Rolling coverage of the latest economic and financial news
Updated
The City of London this week.
Photograph: Hollie Adams/Getty Images
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06:23
UK competition regulators investigates Apple over App Store complaints
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05:42
IFS criticises cliff edge end to universal credit boost
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05:38
Resolution: UK living standards to stagnate even after Covid crisis fades
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05:31
Builders grapple with raw material shortages
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05:12
UK construction returns to growth, as cost pressures mount
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04:28
Worst February since 1959 for UK car sales
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04:10
FTSE 100 drops in early trading
UK competition regulators investigates Apple over App Store complaints
Britain’s competition regulator has launched an investigation into Apple, over whether the technology giant is breaking UK competition law.
The Competition and Markets Authority says it will examine whether Apple is imposing unfair and anti-competitive terms and conditions on software developers who sell their products through its App Store.
The CMA says it will consider whether Apple has a dominant position in connection with the distribution of apps on Apple devices in the UK – and, if so, whether Apple imposes unfair or anti-competitive terms on developers using its App Store — leading to users having less choice or paying higher prices for apps and add-ons.
The move follows complaints from developers about the terms imposed by Apple, and the commission charges they face.
The CMS explains that developers who offer ‘in-app’ features, add-ons or upgrades must use Apple’s payment system, which charges commission of up to 30%.
The CMA hasn’t decided whether Apple is breaking the law, but says complaints about the company ‘warrant careful scrutiny’:
Andrea Coscelli, Chief Executive of the CMA, said:
Millions of us use apps every day to check the weather, play a game or order a takeaway. So, complaints that Apple is using its market position to set terms which are unfair or may restrict competition and choice – potentially causing customers to lose out when buying and using apps – warrant careful scrutiny.
Our ongoing examination into digital markets has already uncovered some worrying trends. We know that businesses, as well as consumers, may suffer real harm if anti-competitive practices by big tech go unchecked. That’s why we’re pressing on with setting up the new Digital Markets Unit and launching new investigations wherever we have grounds to do so.
Competition & Markets Authority
(@CMAgovUK)We’re investigating complaints about Apple’s terms and conditions for third party developers on its App Store.
This is just the initial stage of our investigation and we have yet to reach any conclusions.
Read more: https://t.co/5QK5Am6B3V pic.twitter.com/eJb0EEdFXU
Competition & Markets Authority
(@CMAgovUK)Our investigation will consider Apple’s market position, and whether it’s imposing unfair and anti-competitive terms on developers.
Find out more: https://t.co/fpUu3xVG2l
Updated
IFS criticises cliff edge end to universal credit boost
One of the UK’s leading thinktanks has criticised Rishi Sunak’s plans for an abrupt end to the £20 a week increase in universal credit, calling the decision not to phase out the uplift “remarkable.”
In its post-budget analysis, the Institute for Fiscal Studies contrasted the way in which the furlough, stamp duty holiday, the cut in VAT and business rates support were being phased out, with the cliff edge for universal credit (UC) in September.
Paul Johnson, the IFS’s director, said pressure would mount to maintain the £20 a week increase, even though it would cost the Treasury £6bn a year.
“It is, by the way, remarkable that while the chancellor felt the need for a gradual phase out of furlough, business rates support, stamp duty reductions and VAT reductions he is still set on a cliff edge reduction in UC such that incomes of some of the poorest families will fall by over £80 between one month and the next. Whatever the case for cutting generosity into the longer term, if you’re going to do so the case for doing it gradually rather than all at once looks unanswerable.”
Resolution: UK living standards to stagnate even after Covid crisis fades
Analysis of Rishi Sunak’s budget is pouring in this morning, with warnings that household incomes face a painful squeeze.
My colleague Jasper Jolly explains:
The real earnings of UK workers will fall this year and remain stagnant after that even as the economy recovers from the coronavirus pandemic, according to analysis of the budget that suggests the government will oversee one of the worst periods for UK living standards on record.
Incomes will lag behind inflation during 2021-22 – meaning living standards will drop – and will only rise by an average of 0.3% annually over the course of the next four years, according to the Resolution Foundation, an independent thinktank.
It will be the worst inter-election period for real household disposable income on record, barring the short parliament of 2015-17, when David Cameron and then Theresa May were prime ministers. That parliament was marred by a spike in inflation following the Brexit referendum result.
The overnight analysis of Wednesday’s budget suggested that Rishi Sunak, the chancellor, will have significantly more work to do if the government is to improve UK living standards – or to reach his stated goal of reducing the share of public net debt relative to GDP.
Worst February since 1959 for UK car sales
Just 51,312 new cars were registered last month, which is 28,282 fewer than in February 2020 – when the pandemic was just starting to hit Europe. It’s the worst February since 1959, the Society of Motor Manufacturers and Traders reports, with Covid-19 restrictions meaning showrooms were closed, and commuters continue to work from home.
SMMT
(@SMMT)New car registrations drop -35.5% as lockdown depresses demand ahead of ‘new reg’ monthhttps://t.co/2Cd10eCgMr pic.twitter.com/SKl2girMwX
More concerning, however, is that these closures have stifled dealers’ preparations for March with the expectation that this will now be a third successive dismal ‘new plate month’. Although we have a pathway out of restrictions with rapid vaccine rollout, and proven experience in operating click and collect, it is essential that showrooms reopen as soon as possible so the industry can start to build back better, and recover the £23 billion loss from the past year.”
Car buyers also moved towards greener vehicles: Battery electric (BEVs) and plug-in hybrid vehicles (PHEVs) accounted for more than one in eight registrations, up from just 5.7% in February 2020.
Updated
FTSE 100 drops in early trading
The London stock market is in the red this morning, as those worries about rising government bond yields hit stocks.
The FTSE 100 index is down 50 points or 0.75% at 6625 points, wiping out most of the budget day rally (travel, hotel and pub chains and banks jumped as the furlough scheme, and the lower VAT rate for hospitality, were extended).
Mining companies are having a rough day, with Rio Tinto down 6% and BHP Group off 5%.
Wednesday’s fall in government bond prices (pushing up yields, or interest rates) is raising fears that inflation pressures could force central bankers to tighten monetary policy, hitting growth (and thus demand for commodities).
Scottish Mortgage Investment Trust, a big investor in tech stocks, has fallen 6.5% following the Nasdaq’s slide last night.
Other European markets are softer too, with Germany’s DAX dropping back from record highs yesterday.
Kyle Rodda of IG says rising bond yields are back in focus….
After steadying since the start of the week, it appears that we have returned to watching the bond yields climb as the US 10-year Treasury yields rose to 1.48% levels into the Wednesday US session.
In turn, this had invited the jitters back to the foreground as the likes of the Dow and the S&P 500 indices closed lower after commencing the session wobbling between gains and losses.
Deliveroo picks London for float
Food delivery services Deliveroo has announced it has chosen London for its hotly anticipated stock market debut, in a boost to the City.
The move comes just a day after the government endorsed recommendations for a relaxation on the UK’s stringent stock market rules, designed to encourage fast-growing technology firms to pick London rather than an overseas market.
A review by Lord Jonathan Hill, former EU financial services commissioner, recommended a wide range of reforms to loosen listing rules in the UK.
Deliveroo, which has boomed during the pandemic lockdown, says;
“After eight years of operations and rapid expansion around the globe, choosing London underlines Deliveroo’s commitment to making the United Kingdom its long-term home.”
Deliveroo is planning to use a dual-class share structure for the first three years of listing, and then move on to a single-class structure.
The FT explains:
Deliveroo said in a statement on Thursday morning that its dual-class structure would be “closely in line” with the Hill review’s recommendations and be limited to three years. However, the changes are unlikely to come into force before it has completed its IPO, with initial paperwork expected to be filed as soon as next week.
Companies with dual-class structures can already trade on the LSE’s standard listing. Once the new rules are in place, Deliveroo would be able to move up to a premium listing. A person close to the company said that the Hill review was also likely to attract more tech companies to London, making it more attractive as a listing venue overall.
Updated
Metal prices are also dropping today:
CN Wire
(@Sino_Market)The most active zinc futures in Shanghai slide 3%.
LME zinc futures falls 1.2% to $2,752/ton.#zinc #LME #futures pic.twitter.com/uhFZEcJy5m
Introduction: Bond yield worries weigh on markets
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Another bout of bond yield jitters are weighing on the markets today, just a day after chancellor Rishi Sunak’s budget highlighted that UK government borrowing is at a post-war high, with debt to its highest level in sixty years.
European markets have opened lower as a rise in bond yields rattled markets across Asia.
Japan’s Nikkei has fallen 2%, while China’s CSI 300 slumped 3% in a volatile session.
Investors are once again looking nervously at the bond market, where last night benchmark 10-year U.S. Treasuries rose to 1.477% — back towards the one-year high of 1.614% seen last week.
Jim Reid of Deutsche Bank says these bond market gyrations are worrying:
Global risk appetite was subdued, with equity markets moving lower, especially in the US. As we’ve been saying for a while now I suspect this huge liquidity and recovery story is going to repeatedly lock horns against the risk of higher inflation and higher yields in 2021. This year won’t be for the faint hearted.
By the close, US Treasuries had witnessed another big selloff, with 10yr yields up +8.9bps to 1.481%, marking the 3rd biggest daily increase we’ve seen so far this year, with the moves higher driven by increases in both real rates (+6.6bps) and inflation expectations (+2.5bps).
Last night, the US Nasdaq index slumped 2.7%, extending its recent losses as tech shares took another hammering (Apple fell 2.5% while Tesla shed almost 5%).
Joe Rokop
(@jr_strikezone)Bonds have become the main event for the stock market, and today was no exception. Stocks were were down substantially for a second straight day. The Nasdaq Composite fell 2.7%, giving the tech-heavy index a two-day decline of 4.3%. The S&P 500 was off 1.3%. #barronsonline
Bonds are under pressure for good reasons — predictions of a strong economic recovery aided by government stimulus and progress in vaccination programmes. But if bond prices keep falling, then the cost of borrowing to cover the cost of the pandemic will rise.
UK borrowing costs are still low — the 10-year gilt is trading below 0.8%, meaning London can borrow pretty cheaply for the next decade.
But as the OBR reported yesterday, UK public sector net borrowing is forecast to reach 16.9 per cent of GDP (£355 billion) this year, its highest level since 1944-45.
That pushes the national debt to 100.2 per cent of GDP, its highest level since 1960-61, with further rises ahead:
Office for Budget Responsibility
(@OBR_UK)Headline debt peaks at 109.7% in 2023-24 but historically low interest rates make it relatively cheap to finance.
However, the recent rises in market interest rates highlight this significant risk to the public finances#Budget2021 pic.twitter.com/nHikhlMD3e
The OBR calculates that an increase in interest rates of 1% would increase debt servicing costs by £20bn — wiping out all the tax revenues which hiking corporation tax to 25% will bring in.
But…. if those rising interest rates are driven by better growth, then tax revenues should rise broadly, and automatic stabilisers (lower welfare payments) should kick in too.
The agenda
- 9am GMT: UK car sales for February
- 9.30am GMT: UK construction PMI for February
- 1.30pm GMT: US weekly jobless claims