Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
Having missed out on the Nobel Peace Prize, again, Donald Trump is unlikely to trouble the scorers in Stockholm today when the economics equivalent is handed out.
Instead, Trump’s Middle Eastern conflict is proving – to no-one’s surprise – that high energy prices fuel inflation, and that geopolitical instability hurts growth.
Just this morning, a new report shows that UK businesses are facing the sharpest inflation pressures in three years, due to rising energy, fuel and raw material costs.
Accountancy and advisory firm BDO has reported that its inflation index rose to 103.65 in September, up from 102.18 in August and its highest reading since June 2023.
These elevated costs and weakening demand are putting renewed pressure on firms ahead of the Autumn Budget, BDO warns.
Their report has also found that output fell across UK manufacturing and services last month as domestic demand softened.
Scott Knight, head of growth at BDO, says:
“Businesses head into this Budget with one clear message: no surprises. Cost pressures continue to squeeze margins, hiring intentions are low and growth is starting to plateau.
Firms are not looking for grand interventions, but they do need certainty. Right now, concerns about further downside risks outweigh expectations of positive change.”
The oil price has dropped slightly this morning, though, after Trump declared that Ukraine and Russia have agreed to halt attacks on each other’s energy facilities following the US diesel-supply deal with Moscow announced on Friday night.
Brent crude had been down around 2% a few hours ago – but it’s now just 0.25% lower at $104.46 a barrel, a fairly small move really.
Kyle Rodda, senior financial market analyst at Capital.com, explains why:
A highly contentious US deal with Russia to allow the export of more diesel to ease pressure in the market for the critical industrial fuel helped slightly with optics.
But the true impact is piecemeal, especially as Middle East refining remains heavily compromised and Ukrainian forces strategically strike Russian refineries.
The agenda
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All day: Paris Motor Show
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From 10.45am BST: Nobel Prize for economics announced
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2pm BST: Russia’s trade balance for August
Stocks have opened higher in London this morning, where the FTSE 100 share index is up 53 points, or +0.5%, at 10,604 points.
Banks are leading the risers, with HSBC up 2.1% and Standard Chartered 1.8% higher.
The Fight Inequality Alliance is calling on finance ministers attending the IMF/World Bank meeting in Bangkok to consider debt cancellation measures to help the Global South.
They insist that “the era of austerity is over”, and demand an end to the lending rules that force governments to pay creditors before they pay for hospitals, schools and food.
FIA General Secretary Jenny Ricks said:
“The IMF and World Bank are legacy institutions still writing the economic rules for the rest of the world. Their austerity programmes force governments to cut funding from hospitals and schools while every dollar sent to creditors is a dollar taken from a classroom, a clinic or a family’s food budget. Cancel the debt, tax the super-rich, and stop making ordinary people pay for a crisis they didn’t create.
“Bangkok will deliver more of the same. The era of the IMF and World Bank is over. Workers, teachers, nurses and young people from Nairobi to Jakarta are already building an economy for the 99% and they are not waiting for permission”.
The FIA says it is calling for governments to:
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Cancel debt. Wipe out the debts crushing poorer countries, and make every lender take the hit, from banks and hedge funds to the IMF and World Bank.
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End austerity. No more cuts to schools and hospitals. Tax the richest instead.
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Tax the super-rich. Back a global tax on billionaires and the new UN tax treaty.
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Stop selling off public services. The World Bank should fund free public healthcare and education, not push their privatisation.
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Give poorer countries a real say. The IMF and World Bank are run by rich countries. Every country deserves a fair vote.
UK chancellor John Healey is pledging to push for more international cooperation as he heads to Bangkok for the Annual Meetings of the International Monetary Fund and the World Bank.
The Treasury says Healey will use this week’s Annual Meetings to make the case that Britain and its allies can face of up to global shocks and must work together to limit the damage of conflict at home.
Healey says:
“The consequences of conflict in the Middle East and Europe are hitting countries worldwide, leading to higher prices at the pumps and more expensive mortgages at home, but Britain and our allies can face up to these challenges together.
“I will work with our international partners to keep trade moving, support families and businesses, and make Britain’s economy stronger and more resilient to deliver good growth in every postcode.
“My Budget will build on this approach with fiscal discipline helping to deliver economic resilience. This means breathing space for today, and hope for the future.”
The surge in inflation following the start of the Iran war has taken a bite out of the UK’s spending plans, the Institute for Fiscal Studies (IFS) is warning this morning.
The IFS has calculated that chancellor John Healey is facing a funding gap of up to £35bn, as rising inflation has eroded the value of government departments’ cash budgets, and also driven up government borrowing costs.
They warn today that Healey’s budget later this month risks being a “work of fiction” unless he sets out plans to cover these spending pressures, including the demand to spend more on defence.
Here’s the full story:
The biggest prize in economics, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, will be awarded today.
Known as the Nobel Prize in Economics (although it’s not one of the original Nobels), the winner(s) will be announced at the Royal Swedish Academy of Sciences in Stockholm from 10.45am UK time.
The prediction markets can give some indications about who is under consideration.
Leading the betting on Polymarket, at 30% this morning, is David Autor, professor of economics at the Massachusetts Institute of Technology.
Autor is a labour economist, who has examined how technology changes the world of work, and shown how computerization has increased skill-based wage premia in the US.
Another potential winner is Ariél Pakes, the Thomas Professor of Economics at Harvard University, currently a 19% chance on Polymarket.
Pakes’s work has focused on developing methods to empirically analyze market responses to environmental and policy changes, such as mergers and deregulation.
Pakes’s contributions to economics include the Berry–Levinsohn–Pakes (BLP) approach to demand estimation – which analysed how consumers choose between different producrs, and how a merger might push up prices.
Third, at 12%, is Susan Athey, the Economics of Technology Professor at Stanford Graduate School of Business.
Athey, the former consulting chief economist for Microsoft, was the first woman to win the John Bates Clark Medal (awarded to the top economist under the age of 40). Her research work has focused on auctions, developing the empirical models which underpin them.
There’s also some interest in American macroeconomist and monetary theorist Michael Woodford (currently 10%) – he’s one of the architects of modern forward guidance, the idea that central banks can control the economy through influencing public expectations about inflation, rather than just through interest rates.
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
Having missed out on the Nobel Peace Prize, again, Donald Trump is unlikely to trouble the scorers in Stockholm today when the economics equivalent is handed out.
Instead, Trump’s Middle Eastern conflict is proving – to no-one’s surprise – that high energy prices fuel inflation, and that geopolitical instability hurts growth.
Just this morning, a new report shows that UK businesses are facing the sharpest inflation pressures in three years, due to rising energy, fuel and raw material costs.
Accountancy and advisory firm BDO has reported that its inflation index rose to 103.65 in September, up from 102.18 in August and its highest reading since June 2023.
These elevated costs and weakening demand are putting renewed pressure on firms ahead of the Autumn Budget, BDO warns.
Their report has also found that output fell across UK manufacturing and services last month as domestic demand softened.
Scott Knight, head of growth at BDO, says:
“Businesses head into this Budget with one clear message: no surprises. Cost pressures continue to squeeze margins, hiring intentions are low and growth is starting to plateau.
Firms are not looking for grand interventions, but they do need certainty. Right now, concerns about further downside risks outweigh expectations of positive change.”
The oil price has dropped slightly this morning, though, after Trump declared that Ukraine and Russia have agreed to halt attacks on each other’s energy facilities following the US diesel-supply deal with Moscow announced on Friday night.
Brent crude had been down around 2% a few hours ago – but it’s now just 0.25% lower at $104.46 a barrel, a fairly small move really.
Kyle Rodda, senior financial market analyst at Capital.com, explains why:
A highly contentious US deal with Russia to allow the export of more diesel to ease pressure in the market for the critical industrial fuel helped slightly with optics.
But the true impact is piecemeal, especially as Middle East refining remains heavily compromised and Ukrainian forces strategically strike Russian refineries.
The agenda
-
All day: Paris Motor Show
-
From 10.45am BST: Nobel Prize for economics announced
-
2pm BST: Russia’s trade balance for August
