human resources chief said.
12:02 PM BST
Italy plans raid on banks to plug €9bn budget black hole
Italy is preparing to raise billions of euros from banks as it races to plug a €9bn (￡7.5bn) gap in its public finances, according to reports.
Giorgia Meloni’s government may temporarily remove a deduction for banks on so-called deferred tax assets (DTAs), potentially raising an extra €3bn, the Financial Times reported.
Officials are also reportedly targeting other listed companies as Italy grapples with one of the eurozone’s highest levels of public debt relative to GDP.
11:44 AM BST
Wall Street awaits flood of earnings reports
US stock indexes were muted in premarket trading ahead of quarterly results from the likes of Goldman Sachs and Bank of America.
Shares of AI-darling Nvidia, however, fell 1pc before the opening bell following a record high close on Monday, which helped drive a broader rally on Wall Street.
All three major indexes jumped on Monday, with the S&P 500 and Dow Jones notching record highs for the second consecutive session, as optimism over a strong third-quarter earnings season and a rally in tech stocks lifted equities.
The Dow closed above the 43,000-mark for the first time, while the benchmark S&P 500 is nearing the psychologically significant 6,000 level.
Earnings from major banks including JPMorgan Chase and Wells Fargo last week kicked off the third-quarter reporting season on an upbeat note.
Forty-one S&P 500 companies are scheduled to report results this week, which will help investors gauge the health of the US economy.
In premarket trading, the Dow Jones Industrial Average and S&P 500 were flat, while the Nasdaq 100 fell 0.1pc.
11:23 AM BST
Oil prices on track for steepest fall in a year
Oil prices are on track for their sharpest daily drop in a year as the world faces a glut of supplies and amid reports Israel will target Iran’s crude facilities.
Brent crude, the international benchmark, was last down 5.1pc towards $73 a barrel, which would be its steepest fall since October last year.
Prices had stood at about $78 on Monday before the Washington Post reported that Prime Minister Benjamin Netanyahu told President Joe Biden that he is willing to strike military rather than oil or nuclear facilities in Iran.
Meanwhile, the IEA said there will be a glut in supplies early next year, as it cut its forecasts for demand growth.
It added that spare capacity from the Opec+ cartel of producers is near record levels.
ING analyst Ewa Manthey said: “
Oil prices sold off heavily this morning following the latest comments from Israel that it will avoid targeting Iran’s oil infrastructure.
11:02 AM BST
Eurozone economy shows signs of life
The eurozone economy showed some signs of life amid positive factory production and consumer confidence figures.
Industrial output expanded and lending demand rose, while expectations in a key German sentiment survey also increased more than predicted.
The figures are likely to reinforce bets that the bloc is still growing, even if at the slowest possible pace, but are unlikely to prevent the European Central Bank from delivering an interest rate cut, which is now almost fully priced in.
Industrial production rose by 1.8pc on the month in August, a touch ahead of expectations, and was up 0.1pc from a year earlier, driven by rising demand for capital and durable consumer goods, Eurostat said.
Output in Germany, the bloc’s biggest economy, surged more than 3pc on the month, the biggest rise among the bloc’s larger economies, even if the annualised figure was still deeply negative.
High energy costs, lukewarm demand from China and increased competition from other producers have weakened Germany’s industry in recent years, prompting some soul searching over the viability of the country’s industry-focused economic model.
In another mildly hopeful sign for Germany, investor morale improved more than expected in October with the ZEW economic sentiment index rising to 13.1 points from 3.6 points in September.
Expectations for low and stable inflation, bets on further rate cuts and some mild improvement in export demand all contributed to the better sentiment reading, the ZEW said.
10:43 AM BST
Pound rises amid slowing wage growth
The pound has edged higher against the dollar as figures showed wages rose at the slowest pace in four years in the three months to August.
Sterling gained 0.1pc to $1.307 and was also up 0.1pc against the euro, which is worth 83.4p.
Total pay rose 3.8pc in the three months to August, the ONS said, which cemented bets that the Bank of England will cut interest rates as planned next month and deliver a boost to the economy.
10:20 AM BST
Global public debt to exceed $100 trillion for first time
The world’s total public debt is on track to exceed $100 trillion (￡76.5 trillion) this year for the first time, the International Monetary Fund (IMF) has said.
The Washington-based financial agency warned that global government debt could balloon more quickly than forecast amid slow growth and pressure for higher spending.
The IMF’s latest Fiscal Monitor report showed global public debt will reach 93pc of global gross domestic product by the end of 2024 and approach 100pc by 2030.
It peaked at 99pc during the pandemic.
The IMF’s concerns about rising debt levels comes three weeks before a US presidential election in which both candidates have promised new tax breaks and spending that could add trillions of dollars to federal deficits.
The UK’s public sector net debt excluding banks hit 100pc of GDP at the end of August, and stands at mroe than ￡2.5 trillion.
10:06 AM BST
Bank note maker poised for break-up after sale of authentications business
Bank note producer De La Rue has agreed to sell its authentications business for ￡300m, paving the way for the wider group’s breakup and sale.
On Tuesday, the London-listed company said it was selling the division to American rival NXT Crane and would use the proceeds to pay off debts and reduce its pension fund deficit.
The deal comes as the remaining rump of De La Rue, its currency business, is also up for sale - meaning that could also be snapped up imminently.
Shares in the company surged 26.6pc after the announcement.
09:50 AM BST
Reeves ‘talking down’ property market ahead of Budget, says housebuilder
Rachel Reeves has been “talking down” Britain’s property market by raising fears about tax rises ahead of the Budget, the boss of housebuilder Bellway has said.
Jason Honeyman, chief executive of the FTSE 250 developer, said there is “hesitancy in the market at the moment” despite the Government’s pledge to build 1.5m homes over the next five years.
He said industry had faced “mixed messages” because the Government’s growth agenda has been “damped a bit by talking down the market”.
“We have many customers who have got concerns about the October Budget . . . so they are delaying decisions,” he told the Financial Times.
Rachel Reeves is expected to raise taxes in the Budget on October 30 after repeatedly talking about the need to fill a ￡22bn “black hole” in the public finances.
09:36 AM BST
Oil demand faces ‘sharp slowdown’, says IEA
The world faces a “sizeable surplus” of oil supply in the new year amid weak demand and surging production, according to the International Energy Agency.
Demand for oil faces a “sharp slowdown” from the period immediately after the pandemic as China’s economy struggles.
The world’s second largest economy accounted for about 20pc of global gains in demand both this year and next year, compared to almost 70pc in 2023.
Global oil demand is expected to grow by just under 900,000 barrels per day in 2024 and by around 1m barrels per day in 2025, which is significantly lower than the 2m barrels per day seen in 2023.
The IEA said that exports from Iran and neighbouring countries have been “unaffected” by the conflict in the Middle East, but admitted the “market remains on tenterhooks, awaiting the next developments in the crisis”.
It said: “Heightened oil supply security concerns are set against a backdrop of a global market that – as we have been highlighting for some time – looks adequately supplied.”
It added: “For now, supply keeps flowing, and in the absence of a major disruption, the market is faced with a sizeable surplus in the new year.”
09:11 AM BST
FTSE slumps amid falling oil prices
The FTSE 100 opened lower as heavyweight oil stocks were hit by a sharp drop in the price of Brent crude.
The UK’s blue chip index was down 0.4pc, while the mid-cap index FTSE 250 was flat.
Oil stocks lost as much as 3.2pc and were the worst performers across the two indexes. Crude prices slid on the back of weaker demand outlook and after a report that Israel has assured the US that it will not strike Iranian oil facilities.
Industrial metal miners shed as much as 2.6pc as copper prices were pressured by a firmer US dollar and uncertainty about top consumer China’s economic recovery.
Among stocks, Bellway rose to the top of the FTSE 250, gaining 8.3pc after the homebuilder said it expects to build more homes in the 2025 financial year, buoyed by prospects of further reductions in borrowing costs.
Paragon Banking Group lost as much as 7pc after Jefferies downgraded the stock to “hold” from “buy”.
09:05 AM BST
Starmer refuses to rule out raising employers’ NI contributions
The Prime Minister again declined to rule out increasing employers’ national insurance contributions but insisted the Government would keep its manifesto promises.
Sir Keir Starmer told the BBC: “We were very clear in the manifesto that we wouldn’t be increasing tax on working people and we expressly said that that was income tax, that was NICs etc.”
He added: “It wasn’t just the manifesto, we said it repeatedly in the campaign and we intend to keep the promises that we made in our manifesto.
“So I’m not going to reveal to you the details of the Budget, you know that that’s not possible at this stage.
“What I will say is where we made promises in our manifesto, we will be keeping those promises.”
08:53 AM BST
Robert Walters cuts 700 jobs as job vacancies fall
One of Britain’s largest recruitment companies has cut more than 700 jobs over the last year amid a dwindling number of job vacancies in the economy.
Robert Walters revealed it has reduced its headcount by 159 people over the last three months to 3,466, taking its total number of job losses over the last year to 734.
It comes as official figures show job vacancies fell by 34,000 to 841,000 in the three months to September, which is the lowest level since March to May 2021.
Robert Walters shares were down 2.3pc as it said net fee income was down 12pc to ￡79.9m in the third quarter compared to last year. It is down 13pc so far this year to 246m.
Chief executive Toby Fowlston said:
Global hiring markets remained challenging during the third quarter, bringing the period of rebasing following the 2022 post-pandemic peak to around two years.
08:25 AM BST
Oil prices drop as Israel ‘tells Biden it will avoid Iranian plants’
Oil prices have dropped at their sharpest pace in a month after reports that Benjamin Netanyahu had told Joe Biden he would not strike Iran’s crude or nuclear facilities in retaliation for a missile attack earlier this month.
Brent crude has slumped 3.6pc towards $74 a barrel after the Washington Post reported that the Israeli Prime Minister had pledged to target Iran’s military rather than its oil and nuclear sector.
US-produced West Texas Intermediate was down 3.7pc towards $71.
The sell-off came as the commodity is also hit by worries about China’s economic outlook after Beijing failed to announce any new stimulus at a weekend briefing.
Kathleen Brooks, research director at XTB, said:” The price of oil has been volatile in recent weeks, as it gets jostled around by news flow surrounding the Middle East crisis.
“The latest news suggests that Israel will not directly target Iran, and so an escalation premium is being removed from the oil price right now.
“This could hit the FTSE 100’s oil companies later today, and the energy sector could extend its decline after it was one of the weakest performers on Monday.”
08:15 AM BST
Bellway surges as it expects to build more homes
Housebuilder Bellway expects to complete more homes this year as falling mortgage rates boost demand.
The Newcastle-based developer’s shares jumped 6.4pc in early trading as it said its forward order book has increased to 5,144 homes from 4,411 homes at the same period of last year.
As a result, Bellway said it is targeting at least 8,500 house completions this financial year, which would be an 11pc rise on the previous one.
The company revealed profits tumbled by more than half over the last year after lower orders for new homes in the face of more expensive mortgage rates.
Rates rocketed after interest rates were hiked to a peak of 5.25pc - their highest for 15 years - and remained at this level until the first cut by the Bank of England in August this year.
Revenues fell by 30.1pc to ￡2.4bn for the year to July 31, compared with the previous year.
House constructions also dropped by 30.1pc to 7,654 homes for the year, driven by a weak order book at the start of the year.
Pre-tax profits plunged by 62pc to ￡183.7m for the year.
08:06 AM BST
UK markets flat as wage growth slumps
The FTSE 100 has opened flat despite weakening wage growth paving the way for the Bank of England to cut interest rates next month.
The UK’s blue chip index was little changed at 8,291.60 as trading began in London, while the midcap FTSE 250 was flat at 20,815.16.
08:01 AM BST
Reeves could pull ‘wildcard’ that impacts rate cuts, warns Charles Stanley
Rob Morgan, chief investment analyst at wealth manager Charles Stanley, said:
The Chancellor could be about to throw a wildcard into the mix. Taxation policies could have a major influence on both wages and wider inflation, so all eyes are on the Budget later this month.
07:50 AM BST
Weaker wage growth ‘supports case for rate cuts’
The Bank of England is more likely to cut interest rates after the latest figures showed wages growing at their slowest pace in four years, economists have said.
Money markets are betting there is more than a 92pc chance that policymakers will cut the Bank Rate from 5pc to 4.75pc at the next meeting in November.
Ashley Webb, UK economist at Capital Economics, said: “The further fall in wage growth in August, together with some signs that the labour market continued to loosen gradually, adds further support to widespread expectations that the Bank of England will cut interest rates.”
Jake Finney, economist at PwC UK, said: “A quarter-point cut in November still seems most likely, given signs that wage growth is moderating and increasingly dovish commentary from governor Andrew Bailey.”
Yael Selfin, chief economist at KPMG UK said the “encouraging labour market data clears path for an interest rate cut”.
She added: “Today’s data will reassure the Bank of England that the risk of wage growth remaining persistent is receding.
“With the economy set to slow in the coming months, this is likely to add further downward pressure on labour market activity. We anticipate it will enable the MPC to cut interest rates in the upcoming November meeting.”
07:37 AM BST
Job vacancies fall to lowest level in three years
The ONS data showed vacancies falling by 34,000 to 841,000 in the quarter to September, which is the lowest level since March to May 2021.
Workers on UK payrolls also fell by 35,000 between July and August.
07:34 AM BST
Pay growth still outstrips inflation
Earnings growth continues to outstrip inflation, the ONS figures show.
Real pay increased by 2.6pc in the three months to August after taking the consumer prices index into account.
However, this was lower than the 3pc recorded in the previous three month period.
07:31 AM BST
One-off payments to NHS and civil service hit wage growth figures
The slowdown in wage growth was partly caused by one-off payments to NHS and civil service staff in June, July and August last year, the ONS said.
David Freeman, the head of ONS Labour Market and Household Division, said:
Pay growth slowed again, with last year’s one off payments made to many public sector workers continuing to affect the figures for total pay.
07:22 AM BST
Workers’ pay growth falls to lowest level since pandemic
Wages have grown at their slowest pace since the pandemic, official figures show, as bosses wait to see how Rachel Reeves plans to raise taxes in the Budget.
Total pay, which includes bonuses, grew by 3.8pc in the three months to August, according to the Office for National Statistics (ONS).
It was the slowest pace of growth since November 2020.
Annual growth in wages excluding bonuses was 4.9pc, which was the lowest since the three months to June 2022.
Bosses are waiting to see which measures the Chancellor announces on October 30 as she seeks to fill a ￡22bn “black hole” in the public finances.
Meanwhile, Britain’s unemployment rate fell to 4pc in the three months to August, down from 4.1pc in the previous three months.
07:17 AM BST
Good morning
Thanks for joining me. We begin the day with the latest official wages figures, showing pay growth slumped to its weakest level in four years.
Total pay, including bonuses, grew by 3.8pc in the three months to August, according to the ONS, which was the lowest since November 2020.
5 things to start your day
1) Reeves insists National Insurance increase won’t break manifesto pledge | Chancellor says raising employers’ contributions would stick to promise to protect working people from tax rises
2) Britain ‘critically vulnerable’ to energy crisis | Experts warn over gas dependency after blackout prevention system mobilised for first time in two years
3) Economist who called Brexit ‘self-destructive’ wins Nobel Prize | Simon Johnson receives award for work into how institutions determine economic fortunes
4) US publisher Dovid Efune in exclusive talks to buy The Telegraph | New York Sun owner pursues takeover of ‘the very best of world-class, independent journalism’
5) Vauxhall owner to decide on fate of UK factories ‘within weeks’ | High taxes and changes to non-dom rules driving away wealthy, warns think tank
What happened overnight
Asian stocks were mostly higher on Tuesday, supported by a strong Wall Street close and investor optimism about corporate earnings, while the dollar held near a two-month top, aided by bets on a smaller US rate cut next month.
The Nikkei rallied 1pc to a three-week peak, having been closed on Monday for a holiday. MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.2pc as gains in Taiwan and Australia were partly offset by a drop in Chinese markets.
China’s blue chips fell 0.4pc, while Hong Kong’s Hang Seng index slipped 0.3pc as a lack of new stimulus details from Beijing left investors wanting for more.
Local media reported that Beijing may raise an additional 6 trillion yuan ($850 billion) from Treasury bonds over three years to help bolster a sagging economy.
Oil prices fell amid easing concerns over tensions in the Middle East, on the back of reports that Israel may not target Iran’s crude infrastructure facilities. West Texas Intermediate fell 2.3pc to $72 a barrel.
Israel’s prime minister Benjamin Netanyahu has told the Biden administration that he would target military rather than nuclear or oil sites, the Washington Post reports.
In the US, the S&P 500 and the Dow reached record highs on Monday, fuelled by a surge in technology stocks.
The S&P 500 gained 0.7pc during the day, which was a federal holiday in the US, while the Dow Jones Industrial Average was up by 0.5pc. The Nasdaq Composite climbed 0.8pc. The bond markets were closed.
Chipmaker Nvidia was a standout performer, posting its first record close since June after rising 2.4pc.