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Other European stock markets are also pushing higher, extending yesterday’s rally. France’s CAC is 0.6% ahead while Italy’s FTSE MiB has climbed more than 1%. The pan-European Euro Stoxx index has risen by 0.5%.
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The FTSE 100 index in London is bucking the trend, down by 0.2% or 17 points at 8,737.
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Germany’s borrowing costs are still rising after the prospective partners in the next German government agreed on Tuesday night to loosen the controversial debt brake to allow higher spending on infrastructure and defence.
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The yield, or interest rate, on the 30-year German government bond has risen by 8 basis points to 3.15% this morning, after jumping by 25bps at one stage yesterday. The yield on the 10-year bond is up by 10bps to 2.886%.
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The yield on the two-year UK government bond, known as gilt, is also surging, rising by 11bps to 4.396%, the highest since 21 January.
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Interest rate expectations have shifted in the UK. Financial markets are no longer fully pricing in two rate cuts by the end of the year, predicting 45 basis points of reduction from the current 4.5% base rate by December.
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The shift came during yesterday’s Treasury select committee hearing, when Bank of England governor Andrew Bailey and other policymakers discussed the economic outlook.
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Meanwhile, the British Chambers of Commerce (BCC) is predicting “a long and challenging year for UK businesses”.
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It has become more gloomy about the growth outlook for the UK and said firms will struggle to invest as they deal with a raft of rising cost pressures.
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The business lobby group now expects the UK economy to grow by 0.9% this year, revised down from its previous forecast of 1.3%. This year’s limited growth will be driven largely by increased day-to-day government spending. Growth is expected to accelerate slightly in 2026 to 1.4%, but that is also slightly down from the last forecast of 1.5%.
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With businesses facing increased cost pressures following the autumn’s budget, inflation is now expected to remain above the Bank of England’s target until the last quarter of 2027. Inflation is forecast to be 2.8% by the end of this year, up from 2.2% in the last forecast, before falling to 2.1% by the end of 2026 and 2% in the fourth quarter 2027. The BCC expects unemployment to rise to 4.6% by the end of this year, from 4.4% now.
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With stubborn inflationary pressures in the economy, the BCC is forecasting the Bank of England will continue to take a cautious approach to interest rate cuts. It expects just one cut in the base rate to 4.25% by the end of 2025, rather than two cuts to 4% as previously forecast. The rate is seen falling to 4% in 2026. No further cuts are then predicted through to the end of 2027.
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Vicky Pryce, chair of the BCC Economic Advisory Council, said:
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This is going to be a long and challenging year for UK businesses. The BCC’s forecast shows an economy struggling without the secure foundations to kickstart business investment.
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Inflation will continue to be stubborn this year forcing the Bank of England to keep interest rates relatively high. Global uncertainties will add further dark clouds to the economic climate.
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Businesses can’t simply rely on the promise of long-term strategies from government, they need support now to invest, recruit and trade.
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Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
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The pound has risen further to the heady heights of $1.29. It’s now trading above that level at $1.2916, the highest in four months and up nearly 0.2%.
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Sterling has been boosted by a general slide in the US dollar, and a brighter mood in markets following a reprieve on US tariffs and the prospect of higher infrastructure and defence spending in Europe, led by Germany.
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The dollar slid further against a basket of major currencies, after news that Donald Trump will exempt carmakers from 25% tariffs on Canada and Mexico for a month as long as they comply with free trade rules.
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The euro also continues its rally and has hit a four-month high against the dollar, amid optimism sparked by Germany’s proposed €500bn infrastructure fund and overhaul of its borrowing rules. The European single currency rose by 0.3% to $1.0820 for the first time since 7 November.
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Asian stock markets bounced, led by Hong Kong’s Hang Seng, up by 3.06% while Japan’s Nikkei climbed by 0.77%. In China, the Shanghai Composite rose by 1.17% while the Shenzhen Composite gained 1.77%.
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The South Korean Kospi added 0.7%, despite news that a pair of fighter jets accidentally dropped eight bombs in a civilian district during a military exercise. Fifteen people were injured, two of them seriously.
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European discounter Pepco Group said it is evaluating all strategic options to separate its struggling 825-store Poundland business in Britain this year, including a potential sale.
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Ahead of an investor day, the Warsaw-listed group, which also owns the Pepco and Dealz brands, said it will focus on the Pepco brand “as the single future format and engine driver of group earnings”.
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Pepco said in December it was considering options for the Poundland chain after it booked a €775m impairment charge, plunging the group to an annual loss of €662m.
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Group like-for-like sales were up 1.5% in the eight weeks to 2 March, “with a strong performance from Pepco and Dealz offset by continued challenges at Poundland”.
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The agenda
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8.30am GMT: Eurozone HCOB construction PMI
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9.30am GMT: UK S&P Global Construction PMI
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10am GMT: Eurozone retail sales for January
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1.15pm GMT: European Central Bank interest rate decision (quarter point cut forecast)
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1.30pm GMT: US trade for January, initial jobless claims for week of 1 March
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1.45pm GMT: ECB press conference
\n 2.45pm GMT: ECB staff macroeconomic projections - \n
3.15pm GMT: ECB president Christine Lagarde speech
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8.15pm GMT: Bank of England policymaker Christine Mann speech
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Important Events
Beijing has also adopted a rebellious attitude in the face of new US tariffs.
China's Foreign Ministry has promised that China will “fight to the end” the US in “customs, trade wars, or other wars,” marking China's strongest rhetoric against President Donald Trump since he entered the White House.
On Tuesday, Trump has imposed an additional 10% tariff on Chinese products and has placed a cumulative obligation on 20%, said Lin Jiang, a spokesman for China's Ministry of Foreign Affairs. We advise the United States to clean up the faces of bullying and return to the correct trajectory of dialogue and cooperation as soon as possible. ”
Comments on “other wars” were shared on X by a spokesman for the Ministry of Foreign Affairs. The post was then reposted by the Chinese Embassy in the United States. The embassy reiterated its message, “If war is what we want, then whether it's a tariff war, a trade war, or another kind of war, we are ready to fight to the end.”
Bank of England Governor Andrew Bailey warned yesterday that Donald Trump would pose a “substantial” threat to the UK economy after he imposed a 25% tariff on Canada and Mexico and a 10% tax on China.
Bailey said imbalances such as China's current large account surplus should be addressed in “multilateral forums” rather than bilateral.
Ultimately, the biggest impact of the trade war could be on measures of productivity, economic efficiency, according to bank rate setters. For example, increasing productivity through the introduction of new technologies will allow the economy to expand without increasing inflation.
The breakdown of transatlantic “information sharing” can have a major impact on productivity growth. Huw Pillthe Bank of England chief economist told MPS of the Treasury Select Committee.
“Relationships are broken” is how Canadians responded to Trump's tariffs.
“Since Trump began his “joking” about tariff threats against Canada and making Canada the 51st US state, I have not purchased a single product that has occurred in the US.” Lynn Araldach78, retired employer of New Brunswick, Canada.
“It's not a single lettuce leaves and fruits. I've become an avid reader of the label and adopted a 'US' policy when I shop. I will not visit the state while Trump is in office. Most of the people I know have adopted the same policy. ”
An acquaintance sold holiday property that he had owned for many years.
Lawson Whiting, CEO of Jack Daniel's maker Brown Forman, yesterday said that the Canadian province had removed us from store shelves was a “disproportionate response” to Levy imposed by the Trump administration, saying it was “worse than tariffs.”
Several Canadian provinces have removed US liquor from store shelves as part of retaliation against Donald Trump's tariffs.
“I mean, that's worse than tariffs because it's literally taking away your sales. [and] Whiting said on his call after the proceeds.
European stocks extend profits, bond yields jump again
The German stock market is expanding, with Frankfurt's DAX rising 1.1%. Investors were cheered on by what economists call Berlin's “big bazookas.”
Other European stock markets have also risen, extending yesterday's rally. France's CAC is 0.6% ahead, while Italy's FTSE MIB has risen by more than 1%. Pan-European Euro STOXX index is up 0.5%.
London's FTSE 100 index backs a trend of 0.2% or 17 points down at 8,737.
Germany's borrowing costs are still rising after the next future German government partner agreed on Tuesday night to loosen the controversial debt brakes and slow the rise in spending on infrastructure and defense.
The yield on German government bonds for 30 years, or interest rates, jumped at 25bps at one stage yesterday, up 8 basis points this morning to 3.15%. The 10-year bond yield increased by 10bps to 2.886%.
The yield on UK government bonds over two years, known as GILT, has also skyrocketed, the highest since January 21, rising 11bps, up 4.396%.
The expected shift in the UK rate. BCC predicts “a long and challenging year for UK businesses.”
Interest rate expectations have changed in the UK. Financial markets are expected to be completely priced by the end of the year with two rate cuts, with a 45 basis point reduction from the current 4.5% base rate by December.
The change came when Bank of England Gov. Andrew Bailey and other policymakers discussed the economic outlook at a hearing yesterday at the Treasury Selection Committee.
Meanwhile, the UK Chamber of Commerce (BCC) predicts a “long and challenging year for British companies.”
The UK's growth outlook is getting darker, saying companies will struggle to invest as they will deal with rising costs.
Currently, the Business Lobby Group expects the UK economy to grow by 0.9% this year, revised from its previous 1.3% forecast. This year's limited growth will be driven primarily by increased daily government spending. Growth is expected to accelerate slightly in 2026 to 1.4%, but that's also slightly down from the last 1.5% forecast.
As businesses face increased costs following their fall budget, inflation is expected to exceed the Bank of England targets until the last quarter of 2027. Inflation was 2.8% by the end of this year, falling from the last forecast of 2.2% to 2.1% by the end of 2026, and falling to 2.1% per quarter in 2027. 4.4% now.
Stubborn inflationary pressures in the economy have led the BCC to forecast the Bank of England. By the end of 2025, only one base rate will be reduced to 4.25%. This rate is seen falling to 4% in 2026. No further reductions are expected until the end of 2027.
Vicki PriceChairman of the BCC Economic Advisory Committee said:
This will be a long and challenging year for UK businesses. BCC's forecasts show an economy struggling without a safe foundation to start investing in business.
Inflation continues to become stubborn as the Bank of England is forced to keep interest rates relatively high this year. Global uncertainty adds a darker cloud to the economic situation.
Companies cannot simply rely on long-term strategy promises from the government. We need support now for investment, recruitment and trading.
Introduction: The pound rises above $1.29 because it fears Trump will reach the dollar. Poundland Chain for Sale
Good morning and welcome to our comprehensive coverage of our business, financial markets and the global economy.
The pound rose to another difficult height of $1.29. It is currently trading above that level at $1.2916, a high of four months, up nearly 0.2%.
Sterling is being boosted by a popular slide in the US dollar and a bright mood in the market following US tariffs and the prospect of rising infrastructure and defense spending in Europe led by Germany.
The dollar slipped further against a basket of major currencies after the news Donald Trump Automakers will be exempt from 25% tariffs in Canada and Mexico for a month, as long as they comply with Free Trade Rules.
The euro has also continued to gather, reaching a four-month high against the dollar amid optimism caused by Germany's proposed overhaul of the 500 million euro infrastructure fund and borrowing rules. The European single currency rose 0.3% to $1.0820 for the first time since November 7th.
Asian stock markets have bounced backJapan's Nikko rose 0.77%, led by Hang Sen in Hong Kong. In China, Shanghai composites rose 1.17%, while deep Shenzhen composites rose 1.77%.
Korean Kospi It added 0.7% despite news that a pair of fighter jets accidentally dropped eight bombs into civilian districts during military exercises. Fifteen people were injured, two of whom became serious.
The European discounter Pepco Group said it is evaluating all the strategic options to separate the 825-storey Poundland business that is struggling with the UK this year, including potential sales.
It also owns a group listed by Warsaw ahead of Investor Day Pepco and Disles The brand said it will focus on the PEPCO brand “as a single future form and engine driver of group revenue.”
Pepco will be held in December. Poundland The chain booked an impairment charge of 775 million euros, reducing the group to a loss of 662 million euros per year.
Group-like sales increased 1.5% on March 2nd in eight weeks. Poundland”.
Agenda
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8.30am GMT: Eurozone HCOB Construction PMI
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9.30am GMT: UK S&P Global Construction PMI
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10am GMT: Retail sales in the eurozone in January
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1.15pm GMT: European Central Bank Interest Rate Decision (Quarter Point Reduction Forecast)
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1:30pm GMT: US trade in January, first unemployment claim of the week of March 1st
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1.45pm GMT: ECB Press Conference
2.45pm GMT: ECB Staff Macroeconomic Forecast -
3.15pm GMT: Christine Lagarde, President of ECB
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8.15pm GMT: speech by Bank of England policymaker Christine Mann
