Time to wrap up….

• US consumer confidence has taken a drop this month, as Americans worry about the health of their jobs market.

• The Bank of England governor has predicted that UK interest rates will fall gradually, after the BoE left them on hold last week.

• This helped push the pound up to a new two-and-a-half-year high, at $1.3398 against the US dollar.

• Global stock markets have hit record highs, after China’s central bank announced a new stimulus package – although economists question whether it will revive the economy.

• Anxiety over French political stability pushed France’s borrowing costs over Spain’s briefly today.

• Business pessimism is on the rise in Germany.

Over in Liverpool, Keir Starmer has announced that Britain’s new state-backed power company GB Energy will be headquartered in Aberdeen.

The prime minister told Labour’s annual conference:

“We said GB Energy, our publicly-owned national champion, the vehicle that will drive forward our mission on clean energy, belonged in Scotland. And it does.”

But the truth is, it could only really ever be based in one place in Scotland. So today I can confirm that the future of British energy will be powered, as it has been for decades by the talent and skills of the working people in the Granite City with GB Energy based in Aberdeen.

GB Energy is a flagship policy of the Labour government; it will not supply electricity directly to households but instead plans to develop, invest in and own renewable energy projects.

Newsflash: US consumer confidence has fallen at its fastest rate in three years, as people worry about their job security.

The Conference Board Consumer Confidence Index has fallen this month to 98.7, down from an upwardly revised 105.6 in August.

The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell by 10.3 points to 124.3. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—declined by 4.6 points to 81.7, but remained above 80. (A reading below the threshold of 80 usually signals a recession ahead.)

The drop in confidence was steepest for consumers aged 35 to 54, the Conference Board reports.

“Consumer confidence dropped in September to near the bottom of the narrow range that has prevailed over the past two years,” said Dana M. Peterson, chief economist at The Conference Board.

Peterson says:

“September’s decline was the largest since August 2021 and all five components of the Index deteriorated. Consumers’ assessments of current business conditions turned negative while views of the current labor market situation softened further.

Consumers were also more pessimistic about future labor market conditions and less positive about future business conditions and future income.

The cutoff date for the preliminary results was 17 September, the day before the US Federal Reserve cut US interest rates by half a percent. That move should support the economy, and might calm some worries about the labor market.

Dulux paint maker Akzo Nobel said today it plans to cut about 2,000 jobs globally, more than 5% of its workforce.

The cost-cutting drive will targeting positions in its head offices, the Dutch company – which bought Britain’s ICI back in 2007 – said.

“We will be simplifying our structure, our processes, reducing cost of administrative functions,” Akzo Nobel’s senior spokesperson told Reuters, with positions in finance or global business services at the head offices to be affected.

US house prices remained at a record high in July, as the prospect of cuts to US interest rates pushed down mortgage rates.

The S&P CoreLogic Case-Shiller U.S. National Home Price index shows that US house prices rose by 5% in July, a slowdown on the 5.5% rise reported in June.

Prices in 10 major US cities rose by 6.8%, including an 8.8% rise in New York, followed by Las Vegas (+8.2%) and Los Angeles (+7.2%).

Brian D. Luke, head of commodities, real & digital assets at S&P Dow Jones Indices, points out that house prices – like the stock market – are rising faster than inflation:

“While the S&P 500 has achieved 39 record highs and the S&P GSCI Gold TR hit 35 record highs, housing is following a similar trajectory. The growth has come at a cost, with all but two markets decelerating last month, eight markets seeing monthly declines, and the slowest annual growth nationally in 2024.

Overall, the indices continue to grow at a rate that exceeds long-run averages after accounting for inflation.

Global equities have hit a record high today, after China’s central bank announced new measures to stimulate its economy, support its property sector and boost the stock market.

The MSCI world stocks index has gained 0.3% to touch a record high today, Reuters reports. The rally was driven by Asia-Pacific markets, where China’s CSI 300 index jumped over 4% today.

Economists are warning, though, that Beijing’s government will need to go further to add to the measures from the People’s Bank of China.

Yingrui Wang, China economist at AXA Investment Managers, says:

The newly announced package is designed to ease monetary conditions across the broader economy, with a particular focus on the housing market.

The measures include reductions in the RRR, policy rate, outstanding mortgage rate, and minimum down payment ratio for second homes. Additionally, the re-lending programme for the housing stock buy-back scheme will be strengthened, and restrictions on the equity market will be loosened. This announcement aligns broadly with expectations, though it leans slightly stronger than anticipated.

However, it is unlikely to outweigh the current entrenched economic downturn – coordination from fiscal policy is needed to ensure a good efficacy.

Robert Gilhooly, senior emerging markets economist at abrdn, also doubts China’s policy measures will turn around its economy conclusively.

Gilhooly explains:

Compared to the incremental approach we have become accustomed to – which even saw one key policy rate adjusted by as little as 5bp on one occasion – today’s package is more meaningful, but beating low expectations is a far cry from a package that will conclusively turn around the economy and market sentiment.

The 50bp cut to existing mortgage holders’ borrowing costs is the closest thing we’ve had to a fiscal transfer for households. But other measures to support the property market still appear unlikely to deal with incomplete apartments, which ultimately need someone (local or central government) to bear a substantial fiscal cost. Overall, household spending is likely to remain constrained by the negative wealth effect from falling house prices and a weak labour market.”

France’s borrowing costs have risen above Spain’s for the first time since the financial crisis over 15 years ago.

The yield (or rate of return) on French 10-year government bonds rose as high as 2.986% this morning, slightly higher than the equivalent Spanish 10-year bond, data on LSEG shows, before dipping back.

Bond yields move inversely to prices (ie, they rise when the bond price falls).

The move shows investors are worried about the new French government’s ability to tackle the high budget deficit.

Last weekend, president Emmanuel Macron named a new government led by the prime minister, Michel Barnier. Barnier’s first major task is to submit a 2025 budget plan addressing France’s financial situation, which the PM has called “very serious”.

But, opposition MPs are putting Barnier under immediate pressure, with plans for a no-confidence motion in parliament.

Following the parliamentary elections in July, a leftwing alliance, the New Popular Front (NFP), is now the largest group in parliament, while Marine Le Pen’s far-right National Rally (RN) was the most successful single party in the race.

Yesterday, the gap between French and safe-haven German debt widened.

As Jim Reid of Deutsche Bank told clients:

The move follows the announcement of new ministers over the weekend, but there’s still uncertainty about how long this government will survive, as they don’t have a majority in the National Assembly, and will rely on other parties not voting them down.

Earlier today, the new French finance minister – Antoine Armand – said France now has “one of the worst” public deficits in its modern history.

Armand told broadcaster France Inter:

“Apart from one or two one-off crisis years in the past 50 (years), we have one of the worst deficits in our history.

“On that level, the situation is grave.”

The deficit is expected to reach 5.6% or more of national output this year, AFP reports, almost double the European Union limit.

The FCA has confirmed that it is extending its investigation into motor finance by another 8 months, after a brief consultation over plans to delay the probe.

The regulator is looking into whether consumers had been charged inflated prices for car loans, as a result of open commission arrangements, between 2007 and 2021.

A decision on how to handle the matter - including whether there would be a compensation scheme - was originally due this week. But the FCA said in July it wanted to push that decision to May 2025, after firms took longer than expected to submit data to the regulator. That new date has now been confirmed.

The financial watchdog is also hoping this will leave time for a final ruling on a case that Barclays is battling in the courts that could set precedent on the matter.

In July, the FCA said it was “more likely”to have to prepare a compensation scheme that some analysts have previously estimated could cost lenders billions of pounds.

Customers of TSB bank have reported problems with payments not going through to their accounts.

Several customers have found that their salaries, or child benefit payments, have not arrived as expected today.

TSB has apologised, saying it is working on a fix:

“We’re aware of an issue with some BACS payments not yet showing on customers’ accounts. We are working on fixing this and will provide an update as soon as possible.”

Share in mining companies have jumped today, after China’s central bank unleashed a swathe of stimulus measures to spur growth and prop up its property sector (see opening post).

Traders are betting that the stimulus will lead to higher demand for commodities such as iron ore, copper and coal, as well as oil.

Mining giant Anglo American are the top riser on the FTSE 100 share index, up 6.9%, followed by copper producer Antofagasta (+5.4%), Rio Tinto (+4.6%) and Glencore (+4.5%).

Earlier today, iron ore contracts in China jumped by around 5%, while copper has hit a 10-week high in London this morning, at $9,737 per tonne.

Financial firms focused on Asia are also rallying - Prudential are 4.4% higher, followed by Standard Chartered (+4%).

This has helped to lift the FTSE 100 blue-chip share index by 0.25% to 8280 points this morning.

Fiona Cincotta, market analyst at financial services firm StoneX, says:

Miners have surged on the news of the Chinese stimulus measures. The prospect of stronger growth in China, the world’s largest consumer of metals, has boosted metal prices.

The likes of Anglo-American and Antofagasta are topping the Footsie leaderboard as they track metal prices higher.

Another day, another sign that Germany’s economy is weakening.

This morning, we’ve just learned that sentiment has deteriorated again at companies in Germany.

The ifo Business Climate Index has fallen for the fourth month running, to 85.4 points in September, down from 86.6 points in August.

Companies reported they were less satisfied with the current business situation, and also becoming more pessimistic about the outlook for the coming months.

Ifo, the economic research group, says:

The German economy is coming under ever-increasing pressure.

The survey found that sentiment among German manufacturers has fallen to its lowest since June 2020, early in the Covid-19 pandemic.

Yesterday, a survey of German purchasing managers showed a contraction in manufacturing this month, making it more likely Germany falls into recession this quarter.

Ifo also reports that the business climate also declined in the services sector, and in trade.

Ifo adds:

In trade, the index has fallen. In particular, the outlook for the coming months was again marked by increased skepticism. Traders also assessed their current situation to be slightly poorer.

UK mortgage rates continue to fall, even though the BoE left Bank rate on hold last week.

Data provider Moneyfacts has reported that the average 2-year fixed residential mortgage rate today is 5.43%, down from 5.45% yesterday

The average 5-year fixed residential mortgage rate today is 5.09%, down from 5.12% on Monday.

Mortgage rates have eased over the last year, as the markets have anticipated cuts to UK interest rates. A year ago, two-year fixed-rate mortgages cost an average of 6.56%, while five-year fixeds were 6.06%.

The Bank of England is more likely to cut interest rates if it is confident that inflation is heading sustainably to its 2% target.

Energy prices will be a key factor in that; they pushed up inflation in 2022, but were then a drag on price rises as the cost of oil and gas fell back. This has led to UK petrol and diesel prices dropping at the fastest rate this year.

Today, though, Brent crude has jumped by over 1% to $74.84 per barrel.

Several factors appear to be pushing oil up. First, Israel’s attacks on Hezbollah targets in Lebanon have intensified concerns about rising conflict in the Middle East, which could affect oil supplies.

Second, China’s new stimulus measures could lead to increased demand for energy.

Thirdly, there are fears of disruption to oil supplies from the Gulf of Mexico, as Potential Tropical Cyclone Nine approaches the US coast.

UK micro computer maker Raspberry Pi has released its first financial results since it floated on the stock market in June – and it has not disappointed.

Raspberry Pi, which makes affordable, easily programmable minicomputers, has told the City that its first half profitability was stronger than expected. Gross profits jumped by 47% to $34.2m, compared with $23.2m in the first half of 2023.

Revenues swelled by 61% to $144.0m.

But pre-tax profits were little changed, at £10.8m.

Raspberry Pi says its expectations for the full year remain unchanged, even though gross profitability in the first half was ahead of internal expectations.

Eben Upton, CEO of Raspberry Pi says:

“The IPO was the watershed moment of the first half, with Admission to trading just two weeks before the period end. In continued pleasing trading in the first half, we saw strong uptake of our latest flagship SBC, Raspberry Pi5, the launch of the Raspberry Pi AI Kit, and the successful ramp to production of RP2350, our second-generation microcontroller platform.

The higher than usual customer and channel inventory levels which were evident at the time of the IPO have continued to unwind, and there is a growing sense that this will have concluded by the year end.

Analysts and investors are impressed too – Raspberry Pi’s shares have jumped by over 5% this morning, to the top of the FTSE 100 leaderboard.

Neil Shah, Director of Content & Strategy at Edison Group, says:

“Raspberry Pi’s first set of results since its IPO on the LSEx in June have not disappointed. The company has soundly beaten expectations, with profits rising by 47% from $23.2m to $34.2m. Having mostly focused on producing Single Board Computers (SBCs) for educational purposes, these devices are now set to become much more commercially significant, with applications to AI, machine learning, and the Internet of Things.

Much of this increase in profits is down to supply chain recovery, which had previously buffeted tech companies like Raspberry Pi. It remains to be seen whether the company will join the ranks of the marquee tech stocks like NVIDIA; but with so many new applications for its core product, the potential for growth is vast.”

Raspberry Pi is now worth £700m, a long way from Nvidia which has a market capitalisation of $2.85 trillion…..

Andrew Bailey also sounded sanguine about the criticism raining down on the Bank of England from right-wingers such as Liz Truss.

In April, the UK’s shortest-serving PM revealed that she considered sacking Bailey as part of a drive to dismantle an “economic establishment” that she says helped to bring her down.

Then in August, Truss demanded an investigation into the Bank of England after analysis showed the majority of the bond market crash following her mini-budget was caused by dangerous practices in the pensions industry.

Bailey (whose bank intervened to stop the panic in the bond market), shrugs off the criticism, telling Kent Online:

“I’ve never actually met Liz Truss, so I don’t know her personally.

But I think it’s part of being in public life that you have to accept there will be plenty of comments. My view is that it’s not a moment to get angry or exasperated, we know what our job is.”

The bond market crash after the mini-budget was driven by pension funds selling UK government debt (called gilts), because they faced losses on a strategy called liability-driven investment (LDI). LDI allowed pension funds to hedge against future risk, but the strategy unwound as gilt prices fell, forcing pension funds to sell gilts to meet margin calls – making the situation worse.

You can argue (as Truss does) that regulators should have been more alert to the danges of leveraged LDI strategies. But the spark that lit the fire was the unfunded tax cuts and spending commitments in the mini-budget, which hit government bond prices.

Andrew Bailey has also been quizzed about fears in Kent that Brexit border checks will cause disruption in and around Dover.

Bailey tried to swerve committing news about Brexit, but did point out that some small businesses will suffer from disruption.

He told KentOnline:

“I’m a public official, so I don’t take a position on Brexit per se. I have to say if you ask me about the economics of Brexit what I say is what you would expect, and what we have seen, there will be some short-term painful effect on trade.

“But over a longer period of time the compensation for that is that trade will be redirected. But it can be particular impactful on small businesses and for some of them that’s just not viable.”

We’ve seen this month that the UK government is still struggling to cope with the implications of leaving the European Union.

Planned post-Brexit checks on fruit and vegetables brought into Britain from the EU have been delayed for the third time, while a plan to force food manufacturers to put “not for EU” labels on all meat and dairy products sold across Britain next month have been indefinitely postponed.

But, the EU is due to launch a new “entry-exit system” (EES) that will record the movements of non-EU visitors to the Schengen Area, from November 2024.

This will mean an end to passports being stamped; instead, anyone travelling to a country in the Schengen area using a UK passport must register their biometric details, such as fingerprints or a photo, when they arrive.

The exact date that EES will be introduced has not been confirmed, though.

Newsflash: The governor of the Bank of England has predicted that interest rates will fall “gradually”.

In an interview with KentOnline, just published, Andrew Bailey said that “inflation has come down a long way” – it was 2.2% in August, just above the BoE’s target, having fallen from over 11% in autumn 2022.

Last week, the Bank left interest rates on hold at 5% – but Bailey says he is “very encouraged” that inflation will fall, leading to lower borrowing costs.

He says:

“We still have to get it sustainably at the target and we have quite an unbalanced mix of components of inflation at the moment. But I’m very encouraged that the path is downwards therefore I do think the path for interest rates will be downwards, gradually.”

Bailey also cautions that interest rates are unlikely to fall back to the record low (just 0.1%) we saw in the Covid-19 pandemic, before the inflation shock of the Ukraine war.

He told KentOnline:

“Where it will settle is a good question. Simple answer is I can’t tell you with any great accuracy. What I would say is ‘will we go back to the very low near zero interest rates that we had until not that long ago’?

“My answer is I would not expect that because what caused interest rates to go that way it was, amongst other things, two very big shocks to the economy.

The financial markets predict UK interest rates could fall to 4.5% by the end of this year, and to 3.5% or lower by the end of 2025.

Investors across Asia-Pacific markets have welcomed China’s stimulus measures.

Stocks have surged in Shanghia and Shenzen, driving the CSI300 index up by 3.7% today.

China’s authorities have “set a fire” underneath the country’s equity markets, says Kyle Rodda, senior financial market analyst at Capital.com.

Chinese authorities have set a fire underneath their markets with a raft of new measures to support their financial system and asset prices. Those looking for more direct support to households and fiscal stimulus will be left disappointed by the initiatives.

However, for investors fearful about systemic instability, scarce liquidity and asset price deflation, the policies announced today provide reason for greater optimism about Chinese markets.

While cuts to reverse repo rates and reserve requirements will grease liquidity, the most remarkable move is allowing brokers and funds to tap the PBOC for cash to buy stock

The pound has hit its highest level in over two years this morning, as investors bet that the Bank of England will cut interest rates slower than the US Federal Reserve.

Sterling has extended its recent rally this morning, hitting $1.3366 for the first time since March 2022.

The pound is strengthening after the Bank of England left interest rates on hold last week, and said borrowing costs must not fall “too fast or by too much”.

That caution contrasts with the Fed, which slashed US rates by half a percentage point last Wednesday.

The markets now expect the Fed to cut rates by another three-quarters of a percent by the end of this year. The Bank of England is only expected to cut by up to half a percent.

The pound has also hit its highest level against the euro in over two years, rising over €1.20. That followed economic data which suggested Germany was sliding into recession, as its manufacturing sector continued to contract.

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

China’s central bank has launched a blitz of stimulus measures to support its economy, as policymakers strive to hit Beijing’s growth targets.

Faced with a spluttering economy. the People’s Bank of China has pulled out its bazooka.

First, it is cutting the amount of cash banks must hold on their books (known as the reserve requirements ratio) by half a percentage point (50 basis points). That should free up more money to be lent to customers.

Second, it is lowering several key interest rates. The seven-day repo rate, PBoC’s new benchmark, by 0.2 percentage points to 1.5%. The interest rate on the medium-term lending facility will drop by about 30 basis points, and loan prime rates by 20-25 bps.

Third, there’s more support for the property market. PBoC says it will encourage commercial banks to lower existing mortgage interest rates, which will cut costs for both current and new borrowers.

It is also lowering the down-payment requirements for both first and second homes – to help people get onto the property ladder, and keep sales moving.

Fourthly, PBoC governor Pan Gongsheng announced the central bank will create new monetary policy tools to support the sstable development of the stock market.

All in all – a wide-ranging push, which has pushed shares higher on the Chinese stock exchange.

The package follows signs that China’s economy has been faltering in 2024. Growth slowed to 4.7% year-on-year in the second quarter of the year, down from 5.3% in Q1 – putting Beijing’s 5% growth target at risk.

In July, China’s export growth missed forecasts, and in August manufacturing activity sank to a six-month low.

Economists are sceptical, though, that PBoC’s measures alone will be enough.

Capital Economics analyst Julian Evans-Pritchard says:

“This is the most significant PBOC stimulus package since the early days of the pandemic.

But on its own, it may not be enough.”

The agenda

• 9am BST: IFO survey of German business confidence

• 2pm BST: Case-Shiller index of US house prices for July

• 3pm BST: US consumer confidence report for August