The UK’s long-term borrowing costs have risen to the highest level since 1998. The yield, or interest rate, on 30-year gilts, as UK government bonds are known, climbed by four basis points to 5.22% after a bond auction.

The rise in borrowing costs has piled pressure on the chancellor, Rachel Reeves, to keep the market on side ahead of a raft of bond sales.

The government plans to sell £297bn of bonds this fiscal year — the second-highest on record. This is keeping gilts under pressure, as investors worry about the outlook for the nation’s ballooning debt.

The UK’s Debt Management Office sold £2.25bn of 30-year bonds today paying a yield of 5.198%. The bid-to-cover ratio was 2.75, the lowest demand since December 2023. However, the difference between the average and lowest yield accepted was just 0.3 basis points, indicating robust appetite for the notes.

There is another auction tomorrow, of £4.25bn of new five-year bonds.

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Thank you for reading. Take care – JK

There’s been a fresh blow to green ambitions after JP Morgan confirmed it was leaving the net-zero banking alliance (NZBA) on Tuesday.

JP Morgan is the largest among a growing list of Wall Street lenders to ditch the group, which is dedicated to helping lenders reduce their carbon footprints. Other banks including Citi, Bank of America and Goldman Sachs jumped ship late last year.

It comes amid growing backlash against ESG goals by US politicians, particularly those on the right wing of the Republican party.

A spokesperson for JP Morgan said:

We will continue to work independently to advance the interests of our firm, our shareholders and our clients and remain focused on pragmatic solutions to help further low-carbon technologies while advancing energy security.

We will also continue to support the banking and investment needs of our clients who are engaged in energy transition and in decarbonising different sectors of the economy.

More than 700 junior McDonald’s workers have joined legal action against the fast-food chain after allegations of widespread discrimination, homophobia and sexual harassment at its restaurants across the UK.

Hundreds of current and former crew members – some as young as 19 – have instructed the law firm Leigh Day to take action on their behalf, in a move that has implicated more than 450 of its outlets in Britain.

Complainants have been coming forward after an investigation a year ago by the BBC, which on Tuesday claimed that workers at the chain were still facing sexual abuse and harassment despite a promise from McDonald’s to address the concerns after they were first raised.

The fresh allegations and legal claim are likely to be front and centre when the UK boss of McDonald’s, Alistair Macrow, faces MPs on the business and trade committee on Tuesday afternoon. McDonald’s is one of the UK’s largest private sector employers, with 168,000 people working at more than 1,400 restaurants.

The former Bank of England governor Mark Carney, a climate-focused economist who became the first non-Briton to run the UK central bank, is considering entering the race to replace Justin Trudeau as Canada’s prime minister.

Carney spent seven years in the UK as Bank of England governor, having been headhunted by then chancellor George Osborne in 2013, after serving as governor of the Bank of Canada, and was known at the time by the unlikely epithet, “rock star central banker”.

He remains an influential figure on the global economic stage, as UN Special Envoy on Climate Action and Finance, and Rachel Reeves hailed his endorsement at the 2023 Labour confidence – delivered by video message - as the party sought to present itself as economically credible.

Carney called Reeves a “serious economist,” who “understands the economics of work, of place and family”.

Carney arrived in London determined to bring change to the stuffy Bank. He introduced plastic banknotes, and a new approach to communication known as “forward guidance,” which was meant to give investors a clearer idea of which way interest rates were heading.

The former innovation proved more immediately successful than the latter. After the Bank was seen as sending out mixed signals on rates, Carney was memorably accused of being an “unreliable boyfriend,” by Labour MP Pat McFadden – then a member of the treasury select committee, now a powerful cabinet office minister.

Carney also waded into the fractious debate over Brexit, repeatedly warning about the risks to the economy of leaving the EU – leading to accusations that he had politicised the independent Bank.

In the event, the economy avoided recession in the aftermath of the unexpected vote for Brexit in June 2016 – helped in part by the Bank’s response, which included cutting interest rates and boosting its bond-buying programme, known as quantitative easing.

Since leaving the Bank, Carney has continued to write and work on an area he emphasised as governor: the need for financial markets to catch up with the risks of the climate crisis. In a much-quoted speech from 2015, he warned that efforts to tackle global heating were compromised by, “the tragedy of the horizon” – politicians’ and markets’ inability to look beyond the next few years.

In a 2021 book, Value(s), subtitled “An Economists Guide to Everything that Matters,” Carney enlarged on the idea, and attacked finance-driven capitalism more broadly, for losing sight of society’s needs.

Now 59, Carney is chair of Canadian investment firm Brookfield Asset Management, which has $1trn under management. Since 2023 he has also been chair of Bloomberg’s board.

As reported earlier, the UK’s long-term borrowing costs have risen to the highest level since 1998, as the government gears up for a number of bond sales this year.

The yield, or interest rate, on 30-year gilts, as UK government bonds are known, climbed by four basis points to 5.22% after a bond auction.

The rise in borrowing costs is increasing pressure on the chancellor, Rachel Reeves, to keep the market on side ahead of a raft of bond sales.

The Labour government plans to sell £297bn of bonds this fiscal year — the second-highest on record, Bloomberg News reported. This is keeping gilts under pressure, as investors worry about the outlook for the nation’s ballooning debt.

Sam Hill, head of market insights at Lloyds Banking Group, said:

Following a busy January, the burden of gilt issuance volume is unlikely to ease significantly, if at all, in cash or duration terms, for at least the remainder of the quarter.

The UK’s Debt Management Office sold £2.25bn of 30-year bonds today paying a yield of 5.198%. The bid-to-cover ratio was 2.75, the lowest demand since December 2023. However, the difference between the average and lowest yield accepted — known as tail — was just 0.3 basis points, indicating robust appetite for the notes.

There is another auction tomorrow, of £4.25bn of new five-year bonds.

The global biopharma market is expected to remain in recovery mode throughout the year, with more dealmaking, and obesity drugs making up nearly half of the expected top 10 bestselling drugs this year, according to data firm Evaluate Pharma.

Overall, the sector is expected to see more than 70 approvals of new drugs, and an $82bn increase in pharmaceutical product sales. This growth is manly driven by advancements in the obesity and oncology spaces, while there are also new treatments for cystic fibrosis and immunology therapies.

In oncology, Merck’s Keytruda, which is used to treat a variety of cancers, will retain the top spot in 2025 – possibly for the final time - with sales of over $30bn.

However, it is the incretin class that will lead the market overall this year (incretins are hormones that help regulate blood glucose levels and are released after eating). Out of the 10 projected bestselling drugs of 2025, four are GLP-1s. Novo Nordisk’s semaglutide, sold as Ozempic and Wegovy, and Eli Lilly’s tirzepatide, sold as Mounjaro and Zepbound, are on track to generate more than $70bn in combined sales in 2025.

Daniel Chancellor, vice president of thought leadership at Norstella, Evaluate’s parent company, said:

Over the last year, it has become clear that GLP-1s are one of the most impactful drug mechanisms ever discovered, for both patients and markets. The incretin space this year will be marked by increased dealmaking and pharma can’t afford to miss out on what is likely to be the most significant drug mechanism to be discovered.

The IPO market will begin to grow again, although slowly and cautiously, and most stock market flotations are likely to be in the US, as European markets continue to lack specialist investors, according to the report.

Private investors are reasonably optimistic as they enter 2025, with areas such as antibody drug conjugates, radiopharmaceuticals, and immunology and inflammation joining the GLP-1s as hot areas.

While the new US administration’s plans are unclear, more mergers and acquisitions are likely, as big pharma boardrooms come under pressure to deliver long term growth.

Chancellor added:

This industry has taken its time recuperating from the post-pandemic rock bottom of the last few years. But with more deal making, improved access to capital and the continued explosion of growth around GLP-1s and other key therapy areas, the outlook for 2025 is promising.

Inflation in the eurozone rose for the third month in a row in December, to an annual rate of 2.4%, as expected.

The figure compared with November’s rate of 2.2%, according to the statistics office Eurostat, and matched economists’ forecasts. Core inflation, which strips out volatile energy and food costs, was stable at 2.7%.

The rise in inflation comes as the European Central Bank seeks to revive the region’s flagging economy by reducing borrowing costs.

The ECB has cut interest rates four times since June and is widely expected to lower the benchmark deposit rate from 3% later this month.

Some investors have been hoping for a big (half point) cut, but the latest rise in inflation may make a smaller, quarter point reduction more likely.

In the eurozone, the picture is worse.

The construction sector remained in decline at the end of 2024, as new orders fell markedly, and employment posted the biggest drop in seven months.

Housebuilding remained the weakest segment. Price pressures picked up slightly from November to reach a ten-month high but stayed well below the long-run average, while suppliers’ delivery times lengthened for the second successive month. Companies remained strongly pessimistic regarding the year ahead.

The eurozone construction PMI headline activity index from Hamburg Commercial Bank — a seasonally adjusted index tracking monthly changes in total industry activity — rose slightly from 42.7 in November to 42.9 in December, but remained firmly in contraction territory, well below the 50 mark that separates expansion from contraction. Activity has now fallen in each of the last 32 months.

The overall reduction in activity reflected stronger declines in both Germany and France, with the latter posting the steepest fall since April. Italy bucked the trend with the first rise in activity since March.

Construction output in the UK grew at its slowest rate in six months in December, with a further decline in housebuilding, according to a closely-watched survey.

The headline business activity index from S&P Global fell to 53.3 from 55.2 in November, the lowest since June.

Commercial activity was the fastest-growing area of the construction sector in December (index at 55.0), followed by civil engineering (52.9). However, both areas registered saw a slowdown in the rate of business activity expansion since November.

House building remains the weakest-performing part of the construction sector, posting a further decline (47.6). Any reading below 50 indicates contraction.

On a brighter note, business optimism rebounded from the 13-month low seen in November.

Looking ahead, around 48% of firms surveyed predict a rise in output over the course of 2025, while only 15% forecast a decline. The degree of positive sentiment picked up sharply since November, but it was still much weaker than seen in the first half of 2024.

Tim Moore, economics director at S&P Global Market Intelligence, said:

December data highlighted a loss of momentum for construction output growth, with all three main categories of activity posting weaker performances than in the previous month.

Many firms reported worries about cutbacks to capital spending and gloomy projections for the UK economy.

The UK’s long-term borrowing costs touched the highest level since 1998 ahead of a bond auction of 30-year gilts.

The yield (or interest rate) on 30-year gilts, as UK government bonds are known, climbed by three basis points to 5.21% earlier this morning, and is now at 5.19%. The move came ahead of an auction for £2.25bn.

UK bonds have been under pressure since late last year, as investors worry about the outlook for the country’s rising debt. The Labour government, in power since July, has announced plans to sell a near record amount of bonds in the current fiscal year to plug holes in the public finances left by its predecessor.

The prospect for fewer interest rate cuts from the Bank of England than previously expected has also weighed on bonds. Traders are now betting the central bank will deliver two quarter-point reductions this year, rather than three expected in early December.

Valerie Tytel of Bloomberg TV and radio said on X:

On the stock markets, European share pulled back in early trading after chunky gains yesterday, and are now flat to slightly lower.

Europe’s premier index, the Stoxx 600, edged down after hitting a two-week high yesterday following a newspaper report suggesting that US president-elect Donald Trump, who takes office in a couple of weeks, may opt for less aggressive tariffs on US imports than threatened in November. He later denied the report.

Asian shares rose, with Japan’s Nikkei finishing nearly 2% higher while China’s CSI 300 benchmark index gained by 0.7%.

Healthcare and financial stocks are among the biggest fallers in Europe today. Investors await a flash reading for eurozone inflation later this morning. French consumer prices rose by less than expected in December, to an annual rate of 1.8% from 1.7% in November.

However, inflation in Germany was higher than expected, rising to 2.9% in figures reported yesterday.

• UK’s FTSE 100 index down 0.4%

• Germany’s Dax up 0.04%

• France’s CAC up 0.36%

• Italy’s FTSE MiB down 0.37%

The government has launched a new steel council whose members include Tata Steel and British Steel following thousands of job losses in the UK last year.

The Steel Council will help steer plans for the industry which will be backed by up to £2.5bn of investment, as the Labour government pledged “to rebuild the steel industry”. There is a separate £500m package for Tata Steel to part-fund new, greener steel production at Port Talbot.

Business Secretary Jonathan Reynolds, who will chair the council’s first meeting on Tuesday, said steel communities have “had enough of lurching from crisis to crisis”.

The chief executives of Tata Steel and British Steel, along with the GMB Trade Union and devolved government ministers, will be among the members set to meet regularly.

Last year, Tata Steel said it was replacing traditional blast furnaces with an electric arc furnace at its biggest UK site in Port Talbot, Wales. Traditional steelmaking ceased in September, with thousands of workers losing their jobs.

British Steel said it would close blast furnaces in Scunthorpe in 2023, and unveiled plans to roll out a less polluting electric arc furnace.

While greener, the plans require fewer workers to keep them going, raising fears over potentially thousands of job losses.

Apple has said it will update an AI feature that has issued inaccurate news alerts on its latest iPhones, including that a man accused of killing a US insurance boss had shot himself and that tennis star Rafael Nadal had come out as gay.

The US tech giant said it was developing a software update that would “further clarify” when news notifications were actually summaries generated by the company’s Apple Intelligence system. It said the update would be rolled out in the coming weeks.

It follows a formal complaint by the BBC last month, when news alerts branded with the corporation’s logo told some iPhone users that Luigi Mangione, who is accused of killing UnitedHealthcare chief executive Brian Thompson, had shot himself. Mangione is alive and being held at a prison in Brookyln.

False news alerts were issued again last week, when Apple’s AI system summarised BBC app notifications to wrongly say that Spanish tennis star Rafael Nadal had come out as gay. The summaries also claimed that Luke Littler had won the PDC World Darts Championship hours before the competition even began.

“These AI summarisations by Apple do not reflect – and in some cases completely contradict – the original BBC content,” the BBC said. “It is critical that Apple urgently addresses these issues as the accuracy of our news is essential in maintaining trust.”

The faulty feature was part of a host of AI tools released to users of some newer iPhones in December, including iPhone 16, iPhone 15 Pro and Pro Max handsets, as well as on some iPads and Macs.

In a sign of how tough things are in the retail sector, Britain’s largest retailers are warning they could be forced to cut thousands of jobs this year as the industry braces for higher taxes and employment costs after a bleak Christmas shopping season.

Reflecting tough trading conditions on the high street, figures from the British Retail Consortium (BRC) show sales growth over the “golden quarter” between October and December came close to flatlining.

For the three months to December – when many retailers make the bulk of their annual profits – the BRC said total UK retail sales growth was 0.4% year on year as shoppers prioritised spending on food and drink over the festive season. Once inflation was factored in, retail sales by volume slid over the year.

For 2024 overall, total sales increased by 0.7% from 2023, highlighting a cautious approach to consumer spending as households continue to grapple with higher prices after the worst inflation shock in decades.

Separate figures from Barclays show zero growth in consumer card spending in December, as households cut back on essential items and pub and restaurant meals in favour of spending on experiences.

Helen Dickinson, the chief executive of the BRC, said retailers were poised for a challenging year as they faced £7bn of additional costs from tax increases and new regulations planned by the government.

Grocery price inflation in Great Britain rose to 3.7% in December, the highest since March but this did not stop people splashing out on festive fare, according to retail analysts Kantar.

The average household spent £460 on take-home groceries this Christmas, a record high. Overall take-home sales at the grocers rose by 2.1% over the four weeks to 29 December compared with the previous year.

Fraser McKevitt, head of retail and consumer insight at Kantar, said:

It was a solid Christmas at the supermarkets with sales surpassing £13 billion during the four weeks of December for the first time ever, showing people were clearly in the mood to celebrate and spend. However, despite the festive cheer, grocery price inflation has ticked up to 3.7%, its highest level since March 2024.

In contrast to reports of disappointing footfall across the rest of the high street, it was a very different story in the world of grocery. The average household made nearly 17 separate shopping trips this December, delivering the busiest month for the retailers since the pre-lockdown rush in March 2020. As anticipated, Monday 23 December was the most popular shopping day of the year, with sales a whopping 30% higher than any other day during 2024.

People were willing to splash out that little bit more than usual, as sales growth for branded goods accelerated to 4.2%, while premium own-label lines jumped by 14.6%. The latter now account for a record 7% of all sales, as nine in 10 households bought at least one of these products in December.

Sparkling wine and champagne were the stars of the festive drinks trolley, with sales up by 4%, but 11% of the population bought a no or low alcohol drink, up from under 10% last year.

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

UK house prices finished 2024 up 3.3% over the year, with the average property value falling slightly in December, according to a major mortgage lender.

The average house cost £297,166, down by 0.2% in December from November, following five consecutive monthly increases, according to Halifax. The annual rate slowed from 4.7% in November.

Northern Ireland showed the strongest annual house price growth in the UK, up 7.4%, to an average of £205,895.

House prices in Wales were up 4.6% year on year, with properties costing £226,646, on average. In Scotland, the annual rate was lower than in the rest of the UK, 2.4% to an average £209,959.

London retains the highest average house price across the country, at £547,614, up 3.3% year on year.

Despite the slowdown, Matt Thompson, head of sales at the estate agent Chestertons, said:

December 2024 was one of the busiest Decembers in years in terms of buyer demand. This was driven by first-time buyers who were keen to get on the property ladder before this year’s changes to Stamp Duty but also by second-steppers, including young families, wanting to upsize.

Next has upped its annual profit forecast by £5m after stronger than expected sales online, particularly overseas. However, it also warned that sales growth will slow this year, and said it will need to raise prices due to the impact of recent budget measures.

The UK fashion and homewares retailer faces a £67m increase in its wage costs in the year to January 2026, and said it will need to push through an “unwelcome” 1% rise in prices as well as operational efficiencies and other cost savings to offset the hit. This will affect sales, it said.

We believe that UK growth is likely to slow, as employer tax increases, and their potential impact on prices and employment, begin to filter through into the economy.

Next reported a 5.7% rise in sales for the nine weeks to 28 December, excluding the impact of a change in timing of its annual discount event, our retail correspondent Sarah Butler reports. It now expects profits for the year to the end of January to rise by 10% to just over £1bn for the first time.

Sales online, including Next branded items and its Label selection of other well-know brands, rose by 6.1% and overseas online sales were up by more than 30% but sales in stores fell by 2.1%.

Next is expected to be among the festive winners as fashion retailers had been expected to have endured a tough end to the year as a mild autumn led to widespread discounting across the high street. The retailer is known for holding out on discounting until late in the season and so may have benefited more from the late arrival of colder weather as well as its strong online service.

We are expecting a flurry of economic data today.

The Agenda

• 8.30am GMT: Eurozone, France, Germany, Italy HCOB Construction PMI for December

• 9am GMT: Italy Unemployment rate for November (previous: 5.8%)

• 10am GMT: Eurozone inflation for December flash (previous: 2.2%, forecast: 2.4%)

• 10am GMT: Eurozone unemployment rate for November (previous: 6.3%)

• 1.30pm GMT: US Trade for November

• 3pm GMT: US ISM Services PMI for December

• 3pm GMT: US JOLTs Job Openings for November