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- Business and finance update 13th January 2025
Business and finance update 13th January 2025
UK under pressure
Good morning. Today we're talking about the UK bond market in turmoil, better than expected US jobs data and Meta’s change in policy.
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UK under pressure
The UK gilt market was in turmoil this week, as the cost of 10-year government borrowing hit its highest level since the global financial crisis in 2008. The surge, driven by concerns over government tax levels and persistent inflationary pressures, has coincided with a weakening of the pound sterling against the US dollar. Investor anxiety has been heightened due to their scepticism about Chancellor Rachel Reeves’ budget plans, as well as concerns about the UK’s poor economic growth. The rise in borrowing costs poses a significant challenge to the government's fiscal targets and could further dampen economic growth prospects. This heightened market volatility underscores the ongoing challenges facing the UK economy and the government's efforts to navigate a path to sustained economic recovery.
US defies expectations
The US labour market demonstrated unexpected strength in December, adding 256,000 jobs, exceeding economist forecasts of 155,000. The unemployment rate further declined to 4.1%, marking the 48th consecutive month of job growth, a remarkable feat in US economic history. This robust employment data has dampened expectations of further interest rate cuts by the Federal Reserve. With inflation remaining stubbornly high, the strong labour market suggests that the US central bank may need to maintain a restrictive monetary policy for longer than previously anticipated. While this strong job growth is positive news for the US economy, it has also weighed on stock market sentiment. Investors, who had been anticipating further interest rate cuts to stimulate economic growth, are now facing the prospect of higher interest rates for an extended period. This led to a decline in stock prices, as higher interest rates increase borrowing costs for businesses and reduce the present value of future earnings. The labour market data underscores the resilience of the US economy but also highlights the challenges facing policymakers in navigating a path towards a soft landing, where inflation is brought under control without triggering a significant economic slowdown.
Meta fact change
Meta announced it will end its use of third-party fact-checkers on Facebook and Instagram, shifting towards a community-based approach to content moderation similar to X. It comes as Meta and other tech companies are working to smooth what has been a rocky relationship with Donald Trump ahead of his second term as US president. Repeating talking points long used by Trump and his allies, in a video Meta CEO Mark Zuckerberg said the company's content moderation approach resulted too often in "censorship". This decision marks a significant shift in the company's content moderation policies, prioritising "free expression" over the previous emphasis on combating misinformation. The move comes amid a broader shift in Meta's approach to content moderation, including the relocation of its US content moderation team to Texas and the appointment of prominent Trump supporter UFC President Dana White to its board of directors. While Meta will continue to address illegal content, the elimination of third-party fact-checking raises concerns about the potential spread of misinformation and the impact on public discourse.
Elsewhere...
Under pressure: Chancellor Rachel Reeves has defended her decision to travel to China to improve economic ties at a time when soaring government borrowing costs threaten to squeeze UK public finances.
End of remote working: JPMorgan, the largest bank in the US, plans to end remote work and require more than 300,000 employees to work from the office five days a week.
Staying put: The proportion of 25 to 34-year-olds still living with their parents has increased by more than a third in nearly two decades, according to the Institute for Fiscal Studies.
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Number of the Day
£158 million
The annual pay of gambling firm Bet365 CEO Denise Coates, a 70% drop on the previous year when she was paid £270m in salary and dividends.
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