Household energy bills are expected to fall by an average £500 from July in a sign that Vladimir Putin’s attempt to “weaponise” Russia’s gas supplies has failed.
A typical household’s energy bill will drop to the annual equivalent of £2,053 between July and September, according to a closely-watched forecast by Cornwall Insight. The forecast is based on a predicted change to the energy price cap.
It will mark the first time energy bills have fallen in almost three years, as European gas prices continue to tumble from the highs reached last year following Putin’s attack on Ukraine.
Regulator Ofgem set the price cap at £3,280 for March to June, down from a high of £4,279 in the previous three months.
However, household bills have been capped at about £2,500 per year under the Government’s energy price guarantee, which has been in place since October.
The Government has been paying energy companies the difference between the regulated price cap and its energy price guarantee.
July will be both the first time that the price cap has dipped below the guarantee’s level and the first time consumer bills have fallen in two years and nine months.
Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “As many people continue to suffer from the cost-of-living crisis, this will hopefully bring some cautious optimism that the era of exceptionally high energy bills is behind us.”
However, bills remain far higher than pre-crisis levels. In October 2020, the price cap stood at just £1,042 a year.
The boost to households comes despite Russia’s concerted campaign to pressure Europe into abandoning support for Ukraine by choking off gas supplies and forcing up prices.
At its peak, the benchmark European gas price shot up to €339 per megawatt hour last August when the closure of the Nord Stream 1 pipeline triggered concerns about continental supplies.
However, the European benchmark stood at €30 per megawatt hour on Friday.
Market prices have fallen following efforts across the EU to reduce energy usage, boost gas storage levels and import more liquified natural gas (LNG) from abroad. A relatively mild winter has also helped lower prices, given weaker demand.
Dr Lowrey said bills would “stay relatively stable” over the next nine months.
However, household energy costs are not expected to return to their pre-2020 levels – of about £1,000 less – until the end of the decade at the earliest.
Dr Lowrey added: “Those hoping to see a return to the kinds of bills seen at the start of the decade will be disappointed.
“Regrettably, it looks as if these prices may become the new normal.”
Cornwall Insight predicted the price cap would drop further to £1,976 in the final three months of 2023 before rising to £2,045 in the first quarter of 2024.
Investec has made similar predictions, forecasting that July’s price cap will land at around £2,044 per year.
Ofgem will confirm the next price cap figure on 25 May, before it comes into force from July 1.
The cap is reviewed quarterly and takes effect from April, July, October and January. The energy price guarantee was put in place to protect households amid fears bills could hit £4,000 by January.
The prices reflect the average bill for British households. The cap is actually calculated on the maximum price per kilowatt hour for customers on a standard or default tariff.
That’s all from us! We’ll be back next week with the latest.
As discussions over the US debt ceiling crisis grind to a halt, I’ll leave you this economist’s thoughts:
I’m optimistic the debt limit will be raised.
But thinking more, if talks fail, the 14th Amendment & platinum coin are not workable break glass options.
Both bad economic/financial risks (possibly even more than prioritization) & would likely be blocked by the Supreme Court.
— Jason Furman (@jasonfurman) May 19, 2023
I’m not a lawyer but I’ve talked to a lot of them over the years. There is a good legal argument for the 14th Amendment and maybe even for the coin.
But the question is not how Justice Tribe would rule, it is how this court would rule. I have little faith in them.
— Jason Furman (@jasonfurman) May 19, 2023
Shell faces investor rebellion over plans to scale back net zero ambitions
Shell is facing an investor rebellion over claims the energy giant is scaling back plans to meet its net zero targets.
Banking correspondent Simon Foy has the story:
The Universities Superannuation Scheme (USS), Britain’s largest private pension fund, said it will vote against the re-election of Sir Andrew Mackenzie as chairman amid concerns the oil company is not doing enough to reduce its carbon footprint.
A spokesman for USS said: “We will vote against the re-election of the chair of the board and the chair of the safety, environment and sustainability committee at Shell due to concerns that the company’s plans to decarbonise fall short of our expectations.
“We no longer have confidence in Shell’s overall progress to decarbonise, which seems to fall short of limiting global warming to 1.5C in a Paris-aligned manner.”
The pension fund holds less than 0.1pc of Shell’s shares, according to Bloomberg data.
It comes amid claims that the oil and gas producer has backtracked on its net zero commitments…
Meanwhile, ClientEarth has been granted a hearing to request that the High Court reconsider its decision to reject the environmental organisation’s lawsuit against Shell’s board of directors for failing to prepare for climate change.
“We can’t be spending more money next year,” says House speaker Kevin McCarthy
House speaker Kevin McCarthy said he has not seen “any movement” from the White House in negotiations over the US debt ceiling.
Speaking in Washington, he said: “Yesterday I really felt we were at the location where we could see the path. We can’t be spending more money next year. We have to spend less than the year before,”
FTSE 100 closes in the green
The FTSE 100 ended the week in the green, after a survey showed domestic consumer confidence has surged as households take a more positive view of the economy and their finances.
The blue-chip index closed 0.19pc higher at 7,756.87, while the mid-cap FTSE 250 ended 0.05pc lower at 19,289.10.
London’s equity markets were also bouyed by reports of “steady progress” in US debt ceiling talks and closed just before reports that the Republican’s lead negotiator said discussions have been “paused”.
US stocks fell sharply as reports emerged that Mr McCarthy had left a closed-door meeting with White House representatives shortly after arriving on Friday morning.
The S&P 500 and Dow Jones erased gains made earlier in the day, while yields on US short-term debt also spiked.
Economics editor Szu Ping Chan has more…
Debt ceiling deal is ‘still possible’, says White House after Republican walkout
The White House still believes a deal can be reached on raising the government’s borrowing limit, despite Republican debt-ceiling negotiators abruptly leaving a closed-door meeting soon after it began.
A White House spokesman said: “If both sides negotiate in good faith and reocgnise they won’t get everything they want, a deal is still possible.”
The latest impasse comes after a group of Democrat senators urged Joe Biden to invoke a constitutional backstop to avoid a debt default if negotiations with Republicans fail.
Bernie Sanders said that President Biden should prepare to exercise his authority under the 14th Amendment of the Constitution, which says that the validity of the US’s national debt shall not be questioned.
He said it would allow the US to pay its debt on time, prevent an economic crisis and avoid cuts to vulnerable people.
Republicans have made it clear they will hold the world economy hostage unless President Biden gives in to their demands. Instead, he should prepare to use the 14th amendment to ensure we pay our debts and protect working families who are already struggling. pic.twitter.com/ujpOdy2fJm
— Bernie Sanders (@SenSanders) May 19, 2023
Republicans walk out of White House debt ceiling meeting
Republican debt-ceiling negotiators have walked out of a closed-door meeting with White House representatives shortly after it began.
A top negotiator for House Speaker Kevin McCarthy said it’s time to “press pause” on talks as discussions came to an abrupt standstill at the Capitol.
It marked the third day of closed doors negotiations at the Capitol in hopes of reaching an agreement this weekend.
Republican Garret Graves, who is leading the talks, emerged from the meeting and said gaps remained between House Republicans and the Democratic administration.
He said: “It’s time to press pause because it’s just not productive.”
The Republican negotiator added: “Unless they are willing to have reasonable conversations about how you can actually move forward and do the right thing, we’re not going to sit here and talk to ourselves.”
Graves said he did not know if the negotiators would meet again Friday or over the weekend.
President Joe Biden’s administration faces defaulting on the national debt unless the government’s borrowing limit is increased.
According to the Treasury Department, the administration will run out of cash to pay its bills by June 1 unless the ceiling is raised.
Republicans want to extract steep spending cuts that Biden has so far refused to accept. Any deal would need support of both Republicans and Democrats to find approval in the divided Congress and be passed into law.
Banking crisis takes pressure off Federal Reserve to hike rates
Federal Reserve chairman Jerome Powell said that the after effects of the recent US banking crisis has alleviated pressure on the central bank to increase rates.
Tighter credit conditions mean that “our policy rate may not need to rise as much as it would have otherwise to achieve our goals,” Mr Powell said at a central bank conference in Washington.
However, he added: “We haven’t made any decisions about the extent to which additional policy firming will be appropriate.”
The Fed Chair also said the central bank faces uncertainty about the “lagged effects” of recent rate rises and tighter lending conditions following troubles in the banking sector.
WhatsApp faces first Russian fine over ‘banned content’
WhatsApp faces a maximum fine of 4 million roubles (£40,000) after Russia accused the messaging platform of failing to delete banned content, state-owned news agency RIA has reported.
The RIA report, which cites a Moscow court, does not specify what information WhatsApp had allegedly failed to delete. It said the administrative case was filed by communications regulator Roskomnadzor.
It comes after Russia banned WhatsApp’s parent company Meta Platforms last year, adding both Facebook and Instagram to its list of terrorist and extremist organisations
However, WhatsApp had not previously been threatened with legal proceedings for failing to remove prohibited information.
Google, Wikipedia and Discord are among the technology companies which have been fined under military censorship laws introdcued following Russia’s invasion in Ukraine.
That’s all from me this week. Adam Mawardi will keep you informed as you head towards the weekend.
As stock markets surge, I leave you with this little tale from a financial adviser:
With $NVDA at a price-to-revenue of 28 it is a good time to remember Sun Microsystems letter to shareholders after the dot-com bust. Sun had P/R of 10. pic.twitter.com/Yf4exhLGaH
— Kevin Malone (@Malone_Wealth) May 18, 2023
European stocks hit 15-month high amid US debt deal hopes
European stocks have rallied to a 15-month high following fresh gains on Wall Street as optimism kicked in from progress in US debt-celling negotiations.
The Stoxx Europe 600 Index was up 1pc to its highest level since February last year, with financial services shares leading the gains.
The FTSE 100 has risen 0.6pc in London while a 1pc advance in the DAX Index has boosted the German benchmark index to an all-time high.
In New York, the S&P 500 has climbed above the closely watched 4,200 level, while heading toward its best week since March. The Dow and the Nasdaq are each up 0.2pc.
President Joe Biden today urged his negotiators to keep pushing for a resolution to the debt impasse after House Speaker Kevin McCarthy indicated that both sides may reach agreement as soon as this weekend to avoid a catastrophic US default.
Víctor Álvarez, head of equities at Spanish private banking firm Tressis, said: “An agreement in the US deal is widely expected for this weekend, although we will have to see which conditions are agreed on and what the impact for the economy will be.”
Morgan Stanley boss to step down within a year
Morgan Stanley chief executive James Gorman has told shareholders that the investment bank will likely appoint its next boss within a year.
Mr Gorman, 64, said the bank’s board has identified three strong candidates to succeed him and that he will become executive chairman once a new chief executive is chosen.
Morgan Stanley co-presidents Ted Pick and Andy Saperstein, and head of investment management Dan Simkowitz, are widely seen as contenders for the top job.
Mr Gorman joked: “An issue of paramount importance to shareholders, employees and clients is, of course, Succession — and no, I’m not just talking about the TV series.
“And I definitely have no plans to go out like Logan Roy,” he said, referring to the lead character in the HBO television show about the family of a media tycoon.
Mr Gorman has transformed the Wall Street powerhouse into a more diversified firm that is less reliant on its traditional strengths – trading and investment banking – since taking the helm in 2010.
He struck major deals including the acquisitions of money manager Eaton Vance, online broker E*Trade, and stock-plan manager Solium Capital.
Gas prices head for seventh week of declines
European natural gas has risen from its 23-month low near €30 but remains on course for another weekly drop with demand remaining stubbornly low.
Benchmark futures climbed as much as 3.4pc after slumping to the lowest since June 2021 on Thursday in a blow to Vladimir Putin in his energy war.
Prices are still heading for a seventh straight week of declines, the longest streak in six years, driven by stable supply, mild weather and stronger renewable power generation.
The gain today shows that there may be room for a push higher when summer temperatures boost demand for air conditioning.
Last summer, Europe faced abnormal heat and drought that affected hydro power and some nuclear plants, bolstering the use of gas.
Storage levels in Europe are about 65pc full, compared with a 10-year average of 44pc for this time of year.
Dutch front-month gas, Europe’s benchmark, were last up 2.6pc to a little over €30.50 per megawatt-hour.
US adds 71 companies to trade blacklist amid new Russia sanctions
The Biden administration has added 71 companies to a trade blacklist for supporting Russia, as the G7 announced new sanctions on Moscow over its war in Ukraine.
The US Commerce Department’s action targets support for Russia’s military and expands the scope of export controls on Russia and Belarus. The blacklist includes 69 Russian entities, one from Armenia and one from Kyrgyzstan.
The new export controls target oil and gas projects in Russia and Belarus. Other companies include aircraft repair and parts production plants, gunpowder, tractor and automobile factories, shipyards and engineering centres in Russia.
The actions are part of the latest round of sanctions and export controls by the G7 and their allies in response to Russia’s invasion of Ukraine. They are designed to degrade Russia’s industrial base and its ability to sustain the war.
US markets rise after opening bell
Wall Street’s main indexes opened higher amid optimism that a deal to avoid a catastrophic US debt default could be reached over the weekend.
The Dow Jones Industrial Average rose 47.04 points, or 0.1pc, at the open to 33,582.95.
The S&P 500 opened higher by 6.10 points, or 0.2pc, at 4,204.15, while the Nasdaq Composite gained 20.63 points, or 0.2pc, to 12,709.46 at the opening bell.
Allan allegations ‘risk becoming a distraction to Tesco’
Byron Grote, who has stepped in as interim chair following the announcement of John Allan’s departure, said:
John has made a valuable contribution to Tesco during his eight years as chair.
He has successfully led the board through the turnaround and Covid whilst helping to rebuild the business.
While we have received no complaints about John’s conduct and made no findings of wrongdoing, these allegations risk becoming a distraction to Tesco.
On behalf of the board, I thank him for his substantial contribution to the business.
We are well advanced in our search for a new chair and will make an announcement in due course.
Mr Allan will step down at Tesco’s AGM on June 16 and the supermarket has begun looking for his successor.
Tesco chairman quits amid inappropriate behaviour allegations
The chairman of Tesco will step down from his role amid accusations from four separate women over what they claimed were unprofessional and inappropriate actions.
John Allan was appointed by Britain’s largest supermarket in 2015 but leaves after claims in the Guardian that he touched the bottom of two women and made inappropriate remarks to two other women on separate occasions between 2019 and 2022.
Mr Allan denies three of the claims and has apologised for a fourth.
One of the allegations related to the Tesco AGM in 2022. In response, Tesco immediately instigated an extensive review of the allegation.
Non-executive director Byron Grote said: “While we have received no complaints about John’s conduct and made no findings of wrongdoing, these allegations risk becoming a distraction to Tesco.”
German stock market hits new record amid hopes US will avoid debt default
Germany’s stock market has hit a new record high amid growing optimism that the US will be able to agree a deal that avoids a “catastrophic” default on its debts.
The blue-chip DAX index has climbed 0.8pc today to set a new record high of 16,293.68 points today.
The FTSE 100 in London and CAC in Paris were also higher, after a largely buoyant Asian session.
In a call early today from Japan, President Joe Biden told his negotiating team that he is confident Congress will act in time to avoid a default, according to a White House official.
House Speaker Kevin McCarthy and Senate Majority Leader Chuck Schumer are making plans for votes in the coming days on a bipartisan deal.
Nanoco hits out at shareholder’s ‘damaging and disruptive’ outburst
A British display technology manufacturer has hit back at “damaging and disruptive” claims by an activist shareholder.
Tariq Hamoodi, who is one of the largest shareholders in Nanoco, said he has “significant concerns regarding corporate governance” at the company.
He said he believes that “significant value” can be realised both from the company’s assets and “by augmenting the company’s own licensing business with capabilities to monetise intellectual property for third parties”.
He has called for an extraordinary general meeting to replace its board, saying executives have “failed to adequately engage with many of his concerns” raised in a previous letter sent to fellow shareholders in March.
Christopher Richards, Nanoco’s non-executive chairman, said the Cheshire-based company continues to “emphatically reject Mr Hamoodi’s speculative concerns”. He said:
The board welcomes scrutiny, but his misinterpretation of the past, and consciously selective and factually inaccurate disclosure, including the publication of heavily edited videos, presents a number of events out of context.
The proposed board changes are not in the best interests of the company or its shareholders, and would give undue influence to a disgruntled minority shareholder.
He added: “Mr Hamoodi’s proposals would be damaging and disruptive to Nanoco’s future prospects and, if successful, would result in an exodus of key talent from the business.”
Two in three think AI will take more jobs than it creates
Nearly two in three workers in the UK think the emergence of artificial intelligence (AI) will take away more jobs that it will create, but many fewer are worried about their own prospects, a new study has suggested.
In a poll taken earlier this month before BT said it might lose around 10,000 workers to AI by the end of the decade, 62pc of working Britons said that robotics and AI would take over more jobs than they create.
The YouGov survey of 1,169 people found that 8pc said more jobs will be created than lost, while 14pc said it would be around the same. The survey was carried out between May 5 and May 9.
Yet despite these results, only 22pc of people surveyed said they were worried about the impact of robotics and AI on their future careers.
It comes as businesses, academics and governments are trying to come up with a response to how work might look in the age of AI.
Today Prime Minister Rishi Sunak said the technology could bring great benefits to society, but that it needs “guard rails”.
Oil on target for weekly gain
Oil is heading for its first weekly advance in more than a month amid optimism that the US will reach an agreement to raise its debt ceiling and avert a catastrophic default.
Brent crude, the international benchmark, has risen by 1.3pc toward $77 a barrel, with West Texas Intermediate climbing 1.3pc toward $73 a barrel, bringing this week’s gain to about 3pc.
House Speaker Kevin McCarthy said negotiators may reach an agreement in principle as soon as this weekend.
Asian refiners are snapping up US oil cargoes again, and forecasters continue to predict global crude markets will tighten this summer.
Crude is still down 10pc this year as China’s lacklustre economic recovery and monetary tightening by the Federal Reserve weigh on the outlook.
Sir Richard Branson loses £1.8bn in a year as space flight dreams go sour
Sir Richard Branson’s wealth has dropped by £1.8bn in a year as the tycoon’s space flight dreams came crashing back down to earth.
James Warrington has the details:
The British billionaire saw the value of his fortune tumble by more than 40pc over the last year, according to the Sunday Times rich list.
The decline was largely due to large losses incurred by his space tourism and satellite ventures, which have failed to get off the ground.
Virgin Orbit last month collapsed into bankruptcy after spending more than $1bn (£800m) trying to establish a commercial space launch business.
The company’s last mission ended in failure when a rocket launched from a spaceport in Cornwall suffered a technical issue and crashed into the sea.
Read what the list also revealed about Prime Minister Rishi Sunak’s wealth.
Wall Street poised to inch upward at open
US stock indexes have edged higher in premarket trading amid optimism that a deal to avoid a catastrophic US debt default could be reached over the weekend.
The Dow Jones Industrial Average and S&P 500 are on course to open 0.1pc higher, while the Nasdaq 100 looks flat.
S&P 500 futures hit a 15-week high in early trading, while Nasdaq contracts earlier breached levels not seen in nine months.
The positive momentum carried through for much of the week as investors tracked progress in talks between top US negotiators for an agreement on increasing the $31.4trn debt ceiling.
President Joe Biden and Republican US House Speaker Kevin McCarthy have voiced growing confidence about striking a deal soon, although they could be tripped up by last-minute opposition from the hardline House Freedom Caucus.
Pound poised for second straight weekly fall
The pound is heading for its second straight weekly fall against the dollar, weighed down weakness in the UK economy.
Sterling was up 0.3pc to more than $1.24. It was set for a weekly loss of 0.2pc, however, after falling 1.5pc the previous week.
The euro was up 0.08% against the pound at 86.87 pence.
The dollar has risen around 2.5pc since mid-April as economic data has remained strong, raising the possibility that the Federal Reserve will hike interest rates again next month.
In recent days, concerns about the US debt ceiling standoff has somewhat counter-intuitively boosted the dollar, which is seen as a safe-haven at times of stress.
Meanwhile, data this week showing unemployment ticked up to 3.9pc in the three months to March put pressure on sterling.
North Sea oil workers vote to strike
North Sea oil workers will go on strike next month after rejecting new pay offers.
Around 800 contractors at Bilfinger, which does engineering and maintenance work, will walk out from June 1 to June 3, and then from June 8 to June 10, the Unite union said.
A new pay offer was rejected by about 600 workers on the offshore assets of operators Ithaca, CNRI and TAQA.
These are separate from the 1,200 workers who took part in a previous round of 48-hour strike action from May 10 to 12.
The oil and gas operators hit by the industrial action will include BP, CNRI, Ithaca, Repsol and TAQA.
UK must create ‘technology that the others want,’ says chip boss
A chip company boss has said Rishi Sunak’s semiconductor strategy, published today, can be a success if Britain successfully delivers a part of the industry’s “value chain”.
Mark Lippett, chief executive of Bristol-based fabless chip company XMOS, said:
Securing supply from ‘friendly and secure nations’ is the order of the day, and manufacturing is not the only way to achieve it.
The UK will not be able to develop a full supply chain to fulfil its semiconductor needs – it’s beyond the scope of even the US or Europe.
The question is, how does the UK secure ‘a seat at the table’ when global (or a subset of global) allocation is being determined.
The answer is, by having technology that the others want.
That key technology can be delivered through any part of the semiconductor value chain – from intellectual property (like ARM, Imagination or Alphawave), through fabless chip suppliers (like XMOS), to manufacturers (like IQE and Pragmatic).
Watch here the Government’s stylish video for the semiconductor strategy launch.
Semiconductors power our lives ⚡
From phones to ventilators, these microchips have revolutionised the way we live.
We’re launching a National Semiconductor Strategy to boost the UK’s global strengths.
Here’s @scullyp chipping in to tell us more👇https://t.co/Wlv0MpK6Ww pic.twitter.com/fIVTm1poWK
— Department for Science, Innovation and Technology (@SciTechgovuk) May 19, 2023
Aston Martin boosted by bank upgrade
Aston Martin Lagonda shares are among the top gainers on the FTSE 250 after a bank reversed its three-year recommendation to sell stock in the company.
The British luxury carmaker has risen 2.6pc today after Mediobanca double upgraded the stock to outperform from underperform today.
The change in tone comes a day after news that Geely Automobile Holdings has added £234m to its investment in the UK company.
The broker had held its bearish view on the stock since a downgrade in February 2020.
Aston Martin rallied as much as 25pc on Thursday after the news that Geely would double its stake, becoming the third-biggest shareholder.
Its stock has been pressured by concerns around its balance sheet and weak sales since a high-profile initial public offering in 2018.
Apple ‘bans staff from using ChatGPT for work’
The power of artificial intelligence is coming to smartphones as OpenAI launches an iPhone app of its ChatGPT generative AI tool for the first time.
However, in an ironic twist, Apple is restricting internal use of ChatGPT and other AI tools just as the new app comes out.
The company is concerned that the software could be used to release confidential data, according to the Wall Street Journal.
The software, which is free, is now available in the US for iOS devices through Apple’s App Store.
OpenAI has promised a service for Android devices in the future. It is not known when the ChatGPT app will be available in the UK.
Twitter no longer ‘high risk’ after Musk replaced, says leading advertising agency
Twitter is no longer “high risk” for brands after Elon Musk hired a seasoned marketing executive as the company’s new boss, a leading advertising agency said.
Our media reporter James Warrington has the details:
GroupM, which is part of the London-listed ad group WPP, previously warned clients about advertising on the social media site in the wake of Mr Musk’s $44bn (£35bn) takeover last year.
But the agency has rowed back following the appointment of Linda Yaccarino, former head of advertising at US media giant NBCUniversal, as the platform’s chief executive.
Ms Yaccarino’s appointment has been widely welcomed by advertisers after months of turmoil sparked by the Tesla billionaire’s troubled reign at Twitter.
Read the extent to which brands have cut back advertising.
German DAX heads towards new record high
The German DAX has pushed towards record-high levels, lifted by signs of progress in US debt ceiling negotiations.
The index has risen 0.7pc after closing at its strongest level of 2023 on Thursday.
The index is less than 30 points below its all-time high of 16,290.19, hit in November 2021.
Wall Street’s S&P 500 and Nasdaq notched their strongest close in over eight months on Thursday, driven by mounting optimism that a US debt ceiling deal could be reached within days.
Semiconductor funding at the ‘low end of what’s going to be meaningful’
Yet more lukewarm reaction is coming in to Rishi Sunak’s much touted semiconductor strategy providing £1bn of funding over the next 10 years.
The Prime Minister said the funding would help “build our competitive edge on the global stage”.
Scott White, founder of Cambridge-based Pragmatic Semiconductor, told senior technology reporter Gareth Corfield that he wants more clarity from the Government. He asked:
How does that tangibly translate into things that will be of benefit to individual companies or to the UK semiconductor industry in general?
In one sense, it’s good that it’s a long term strategy, rather than just a sort of short term fix.
But as it does dilute the amount down to only £100m per year, which is definitely at the low end of what’s going to be meaningful.
Global markets at one-month high as US debt default fears ease
Global shares have risen to a one-month high as markets reflect increased hopes for a deal over the US debt ceiling that could avoid a calamitous default.
The FTSE 100 has risen 0.4pc and Europe’s STOXX 600 traded up 0.4pc, while the S&P 500 is on track to rise 0.2pc at the opening bell in the US, following a 0.9pc gain for the benchmark Wall Street index overnight.
MSCI’s broadest index of global shares was up 0.1pc, inching up to its strongest level since April 19 and on course for its best weekly gain for more than a month.
The moves came after Democratic negotiators told Joe Biden they were making “steady progress” on a deal to lift the US debt ceiling and avoid a default by the world’s largest economy.
The President held a 20-minute call with White House officials about the talks as he attends the G7 Summit in Japan.
The US government may default on some debt as early as June 1 unless Congress votes to lift the debt ceiling beyond $31.4trn (£25.3trn), which has sparked fears of the nation sliding into a recession.
Delayed semiconductor company accounts show £2.4m blow to profits
The most valuable semiconductor business listed on the London Stock Exchange has revealed profits were £2.4m lower than previous estimates, weeks after it was forced to delay issuing its final accounts.
Alphawave’s audited accounts, finally released this morning, showed adjusted profits after tax were 27pc in its audited results than its pre-audit estimates, coming in at £6.7m.
The chief financial officer of the most valuable semiconductor business listed on the London Stock Exchange has stepped down with immediate effect weeks after the company was forced to suspend its shares last month.
Daniel Aharoni will also leave his position as an executive director at Alphawave after auditors last month delayed issuing its final accounts.
Shares in the Anglo-Canadian microchip designer plunged 20pc last month after it admitted KPMG would not be able to provide a final opinion on its results on time.
Gas prices edge up from lowest level since 2021
European gas prices have edged up from their 23-month low set on Thursday.
Dutch front-month futures have climbed 1.7pc this morning to back over €30 per megawatt hour, having fallen below the mark earlier in the day.
UK semiconductor plan ‘disappointing’
Our senior technology reporter Gareth Corfield has been hearing more criticism for the Government’s £1bn semiconductor strategy.
Amelia Armour, a partner at venture fund Amadeus Capital, which has invested in British companies including Graphcore and AI startup Improbable, told him:
The level of investment announced for the next two-year period is disappointing, especially considering the UK needs to try to keep pace with the investment levels announced as part of the EU and US Chip Acts.
The strategy also comes across as lacking compared to the £2.5bn which has been announced for quantum technologies.
Andrew Thompson, a lawyer at London-based firm EIP who specialises in semiconductors, said details so far “do not tackle how the strategy will work in practice”.
FTSE 100 rises amid strong consumer confidence
The FTSE 100 has risen as data showed British consumer confidence hit a 15-month high, adding to the optimism that a deal over the US debt ceiling was imminent.
The blue-chip index has climbed 0.2pc, turning positive for the week.
Industrial metals miners and energy firms added 0.6pc and 1.3pc, respectively, as commodity prices were boosted by signs that a deal on raising the US debt ceiling could be done as early as Sunday.
Adding to the upbeat mood, a survey showed domestic consumer confidence rose to its highest in 15 months in May as households took a more positive view of the economy and their finances.
Smiths Group rose 1pc after the industrial group lifted its annual revenue growth forecast for the third time in five months, as demand for its products improved on decarbonisation trends and from airport upgrades.
The FTSE 250 midcap index is flat after earlier adding 0.1pc.
Magners maker’s boss steps down amid botched software upgrade
The boss of beer and cider maker C&C Group has stepped down as the company revealed that the botched implementation of new software at one of its subsidiaries was going to cost it millions of pounds.
The company, which makes Bulmers, Magners and Tennent’s among other brands, said that it had “encountered significant challenges” implementing the new system at Matthew Clark and Bibendum, a British subsidiary.
It said that the implementation had taken longer and been much more challenging and disruptive than originally thought, affecting service levels and profitability at the business.
C&C said that it expects a one-off €25m (£22m) hit due to the disruption during this financial year.
Apart from the Matthew Clark business, C&C is performing in line with expectations, the company said.
The firm also announced that chief executive David Forde will step down and be replaced by finance boss Patrick McMahon with immediate effect.
Chairman Ralph Findlay said: “David has informed the board that he believes that now is the right time for him to step down as CEO and to allow the business to go forward under new leadership.”
TikTok influencers sue Montana over ban
Five TikTok influencers in Montana who create content posted on the short-video app have filed a lawsuit in federal court seeking to block the state’s new ban on the Chinese-owned platform.
The diverse group argue the new law violates free-speech rights and will disrupt their livelihoods.
Montana’s Republican governor, Greg Gianforte, signed a measure on Wednesday that will prohibit the app’s download by the general public beginning next year.
The suit was brought on behalf of Montanans who use TikTok for entertainment but also places a particular emphasis on users who earn income from the platform, and are making “life decisions” based on it.
One of them, Samantha Alario, a mother of two living in Missoula, owns a small business that designs and sells sustainable swimwear, according to the complaint filed in federal court in Missoula.
Using TikTok to promote her company and communicate with customers has “taken her business to new heights,” according to the suit.
UK markets rise at the open
Markets have opened higher, extending rallies on Wall Street fuelled by optimism over talks to avert a catastrophic US debt default.
The FTSE 100 has risen 0.5pc at the open to 7,761.47 while the midcap FTSE 250 has risen 0.2pc to 19,328.96.
Ichan admits error after £7bn loss betting on market crash
Carl Ichan has admitted he was wrong to make a huge bet that markets would crash, a decision that has reportedly cost his firm more than £7bn since 2017.
His Ichan Enterprises business began betting on a market collapse in the aftermath of the 2008 financial crisis, at one point leading to a notional exposure of more than $15bn (£12bn).
The company reported a total of $4.3bn in short losses in 2020 and 2021 as markets rebounded from the pandemic.
The activist investor told the Financial Times:
I’ve always told people there is nobody who can really pick the market on a short-term or an intermediate-term basis.
Maybe I made the mistake of not adhering to my own advice in recent years.
British shoppers shrug off cost-of-living pressure
Consumer confidence in the year ahead is continuing to recover across Britain despite persistent cost-of-living pressures, a long-running survey suggests.
GfK’s Consumer Confidence Index rose by three points in May to minus 27, the fourth monthly increase in a row from January’s minus 45.
Confidence in personal finances over the coming 12 months saw a “robust” five-point jump to minus 8 – 17 points higher than this time last year.
Expectations for the general economic situation over the next year increased by four points, remaining at a firmly negative minus 30 but 26 points higher than last May.
The major purchase index, an indicator of confidence in buying big ticket items, also rose four points to minus 24, 11 points higher than a year ago.
GfK client strategy director Joe Staton said:
The cost-of-living crisis has been part of our daily financial reality for a long time, with double-digit inflation and record high food prices.
But despite those pressures, May sees an encouraging three-point uptick in consumer confidence.
Disney drops plans for $900m park in Florida amid row with Ron DeSantis
Disney has axed plans to build a $900million (£725million) complex in Florida amid escalating tensions between the entertainment company and state Governor Ron DeSantis.
Susie Coen has the latest:
The company’s head of parks told staff on Thursday that the move to scrap the office complex, which would have seen the company relocate 2,000 jobs to Florida, was because of “changing business conditions”.
In an internal email seen by Reuters, Josh D’Amaro cited “leadership changes” as the reason for shelving the 2021 plan to shift thousands of employees, including the Imagineer team which designs theme park rides.
Disney has been at loggerheads with Mr DeSantis – who is expected to soon announce his bid for the 2024 Republican nomination – since March 2022 when its then chief executive, Bob Chapek, criticised legislation that would limit the discussion of gender identity and sexuality in elementary schools.
Mr DeSantis moved to strip Disney of its long-standing self-governing power over its 25,000-acre resort Walt Disney World. The governor argued that “woke Disney” should not receive special treatment in the state.
Read how Disney justified the move.
Nationwide profits hit record
Nationwide Building Society has reported record profits but cautioned over reduced activity in the mortgage market and subdued house prices over the rest of the year.
The mutual lender saw its underlying pre-tax profit increase to £2.2bn in the year to April, from £1.6bn this time last year.
The “strong financial performance” has allowed it to launch the Nationwide Fairer Share Payment where eligible members will receive a £100 payment into their current accounts in June.
But chief executive Debbie Crosbie said the economic outlook remains uncertain and households could struggle to adjust to higher interest payments.
UK’s £1bn chip plan ‘insignificant’, warn bosses
The UK’s plan to invest £1bn into its semiconductor industry over the next decade has been branded “quite frankly flaccid” by industry bosses.
Rishi Sunak, who launched his long-awaited semiconductor strategy at the G7 Summit in Japan, said boosting the sector “will grow our economy, create new jobs and [help the UK] stay at the forefront of new technological breakthroughs”.
However, the plan was described as “insignificant” compared to support announced by the US and the EU in recent months of $50bn (£40bn) and €43bn (£37bn) respectively to spur manufacturing.
The Government said the investment will expand the domestic sector, protect national security and mitigate the risk of supply chain disruptions. However, the silicon chips most critical to day-to-day applications will still come from overseas — particularly from Taiwan, home to the world’s leading supplier of chips.
The UK’s total 10-year funding commitment is less than what the world’s leading chip foundry company Taiwan Semiconductor Manufacturing spends every two weeks.
Dr Simon Thomas, chief executive of British graphene semiconductor start-up Paragraf said the announcement was “quite frankly flaccid”.
He said: “It is a long way from addressing the needs of UK chipmakers.”
Gartner consultant Gaurav Gupta said the £1bn was “insignificant” if the goal was to create a British company able to compete with the likes of Nvidia, Qualcomm, Broadcom and AMD.
Americo Lemos, chief executive of IQE, Britain’s only listed chip manufacturer, said the UK risked falling behind the US’ £45bn chip industry subsidies and needs to act now.
He said: “When you look at it, the EU is funding specific programs. And the US is funding the industry. So we believe the CHIPS Act resources will start to be allocated this year.
“So that’s why I’m emphasizing for the UK to also get the funds released, including manufacturing during the course of this year. It is very important that we don’t lose momentum.”
The UK is committing £1bn to bolstering its domestic semiconductor industry over the next decade, in a plan which industry leaders have dubbed “insignificant” compared to other nations.
The investment is a fraction of what other governments have pledged to the sector after pandemic-era shortages upended global supply chains and underscored the world’s reliance on Asia for chips used in everything from mobile phones to laptops and other home electronics.
The US and EU have in recent months pledged $50bn (£40bn) and €43bn (£37bn) respectively to spur manufacturing.
5 things to start your day
1) Bank of England plans to reject Revolut’s bid for banking licence | Regulator tells Treasury it intends to refuse request from UK’s biggest fintech company
2) Jaguar Land Rover owner ‘close to picking Britain for gigafactory’ | Tata’s decision could boost UK carmaking as petrol ban looms
3) Tories accused of levelling down as regions languish behind London | Economic output fell in six of nine English regions following outbreak of Ukraine war
4) We must fight back against end of home working, says Microsoft executive | Warning comes as Lloyds staff protest against plans to end flexible arrangements
5) Asda plans to ‘fire and rehire’ 7,000 workers, claims union | Supermarket consults on pay cuts at stores outside the M25
What happened overnight
Wall Street stocks rose after more companies reported better profits than expected, while yields climbed after a Federal Reserve official cautioned the end to its interest-rate hikes may not arrive as soon as Wall Street hoped.
The S&P 500 gained 39.28 points or 0.94pc at 4,198.05, adding to its rally from the day before as hopes rise further that the US government can avoid a disastrous default on its debt.
The Dow Jones Industrial Average rose 115.14 points or 0.34pc to 33,535.91. The Nasdaq Composite added 188.27 points or 1.51pc at 12,688.84.
The yield on the 10-year Treasury rose to 3.64pc from 3.57pc late Wednesday.
The two-year yield, which moves more on expectations for the Fed, rose to 4.25pc from 4.16pc.
Meanwhile, Asian shares nudged lower on Friday morning, weighed down by China and Hong Kong stocks due to concerns over the stuttering recovery in the world’s second-biggest economy, although Japan’s Nikkei clocked a near 33-year peak.
MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.20pc but was set to eke out a gain of 0.19pc for the week.
China shares fell 0.61pc, while Hong Kong’s Hang Seng index dropped as much as 1.8pc, dragged down by tech stocks after Alibaba Group Holding Ltd reported a lower-than-expected 2pc rise in quarterly revenue.
Data in the week underscored that China’s economy lost momentum at the beginning of the second quarter, stoking worries over the wobbly post-COVID-19 recovery.
Japan’s Nikkei though continued its ascent, rising to its highest since August 1990, during the country’s so-called bubble era.
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