Disinflation takes grip in major economies

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Good evening.

It was confirmed today that inflation in the Eurozone fell sharply last month, adding to evidence of slower price rises across major economies and to expectations that interest rates may have peaked.

The slowdown across all major markets has strengthened the case for global monetary loosening, and has prompted central banks to address their timelines for lowering interest rates.

Today’s figures confirmed that Eurozone annual inflation for October was 2.9 per cent, down from 4.3 per cent the month before and from a peak of 10.6 per cent in October last year.

Slowdown in price rises, which has again shifted attention on to the European Central Bank, comes as markets have already bet on interest rate cuts.

Last week Christine Lagarde, president of the ECB, dismissed the prospect of near term rate cuts, telling the Financial Times Global Boardroom event that the bank would not begin cutting rates for at least “the next couple of quarters”.

Earlier in the week US inflation fell to 3.2 per cent, slightly below expectations of 3.3 per cent, marking the first decline in four months.

Following “very, very encouraging” numbers, the US Federal Reserve was quick to say that it remained cautious and was not going to declare a premature victory over price rises. Mary Daly, president of the Federal Reserve Bank of San Francisco, told the FT that she was unable to rule out increasing rates, which have been held steady at a 22-year high of 5.25-5.5 per cent since July.

However, in a blow for those wanting to see interest rate cuts, the drop in inflation sent US Treasury yields tumbling on Tuesday, shortly after Fed officials had suggested that sustained higher yields might reduce the need to increase interest rates further.

Inflation also fell sharply in the UK this week. The consumer price index rose 4.6 per cent in October compared to the previous year, down from the 6.7 per cent pace recorded for September and lower than the 4.8 per cent predicted by economists.

The year-on-year rise in the consumer prices index has now fallen such that Prime Minister Rishi Sunak can declare he has met his pledge — which some economists said would be easy to achieve — to halve the rate of price rises by year end.

The figures added to the financial market’s conviction that the Bank of England is now done with rate rises, and sent sterling down 0.3 per cent against the dollar to $1.246 on Wednesday. The current rate of inflation, although moving in the right direction, remains more than double the BoE’s 2 per cent target.

Price rises and high interest rates pushed British retail sales to their lowest level since February 2021, as household finances were hit by both. The weaker spending shown in today’s figures strengthened expectations that the BoE will cut interest rates next year.

Need to know: UK and Europe economy

The head of the London Stock Exchange Group, David Schwimmer, has said that companies going public in New York do not receive a higher valuation than they would in London. “The notion that you get a better valuation in the US, it’s a myth,” he said.

Richard Moriarty, the new chief executive of the UK’s accounting watchdog, has signalled he is relaxed about allowing the Big Four to continue dominating Britain’s audit market. Deloitte, EY, KPMG and PwC still audited 98 companies in the blue-chip FTSE 100.

More than half of the UK’s low-income households with mortgages have fallen behind on one or more of their bills, according to a survey from the Joseph Rowntree Foundation charity. The data comes as building society Nationwide reported an uptick in mortgage arrears in its half-year results.

UK Chancellor Jeremy Hunt is looking at cutting inheritance tax and business taxes in Wednesday’s Autumn Statement, after finding himself with more fiscal “headroom” than expected.

Hunt is also planning to spend an extra £2.5bn on employment support for people suffering from long-term sickness and joblessness in an attempt to cut the welfare bill and boost the workforce.

ECB president Christine Lagarde has said that Europe needs its own version of the US Securities and Exchange Commission.

Need to know: Global economy

US business leaders welcomed Xi Jinping with a standing ovation in San Francisco, after he told them that China is a big market and a friend.

The sister of Javier Milei, the radical libertarian candidate in Argentina’s presidential race, has tabled a formal accusation of voter fraud ahead of Sunday’s presidential poll.

US Republican candidate Nikki Haley’s strong performances in the presidential debates have won over a number of big donors as well as other Wall Street figures this week.

The US Treasury department has sanctioned three shipowners based in the United Arab Emirates in an attempt to enforce the Russian oil price cap, accusing them of exporting Russian crude oil priced above the $60 per barrel limit.

Need to know: business

South Korean prosecutors are seeking a five-year jail term for Samsung chair Lee Jae-yong, who is accused of stock manipulation and orchestrating a $3.9bn accounting fraud at the group’s biopharmaceutical unit in 2015.

The president of Goldman Sachs Japan, Masanori Mochida, has resigned after 38 years at the US investment bank, bringing to an end the career of one of the biggest figures in Tokyo’s financial industry.

Octopus Energy announced that it is launching a new fund to invest £3bn in offshore wind by the end of the decade, after the UK energy company said in July that it planned to deploy £15bn of investments in offshore wind by 2030.

Chinese ecommerce group Alibaba has paused the listing of its supermarket unit and scrapped its plan to spin off its cloud business amid waning investor enthusiasm for the radical restructuring plan.

Everton football club has been docked 10 points for breaching the Premier League’s financial rules. It’s the toughest sanction to be given out to a top-tier English club. 

Collapsed Middle Eastern hospital operator, NMC Health Plc, has been found by the UK Financial Conduct Authority to have committed market abuse by understating its debt by as much as $4bn.

Science round up

The UN predicted greenhouse gas emissions would rise 9 per cent by 2030 from 2010 levels, massively short of the 45 per cut needed to limit warming to the 1.5C goal set as part of the Paris Agreement. “The world is failing to get to grips with the climate crisis” and national pledges were “strikingly misaligned with the science”, UN secretary-general António Guterres said.

AI is more accurate at medium-range weather forecasting (up to 10 days ahead) than the numerical predictions run on supercomputers, which are used today, according to a DeepMind paper.

AI is also able to cut the number of missed early stage breast cancers, with new research demonstrating the technology’s potential to improve and accelerate medical diagnoses.

South Korea and the US pledged to expand their defence alliance into orbit in response to emerging threats from adversaries including North Korea and China. South Korea has raised its ambitions for independent launch and surveillance capacities.

A robot chemist has used meteorite extracts from Mars to help make oxygen from water, raising hopes for the viability of a mission to the red planet and possible colonisation.

A new TechTonic podcast series on superintelligent AI begins with a touch of doom: could artificial general intelligence (AGI) spell the end of humanity?

Some good news

Fire Weather: A True Story from a Hotter World, a “meticulously researched, thrillingly told” account of a devastating wildfire in Canada by author John Vaillant, has won this year’s Baillie Gifford prize, the UK’s leading award for non-fiction.

Something for the weekend

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