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Today’s agenda: US soft landing; oil passes $80; Lebanon’s reopened wounds; Google’s court loss; and Harris’s foreign policy
Good morning. We begin with the sharp rise in the UK’s long-term borrowing costs, with the 10-year gilt yield climbing from 3.75 per cent in mid-September to 4.21 per cent yesterday. The gap between yields on gilts and German bonds has also reached its widest in more than a year.
Why gilt investors are rattled: The rise in yields was fuelled by investor fears over reports that Rachel Reeves was planning to relax borrowing rules to fund her October 30 Budget. Analysts said investors were also worried about persistent inflation, with the widening gap with Germany due to expectations the European Central Bank will cut interest rates faster than the Bank of England to boost a sluggish Eurozone economy.
Why it matters: With three weeks to go until the Budget, the chancellor is struggling to find tax rises to fill what she says is a £22bn hole. UK public borrowing has already overshot forecasts this year, partly because of higher than expected spending, and some analysts expect the government will have to sell more gilts in the financial year to March 2025 than the current forecast of £278bn. Bondholders say the UK chancellor will have to walk a “tightrope” if she is to proceed with her borrowing and investment plans without triggering a gilt sell-off.
Here’s what else I’m keeping tabs on today:
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Central banks: ECB board member Isabel Schnabel chairs a keynote session, while US Federal Reserve governor Adriana Kugler gives a speech on global inflation at a monetary policy conference in Frankfurt.
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EU: The bloc’s finance ministers meet in Luxembourg, and commission president Ursula von der Leyen attends a plenary session at the European parliament in Strasbourg.
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US presidential election: Republican candidate Donald Trump participates in a town hall presented by Spanish-language network Univision.
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Nobel Prize: The award in physics will be announced in Sweden.
Five more top stories
1. A top Federal Reserve official said the central bank was now “well positioned” to pull off a soft landing for the US economy and signalled support for a slower pace of cuts after September’s big half-point move. New York Fed president John Williams said the “very good” September jobs report confirmed the US economy remained in robust health. Read the full Financial Times interview.
2. Google has been ordered to open its Android operating system to rivals and allow them to create their own app marketplaces and payment systems to compete with its dominant Play Store. A San Francisco judge ordered the changes yesterday following a successful lawsuit from Epic, the maker of popular video game Fortnite. It is the latest setback to the search giant, which is battling antitrust cases that threaten its core business.
3. Kamala Harris has ruled out meeting one-on-one with Russian President Vladimir Putin to negotiate an end to the war in Ukraine unless leaders from Kyiv are involved. In an interview with CBS News’s 60 Minutes last night, the US vice-president also criticised claims by rival Donald Trump that he would immediately halt the war. Read more on the interview.
4. Oil prices surged above $80 yesterday as fears grew of an escalating conflict in the Middle East and possible supply disruptions in the Gulf of Mexico from Hurricane Milton. There are signs that hedge funds, many of which had been betting on oil extending this year’s falls, are beginning to adjust their positioning.
5. Nearly one in 10 Labour MPs received financial support before the UK general election from Arden, a lobbying firm founded by former Gordon Brown cabinet minister Jim Murphy. While the consultancy is not accused of breaking any rules, its ability to forge close links with a party poised to enter government with only limited formal disclosure raises questions about the adequacy of the UK’s political transparency rules.
The Big Read
While US allies may prefer Kamala Harris’s victory over the presumed unpredictability of a second Donald Trump term, the vice-president would enter the Oval Office with one of the least articulated visions of the world and America’s place in it. Critics of Harris say she is yet to clearly define her foreign policy vision, but the contours of a philosophy are starting to emerge.
We’re also reading . . .
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Exploding pagers: The risk of hardware tampering is rising as companies devote few resources to verifying the origin of components, writes Chip War author Chris Miller.
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Iran: Calls for regime change are becoming louder, but military intervention is not the way to bring about the fall of the Islamic republic, writes Gideon Rachman.
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BBC: The public broadcaster plays a distinct role in preserving British culture. Politicians should be wary of undermining it, writes Stephen Bush.
Chart of the day
Israel has in recent weeks dramatically intensified its campaign against Hizbollah, mounting a relentless barrage of air strikes across the country and a ground offensive in southern Lebanon. The escalation has emptied out sections of the area home to hundreds of thousands of people and reopened wounds of past displacement and occupation.
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Take a break from the news
A small but growing number of skiers are discovering the joys of Svalbard, skiing’s northern frontier more than 1,000 miles above Oslo. At almost 80 degrees North, adventurers are as close to the North Pole as the Arctic Circle. Just watch out for the polar bears.
Additional contributions from Benjamin Wilhelm and Gordon Smith
