Donald Trump promised to cut inflation – markets expect the opposite

Published

3 hours ago

November 6, 2024

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Donald Trump’s victory was secured on an unequivocal promise to stretched American households that he would “end inflation”, but markets and economists are anticipating his second term will do the opposite.

A combination of corporate tax cuts, government borrowing, lower migration and swingeing tariffs on overseas imports are all expected to heat up the American economy and stoke price rises.

Bond yields on 10-year US Treasuries, effectively the price of borrowing for the American government, were up by 3.6% overnight, rising more than 15 basis points to above 4.4% as European markets opened.

That signals investors believe that borrowing will rise, and the Federal Reserve will be forced to slow rate cuts in order to tackle inflation.

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A clearer picture will emerge on Thursday when Federal Reserve chairman Jay Powell, who Mr Trump said will not be reappointed, announces the next move on rates.

Markets still expected a 0.25 percentage point cut (a similar move to that anticipated from the Bank of England earlier in the day) but Mr Powell’s comments will be scrutinised for signals of what Trump 2.0 means for the prospect of further cuts.

But higher prices for consumers are not necessarily bad news for corporate America, with the dollar surging against sterling and the euro as swing states fell to Mr Trump, and Wall Street futures trading indicating a rally when they reopen with him confirmed as president-elect.

Shares in US banks were boosted with J.P. Morgan, Goldman Sachs and Morgan Stanley all up more than 6% in pre-market trading, along with Tesla, boosted by more than 13% as markets anticipate a dividend for Elon Musk’s campaign-trail support.

Defence stocks were higher too and not just in the US – BAE Systems and Rolls Royce were both up – reflecting likely pressure on America’s NATO allies to make good on their commitments to increase spending.

Bitcoin was also positive in anticipation of a more benign regulatory environment from a president who used the campaign platform to launch his own cryptocurrency.

By contrast renewable holdings, the target of much of Joe Biden’s economic stimulus, were in negative territory, with wind and solar priorities likely to be replaced by a pledge to “drill baby, drill”.

Of most concern to America’s trading partners and allies will be Mr Trump’s promise to erect barriers to free trade.

The man who said tariffs “is the most beautiful word in the world” has pledged a 60% levy on Chinese imports and 10% on those from elsewhere, a deeply protectionist move that could trigger a trade war with China and the EU.

These can only increase prices in the US, with importers paying the levies at the point of entry, and other trading blocs likely to respond in kind.

The EU has already imposed its own 35% tariff on Chinese EVs to the dismay of the continent’s carmakers the measure is intended to protect.

While these tensions play out, post-Brexit Britain, a relatively small player outside the major trading blocs, is likely to be a spectator.

Business

Cambridge semiconductor company at Forefront of investors’ thoughts

Published

3 hours ago

November 6, 2024

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Cambridge semiconductor company at Forefront of investors’ thoughts

A Cambridge semiconductor company has defied the tough funding environment for early-stage businesses by securing £16m to fuel its expansion.

Sky News understands that Forefront RF, which was set up in 2020, will announce this week that it has raised the money from new venture capital backers Octopus Ventures and Cambridge Innovation Capital, as well as existing investors BGF and Foresight Group.

Forefront RF is a fabless semiconductor company which makes multi-band smartphones, wearable and Internet of Things-connected devics simpler to design.

Its technology aims to solve some of the challenges presented by printed circuit board (PCB) size limitations, enabling mobile devices to manage complex radio frequency environments.

The Series A fundraising takes the total sum raised by Forefront RF to nearly £25m.

The company employs 17 people, and intends to use the new capital to support a major product launch in 2026.

Ronald Wilting, Forefront RF chief executive, said its innovation would “help device manufacturers create smaller, more powerful wearables that support a wider range of communication bands”.

Mr Wilting, a former executive at Ericsson and Qualcomm, joined the company in 2022.

“[Forefront RF’s] patented technology will revolutionise how mobile devices are designed, reducing complexity, and streamlining supply chains,” said Owen Metters, investor at Octopus Ventures.

“The continuing proliferation of cellular-enabled devices means there is a significant opportunity for technology such as [the company’s flagship product] ForetuneTM.”

Business

Post Office campaigner Sir Alan Bates says he is yet to receive reply to letter to PM

Published

1 day ago

November 5, 2024

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Post Office campaigner Sir Alan Bates says he is yet to receive reply to letter to PM

Post Office campaigner Sir Alan Bates is yet to receive a reply from Sir Keir Starmer, despite writing to him over a month ago.

Sir Alan said he had written to the prime minister to remind him the “clock is still ticking” on a financial redress deadline for victims.

In his letter, he demanded a March 2025 deadline for compensation for sub-postmaster victims of the Horizon scandal.

Sir Alan confirmed to Sky News he was yet to hear back from the prime minister.

“It was over a month ago,” he said.

“I sent him a reminder yesterday. I told him the clock is still ticking and it’s now five months from the March deadline, which I’m told is still achievable by other professionals.

“So let’s get on with it, that’s all we want. Get on with it.”

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Business

Vodafone and Three merger could get green light, says UK’s competition watchdog

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1 day ago

November 5, 2024

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Vodafone and Three merger could get green light, says UK's competition watchdog

A £15bn merger between two of the UK’s biggest mobile networks could get the green light – if they stick to their commitments to invest in the country’s infrastructure, the competition watchdog has said.

The Competition and Markets Authority (CMA) said the merger of Vodafone and Three had “the potential to be pro-competitive for the UK mobile sector”.

Announced last year, the proposed £15bn merger would bring 27 million customers together under a single provider.

The watchdog previously warned that tens of millions of mobile phone users could end up paying more if the merger went ahead.

However, the two groups recently set out plans to protect consumer pricing and boost network investment.

The CMA has now laid out a list of “remedies” required for the deal to go-ahead.

They include the networks committing to freezing certain tariffs and data plans for at least three years to protect customers from short-term price rises in the early years of the network plan.

Stuart McIntosh, chair of the inquiry group leading the investigation, said on Tuesday: “We believe this deal has the potential to be pro-competitive for the UK mobile sector if our concerns are addressed.

“Our provisional view is that binding commitments combined with short-term protections for consumers and wholesale providers would address our concerns while preserving the benefits of this merger.

“A legally binding network commitment would boost competition in the longer term and the additional measures would protect consumers and wholesale customers while the network upgrades are being rolled out.”

Today’s announcement is provisional, with a final decision due before 7 December. The inquiry group is inviting feedback on today’s announcement by 5pm on 12 November.

The CMA also published a list of potential solutions – which it called remedies – to issues it identified with the merger.

If the networks want the merger to go ahead, the watchdog requires Vodafone and Three to:

• Deliver a joint network plan to set out network upgrades and improvements over eight years;

• Commit to keeping certain existing tariff costs and data plans for at least three years to protect customers from price hikes;

• Commit to pre-agreed prices and contract terms so Mobile Virtual Network Operators (MVNOs) – mobile providers that do not own the networks they operate on – can obtain competitive wholesale deals.

Vodafone and Three are two of the biggest mobile firms in the UK, and their networks support a number of MVNOs including Asda Mobile, Lebara, Voxi, and Smarty.

Responding to the watchdog’s announcement, a spokesperson for Vodafone on behalf of the merger said: “The merger will be a catalyst for positive change.

“It will bring significant benefits to businesses and consumers throughout the UK, and it will bring advanced 5G to every school and hospital across the country.

“The merger is also closely aligned with the government’s mission to drive growth and to encourage more private investment in the UK.”

Earlier this year, Three’s chief executive hit out at the UK’s “abysmal” 5G speeds and availability as he urged regulators to approve the company’s merger with Vodafone.

Robert Finnegan noted his firm’s “cash flows have been negative since 2020 and our costs have almost doubled in five years, meaning investment in [the] network is unsustainable”.

“UK mobile networks rank an abysmal 22nd out of 25 in Europe on 5G speeds and availability, with the dysfunctional structure of the market denying us the ability to invest sustainably to fix this situation,” he added.