Today’s top stories
The UK has paid the highest borrowing cost on two-year debt this century at an auction of £4bn of gilts, as the recent surge in bond yields feeds through to the government’s finances. The average five-year fixed UK mortgage topped 6 per cent for the first since last November, just as banks prepare for a meeting tomorrow with the financial watchdog about their failure to help struggling consumers.
Ukraine’s president Volodymyr Zelenskyy warned that Russia might be preparing to blow up part of the Zaporizhzhia nuclear power plant, the biggest such facility in Europe. Chinese president Xi Jinping warned Vladimir Putin against using nuclear weapons in Ukraine, officials say.
The UK’s Financial Conduct Authority laid out the scale of its investigation into troubled hedge fund Odey Asset Management and its founder Crispin Odey.
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Good evening.
There was more encouraging news today for eurozone policymakers battling to restrain inflation, even as new survey data highlighted pressures on the bloc’s services sector.
Growth in producer prices, which tend to foreshadow patterns in consumer inflation, turned negative in May for the first time since 2020. The bigger than expected drop of 1.5 per cent, driven by a 13.3 per cent fall in energy prices, will be welcomed by the European Central Bank as a sign that its programme of increasing interest rates is bearing fruit. It follows last week’s news of eurozone CPI falling more than expected to 5.5 per cent in June.
Consumer expectations, which help shape wage and price decisions, are also moving in the right direction. New ECB survey data today showed median expectations for inflation for the next year falling to 3.9 per cent — the lowest since the start of Russia’s war in Ukraine. Andrzej Szczepaniak, an economist at Nomura, described the news as “exactly what the ECB will have been looking for”.
There is still a way to go. CPI is still well above the ECB’s 2 per cent target and core consumer prices remain elevated. High interest rates are also hurting the housing market: separate official data today showed eurozone house prices falling for the second quarter in a row — the first two consecutive contractions in almost a decade.
A cooling of price pressures in the eurozone was also highlighted in new PMI survey data for the services sector in June. Input costs remained high but fell to a 25-month low, with businesses moderating price rises in response. The sector is still fragile, with growth slowing for a second month, although job creation remained solid. The slowdown in momentum was most noticeable in France, hit by pension reform protests and strikes, alongside tougher financing conditions and weaker demand.
The highlight of today’s batch of PMI readings however was China, where slower than expected services activity reinforced concerns around the strength of the country’s recovery, dragging down stocks in Asia and Europe.
In the UK, momentum was at its weakest in three months as growth in new orders slowed, although job creation was robust. Input cost inflation eased to its lowest level since May 2021, while survey respondents noted that business and consumer spending remained resilient.
Need to know: UK and Europe economy
Many UK home buyers may be suffering from higher interest rates, but wealthier cash customers are snapping up London’s high-end properties. Equity buyers bought 71 per cent of homes in prime central London locations between January and May this year, compared with 60 per cent in the same period of 2022.
The rise in online shopping since the pandemic has led to increasing demands for warehouse space — and triggered a wave of protests in the UK against development projects.
The EU wants the textile industry to pay for the processing of discarded clothing and footwear to cut the waste endemic in fast fashion, with millions of tonnes of clothes being thrown away as trends move on.
Need to know: Global economy
At 2pm ET/7pm BST today The Federal Reserve publishes the minutes of its last policy meeting when it paused its programme of interest rate rises. FT.com will have the details.
Pan Gongsheng, the new People’s Bank of China chief, has a daunting in-tray including calculating how much stimulus is needed to revive the economy while navigating regulatory changes.
India’s ambitions to serve as a strong alternative to manufacturing in China have led to clashes with trade unions and opposition parties over relaxing labour laws.
Why did consumer price inflation get so high? Will it be a lasting change? What should the policy response be? Chief economics commentator Martin Wolf attempts an answer, while economics editor Chris Giles explains why raising interest rates doesn’t seem to be the solution it once was.
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Need to know: business
The Bank of England is considering forcing more international banks to create subsidiaries in the UK rather than branches, to enable local regulators to seize control in the case of collapse rather than leaving their fate to their parents’ supervisors.
Trade officials in Taiwan, South Korea and Japan are assessing the fallout from China’s curbs on exports of key metals used in chipmaking. India said it was on track to producer its first chips by the end of next year.
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Facebook suffered a further setback in how it uses data for online ads after a significant EU ruling on the use of personal information. Facebook parent Meta is launching a rival to Twitter called Threads.
Like other passenger transport companies, train operator Eurostar incurred significant losses during the pandemic. Can a new chief executive and a focus on core routes get it back on track?
Toyota said it could halve the size, cost and weight of batteries for its electric vehicles following a breakthrough in its solid-state battery technology. Shares in Tesla and start-up EV maker Rivian surged after reporting strong production and delivery numbers. They also have a new rival: Vietnam’s VinFast.
Here’s one way of cutting your environmental footprint when travelling: rent clothes instead of taking them with you. Japan Airlines is beginning a year-long experiment whereby passengers can hire outfits in advance and have them delivered to their destination and collected at the end of the visit to be washed and recycled.
The World of Work
What can workplaces do about the “epidemic of loneliness” that seems to have hit men more than women? Listen to the Working It podcast with guest Max Dickins, author of the memoir Billy No-Mates: How I Realised Men Have a Friendship Problem.
Some good news
An international team of scientists has discovered a new octopus nursery — just the third to be found — 2,800m below the surface of the Pacific Ocean off Costa Rica.
Source: Economy - ft.com
