The Bank of Canada has cut interest rates by a quarter point, becoming the first G-7 nation to lower borrowing costs in the current cycle. The European Central Bank is expected to follow suit tomorrow.

Business activity in the eurozone grew at the fastest rate in a year, while inflation cooled in May -- welcome news for the European Central Bank, which meets tomorrow and is widely expected to cut interest rates by a quarter point.

By contrast, the UK services sector lost some momentum last month, as business activity and new orders eased from 11-month highs in April. That said, job growth and business confidence improved slightly.

On a brighter note, there was a substantial cooling in the rate of UK firms’ input cost inflation, which fell to its weakest level since February 2021. This fed through to prices charged by businesses, which rose at the slowest rate in more than three years.

Economic activity in the US services sector returned to growth in May after contracting marginally in April for the first time since December 2022, as just reported.

The UK shadow chancellor, Rachel Reeves, has accused Rishi Sunak of lying after it emerged that a senior Treasury official warned Tory ministers not to say civil servants were behind their claim that a Labour government would increase taxes by £2,000.

The prime minister made the claim throughout his ITV head-to-head debate with Keir Starmer, saying “independent Treasury officials” had costed Labour’s policies “and they amount to a £2,000 tax rise for everyone”.

In a letter to the Labour party on Monday, James Bowler, the Treasury permanent secretary, said ministers had been told not to suggest civil servants had produced the figure at the heart of the Tory attack.

India’s stock market recovered somewhat following yesterday’s sell-off, caused by uncertainty over the country’s next government and its policies.

Narendra Modi’s ruling Bharatiya Janata party has lost its parliamentary majority, dealing an unexpected blow to the Indian prime minister and forcing him to negotiate with coalition partners in order to return to power. He has been meeting key allies at his official residence. India’s main stock indices, the Nify 50 and the BSE Sensex, both rose more than 3%, after sliding close to 6% yesterday.

The Indian rupee ticked up to 83.37 per dollar, probably aided by intervention from the central bank after the currency fell the most in over a year yesterday.

European stock markets are trading modestly higher. The UK’s FTSE 100 index is 13 points ahead at 8,245 while Germany’s Dax has gained 0.9%, France’s CAC is almost 1% higher and Italy’s FTSE MiB rose almost 0.9%.

Thank you for reading. We’ll be back tomorrow. Bye! – JK

Economic activity in the US services sector returned to growth in May after contracting marginally in April for the first time since December 2022, according to the nation’s purchasing and supply executives 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.

Anthony Nieves of ISM said:

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 labor expenses. The majority of respondents indicate that inflation and the current interest rates are an impediment to improving business conditions.

• Business Activity Index at 61.2

• New Orders Index at 54.1

• Employment Index at 47.1

• Supplier Deliveries Index at 52.7

A £13.6bn claim against Google over allegations that it has behaved anti-competitively in the digital advertising space can proceed to trial, the UK’s Competition Appeal Tribunal has ruled.

The claim, brought by a group called Ad Tech Collective Action, alleges that Google has abused its dominant position, causing significant losses to UK online publishers, PA reported.

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.

The case centres around advertising technology, or ad tech, the system that decides which online adverts people see and how much they cost -- a major source of revenue for many websites and a vital, valuable sector for Google because its search engine is the most widely used and it offers a number of services in the ad tech space.

At the heart of the Ad Tech Collective Action argument is the claim that Google has abused its position in the market by promoting its own products and services over those of its rivals. It argues that the activity has meant publishers have received less money from ads they host, as well as paying higher fees to Google.

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.

Oliver Bethell, legal director at Google, said:

Google works constructively with publishers across the UK and Europe - our advertising tools, and those of our many ad tech competitors, help millions of websites and apps fund their content, and enable businesses of all sizes to effectively reach new customers. These services adapt and evolve in partnership with those same publishers.

This lawsuit is speculative and opportunistic. We’ll oppose it vigorously and on the facts.

The legal action comes as Google is under scrutiny from regulators in the UK, US and Europe around its actions in the ad tech sector.

Zara owner Inditex reported a pick-up in recent sales from its spring/summer collections, sending its shares 5% higher, as the world’s biggest fashion retailer delivered quarterly results in line with expectations.

The Spanish retailer, whose full name is Industria de Diseño Textil, said sales rose 12% between 1 May and 3 June compared with the year-earlier period.

This was faster than the 7% rise in sales for its first quarter to the end of April, although sales had been expected to slow from a year earlier when the company benefited from a post-pandemic shopping spree.

Inditex, which also owns Pull&Bear and Massimo Dutti, is battling fierce competition from its Swedish rival H&M, as well as fast fashion retailers Shein and Temu by delivering fashion trends faster through investment in logistics and technology.

Shein, the Chinese online fashion company, is preparing for a London listing.

However, France’s lower house of parliament has backed a string of measures to make low-cost fast fashion, especially items from Chinese mass producers, less attractive to buyers.

Inditex’s chief executive Oscar Garcia Maceiras told analysts the company would expand livestream services through its own platforms to markets including the US and the UK following good results in China.

We expect to launch this new service in the coming weeks.

He added the company would also increase store selling space by about 5% a year until 2026, after upgrading or opening stores in 28 markets in recent months. Inditex now has 5,698 shops.

The small Irish takeaway chain Supermac’s has won a David v Goliath court battle with McDonald’s over the use of the Big Mac trademark, paving the way for it to open outlets across Europe.

The ruling also means the US-founded fast food multinational has lost the right to use the name “Big Mac” in the EU in relation to chicken burgers.

The decision by the European court of justice (ECJ) ends a marathon 17-year legal fight by the Irish operator against its global rival. A Supermac’s spokesperson said the chain also had a similar case pending in the UK that, if successful, could lead to an expansion into the British market.

The legal tussle began in 2007, when Supermac’s tried to register its name in the EU as a trademark for restaurants, with a view to moving into the rest of Europe, prompting McDonald’s to oppose the application by Supermac’s as a name and a logo.

McDonald’s argued that the name was too similar to its Big Mac burgers and would cause confusion among customers, winning a partial victory in 2016, when Supermac’s was granted the trademark for its restaurant name but not for many items of food and drink.

The following year, the Irish chain founded in 1978 in Ballinasloe, County Galway, filed an application before the EU Intellectual Property Office (EUIPO) to end the exclusive use of the term “Big Mac” by McDonald’s in the bloc.

It argued that the trademark had not been put to genuine use in the EU in connection with a restaurant name within a continuous five-year period, and accused McDonald’s of engaging in “trademark intimidation, registering brand names that are simply set aside to be used against future competitors”.

The EUIPO partly upheld Supermac’s case in 2019, and on Wednesday the ECJ found in its favour with a decision to delist Big Mac as a trademarked restaurant name and stop the chain using it on poultry products.

Asda is now the UK’s most expensive supermarket fuel seller, research shows, after the retailer’s private owners ditched its long-held pledge to be the cheapest on the market.

The retailer, which was bought by the billionaire Issa brothers and their private equity partner TDR Capital in 2021, charged an average 2.1p a litre more for unleaded petrol than rivals Tesco, Sainsbury’s and Morrisons at the end of May, according to an analysis by the RAC motoring organisation.

The difference in average diesel prices was even steeper, at 2.5p a litre, according to the study using data gathered by the Competition and Markets Authority (CMA) which has been closely monitoring fuel prices in an effort to ensure motorists are not being ripped off.

The Issa brothers made their fortune from petrol forecourts. After acquiring Asda they folded part of their forecourts business, EG Group, into the supermarket chain. At the time of the deal in May 2023, Mohsin Issa said it would enable him to offer “Asda’s highly competitive fuel” to more customers.

Three British energy companies have decided to delay by a year the planned start of oil production at their joint-venture oilfield in the North Sea –– citing the need for clarity on the next government’s policies.

Jersey Oil & Gas, which owns 20% of the Buchan field 120 miles northeast of Aberdeen, announced this today on behalf of the joint venture partners, among them Serica Energy and NEO Energy.

Shares in Jersey slid more than 16% and Serica’s shares dipped nearly 1% on the news.

Many North Sea oil and gas producers have been merging, shifting overseas, or cutting investment, after the UK government’s windfall tax slashed profits and the opposition Labour Party threatened more tax if it wins the next general election on 4 July.

When Serica bought its 30% stake in the Buchan field from Jersey in February, the target for the start of oil production was the fourth quarter of 2026. That target has now moved to late 2027.

Jersey said the Buchan Field Development Plan was on course for end-2024 approval. But it added:

The exact timing for achieving this key milestone and enabling project sanction is naturally linked to securing fiscal clarity from the next government and ensuring that the project remains financially attractive.

The Labour Party, which has a strong lead in the polls, has vowed to raise the windfall tax by 3% to help fund its energy transition strategy, which the North Sea oil industry has complained would further deter investment.

Brendan Long, an analyst at the wealth manager WH Ireland, said:

We anticipate the UK government will provide fiscal clarity such that the operator of the Buchan redevelopment will have sufficient confidence in the fiscal regime to progress with project sanction.

It is the best undeveloped oilfield of its kind in the UK North Sea in terms of scale and low risk, he added.

In other UK news, the new car market held steady last month with company fleets driving growth.

New car registrations rose 1.7% in May, according to the industry body, the Society of Motor Manufacturers and Traders (SMMT). With 147,678 vehicles reaching the road, it was the best May market performance since 2021, although it remains down 19.6% on 2019, before the Covid pandemic.

Fleets and businesses continued to fuel market growth, up 14% and 9.5% respectively, narrowly offsetting a 12.9% decline in uptake from individual buyers.

While deliveries of both petrol and diesel cars fell, demand for electrified vehicles rose, with plug-in hybrids recording the highest growth, up 31.5% to reach an 8% market share. Sales of hybrids rose by 9.6%, maintaining their status as the third most popular fuel type after petrol and battery electric, at 13.2% of the market.

Nick Williams, transport managing director at Lloyds Banking Group, said:

Despite a challenging start to the year for consumers and businesses alike, it’s heartening to see electric vehicle sales continue to increase. That’s feeding through to confidence with those we speak to, which in turn will fuel investment in new models and spur sales further.

Consistency will be key to maintaining that long term confidence and helping the market grow. As it does, momentum will pick up and the second-hand market will entice yet more people to make the leap.

With consumer trust and confidence low, which is affecting retail registrations, it’s time to bust the myths surrounding electric vehicles. As an industry, we need to come together to ensure drivers are informed of the cost saving of driving and charging electric vehicles.

By contrast, the UK services sector lost some momentum in May, as business activity and new orders eased from 11-month highs in April. That said, job growth and business confidence improved slightly.

On a brighter note, there was a 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 closely watched 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:

The PMI survey for May showed another reasonable rate of expansion in the UK service sector. Taken in tandem with our earlier-released manufacturing survey, the PMIs imply GDP growth of around 0.3% so far in the second quarter.

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.

Business activity the eurozone as a whole grew at the fastest rate in a year, while inflation cooled -- welcome news for the European Central Bank, which meets tomorrow and is widely expected to cut interest rates by a quarter point.

The latest HCOB PMI data compiled by S&P Global showed the headline business activity index climbed to a one-year high of 52.2 in May from 51.7 in April.

Of the top four economies, France was the outlier in May as a slight contraction in private sector activity contrasted with growth in Germany, Spain and Italy. Spain’s position as the top performer was solidified as economic growth here was sharp, quickening to a 14-month high.

The bloc’s largest economy, Germany, also registered a marked upturn, with output volumes rising at the fastest pace for a year. On the other hand, Italy’s expansion lost momentum, cooling to its weakest since February.

Stronger demand was a key reason behind May’s upturn in business output across the euro area. Total new order intakes rose for a second month in a row and at the fastest rate since April 2023.

There was a further pickup in demand for services, while the downturn in factory orders cooled markedly from the previous month. The survey indicated that improved sales performances were restricted to domestic markets, as new business received from abroad declined, in line with the trend since March 2022.

Prices gauges signalled cooling inflationary pressures across the eurozone half way through the second quarter. However, the increase in input costs remained sharp and well above its pre-pandemic average. It was a similar picture for output prices where the selling price increases eased to a six-month low, but remained considerably steeper than seen on average prior to 2020. Manufacturers continued to see reductions in both pricing measures, whereas services companies registered historically sharp rises.

Unlike its neighbours, France’s services sector suffered a slight setback. After rising in April for the first time in nearly a year, activity levels shrank slightly in May. That said, there was a sustained pick-up in sales, driven by domestic demand, while employment continued to rise.

The headline France services PMI business activity index fell from 51.3 in April to 49.3 last month.

Inflationary pressured cooled across France, with rates of increase in input costs and output charges the weakest since July and May of 2021 respectively.

Norman Liebke, economist at Hamburg at Hamburg Commercial Bank, said:

The latest HCOB PMI figures are giving mixed messages about the state of the French services sector. Although business activity declined slightly in May, overall demand grew for the second month in a row. Additionally, although at a slower pace, employment improved for another month, showing robust expectations about the future.

Services inflation slowed in May, but stayed fairly elevated. For input prices, the increase can be attributed to higher salaries and greater supplier charges. Wages remain a risk for the ECB due to the possibility of a resurge in consumer price inflation. Service providers managed to pass on higher costs to customers, but only partially, as evidenced by the output prices index signalling only a marginal rate of increase.

In Germany, Europe’s biggest economy, service sector growth picked up to a 12-month high in May. The services PMI headline index climbed from April’s 53.2 to 54.2, further above the 50 no change threshold for the third month running.

Firms stepped up hiring, and inflationary pressures in the economy’s largest sector eased. Although still above their long-run averages, the rates of increase in both input costs and output prices were the weakest for three years.

Cyrus de la Rubia, chief Economist at Hamburg Commercial Bank, which produces the survey, said:

Things are looking up. The mood in the German service sector is improving month by month. There’s growing hope that the German economy is not the sick man of Europe after all. In fact, Germany is no longer lagging behind other countries and has passed this baton to France, where the service sector has slipped back into recession.

Meanwhile, Germany’s service sector has caught up with Italy’s and almost also to Spain’s, whose business activities have been rising since the beginning of the year and last autumn, respectively. A well-performing tourism sector likely plays a crucial role in this upswing.

TikTok has said it is taking measures to tackle a cyber attack that targeted several celebrities and brand accounts, 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.

TikTok also said that the account of reality TV star Paris Hilton was targeted but not compromised.

The social media company told the Associated Press that the attack took place through the platform’s direct messaging feature but would not give any more details. It is still investigating the what happened and working with affected account owners who need their access restored.

The news of the hack comes as the app, which is owned by Chinese tech firm Byte Dance, is under scrutiny in the US over concerns over whether it poses a national security threat.

Joe Biden signed legislation in April that would see the app banned across the country unless ByteDance can sell it to a non-Chinese entity by mid-January next year.

TikTok, which has around 170 million users in the US, revealed last month that it was taking legal action to block the law, arguing it was unconstitutional and violated free speech.

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

New banknotes featuring a portrait of King Charles III have entered circulation today, nearly two years after he succeeded the late Queen Elizabeth as head of state.

The king’s image will appear on the new £5, £10, £20 and £50 notes issued by the Bank of England. Existing notes that carry a portrait of Elizabeth will continue to circulate.

However, it will take some time before the new notes are commonly seen in people’s wallets and purses. The new notes will gradually replace damaged banknotes, or will be printed when demand increases.

The Bank of England said:

This approach is in line with guidance from the Royal Household, to minimise the environmental and financial impact of this change. This means the public will begin to see the new King Charles III notes very gradually.

Elizabeth was the first monarch to feature on banknotes in 1960, in contrast to coins in England which have carried images of kings and queens for more than 1,000 years.

The reverse side of Bank of England polymer banknotes are unchanged, featuring Sir Winston Churchill, Jane Austen, JMW Turner and Alan Turing. Notes issued in Scotland and Northern Ireland do not feature the monarch.

In financial markets, Asian stocks are mixed, with Japan’s Nikkei 0.9% lower, dragged down by the renewed strength of the yen, and the Shanghai Composite slipping 0.7% while Hong Kong’s Hang Seng rose 0.4%. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.5%.

In India, the Nifty 50 index rose 1.9% in volatile trading, after sliding nearly 6% on Tuesday, its worst session in four years, when foreign investors sold around $1.5bn worth of shares. The BSE Sensex (formerly Bombay Stock Exchange) rose 2% after losing 5.7% yesterday. Both indices had touched lifetime highs on Monday.

Narendra Modi’s ruling BJP party lost an outright majority in parliament for the first time since he became prime minister in May 2014, forcing him to forge a coalition government to return to power. This has sparked uncertainty over economic policies, including Modi’s push for investment-led growth.

Mark Matthews, head of research for Asia at the bank Julius Baer said:

While the BJP’s power may be diluted, it’s still intact. Momentum in the economy from the existing reforms is still strong and will not fade away.

The Agenda

• 8.15am BST: Spain HCOB Services and Composite PMIs for May

• 8.45am BST: Italy PMIs for May

• 8.50am BST: France PMIs for May

• 8.55am BST: Germany PMIs for May

• 9am BST: Eurozone PMIs for May

• 9.30am BST: UK S&P Global PMIs for May

• 1.15pm BST: US ADP Employment for May

• 2.45pm BST: Bank of Canada interest rate decision

• 3pm BST: US ISM Services PMI for May