Stocks mixed as pound falls to 14-month low after bond sell-off

The latest retail industry data showed that shop prices continued to fall in December, driven by heavy discounting.

According to the BRC-NielsenIQ shop price index, deflation was 1.0%, compared to deflation of 0.6% in the previous month.

Within that, non-food deflation was -2.4%, its most since April 2021. Food inflation was 1.8%, unchanged on November but still the lowest rate since December 2021.

Helen Dickinson, chief executive of the British Retail Consortium, said:

Black Friday was on 29 November last year, compared to 24 November in 2023. Retailers tend to discount heavily in the build-up to the event and then maintain the cheaper prices into the following week.

Dickinson continued:

Prices of the UK’s most popular used electric and hybrid vehicles rose in the final three months of 2024 in a sign that the recent market volatility is easing, according to the latest AA used car index.

The average cost of the top 20 most searched for EVs and hybrids on AA Cars crept up 1% to £19,143 in the three months to December, compared with a 16% annual drop in the third quarter of 2024.

Despite the recent increase, prices are still 10% lower than the same period in 2023, following a long period of depreciation after a surge of fleet-owned EVs into the second-hand market.

• See more : CWB reports fourth quarter and full year 2024 financial performance

  The biggest price risers since the third quarter of 2024 are the Lexus RX (9%), Toyota Camry (7%) and Toyota Prius (6%), while the Toyota Yaris remains the most loved of all EVs and hybrids on the platform.

• As for the biggest fallers among the top 20 over the past year, the Nissan Leaf has plummeted 23% in value since the final quarter of 2023, while the Renault Zoe and Mitsubishi Outlander are down 22% and 20% respectively.

Prices for the most sought-after petrol and diesel cars have held up better over the past year, falling by just 4% to £17,364 in the final quarter of 2024.

Compared with the previous quarter — July, August, September — average prices have seen a slight decrease of 1%, down from £17,560.

• The Vauxhall Corsa holds on to top spot as the most popular used car at the end of 2024, ahead of the Nissan Qashqai and Ford Fiesta.

• Offering the best value for money currently are Ford Transits (-19%), Volvo XC40s (-18%) and Ford Fiestas (-13%), which have all registered double-digit price falls over the past year.

Tesco (TSCO.L), the UK’s largest supermarket, saw its “biggest ever Christmas”, UK and Ireland like-for-like sales, excluding fuel and VAT, up 3.7% over the six weeks to 4 January and record trading in the week before Christmas.

It said sales over its third quarter before the Christmas period lifted 2.8% across the 13 weeks to 23 November, with sales up 3.1% in total over the 19 weeks to beginning of January.

The grocer benefited from investments in prices as customers switched to the chain. Recent industry data from Kantar revealed Tesco’s market share reached a nine-year high of 28.5% in the 12 weeks to 29 December.

Boss Ken Murphy said Tesco would “do our very best” to keep prices low in the face of a raft of cost increases linked to the autumn budget.

“What I won’t say is there will be no inflation, but we’ll do out very best to minimise the impact.”

The latest research from The Global Payroll Association (GPA), revealed that it takes the UK’s top 1% of earners just 39 days to earn the nation’s average annual salary.

GPA’s analysis of earnings data from the Office for National Statistics showed that: –

• The average UK salary stands at £28,932 per year.

• Meanwhile, the average salary for the UK’s top 1% of earners stands at £186,120 per year.

• With approximately 253 working days in a year, after accounting for weekend days and public holidays, this means the top 1% rake in an average of £735.65 per day.

• Therefore, it takes the top 1% just 39 working days to earn what the average person makes in an entire year.

• This means that by 26 February 2025, while the majority of people are still settling into the year and the Christmas decorations are still waiting to be returned to the loft, the UK’s highest paid workers will have already surpassed the full year’s earnings for the average person.

Traders are reducing bets on the number of UK interest rate cuts this year as markets are spooked by a falling pound as government borrowing costs rise.

Money markets indicate that policymakers will only reduce the Bank Rate once this year, compared to two cuts being priced in at the start of the year.

Jim Reid, an analyst at Deutsche Bank, said:

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Greggs (GRG.L) has revealed that sales growth slowed at the end of last year with sales at its company-managed shops up 2.5%, compared to full-year sales growth of 5.5%.

It also warned that it faces more challenging market backdrop and headwinds as UK consumer confidence falls.

Weaker consumer confidence hit high street footfall meaning fewer visits to its stores.

Roisin Currie, chief executive, said:

Shares slipped 10% in London on the back of the news.

Experts in the City are comparing the current bond sell-off to the days after Liz Truss’s mini-budget of 2022. Long-term borrowing costs are now higher than in the Truss panic.

See more : Fed ‘dot plot’ shows central bank will cut interest rates 2 more times in 2025

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says “the UK’s demons are back”, driven by heightened fiscal concerns – which are “evoking memories of Liz Truss’s chaotic ‘mini-budget days.’”

He added:

Last night, chancellor Rachel Reeves insisted she had an “iron grip” on the nation’s finances, with a Treasury spokesperson declaring:

The pound (GBPUSD=X) hit a 14-month low against the dollar in early trading in London today. Sterling lost a cent against the US greenback, extending its recent losses and falling below $1.23 to its lowest level since November 2023.

It comes as a rise in borrowing costs this week continued to spook the markets. The yield, or interest rate, on benchmark 10-year UK debt rose by 12 basis points in early trading in London to 4.921%, the highest since 2008.

Thirty-year bond yields, which hit 28-year highs this week, are rising again too, currently up over 10 basis points to 5.474%.

Kyle Rodda, senior financial market analyst at Capital.com, said:

Adding pressure to this, the US dollar has been strengthening in value, pushing US bond yields higher, and raising bond yields in anticipation of potentially inflationary policies from Donald Trump.

Asian stocks were mostly lower overnight after UK and US stock indices ended on a mixed note.

The Nikkei (^N225) fell 0.9% on the day in Tokyo as Japan reported strong wage growth for November which might help persuade its central bank to raise interest rates.

The dollar also slipped against the Japanese yen. A dollar bought 157.78 yen, down from 158.36 late Wednesday.

The Hang Seng (^HSI) lost 0.2% in Hong Kong and the Shanghai Composite (000001.SS) was 0.6% down by the end of the session.

South Korea’s Kospi (^KS11) ended the session flat despite strong gains for technology companies and carmakers.

Across the pond on Wall Street the Dow Jones (^DJI) rose 0.3% to 42,635.20, the S&P 500 (^GSPC) rose 0.2% to 5,918.25 and the Nasdaq Composite (^IXIC) fell 0.1% to 19,478.88.

It came a day after strong reports on the economy stirred up worries that inflation and interest rates may remain higher than expected.

In the bond market, benchmark 10-year US Treasury notes yielded as much as 4.73%, a peak since April 2024, and were 4.7% last night. They were up from 4.69% late on Tuesday.

US markets will be closed today to observe a National Day of Mourning for former president Jimmy Carter.

Good morning, and welcome back to our markets live blog. As usual we will be taking a deep dive into what’s moving markets, and all that’s happening across the global economy.

Here’s a quick look at what’s on the agenda for today:

• 7am: Trading updates: Tesco, Hilton Foods, Marks and Spencer, Unite, Greggs, B&M

• 10am: Eurozone retail sales for November

• 12.30pm: Challenger survey of US job cuts in December

• 1.30pm: US Wholesales Inventories

• 4pm: Bank of England policymaker Sarah Breeden gives speech