Gold hits record high and bitcoin breaks $40,000; Spotify to cut headcount by 17% – business live | Business

UK mortgage borrowers, and those with childrem face higher interest rates

Jeremy Hunt, chancellor of the exchequer, then takes the stage at Resolution Foundation’s event on the need for a new economic strategy for Britain.

And he gets a reminder of political mortality, with Zanny Minton Beddoes, editor-in-chief of The Economist, introducing Hunt as “at least for the moment” the man in charge of sorting out the UK economy.

Hunt presses for a clarification, can’t we say “subject to the next election”?

“Subject to the next election, blah blah blah”, Minton Beddoes concedes.

But then she asks Hunt for his view of why the UK is in such a mess – how much blame should the government take?

Hunt replies that it’s wrong to take the view that the UK has been an outlier.

We were been hit by the worst financial crisis since the second world war, he points out, adding that since 2010 the UK has grown faster than Spain, Portugal, France, Italy, the Netherlands, Austria, Germany and Japan.

Hunt says:

It’s absolutely right to say ‘why have we all fallen into this low-growth paradigm and what can we do to get out of it?’

But I don’t think this is something we are uniquely in a bad situation with respect to.

This is affecting all westen nations, and you have to have a plan to get out of it.

Q: We have been doing significantly worse, though, if you look at living standards over the last 15 years. Is there anything, with hindsight, you’d have done differently?

Hunt prefers to talk about what he’s doing now. He says productivity is the key to raising living standards, and points to his decision in the autumn statement to make ‘full expensing’ permanent (allowing businesses to offset investment against their tax bills).

That will help lift business investment by £20bn a year, Hunt says, closing half of the gap between the UK and France, Germany and the US.

The chancellor then claims that the UK has the most untapped potential to become the most prosperous 21st century economy.

Why? Partly because the UK’s introspection, and also because the UK’s potential in technology and innovation.

Q: But what’s your growth strategy?

Hunt says he wants to improve productivity, by increasing business investment

Secondly, you need a very clear view as to where the UK’s competitive advantage lies. Outside the US, it has the best higher education sector, and the best financial sector, he says.

He says it needs to focus on innovation, to create a world-beating technology sector and a new Silicon Valley.

Our Politics Live blog has more coverage, here:

Here are some more highlights from Resolution Foundation’s report into the UK economy.

It shows that the UK is the second-biggest services exporter in the UK, after the US, but ahead of Germany and France:

But here’s the damage caused by over a decade of relative economic decline:

Back in the crypto market, Bitcoin is still trading at an 18-month high.

Bitcoin is up over 7%, and has traded as high as $41,800, the highest since April 2022.

Rania Gule, market analyst at broker XS.com, say the prospect of bitcoin exchange-traded fund winning approval (as has been oft-rumoured) is one factor:

The cryptocurrency market is now eagerly anticipating the impact of both Fear of Missing Out (FOMO) and Fear, Uncertainty, and Doubt (FUD) regarding the expected approval dates for the Exchange-Traded Fund (ETF).

I believe developments in the Bitcoin ETF will influence the current upward trend, pushing it towards $50,000. This is especially true with signs of slowing inflation, and investors gaining confidence that the Federal Reserve has concluded its series of interest rate hikes. Attention has shifted to expectations of potential interest rate cuts next year, supporting the current rise in global markets.

Resolution Foundation’s Torsten Bell then shows the impact of the UK’s wage stagnation since the financial crisis of 2008.

He shows a graph showing that French middle-income households are now 9% richer than middle- income British households. German households are 20% richer.

Most people think of those countries as ones we’re similar too, but we are not any more.

The squeeze is worse for low-income households, Bell says.

The typical poor French and German household is 27% richer than its UK counterpart, or about £4,500 per year.

That’s why many families struggled to cope with the cost of living crisis, as they didn’t have any spare money to cover the jump in prices of essential goods.

Resolution Foundation conference on UK economy underway

In London, the stock market has opened lower, failing to follow gold’s lead.

The FTSE 100 index down 39 points or 0.5% at 7490 points, having ended at a six-week high on Friday.

Mining stocks are among the big fallers on the blue-chip index, with Anglo American down 3%, although the biggest faller is gambling group Flutter (-3.5%).

Small rival 888 Holdings, which owns William Hill, is up 13% though, leading the FTSE 250 index of medium-sized firms, after the Sunday Times reported it had been the target of a £700m approach from gambling tech provider Playtech.

Victoria Scholar, head of investment at interactive investor, comments:

The M&A speculation has skyrocketed shares in William Hill’s parent company today which is trading up by around 13%. 888 currently has a market cap or around £355 million, sharpy below the reported offer price from Playtech.

Shares in 888 have had a tough time this year, shedding over 20% year-on-year even after today’s surge and 50% in the past five years, highlighting the potential for an opportunistic takeover. Playtech is not the only party reported to be interested – in November, the Financial Times reported that US betting group DraftKings was also eyeing up a bid for 888 over the summer.

888 has suffered a series of setbacks lately with a profit warning in September, UK regulatory headwinds amid a clampdown on player safety, and a series of C-suite changes including the departure of its former CEO in January which sent shares tumbling at the time.”

It’s worth keeping an eye on gold, says market strategist Bill Blain of Shard Capital, after it hit its record high this morning.

Blain says:

Gold has hit new record dollar levels – reflecting not just current uncertainty, but also the de-dollarisation narrative and it’s attractions as an inflation and market hedge, and long-term value.

He argues there are very good reasons to include gold as part of a diversified asset portfolio, especially in uncertain times.

He writes:

Let’s get the “desirability” and emotional aspects out the way. I am told a significant influence on the price of gold is the weather – a good monsoon in India means farmers buy more bangles for their daughters’ weddings from the gold souks. It is beautiful. It is lustrous. It is unblemished. It is Gold. Always believe in… Gold! There will always be demand for gold for personal adornment – which is pretty much irrelevant when it comes to its proposition as an investment asset.

As an investment in its own right gold performs well; over the last 50 years Gold prices have risen over 3000%, compared to a 3500% gain in the S&P 500. However, in periods of financial instability gold outperforms stocks – notably over the past 20-years even though the prices of financial assets were artificially juiced by the effects of zero interest rates! In terms of risk, companies come and go, but Gold is forever. If the world remains unstable – and no reason to think it won’t – then gold should be front and centre on your radar – no matter how archaic you consider it.

Victoria Scholar, Head of Investment at interactive investor, points out that Spotify’s share price has more than doubled this year – but that hasn’t prevented today’s job cuts,

She writes:

“Spotify is planning to reduce its total headcount by approximately 17% across the company, equivalent to around 1,500 positions, having already laid off 6% of its staff in January. The digital music service said it wants to right size its costs in order to achieve its financial goals.

In October, Spotify reported improving financials – better than expected monthly active users and subscribers as well as its first quarterly profit since 2021. In an expensive move, it has been investing heavily in the expansion of its podcast business. Plus it has been grappling with ‘dramatically’ slowing economic growth, a weak consumer backdrop and ballooning costs.

Shares in Spotify could open higher today, extending this year’s sharp rebound with the stock up over 120% year-to-date.

However shares are still trading substantially lower than their covid-era highs after a painful period for price action between the 2021 highs and the lows at the start of this year after the 2022 ‘tech-wreck’.”

Spotify staff will learn quickly today if they are in the 17% of staff losing their jobs.

CEO Daniel Ek said in his message to staff this morning:

If you are an impacted employee, you will receive a calendar invite within the next two hours from HR for a one-on-one conversation.

These meetings will take place before the end of the day tomorrow.

Those losing their jobs will receive an average of five month’s pay as severance (although the precise amount will depend on local notice period requirements and employee tenure), plus all unused vacation will be paid out too.

Spotify to cut headcount by 17%

In the eurozone economy, Germany’s trade performance has deteriorated again.

German exports fell by 0.2% in October compared with the previous month, dashing hopes of a 1.1% rise.

Geeman imports contracted too, down 1.2% compared with September.

On an annual basis, statistics office Destatis estimates that exports decreased by 8.1% and imports fell by 16.3% compared with October 2022.

Investors don’t appear to be listening to the warnings coming from central bankers that it’s too early to cut interest rates. Or they don’t believe them.

As well as the weakening US dollar, we’ve seen bond prices rally over the six weeks or so, pushing down bond yields.

The market is pricing in earlier and more aggressive cuts from the central banks and inflation appears set on a path lower, says Mohit Kumar, chief economist europe at investment bank Jefferies.

That’s despite efforts on both sides of the Atlantic to push back against this narrative.

Las Friday, Federal Reserve chairman Jerome Powell insisted it would be “premature to conclude with confidence” that interest rates have now peaked, or to speculate on when they might be cut.

Some analysts are predicting that gold could continue to push higher, adding to the record high of $2,111/ounce set this morning

UOB’s Head of Markets Strategy, Global Economics and Markets Research, Heng Koon How, told CNBC:

“The anticipated retreat in both the USD and interest rates across 2024 are key positive drivers for gold,”

He estimated that gold prices could reach up to $2,200 by the end of 2024.

Everett Millman, chief market analyst at Gainesville Coins, also sees more short-term gains, saying:

“Gold has had a Santa Claus rally and I expect that to continue until the end of this year.

Full story: Bitcoin over $40,000

Introduction: Gold at all-time high on rate cut hopes