Pound hits two-year low against euro as Starmer under fire
04:48pm
Simon Phillips, managing director of No1 Currency, weighs in on how Starmer’s political woes are hurting sterling.
The Pound, just like the Prime Minister’s job security, is under pressure.
04:20pm
The cost of UK government borrowing rose at the fastest pace among major global markets after Downing Street said Sir Keir Starmer would fight any leadership challenge.
The yield on UK bonds – or gilts as they are known – rose as investors grew worried about the possibility that the Prime Minister and Chancellor Rachel Reeves could be ousted after the Budget.
Sir Keir’s supporters have accused Wes Streeting, the Health Secretary, and Shabana Mahmood, the Home Secretary, of being on leadership manoeuvres.
Mr Streeting denied being at the centre of any leadership plot and attacked a “toxic” culture in Downing Street.
Bond yields – a benchmark for the cost of government borrowing – have been a focal point for the Chancellor as she battles to balance the books in the upcoming Budget.
Sir Keir and Ms Reeves have repeatedly outlined their commitment to Government’s fiscal rules but investors fear a Labour leadership change risks higher borrowing and spending.
The yield on 30-year UK gilts rose four basis points to 5.21pc, having hit their highest level since 1998 in August. The yield on two-year and 10-year gilts also climbed.
The moves had echoes of the jump in borrowing costs seen in July when the Chancellor made a tearful appearance in the Commons, leading to speculation that she was about to be sacked. Yields came down when she was backed by the Prime Minister.
The moves indicate that bond vigilantes want Sir Keir and Ms Reeves to remain in office over concerns that new leadership could lead to more public borrowing and less control of the nation’s finances.
“It points to the very real risk that the Budget leads to unrest within the parliamentary Labour party, a big market reaction, and the fall of Starmer and Reeves,” said Neil Wilson, an analyst at Saxo Markets.
“Instability with the politics means fiscal instability, which means market instability regarding gilts – perhaps baking in a premium for an even more left-leaning, tax-and-spend government.
“We are heading to a fiscal showdown and political crisis that will show up in volatility in gilts and sterling – potentially a serious wobble in the pound if gilts run.
“The key risk is that if Reeves and or Starmer go then their fiscal rules which have underpinned an easing in gilt yields, would be in serious doubt.”
04:05pm
Scott Bessent, the US Treasury Secretary, said Americans should expect a “substantial” announcement to lower the cost of coffee, bananas and other fruit.
It comes as the Trump administration seeks to ease consumer worries about affordability and the US economy.
The cost of living has emerged as a key issue for voters in recent elections in New York City, New Jersey and Virginia.
Coffee prices have increased by 19 percent over 12 months to September, according to consumer inflation data. Food prices have risen in the US due to tariffs and climate shocks.
Speaking to Fox News Mr Bessent said that households should expect a “substantial” announcement “over the next couple of days in terms of things we don’t grow here in the United States.”
“Coffee being one of them, bananas, other fruits, things like that,” he said. “So that will bring the prices down very quickly.”
03:16pm
The FTSE 100 has risen this afternoon, boosted by strong investor sentiment.
The blue chip index rose 0.3pc to 9,924.32, lifted by SSE and Games Workshop.
The more domestically-focused FTSE 250 also gained 0.3pc.
03:02pm
The German economic council has cut its growth forecasts for 2026 to below 1pc, in a blow to the EU’s largest economy.
The reduction comes as the German Council of Economic Experts warn that a spending boost rolled out by Merz’s government will only have a small impact on growth.
The council estimate Germany’s economy will grow by just 0.9pc in 2026, down from 1pc forecast in May.
In a statement, the five person panel of economists said: “The current weakness is caused not only by cyclical factors but also by profound structural change and geopolitical shifts that threaten the German export model.”
The reduction in the growth forecasts marks the challenge facing Friedrich Merz, the German Chancellor.
Mr Merz told reporters on Wednesday: “We are not living up to our potential, and the productivity of our economy is not as good as it should be and could be.”
He added that Germany’s economic growth “has been too low for many years”.
02:46pm
Stocks on Wall Street climbed higher as investors were boosted by optimism that the US government shutdown is coming to an end.
The Dow Jones Industrial Average was up 0.8pc to 48,302.72,. The S&P 500 added 0.2pc to 6,863.20, nearing the record it set a just weeks ago.
The tech-heavy Nasdaq Composite was largely flat at 23,474.56. The index shed 0.2pc yesterday amid growing concerns over valuations in the artificial intelligence industry.
02:19pm
Nearly a quarter of the wind power generated by one of Britain’s biggest electricity companies is being wasted because of grid congestion.
SSE, which controls part of Scotland’s transmission network and multiple wind farms, has admitted that 23pc of the output from its onshore and offshore wind farms was “constrained” in the six months to the end of September.
This means it was paid to switch off or curtail its turbines because the UK electricity grid could not cope with the power they were generating. The costs of the curtailment were added to energy bills.
01:52pm
The Office for National Statistics (ONS) has announced plans to cut back some of its health, crime and regional publications, in a bid to improve the reliability of its core economic data.
The statistics body said it would reduce the number of reports it releases annually by around 10pc next year, as it re-prioritises its resources.
The change comes as the ONS revamps its statistics and surveys amid worries about the reliability of key economic data.
Economists and policymakers have previously raised concerns about the labour force survey (LFS), the official measure of employment in the UK, which is produced by the ONS. The survey has struggled with a sharp decline in response rates.
01:15pm
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Britain risks missing out on a global plunge in gas prices under Labour’s clean power push, experts have warned.
In a report published on Wednesday, the International Energy Agency (IEA) said supplies of liquefied natural gas (LNG) are expected to swell later this decade as new facilities come online in the US and Qatar.
The organisation said this is likely to spark a potential glut of LNG, triggering a fall in prices across the world.
But analysts warned that British households and businesses could miss out on savings because of the Government’s proposals to shift the electricity system away from gas.
12:43pm
The FTSE 100 was down 0.1pc at lunchtime, falling back from its 10,000 milestone to 9,890.89.
The blue-chip index came under pressure from Tesco, which shed 3.1pc and Experian, the credit data specialist, which declined 3.2pc.
The domestically-focused FTSE 250 was up 0.1pc.
Investor sentiment had improved earlier this week amidst hopes that the US government shutdown will come to an end.
12:15pm
An auction of inflation-linked bonds, sometimes known as linkers, has drawn a record level of demand.
Investors placed over £69bn of bids for £4.25 billion UK debt syndication, beating a previous record of £67.5bn set in March.
The record level of demand from investors eager to purchase the bonds comes amid worries about the UK’s debt sustainability ahead of the Budget this month.
The high level of bids for inflation-linked bonds is likely to fuel criticism of Britain’s decision to link an unusually high proportion of its debt to inflation.
The interest rates on around a quarter of gilts, as UK government bonds are known, are tied to price rises. That compares to around a tenth in the US and France.
It is the last auction of inflation-linked bonds before the Budget on November 26.
Economists expect Rachel Reeves to unveil another round of tax increases to address a black hole in the public finances.
11:44am
UK gilts have been the weakest performers in Europe this morning following the latest political uncertainty.
Kathleen Brooks, research director at broker XTB, said the rise in bond yields today is small compared to the “bond market tantrum in the summer” when there was speculation that Rachel Reeves could be removed as Chancellor.
Brooks said: “The bond yield spike back in July helped Reeves keep her job, the question now is, will a mild reaction to the prospect of Keir Starmer being overthrown as PM embolden his potential successors?
“Reeves and Starmer’s swing to the left on public spending and tax rises has been well absorbed by the bond market so far, since a tax increase could build a structural budget surplus for the UK, even if there is a hit to growth.”
11:21am
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Rachel Reeves by now has a well-worn script when it comes to who’s to blame for the financial mess she’s in: Brexit, Covid, the Tories in general and Liz Truss in particular, Donald Trump’s trade tariffs, bottlenecks in global supply chains and unhelpful investors in bond markets.
“The economic circumstances have declined and deteriorated since a year ago because of those conflicts and because of those trade barriers, and as a result, we are having to look at taxes and spending,” she said in an interview with BBC 5 Live on Monday.
The Chancellor also blamed the upcoming Office for Budget Responsibility (OBR) productivity downgrade on “the past few years, under the last government”, rather than taking any of the blame herself.
10:58am
Demand for oil and gas is expected to continue rising until 2050, according to new projections by the International Energy Agency (IEA).
The IEA had previously forecast that oil demand would level off or fall this decade. However, new estimates from its latest “World Energy Outlook” suggest global consumption will rise 13pc by 2050.
It marks a change from earlier predictions which had signalled a rapid transition to clean energy.
“One major determinant of future oil demand is electrification of the transport sector,” Fatih Birol told Bloomberg.“It will depend on government policies.”
10:35am
UK bonds have underperformed global rivals amid the “additional uncertainty” caused by the leadership drama from Number 10.
The yield on 10-year UK gilts rose four basis points to 4.42pc, a much sharper move than the next largest rise among major markets of around two basis points in Sweden.
Mike Riddell, portfolio manager of the Fidelity Strategic Bond Fund, admitted gilts have “underperformed other global bond markets today”, which he said was “likely linked to a small amount of additional uncertainty”.
He added: “But for context, yesterday saw a big gilt rally, and gilts are still a top performer globally over the last few days and indeed months.”
Julian Jessop, an economist at the Institute of Economic Affairs, said there was “no sign that bond markets are being rattled by talk of a leadership challenge to Starmer”.
10:21am
The pound fell amid concerns that a leadership challenge to Sir Keir Starmer could lead to higher borrowing in Britain.
Sterling was down 0.3pc to $1.312 after Downing Street said the Prime Minister would fight any attempt to oust him after the Budget.
The drop in the pound comes despite a rise in UK bond yields, which usually boost the currency, in a signal that investors were losing confidence.
Jordan Rochester, an analyst at Mizuho Bank, said any veer to the left on spending could lead to more government debt being issued and send the pound down below $1.30 against the dollar.
He said: “For markets, what matters is the spend and tax impact, something the new leader could change in significant ways but would be unlikely to do quickly.”
10:02am
The cost of UK government borrowing rose at the fastest pace among major global markets after Downing Street said Sir Keir Starmer would fight any leadership challenge.
The yield on UK bonds – or gilts as they are known – rose as investors grew worried about the possibility that the Prime Minister and Chancellor Rachel Reeves could be ousted after the Budget.
Sir Keir’s supporters have accused Wes Streeting, the Health Secretary, and Shabana Mahmood, the Home Secretary, of being on leadership manoeuvres.
Mr Streeting denied being at the centre of any leadership plot and attacked a “toxic” culture in Downing Street.
The yield on 30-year UK gilts rose four basis points to 5.21pc, having hit their highest level since 1998 in August. The yield on two-year and 10-year gilts also climbed.
The moves had echoes of the jump in borrowing costs seen in July when the Chancellor made a tearful appearance in the Commons, leading to speculation that she was about to be sacked. Yields came down when she was backed by the Prime Minister.
The moves indicate that bond vigilantes want Sir Keir and Ms Reeves to remain in office over concerns that new leadership could lead to more public borrowing and less control of the nation’s finances.
“It points to the very real risk that the Budget leads to unrest within the parliamentary Labour party, a big market reaction, and the fall of Starmer and Reeves,” said Neil Wilson, an analyst at Saxo Markets.
“Instability with the politics means fiscal instability, which means market instability regarding gilts – perhaps baking in a premium for an even more left-leaning, tax-and-spend government.
“We are heading to a fiscal showdown and political crisis that will show up in volatility in gilts and sterling – potentially a serious wobble in the pound if gilts run.
“The key risk is that if Reeves and or Starmer go then their fiscal rules which have underpinned an easing in gilt yields, would be in serious doubt.”
09:28am
Hong Kong’s benchmark share index ended at a more than one-month high as the record US government shutdown looked on track to end.
Meanwhile, mainland China shares slid, as the Chinese central bank indicated limited appetite for imminent monetary easing, analysts said.
At the close, the benchmark Hang Seng Index rose 0.9pc to 26,922.73 points, the highest close since October 6.
On the mainland market, the Shanghai Composite index slipped 0.1pc to 4,000.14, while the blue-chip CSI 300 index lost 0.1pc.
09:06am
Defence giant BAE Systems pushed for an end to the longest US government shutdown in history, which it warned could delay contract funding and payments if it continues without resolution.
Europe’s biggest defence contractor said that while the lengthy shutdown had not yet had any “material” effects on its US business, there could be an impact on contracts before the end of the year.
It said: “We are encouraged by the momentum in Congress to end the US government shutdown, especially the positive actions of this week.
“To date, we do not see material effects on our US business.
“If the shutdown persists, delays to contract funding and timing of payments before year-end are possible.”
There are hopes the US government shutdown could now be heading for resolution, with a spending bill finally passed by the US senate in a move that could bring it to an end.
But the issue will now moves to the House of Representatives, with the lower chamber of Congress expected to vote this week on the funding measure.
The six-week shutdown has already taken a severe toll on the US economy, with around 1.25 million federal workers missing at least one or two of their salary payments, while thousands of flights have been cancelled and government contract awards have slowed.
BAE Systems shares rose 1.1pc.
08:57am
European shares hit a record high as investors were relieved by a potential end to a historic US government shutdown.
The pan-European Stoxx 600 index added 0.6pc to an unprecedented 583.4 points. The Cac 40 in France rose 0.7pc and the Dax in Germany gained 0.9pc.
Investors globally were hopeful that the US House of Representatives could soon vote to end a government shutdown that has halted economic data that is crucial for policymakers.
08:39am
Taylor Wimpey shares fell as the house builder warned the upcoming Budget was hitting house sales.
The developer dropped by as much as 3.9pc to the bottom of the FTSE 250 as it warned its number of weekly home sales had fallen to 0.63 between June 30 and November 9. This was lower than the rate of 0.71 during the same period last year.
It warned investors: “Reflecting current uncertainty in the housing market ahead of the November Budget, we continue to experience softer market conditions in the second half of the year to date.”
Rachel Reeves is expected to unveil property taxes in the Budget, including a potential new mansion tax and new levies on the sale of homes.
Taylor Wimpey said its order book excluding joint ventures at 7,253 homes, down from 7,771 homes last year. This had a value of about £2.1bn, down from £2.2bn last year.
Chief executive Jennie Daly said: “Market conditions remain challenging, impacted by uncertainty ahead of the upcoming UK Budget and continued affordability pressures.”
08:24am
The FTSE 100 edged higher in early trading as traders continued to bet that the Bank of England will cut rates next month.
The blue-chip index rose by 0.2pc to 9,921.21, although the domestically focused FTSE 250 was flat at 22,146.92.
08:13am
Thanks for joining me. Shares in one of the world’s biggest technology investors plunged after it revealed it had sold its entire stake in Nvidia for $5.8bn (£4.4bn).
SoftBank sank as much as 10.1pc after it disclosed on Tuesday that it had offloaded its entire shareholding in the $4.7tn (£3.6tn) chip giant in October.
While its profits soared as a result of the sale, as much as 3.2 trillion yen (£15.7bn) was wiped off its market valuation during trading today. Shares eventually closed down 3.5pc, delivering a 1 trillion yen (£5.4bn) blow.
Nvidia shares dropped by 3pc on Wall Street, wiping $188.3bn (£143.3bn) off its total worth.
SoftBank’s shares had surged nearly 150pc this year as it is seen as a bellwether for the boom in demand for AI. However, investors have grown concerned about the sky-high valuations of companies in the sector.
Last month Michael Burry, the so-called Big Short investor who predicted the 2008 financial crisis, unveiled a series of bets against major AI stocks including Nvidia.
Executives at SoftBank on Tuesday played down those concerns and insisted the decision to cash in on its Nvidia shares was down to its financing plans. SoftBank needs to raise a vast war chest to fund its proposed investments in AI, including around $30bn on ChatGPT creator OpenAI.
Yoshimitsu Goto, SoftBank’s chief financial officer, said: “I can’t say if we’re in an AI bubble or not.”
He added the stake sale was “nothing to do with Nvidia itself”.
Tomoichiro Kubota, an analyst with Matsui Securities, said: “The company appears to have sold off Nvidia and bet everything on OpenAI — and investor opinions on this move are divided.” Here is what you need to know.
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Net zero goals mean Britain risks missing out on gas price crash | Supplies of LNG expected to swell as new facilities come online in the US and Qatar
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Bank of England claims money-printing spree saved £125bn | Quantitative easing aided public finances by pushing down borrowing costs, says Governor
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Number of benefits claimants who never have to work hits 4m for first time | More than a million foreigners receive Universal Credit, official figures show
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Asda market share hits record low as supermarket’s sales slide | Retailer suffers 20th consecutive month of decline as chief marks year in charge
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Apple caves to China demands to remove gay dating apps | iPhone maker complies with orders from Beijing’s internet regulator to take down Blued and Finka
Asian shares mostly as the US shutdown neared an end and after fresh jobs data boosted the chances of a third successive Federal Reserve interest rate cut.
Japan’s benchmark Nikkei 225 added 0.4pc to finish at 51,063.31.
SoftBank Group’s shares fell 3.5pc, plunging as much as 10.1pc earlier in the day, after it said Tuesday that it sold its entire stake in the AI chip company Nvidia for $5.8bn last month.
Elsewhere in Asia, Hong Kong’s Hang Seng rose 0.8pc to 26,913.90, while the Shanghai Composite edged up less than 0.1pc to 4,006.17.
Australia’s S&P/ASX 200 shed 0.2pc to 8,799.50. South Korea’s Kospi added 1.1pc to 4,151.36.
It comes amid optimism that Washington’s record-breaking shutdown could end as soon as Wednesday, after the US senate passed temporary legislation to reopen the government.
Despite this, US stocks were mixed at market close. The Dow Jones Industrial Average climbed 1.2pc and the S&P 500 was up 0.2pc, but the tech-heavy Nasdaq Composite stumbled by 0.2pc as concerns mount over valuations in the artificial intelligence industry.
Stocks were dragged down by tech players such as Nvidia, with shares in the chipmaker closing down by around 3pc after Japan’s SoftBank sold its entire stake in the business.
Elsewhere, gold prices rose above $4,100 an ounce during early Wednesday morning trading. Oil held steady, with West Texas Intermediate closing at around $61 per barrel after rising 1.5pc on Tuesday and Brent crude at more than $65 per barrel.
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