Time to wrap up.

Here are today’s main stories:

Chancellor Jeremy Hunt and work and pensions secretary Mel Stride have been accused of “gaslighting the British public”, after claiming the unemployed have “ample opportunities” to find a job.

Former Federal Reserve chair Ben Bernanke has told MPs that the UK’s inflation shock “was inevitable”, and would have happened even if his recommendations to improve the Bank of England had been implemented.

Back in New York, stocks are at record highs after US inflation dropped in April.

The S&P 500 and the tech-focused Nasdaq both hit record highs in early trade on Wednesday, as the fall in US CPI to 3.4% bolsters hopes of interest rate cuts from the Federal Reserve this year.

The Dow Jones industrial average is up 0.5% at 39,755 points, closing in on the 40,000 mark….

Ronald Temple, chief market strategist at Lazard, says:

“The Fed can breathe a sigh of relief after today’s CPI. This report alone is insufficient to generate a rate cut at the June or July FOMC meeting, but it lays the groundwork for 25 bps of easing at the September meeting on the back of decelerating shelter and services ex-shelter price pressures.”

Britain’s surge in inflation would still have happened even if the Bank of England’s processes had been better, says former Federal Reserve chair Ben Bernanke.

He has been asked by the Treasury committee whether the recent painful rise in inflation could have been avoided, if the recommendations made in his new review of the BoE had been implemented a couple of years ago.

Bernanke suggests not, pointing out to MPs that the inflation surge was due to global shocks, from the impact of pandemic lockdowns to the Ukraine war – which pushed up oil and food prices and caused supply chain disruption.

He explains:

Avoiding inflation entirely would have been essentially impossible without throwing the economy into essentially a depression.

Significant inflation was unavoidable, and every market economy experienced that.

But… Bernanke adds that the MPC might have understood the modelling aspects of the inflation shock better, had his recommendations (which include modernising its software) been implemented.

But either way, “significant inflation was inevitable”, he adds.

Over in parliament, former Federal Reserve chair Ben Bernanke is briefing MPs about his review of the Bank of England.

The Bernanke review, published last month, reported that the BoE’s economic model needed revamping, and that key systems were out of date.

Testifying to the Treasury Committee today, Bernanke says he was concerned about some aspects about the Bank’s modelling and the software it uses; it may be possible to improve the use of its economic forecasts.

But Bernanke says he was also impressed by many elements of how the Bank worked – including the collaboration between its Monetary Policy Committee and its staff on drawing up those forecasts.

The owner of Royal Mail has accepted a £3.5bn bid for the postal company from a Czech billionaire after he ramped up the value of the takeover, creating a political headache for the government.

Last month, Royal Mail’s parent company, International Distributions Services (IDS), rejected a preliminary offer worth 320p a share, or £3.1bn, from Daniel Křetínský, an energy tycoon whose company, EP Group, is its largest shareholder.

However, on Wednesday IDS said it was recommending an improved 370p a share offer to its investors. More here.

Shares in IDS have jumped to a two-year high, after the company announced that Daniel Křetínský has raised his takeover offer to £3.5bn.

They’re up 20% at 325p per share, the highest since May 2022.

That’s still some way short of Křetínský’s offer, which is worth 370p per share in total.

Today’s new offer is a 72.7% premium to IDS’s share price on 16 April, the day before his first offer was revealed.

Keith Williams, chairman of IDS plc, has criticised the government, as he explains why Royal Mail’s parent company is minded to recommend Daniel Křetínský’s new £3.5bn takeover proposal:

“The Board is minded to recommend this offer price, which it considers to be fair and reflects the value of GLS’ current growth plans and the progress being made on change at Royal Mail to adapt the business to a significant fall in the demand for letters and growth in parcels.

“It is however regrettable that despite four years of asking, the Government has not seen fit to engage in reform of the Universal Service and thus improve our financial position and ensure that Royal Mail could provide an economically sustainable service to the British public.

“The Board believes that the proposed contractual undertakings to be offered by EP Group should ensure that IDS continues to deliver the key elements of the Universal Service in the UK and protect the interests of the workforce at both Royal Mail and GLS.”

IDS adds that “There can be no certainty that any offer will be made”…

Czech billionaire Daniel Křetínský has raised its takeover offer for Royal Mail.

Křetínskýs investment vehicle, EP Group, is now offering to pay around £3.5bn for Royal Mail’s parent company International Distributions Services.

That’s an increase on last month’s offer, of £3bn.

Kretinsky’s new offer is worth 370p per IDS share – 360p per share in cash, plus a 2p dividend and an 8p special dividend.

Kretinsky currently owns around 27.6% of IDS’ issued share capital.

IDS’s board say they have indicated to EP Group that it would be minded to recommend the offer to IDS shareholders, should it be formally made.

IDS adds that it has sought “a set of contractual undertakings to protect key public interest factors and recognise Royal Mail’s status as a key part of national infrastructure”, which EP Group has agreed to offer.

The slowdown in US inflation appears to be lifting confidence that British interest rates could be cut soon.

The money markets now indicate that a June cut to UK interest rates is now a 58% chance, up from about 50% last night.

Back in the UK, a clutch of directors are reportedly ready to resign from the board of Thames Water’s owner, as the uncertainty over the debt-laden utility company’s future continues.

A number of board members of Kemble Water Finance, the ultimate parent of Thames Water, are poised to quite in the coming days, Sky News reported.

The directors have looked to be in a difficult position since Thames’s owners pulled the plug on £500m of emergency funding in late March, and indicated that they were unprepared to stump up more funds to invest in Thames’s infrastructure. The company’s investors – a consortium of funds from Canada, Abu Dhabi, Australia, Britain and China – had deemed the company “uninvestible”, arguing that the industry regulator, Ofwat, had been too stringent.

Kemble then defaulted on a debt interest payment last month. Thames could ultimately fall into a special administration, effectively a temporary nationalisation by the government to ensure service is maintained for the company’s 16 million customers.

Ofwat’s draft view of English and Welsh water companies’ five-year business plans, due next month, is seen as a crucial moment in determining the immediate future of Thames Water.

The US dollar is weakening, as April’s inflation report lifts hopes that the US Federal Reserve will cut interest rates this year.

The greenback has dropped to a one-month low against a basket of other major currencies:

This has pushed the pound up by half a cent, to $1.2645, the highest since 10 April.

The euro has climbed to its highest level against the dollar in a month too, at $1.086.

Traders are cheered that US inflation rose by less than expected during April alone. Economists polled by Reuters had forecast the CPI gaining 0.4% on the month – but in the event, it only rose by 0.3%.

Core US inflation also eased last month.

The all items less food and energy index rose by 3.6% over the 12 months to April, today’s inflation report shows, down from 3.8% in the year to March.

On a monthly basis, core inflation slowed to 0.3% in April alone, having risen by 0.4% in the preceeding three months.

The inflation report adds:

Indexes which increased in April include shelter, motor vehicle insurance, medical care, apparel, and personal care. The indexes for used cars and trucks, household furnishings and operations, and new vehicles were among those that decreased over the month.

Newsflash: Inflation across the US has slowed, bringing some relief to American families and perhaps reassuring America’s central bankers that price pressures are easing.

The consumer price index rose by 3.4% in the year to April, down from 3.5% in March.

That’s in line with Wall Street forecasts.

In April alone, prices rose by 0.3%, a slowdown on March when they increased by 0.4%.

Rising costs of housing, and fuel, were both key factors behind inflation last month.

The Bureau of Labor Statistics says:

The index for shelter rose in April, as did the index for gasoline. Combined, these two indexes contributed over seventy percent of the monthly increase in the index for all items.

The energy index rose 1.1 percent over the month. The food index was unchanged in April. The food at home index declined 0.2 percent, while the food away from home index rose 0.3 percent over the month.

Back in the UK, digger maker JCB, owned by the billionaire Bamford family, continued to build and supply equipment for the Russian market months after saying it had stopped exports because of Vladimir Putin’s invasion of Ukraine, the Guardian can reveal.

Russian customs records show that JCB, whose owners are major donors to the Conservative party, continued to make new products available for Russian dealers well after 2 March 2022, when the company publicly stated that it had “voluntarily paused exports” to Russia.

The data raises questions about the accuracy of JCB’s statements on its business in Russia and relationship with its biggest dealer there, Moscow-based Lonmadi, and that company’s former owner, UK-based JVM group.

JCB has repeatedly said that it stopped exporting products to Russia and JVM companies after 2 March 2022 – less than a week after Putin sent troops into Ukraine.

However, customs records collated by a trade data provider show the serial numbers of dozens of vehicles, worth millions of pounds, which appear to have been supplied to companies in Russia after that date.

When the Guardian presented a sample of those records to the Staffordshire-based manufacturer, it admitted that JVM continued to collect diggers from JCB’s factories for months after the voluntary pause, but said that was due to contractual obligations.

JCB also confirmed that the manufacturing of some of the equipment continued after that date.

JCB’s lawyers said: “Any collection of goods by a JVM company after 2 March 2022 was pursuant to contractual obligations already entered into and completed or substantially completed prior to that date.”

The company also denied any inconsistency or inaccuracy in its public statements.

More here:

Tensionis rising in the financial markets as global investors await the latest US inflation report, due in 30 minutes time.

As covered in the introduction, economists are expecting a slight slowdown in the rising cost of living.

The US CPI inflation rate is forecast to slow to 3.4% for April, down from 3.5% in the year to March.

Core inflation, which excludes volatile food and energy costs, is forecast to slow to 3.6%, which would be the lowest level in three years, from 3.8% in March.

Traders are very keen to see signs that price pressures are easing, having driven global stock markets to record highs today (see here) on hopes that a slowdown in inflation will allow interest rates to be cut this year.

Jens Magnusson, chief economist at SEB, says there is cautious optimism for a slight decline in core inflation, but also nervousness in the markets.

Magnusson explains:

For three months in a row, we have had US inflation disappointments. Combined with continued strong growth and an almost overheated labour market, this has led to a dramatic shift in the view of the Fed and the possibility of US interest rate cuts.

At the beginning of the year, market pricing was leaning towards as many as seven interest rate cuts in 2024; now the expectation is a maximum of two. Many experts are asking if today’s figures confirm inflation is stuck at too high levels or will they provide hope, that Q1 was a temporary delay on the road to a permanently lower inflation.

There’s another shake-up at artificial intelligence pioneer OpenAI.

Ilya Sutskever, OpenAI’s co-founder and chief scientist, has left the artificial intelligence start-up, six months after the turmoil that saw CEO Sam Altman fired and rehired amid a staff revolt.

Sutskever has posted that he will now work on “a project that is very personally meaningful to me about which I will share details in due time”.

Sutskever was a crucial part of OpenAi’s growth – the company was valued at $80bn earlier this year, and launched a powerful new chatbot model this week.

Altman has posted that Sutskever’s departure is “very sad” news.

Sutskever will be succeeded by Jakub Pachocki as OpenAI’s new chief scientist; Altman described Pachocki as “also easily one of the greatest minds of our generation”.

Jan Leike, another senior researcher at OpenAI, has also announced his departure from OpenAI, posting “I resigned” on X.

Leike had been the co-lead of OpenAI’s superalignment group, which worked on ensuring that AI systems act in the human interest if/when they surpass human-level intelligence.

The Bank of England has fired a warning shot at UK banks and building societies after an 18-month review of more than 70 lenders found firms were ill-prepared for a severe shock that could put their finances at risk.

A letter sent by the Bank’s Prudential Regulation Authority to CEOs and board members this morning said firms had failed to create severe enough stress tests and as a result, did not have sufficient recovery plans.

The letter warned:

“Our review found that a number of firms did not use scenarios of sufficient severity, which will limit the effectiveness and value of the testing.”

It added that:

“...although many firms understand the basics of recovery planning, there are significant areas for improvement, most notably related to the development of recovery scenarios and the calculation of recovery capacity.”

The thematic review is the first of this scale conducted by the PRA, and covered unnamed non-systemic banks (so that includes smaller challengers, beyond the big lenders like NatWest, Barclays, HSBC, Lloyds, Standard Chartered, the UK arm of Santander, Nationwide building society and Virgin Money UK that are stress tested every year).

The PRA said it would now be pushing firms to improve their stress testing and recovery plans over the next six months.

“We will engage collectively with firms and trade associations as appropriate to discuss the findings of this letter in 2024 H2 and we will include this as a topic for discussion at the June CEOs conference. Firms are expected to consider the actions outlined above and update their recovery plans to meet expectations.”

The International Energy Agency (IEA) has cut its forecast for oil demand growth this year, due to weakening demand.

The Paris-based energy watchdog has lowered its growth outlook for 2024 by 140,000 barrels per day (bpd) to 1.1 million bpd, largely citing weak demand in developed OECD nations.

In its latest monthly report, the IEA says that “weak deliveries, notably in Europe” pushed demand across the OECD into contraction in the first quarter of this year.

It says:

Poor industrial activity and another mild winter have sapped gasoil consumption this year, particularly in Europe where a declining share of diesel cars in the fleet were already undercutting consumption.

The IEA adds that the health of global oil demand will probably be “a key topic for discussion” when OPEC+ ministers meet in Vienna on 1 June.

The European Commission has warned that external economic risks to Europe’s economy have risen in recent months, due to the ongoing Russia-Ukraine war and the Israel-Gaza conflict.

In its new spring forecasts, the EC says that risks originating from outside the EU have increased in recent months amid “two ongoing wars in our neighbourhood and mounting geopolitical tensions”.

It says:

Global trade and energy markets appear particularly vulnerable. Moreover, persistence of inflation in the US may further delay rate cuts in the US, but also beyond, resulting in somewhat tighter global financial conditions.

On the domestic front, EU Central Banks may also postpone rate cuts until the decline in services inflation firms

The EC also says that Europe’s economy staged a comeback at the start of the year, following a prolonged period of stagnation, with growth of 0.3% in the last quarter (see previous post).

It is sticking with its forecast that the eurozone will grow by 0.8% this year, but trimmed its forecast for growth in 2025 to 1.4%, slightly lower than the 1.5% predicted in February.

But it has also lowered its inflation forecasts. Eurozone inflation, which averaged 5.4% last year, is forecast to slow to 2.5% this year, and then 2.1% in 2025 – virtually back to the European Central Bank’s target.

Paolo Gentiloni, Commissioner for Economy, says:

The EU economy perked up markedly in the first quarter, indicating that we have turned a corner after a very challenging 2023.

We expect a gradual acceleration in growth over the course of this year and next, as private consumption is supported by declining inflation, recovering purchasing power and continued employment growth.

But, Gentolini adds, “downside risks have increased” as “two wars continuing to rage not far from home”.

Just in: We have confirmation that the eurozone escaped recession at the start of this year, but not as briskly as the UK managed.

Data provider Eurostat has reported that eurozone GDP rose by 0.3% in the January-March quarter, in line with its flash estimate last month. That follows two quarters in which the eurozone shrank by 0.1%, which put it in a technical recession.

Among major eurozone economies, Germany avoided recession by growing by 0.2% in Q1 2024, a growth rate matched by France, while Spain grew by 0.7 and Italy by 0.3%.

The UK expanded by 0.6% in the January-March quarter, beating both the eurozone and the US which grew by 0.4%.

Chancellor Jeremy Hunt and work and pensions secretary Mel Stride have been accused of “gaslighting the British public”, after claiming the unemployed have “ample opportunities” to find a job.

Hunt and Stride have written in the Times today that there’s no reason to be stuck on benefits.

The ministers wrote:

“We’ve been clear that unemployment benefits should only be there as a safety net, not a lifestyle choice. With around 900,000 vacancies in the economy there are ample opportunities for people to get on and get ahead in the world of work.”

Their comments come after the UK unemployment rate yesterday rose to 4.3% in the first quarter of this year, with the number of people out of work and looking for a job rising by 166,000 to 1,486m.

The number of vacancies fell to 898,000 and company payrolls shrank.

The number of people ‘economically inactive’ jumped to almost 9.4m, due to more people becoming temporarily sick, long-term sick, or retiring. The rise in sickness has been blamed on the long waits for treatment on the NHS, which prevent people getting back to work.

TUC General Secretary Paul Nowak says the government should focus on bringing down NHS waiting lists, rather than “punching down” by suggesting unemployment is a lifestyle choice.

Nowak tells us:

“Ministers are gaslighting the British public on the state of the UK labour market.

“Unemployment shot up by over 160,000 over the last quarter and record numbers of people are becoming economically inactive because they are too sick to work.

“Instead of punching down, the Tories should be tackling our sky-high waiting lists and improving access to treatment.

“And they should be laser-focused on improving the quality of work in this country.

“People need jobs they can build a live on. But under the Conservatives we have seen an explosion of low-paid and insecure work that has led to eye-watering levels of in-work poverty.

“Before handing out lectures, Jeremy Hunt and Mel Stride should try surviving on a zero-hours contract.”

Stephen Evans, chief executive at Learning and Work Institute, agrees that it’s wrong to suggest there is a widespread sicknote culture, or that unemployment benefits are a lifestyle choice for many.

Evans explains that more needs to be done to help people improve their skills, and access to the jobs market, saying:

“Many people who are out of work want to work, including 1.7 million who are economically inactive. But only one in ten out-of-work disabled people get help to find work each year and many people can’t find work that fits with caring responsibilities or health conditions.

It’s wrong to suggest that unemployment benefits are a lifestyle choice for many or that there’s a widespread sicknote culture. Rather, there’s not enough support to improve skills or find work and employers need to look at job design and terms and conditions to attract potential workers.”

In their Times article, Hunt and Stride write that the UK economy is doing “far better than many would have you believe”, after it emerged from recession last week, though they do concede there have been “bumps, twists and turns” in the economic recovery.

Jobs are there if unemployed want them, ministers insist

The London stock market received a boost this morning, with low-cost computing pioneer Raspberry Pi announcing it is considering floating here.

The Cambridge-based maker of low-cost computers, designed to help children learn to code, announced it is considering an initial public offering in London.

Eben Upton, CEO of Raspberry Pi, told the City:

“When we released our first product in 2012, our goal was to provide a computer that was affordable enough for young people to own and explore with confidence, giving them the chance to discover computing and get excited about it.

But from the very beginning we saw customers using our products in a staggering variety of applications across a broad swathe of markets, and as we recognised the potential for affordable technology to make a meaningful difference not just in education but in countless other contexts, the scale of our ambition grew. Twelve years later, we have sold over 60 million units in over 70 countries around the world.

Raspberry Pi really is a UK tech success story; created with the idea of providing a cheap, but powerful computer that made it easier to understand how computers worked.

The FT reports that the company hopes to seek a market valuation of about $630m (£500m).

If Raspberry Pi’s float does come off, it would show that the LSE can still attract companies, and help address the lack of exciting tech companies here in London.

Lorries carrying perishable food and plants from the EU are being held for up to 20 hours at the UK’s busiest Brexit border post as failures with the government’s IT systems delay imports entering Britain, my colleague Jack Simpson reports.

Businesses have described the government’s new border control checks as a “disaster” after IT outages led to lorries carrying meat, cheese and cut flowers being held for long periods, reducing the shelf life of their goods and prompting retailers to reject some orders.

The worst disruption was last weekend, with dozens of lorries being held at the government’s control post serving Dover and the Channel tunnel for periods of between eight and 20 hours after the IT system that registers goods went down.

More here.

It’s done it again!

The UK’s blue-chip share index has climbed to a new record high in early trading.

The FTSE 100 index jumped around 0.5% to a new intraday high of 8474 points, as investors hope that US inflation will fall today.

Experian, the credit data firm, are the top riser – up over 8% after it reported growth at “the top end of our expectations” for the last financial year.

In the City, profits at Burberry have dropped by 40% as the luxury goods market continues to struggle.

Burberry’s profits fell to £383m in the 12 months to the end of March, down from £634m a year earlier.

Revenues fell 4%, while profit margins also shrank.

Burberry reports that men’s and women’s ready-to-wear clothes sales were below average, but outerwear – such as its Heritage raincoats - were strong, while there was a double-digit increase in sales of scarves.

Jonathan Akeroyd, Burberry’s CEO, says that “executing our plan against a backdrop of slowing luxury demand has been challenging”, adding:

While our FY24 financial results underperformed our original expectations, we have made good progress refocusing our brand image, evolving our product and strengthening distribution while delivering operational improvements.

Back in January, Burberry issued a profit warning after weak Christmas trading.

And looking ahead today, Burberry cautions that the first half of the current financial year is expected to “remain challenging”.

It reports that sales in the Americas fell 12% last year. Sales in mainland China fell by 19% in the last quarter, but were up 2% over the year.

Sarah Riding, retail & supply chain partner at law firm Gowling WLG, says the retail market in general is “under the kosh at the moment”, adding:

“While Burberry’s results highlight a significant global reduction in sales and the subsequent fragility of the luxury market at present, there are still plenty of opportunities for those that have the supply chain ingenuity and ability to deliver against specific customer requirements in this space.

“Burberry has a proven track where this dynamic is concerned, given its aptitude in splitting its offering to suit key demographics that span demand for more obvious Burberry-led branding applies, while providing more subtle focused designs within its other lines – for example Thomas Burberry - thus, helping meet the need for quality and less obvious brand association at the same time

Global stock markets have climbed to a new record high today, ahead of the US inflation data due at 1.30pm UK time.

The MSCI All Country World Index, which tracks equities around the globe, nudged up to a new peak this morning, having closed at a record high last night.

That suggests optimism that today’s inflation report will show that underlying US inflation moderated last month.

Last night, the US tech-focused Nasdaq index closed at a record high; it’s gained around 10% so far this year.

There was also another flurry of meme stock excitement yesterday, with Gamestop surging 60%.

The UK’s stock market has helped with this rally – with the FTSE 100 hitting a series of record highs in recent weeks. The Footsie is up 9% since the start of January.

Jim Reid of Deutsche Bank reports that the markets turned more upbeat yesterday, telling clients:

The S&P 500 (+0.48%) closing within two tenths of a percent of its all-time high on March 28. Tech stocks outperformed, with the Magnificent 7 (+1.01%) reaching a new all-time high, led by Tesla (+3.29%) and Nvidia (+1.06%). But the equity rally was broad-based, with the small-cap Russell 2000 up +1.14%.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Hopes that America’s economy will achieve a ‘soft landing’ will be tested today by the latest US inflation data.

Investors across the globe are poised for April’s US CPI report, hoping to see signs that inflationary pressures are easing. But there’s also anxiety that price pressures are sticky, making it harder for the US Federal Reserve to lower interest rates soon.

Economists predict the annual US inflation rate will dip to 3.4% for April, after jumping unexpectedly to 3.5% in March.

On a monthly basis, prices are expected to have risen by 0.3%, a slowdown on March’s 0.4%.

Yesterday, Fed chair Jerome Powell pointed out that inflation has been falling more slowly than expected, despite US interest rates being raised to their highest in over two decades.

Powell told a conference in Amsterdam:

“We did not expect this to be a smooth road. But these [inflation readings] were higher than I think anybody expected.

“What that has told us is that we’ll need to be patient and let restrictive policy do its work.”

Investors are keenly awaiting the inflation data to gain a clearer understanding of when and to what extent the Fed might adjust interest rates, explains Fawad Razaqzada, market analyst at City Index and FOREX.com.

Razaqzada adds:

Persistent inflation in the first quarter, coupled with hawkish sentiments expressed by Fed officials advocating for prolonged high interest rates, have bolstered the US dollar.

However, recent developments such as weaker-than-anticipated US non-farm payrolls and an increase in jobless claims have fuelled speculation that the Fed might initiate interest rate cuts as early as September.

Core inflation, a key measure of underlying price trends, is forecast to slow to 3.6% per year, down from 3.8%.

Yesterday, we learned that US producers raised the prices by 0.5% in April, a faster increase than expected – but Wall Street shrugged that off, seemingly hopeful that today’s Consumer Price Inflation report will show prices easing.

The dollar has dropped to a one-month low against the euro this morning, ahead of the CPI data.

The agenda

• 10am BST: Second estimate of eurozone GDP in Q1 2024

• 10am BST: European Commission to release its spring economic forecasts

• 1.30pm BST: US inflation report for April

• 1.30pm BST: US retail sales report for April

• 3pm BST: UK Treasury Committee questions former Federal Reserve chair Ben Bernanke about the Bank of England’s forecasting