Growth in the US services sector comes amid signs of a cooling US jobs market which helped boost markets. The FTSE was higher on Wednesday. (Richard Levine)
Wall Street followed the the FTSE 100 (^FTSE) and European stocks higher on Wednesday as the US services sector returned to growth in May.
This was after economic activity contracted marginally in April for the first time since December 2022.
In the latest services Report On Business from the Institute for Supply Management, the headline reading was 53.8 in May, up from 49.4 in April. The 50 mark divides expansion from contraction.
It came amid signs of a cooling US jobs market helped boost markets on Tuesday. Traders are now more optimistic on interest rate cuts later this year. Data on Tuesday revealed that job openings plunged to their lowest in over three years, reinforcing predictions of a rate cut by the Federal Reserve in September.
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Meanwhile, the European Central Bank (ECB) is expected to announce its first interest rate cut in five years on Thursday, reducing its deposit rate from record highs of 4% to 3.75%.
London’s benchmark index was 0.3% higher as risk appetite continued to grow.
Germany's DAX (^GDAXI) gained 0.9% and the CAC (^FCHI) in Paris headed 0.9% into the green.
The pan-European STOXX 600 (^STOXX) was up 0.9% led higher by all sectors, with top performers among tech and utility shares.
Wall Street opened higher as tech giant Google faces £13.6bn legal claim over advertising tech
The pound was flat up against the dollar (GBPUSD=X) at 1.2780.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: "The wheel of speculation over when interest rate cuts will come in the US has stopped in a more positive position, buoying sentiment and helping push up the FTSE 100."
Follow along for live updates throughout the day:
LIVE COVERAGE IS OVER22 updates
LaToya Harding
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Well that's all from us today, thanks for following along. Be sure to tune in again tomorrow for that all important ECB interest rate decision...
... and of course all the latest market news and what's happening across the global economy.
Have a good evening all!
LaToya Harding
US services sector grows at fastest pace in nine months
The US services sector economy grew at its fastest pace in nine months in a blow to hopes of summer interest rate cuts.
The latest ISM Services PMI reading came in at 53.8%, bouncing back from a contraction in April, and putting the sector above the 50 mark separating growth from contraction for the 46th time in the last two years.
It was also higher than analyst expectations of 51%, and indicates the US economy remains resilient in spite of high interest rates.
Anthony Nieves, chairman of the Institute for Supply Management (ISM) services committee said:
The increase in the composite index in May is a result of notably higher business activity, faster new orders growth, slower supplier deliveries and despite the continued contraction in employment.
Survey respondents indicated that overall business is increasing, with growth rates continuing to vary by company and industry.
Employment challenges remain, primarily attributed to difficulties in backfilling positions and controlling labour expenses.
The majority of respondents indicate that inflation and the current interest rates are an impediment to improving business conditions.
The US ISM service sector report for May offered up a significant upside surprise of 53.8 vs 50.8 expected and 49.4 previously.
New orders jumped, employment improved (still contractionary, 47.1) and prices eased (58.1).
— John Kicklighter (@JohnKicklighter) June 5, 2024
LaToya Harding
Google faces £13bn legal claim over advertising tech
A multibillion-pound claim against Google over allegations that it has behaved anti-competitively in the advertising tech space can proceed to trial, the UK’s Competition Appeal Tribunal has ruled.
The £13.6 billion claim, brought by a group called Ad Tech Collective Action LLP, alleges that Google has abused its dominant position in the digital advertising space, causing significant losses to UK online publishers.
In its attempts to get the legal action dropped, Google called the case “incoherent”, but the Competition Appeal Tribunal has now ruled that it can go to trial.
Claudio Pollack, a partner of Ad Tech Collective Action, said:
This is a decision of major importance to the victims of Google’s anti-competitive conduct in ad tech. Google will now have to answer for its practices in a full trial.I look forward to working with our legal and economic advisers to deliver compensation for years during which the relevant markets did not provide a competitive outcome for the UK publishing market.
No court date has yet been set for the trial.
LaToya Harding
Ocado and St James Place set to crash out of FTSE
Online supermarket Ocado (OCDO.L) is set to end its six-year stay in the FTSE 100 (^FTSE) on Wednesday night as the UK's blue chip index undertakes a reshuffle that should also see financial adviser St James Place (STJ.L) drop out.
On the other hand, software company Darktrace (DARK.L) could come back on the FTSE 100, as well as house builder Vistry Group (VTY.L).
The FTSE 100 is reshuffled by FTSE Russell, the index provider, every quarter according to market cap data from the end of the previous month.
The changes are expected to be announced this Wednesday after the bell, based on the official review using data as of market close on Tuesday 4 June.
The Bank of Canada cut interest rates by a quarter of a percentage point to 4.75%, signalling an end to its aggressive monetary policy after inflation fell to 2.7% in April.
The central bank said on Wednesday:
With continued evidence that underlying inflation is easing, (the bank’s) Governing Council agreed that monetary policy no longer needs to be as restrictive and reduced the policy interest rate by 25 basis points.
Recent data has increased our confidence that inflation will continue to move towards the 2% target.
🇨🇦Bank of #Canada cuts overnight rate 25bps to 4.75%
▶️"With continued evidence that underlying #inflation is easing.. monetary policy no longer needs to be as restrictive" ▶️"Recent data has increased our confidence..." ▶️"Inflation outlook risks remain"https://t.co/uka9w1TqZ2pic.twitter.com/3sDr7h66BC
Paragon Banking climbed higher on Wednesday as the specialist lender reported its half-year results. It more than doubled its interim profit.
The company said it would extend its share buyback by up to £50m as customer demand returned after the 'mini-budget' fiasco of Liz Truss's short-lived government last October.
LaToya Harding
Bitcoin breaks through $70,000
Bitcoin (BTC-USD) was in focus again on Wednesday after the cryptocurrency rose above the $71,000 level and flirted with a gain for a fifth straight session.
The move reflected greater confidence in global markets about the prospect of US Federal Reserve interest-rate reductions this year. It was also benefiting from high inflows into exchange-traded funds holding the token.
However, on Tuesday, spot Bitcoin ETFs received $886.6m in inflows, according to crypto data firm CoinGlass. This was the best day of inflows since March and the second-largest amount of inflows in a single day since the spot ETFs launched at the start of this year.
Traders are now pricing in a bigger chance of a Fed rate cut as soon as November in the wake of data signalling moderating US inflation and a softer jobs market.
Some Treasury yields registered their largest two-day drops of the year, a loosening in financial conditions that may help speculative assets like crypto.
“Crypto assets are responding positively to the decline in rates,” Tom Couture, digital-asset strategy vice president at Fundstrat Global Advisors, said in a note.
The UK services sector lost some momentum in May, as business activity and new orders eased from 11-month highs the month before.
However, job growth and business confidence improved slightly during the month.
There was also substantial cooling in the rate of firm’s input cost inflation, which fell to its weakest since February 2021. This fed through to prices charged by businesses, which rose at the slowest rate in more than three years.
The S&P Global UK services PMI business activity index fell to 52.9 last month from April’s 11-month high of 55, indicating a softer rate of expansion that was also the slowest since November last year.
Joe Hayes, principal economist at S&P Global Market Intelligence, which compiles the survey, said:
Of particular interest to the immediate outlook for the UK economy will be the prices measures, with the Bank of England potentially moving to cut interest rates as soon as this month.
The PMI surveys show prices for UK services rising at the slowest pace for over three years. That’s now three months on the trot that selling price inflation in the service sector has eased – this will be very encouraging to the Monetary Policy Committee and suggests the trajectory of services prices is moving in the right direction.
It is worth noting however that the PMI’s gauge of UK services inflation is still sitting well above its pre-pandemic trend, which may give more weight to those suggesting the Bank of England hold out until August to loosen policy.
LaToya Harding
Pound rises ahead of ECB interest rate decision
Sterling edged up 0.1% against the dollar and the euro on Wednesday ahead of key US economic data.
It also comes ahead of a decision from the ECB on Thursday, where it is expected to cut interest rates for the first time in five years.
Investors are currently pricing more than a 50% chance of 25 bps of BoE rate cuts by September while discounting 35 bps by year-end, which means one cut and a 40% chance of a second move in 2024.
Meanwhile, the US employment data throughout the week will dominate the macro calendar, after Wednesday's US services data.
LaToya Harding
Asda most expensive UK supermarket fuel retailer
Asda is now the UK’s most expensive supermarket fuel retailer, according to new analysis from the RAC.
Rival grocers Tesco (TSCO.L), Morrisons and Sainsbury’s (SBRY.L) sold a litre of petrol for an average of 2.1p less than Asda at the end of May. The difference in average diesel prices was even steeper, at 2.5p per litre.
The RAC said that for many years Asda “prided itself on selling the cheapest fuel”, often being the first supermarket to cut pump prices.
It comes as the supermarket was taken over by the billionaire Issa brothers and private equity firm TDR Capital in 2021.
LaToya Harding
How to choose between saving and investing your money
When you’re weighing up whether to save or invest, there's always going to be a beady eye on how much money you could make. Using long term averages of medium returns, you might assume you could make 5% a year on a stocks and shares ISA. Meanwhile, a quick glance at the most competitive savings accounts on the market will see they pay 5% right now. So given that investing comes with added risk, it’s no wonder some people are wondering whether they should just stick with savings.
It's a good question, but it doesn’t start and end with returns. There’s also the question of what the money is for.
If this is an emergency savings safety net, it needs to be in an easy access savings account, so you can get your hands on the money when you need it. If it’s for something specific over the next five years, it should also be in cash — although you can pick a fixed rate account and tie the money up for the period that suits you best.
Once you can tie the money up for five to 10 years or more, investments are well worth considering.
B&M European Value Retail (BME.L) is set to open at least 1,200 stores in the UK over time, up from its previous target of 950. It currently has 741 stores and opened a swathe of new sites in recent months.
The discount retailer said sales have grown over the past year to March, with group revenues jumping by a tenth.
On a like-for-like basis, which strips out the impact of new store openings, sales across the UK increased by 3.7% compared to 2023. This was driven by a higher volume of sales.
Chief executive Alex Russo said:
“We are well set for the year ahead. Despite the more challenging comparatives, with continued new store openings, and a laser focus on low prices and best in class retail standards, we remain confident in our outlook for cash generation and profit growth.”
LaToya Harding
Zara owner boosted by spring sales
Inditex (4ITX.TI), the owner of clothing store Zara, reported a pick-up in recent sales from its Spring/Summer collections, delivering quarterly results in line with expectations.
Sales grew 7% in the first quarter of its financial year, and rose 12% between 1 May and 3 June compared to the same time the year before.
The company, whose brands also include Pull&Bear and Massimo Dutti, added that it expected adverse currency moves to cut 2% from sales this year, up from previous guidance for a 1.5% hit.
It is currently fending off intense competition from rivals such as H&M by chasing and delivering fashion trends faster, as well as rapidly growing Chinese-owned online retailers Shein and Temu.
Xavier Brun, portfolio manager at Madrid-based Trea Asset Management, which holds Inditex shares, said Inditex was currently "competing against itself", with a strong performance last year making for a tough comparison this year.
LaToya Harding
Oil nears four-month low on OPEC+ supply outlook
Oil prices are hovering near four-month lows today on an expected supply boost later in the year when OPEC+ begins to unwind some output cuts.
Brent crude futures were up 26 cents, or 0.3%, at $77.78 a barrel this morning while US West Texas Intermediate crude futures rose 24 cents, or 0.3%, to $73.49.
Both contracts fell more than 1% on Tuesday to their lowest settlement levels since early February, having declined by about $3 a barrel on Monday.
It comes after news from the Organisation of the Petroleum Exporting Countries (OPEC) and its allies of plans to increase supply from the fourth quarter despite recent signs of weakening demand growth.
"The abundant supply picture at present undoubtedly is generating queasiness even from those not in the perennial OPEC-sceptic camp," RBC Capital's head of commodities research, Helima Croft, said in a market note.
LaToya Harding
WH Smith rises on strong travel sales while high street slumps
WH Smith gained as much as 3% on Wednesday after it delivered a positive trading update ahead of its peak summer season.
The retailer said it was well set for the peak summer holiday season as buoyant sales across its travel sites continue to offset slower trading in its high street arm.
The group posted like-for-like sales growth of 4% for the 13 weeks to 1 June, with a 5% rise across global travel stores and a 1% drop for its high street business.
However, there was a slowdown from the 15% sales growth notched up in the first half across its travel shops based in railway stations, airports and hospitals worldwide.
It added that it opened five Toys R Us shop-in-shops within stores and is on track to open another 25 by the end of August. WH Smith also expanded its food-to-go ranges, launching the new brand Smiths Family Kitchen in more than 300 sites.
In a statement, the group said: “The transformation of the business to a one-stop-shop for travel essentials is delivering strong results, increasing average transaction values and returns.”
LaToya Harding
Rising fleet sales boosts new car sector
James Hosking, managing director of AA Cars, said:
“This trend highlights diverging commercial and consumer demand for new vehicles. Fleet sales, which are bulk purchases by companies, have remained strong as businesses replenish fleets amid improving sentiment and better economic conditions.
“Meanwhile, sales to individual drivers are lagging behind as consumer sentiment remains weak despite the fall in inflation — prompting some buyers to hold off on big-ticket purchases like cars.
“While the production of new cars in the UK continues to dip as manufacturers retool for the next generation of models, including EVs, this temporary downturn in output should have a minimal impact on sales.
“Consumers looking to purchase new vehicles still have ample options available in the market despite the short-term manufacturing lull.
“It’s a testament to the strength of the UK’s new car market that it is still recording growth each month, despite this quieter period for private sales and production disruptions.”
LaToya Harding
New car market grows for 22nd month in a row
File photo dated 01/01/21 of new cars at the port of Southampton. The new car market recorded its strongest February in 20 years, figures show. Registrations of new cars were up by more than 10% last month compared with February 2023, the Society of Motor Manufacturers and Traders (SMMT) said. Issue date: Tuesday March 5, 2024. (Steve Parsons, PA Images)
The new car market continues to be buoyed by rising fleet sales, which have helped it notch up a 22nd straight month of rising sales despite cooling demand from private buyers.
It enjoyed its best May in three years, with 147,678 cars sold last month, up 1.7%, although this remains 19.6% lower than 2019.
Demand for electrified vehicles also rose, with plug-in hybrids recording the highest growth of all powertrains, up 31.5% to reach an 8% market share.
Battery electric vehicle (BEV) registrations also outperformed the market, rising 6.2% over the month to claim a 17.6% market share, up from 16.9% in the same month last year.
SMMT chief executive Mike Hawes said:
“As Britain prepares for next month’s general election, the new car market continues to hold steady as large fleets sustain growth, offsetting weakened private retail demand.”
LaToya Harding
TikTok says cyber attack targets brand and celebrities
TikTok was victim of a cyber-attack that targeted brands and celebrities, including Paris Hilton and CNN.
The social media app confirmed that CNN’s feed was one of a small number of “high profile” accounts that had been affected after its security team was alerted to malicious actors targeting the US news outlet.
A TikTok spokesperson said:
"We have been collaborating closely with CNN to restore account access and implement enhanced security measures to safeguard their account moving forward."
The company added that Hilton's account was targeted, but it was not compromised.
The reality TV star, who has more than 10 million followers on TikTok, is an active user of the platform.
LaToya Harding
ECB rate cut preview
Tomorrow we have the European Central Bank (ECB) meeting, with the bank expected to cut interest rates for the first time in five years from 4% to 3.75%.
The attention will also be on comments around inflation and further easing. Inflation has ticked up but remains on a broadly downward trend.
Neil Wilson at FinalTo said:
"The market is fully pricing a rate cut, which would be the first since 2019. Policymakers have been pretty vocal in saying June is ‘on’.
"In a recent interview, ECB chief economist Philip Lane said that “at this point in time there is enough in what we see to remove the top level of restriction”.
"You don’t get much clearer a signal than that in central bank speak, and there has been plenty of others basically saying June will see a cut."
Meanwhile the Bank of Canada is set to cut interest rates today.
LaToya Harding
King Charles banknotes enter circulation
New British banknotes featuring portrait of King Charles III revealed by the Bank of England. GBP pounds printing. UK Economy, banking, finance, cash (Corona Borealis studio)
New banknotes featuring the portrait of King Charles III have now entered circulation.
The notes, based on a picture taken in 2013, will gradually replace those that are damaged, or will be issued when demand increases.
Shoppers can still use current circulating £5, £10, £20 and £50 notes carrying the portrait of the late Queen.
Bank of England governor Andrew Bailey said:
"This is a historic moment, as it’s the first time we’ve changed the sovereign on our notes.
"We know that cash is important for many people, and we are committed to providing banknotes for as long as the public demand them."
Stocks in Asia fell overnight despite a softening US labour market shoring up bets of a Federal Reserve interest rate cut in September.
The Nikkei (^N225) fell 0.9% on the day in Japan, as the renewed strength in Japanese yen weighed, while the Hang Seng (^HSI) fell 0.2% in Hong Kong. The Shanghai Composite (000001.SS) was 0.8% down by the end of the session.
It followed a plunge on Tuesday as voting results showed a slimmer-than-expected victory margin for prime minister Narendra Modi in India.
Across the pond, worries about a cooling US economy, managed to keep a lid on risk appetite.
Stocks rebounded from an early morning slump to close higher as new data showed that job vacancies slid in April to their lowest level since 2021.
The S&P 500 (^GSPC) rose 7.94 points or 0.15% to 5,291.34 while the Dow Jones (^DJI) gained 0.4%to 38,711.29 and the tech-heavy Nasdaq Composite (^IXIC) added 0.2% to close at 16,857.05.
In the bond market, the yield on the 10-year Treasury slid to 4.33% from 4.39% late on Monday and 4.50% late on Friday.
LaToya Harding
Coming up
Good morning, and welcome to our markets live blog. As usual will be keeping you updated with what's moving markets and happening across the global economy.
Here's a quick look at what's on the agenda for today:
7am: Trading updates: Workspace, B&M, Paragon Group
8.15am: Spain HCOB Services and Composite PMIs for May
8.45am: Italy PMIs for May
8.50am: France PMIs for May
8.55am: Germany PMIs for May
9am: Eurozone PMIs for May
9.30am: UK S&P Global PMIs for May
1.15pm: US ADP Employment for May
2.45pm: Bank of Canada interest rate decision
3pm: US ISM Services PMI for May
Watch: How does inflation affect interest rates?
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Fisker an electric-vehicle start-up that attempted to follow in Tesla footsteps, filed for bankruptcy. It becomes the latest battery-powered car start-up to seek protection from creditors, following Lordstown Motors and Arrival as the electric-vehicle stock bubble is bursting. Founder Henrik Fisker successfully raised more than $1 billion from investors, but was unable to steer a path to profitability for the company.
Tesla shareholders on Thursday confirmed they want Elon Musk to get a massive record pay package for running Tesla for the last six years. The question now is, how much will he get going forward?
The IRS plans to end a major tax loophole for wealthy taxpayers that could raise more than $50 billion in revenue over the next decade, the U.S. Treasury Department says. The proposed rule and guidance announced Monday includes plans to essentially stop “partnership basis shifting" — a process by which a business or person can move assets among a series of related parties to avoid paying taxes. Biden administration officials said after evaluating the practice that there are no economic grounds for these transactions, with Deputy Treasury Secretary Wally Adeyemo calling it “really just a shell game.”
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