Wall Street at record high after US inflation falls to 3.4%; takeover offer for Royal Mail raised – as it happened | Business

Core US inflation also eased last month.

The all items less food and energy index rose by 3.6% over the 12 months to April, today’s inflation report shows, down from 3.8% in the year to March.

On a monthly basis, core inflation slowed to 0.3% in April alone, having risen by 0.4% in the preceeding three months.

The inflation report adds:

Indexes which increased in April include shelter, motor vehicle insurance, medical care, apparel, and personal care. The indexes for used cars and trucks, household furnishings and operations, and new vehicles were among those that decreased over the month.

Newsflash: Inflation across the US has slowed, bringing some relief to American families and perhaps reassuring America’s central bankers that price pressures are easing.

The consumer price index rose by 3.4% in the year to April, down from 3.5% in March.

That’s in line with Wall Street forecasts.

In April alone, prices rose by 0.3%, a slowdown on March when they increased by 0.4%.

Rising costs of housing, and fuel, were both key factors behind inflation last month.

The Bureau of Labor Statistics says:

The index for shelter rose in April, as did the index for gasoline. Combined, these two indexes contributed over seventy percent of the monthly increase in the index for all items.

The energy index rose 1.1 percent over the month. The food index was unchanged in April. The food at home index declined 0.2 percent, while the food away from home index rose 0.3 percent over the month.

Back in the UK, digger maker JCB, owned by the billionaire Bamford family, continued to build and supply equipment for the Russian market months after saying it had stopped exports because of Vladimir Putin’s invasion of Ukraine, the Guardian can reveal.

Russian customs records show that JCB, whose owners are major donors to the Conservative party, continued to make new products available for Russian dealers well after 2 March 2022, when the company publicly stated that it had “voluntarily paused exports” to Russia.

The data raises questions about the accuracy of JCB’s statements on its business in Russia and relationship with its biggest dealer there, Moscow-based Lonmadi, and that company’s former owner, UK-based JVM group.

JCB has repeatedly said that it stopped exporting products to Russia and JVM companies after 2 March 2022 – less than a week after Putin sent troops into Ukraine.

However, customs records collated by a trade data provider show the serial numbers of dozens of vehicles, worth millions of pounds, which appear to have been supplied to companies in Russia after that date.

When the Guardian presented a sample of those records to the Staffordshire-based manufacturer, it admitted that JVM continued to collect diggers from JCB’s factories for months after the voluntary pause, but said that was due to contractual obligations.

JCB also confirmed that the manufacturing of some of the equipment continued after that date.

JCB’s lawyers said: “Any collection of goods by a JVM company after 2 March 2022 was pursuant to contractual obligations already entered into and completed or substantially completed prior to that date.”

The company also denied any inconsistency or inaccuracy in its public statements.

More here:

Tensionis rising in the financial markets as global investors await the latest US inflation report, due in 30 minutes time.

As covered in the introduction, economists are expecting a slight slowdown in the rising cost of living.

The US CPI inflation rate is forecast to slow to 3.4% for April, down from 3.5% in the year to March.

Core inflation, which excludes volatile food and energy costs, is forecast to slow to 3.6%, which would be the lowest level in three years, from 3.8% in March.

Traders are very keen to see signs that price pressures are easing, having driven global stock markets to record highs today (see here) on hopes that a slowdown in inflation will allow interest rates to be cut this year.

Jens Magnusson, chief economist at SEB, says there is cautious optimism for a slight decline in core inflation, but also nervousness in the markets.

Magnusson explains:

For three months in a row, we have had US inflation disappointments. Combined with continued strong growth and an almost overheated labour market, this has led to a dramatic shift in the view of the Fed and the possibility of US interest rate cuts.

At the beginning of the year, market pricing was leaning towards as many as seven interest rate cuts in 2024; now the expectation is a maximum of two. Many experts are asking if today’s figures confirm inflation is stuck at too high levels or will they provide hope, that Q1 was a temporary delay on the road to a permanently lower inflation.

There’s another shake-up at artificial intelligence pioneer OpenAI.

Ilya Sutskever, OpenAI’s co-founder and chief scientist, has left the artificial intelligence start-up, six months after the turmoil that saw CEO Sam Altman fired and rehired amid a staff revolt.

Sutskever has posted that he will now work on “a project that is very personally meaningful to me about which I will share details in due time”.

Sutskever was a crucial part of OpenAi’s growth – the company was valued at $80bn earlier this year, and launched a powerful new chatbot model this week.

Altman has posted that Sutskever’s departure is “very sad” news.

Sutskever will be succeeded by Jakub Pachocki as OpenAI’s new chief scientist; Altman described Pachocki as “also easily one of the greatest minds of our generation”.

Jan Leike, another senior researcher at OpenAI, has also announced his departure from OpenAI, posting “I resigned” on X.

Leike had been the co-lead of OpenAI’s superalignment group, which worked on ensuring that AI systems act in the human interest if/when they surpass human-level intelligence.

BoE warns banks to prepare for shocks

Kalyeena Makortoff

The Bank of England has fired a warning shot at UK banks and building societies after an 18-month review of more than 70 lenders found firms were ill-prepared for a severe shock that could put their finances at risk.

A letter sent by the Bank’s Prudential Regulation Authority to CEOs and board members this morning said firms had failed to create severe enough stress tests and as a result, did not have sufficient recovery plans.

The letter warned:

“Our review found that a number of firms did not use scenarios of sufficient severity, which will limit the effectiveness and value of the testing.”

It added that:

“…although many firms understand the basics of recovery planning, there are significant areas for improvement, most notably related to the development of recovery scenarios and the calculation of recovery capacity.”

The thematic review is the first of this scale conducted by the PRA, and covered unnamed non-systemic banks (so that includes smaller challengers, beyond the big lenders like NatWest, Barclays, HSBC, Lloyds, Standard Chartered, the UK arm of Santander, Nationwide building society and Virgin Money UK that are stress tested every year).

The PRA said it would now be pushing firms to improve their stress testing and recovery plans over the next six months.

“We will engage collectively with firms and trade associations as appropriate to discuss the findings of this letter in 2024 H2 and we will include this as a topic for discussion at the June CEOs conference. Firms are expected to consider the actions outlined above and update their recovery plans to meet expectations.”

The International Energy Agency (IEA) has cut its forecast for oil demand growth this year, due to weakening demand.

The Paris-based energy watchdog has lowered its growth outlook for 2024 by 140,000 barrels per day (bpd) to 1.1 million bpd, largely citing weak demand in developed OECD nations.

In its latest monthly report, the IEA says that “weak deliveries, notably in Europe” pushed demand across the OECD into contraction in the first quarter of this year.

It says:

Poor industrial activity and another mild winter have sapped gasoil consumption this year, particularly in Europe where a declining share of diesel cars in the fleet were already undercutting consumption.

The IEA adds that the health of global oil demand will probably be “a key topic for discussion” when OPEC+ ministers meet in Vienna on 1 June.

The European Commission has warned that external economic risks to Europe’s economy have risen in recent months, due to the ongoing Russia-Ukraine war and the Israel-Gaza conflict.

In its new spring forecasts, the EC says that risks originating from outside the EU have increased in recent months amid “two ongoing wars in our neighbourhood and mounting geopolitical tensions”.

It says:

Global trade and energy markets appear particularly vulnerable. Moreover, persistence of inflation in the US may further delay rate cuts in the US, but also beyond, resulting in somewhat tighter global financial conditions.

On the domestic front, EU Central Banks may also postpone rate cuts until the decline in services inflation firms

The EC also says that Europe’s economy staged a comeback at the start of the year, following a prolonged period of stagnation, with growth of 0.3% in the last quarter (see previous post).

It is sticking with its forecast that the eurozone will grow by 0.8% this year, but trimmed its forecast for growth in 2025 to 1.4%, slightly lower than the 1.5% predicted in February.

But it has also lowered its inflation forecasts. Eurozone inflation, which averaged 5.4% last year, is forecast to slow to 2.5% this year, and then 2.1% in 2025 – virtually back to the European Central Bank’s target.

Paolo Gentiloni, Commissioner for Economy, says:

The EU economy perked up markedly in the first quarter, indicating that we have turned a corner after a very challenging 2023.

We expect a gradual acceleration in growth over the course of this year and next, as private consumption is supported by declining inflation, recovering purchasing power and continued employment growth.

But, Gentolini adds, “downside risks have increased” as “two wars continuing to rage not far from home”.

Just in: We have confirmation that the eurozone escaped recession at the start of this year, but not as briskly as the UK managed.

Data provider Eurostat has reported that eurozone GDP rose by 0.3% in the January-March quarter, in line with its flash estimate last month. That follows two quarters in which the eurozone shrank by 0.1%, which put it in a technical recession.

Among major eurozone economies, Germany avoided recession by growing by 0.2% in Q1 2024, a growth rate matched by France, while Spain grew by 0.7 and Italy by 0.3%.

The UK expanded by 0.6% in the January-March quarter, beating both the eurozone and the US which grew by 0.4%.