LockBit ransomware group’s leader unmasked and hit with sanctions; UK house prices inch higher– business live (2024)

The Eurozone construction sector struggled in April, with activity falling.

Building firms across the euro area reported that new orders fell sharply last month, leading to a further reduction in construction activity, and cutbacks on employment levels and purchasing activity.

That’s according to S&P Global’s survey of purchasing managers at eurozone construction firms, which has slumped to just 41.9 in April from 42.4 in March. That shows a hefty fall in activity, further from the 50-point mark that splits expansion from contraction.

Construction activity fell again in Germany and France, while in Italy it decreased for the first time in seven months.

The Eurozone’s construction sector appears to be even further from recovery than in March, warns Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, adding:

Civil engineering activity is in a bad state, commercial activity is worse and housing activity looks bleak. While the performance of housing and civil engineering is similarly as bad than in previous months, the crisis in commercial building activity, including offices, has deepened. With the marginal softening of the fall in new orders, any expectation of a near-term recovery seems unfounded.

The development in the Eurozone’s construction sector, which has been rather varied in recent months, is now converging among Germany, France and Italy. However, this convergence is not cause for celebration, as Italy has simply joined the club of countries with a shrinking construction sector. Until recently, Italy had shown surprising resilience linked to the so-called superbonus program and recovery and resilience plan. Both seem to have lost force over the last months, in part because they are running out.

“The most forward-looking indicator of new orders in April is almost as dire as it has been over the past five months. New orders are plummeting rapidly, with Germany leading the downward trend, followed by France and Italy. This trend does not augur well for the near future, indicating that the construction sector’s recession will persist in Germany and France, while beginning to take hold in Italy.

Entertainment giant Disney has hit a landmark today – its streaming business has turned a profit for the first time since the launch of Disney+ more than four years ago.

Disney has report that its “Direct-to-Consumer” division made a profit of $47m in the first quarter of this year, up from a $587m loss in Q1 2023.

It also added more than six million Disney+ subscribers in the quarter, taking the total worldwide to 117.6m

But, Disney’s shares have dropped by more than 5% in pre-market trading.

Kathleen Brooks, research director at XTB, says the results have fallen short of high expectations:

Revenues were $22.08bn, down a touch from the $22.1bn expected. Operating income was 17% higher than a year ago at $3.85bn, vs. $3.51bn expected. Hulu reported higher than expected subscriber figures, however, Disney + subscriber growth did not meet expectations, the total number of subscribers is now 153.6mn, analysts were expecting 155.66mn.

In the cut-throat world of streaming, subscribers mean everything, and if you fall short on this metric, then it can put off investors, which may be the case on Tuesday.

Bob Iger may have won the boardroom battle with Nelson Peltz, but not even higher future guidance for earnings -per – share was enough to stop the market selling Disney on the back of these results.

UK government bonds have been rising in price today, as City investors await hints from the Bank of England as to when interest rates may start to fall.

This has pushed down the yield, or rate of return, on short and long-term UK bonds.

The yield on two-year UK gilts has dropped by 7 basis points, to 4.31% from 4.38% at the end of last week. That’s the lowest since mid-April.

Ten-year gilt yields also hit a three-week low, at 4.61%.

Thirty-year debt (which matures in 2054) has also strengthened, which has pushed down its yield by 10 basis points (0.1 percentage point) to 4.618% from 4.71%.

Mechanistically, bond yields fall when the price paid by investors rises.

Falling bond yields can be a sign that the City is anticipating that central banks will cut interest rates soon – as investors would accept a lower rate of return for holding onto government bonds.

The BoE isn’t expected to cut interest rates on Thursday, but it could offer hints as to how soon it might lower borrowing costs.

Back in the housing market, estate agent Savills predicts today that UK house prices are expected to rise by more than £60,000 over the next five years.

Prices will pick up as Britain’s mortgage crunch eases, Savills argues. More here:

Some good news – household incomes across advanced economies picked up at the end of last year.

New data today shows that real household income per capita in the OECD rose by 0.5% in the fourth quarter of 2023, following a 0.2% fall in the third quarter.

Among G7 members, real household income per capita grew fastest in France (by 0.7%), follwed by the UK with a 0.5% rise.

This real income growth was driven mainly by increased social benefits, the OECD says.

That’s despite the UK falling into recession at the end of last year, with GDP per capita (a measure of living standards) dropping by 0.6% in Quarter 4 2023. UK GDP per capita has not grown since the first quarter of 2022, leaving Britain in a long living standards recession.

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Looking back at today’s UK construction PMI, the survey shows that building firms are hoping that the Bank of England will lower interest rates later this year.

S&P Global’s economic director Tim Moore says:

“Business activity expectations for the year ahead picked up slightly in April, supported by a sustained recovery in new orders, positive signals for sales pipelines, and anticipated interest rate cuts in the second half of 2024.”

The interest rate probabilities market has been volatile this year. Today, it shows that the money markets are anticipating two quarter-point cuts to Bank rate this year, bringing it down from 5.25% to 4.75% by the end of 2024.

The first cut is fully priced in for August, with the second likely in November, or possibly December.

The Bank of England has an attack of the gremlins this morning.

The UK central bank has said today it is postponing an indexed long-term repo operation due to technical problems with the platform markets use to place bids for funds, Reuters reports.

In a message to markets, the BoE said:

“A further screen announcement will be made as soon as possible.”

Repo auctions allows commercial banks to borrow cash from the Bank of England, in return for providing other, less liquid assets as collateral. They’re part of the plumbing of the financial system.

The ongoing slump in UK housebuilding, reported in today’s construction PMI report, is a blow to people looking to get onto the housing ladder, or simply to escape homelessness.

Britain’s large construction firms cut their housebuilding work last year, as the rise in mortgage costs made it harder for buyers to afford new homes. Last December, the government relaxed the housing targets for local authorities in England, which critics warned would lead to less property development.

Last summer, the number of households in temporary accommodation in England hit a record high of 105,750, and in February, housing associations warned that the number of affordable homes being built in London had plummeted by three-quarters in the last 12 months.

Just in: UK construction sector growth has hit a 14-month high, despite a drop in housebuilding.

Data firm S&P Global reports that the UK construction sector gained momentum last month, due to solid rates of expansion in the commercial and civil engineering segments.

This pushed the S&P Global UK Construction Purchasing Managers’ Index, which measures activity, up to 53.0 in April, from 50.2 in March. That’s the highest reading since February 2023, further from the 50-point mark that shows stagnation.

But, the survey also shows a “setback” for house building activity, where the sub-index dropped to 47.6.

The data suggests “a moderate fall in residential building work”, with builders blaming sluggish market conditions and higher borrowing costs.

Tim Moore, economics director at S&P Global Market Intelligence, says:

Lacklustre market conditions in the house building segment continued to weigh on activity. The latest survey pointed to the fastest reduction in residential building work since January, although the speed of the downturn remained much softer than in the second half of 2023.

Hiring trends were subdued in April despite a recovery in workloads, which mirrored trends seen in other part of the UK economy, as construction firms sought to maintain a tight focus on costs against a backdrop of strong wage pressures. Purchasing prices nonetheless increased only modestly in April.

Car sales to UK private buyers fell in April, as demand for vehicles weakened and sales of electric cars to consumers fell.

Industry body SMMT has reported that overall UK new car registrations grew for the 21st consecutive month in April, rising by 1.0% to 134,274 units.

But, that growth was entirely due to sales to fleet operators (such as car rental firms). While fleet registrations jumped by 18.5%, there was a 17.7% drop in sales to private buyers and a 16.1% drop in registrations to businesses

The SMMT reports that electrified vehicles were the main drivers of market expansion again.

Sales of plug-in hybrids (PHEVs) rose by 22.1% year-on-year, followed by hybrid electric vehicles (HEVs) which gres by 16.7%. Sales of battery-powered electric vehicle (BEVs) rose by 10.7%.

But, the increased sales of BEVs was entirely due to business buyers, with sales to consumers falling by almost 22%.

The SMMT says:

While the overall increase in BEV demand is positive, urgent action is needed to re-enthuse private buyers into switching….

Drivers today enjoy the widest ever choice of BEV models – more than 100 – powered by the latest technology, and manufacturers continue to provide compelling offers to encourage their uptake. However, the lack of government incentives for private motorists remains a barrier that cannot be overcome by industry alone.