UK grocery inflation falls to 2.1%
Newsflash: UK grocery inflation has fallen for the 16th month in a row.
Data firm Kantar reports that supermarket prices are 2.1% higher than a year ago this month, a slowdown on the 2.4% annual rise recorded in early May.
UK GROCERY PRICE INFLATION IN 4 WEEKS TO JUNE 9 WAS 2.1%, KANTAR SAYS
— Capital Hungry (@Capital_Hungry) June 18, 2024
Kantar reports that prices are now falling in nearly one third of the grocery categories it tracks, such as toilet tissues, butter and milk.
This slowdown in price rises should bring some relief to households, who were hit by grocery inflation of 17% in March 2023.
But Fraser McKevitt, head of retail and consumer insight at Kantar, warns that the squeeze on budgets isn’t over.
“The cost-of-living crisis isn’t over – far from it. 22% of households say they’re struggling, meaning that they aren’t able to cover their expenses or are just making ends meet.
“However, there are positive signs that many of us no longer feel the need to restrict our spending quite so much, with lower inflation helping to ease the pressure on people’s pockets.”
Key events
FINMA: HSBC Private Bank violated Swiss money laundering regulations
Just in: HSBC’s private bank has been blocked from taking on any politically exposed people as clients in Switzerland, after violating Swiss money laundering regulations.
Swiss financial regulator FINMA has announced that HSBC “seriously violated financial market law” in its handling of high-risk business relationships with two politically exposed people.
HSBC failed to carry out an adequate check of either the origins, purpose or background of the assets involved, FINMA says.
The regulator explains:
The transactions in question were carried out between 2002 and 2015 and amounted to a total of more than $300m.
The funds, which originated from a government institution, were transferred from Lebanon to Switzerland and – generally after a short time – primarily flowed back to other accounts in Lebanon.
FINMA has ordered HSBC to review its anti-money laundering aspects, adding:
The bank may not enter into any new business relationships with politically exposed persons until such time as completion of the reviews has been confirmed by the audit agent.
A strike at Dounreay nuclear power station has been postponed at the last minute, after workers were offered an improved pay deal.
Around 600 workers, employed by Nuclear Restoration Services Limited (NRS), had been due to strike on Wednesday, in a pay dispute.
The Unite union says the action has been suspended “as a sign of good faith” to allow workers to be balloted on a new pay offer. Staff had previously rejected a pay increase of 4.5% plus a one-off £500 payment, the union says.
Unite adds that an overtime ban and an end to working voluntary appointments will continue during the ballot process. If the new offer is rejected by the membership, fresh strike action will be announced.
Bank of America’s survey was carried out between June 7 to June 13, which covered much of last week’s stock market tumble in France.
…[last week] France’s CAC 40 Index fell the most since in over two years and wiped out $258bn in market capitalization.
Investors are anxious about the French national assembly elections because there is a high probability that no party will win an overall majority.
Campaigning for the election began yesterday, when a poll of voting intentions showed that Marine Le Pen’s far-right Rassemblement National (RN) party currently has 33% support in the first round of the French legislative election, while an alliance of left-wing parties would get 28%.
Analysts at UBS suggests there are four possible scenarios for how the elections could play out:
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Scenario 1: Rassemblement National (RN) with Absolute Majority. This would allow RN to appoint a prime minister and comfortably pass laws, though internal government dissension could pose challenges. The RN’s policies focus on new spending for pensioners and household purchasing power, funded by controlling social spending linked to immigration.
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Scenario 2: RN with Relative Majority. RN could become the largest party but with less than 289 seats, leading to a complex cohabitation. With the president appointing a prime minister from RN. This scenario would likely result in political deadlock and limited policy changes.
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Scenario 3: Front Populaire with Relative Majority. The left-wing coalition could win a relative majority, leading to a similar cohabitation scenario with potential deadlock. Their manifesto includes undoing recent pension and unemployment reforms and increasing spending on pensions and purchasing power.
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Scenario 4: Renaissance 2.0. Macron’s party could maintain a relative majority, continuing to face challenges in passing laws without forming alliances. Macron’s policies would focus on household purchasing power and competitiveness, partially funded by labor reforms and localauthority savings.
Bank of America’s Fund Manager Survey also found that global investors remained bullish in June, although inflation remains a top worry.
“‘Higher inflation’ remains the #1 tail risk according to 32% of FMS investors, but down sharply from 41% in May.” – BofA Global Fund Manager Survey pic.twitter.com/GVYQ2rjYFm
— Sam Ro 📈 (@SamRo) June 18, 2024
“Majority of FMS investors (53%) still expect no recession for the US economy in the next 18 months.” – BofA Global Fund Manager Survey pic.twitter.com/M0w8jcDGSZ
— Sam Ro 📈 (@SamRo) June 18, 2024
France has turned into investors’ most unloved European stock market
France has turned into the most unloved European equity market, as political uncertainty spooks investors, according to a regular poll from Bank of America.
BofA’s European Fund Manager Survey found that investors have grown gloomier about Europe’s growth prospects, partly due to the looming French elections.
A net 43% of respondents expect stronger European growth over the coming twelve months, down from 61% last month, which was the highest since July 2021.
Enthusiasm has probably been tempered by “rising French political and economic policy uncertainty”, BofA says, along with rising predictions that the US economy will slow and China’s growth will soften.
This gloominess has prompted a rotation into defensive stocks, and out of those which benefit from a cyclical upturn.
BofA adds:
France has turned into investors’ most unloved European equity market, having been the most preferred last month, while Spain is the biggest favourite.
Data from Bloomberg yesterday showed that London had regained its crown as Europe’s biggest stock market from Paris.
EV maker Fisker files for bankrupcy protection
Overnight, US electric car maker Fisker filed for bankruptcy protection, and hopes to sell its assets, after struggling to challenge Tesla in the EV market.
Fisker has filed for Chapter 11 protection in the District of Delaware, after failing to find a rescue, three months after suspending all manufacture of its electric vehicles.
Fisker suffered a rapid cash burn as it tried to roll out its Ocean SUV cars in the US and Europe.
A Fisker spokesperson says:
“Fisker has made incredible progress since our founding, bringing the Ocean SUV to market twice as fast as expected in the auto industry and making good on our promises to deliver the most sustainable vehicle in the world.
“We are proud of our achievements, and we have put thousands of Fisker Ocean SUVs in customers’ hands in both North American and Europe. But like other companies in the electric vehicle industry, we have faced various market and macroeconomic headwinds that have impacted our ability to operate efficiently. After evaluating all options for our business, we determined that proceeding with a sale of our assets under Chapter 11 is the most viable path forward for the company.”
EV startup Fisker filed for bankruptcy after failing to find a financial savior, the second time a high-profile car company founded by car designer Henrik Fisker has gone bust https://t.co/ObbYg2OUP6 via @WSJ
— Gotham Sixth (@gothamsixth) June 18, 2024
Fisker had tried to keep its costs down by using Austrian contract manufacturer, Magna Steyr, to build its car in Graz.
The company was founded by Danish automotive designer Henrik Fisker, who had previously designed luxury cars for BMW, Ford, and Aston Martin, such as BMW’s Z8 roadster and the Aston Martin DB9 and Vantage cars.
Eurozone inflation confirmed at 2.6%
Just in: We have confirmation that inflation across the eurozone accelerated last month.
The euro area annual inflation rate was 2.6% in May 2024, up from 2.4% in April, statistics body Eurostat reports – confirming its flash estimate at the end of May.
That takes inflation away from the 2% target set by the European Central Bank, which cut interest rates two weeks ago.
Core inflation, which strips out energy, food, alcohol & tobacco, rose to 2.9% from 2.7% (which also matches the initial estimate).
Investors are now pondering how soon the ECB might cut interest rates for a second time this year. Governing council member Boris Vujcic warned yesterday that an interest rate cut in September would require an improvement in the ECB’s inflation outlook.
Vujcic explained:
“In order to do more, we need to see more.
Any prolongation of the inflation conversion toward the medium-term target weakens the case for an interest-rate cut, and vice versa.”
David Hudson, restructuring advisory partner at FRP, warns that many firms are still in a “perilous state of limbo”, despite the slowdown in insolvencies last month:
“Insolvency levels appear to be stabilising, however many businesses still find themselves in a perilous state of limbo. Economic growth has stagnated after a positive couple of months while many investment decisions remain on pause as we await predicted interest rate cuts and the outcome of the general election – a particular risk in sectors like construction where purdah can stall planning decisions.
In this environment, more will continue to falter, and we’re anticipating seeing the profile of those exposed shifting to larger companies – the impact of which will be felt keenly across supply chains. The future of many will be dependent on a stronger second half to the year, with greater economic and political certainty stimulating demand as well as falling input costs.”
UK insolvencies dip in May as cost pressures ease
The number of UK individuals and businesses falling into insolvency has slowed, as pressures from rising costs ease.
Official data shows that 9,266 individuals entered insolvency across England & Wales in May, a 4% drop compared with April (but also 3% more than a year ago).
The Insolvency Service reports there were 604 bankruptcies, 3,716 debt relief orders (DROs) and 4,946 individual voluntary arrangements (IVAs).
DROs are available to those on low incomes, and will freeze, then wipe out, existing debts up to £30,000 on, for example, council tax, rent and energy bills. Their popularity has risen since a £90 fee was scrapped.
Company insolvencies fell by 6% in May, month-on-month, in England and Wales to 2,006, which is 21% lower than in May 2023.
Benjamin Wiles, managing director at Kroll, says the pace of insolvencies seems to be easing:
“Compared to this time last year, we are seeing a pickup in business activity with key indicators showing improving consumer and business confidence. While I think it’s fair to say that we aren’t quite out of the woods, compared to twelve months ago when businesses were managing unpredictable cost inflation and energy bills, it does feel there’s now a lot more certainty for companies to plan.
Interestingly, businesses we speak to are also coming to terms with higher borrowing costs – though there is evidence that some lenders are extending finance rather than restructuring debt.
“Company administrations that we track are up year-on-year, but it does seem the pace of insolvencies are easing. There are some sectors including manufacturing and media and tech, which are continuing to see big increases, but overall it’s now a smaller trickle than a tidal wave.”
