1 year ago
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Key events
Spain’s service sector enjoyed modest growth in December for a second month, with growth in jobs, while cost inflation eased noticeably.
The monthly business activity index from S&P Global rose to 51.6 last month from 51.2 in November, above the 50 mark that divides expansion from contraction. This marked the strongest growth in the service sector since July.
Service firms in Spain were willing to take on more staff for a third month running. Input price inflation eased to its lowest level since August, but prices overall are still increasing at a substantial pace, the survey showed.
Paul Smith, economics director at S&P Global Market Intelligence, said:
The Spanish service sector more than held its ground at the end of year, registering back-to-back rises in activity and new business. Although modest, when viewed through the prism of widespread cost pressures and ongoing economic uncertainty, the latest data point to reasonable sector performance, even more so when we add in another month of employment gains.
However, ongoing high inflation and reports of suppliers seeking to repair margins add to worries that price pressures will remain elevated and weigh on activity and consumption for some time to come. Indeed, this remains the overwhelming worry for many firms at the start of 2023, and as a result, confidence in the outlook remained historically subdued.
French inflation slows
In France, inflation slowed to 6.7% in December compared with 7.1% in November – but not as much as economists expected. They had pencilled in a drop to 6.4%.
The preliminary figures were released by France’s statistics office Insee. That’s inflation measured by the harmonised index of consumer prices, an internationally comparable measure. The national consumer price index rose by 5.9% in December, following November’s 6.2% annual rate.
French inflation is far below that seen in the UK (10.7% in November) and Germany, where provisional figures yesterday showed inflation cooled to to 8.6% in December, from 10% in November and 10.4% in October.
The French government has moved quickly to cap energy prices, which have risen a lot less than in the UK as a result. This hasn’t come cheap – it is reportedly spending more than €85bn on energy support measures.
In the UK, a typical household energy bill has been capped at £2,500 a year, but this is still a lot more than people paid before the energy crisis.
European shares perform hat-trick
While US indices were hit by the tech rout yesterday, European shares have performed a hat-trick, rising for the third day in the new year.
The German Dax and the Spanish Ibex both rose 0.6% in early trading, the French CAC was up 0.7% and the FTSE MiB gained 0.5%. The broader Euro Stoxx index also advanced 0.6%.
In London, the FTSE 100 index, which was closed on Monday for the New Year’s bank holiday, eked out a 0.15% gain this morning, rising 10 points to 7,565. Prime minister Rishi Sunak will set out his priorities for 2023 in a speech later today.
Tesla sells off 12%, Apple's market value falls below $2tn in tech rout
In yesterday’s tech rout on Wall Street, Tesla shares slumped 12%, the latest sell-off after a bad year for the electric carmaker’s share price.
Apple shares fell 3.7%, and its market value dropped to $1.99bn. Its value declined by a staggering $1tn over 2022, with investors worrying about disruption to its China-based factories.
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, says:
On Wall Street stocks started the year on a downbeat note, with Tesla and Apple leading the pack downwards amid worries that sales will take a hit as consumer wariness rises during the downturn. The minutes of the latest Federal Reserve meeting will be devoured later, in a search for clues about how much higher rates will go, before policymakers consider pressing the pause button.
Naeem Aslam, chief market analyst at trading platform Ava Trade, says:
Tesla’s stock price plunged another 12% and continued its year-long sell-off that took place in 2022. Of course, the primary reason behind the fresh sell-off was its car delivery numbers which were much softer than the market expectations. Wall Street was expecting the number to be near the 427K mark for the fourth quarter of the last year when the company reported 405,278K. If you look at the numbers, the difference isn’t ocean’s apart. The softness in the numbers can be blamed to a number of factors, such as higher inflation which has made consumers wary about their spending. Higher interest rates is another factor that consumers are mindful of before committing to a monthly payment.
Smart money believes that most of the bad news for Tesla is already priced in, such as the shaky deal that Elon Musk announced about buying Twitter for $44bn, which made him to sell a large portion of his stock in Tesla. In addition, Elon has been distracted or less focused on the company’s core product due to the stress of taking another company under his wing. Allocation of sources from Tesla to Twitter and the process of finding an appropriate CEO for Twitter.
Introduction: UK chancellor expected to meet business leaders to discuss energy support
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The UK chancellor, Jeremy Hunt, is expected to meet with business groups at lunchtime to discuss the government’s energy support after March. Business leaders fear the government will halve its help with energy bills.
The Federation of Small Businesses, UK Hospitality, the CBI and the British Chambers of Commerce are all expected to attend the meeting, the BBC reported.
There is more disruption on the railway as people return to work after the Christmas break, the second of five days of rail strikes. Only one in five UK train services is expected to run today.
Food prices in the UK jumped to a record rate in December, prompting warnings of “another difficult year for consumers and businesses” as inflation shows no immediate signs of waning. The British Retail Consortium said annual food inflation rose to 13.3% in December from 12.4% in November.
It explained that high prices for animal feed, fertiliser and energy fed into higher food prices on supermarket shelves, and warned that consumers would probably face further increases in 2023. Non-food items became slightly cheaper as retailers offered discounts to try and shift stock, and the overall shop price inflation figure eased a little, to 7.3% from 7.4%.
On Wall Street, technology shares sold off on Tuesday led by Tesla. Its shares slid 12% on fears about weakening demand and logistical problems, after the electric carmaker missed market expectations for fourth-quarter deliveries despite shipping a record number of vehicles.
Apple’s share price also suffered and ended the day 3.7% lower, taking its market value below $2 trillion. It’s in stark contrast to the beginning of last year, when the iPhone maker became the only company ever to reach a $3tn valuation. Investors are worried about disruptions to its factories in China because of the Covid wave there.
The Nasdaq closed 0.76% lower while the S&P 500 lost 0.4%.
In Asia, Japan’s Nikkei dropped 1.45%, while Hong Kong’s Hang Seng rose 2.8% and the Australian and South Korean markets gained about 1.6% each.
For financial markets, the main event today is the release of the minutes of the US Federal’s December meeting, when it raised interest rates by 50 basis points and cautioned rates may need to remain higher for longer.
The Agenda
7.45am GMT: France inflation for December (forecast: 6.4%)
8.45am GMT - 9am GMT: Italy, France, Germany, Eurozone S&P global services PMIs final for December
9.30am GMT: UK Mortgage approvals and consumer credit for November
3pm GMT: US ISM Manufacturing PMI for December (forecast: 48.5)
7pm GMT: US Federal Reserve minutes
English (US)