Barnier’s French borrowing target ‘unreachable’, warns Barclays

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The Markets blog will return on Monday morning but do check out our full range of business and economics stories here.

Rachel Reeves will deliver her first major speech to the financial and professional services industry on Nov 14, the Government said today.

Known as the Mansion House speech, the annual address by the Chancellor is often used to sketch out future plans for the industry and is closely watched for clues on the Government’s next steps on issues such as regulation.

Major stock markets have risen today after positive US jobs data lifted investors’ spirits. The MSCI World index, a gauge of global stock prices, is up 0.3pc. The main American indexes are also up, with the S&P 500 up 0.5pc, the Dow Jones up 1.5pc and the Nasdaq up by 0.9pc.

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

With companies remaining positive and hiring more staff, and fresh interest rate cuts in sight, hopes are rising that the US economy will be blessed with a goldilocks scenario, with growth being maintained, as inflationary pressures are tamed.

The brighter picture emerging for the US economy has also lifted shares in London, with the internationally focused FTSE 100 reversing earlier losses.

European shares closed higher this afternoon as a stronger-than-anticipated US jobs report allayed growth fears in the world’s biggest economy.

The pan-European Stoxx 600, which includes some of Britain’s biggest companies, closed 0.4pc higher, with most local stock markets, including Germany and France, also clocking gains.

Janet Mui, head of market analysis at wealth manager RBC Brewin Dolphin, said:

Economically-sensitive bank stocks led gains among major Stoxx sectors, rising 1.8pc.

Carmakers gained 1.6pc after the European Commission said the EU will press ahead with hefty tariffs on China-made electric vehicles, even after the bloc’s largest economy, Germany, rejected them.

The French prime minister’s economic plans have been criticised as containing “unreachable goals” by economists at Barclays.

The banking giant’s economists told clients that Michel Barnier’s plans to cut the budget deficit would be derailed by his need to keep coalition partners on board.

Mr Barnier has pledged to cut the deficit to 5pc of GDP, from around 6pc this year. But Barclays says this is “unreachable” and noted that France “has consistently deviated” from its published plans.

The economists said: “This would require a sizable fiscal adjustment which we doubt the government will be able to implement… The measures required to achieve this would be incompatible with the political agendas of the various parties supporting the coalition government. Besides, a large fiscal consolidation would likely weigh on what is already a weak economic outlook.”

Barclays is predicting that France’s deficit will instead be 5.8pc of GDP in 2025. The bank also said it expects public debt to continue to increase, reaching 115.2pc of GDP in 2025, up from 112pc this year.

The bank added:

Given the weak parliamentary support for the Barnier government, using Article 49-3 of the Constitution to adopt the budget (eg. bypassing a vote in the National Assembly) seems increasingly likely at this stage.

If this happens, no-confidence motions could be tabled by opposition parties which, if adopted, would bring down the government and lead to the rejection of the budget.

In other words, the adoption of the 2025 budget could ultimately depend on [Marine Le Pen’s party] RN abstaining in any no-confidence vote triggered against the government.

This week, following the prime minister’s general policy address, Le Pen reiterated that her party would “refuse to vote no-confidence motions a priori in order to give the government a chance, however small, to finally implement the necessary recovery measures”.

Nevertheless, she outlined a number of red lines, particularly with regard to tax increases on the working and middle classes.

The FTSE 100 closed broadly unchanged today.

The biggest riser was NatWest, up 3.9pc, followed by Schroders, up a simialar amount.

The biggest faller was manufacturer Spirax, down 3.4pc, followed by energy generator SSE, down 2.8pc.

Meanwhile, the FTSE 250 rose 0.8pc. The top riser was Rasberry Pi, up 6.3pc, followed by Watches of Switzerland, up 5.5pc.

The biggest faller was Wag Payments, down 3.7pc, followed by property company Tritax EuroBox, down 2.1pc.

Larry Summers, the former US Treasury secretary under Bill Clinton, has criticised the Fed for cutting interest rates too deeply.

In a post to the social media platform X, he said that “responsible monetary policy requires caution in rate cutting” and that “with the benefit of hindsight, the 50 basis point [half a percentage point] cut in September was a mistake”.

Today’s employment report confirms suspicions that we are in a high neutral rate environment where responsible monetary policy requires caution in rate cutting. With the benefit of hindsight, the 50 basis point cut in September was a mistake, though not one of great consequence.…

— Lawrence H. Summers (@LHSummers) October 4, 2024

It came on the day US Treasury yields jumped in the bond market after the US government said employers added 254,000 more jobs to their payrolls last month than they cut. That was an acceleration from August’s hiring pace of 159,000 and blew past economists’ forecasts.

Danish shipping giant Maersk believes the UN will secure agreement next year for a new levy on vessels’ carbon dioxide emissions, according to a report.

Simon Bergulf, a Maersk executive, told Bloomberg that he believes the levy will be approved next year at the International Maritime Organisation (IMO), a UN body responsible for regulating maritime transport. He said:

We still don’t have the full contour of what that framework’s gonna be, but it’s becoming more and more clear.

The IMO is planning to gain agreement during 2025, with the new regime coming into force in 2027, Bloomberg reported.

Shares of French video game publisher Ubisoft surged by around 30pc today after a report suggested China’s Tencent was poised to join a potential buyout.

Bloomberg reported that the Chinese giant was considering a joint move with the Guillemot family, which founded Ubisoft and is still the main shareholder, after the French company lost half its market value this year.

Ubisoft has faced several years of turbulence after allegations of pervasive sexism, discrimination and workplace harassment began to emerge in 2020 and led to the departure of several top executives.

The French firm, best known for creating Assassin’s Creed and Far Cry, has also postponed several releases and endured an underwhelming response to its Skull and Bones pirate role-play game.

Tencent, the world’s biggest game maker, already holds nearly 10 percent of Ubisoft’s capital, while the Guillemot family owns around 15 percent.

Bloomberg reported that Tencent and the Guillemot family were now exploring several options, including a buyout that would take Ubisoft off the stock market.

The Telegraph has approached Tencent and a member of the Guillemot family for comment. Ubisoft declined to comment.

Gold has rebounded this afternoon after unexpectedly strong US jobs data earlier pushed down its price.

Gold fell by as much as 1.1pc during trading, but is currently up around 0.3pc.

Oil prices have continued to rise today, with a barrel of Brent crude currently up 0.7pc at over $78 a barrel.

Crude has risen 8.9pc since Monday, and started the week at $71.77.

Axel Rudolph, senior technical analyst at online trading platform IG, said:

The oil price hit a four-week high … on Friday, heading for its largest weekly gain since late March 2023.

The surge is primarily driven by escalating tensions in the Middle East, with concerns about potential supply disruptions as Israel vows to retaliate against Iran.

A strong US economy amid positive labour market data has bolstered expectations for fuel consumption, contributing to the overall bullish sentiment in the oil market.

Pub group Marston’s is expected to report stronger sales for the past year despite wet weather dampening summer trade.

The group, which runs about 1,370 pubs across the UK, is set to post a trading update for shareholders on Wednesday.

It is expected to unveil a rise in like-for-like sales as punters continued to drink and dine at its venues despite pressures on consumer budgets.

Analysts at Panmure Liberum have predicted Marston’s will record sales of £900m, with like-for-like growth of 5pc, for the year to September.

In its most recent update, the company said like-for-like sales grew by 5.2pc over the 42 weeks to July 20, while total sales from its managed and franchised pubs increased by 6.2pc.

In July, the company highlighted that sales growth was slightly slowed over the latter four months as wet weather pressed on demand.

However, this was significantly offset by a boost during the Euro 2024 football tournament.

The results come amid a transition period for the business, as it fully focuses on pub operations after exiting brewing operations fully.

In 2020, Marston’s agreed to sell part of its brewing business – which makes Hobgoblin and Shipyard – to Carlsberg and form a joint venture with the Danish brewer.

In July this year, it sold its remaining stake in the cask ale brewer for around £206m.

A US central banker has said the Fed should not give too much weight to today’s strong jobs data.

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, told Bloomberg Television:

This jobs number today, and the whole report, is a superb report. I still think, as a central bank, you don’t want to react too much to one month’s report… If you look at expectations, there are some signs that inflation might undershoot the 2pc target, and we want to be mindful of that too.

UK and European stocks rose this afternoon after US employment figures suggested added reslience in the American economy.

The pan-European Stoxx 600 is up 0.5pc, while Germany’s Dax is up a similar amount, and France’s Cac 40 is up 1pc.

The FTSE 100 is up 0.1pc, while the FTSE 250 is up 0.7pc.

The dollar jumped to a seven-week high on Friday after data showed that US employers added more jobs than expected in September. This led traders to pare bets that the Federal Reserve will cut rates again by half a percentage point at its November meeting.

Karl Schamotta, chief market strategist at Corpay in Toronto, said:

Rate cut expectations are being pulled back and the expectation now would be for a Federal Reserve that treads far more cautiously in easing policy.

Improving economic data and more hawkish comments from Fed chair Jerome Powell on Monday, in which he pushed back against expectations of continuing hefty rate cuts, has led traders to reduce bets on a half a percentage point reduction at the Fed’s November meeting.

The dollar index (which compares the US currency with a basket of six leading alternatives) reached the highest level since Aug 16, and is on track for its best weekly percentage gain since September 2022.

Naeem Aslam, chief investment officer at Zaye Capital Markets, told The Telegraph that the US economy “is on fire” after official figures showed that the number of people employed rose faster than expected. 

Traders scaled back bets on the scale of cuts by the end of the year, suggesting a half a percentage point cut in one go was now less likely. Meanwhile gold dropped 0.4pc against the dollar.

Mr Aslam said:

The market’s reaction is crystal clear: the dollar is king, and the demand for gold is waning.

As for the US equity markets, we need to let the dust settle, as there are several factors at play.

However, good news is still good news – the Fed will likely cut interest rates, just not by a hefty [half a percentage point].

A Government decision on whether to go ahead with a new £9bn road crossing between Kent and Essex will not be announced before next week.

Today was the statutory deadline for whether to approve the 14.3-mile long Lower Thames Crossing, but the Department for Transport (DfT) said an update will be given “in due course”.

Work on the project has been ongoing since 2009, and more than £800 million of taxpayers’ money has been spent on planning.

The Lower Thames Crossing proposal is aimed at reducing congestion on the Dartford Crossing with a new motorway-style road.

The initial deadline for a decision on whether to grant a development consent order enabling National Highways to build the road was initially scheduled for June 20, but was delayed until today because of the general election.

However, a DfT spokesperson said: “An update on the application will be provided in due course.

“We cannot comment any further on a live application.”

With that, I will head off for the week and leave you in the hands of Alex Singleton, who will guide you into the weekend.

Oil prices have risen further amid fears Israel could strike Iranian crude facilities.

Brent crude, the global benchmark, was last up 0.6pc over $78 a barrel, having gained more than 8pc this week. US-produced West Texas Intermediate was up 0.5pc above $74.

Escalating overnight assaults by Israel on Hezbollah positions in Lebanon come as it weighs retaliation for Iran’s barrage of missiles fired at the country.

Crude prices rocketed around 5pc on Thursday when US President Joe Biden said he was “discussing” possible Israeli strikes on Iranian oil sites in retaliation for Tehran’s barrage.

But analysts warned that slowing demand in many countries and plentiful supply both within and outside OPEC is likely to eventually put a cap on prices.

David Oxley, commodities economist at Capital Economics, said: “While geopolitical risks are firmly in the spotlight at present, one should not forget the fundamental oil market drivers waiting in the wings, which are not supportive of a persistently higher oil price.”

UK bond yields have surged at their fastest pace in five months as traders dramatically reduced bets on the Federal Reserve cutting interest rates swiftly.

The yield on two-year gilts jumped 15 basis points – the most since May – after the US economy added more jobs than expected in September.

The coupon on 10-year gilts rose about 10 basis points to 4.11pc, with US Treasuries rising by a similar amount to 3.95pc.

Bond yields rise when markets expect interest rates to fall at a slower pace as traders wait to see if they will be offered a higher return on their investments at a later date.

The main US indexes opened higher after America’s crucial jobs report eased concerns about a rapid slowdown in its labour market.

The Dow Jones Industrial Average rose 236.7 points, or 0.6pc, at the open to 42,248.26. 

The S&P 500 rose 37.5 points, or 0.7pc, at the open to 5,737.48​, while the Nasdaq Composite rose 211.9 points, or 1.2pc, to 18,130.421 at the opening bell.

The pound is on track for its worst week against the dollar in more than a year after strong US jobs figures wiped out the chances of steep interest rate cuts in America.

Sterling is on course to fall 2.3pc this week versus the US currency, which would be its worst performance since February 2023.

Britain’s currency was already coming off sharp losses on Thursday, triggered by Bank of England governor Andrew Bailey saying policymakers might be a “bit more aggressive” about interest rate cuts.

The poor performance was cemented by the latest US nonfarm payrolls data, showing the American economy added 254,000 jobs in September, which was far ahead of analyst estimates of 150,000.

Gold prices came under pressure after the latest jobs figures indicated the US economy is in rude health, lowering the chances of steep interest rate cuts.

Bullion was last down 0.5pc to about $2,647 an ounce after the significantly higher-than-expected growth in US payrolls and fall in unemployment.

Bas Kooijman, chief executive of DHF Capital, said:

A milder rhythm of interest rate cuts could leave the gold market with less support and could limit its ability to record new highs and could expose the market to short-term losses. 

Although gold could continue to see favourable factors such as geopolitical concerns and central bank purchases, traders could continue to monitor new developments and data in the US as they reassess their view on interest rates.

As US jobs figures came in higher than expected, Capital Economics chief North America economist Paul Ashworth said:

Looking at the labour market strength evident in September’s employment report, the real debate at the Fed should be about whether to loosen monetary policy at all.

Any hopes of a 50bp cut are long gone. We continue to expect the Fed to take a more measured approach – cutting rates by 25bp at each meeting until the policy rate is down to between 3pc and 3.25pc.

The 254,000 gain in non-farm payroll employment in September was accompanied by a 72,000 upward revision to the gains in the preceding two months. 

September’s job gain were broad-based, with leisure & hospitality adding 78,000 jobs, health care & social assistance adding 71,700 jobs, government employment up 31,000 and construction employment increasing by 25,000. The only notable weakness was in manufacturing, which lost 7,000 jobs.

For those worried that the payroll employment gains are all down to the birth/death model, the household survey measure of employment increased by an even bigger 430,000. Together with a more muted 150,000 increase in the labour force, the strength of household employment means the unemployment rate fell to a three-month low of 4.1pc, from 4.2pc. 

There also appears to be something of a mini-resurgence in wage growth, with average hourly earnings increasing by 0.4pc month on month, which was enough to push the annual growth rate up to 4pc, a five-month high.

Traders have all but written off the chances of the Federal Reserve repeating its half a percentage point interest rate cut this month after the latest US jobs figures were stronger than expected.

Money markets indicate there is a 6pc chance of a larger-than-usual rate cut by the Fed later this month, compared to a 54pc chance according to Fed Funds Futures derivatives just a week ago.

The Fed surprised markets by announcing a half a point rate cut in September and is expected to follow it up with another cut this month and again in December. However, these are now likely to be by smaller, quarter of a point measures.

Richard Flynn, managing director at Charles Schwab UK, said:

Today’s jobs figures have exceeded expectations, indicating a high level of demand in the labour market, reversing a recent trend. 

At the last Fed meeting, Jerome Powell emphasised that the slowdown in job growth was the key factor behind the decision to kick off the easing cycle with a larger-than-normal rate cut. 

Powell indicated that the “balance of risks” to the US economy has shifted—implying that supporting the job market has taken precedence over fighting inflation. 

Today’s jobs figures suggest the Fed’s action is working well to support its full-employment mandate. With high inflation largely in the rearview mirror, this could be less good news for markets, as it may slow the pace of future rate cuts.

US stock indexes extended gains in premarket trading after a crucial jobs report showed a higher-than-expected rise in staff on payrolls.

A Labor Department report showed nonfarm payrolls rose 254,000 in September compared with an estimate of 150,000, calming worries of a rapid cooldown in the jobs market. 

The August number was revised upwards to 159,000, while the unemployment rate was 4.1pc, lower than estimates that it would remain unchanged at 4.2pc.

In premarket trading, the Dow Jones Industrial Average was up 102 points, or 0.2pc, the S&P 500 rose 24.5 points, or 0.4pc and the Nasdaq 100 gained 107 points, or 0.5pc.

The US economy added more jobs than expected last month, official figures show, in a sign the American economy is holding up well under the weight of high interest rates.

Nonfarm payrolls rose by 254,000 in September, according to the Labor Department, which was well over analyst predictions of a rise of 150,000.

It was also higher than an upwardly revised 159,000 jobs added in August.

In a further encouraging sign for the Federal Reserve, the US unemployment rate fell from 4.2pc to 4.1pc.

Network Rail said it has turned off its large advertising board at London’s Euston station, following criticism it made the passenger experience worse.

Reviewing how the screen is used is part of a five-point plan aimed at improving the station.

Other measures include creating more concourse space and enhancing how the station operates during disruption.

Passengers have complained about the advertising board, with one saying the replacement of the departure board with the “hideous and overly distracting screen” was “one of the worst decisions ever made at an already poorly managed station”.

Wine sellers are warning customers that prices could rise and some bottles disappear from shelves next year if a new tax system comes into effect.

Majestic and Cambridge Wine Merchants are among retailers contacting their customers to prepare them for the potential impact.

New tax rules are set to come into force from February 2025 as a result of plans introduced by the previous Conservative government.

The wine industry has warned that the changes will heavily complicate the system by introducing more than 30 different duty bands.

This will affect the amount of duty paid on wines between 11.5pc to 14.5pc alcohol by volume (ABV), which account for about 80pc of the UK market, according to the Wine and Spirit Trade Association (WSTA). A bottle of wine at 14.5pc ABV would see duty increase from £2.67 to £3.09.

Wine sellers say they will be “powerless” to protect consumers from price hikes if the policy changes go ahead.

“Most concerningly for you as discerning wine drinkers, the quality and choice of wine available for you to purchase is likely to be negatively impacted,” a letter sent to Majestic and Cambridge Wine Merchants customers read.

“There is a genuine risk that the producers of your favourite wine will stop shipping it to the UK entirely, due to the additional administrative burden that will be involved in exporting wine to Britain.

French cognac makers have said they were being “sacrificed” after EU states gave the green light for tariffs on Chinese-made electric cars, fuelling fears of retaliation from Beijing against other sectors.

China is predicted to respond by imposing import tariffs on Armagnac and Cognac. 

The National Interprofessional Cognac Bureau (BNIC), an industry body, said:

Our requests to delay the vote and find a negotiated solution were ignored. The French authorities have abandoned us. 

We don’t understand why our sector is being sacrificed like this.

Nevertheless, we hope that common sense will prevail. 

Dialogue must continue to reach a negotiated solution that would prevent our products from facing a surtax that could exclude them from the Chinese market.

A £2.5bn merger between housebuilders Barratt and Redrow has been given the go-ahead by the Competition and Markets Authority (CMA).

Our property correspondent Pui-Guan Man has the latest:

The merger, initially announced in February, had been slowed down on the back of competition concerns raised by the CMA regarding a number of homes that both held in Shropshire and Cheshire.

To resolve those concerns, the merged entity has appointed Savills to find buyers for unsold houses in Cheshire. 

The boards of both businesses confirmed receipt of CMA clearance in a trading update today.

David Thomas, chief executive of Barratt, said: “Our focus now is on integrating our businesses as efficiently and effectively as we can to deliver the expected benefits of the combination.”

In August, Barratt, already the UK’s biggest housebuilder, decided to press on with the merger while it awaited approval from the watchdog.

House building has surged by most in over two years as Angela Rayner scraps planning red tape.

Our economics reporter Melissa Lawford has the detials:

Housing development jumped in September at the fastest pace since March 2022, hitting 54.3, up from 52.7 in August, according to the S&P Global Construction purchasing managers index (PMI).

This boom, alongside massive growth in civil engineering, which includes energy infrastructure projects, meant the headline construction PMI rose from 53.6 in August to 57.2 in September, the strongest reading for the sector in nearly two and a half years.

The surge follows Labour’s overhaul of the planning system, which was kickstarted by Housing Secretary Angela Rayner at the end of July, when she published a new draft National Planning Policy Framework (NPPF).

Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, said: “The Monetary Policy Committee’s rate cut, and anticipation of further reductions, feed through rapidly to a construction sector also buoyed by the new government focus on loosening planning rules.”

Matthew Pointon, senior commercial real estate economist at Capital Economics, said: “The prospect of lower interest rates, rising capital values and a government committed to boosting home construction all helped to raise developer confidence.” 

The figures will be welcome news for Labour, which made boosting building the central pillar of its manifesto pledge to achieve the highest sustained economic growth in the G7.

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said: “The broad trend is that the construction sector looks set to at least support growth across the latter half of the year, where the EY ITEM Club expects GDP growth to nudge down a little towards trend rates.”

Royal Mail is to recruit 16,000 temporary workers to help with the busy festive season.

The temporary positions will be located in two parcel hubs, five seasonal parcel sort centres and 37 mail centres across the country, with a variety of shifts available.

Delivery and collection jobs will also be available in local delivery offices across the country.

The company’s two parcel hubs, based in Daventry and Warrington, will be hiring more than 2,000 additional staff as they expect 1.7 million parcels a day to be processed across both sites.

Extra temporary space equivalent to 20 football pitches has been created across the five seasonal parcel sort centres located in Atherstone, Milton Keynes, Northampton, Daventry and Greenford in London.

The temporary recruits will help sort the growing number of online shopping orders expected before they are taken to Royal Mail’s 1,200 delivery offices.

Contracts will run from late October to early January 2025, covering big shopping events such as Black Friday and Cyber Monday.

US stocks were on track to open higher in anticipation of crucial jobs data that will indicate how swiftly the Federal Reserve will cut interest rates.

The Labor Department’s non-farm payrolls data is expected to show that the economy maintained a moderate pace of job growth in September, while the unemployment rate is expected to have held steady at 4.2pc.

Paul Donovan, chief economist at UBS Global Wealth Management, said: “Looking at the broad picture of the US labour market, the position is what it has been all year. 

“Firms are slower to hire, but not keen to fire. This gives job security and supports consumer spending patterns,” 

Odds of a smaller quarter of a percentage point reduction in rates at the Fed’s November meeting stand at 68pc, up from 46.7pc a week ago.

In premarket trading, the Dow Jones Industrial Average was up 0.1pc, the S&P 500 had gained 0.2pc and the Nasdaq 100 was up 0.4pc.

A Government decision on whether to go ahead with a new £9bn road crossing between Kent and Sussex is due to be announced today.

That is the deadline for whether the 14.3-mile long Lower Thames Crossing will be approved.

Work on the project has been ongoing since 2009, and more than £800m of taxpayers’ money has been spent on planning.

The proposal is aimed at reducing congestion on the Dartford Crossing with a new motorway-style road.

It would connect the A2 and M2 in Kent to the A13 and M25 in Essex via a 2.6-mile long tunnel under the Thames, which would be the UK’s longest road tunnel.

National Highways says the plan will almost double road capacity across the Thames east of London, describing it as “our most ambitious scheme in 35 years”.

It is aiming to start construction in 2026, with the road opening in 2032.

Thurrock Council in Essex has consistently opposed the project, citing negative economic, social and environmental impacts, but the leader of Kent’s Dartford Borough Council is in favour of the scheme.

Volkswagen said the EU had taken “the wrong approach” as it imposed hefty tariffs on electric car imports from China.

The German carmaker urged more talks with Beijing “to prevent any countervailing duties and thus a trade conflict”.

Germany warned the European Union against triggering a “trade war” with Beijing after members gave a definitive green light to hefty additional tariffs on electric cars made in China.

Finance Minister Christian Lindner said: “The EU Commission of Ursula von der Leyen should not trigger a trade war despite the vote in favour.

“We need a negotiated solution.”

Germany’s chancellor Olaf Scholz opposed trade tariffs on Chinese electric vehicles (EVs) in a move underlining deep political splits within the European Union.

Our transport industry editor Matt Oliver has the details:

In a key vote this morning, Berlin voted against levying extra taxes on imported Chinese EVs, challenging the measures announced by the European Commission over the summer.

The decision to impose tariffs followed an EU investigation which found China’s electric car industry had received “unfair” state subsidies at every level, helping carmakers to undercut their European rivals on price.

Previously, Germany abstained from a non-binding vote on the measures.

But after furious lobbying by Beijing and the German car industry, which depends on exports to China, Mr Scholz voted against the tariffs at a meeting of EU member states today, according to Reuters.

Read how German carmakers have complained loudly that the tariffs.

The Government’s commitment to build 1.5m homes within five years has helped boost activity in the construction sector to a two and a half year high, according to economists.

The closely watched S&P Global UK Construction PMI showed the fastest upturn in construction output in September since April 2022.

Matthew Pointon, senior commercial real estate economist at Capital Economics, said “the prospect of lower interest rates, rising capital values and a government committed to boosting home construction all helped to raise developer confidence”.

Other market commentators agree:

Political certainty + reducing interest rates accelerated construction growth at the start of the autumn term. Civil engineering excelled with increased demand for renewable energy infrastructure and an uplift in work on major projects. Meanwhile commercial and house building… pic.twitter.com/xzE8ZEW6bf

— Emma Fildes (@emmafildes) October 4, 2024

The bond market has slumped after the Bank of England’s chief economist warned that about the “risk of cutting rates either too far or too fast”.

The yield on two-year UK bonds – the return the Government promises to pay buyers of its debt – has risen about five basis points on the debt market to 4.01pc. Yields tend to move inversely to a bond’s price.

The yield on 10-year UK bonds -known as gilts – climbed more than four basis points to 4.06pc.

Huw Pill suggested the Bank of England should seek a “gradual withdrawal” from the high interest rates which restricted the economy to bring down inflation.

The Bank’s chief economist said he is concerned hat inflation could prove “more lasting” than expected.

Inflation has risen to 2.2pc over the last two months after falling back to the Bank of England’s 2pc target in May and June.

Mr Pill said policymakers “need to be alert to disturbances in the global economy” during a speech at the Institute Chartered Accounts in England and Wales Annual Conference.

His comments come as the price of oil has spiked by 11pc since Iran launched a barrage of missiles at Israel, following its invasion of Lebanon.

Mr Pill opposed the Bank of England’s decision in August to cut interest rates from 5.25pc to 5pc.

Activity in Britain’s construction sector expanded at the fastest pace in two and a half years last month amid falling interest rates, a closely watched survey showed.

The S&P Global UK Construction PMI rose to 57.2 in September, up from 53.6 in August, which was the quickest upturn since April 2022.

It was the seventh straight month that the sector has been above the 50 mark separating growth from contraction amid rising confidence in the housebuilding sector following the Government’s promise to build 1.5m homes in five years.

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

UK construction companies indicated a decisive improvement in output growth momentum during September, driven by faster upturns across all three major categories of activity. 

A combination of lower interest rates, domestic economic stability and strong pipelines of infrastructure work have helped to boost order books in recent months. 

New project starts contributed to a moderate expansion of employment numbers and a faster rise in purchasing activity across the construction sector in September. 

However, greater demand for raw materials and the pass-through of higher wages by suppliers led to the steepest increase in input costs for 16 months.

Ed Miliband accused the previous Conservative government of “spooking” the electric car market with its decision to delay the ban on sales of new petrol and diesel vehicles.

The Energy Secretary  accepted there is more that needs to be done to persuade people to buy electric vehicles as figures show sales of diesel cars are growing faster than those of electric vehicles in Britain.

Mr Miliband said this was down to Rishi Sunak’s decision during his premiership to push back the ban on combustion engine vehicles sales from 2030 to 2035.

He told BBC Radio 4’s Today programme: 

There’s two particular problems that I would identify. The first problem is that the last government pushed the date back to 2035 and that was part of what has spooked the market a bit.

That is why we are clear about the 2030 phase-out date for new petrol and diesel vehicles.

The second thing that has got to be done, and I actually think this is the biggest thing, is to get this charging infrastructure right.

Because I think one of he worries people have is, is the charging infrastructure going to be there? Am I going to be ripped off at the charging infrastructure?

The pound has risen after the chief economist of the Bank of England appeared to contradict Governor Andrew Bailey’s suggestion that policymakers could become “more aggressive” in cutting interest rates.

Huw Pill said there is “ample reason for caution” when assessing how far inflation could rebound in the coming months.

Inflation has risen to 2.2pc after falling to the Bank of England’s 2pc target in May and June.

Mr Pill told the Institute Chartered Accounts in England and Wales Annual Conference: “While further cuts in Bank Rate remain in prospect should the economic and inflation outlook evolve broadly as expected, it will be important to guard against the risk of cutting rates either too far or too fast.”

The pound gained 0.2pc against the dollar to $1.315 after falling more than 1pc on Thursday when Mr Bailey suggested policymakers could become “a bit more activist”. 

It was up 0.2pc versus the euro, which is worth 83.9p, after suffering its worst day against the single currency since December 2022. 

UK stock markets were lifted by energy shares amid the escalating conflict in the Middle East.

The blue-chip FTSE 100 was up 0.1pc while the mid-cap FTSE 250 moved 0.5pc higher. 

However, both indexes look set to register weekly declines of 0.4pc and about 2pc, respectively.

Heavyweight oil and gas shares advanced as much as 1pc, rising for the sixth consecutive session in tandem with oil prices as the Middle East conflict raised worries about disrupting supply.

Among individual stocks, Watches of Switzerland Group added as much as 2.9pc as it revealed its plan to buy Hodinkee, a digital content provider for luxury watch enthusiasts.

The price of oil has surged 11pc since the day Iran launched its barrage of missiles on Israel on Tuesday, raising concerns about a wider war in the Middle East.

That is a rise of nearly $8 a barrel in three days to $78.

The pound is on course to record its worst week against the dollar in more than a year after Andrew Bailey hinted that interest rate cuts could become “more aggressive”.

Sterling is down 1.8pc so far this week, its worst performance since July 2023.

However, that could all change after the Bank of England’s chief economist Huw Pill speaks later.

The big event set to impact the pound’s relationship with the dollar is the US nonfarms payrolls report, which will indicate the strength of the American jobs market.

BoE Chief Economist Pill speaks at 08:55 GMT this morning (text to be published)

Does he push back against Bailey’s dovish shift?

It wouldn’t be the first time the two have differed over the best course of action for rates. Pill was one of the dissenters in August who wanted… pic.twitter.com/suuIfAuaQ1

— Conor Cooper (@Conor_Coops) October 4, 2024

Gas prices are on track for a second consecutive weekly gain amid the risk of war in the Middle East.

Dutch front-month futures, the European benchmark, are poised for gains of 4pc this week, just as oil is on course for its biggest rise since April 2023.

However, the price has fallen as much as 1.4pc today towards €39 per megawatt hour.

Emily McClain of Rystad Energy said: “Uncertainty has loomed throughout this year.”

The FTSE 100 dipped at the open ahead of a speech by the chief economist of the Bank of England and crucial US jobs data.

The UK’s blue-chip stock index dropped 0.2pc to 8,265.36 while the midcap FTSE 250 edged up 0.1pc to 20,752.56.

Sales of diesel cars are growing faster than those of electric vehicles (EVs) as money-conscious consumers refuse to make the switch, top manufacturers including Ford, Volkswagen and Vauxhall have warned the Chancellor.

Our industry editor Matt Oliver has the latest:

In a letter to Rachel Reeves, the chief executives of 10 major carmakers urged ministers to increase subsidies for EVs or row back on “flawed” legally binding sales targets.

They warned that pressing ahead with the regulations – under which those who fail to comply could be hit with large fines – would risk jobs and investment in the UK.

Figures showed the number of EVs sold in September, a traditionally strong month for new car sales, grew by 25pc to reach a record 56,362.

Read what the lobby group said is going on beneath the headline figures.

Pub group JD Wetherspoon has revealed its profits rebounded further over the past year, as strong customer demand helped boost revenues.

The company revealed that pre-tax profits jumped by 73.5pc to £73.9m for the year to July 28, compared with the previous year.

It came as revenues grew by 5.7pc to £2.04bn, driven by a 7.6pc rise in like-for-like sales.

The improved rate of sales at its pubs was slightly offset by a decrease in its number of pub sites, after the group sold 18 pubs and terminated the lease on a further nine. It also opened two sites.

Tim Martin, the chairman of JD Wetherspoon, said: “Sales continue to improve. In the last nine weeks, to September 29 2024, like-for-like sales increased by 4.9pc.

“The company currently anticipates a reasonable outcome for the current financial year, subject to our future sales performance.”

Charlie Huggins of Wealth Club said: “Wetherspoons has enjoyed a good year, reporting a significant recovery in sales and profits and a return to the dividend register. 

“With many pub and restaurant companies struggling in the current environment, this is an impressive performance.”

The pound has begun the day slightly higher after a sharp sell-off prompted by the Governor of the Bank of England.

Sterling was up 0.2pc against the dollar to $1.314 after dropping more than 1pc on Thursday after Andrew Bailey said policymakers could become a “bit more aggressive” on interest rate cuts.

The pound dropped 1pc against the euro in its sharpest daily decline since December 2022.

The dollar has been boosted by its status as a safe haven amid the conflict in the Middle East.

However, the pound could enjoy a jump if Bank of England chief economist Huw Pill signals in a speech later that he disagrees with the Governor.

The main event of today is the US non-farm payrolls report, which will indicate the strength of the American jobs market and indicate how sharply the Federal Reserve will need to cut interest rates

Oil is on track for its strongest week in more than a year as the conflict in the Middle East ratcheted up amid Israeli air strikes on Lebanese capital Beirut.

Brent crude, the global benchmark, steaded overnight at less than $78 a barrel a day after surging 5pc as President Joe Biden said the US was discussing whether to support potential Israeli attacks on Iranian oil plants.

Crude has soared by nearly 8pc this week, its strongest rise since April 2023, amid fears that the conflict could become a wider war in the Middle East.

Citigroup estimated that a major strike by Israel on Iran’s export capacity could take 1.5m barrels of daily supply off the market. 

If Israel struck minor infrastructure, 300,000 to 450,000 barrels could be lost.

Vishnu Varathan, the Asia head of economics and strategy at Mizuho Bank, said there are “fears that Israel will target Iran’s oil production capabilities, so as to hit Iran where it hurts – its pocket”.

Thanks for joining me. Oil prices are on course for their biggest weekly gains in more than a year as Israel launched a massive missile strike on Beirut.

The conflict in the Middle East – and concerns that it could impact supplies – have sent the price of a barrel of oil surging this week from $70 a barrel to more than $77.

5 things to start your day 

1) Diesel car sales outpace electric amid ‘flawed’ net zero targets | Carmakers urge Chancellor to overhaul green mandate as EV uptake falters

2) Post Office Horizon replacement in doubt following delays | Scandal-hit postal service faces setback as new computer system to be ‘reassessed’

3) Sadiq Khan brands critics of London investment ‘unpatriotic’ | Mayor calls for cash injection into capital’s railways to compete with global cities

4) Pimm’s sale scrapped as Aperol eclipses it as drink of the summer | Diageo ends auction as demand for British cocktail comes under pressure from Italian rival

5) Ambrose Evans-Pritchard: Iran cannot set off a global oil crisis without hurting its biggest ally | The Middle East may be America’s political problem – but these days, it is China’s energy supply at risk

What happened overnight 

Asian stocks rose while oil prices were headed for their sharpest weekly gain in more than a year, as escalating tensions in the Middle East kept markets on edge.

Hong Kong’s Hang Seng Index jumped 2.2pc to 22,600.62 amid continuing optimism over China’s massive stimulus measures. 

The Hang Seng Index is heading for a weekly gain of more than 9pc and is up 22pc since September 24, when Beijing kicked off rate cuts.

It is now up roughly 32pc for the year, and has dethroned Taiwan to become Asia’s best-performing stock market.

In Japan, the Nikkei rose 0.3pc, but was set for a weekly loss of about 3pc.

Japanese stocks have had a choppy few sessions this week as investors weighed rising geopolitical tensions against the domestic rate outlook.

On Wall Street, the Dow Jones Industrial Average fell 0.4pc, to 42,011.59, the S&P 500 lost 0.2pc, to 5,699.96, and the Nasdaq Composite was broadly flat, closing at 17,918.48.

In the bond market, the yield on benchmark 10-year US Treasury notes rose to 3.85pc from 3.80pc late on Wednesday.