Yahoo Finance Microsoft creates top secret AI tool for US spies
Microsoft has developed artificial intelligence that can be used by American spies, deeming it safe because it is completely divorced from the internet.
It is the first time a large language model has been fully separated from the online world and worked, a senior executive at the company told Bloomberg.
Most AI models, including OpenAI’s ChatGPT, which is backed by Microsoft, rely on cloud services to learn and infer patterns from data.
However, Microsoft said it wanted to deliver a truly secure system to the US intelligence community.
William Chappell, Microsoft’s chief technology officer for strategic missions and technology, said the system has an “air-gapped” environment that is isolated from the internet.
Sheetal Patel, assistant director of the CIA for the Transnational and Technology Mission Center, told a security conference last month: “There is a race to get generative AI onto intelligence data.”
She said that the first country to use generative AI for their intelligence would win that race, adding: “And I want it to be us.”
Read the latest updates below.
06:10 PM BST
Signing off...
Thanks for joining us today. We’ll be back tomorrow morning ahead of the markets opening in London. But I’ll leave you with a report from our economics editor Szu Ping Chan that lobal debt has surged to new record high:
Global debt has surged to a record high of $315 trillion (£250 trillion) as China and India continued their borrowing binge despite the risks posed by geopolitical tensions and higher interest rates.
The Institute of International Finance (IIF) warned that post-pandemic efforts to reduce debt were coming to an end as governments cut taxes and increase spending amid a record number of elections this year.
It said the increase was “primarily driven by emerging markets”, where debt surged to “an unprecedented high of over $105 trillion”.
This is $55 trillion more than a decade ago, with China, India and Mexico seeing the biggest increases so far this year.
06:08 PM BST
Ferrari drops despite double-digit rise in profits
Shares in Ferrari dropped 4.7pc in Milan yesterday despite the maker of luxury sports cars reporting quarterly results that were broadly in line with expectations.
Sales increased by 11pc to €1.58bn (£1.35bn) for the first three months of the year, while profit jumped 19pc to €352m.
Benedetto Vigna, chief executive, said:
The start of the year was very positive: revenues and profits recorded double-digit growth with stable deliveries.
Shares fell after the company failed to raise its estimate of future earnings. The company also reported that sales in China and Taiwan had plunged 20pc.
In March, Porsche boss Oliver Blume said that he would not cut prices in response to falling sales in China, amid slumping demand fueled by a faltering economy and real estate crisis.
05:36 PM BST
Global stock market rally continues as FTSE 100 races to another record high
London’s stock market rally has shown no signs of slowing after hitting another record high..
Investor spirits were raised as global leaders continued to push for a pause in fighting in the Israel-Hamas conflict.
Yesterday, Hamas said it had accepted an Egyptian-Qatari mediated ceasefire proposal, which Israel rejected because it failed to meet its “core demands”.
Nonetheless, oil prices were lower today amid hopes of tensions easing in the region, with the price of Brent crude oil down about 0.2pc to $83 per barrel.
Furthermore, investors appeared to still be holding on to hopes that interest rate cuts will be on the horizon.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said:
The FTSE 100 has scaled fresh heights as buds of May hope unfurl about interest rate cuts on the horizon.
The blue-chip index smashed through the 8,300 mark in early trade as the feelgood factor around London-listed stocks continued.
A set of soggy retail sales figures hasn’t squished enthusiasm, instead the data has served to provide fresh optimism that demand in the economy is falling back and that could help bring about the beginning of the end to painfully high borrowing costs.
New figures from the British Retail Consortium and KPMG showed that retail sales dropped 4pc in April versus the previous year.
Meanwhile, it was a strong session for other top European markets. Germany’s Dax neared a new all-time high, surging 1.45pc, while France’s Cac 40 was up 0.97pc at close.
05:26 PM BST
Construction sector grows at fastest pace for 14 months
Britain’s construction sector grew in April at its fastest pace for 14 months as companies increased their spending on renovations.
Data from S&P said that although there had been “solid rates of expansion” in the commercial and civil engineering activity, there had been a setback for house building as high interest rates continued to have an effect.
The S&P’s Construction Purchasing Managers’ Index, which tracks changes in the industry’s activity, reached 53.0 in April, up from 50.2 in March. Any reading above 50 indicates expansion.
S&P economist Tim Moore said: “The latest survey pointed to the fastest reduction in residential building work since January, although the speed of the downturn remained much softer than in the second half of 2023.”
04:59 PM BST
Facebook supreme court to investigate ‘from the river to the sea’ posts
Facebook’s “supreme court” is investigating the social media giant for allowing users to post the controversial pro-Palestinian slogan “from the river to the sea”. Matthew Field reports:
The company’s Oversight Board, a panel of academics and campaigners who review moderation policies, said it would consider three posts where parent company Meta left the phrase online after appeals from users.
Hate speech campaigners have condemned chants of “from the river to the sea, Palestine will be free” as anti-Semitic and genocidal, arguing the words imply the destruction of the state of Israel and are used as a rallying cry by terror groups including Hamas.
The board – whose members include ex-Guardian editor Alan Rusbridger and Helle Thorning-Schmidt, the former prime minister of Denmark – will look at three posts that were viewed millions of times between them.
All three posts were reported by multiple users and allowed to remain online by Meta. One post condemned “senseless slaughter” by “Zionist Israeli occupiers”.
The panel said it had picked the cases to determine how Meta should moderate the phrase “given the resurgence in its use after October 7, 2023, and the controversies surrounding the phrase’s meaning”. The board’s decisions are non-binding.
04:54 PM BST
Footsie closes up
The FTSE 100 closed up 1.2pc. The biggest riser was industrial holding company DCC, up 4.6pc, followed by energy business SSE, up 4.2pc. The biggest faller was easyJet, down 5.8pc, followed by Burberry, down 2.5pc.
The FTSE 250 likewise rose 1.2pc. Engineering business John Wood was the biggest riser, up 8.6pc, followed by Asia Dragon Trust, up 7pc. The biggest faller was Wizz Air, down 7pc, followed by TBC Bank, down 3.8pc.
04:22 PM BST
Royal Family’s crockery supplier taken to court over unpaid bill
A supplier of fine china and silverware to the Royal Family has been hit by a winding-up petition from HMRC. Hannah Boland has the details:
Thomas Goode, which was founded in 1827 and is backed by Sir Elton John, has been taken to court by HMRC over an outstanding tax bill.
Winding up petitions are taken as a measure of last resort by creditors to recover unpaid debts. It is the first step towards compulsory liquidation, although the petition can be withdrawn if a company is able to pay off its debts.
A spokesman for HMRC said: “We take a supportive approach to dealing with customers who have tax debts and only file winding-up petitions once we’ve exhausted all other options, in order to protect taxpayers’ money.”
Thomas Goode, which supplied the dinner service for the wedding of the then Prince of Wales and Princess Diana, is understood to be working to settle the outstanding bill within the coming days.
A spokesman for the company said: “We are presently in the final stages of a restructuring of the business and remain confident of our ability to meet all our obligations.”
They added that Thomas Goode would “then continue with our overseas expansion plans”, saying: “It’s certainly true that we have had a difficult few years, but with this fresh investment we look forward to celebrating our bi-centennial in 2027 and beyond.”
04:19 PM BST
British self-driving AI car firm wins record funding
British tech start-up Wayve said today it had secured a record $1.05bn (£836m) in new investment to develop artificial intelligence systems for self-driving cars.
Wayve, which was founded in 2017, secured the money in a fundraising round led by Japan’s SoftBank, with some of the cash coming from Microsoft and chip giant Nvidia.
Rishi Sunak, the Prime Minister, said it was “the biggest investment yet in a UK AI company”. He added:
We already have the third highest number of AI companies and private investment in AI in the world, and this announcement anchors the UK’s position as an AI superpower.
The startup, which plans to licence the technology to existing car makers, had previously raised more than $258m from Virgin, Ocado and other investors.
04:05 PM BST
Carpetright to cut a quarter of workforce after sales slump
Carpetright is planning to cut a quarter of its staff after struggling with sliding sales. Our retail editor Hannah Boland reports:
The UK carpet seller said it would slash 70 roles in areas including in its head offices, saying this reflected the “depletion in the retail portfolio - and revenues - that the business has experienced over the past eight years”.
The company will also be restructuring its IT, warehouse and distribution operations. It said this would help it to strip a total of £22m of costs out of the business. Store numbers and services will not be affected during the process.
Kevin Barrett, the chief executive of Carpetright owner Nestware Holdings, said: “As with many businesses, we face ongoing challenges in today’s tough economic climate. We’ve carefully examined our performance against operating costs, leading us to make difficult decisions to ensure the future success of our brand.
“Unfortunately, this means reducing our central payroll costs. Whilst every effort has been made to seek the best solution to our current situation, we are aware that valued members of our team will be impacted.”
04:00 PM BST
UK and allies unmask Russian leader of LockBit cybercrime gang
Britain, the US and Australia have unmasked and sanctioned a senior Russian leader of the notorious cybercrime gang LockBit, the British Government said today.
Dmitry Khoroshev will face asset freezes and travel bans after being identified as one of the leaders of LockBit, the ransomware group which has digitally extorted over $1bn (£796m) from victims globally, it said.
Anne-Marie Trevelyan, sanctions minister, said:
In sanctioning one of the leaders of LockBit we are taking direct action against those who continue to threaten global security, while simultaneously exposing the malicious cyber-criminal activity emanating from Russia.
Graeme Biggar, head of the National Crime Agency (NCA) , said:
These sanctions are hugely significant and show that there is no hiding place for cyber criminals like Dmitry Khoroshev, who wreak havoc across the globe. He was certain he could remain anonymous, but he was wrong.
Ransomware is malicious software that encrypts data. Lockbit and its affiliates make money by coercing its targets into paying a ransom to unlock that data with a digital key.
03:59 PM BST
Buyer of DS Smith faces is itself a takeover target
Brazilian pulp and paper company Suzano has approached US-based International Paper to express interest in an all-cash acquisition that would be worth almost $15bn (£11.9bn), Reuters has reported.
The approach comes less than a month after International Paper agreed to buy British packaging firm DS Smith for $7.2bn, beating a rival bid from London-listed Mondi. This deal, which is scheduled to close by the fourth quarter of 2024, could be disrupted were Suzano to press ahead with its bid for Memphis-based International Paper.
Suzano has communicated its $42-per-share offer to International Paper’s board of directors verbally, and could submit a formal bid in the coming days, according to sources.
International Paper shares jumped as much as 12pc on the news before paring some gains in early trading in New York today.
Shares of Suzano dropped in Brazil, while DS Smith’s shares in London fell as much as 7.3pc before reversing those losses to trade up 1.2pc.
International Paper is poised to reject Suzano’s offer as inadequate, one of the sources said.
Suzano declined to comment. International Paper has been approached for comment.
03:44 PM BST
Morrisons buys out Channel Islands partner
Morrisons has bought 38 stores in the Channel Islands from its long-term partner, SandpiperCI.
All of the stores are currently supplied by Morrisons “in some capacity”, the supermarket group said, while 19 already operated as Morrisons Daily stores.
They are located on the Jersey, Guernsey and Alderney, and in the last 12 months had a turnover of £124.5m.
Rami Baitieh, Morrisons chief executive, said:
Our convenience business is now well set and growing rapidly. The addition of a further 38 stores will bring us another opportunity for growth and a strong position in the important Channel Island convenience market.
03:39 PM BST
Zoo game boosts Frontier Developments
Computer games developer Frontier told investors today that its losses would be “better than previously guided” after it sold the rights to RollerCoaster Tycoon 3 to Atari and experienced strong sales of PlayStation and Xbox versions of Planet Zoo.
The company now expects a turnover of at least £85m in the year to the end of May 2024, with underlying losses of £5m or less.
Jonny Watts, chief executive, said:
We are making strong progress following the reset of our strategy during 2023 and I’d like to thank our people for their support during a difficult period in Frontier’s thirty year history. We look to the future with renewed confidence.
Shares are up nearly 6pc in trading today. The company benefited from a gaming boom during lockdowns but were hit after poor sales from the launch of Jurassic World Evolution 2 at the tail end of 2021.
The company was founded by David Braben, who was one half of the team that created the top 1980s British computer game Elite.
03:38 PM BST
Handing over
That’s all from me today. I’ll be joining many of you in tuning into the start of the Eurovision madness tonight, which kicks off in Malmo.
Here are some fans jetting off to Sweden for the musical mania - but before then the live updates will keep coming from my colleague and occasional musician Alex Singleton.
03:17 PM BST
Apple unveils new iPad models
Apple has unveiled new models of its iPad at a virtual event as it aims to catch up with Big Tech rivals in the AI race.
The world’s largest company has revealed larger versions of the tablet, including new iPad Pro and iPad Air designs.
Apple often introduces new iPads in May, a time when education customers are making purchasing decisions for the next academic year. But in recent years, Apple has started to transform its higher-priced models into devices for creative and business professionals with its iPad Pro models.
Apple introduces the new iPad Pro #AppleEvent pic.twitter.com/JJR1jk1WQT
— Apple Hub (@theapplehub) May 7, 2024
Apple introduces the new iPad Air, now in two sizes: 11' and 13' sizes #AppleEvent pic.twitter.com/v6aoPIt1Kk
— Apple Hub (@theapplehub) May 7, 2024
The new colors on the iPad Air #AppleEvent pic.twitter.com/PGbq1w3kwU
— Apple Hub (@theapplehub) May 7, 2024
03:02 PM BST
P&O Ferries boss admits paying workers £4.87 per hour
The boss of P&O Ferries has admitted to paying the company’s workers as little as £4.87 per hour, nearly two years on from a scandal which saw it branded “pirates” for laying off hundreds of staff without notice.
Peter Hebblethwaite repeatedly told MPs on the Business and Trade Committee that P&O’s workers were not being exploited, while resisting calls for an independent investigation into the company’s employment practices.
The chief executive, who admitted he could not live on £4.87 per hour, also revealed he earned £508,000 including a bonus of £183,000 last year.
Mr Hebblethwaite said: “We are paying considerably ahead of the international minimum standard. We believe that it is right that as an international business operating in international waters, we should be governed by international law.”
He added: “All we want is a level playing field with our competitors.”
Mr Hebblethwaite’s appearance before MPs came two years after P&O Ferries fired 786 of its staff and replaced them with low-paid workers who are employed by an external crewing agency.
The company fired employees without notice or union consultation, attracting widespread criticism from ministers, unions and the public.
02:57 PM BST
Microsoft creates top secret AI spying tool
Microsoft has developed artificial intelligence that can be used by intelligence agencies that is deemed safe because it is completely divorced from the internet.
It is the first time a large language model has been fully separate from the online world and worked, a senior executive at the company told Bloomberg.
Most AI models, including OpenAI’s ChatGPT, which is backed by Microsoft, rely on cloud services to learn and infer patterns from data.
However, Microsoft said it wanted to deliver a truly secure system to the US intelligence community.
William Chappell, Microsoft’s chief technology officer for strategic missions and technology, said the system has an “air-gapped” environment that is isolated from the internet.
Sheetal Patel, assistant director of the CIA for the Transnational and Technology Mission Center, told a security conference last month: “There is a race to get generative AI onto intelligence data.”.
She said that the first country to use generative AI for their intelligence would win that race, adding: “And I want it to be us.”
02:35 PM BST
Wall Street edges up amid Fed rate cut hopes
US stock indexes opened slightly higher, with the S&P 500 and Nasdaq extending gains for a fourth straight session amid expectations that the Federal Reserve will ease monetary policy this year.
The Dow Jones Industrial Average rose 6.7 points to put it fractionally higher at the open at 38,858.94.
The S&P 500 rose 6.5 points, or 0.1pc, at the open to 5,187.2​, while the Nasdaq Composite rose 9.1 points, or 0.1pc, to 16,358.343 at the opening bell.
02:14 PM BST
Troubled Co-op Live arena announces new gigs despite issues
Co-op Live has announced it will host a Travis Scott gig amid ongoing issues which have seen the new music venue postpone its opening multiple times.
On its social media, the Manchester-based arena, which is set to become the largest in the UK - seating 23,500 people, wrote: “Just announced: @trvisXX
“Travis Scott’s Utopia - Circus Maximus Tour is set to continue this summer with a headline performance here at Co-op Live on 13 July 2024.”
On May 2, the venue provided an update after it postponed a number of gigs and said it would be taking “a short pause to events at Co-op Live to fully ensure the safety and security of fans and artists visiting the venue”.
The day previous, a gig by American rapper A Boogie Wit Da Hoodie was cancelled at the last minute due to a “technical issue” during a soundcheck.
It is understood that a nozzle from the ventilation and air conditioning system fell to the ground from the ceiling shortly before the event was due to take place.
British rock band Elbow are the next artists scheduled to perform at the indoor arena and they will be the venue’s opening act if the performance goes ahead as planned.
01:54 PM BST
Major investors back Octopus Energy amid international expansion
Octopus Energy’s valuation has jumped to $9bn (£7.2bn) after two of its biggest investors increased their stakes in the business.
Generation Investment Management and Canada Pension Plan Investment Board, already major investors, took even bigger shares in the energy and technology group, pushing its value up 15pc on a previous estimate.
Generation, which focuses on sustainable investments, upped its stake to 13pc after getting new backing from pension funds in the US and Australia, including Australian superannuation fund Aware Super.
CPP Investments, which manages about 590.8 billion Canadian dollars-worth of assets, increased its stake to 12pc.
Greg Jackson, founder of Octopus Energy Group, said: “Bringing globally respected long-term investors on board helps raise our profile in key markets, and open up new opportunities to continue our international expansion.”
Octopus has been expanding abroad for some years and now has a presence in 18 countries. It is pushing its energy software platform, Kraken, in North America, having signed its first licensing deal in Texas last year.
Octopus recently became the largest domestic electricity supplier in the UK by customer numbers, after the company added 1.3 million customers via its takeover of Shell Energy last year.
The eight-year-old company overtook Centrica-owned British Gas, which had been the largest supplier for the last 20 years, according to Ofgem data.
01:32 PM BST
BP boss says New York listing ‘not on agenda’
The boss of BP has said a move away from the London Stock Exchange is “not on our agenda” in a boost to the City.
Our industry editor Matt Oliver has been speaking to him:
Murray Auchincloss said that the oil giant was not considering a switch to New York.
He said: “It’s not on our agenda. We’re just tightly tightly focused on performance... we think that’s what will close the gap with the American companies.”
It comes after the boss of Shell said he is considering quitting the London Stock Exchange for New York in what would be the biggest blow to the UK’s struggling stock market so far.
Wael Sawan, the oil giant’s chief executive, said this month that the company is looking at “all options” for its listing amid concerns it is under-appreciated by investors.
01:07 PM BST
IWG signals fresh push towards US listing
Office and hybrid workspace company IWG has said it is on track to meet its financial targets amid speculation the company could be mulling a US stock market listing.
The WeWork rival said that adopting US accounting standards “remains under evaluation” and it will make a decision in the coming months. The move would be a prerequisite to a listing in New York.
The company, which has around 4,000 global office locations, told investors that overall revenues grew by 1pc to $1.03bn (£820m) for the first quarter of 2024, compared with the same period a year earlier.
The group, which owns the Regus and Basepoint brands, said this was driven by 12pc growth across its managed and franchised business, as it continued to expand.
It said this division signed up 179 new sites over the quarter, accelerating its rate of growth.
Meanwhile, its company-owned and leased operation, the largest arm of the business, saw broadly flat quarterly revenues.
IWG said it is confident of meeting its earnings and net debt expectations for 2024 as a result.
Its shares have risen by 0.3pc.
12:39 PM BST
US markets subdued after poor corporate updates
Wall Street lacked direction in premarket trading amid a string of weak company results.
The tech-heavy Nasdaq 100 dipped as most megacap and technology companies came under pressure following Apple and Tesla updates.
Walt Disney dropped by 5pc in premarket trading as its quarterly results fell short of market expectations.
Ahead of the opening bell, the S&P 500 was flat. Nasdaq 100 futures dipped 27.75 points, or 0.2pc, while the Dow Jones Industrial Average added 64 points, or 0.2pc.
The three main US stock indexes closed at their strongest level in more than three weeks on Monday, after a weaker-than-expected jobs market report last week fuelled bets that the US Federal Reserve will cut interest rates later this year.
The report and better-than-expected earnings reports helped soothe jittery investors, who sent markets lower in April, amid concerns that sticky inflation and a robust economy would prompt the Fed to keep rates higher for longer.
Traders currently anticipate rate cuts of 45 basis points from the Fed by the end of 2024, according to LSEG’s interest rate probabilities app, with the first pivot to a quarter of a point rate cut is priced in for September and another in December.
12:15 PM BST
Disney boss hails turnaround as streaming expected to turn profit
Disney hailed its turnaround efforts as it suffered a loss in its second quarter as the entertainment giant was hampered by restructuring costs.
The House of Mouse’s adjusted profit beat analyst expectations and its streaming business turned a profit. Theme parks also continued to do well.
While Disney said that it foresees its streaming business softening in the current quarter amid weaker performance in India, it expects its combined streaming businesses to be profitable in the fourth quarter and to be a meaningful future growth driver for the company, with further improvements in profitability in fiscal 2025.
Disney+ core subscribers climbed by more than 6pc in the second quarter. Meanwhile, revenue at Disney’s domestic theme parks rose 7pc and its theme parks overseas reported a 29pc increase.
Chief executive Bob Iger said: “Looking at our company as a whole, it’s clear that the turnaround and growth initiatives we set in motion last year have continued to yield positive results.”
It’s the first financial report since shareholders rebuffed efforts by activist investor Nelson Peltz to claim seats on the company board last month, standing firmly behind Mr Iger.
For the period ended March 30, Disney lost $20m (£15.9m), or a penny per share. That compares with a profit of $1.3bn (£1bn), or 69 cents per share, a year ago.
Restructuring and impairment charges surged to $2.1bn from $152m in the prior-year period.
11:48 AM BST
China-made Tesla sales plunge
Tesla’s sales of China-made electric vehicles plunged in April amid increased competition from local rivals.
The US carmaker sold 62,167 China-made Model 3 and Model Y vehicles last month, down 18pc from a year earlier and a drop of 30.2pc compared to March.
Tesla’s China-made cars are also exported to various markets including Europe. The CPCA did not provide a breakdown of Tesla exports by destination. Tuesday’s numbers are a prelude of full data for April due out later this week.
The sharp slide contrasts with rising EV sales in the world’s largest car market, albeit at the slowest pace in a year in the first quarter, amid slowing demand and a ferocious price war.
China’s new-energy vehicle sales including battery-powered EVs and plug-in hybrids were estimated to hit 800,000 units in April, up 33pc on the year and a 2pc drop from the month before, according to CPCA data.
Tesla’s biggest Chinese rival BYD, with its Dynasty and Ocean lineups of EVs and plug-in hybrids, sold 312,048 passenger vehicles in April, up 49pc year-on-year and a 3.5pc increase from March.
11:39 AM BST
Demand for electric vehicles plunges by a fifth
Electric car sales to private consumers have plunged by a fifth amid growing concerns that the industry will miss its legal net zero targets.
Our industry editor Matt Oliver has the details:
A total of 22,717 electric cars were registered in April, an increase of 10.7pc compared to a year earlier, but this was overwhelmingly driven by businesses.
Sales to private consumers made up just 15.6pc of this, down from 22.1pc in 2023, according to the Society of Motor Manufacturers and Traders (SMMT).
The actual number of electric cars sold to private consumers fell from 4,535 to 3,544, a drop of 22pc.
Read how demand is dropping and see a chart showing how diesel cars now outprice electric vehicles.
11:25 AM BST
Oil falls amid hopes for Gaza peace talks
Oil prices slipped back amid hopes for a ceasefire in the Gaza Strip as peace talks are due to begin in Egypt.
Global benchmark Brent crude earlier rose toward $84 a barrel after Israel rejected the ceasefire and sent tanks into Rafah, after a 0.5pc gain on Monday.
However, oil 0.2pc towards $83 as Egypt, which borders Rafah and has a peace treaty with Israel, and Qatar, a US ally that is also home to Hamas leaders, has taken the lead in the ceasefire negotiations.
US-produced West Texas Intermediate was down 0.2pc towards $78.
Crude’s advance came as European and Asian stocks pushed higher amid optimism the Federal Reserve will start cutting interest rates this year. Lower US borrowing costs should be a plus for the nation’s energy demand.
11:02 AM BST
Pound falls ahead of Bank of England’s interest rate decision
The pound has fallen 0.2pc against the dollar to $1.254 ahead of the Bank of England’s next interest rate decision on Thursday.
Matthew Ryan, head of market strategy at Ebury, said:
Sterling has outperformed all other G10 currencies in 2024 save for the US dollar, on the back of high interest rates, expectations that they will be kept high for longer, and now a string of positive developments on growth and the economy.
The former two will be tested this week at the Bank of England meeting on Thursday, where we expect to see some clarification of the Monetary Policy Committee’s expectations for the timing of the first cut.
Right now, markets do not expect this to happen till late summer at the earliest.
Any validation of this outlook from Bank of England officials would add fuel to the pound’s rally.
11:00 AM BST
British households suffer longest drop in living standards in G7
British households are suffering the longest drop in living standards in the G7 as the economy fails to keep up with population growth, new data shows.
Gross domestic product (GDP) per person fell for four quarters in a row across 2023 in the UK and has been at 0pc or less since spring 2022, according to the Organisation for Economic Cooperation and Development (OECD).
Although data from the Office for National Statistics (ONS) shows that overall GDP rose by 0.1pc across 2023, on a per person basis it fell by 0.8pc.
This measure accounts for population growth, which in the UK was the second highest in the group of seven advanced economies.
The figures were in stark contrast to the G7 average, where GDP per capita rose by 1.2pc last year.
Canada, which recorded the highest rate of population growth also had the steepest drop in living standards in the G7, with GDP per capita falling by 1.7pc across 2023.
However, here the drop has been much less protracted than in the UK, with real GDP only falling on a per person basis for three quarters in a row.
The UK economy fell into a technical recession at the end of last year, defined as two consecutive quarters of falling GDP, but monthly data so far in 2024 shows that the economy has returned to headline growth.
10:49 AM BST
German exports bounce back but orders remain weak
German exports picked up in March but industrial orders fell unexpectedly, official data showed, reflecting a mixed picture for Europe’s biggest economy.
Exports rose by 0.9pc month-on-month after a decline of 1.6pc in February, federal statistics agency Destatis said, defying expectations of a continued downward trend.
But new orders, closely watched as an indicator of future business activity, fell by 0.4pc month-on-month. Analysts surveyed by FactSet had expected a rise of 0.5pc.
ING bank analyst Carsten Brzeski said the figures confirmed “the return of the export-driven German growth model”.
However, the weak industrial orders “spoiled the party of optimism”, he said, illustrating “the high risk that the revival of the export-oriented success formula is only short-lived”.
Good Morning from Germany where factory orders unexpectedly dropped in March, 3rd drop in a row, pointing to persistent weakness in a sector already lagging behind the improvement in the wider economy. Feb's reading was also revised down to a 0.8% decrease. The recent rise in… pic.twitter.com/KP08OOVJEv
— Holger Zschaepitz (@Schuldensuehner) May 7, 2024
10:20 AM BST
FTSE 100 leads gains in Europe
The FTSE 100 has led gains in Europe after another day of gains on Wall Street led by technology stocks.
Germany’s DAX rose 0.4pc to 18,401.00 and the CAC 40 in Paris edged 0.2pc higher, to 8,015.58.
The FTSE 100 surged 1.1pc to 8,300.55 after the extended bank holiday weekend, which helped it make a bigger jump to catch up with the solid gains in the US on Monday.
Also supporting the market, the pound was down 0.2pc against the dollar at $1.254, while the price of oil - a key driver of the energy heavy index - was up 0.1pc to $83 a barrel.
09:59 AM BST
Commercial work to support ‘gradual recovery in construction this year,’ say economists
As the UK construction sector expanded for a fifth consecutive month, Capital Economics’ senior property economist Matthew Pointon said:
The commercial balance jumped from 49.9 in March to 53.9 in April, the first time it has been in expansionary territory since August last year.
That improvement is in line with a rise in commercial property investment to a one-year high in March.
Admittedly, lending for commercial property development is still subdued. But with all-property yields seeing a marginal rise of just 7bps in Q1 there is growing evidence that capital values are close to bottoming out.
That will support a gradual recovery in construction this year. Indeed, the future business expectations balance rose to 69.4 in April, from 68.9 in March.
09:54 AM BST
Construction sector grows amid strong commercial work
Britain’s construction sector expanded at its fastest pace in more than a year as the outlook for the economy improved, according to a closely-watched survey.
The S&P Global UK Construction PMI gave a reading of 53 in April, up from 50.2 in March and hitting a 14-month high. A reading above 50 indicates the sector is expanding.
However, the survey also showed the housebuilding sector declined at its fastest pace since January amid a slowdown in residential building work.
Tim Moore, economics director at S&P Global, said:
The construction sector consolidated its recent return to growth in April, with total industry activity rising at the fastest pace for 14 months amid an ongoing recovery in order books.
Demand was boosted by greater confidence regarding the broader UK economic outlook.
Commercial construction outperformed in April and civil engineering also provided a solid contribution to overall growth.
Lacklustre market conditions in the house building segment continued to weigh on activity.
09:37 AM BST
Nissan boss not optimistic about China market
The boss of Nissan has said he does not look “optimistically” at his company’s operations in China as it responds to the “massive” speed at which its competitors operate there.
Makoto Uchida said the Japanese car company has been forced to change its strategy for the Chinese car market, where it had decided to “100pc develop in China for China”.
He said the car maker’s portfolio of joint ventures was getting smaller while its local operations were getting stronger in an attempt to “survive” in the world’s second largest economy.
He told the FT’s Future of the Car Summit in London it is “one of the largest markets we cannot ignore” but said the “transaction price of EV is coming down faster than we expected”.
He said: “We are committed to China but how we stay, the strategy has dramatically changed.”
08:57 AM BST
Gaza peace talks ‘calming oil supply concerns,’ say analysts
As the FTSE 100 hit a new record, Hargreaves Lansdown’s head of money and markets Susannah Streeter said:
The FTSE 100 has scaled fresh heights as buds of May hope unfurl about interest rate cuts on the horizon.
The blue-chip index smashed through the 8300 mark in early trade as the feel-good factor around London-listed stocks continued.
Energy giant BP has partly blamed lower oil and gas prices for a 40pc dip in profits compared to the same period a year earlier.
Its results come amid a dip in the oil price to $83 away from highs above $90 a barrel reached last month as fears intensified that conflict would take a dangerous new turn in the Middle East.
Although there remains confusion surrounding the acceptance of a truce by Hamas, oil prices have edged lower.
It’s still unclear what Israel’s next move will be, however, there remain hopes that a fresh breakthrough could be secured. This is helping calm supply concerns emanating from the region amid the conflict.
08:45 AM BST
Heathrow accused of overlooking profits from passenger charges
Union chiefs have accused Heathrow of overlooking hundreds of millions of pounds in profit, as a row over strike action intensifies at Britain’s largest airport.
Luke Barr has the details:
Tensions are running high over Heathrow’s claim it is facing a £400m funding gap after the aviation regulator ordered it to reduce the amount it can charge airlines to use the airport.
The shortfall has prompted chief executive Thomas Woldbye to introduce cost-saving measures, including a proposal to outsource hundreds of security staff to third-party contractors.
The plans have angered unions and Unite is now seeking to challenge the £400m figure, claiming it fails to account for a revised decision from the Civil Aviation Authority (CAA) in March.
Read what union officials allege.
08:40 AM BST
FTSE hits new record as Gaza peace talks continue
The FTSE 100 opened at a record high ahead of fresh talks to secure a ceasefire in Gaza.
The UK’s blue-chip stock index was up as much as 1.2pc to 8,309.04 while the midcap FTSE 250 gained 0.9pc to 20,353.51.
It comes as Israel carried out strikes on the Gazan city of Rafah overnight as it sought to put “pressure” on Hamas ahead of talks in Egypt today aimed at sealing a truce proposal endorsed by the militants.
Meanwhile, the FTSE 100 was boosted by reports that Shell is in talks to sell its gas station business in Malaysia to Saudi Aramco, according to Reuters.
Shares in Shell, the second most valuable company on the FTSE 100, gained 1.5pc.
Meanwhile, BP was down 0.4pc after the oil giant revealed falling profits, although it maintained the rate of its share buyback programme at $1.75bn over the next three months.
It missed forecasts due to lower oil and gas prices and a US refinery outage.
08:12 AM BST
UK markets jump at the open
The FTSE 100 leapt higher as trading began in London amid rising oil prices and following on from strong results in Asia and Wall Street.
The UK’s flagship stock market gained 1.1pc to 8,304.78 while the midcap FTSE 250 rose by 0.8pc to 20,321.02.
08:00 AM BST
Audit giants fined over £237m fraud that rocked City
Accounting giants PwC and Ernst & Young have been hit with multimillion-pound penalties by the accounting watchdog over their audits of failed minibonds firm London Capital & Finance (LC&F).
LCF collapsed in early 2019 after it was unable to meet the payments it had promised to bondholders, owing around £237m to nearly 12,000 people, many of them elderly.
The Financial Reporting Council (FRC) said PwC has agreed to a £4.9m sanction as part of a settlement for failures over its audit of the 2016 financial statements of LC&F.
PwC auditor Jessica Miller was also given a £105,000 financial sanction.
Ernst & Young (EY) - which was responsible for auditing LC&F’s 2017 accounts, the last before it collapsed - agreed to a settlement including a £4.4m sanction, with its auditor Neil Parker paying £47,250.
A third, smaller firm - Oliver Clive & Co, which had audited LC&F’s 2015 statements - has been sanctioned with a £42,000 penalty and a £14,000 financial sanction for its auditor Emma Benjamin.
07:49 AM BST
BP profits slump amid lower gas prices
Oil giant BP’s profits have almost halved amid lower natural gas prices.
Our industry editor Matt Oliver has the latest:
The FTSE 100 company reported first quarter profits of $2.7bn (£2.2bn), down from $5bn a year earlier.
BP said the numbers reflected “lower oil and gas realizations”, an outage at its Whiting refinery in Chicago and “significantly weaker” margins on fuel sales.
It missed the $2.9bn analysts had been predicting, capping a set of mixed results from oil and gas giants in the first quarter.
However, BP said it was pressing ahead with $3.5bn of share buybacks in the first half of 2024 and pledged to make $2bn of efficiency savings across its business.
Murray Auchincloss, the company’s chief executive, said: “We’ve delivered another resilient quarter financially and continued to make progress on our strategy.”
It comes after a winter in which gas prices have been lower than a year ago, as fears of a supply crisis in Europe have softened thanks to a glut of liquified natural gas (LNG).
07:46 AM BST
Saudi Aramco profits slump amid production cuts
Oil giant Saudi Aramco said first-quarter profits fell as the Gulf kingdom kept production cuts in place.
Earnings dropped by 14.5pc to 102.27bn riyals (£21.7bn), down from 119.54 billion riyals (£25.4bn) for the same period in 2023.
Aramco added that “the decrease was primarily a result of lower crude oil volume sold”.
The world’s biggest crude exporter, whose profits dropped by a quarter last year, is currently producing roughly nine million barrels per day (bpd), well below its capacity of 12 million bpd.
That follows a series of production cuts dating back to October 2022, when the Opec+ bloc of oil producers that Riyadh co-leads with Moscow announced it would reduce output by two million bpd to boost prices.
On top of that cut, in April 2023 Saudi Arabia and several other Opec+ members agreed to slash production voluntarily by more than one million bpd.
After a further meeting of the cartel in June 2023, Riyadh announced another reduction of one million bpd.
07:39 AM BST
Buyers hope mortgage rate reductions are on horizon, say estate agents
Buyers are pressing ahead with buying homes in the hope that mortgage rates will begin to fall in the near future, according to estate agents.
Foxtons chief executive Guy Gittins said:
Although UK homebuyers continue to wait patiently for interest rates to fall, this has not dampened the growing level of market confidence that has been building since the start of the year and, in fact, many buyers are already pressing ahead with their plans to purchase with hopes of mortgage rate reductions on the horizon.
Since a hold on interest rates in September last year mortgage approvals have been climbing, there’s been an uplift in viewing activity and more offers are being made, and so it’s clear that both buyers and sellers are responding favourably to a greater degree of market stability.
Yopa chief executive Verona Frankish added: “Just last week, the Bank of England reported that mortgage approvals have climbed for their sixth consecutive month in a row and, while the market may still be finding its feet, it’s only a matter of time before this increase in buyer demand starts to drive a far stronger level of house price growth.”
07:27 AM BST
BP profits slump amid falling oil prices
Energy giant BP has revealed a fall in profits in the face of lower oil prices and weaker refining margins than this time last year.
BP said that underlying replacement cost profit - its preferred measure - was $1.6bn (£1.3bin) in the first quarter, down from $8.7bn (£6.9bn) a year earlier.
The London-listed company also revealed plans to deliver $2bn (£1.6bn) in extra in cost savings by 2026.
07:24 AM BST
Northern Ireland leads UK house price growth
Northern Ireland remains the strongest performing part of the UK when it comes to house prices, with the value of the average property up by 3.4pc on an annual basis.
This was a slowdown from a rise of 4.1pc in the year to in March, with homes now costing an average of £192,502.
In Wales annual property price growth slowed to 1.1pc in April, from 1.9pc in March, with the average home now costing £218,775.
Meanwhile Scottish house prices rose by 1.5pc year-on-year to stand at £204,579.
The North West continues to see the strongest growth in England, up by 3.3pc on an annual basis to £231,599.
Annual price falls are predominately found in the south of England, as the ‘North-South’ divide across English regions is sustained.
Properties in Eastern England recorded the biggest decline of 1.1pc, with homes selling for an average of £329,723, a drop of £3,541 over the last year.
London remains the most expensive region in the UK to buy a home, with an average price of £539,336. However prices in the capital have been relatively flat over the last year, up by just 0.1pc.
According to lender @HalifaxBank the typical UK home found an extra £200 down the sofa, rising 0.1% on last month to £288,949. Annually they increased by 1.1% but this was largely due to weak growth the year before.
Ireland (3.4%) Scotland (+1.5%) Wales (1.1%) & North west… pic.twitter.com/AbcRdUZdoj— Emma Fildes (@emmafildes) May 7, 2024
07:14 AM BST
House prices return to growth despite mortgage rates pain
House prices returned to growth as the housing market tries to “find its feet” in the era of higher interest rates, according to a lender.
Typical property values grew by 0.1pc between March and April, the Halifax house price index showed, after a decline of 0.9pc over the previous month.
It meant the average home was worth £288,949, which was 1.1pc higher than the same month last year, and up from a rise of 0.4pc in the year to March.
It comes as Savills said it expects house prices to rise by more than £60,000 over the next five years as Britain’s mortgage crunch eases.
The estate agent significantly upgraded its five-year forecasts for the housing market, citing an “improved economic outlook”.
Amanda Bryden, head of mortgages at Halifax, said:
While there is always much scrutiny of monthly price changes – and a degree of volatility is to be expected given current market conditions – the reality is that average house prices have largely plateaued in the early part of 2024.
This reflects a housing market finding its feet in an era of higher interest rates. While borrowing costs remain more expensive than a few years ago, homebuyers are gaining confidence from a period of relative stability.
Activity and demand is improving, evidenced by greater numbers of mortgage applications so far this year, while at an industry level mortgage approvals have reached their highest point in 18 months. Our recent research also found that buyers are adjusting their expectations, with first-time buyers in particular compensating for higher borrowing costs by targeting smaller properties.
We see this reflected in property prices for the first few months of this year, with the value of flats rising most sharply, closing the ‘growth gap’ on bigger properties that’s existed for most of the last four years.
However, we can’t overlook the fact that affordability constraints are still a significant challenge, for both new buyers and those rolling off fixed-term deals. Mortgage rates have edged up again in recent weeks, primarily as a result of expectations around future Bank of England base rate changes, with markets now pricing in a slower pace of cuts.
If, as is still expected, downward moves in Bank Rate come into play later this year, fixed mortgage rates should fall. Combined with the resilience displayed by the housing market over recent months, we now expect property prices to rise modestly over the course of 2024.
07:09 AM BST
Good morning
Welcome to another week. UK markets are back in action today after the (wet) bank holiday weekend.
We will have the first quarter results from BP shortly, but first we have the latest data on house prices from mortgage lender Halifax.
It showed that the average price of a home increased by 0.1pc between March and April to £288,949.
5 things to start your day
1) House prices to leap more than £60,000 over next five years | House price to rise more than £60,000 as interest rate pain eases
2) Labour will boost ‘appetite’ for London stock market, says City broker | Peel Hunt believes change of government will make UK investable again after a gloomy time for the stock market
3) Bud Light has promised to ‘stay in their lane’ after trans backlash | Brewer’s European boss has learned to keep contested issues away from beer
4) Royal Mail suitor Kretinsky is eyeing a bid for troubled French tech giant Atos | The “Czech Sphinx” is among the financiers vying to bail out troubled tech company
5) Russians launch package holidays to see Taylor Swift and Coldplay | Moscow was a key stop-off in pop stars’ tours before Putin’s invasion of Ukraine - now Russians are travelling to see them
What happened overnight
Asian markets were mostly higher after another day of gains on Wall Street, although Chinese shares faltered.
Tokyo’s Nikkei 225, reopening after a national holiday, jumped 1.5pc to 38,784.91 and the Kospi in South Korea surged 1.9pc to 2,728.05.
The yen fell after Japan’s top currency official Masato Kanda said there was no need for the government to intervene if the market is functioning properly.
Hong Kong’s Hang Seng shed 0.9pc to 18,420.38 and the Shanghai Composite index edged 0.1pc lower, to 3,136.62. Data on travel, retail spending and home sales during the weeklong Golden Week holidays showed persisting weakness in the economy.
Australia’s S&P/ASX 200 advanced 0.7pc to 7,739.00 ahead of a central bank decision on interest rates.
Taiwan’s Taiex was up 0.3pc, while India’s Sensex was nearly flat as the country began the third phase of its weeks’ long national elections process.
On Monday, the S&P 500 rose 1pc to 5,180.74. The Dow Jones Industrial Average added 0.5pc to 38,852.27, and the Nasdaq Composite jumped 1.2pc to 16,349.25.
Tech stocks were at the forefront, with familiar ringleaders Nvidia and Super Micro Computer again pulling the market higher.
They have had a couple hiccups recently, but a frenzy around artificial-intelligence technology has Nvidia up 86.1pc for the year so far after Monday’s 3.8pc gain. Super Micro is up 192.1pc after its gain of 6.1pc.
