Time to wrap up….

The Dow Jones Industrial Average passed 40,000 points for the first time on Thursday, powered by strong quarterly results from corporate America and rising bets of interest-rate cuts by the Federal Reserve.

The index has more than doubled since the spring of 2020 when the World Health Organization declared Covid-19 to be a global pandemic. The outbreak shuttered businesses worldwide as the death toll mounted. In its wake came supply chain issues that led to soaring inflation.

The US has staged a remarkable recovery despite widespread predictions of disaster in the face of runaway prices and the Federal Reserve’s aggressive series of interest rate hikes, aimed at tamping down inflation.

On Wednesday, government figures showed that the annual rate of inflation, which peaked at over 9% in June 2022, had slowed to 3.4% in April, down from 3.5% in the previous month.

More here.

And here are the rest of today’s business news stories:

A group of UK social media influencers from reality TV shows including The Only Way Is Essex and Love Island have been charged in relation to promotions of unauthorised investments.

The weight loss market is heating up, with the Swiss drugmaker Roche reporting that its once-weekly obesity injection delivered almost 19% weight loss in early trials.

Like the popular weight loss treatments from Denmark’s Novo Nordisk and US firm Eli Lilly, Roche’s CD-388 drug is part of a new class of drugs that mimic the action of a gut hormone called glucagon-like peptide 1 (GLP-1) and suppresses appetite. Over 24 weeks, it led to 18.8% weight loss.

This compares with 21% weight loss over 72 weeks for Eli Lilly’s Zepbound, and 15% weight loss over 68 weeks for Novo Nordisk’s Wegovy.

Roche’s share price rose more than 3% today.

Side effects were similar to those experienced by people taking Zepbound and Wegovy, such as nausea and vomiting, described as “mild to moderate gastrointestinal-related adverse events” by Roche.

It acquired the treatment via its $2.7bn acquisition of the Californian biotech Carmot Therapeutics in December.

The company is also trialling the drug in obese people with type 2 diabetes over 12 weeks, with results expected in the second half of this year.

Like Zepbound, the Roche drug works by mimicking GLP-1 and another gut hormone called GIP. This could lead to stronger weight loss and reduction in blood sugar with fewer side effects than drugs such as Wegovy, which is only based on GLP-1.

Levi Garraway, Roche’s chief medical officer and head of global product development, said:

“We are very pleased to see the significant and clinically meaningful weight loss in people treated with CT-388. The results are highly encouraging for further development of CT-388 for both obesity and type 2 diabetes and underscore its potential to become a best-in-class therapy with durable weight loss and glucose control.”

However, Roche did not say how high its weekly doses were and analysts said the company still has a long way to go.

Boom! The Dow Jones industrial average, America’s much-storied stock index, has hit the 40,000 point mark for the first time, as traders anticipate interest rate cuts.

The Dow, which contains 30 major US companies, nudged a new alltime high of 40,000.54 points in morning trading in New York.

Hypermarket giant Walmart are the top riser on the Dow, up over 6%, after announcing better-than-expected earnings for the first quarter.

Other top risers today include aeroplane manufacturer Boeing (+3%) and conglomerate 3M (+3%).

The rally comes as investors continue to hope that the Federal Reserve will start to cut interest rate this year, after US inflation yesterday dropped to 3.4%.

The US stock market is having a good year, with technology stocks booming on the back of hopes for artificial intelligence systems.

Rania Gule, market analyst at XS.com, explains:

Overall expectations for the stock market remain positive, especially with supportive monetary policy expectations and continued corporate growth, especially in the technology and artificial intelligence sectors.

However, I advise traders here and at this stage to remain cautious of volatility, especially in stocks that have shown significant price fluctuations influenced by social media and retail investor sentiment.

Nevertheless, I believe prevailing economic conditions and policy expectations indicate that the upward trend in major stock indices is likely to continue in the short to medium term.

Today’s rally means the Dow has doubled since the depths of the pandemic selloff in March 2020, when it briefly fell below 20,000 points.

A majority of City economists believe the Bank of England will make its first cut to UK interest rates since 2020 in August, although a significant minority think it could act in June.

A poll of 71 City experts conducted this week by Reuters found that 38 predicted the BoE will lower Bank rate to 5%, from 5.25%. at its meeting in the first week of August.

But 31 opted for the BoE’s next meeting, in June, while two thought it would wait until September.

Bank rate is currently a 16-year high; last week, the BoE left borrowing costs unchanged, but governor Andrew Bailey hinted that rates could be cut faster than the markets expect.

After jumping last week, the number of Americans seeking unemployment support has dropped back.

There were 222,000 fresh ‘initial claims’ for jobless help last week (to 11 May), the US Department of Labor has reported, down from 232,000 in the previous seven days.

The DOL reports that in the previous week:

The largest increases in initial claims for the week ending May 4 were in New York (+10,171), California (+3,595), Indiana (+2,367), Illinois (+1,836), and Texas (+1,253), while the largest decreases were in Iowa (-1,177), New Hampshire (-435), Connecticut (-334), Louisiana (-213), and Kentucky (-208).

It’s a sign that US firms are holding onto workers, despite efforts by the Federal Reserve to suppress demand and price rises by raising interest rates.

However, there is an increase in people receiving at least two week’s unemployment support.

The number of continuing claims jumped by 13,000 to 1,794,000, up from 1,781,000, which suggests it’s becoming harder to find a job…

Bank of England policymaker Megan Greene has said this lunchtime that the persistence of inflation has weakened since last summer.

In a speech to manufacturers body Make UK, Greene says the Bank’s “restrictive stance of policy” – raising interest rates to a 16-year high of 5.25% – is partly responsible for inflation persistence waning since she joined the Monetary Policy Committee last July.

Greene adds that there is uncertainty about how much inflation persistence indeed persists. For interest rates to start to fall, she adds, inflation persistence must continue to wane, so she wants to see evidence that this is happening before voting to cut rates.

UK CPI inflation is expected to fall to near the Bank’s 2% target next Wednesday, down from 3.2% last month.

Greene speech is mainly about “excess labour hoarding” – where companies hold onto workers even though they don’t have enough work for them.

Labour hoarding helps explain why unemployment has remained lower than expected given weak growth and why wage growth has remained stubbornly high, she tells Make UK.

And Greene fears it poses “a two-sided risk” to the Bank’s outlook.

One possibility is that companies decide they can’t pass on higher costs to consumers, so lay off some workers – pushing unemployment higher than forecasst.

Alternatively, if household consumption picks up, firms may decide they have pricing power again and pass through higher costs to consumers, buoying inflation more than the BoE is currently forecasting.

Britain’s secretary of state for business, Kemi Badenoch, will meet the CEO of Royal Mail’s parent company International Distributions Services today to discuss Czech billionaire Daniel Křetínský takeover offer.

A spokesman for Prime Minister Rishi Sunak told reporters that:

[Badenoch] is meeting the chief executive officer of Royal Mail’s parent company to discuss this and other matters.”

The meeting comes a day after Křetínský increased his offer for IDS to £3.5bn – a proposal which IDS’s board said it was ‘minded to accept’ if Křetínský makes a formal bid.

Keith Williams, the IDS chair, yesterday called Křetínský’s new offer “fair”, adding that he had agreed to “protect employees’ current rights and continue to recognise the existing unions”.

The Guardian’s financial editor, Nils Pratley, wrote last night that almost every aspect of Křetínský’s fresh offer is unsatisfactory, from the price, to the identity of the bidder and the sketchy “undertakings” to protect the UK postal service.

Nils explained:

Williams is rolling over just as the government and Ofcom, the regulator, are conducting a review that could, possibly, deliver economic sustainability for Royal Mail in the form of a reduced second-class service. Nobody imagines regulatory nirvana, but £300m of cost-savings, as Royal Mail’s proposal has it, would clearly improve the medium-term financial profile. It is why the superficially huge 73% premium to the pre-offer share price of 214p is not quite as it seems.

Second, the bidder here is almost the definition of problematic. Křetínský is a billionaire whose approach to clear and open communication has earned him the nickname “the Czech Sphinx”. In his last UK newspaper interview, he seemed to indicate to the Sunday Times a year ago that he would not bid for IDS.

Nils adds that both the government and the opposition Labour party must take a position over the ownership of Royal Mail, from a national interest and foreign ownership point of view.

More here.

Another key question is whether GLS, IDS’s very profitable Amsterdam-based parcel business, could be formally separated under Křetínský’s ownership. That would leave Royal Mail, currently loss-making, without the financial support from GLS.

Activists have disrupted Lloyds Banking Group’s annual shareholder meeting in Glasgow today, Reuters reports, protesting against its alleged provision of financial services to defence firms linked to violence in the Middle East.

Lloyds chairman Robin Budenberg requested the removal of at least two activists at the outset of the meeting, pleading with the protestors to reserve their questions until later in the proceedings.

Activists have in recent weeks targeted British banks including Barclays’ annual shareholder gatherings, to protest the lenders’ alleged indirect involvement in the Gaza conflict.

Barclays said it did not invest its own money in companies that supply weapons used by Israel in Gaza, and it only trades shares in such companies on behalf of clients

Press Association have more details:

A female protester could be heard referring to Lloyds “funding genocide in Gaza” and “funding climate catastrophe”.

“Everywhere you look, you can see it happening,” the protester added, referring to “wildfires and floods” before being removed by security guards.

Other attendees shouted: “Oh, shut up” and appeared to want to get involved, with Sir Robin asking them to leave the removal of the protesters to the stewards.

Newsflash: Britain’s financial watchdog has brought charges against several reality TV star ‘finfluencers’ over an unauthorised foreign exchange trading scheme promoted on social media.

The Financial Conduct Authority says seven influencers promoted the unauthorised trading scheme on their Instagram accounts.

The list includes Lauren Goodger and Yazmin Oukhellou of The Only Way is Essex, Rebecca Gormley, Biggs Chris, Jamie Clayton and Eva Zapico of Love Island, and Scott Timlin of Geordie Shore.

The FCA has charged an individual named Emmanuel Nwanze with running an unauthorised investment scheme and issuing unauthorised financial promotions.

The FCA claims that between 19 May 2018 and 13 April 2021, Nwanze and Holly Thompson used an Instagram account (@holly_fxtrends) to provide advice on buying and selling contracts for difference (CFDs), which they were not authorised to do so.

CFDs are a kind of derivative contracts which allow people to trade in the price movement of securities and derivatives.

Goodger, Gormley, Chris, Clayton, Zapico, Oukhellou and Timlin are accused of promoting the @holly_fxtrends Instagram account to their Instagram followers. They, and Thompson, face one count of unauthorised communications of financial promotions under Section 21 of the Financial Services and Markets Act 2000.

Collectively, the nine have 4.5 million Instagram followers.

The defendants will appear before Westminster Magistrates’ Court on 13 June 2024.

The FCA are encouraging anyone who believes they have suffered loss in relation to this matter to contact its consumer contact centre on 0800 111 6768.

Newsflash: The European Commission has launched an investigation into the owner of Facebook and Instagram over concerns the platforms are creating addictive behaviour among children and damaging mental health.

The EU executive said Meta may have breached the Digital Services Act, a landmark law that makes digital companies large and small liable for disinformation, shopping scams and child abuse.

“Today we open formal proceedings against Meta,” the EU commissioner for the internal market, Thierry Breton, said in a statement.

“We are not convinced that it has done enough to comply with the DSA obligations to mitigate the risks of negative effects to the physical and mental health of young Europeans on its platforms Facebook and Instagram.”

The Commission’s investigation will explore potential addictive effects of the platforms, so-called rabbit hole effects where an algorithm feeds young people negative content, such as on body image. It will also look at the effectiveness of Meta’ age verification tools and privacy for minors.

Breton added:

“We are sparing no effort to protect our children.”

Last month, the European Commission opened formal investigation proceedings into Meta over its handling of political content, including a suspected Russian influence campaign.

Denmark has hiked its growth forecasts for 2024, thanks to the strong demand for pharmaceutical company Novo Nordisk’s weight loss drugs, Ozempic and Wegovy.

Bloomberg has the details:

Denmark’s government now predicts the economy will expand 2.7% this year, almost double the rate it previously estimated, accelerated by the Scandinavian country’s flourishing .

The economy ministry raised its 2024 gross domestic product growth forecast from a December estimate of 1.4%. In 2025, GDP is forecast to rise 1.8%, up from 1% seen previously.

Pharmaceuticals and raw material extraction, including the reopening of the Tyra North Sea gas field, will be key drivers of economic growth, the ministry said in its spring economic review. Without these two industries, Denmark’s GDP would grow just 1.6% this year, and 1% in 2025.

Earlier this month Novo Nordisk raised its profit forecast for this year, and is spending billions to expand its manufacturing capacity.

Geopolitical tensions and a busy slate of elections around the world pose risks to financial stability, the European Central Bank has warned.

In its latest Financial Stability Review, the ECB cautions that financial markets are vulnerable to sudden shifts in sentiment. And while risks of a deep recession have declined, geopolitical risks are on the rise, it says.

Luis de Guindos, vice-president of the ECB, explains that geopolitical tensions are a “significant source of risk” for both euro area and global financial stability.

De Guindos says:

Policy uncertainty remains high around the world in a year featuring so many major elections. In such an environment, the scope for adverse economic and financial surprises is elevated, and the risk outlook for euro area financial stability remains fragile accordingly.

2024 is certainly a bumper year for elections, with more than 40% of the world’s population heading to polling stations this year, including in the US, India and (probably) the UK.

But, De Guindos also points out that financial stability conditions have improved since the last edition of the Financial Stability Review was published six months ago.

The near-term risk of a deep recession accompanied by rising unemployment – a major source of concern six months ago – is much lower from today’s perspective, and disinflation has proceeded in parallel.

The Review points out that financial markets – currenty at record highs – are priced for perfection, creating a risk of an outsized reaction to any shocks.

A group of business leaders have warned Rishi Sunak that the government’s migration policies risk weakening the UK university sector, the Financial Times reports, undermining a key reason for companies to invest in the country.

The FT explains:

In a letter to Rishi Sunak, bosses at groups including miners Anglo American and Rio Tinto and industrial conglomerate Siemens, said they were “deeply concerned” by widening funding gaps and declining international student applications that were “a result of government policy”.

They said this risked “undermining the positive impact that international students have on our skills base, future workforce, and international influence”, as well as reducing the funding available for research and industry collaboration.

The intervention by business leaders came as ministers were urged not to abolish the graduate visa programme by the independent Migration Advisory Committee, which advises the government on migration, in its review of the proposal.

The government has been considering whether to axe the scheme, which allows foreign students to live and work in the UK for up to two years after graduation, amid fears it is being misused as a backdoor entry route and pressure from the right flank of the Conservative party.

More here: UK migration policy risks undermining university sector, business warns

Last week, senior Tories warned that ministers should not proceed with a new “self-defeating” clampdown on international student visas, fearing it would hurt the economic recovery and plunge universities into greater financial distress.

Sunak, though, is keen to show he’s taking action to reduce migration:

Elsewhere in the water industry, United Utilities has said it expects financial penalties due to flooding problems last year.

United Utilities, which reportedly pumped millions of litres of raw sewage into lake Windermere earlier this year, has reported profit after tax of £127m for the year to 31 March.

The utility, based in the north-west of England, is proposing to raise its dividend by 9.4%, having being ranked as the most polluting water firm in England earlier this year.

It has made a pretax profit of £220.5m for the last financial year, up from a £34.3m loss, with operating profits rising 17%.

It reports that it received an ODI (outcome delivery incentive) reward of £34m from the regulator Ofwat, its highest ever. Those ODIs are bonuses which are granted for exceeding services targets.

But it also warned that “exceptionally high rainfall” during the year adversely impacted performance such as flooding, meaning United expects to receive penalties from Ofwat against its ODIs.

Louise Beardmore, chief executive officer, says the company “take our role in protecting the environment very seriously”. It is bringing forward £400m of investment to reduce spills at more than 150 storm overflows, and to accelerate environmental schemes in communities such as Windermere.

EasyJet’s CEO is stepping down, after a gruelling seven years in which he handled the Covid-19 disrupion and soaring oil prices after Russia invaded Ukraine.

The budget airline has annnounced that chief executive Johan Lundgren will leave the company at the start of next year. CFO Kenton Jarvis has been appointed as his successor.

EasyJet has also reported that its losses narrowed in the last six months, to £347m in the half-year to 31 March from £411m a year earlier.

The company says it is on track to deliver its “ambitious medium term target” of pre-tax profits over £1bn.

Lundgren will be a loss, says Zoe Gillespie, investment manager at RBC Brewin Dolphin. explaining:

EasyJet continues to reduce losses during the quieter winter period, while summer bookings are strong. Greater airline capacity, increased revenue from ancillary services, and the growth of easyJet Holidays are adding to the spread of revenue sources and giving customers a better connection to the brand.

Johan Lundgren has navigated a particularly turbulent period for easyJet in the last seven years and his departure will be a loss to the company. But, he leaves the airline in a strong position and there are clear succession plans in place, providing a good deal of stability for easyJet as it continues on its upward trajectory. While the shares have rallied since October 2023, they remain some way off their pre-pandemic peak – so there is still plenty of room for growth.

Thames Water’s largest shareholder has withdrawn its representative from the utility’s board, as the uncertainty over the debt-laden utility company’s future continues.

Thames told the City this morning that Michael McNicholas, a representative of the giant Canadian pension fund Omers, is stepping down with immediate effect.

Thames’ board members have been in a tricky position since its owners pulled the plug on £500m of emergency funding in late March, and indicated that they were unprepared to stump up more funds to invest in Thames’s infrastructure.

The company’s investors – a consortium of funds from Canada, Abu Dhabi, Australia, Britain and China – had deemed the company “uninvestible”, arguing that the industry regulator, Ofwat, had been too stringent.

The FT says McNicholas’s departure is a further sign that Thames’s owners “are prepared to ditch their stake in the UK’s biggest water company”.

UK telecoms group BT has announced a new cost savings push to save £3bn per year, after reporting a drop in profits.

BT’s new CEO, Allison Kirkby, says the group is now aiming to make £3bn of gross annualised cost savings by the end of its 2029 financial year.

That’s on top of an existing £3bn cost savings and service transformation programme, which costs jobs, and which BT reports has been competed a year early.

Kirkby reports that BT has now reached “the inflection point” on its long-term strategy, having passed the peak spending point of its full-fibre broadband rollout.

She is now announcing new financial guidance, including doubling BT’s free cash flow over the next five years.

The company is also lifting its dividend by 3.9% this year, to 8p a share.

Kirkby says:

BT Group built and connected customers to our next generation networks at record speed and efficiency over the past year, while continuing to grow revenue and EBITDA.

Having passed peak capex on our full fibre broadband rollout and achieved our £3 billion cost and service transformation programme a year ahead of schedule, we’ve now reached the inflection point on our long-term strategy.

Kirkby is under pressure from sceptical investors, who have taken out short positions worth £300m against BT’s share price.

This morning, the company also reported a 31% drop in pre-tax profits for the last financial year, to £1.186bn from £1,729bn.

That’s despite BT raising prices; average revenue per user for its Openreach broadband division grew by 10%, partly due to price rises and increased volumes.

But it lost 491,000 Openreach broadband customers, a decline of 2%.

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

Japan’s economy has made a weak start to 2024, shrinking faster than expected, and confirming the UK as the joint fastest-growing G7 country this year.

Japan’s GDP contracted at an annualised rate of 2% in January-March, compared to October-December, worse than the 1.5% drop in activity forecast. That works out as a 0.5% quarterly drop in activity, as households and companies cut back.

Weak consumer spending dragged on growth as did a fall in capital spending and net exports.

There are temporary factors to blame – including a New Year’s Day earthquake near Tokyo in which more than 200 people died, and a safety scandal at carmaker Daihatsu which disrupted production.

But in another blow for Tokyo, data for the fourth quarter of last year was revised down to show GDP was flat. That means nine months with no growth, since Japan’s economy slumped last summer.

This 0.5% contraction in January-March puts Japan at the bottom of the G7 growth league.

We already know that the UK expanded by 0.6% in Q1, ahead of the US with 0.4% growth and Italy with 0.3%, while Germany and France both expanded by 0.2%. Official Q1 data for Canada isn’t out yet, but it’s estimated to have expanded by 0.6%.

Japan’s weak growth is a headache for the Bank of Japan, as it tries to normalise monetary policy after running a massive stimulus programme. Predictions that the BoJ will struggle to raise interest rates have hurt the yen against the US dollar in recent weeks.

Fortunately for the BoJ, though, the dollar is weakening after yesterday’s drop in US inflation.

The agenda

• 7am BST: Norway’s Q1 2024 GDP report

• 9am BST: European Central Bank’s financial stability review

• Noon BST: Bank of England policymaker Megan Greene gives speech on “The current state of Britain’s labour market”

• 1.30pm BST: US weekly jobless figures

• 2.15pm BST: US industrial production data