Our full story on Nvidia reaching a valuation of $1tn is now live

A restrictive mortgage market might be here to stay if Goldman Sachs is right in predicting that inflation is unlikely to come back under control until the end of 2025.

The Wall Street bank has said that while commodity prices are starting to cool – a move that could help dampen food price growth – a tight labour market and rising wages could keep UK inflation higher for longer.

Its economists have revised up their forecasts, with annual inflation expected to come in at 3.2% at the end of 2024 (compared to previous predictions of 2.7%).

And as the chart above shows, Goldman’s economists are predicting that CPI won’t come back down to the Bank of England’s 2% target for another two years, at the end of 2025.

In the interim, expect further interest rate hikes, Goldman warns:

Our analysis reinforces our view that resilient growth, a tight labour market, and persistent inflationary pressures will convince the MPC to deliver significant additional tightening.

We maintain our forecast of two further 25bp hikes at the upcoming June and August meetings for a terminal policy rate of 5%, but see risks to our terminal rate forecast as skewed to the upside.

Those further rate hikes could ultimately mean more mortgages being pulled off the shelves by UK lenders.

The Asda-EG Group deal has more to do with debt management than its owners might care to admit, our retail correspondent Sarah Butler writes.

Asda’s £2.27bn acquisition of sister company EG Group’s UK and Irish petrol forecourts business is billed as its shift into “omnichannel retail”.

The UK’s third biggest supermarket says the move will help spread its wings into convenience store retailing by adding thousands of locations where shoppers can pick up goods bought online, and bringing in the expertise to run small local stores, as well as cafes and takeaways, in Asda.

There is certainly some truth in that tale: Asda has long been searching for a new avenue of growth as the days of opening dozens more big box supermarkets are certainly over.

However, it is clear that the biggest driver of this deal is debt, which has fuelled the fortunes of the two business’s co-owners: the billionaire Issa brothers and private equity firm TDG Capital.

The deal will ease EG’s £7bn debt burden, which has become harder to bear as interest rates around the world have risen.

The sale of the large part of EG’s UK and Irish business will help it pay down debt ahead of some big refinancing deadlines early next year and in 2025.

However, the deal is not such good news for Asda which has taken on £770m of new loans.

Asda will look to raise £1.1bn from the sale of supermarkets, which it will then have to lease back, raising rents at a time when supermarket’s profits are being squeezed by rising costs of energy, labour and food, while consumers are also reining in spending.

Asda’s position as the cheapest in the grocery market has already been usurped by Aldi and Lidl. Meanwhile, Sainsbury’s and Tesco have taken big steps to be more competitive on key items sold by those chains.

This deal will mean that Asda, along with its private equity owned rival Morrisons, will find it ever harder to compete on price. Instead it will become more reliant on tempting shoppers with a wider array of services, such as takeaways and vehicle charging or petrol.

Unilever is the worst performer on the FTSE 100 after its chief financial officer – the once leadership-hopeful Graeme Pitkethly – said he would step down next year.

The CFO will leave at the end of MAy 2024 after more than two decades in the role, having joined the Marmite and Dove soap maker in 2002.

Pikethly was said have been a contender to replace outgoing CEO Alan Jope, who is set to step down from July. However, the company chose non-executive director and former Heinz boss Hein Schumacher for the job.

Unilever shares are currently at the bottom of London’s blue chip index, after falling 2.3%.

Tineke Frikkee, a fund manager at Unilever shareholder Waverton Investment Management, told Reuters:

The timing of Pitkethly’s retirement announcement is maybe not a surprise, as this will give the incoming CEO the opportunity to reshape his leadership team

Eight years as CFO of a multinational is a decent time and retiring in May 2024 should enable a useful handover to a new CFO.

A private jet used by Tesla CEO and Twitter owner Elon Musk has arrived in Beijing, according to a Reuters witness.

The billionaire is expected to meet senior Chinese officials and visit Tesla’s Shanghai plant, as part of his first trip to the country in three years.

It was not clear who Musk would meet from the Chinese government or what issues they would discuss, though reports regarding Musk’s trip to Beijing, and a hopeful meeting with Chinese premier Li Qiang, first emerged in March.

While Reuters said Tesla had not yet confirmed the visit, China’s foreign ministry said in a statement that the government welcomed Musk - and other business leaders - looking to promote “mutually beneficial cooperation.”

The trip comes as Tesla faces intensifying competition from China in the electric vehicles market, There is also some uncertainty about expansion plans for the Shanghai factory complex Musk last visited in early 2020.

My colleague Joanna Partridge notes the union row sparked by the Asda merger.

The GMB union, which represents thousands of Asda workers, has called on the government to block the merger, arguing it will be bad for both consumers and workers.

Nadine Houghton, GMB organiser, is calling for a review of the deal by the Competition and Markets Authority (CMA):

GMB believes this merger requires proper scrutiny from the CMA. We are concerned rising interest rates will leave the debt of the UK’s third largest retailer unsustainable.

GMB’s priority is to protect and improve our members’ jobs and conditions and we believe this merger makes that harder.

You can read the full story here:

Asda’s merger could raise the pressure on its supermarket rivals, but share price reaction this morning suggests investors are not too worried about the near-term impacts.

Susannah Streeter, head of money and markets at Hargreaves Lansdown:

Asda’s further foray into the convenience supermarket sector hasn’t knocked the share price of Sainsbury’s, Tesco and Marks and Spencer, which rose in early trading.

The Issa brothers, who own the company, intend to gobble up a bigger slice of the grocery-on-the-go market, by acquiring EG Group’s UK and Ireland operations.

The idea is that by being super-competitive on petrol, Asda may win more grocery custom from rivals at a time when grocery top-ups are all the rage, rather than dedicated weekly shops.

But while the cost-of-living crisis rages and so many consumers shop frenetically around for the lowest possible price, the search for value may be prioritised over convenience for the foreseeable future.

Stock prices across other grocers rose at the start of trading, but have since eased back:

• M&S shares are down 0.3%

• Tesco are up 0.7%

• Sainsbury’s is down 0.1%

Asda’s tie-up with EG Group will accelerate the supermarket’s shift into the convenience store market.

In the announcement released this morning, Asda said was a “natural next step” for both businesses, and would “open up significant growth opportunities in the growing convenience and foodservice markets”, which are estimated by Euromonitor to be worth around £40bn and £62bn, respectively.

Asda has a nascent foothold in the market, having bought up 119 convenience stores with attached petrol forecourts from the Co-op Group in October.

It has also already converted 166 EG sites into “Asda on the Move” stores, and plans to do the same for the 1,000 food-to-go sites acquired through today’s merger.

Overall, Asda said it would invest more than £150m over the next three years to fund the integration of the two businesses, which are expected to serve around 21 million customers per week.

Asda’s chair, the former M&S boss Stuart Rose, has (as expected) cheered the deal:

Asda’s acquisition of EG UK and Ireland will create a consumer champion like the UK has never seen. Throughout my career in retail – one thing has always been true, that meeting the evolving needs of customers is the route to growth.

This transaction is all about driving growth by bringing Asda’s heritage in value to even more communities and accelerating the growth of its convenience retail business.

A quick check-in on markets at the start of trading this morning.

It’s broadly negative across Europe (barring the more domestically-focused FTSE 250):

• FTSE 100 is down 0.2%

• FTSE 250 is up 0.18%

• Germany’s DAX is down 0.2%

• France’s CAC 40 is down 0.4%

• Italy’s FTSE MIB is down 0.14%

• Spain’s IBEX is up 0.1%

Food inflation in the UK fell in May, lifting hopes that the rapid increase in grocery prices may have reached its peak after keeping the broader consumer prices index painfully high so far this year, my colleague Phillip Inman writes.

After more than a year of sharp increases in the price of food, the British Retail Consortium (BRC) said annual food inflation eased this month from 15.7% to 15.4%, even as the overall rise in shop prices hit a fresh high.

Fresh-food inflation, which has rocketing after spectacular increases in the price of sausages, milk, cheese and eggs, fell from 17.8% to 17.2%

While the decrease in May was modest, the BRC said it indicated that food-price inflation had peaked and was beginning to come down.

The BRC chief executive, Helen Dickinson said the fall in food inflation was offset by an increase in non-food prices despite “consumers benefiting from heavy discounts in footwear as well as books and home entertainment”.

Non-food inflation hit 5.8% in May, up from 5.5% in April and above the three-month average of 5.7%. Overall, retailers increased prices by 9%, up slightly from 8.8% in April, pushing shop price growth to a fresh high.

You can read the full story here: