Time to recap…

German carmaker Volkswagen is planning to shut at least three factories in its home country, lay off thousands of workers and cut pay by 10%, according to the company’s union.

The deeper-than-expected cuts come as the company faces weak sales and slow expansion in the electric vehicle (EV) sector amid tough competition from Chinese manufacturers.

“The board wants to close at least three factories in Germany,” the works council chief, Daniela Cavallo, told employees at VW’s headquarters in Wolfsburg. Its remaining manufacturing sites will reduce capacity, she said, citing information provided by management.

Boeing has announced plans for $19bn of share sales, to shore up its finances amid a costly worker strike and an ongoing crisis about the safety of its aeroplanes.

The oil price has tumbled, on relief that Israel’s attack on Iran last weekend did not hit oil production or nuclear facilities.

Brent crude is now down 5.3% today at $72.06 per barrel.

Ricardo Evangelista, senior analyst at ActivTrades, says:

“WTI oil prices dropped as markets opened after the weekend, hitting their lowest level in over three weeks. This decline comes as tensions in the Middle East appear to ease.”

“Concerns of an all-out war between Israel and Iran had loomed over the region for the past month, with markets bracing for Israel’s potential retaliation following Iran’s missile strike on October 1.”

“However, the response was measured, and for now, the worst fears have subsided. With reduced geopolitical risks to supply, traders have shifted their focus back to market fundamentals, which currently include a demand slowdown—especially from China, the world’s top crude importer—and an upcoming OPEC+ production increase set for December. In this context, the risk to oil prices appears skewed to the downside.”

The budget continues to dominate the economy, with just two days to wait for Rachel Reeves’s fiscal statement.

New data shows that the UK’s Alternative Investment Market (Aim) has shrunk to its smallest size in 23 years as business owners and investors anticipate an abolition of inheritance tax relief.

Pubs and restaurants are warning of closures and a tough Christmas ahead if Rachel Reeves’s budget this week raises taxes and ends a Covid-era relief on business rates.

There are also fears that Reeves could cut funding for nuclear sites including Sellafield.

While bosses are cross that they are losing staff working time because of waits for healthcare or caring duties due to underfunded public service

Meanwhile, the government has announced that the budget will include £240m of funding to help people currently economically inactive to get into work.

While Oxfam has reported that the high carbon emissions of the world’s richest 1% are worsening hunger, poverty and excess deaths.

Another troubled company, Boeing, is also making news today.

Boeing has announced it will issue 90 million new shares to bolster its balance sheet. At a current share price of $155, that would raise almost $14bn for the firm whose production is currently stymied by strikes by its workers.

In addition, Boeing will issue $5bn of depositary shares, meaning it will raise a total of $19bn.

Two weeks ago, Boeing said it planned to raise up to $25bn through a stock and debt offering. It has also lined up a $10bn credit agreement with a consortium of banks, to give it more access to liquidity.

Last week, Boeing’s staff rejected their latest pay offer, meaning the industrial action continues….

Back in the UK, chancellor Rachel Reeves has announced a £240m package to help people back into work.

The cash injection will accelerate the rollout of local services to help people out of economic inactivity.

Get Britain Working “trailblazers” in local areas will bring together and streamline work, health, and skills support to disabled people and those who are long term sick, the Treasury says.

Reeves says:

Due to years of economic neglect, the benefits bill is ballooning. We will build a Britain where people who can work, will work, turning the page on the recent rise in economic inactivity and decline and towards a future where people have good jobs and our benefits bill is under control.

Official data shows that more than 9.2 million people are economically inactive – neither working, nor looking for work – often because of illness, or caring responsibilities.

My colleague Richard Partington wrote last weekend about the efforts to reduce inactivity in Barnsley, one of the areas with the highest rates of economic inactivity:

The German carmaker Volkswagen is planning to shut at least three factories in Germany, lay off thousands of workers and cut pay by 10%, the company’s union has revealed.

Daniella Cavallo, the head of Volkswagen’s workers council, told workers at VW’s headquarters in Wolfsburg today that the company is planning even deeper cuts than expected.

This would be the first closure of domestic plants in Volkswagen’s 87-year history.

Cavallo told staff that VW’s management have a “clear intention” to cut tens of thousands of jobs, Reuters reports, to shrink German factories that remain open.

Cavallo said:

Management is absolutely serious about all this. This is not sabre-rattling in the collective bargaining round.

This is the plan of Germany’s largest industrial group to start the sell-off in its home country of Germany.

At the start of September, Volkswagen told staff it was planning to close at least one larger vehicle manufacturing plant and one component factory in Germany.

The company has been struggling to manage the transition away from fossil fuel cars to electric vehicles, where it is facing tough competition from Chinese manufacturers

Shares in Georgian banks listed in London have dropped sharply, after the ruling, Russia-aligned Georgian Dream (GD) party won a contested election last weekend.

Tbilisi-based TBC Bank’s shares tumbled 10%, making it the biggest faller on the UK’s FTSE 250 index, followed by Bank Of Georgia whose shares are down 7.5%.

GD’s victory is a blow to the country’s aspirations to join the European Union, and there are accusations of intimidation and coercion of voters.

The pro-western opposition are accusing GD of a “constitutional coup”, while the. country’s pro-EU president, Salome Zourabichvili, has called for protests against the result this evening.

The oil price is sinking lower, with Brent crude now down over 5% at $71.95 per barrel.

That means oil has now dropped by $10/barrel over the last three weeks, and is now at a fresh four-week low.

As flagged in the introduction, traders are optimistic that tensions in the Middle East may ease now that Israel has retaliated against Iran – without hitting its energy infrastructure.

Antonio Ernesto Di Giacomo, senior market analyst at XS.com, says:

Despite the tensions generated by this event, the impact was less severe than anticipated, immediately affecting the crude market.

The Israeli attack, which avoided vital facilities such as nuclear and oil sites in Iran, significantly reduced the uncertainty that had reigned in the previous weeks.

Despite Iran’s threat to retaliate, the fact that the attack avoided critical facilities managed to moderate concerns about a possible significant escalation in the conflict. In recent months, oil prices have seen a considerable increase due to the growing tension between Israel and Iran, exacerbated by ongoing operations against factions like Hamas and Hezbollah. However, this episode seems to have reduced the likelihood of a larger-scale confrontation, at least in the short term.

That remains to be seen, of course. Earlier today, Iranian foreign ministry spokesperson Esmaeil Baghaei said Tehran will “use all available tools” to respond to Israel’s attack.

Dutch medical devices maker Philips has been hit by a slowdown in demand from Chinese customers, forcing it to slash its sales forecast for this year.

Philips reported that it saw a deterioration in demand in China in the last quarter, leading to flat group sales over the July-September period. Comparable orders fell by 2%, due to the decline in China.

Roy Jakobs, CEO of Royal Philips, says:

In the quarter, demand from hospitals and consumers in China further deteriorated, while we continue to see solid growth in other regions. We have adjusted our full-year sales outlook to reflect the continued impact from China.

Philips now expects its comparable sales to grow by only 0.5% to 1.5% in 2024, down from a previous forecast of 3% to 5%.

Shares in Philips have dropped by almost 17% in early trading.

Analysts at Goldman Sachs are predicting that economic uncertainty in the UK should fall once Wednesday’s budget has passed – unless the bond market reacts badly, of course!

In a research note, they predict Rachel Reeves will steer a middle course, which could be good for shares in UK companies.

Goldman told clients:

Our economists expect the government to set a budget that finds a middle ground: it won’t be so tight as to hinder growth and investment, nor so loose as to risk fiscal stability.

If this is the case, it would be a support for our Buy British view and Long recommendation on FTSE 250.

Government bond prices are weakening this morning, pushing up the yield – or rate of return – on the debt.

This has pushed the yield on UK 10-year bonds up to 4.27%, the highest since the start of July, a rise of about 6 basis points from 4.21% on Friday night.

Yields rise when bond prices fall, so this can be a sign that investors are nervous about a country’s debt and demanding a higher rate of return.

Chancellor Rachel Reeves will be watching the bond market closely, as she prepares to announce an overhaul of the UK’s budget rules which will give her the flexibility to borrow billions of pounds more.

But the UK is not alone this morning. US 10-year bond yields have also risen today, by around 5 basis points to 4.28%, while German bonds are 4bps higher at 2.32%.

There is concern this morning that the global economic recovery could be derailed by a lurch towards economic protectionism.

The FT reports:

Speaking on the sidelines of the IMF’s annual meetings with the World Bank in Washington this week, officials expressed relief at signs that the global economy is on track for a soft landing, avoiding recession after the worst bout of inflation for a generation.

However, they cautioned that mounting political risks in the US and elsewhere threatened the outlook.

A study by Oxfam into the emissions of the world’s super-rich has found that the use of private jets and superyachts combined with high-polluting investments are accelerating climate breakdown and wreaking havoc on lives and economies around the world.

The research found that the world’s 50 richest billionaires took on average 184 private jet flights in a single year, spending 425 hours in the air and producing as much carbon as the average person would in 300 years. Their luxury yachts emitted as much carbon as the average person would in 860 years, according to the report.

Chiara Liguori, Oxfam’s senior climate justice policy adviser, said:

Most of the super-rich are treating our planet like their personal playground, setting it ablaze for pleasure and profit.

Ahead of the Labour government’s first budget statement Oxfam is calling on the chancellor, Rachel Reeves, to increase taxes on “climate-polluting extreme wealth”, starting with private jets and superyachts, to raise funds which could be used to tackle the climate crisis.

The report found that if all people used private jets and superyachts as much as the group of ultra-wealthy individuals highlighted in the report, the world would breach its climate targets in two days rather than current estimates of four years if carbon emissions remain as they are today.

However, it is their investments in fossil fuels which creates even greater damage, according to the report. It found that the investments made by this group created around 340 times more emissions than from their private jets and superyachts combined.

Liguori says:

The evidence is clear: the extreme emissions of the richest, from their luxury lifestyles and even more from their polluting investments, are fueling inequality, hunger and threatening lives. It’s not just unfair that their reckless pollution is fueling the very crisis threatening our collective future – it’s lethal.

This report shows that fairer taxes on extreme wealth are crucial to accelerate climate action and fight inequality – starting with private jets and superyachts. It’s clear these luxury toys aren’t just symbols of excess; they’re a direct threat to people and the planet.

The study into both the luxury transport and polluting investments of billionaires, believed to be the first of its kind, found that the ultra-wealthy billionaires are responsible for causing economic losses of trillions of dollars as well as contributing to huge crop losses and millions of excess deaths because the impacts of the climate crisis are disproportionately felt by low-income countries and communities.

The carbon emissions of the world’s richest 1% have caused global economic output to drop by $2.9 trillion since 1990, according to Oxfam. It found that low- and lower-middle-income countries are expected to lose about 2.5% of their cumulative GDP between 1990 and 2050 due to the impact of the climate crisis while high-income countries are likely to accrue economic gains, it said.

UK business confidence has dipped to a four-month low in October, a new survey has shown.

Firms are less optimistic about their own trading prospects, and wider economic optimism, according to the latest Lloyds Business Barometer.

The net balance of optimism towards the economy slipped three points to 35%, the lowest since March, Lloyds reports. In October, 55% of businesses felt more confident about the economy than three months ago (down from 57%), while 20% were less positive (up from 19%).

Hann-Ju Ho, senior economist at Lloyds Commercial Banking, said:

Although overall business confidence dipped in October, it follows a sustained period of significant optimism, and business sentiment remains above historical levels. Encouragingly, many businesses remain confident in their own trading prospects, and the increase in hiring intentions suggests more employers want to grow their workforce.

Businesses’ broader economic outlook continues to reflect this rounded picture, and as they move into the final part of the year, they will look to manage these considerations effectively.

This is the latest in a string of surveys showing a drop in consumer and business morale in recent weeks, as the government has signalled that this week’s budget will be a tough affair.

Prime minister Sir Keir Starmer is expected to talk about “the harsh light of fiscal reality” in a speech today, and the need to run towards “tough decisions”…

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

The oil price is sliding today, on relief that Israel’s attack on Iran last weekend avoided striking energy facilities.

Brent crude has sunk by over 4% this morning, dropping as low as $72 per barrel at one point, its weakest since 1st October – the day that Iran launched its large missile attack on Israel.

Oil is selling off, despite initial fears that Israel’s direct, retaliatory, airstrikes against military targets in Iran on Saturday morning could bring the Middle East closer to a full-scale regional war. The Israeli air force struck about 20 military bases across Iran, including missile and drone manufacturing sites and air defence systems.

Traders, it seems, are relieved that Israel avoided hitting Iranian oil production facilities, which would have removed some supplies from the market.

There are also hopes that Israel’s latest strikes on Iran will mark the end of a months-long cycle of escalation, with US President Joe Biden telling reporters “I hope this is the end.”

Iran’s president, Masoud Pezeshkian, said yesterday that Tehran was not looking for a war but would respond “appropriately” to Israel’s strikes.

Pezeshkian told a cabinet meeting on Sunday:

We do not seek war but we will defend the rights of our nation and country.

The fact Iran hasn’t vowed to respond is “a clear sign of de-escalation – or at least not a re-escalation – of the tensions in the region”, says Ipek Ozkardeskaya, senior analyst at Swissquote Bank, adding:

As such, the geopolitical tensions that were keeping the oil bulls on alert near the $70 per barrel level has gone up in smoke.

The agenda

• 11am BST: CBI distributive trades survey of UK retail sector

• 1.30pm BST: US Dallas Fed Manufacturing Index