Closing summary
The Federal Reserve, the US central bank, is gearing up to restart interest rate cuts, its chair Jerome Powell signalled in a closely-watched speech.
Powell has come under intense political pressure from Donald Trump in recent months and has defied the US president’s calls to resign, calling the independence of the Fed into question.
He warned that the US economy was facing a “challenging situation” and said Trump’s tariffs and immigration crackdown were knocking the global economy and the US labour market.
You can read the full story here:
Stock markets rallied on the suggestion of future rate cuts, while the yields on US government bonds fell, and the dollar moved lower.
In the UK, the government is to cover pay and unpaid pension contributions for workers at the UK’s third-largest steelworks, in South Yorkshire, which collapsed on Thursday.
Liberty Steel’s main British business, Speciality Steel UK (SSUK), was put into administration yesterday after a high court judge ruled that it was insolvent and that its owner, the metals tycoon Sanjeev Gupta, had no prospects of repaying debts of several hundred million pounds.
The full story is here:
A row between UK health secretary Wes Streeting and pharmaceutical companies has intensified after drugmakers rejected the government’s latest offer on NHS drug pricing.
The two sides failed to reach agreement by a midday deadline on Friday, meaning the mechanism under which the health service claws back some of the money it pays for medicines will continue at a rate the industry said was “unsustainable” and could ultimately disadvantage patients.
The industry body, the Association of the British Pharmaceutical Industry (ABPI), said the stalemate could mean companies launch fewer medicines in the UK, which could ultimately disadvantage patients.
Our other main stories today:
Many thanks for reading the blog this week. Wishing you all a pleasant weekend, and an enjoyable August bank holiday to readers in England and Wales – JP
There’s been some marked market reaction to US Fed chair Jerome Powell’s closely-watched Jackson Hole speech.
US stock markets rallied in response to Powell’s speech, where he pointed to a possible rate cut at the central bank’s September meeting but also said the US economy was facing a “challenging situation”.
Powell’s speeches have often moved markets in the past and this, expected to be his last as Fed chair, was no exception.
Share markets rallied in response, while yields on US government bonds and the dollar fell.
The S&P 500 rose by about 1.6% following Powell’s remarks, while the Nasdaq Composite climbed by almost 2%. The Dow Jones Industrial Average rose 2% to a record intraday high.
The suggestion of rate cuts to come was welcomed, with yields falling on US Treasuries.
The rate-sensitive two-year Treasury yield fell nearly 10 basis points to 3.69% immediately after the speech, while the benchmark 10-year yields fell 6 basis points to 4.27%.
The US dollar also weakened against a basket of currencies, including the euro and the Japanese yen.
Chris Beauchamp, chief market analyst at trading platform IG, said:
Stocks have surged in the wake of [Powell’s] speech, with the S&P 500 clawing back almost all the losses this week and indices in both the US and Europe firmly in positive territory. Worries about higher inflation have been cast aside for now, as investors look forward to the US economy powering ahead in the autumn.”
Updated
Powell nods to a possible US rate cut next month
Signalling that the US Federal Reserve could restart interest rate cuts, its chair Jerome Powell said the US economy had “faced new challenges” over the past year.
Focusing on inflation - Powell said Trump’s tariffs had “begun to push up prices in some categories of goods”.
He added he expected the effects of tariffs to “accumulate over the coming months, with high uncertainty about timing and amounts.”
Powell also said: “Tighter immigration policy has led to an abrupt slowdown in labour force growth.”
Some of the changes to tax, spending and regulatory policies brought in by the Trump White House could also have “important implications for economic growth and productivity,” he said.
Changes in trade and immigration policies are affecting both demand and supply. In this environment, distinguishing cyclical developments from trend, or structural, developments is difficult.
Powell’s speech did not mention the political pressure he, and the Fed, have been under in recent months, after Trump repeatedly threatened to fire him, which has raised questions over the independence of the central bank.
Instead, he repeatedly mentioned the central bank’s mandate “to foster maximum employment and stable prices for the American people” and said the Fed remained “fully committed to fulfilling our statutory mandate”.
US Federal Reserve chair Jerome Powell points to possible rate cut
US Federal Reserve chair Jerome Powell has nodded to a possible rate cut at the central bank’s September meeting.
However, Powell stopped short of committing to cutting rates next months during a speech to policymakers and economists at the Fed’s annual Jackson Hole conference.
He acknowledged the tight rope that policymakers have to walk at a time of potential risks for the US jobs market, while there is the possibility that inflation moves higher.
Powell said:
The stability of the unemployment rate and other labour market measures allows us to proceed carefully as we consider changes to our policy stance. Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.
Updated
Powell poised for key speech at Jackson Hole
The countdown is now on, with US Fed chair Jerome Powell set to deliver his keynote speech at the Jackson Hole symposium in about 35min.
The central banker is due to begin his address around 3pm BST in the Wyoming resort, which has become the Davos for central bankers.
Powell’s speech is expected to address the economic outlook, and investors around the world will be on tenterhooks for any hints of whether a fresh rate cut is coming next month.
It is expected to be Powell’s last speech in his post, with Trump having said for months that he does not intend to reappoint Powell to the top of the Federal Reserve.
There are fears, though, that his final address will be overshadowed by the political pressures coming from the White House.
That includes the US president’s controversial call for a Fed governor, Lisa Cook, to resign. It comes after one of Trump’s allies, the US Federal Housing Finance Agency head, Bill Pulte, alleged that Cook had committed mortgage fraud. Cook said she had “no intention of being bullied” into stepping down.
Stay tuned.
That’s the opening bell stateside, with US stocks in positive territory at the start of trading:
Dow rose 0.57% to 45,039 points
S&P rose .27% to 6,387 points
Nasdaq was nearly flat but rose 0.07% to 21,114 points
US futures rise ahead of Powell speech
US futures are pointing to a positive start on Wall Street ahead of Powell’s much-anticipated address at Jackson Hole:
Dow futures are up 0.3%
S&P futures are up 0.2%
Nasdaq futures are up 0.15%
Drug pricing talks break down between UK government and pharma firms
A row between pharmaceutical companies and Wes Streeting has intensified after drugmakers rejected the health secretary’s latest offer on the NHS drug pricing rebate scheme.
Talks broke up without agreement on Friday, meaning the scheme under which the health service claws back some of the money it pays for medicines will continue at a rate the industry has described as “unsustainable”.
At the heart of the dispute is the voluntary scheme for branded medicines pricing, access and growth (VPAG), under which the sector agrees the amount of revenues from drug sales to the NHS they have to pay back.
The two sides have been in acrimonious negotiations for months after the rate unexpectedly raised last December by the government to 22.9% for 2025 for newer medicines.
It is understood that Streeting had made an ultimatum that if the industry did not accept his latest “generous” offer on pricing then the current mechanism would “continue to have effect unamended” and on Friday the Department for Health and Social Care (DHSC) announced there had been no agreement.
The pharma industry said the impasse could mean companies launch fewer medicines in the UK and would discourage them from making investments in the country, ultimately disadvantaging patients.
A government spokesperson said on Friday:
This was an unprecedented offer which would increase net spending on medicines by around £1bn over the next three years with billions more expected over the next decade.
It is regrettable that following weeks of delay, ABPI members are unwilling to take our proposals to a board vote.
We have therefore determined that the interests of patients and the NHS are best served by concluding the review and continuing with the existing VPAG scheme unamended, while continuing to support the UK’s world leading life sciences sector through investment, innovation and reform as set out in our Life Sciences Sector Plan and 10 Year Health Plan.
Updated
There’s been a further rise in WH Smith shares, which are now up by 7%, suggesting some bargain hunters are prepared to buy shares from their 12-year low.
But Dan Coatsworth, investment analyst at AJ Bell, says there are currently more questions than answers about the retailer’s accounting mistake.
Bargain hunters might now be prepared to buy WH Smith following its accounting warning given the shares fell to a 12-year low.
However, there are more questions than answers following its shock warning.
Principally, does the accounting issue mean investors can no longer trust historic profits for its US arm, and has the company made other accounting errors?
Coatsworth said there is also a chance the drop was exacerbated by short sellers:
The other area to watch is the amount of stock on loan as that can illustrate if the stock is being heavily shorted or not. Short sellers bet against a company and stand to profit from a falling share price.
Prior to this week’s profit warning, 1.27% of WH Smith’s stock was on loan, according to data from the FCA. This was split across Citadel Advisors and GLG Partners.
The market will be watching the FCA’s short-selling data over the coming days to see if additional names are betting against WH Smith in the belief there is more bad news to come.
WH Smith shares rise 5.5% after plummeting 42% on Thursday
Usually a 5.5% jump in WH Smith shares would be nothing to sniff at, but given the 42% plunge in shares yesterday, it’s likely to be nothing but a dead cat bounce.
Almost £600m was wiped off the market value of WH Smith on Thursday after the retailer cut financial forecasts and launched an independent review following the discovered an accounting blunder at its North American arm.
Shares plunged 42% on Thursday after investors took fright at the news, which meant that profits at the division had likely been overstated by £30m.
The 5.5% rise on Friday is likely to be a dead cat bounce, in which a spectacular decline in share price is immediately followed by a moderate and temporary rise before they continue their decline.
(The gruesome phrase refers to the fact that, while a dead cat will bounce if you drop it from a high building, that doesn’t mean it’s alive.)
Unions are raising concerns about the threat of TikTok layoffs, warning it would put millions of British TikTok users at risk.
John Chadfield of the Communication Workers Union (CWU) said:
TikTok workers have long been sounding the alarm over the real-world costs of cutting human moderation teams in favour of hastily developed, immature AI alternatives.
This has been a constant concern throughout the process of TikTok workers’ effort to form a union.
Updated
TikTok puts hundreds of jobs at risk as it ditches moderators for AI
TikTok is putting hundreds of jobs at risk in the UK as part of a restructure of its trust and safety operations as it increasingly uses AI to moderate content.
The video-sharing app said it was “concentrating our operations in fewer locations globally”.
Plans for a global restructure will affect jobs in the UK, as well as south and south-east Asia.
It is understood that several hundred jobs will be impacted in the UK, where it currently employs more than 2,500 staff.
Under the proposed plans, the work of affected employees will be reallocated to other offices in Europe and some third-party providers - with some trust and safety roles and operations remaining in the UK.
TikTok’s UK head office is in Farringdon in London, and it is set to open a new office in Barbican in the capital early next year.
A spokesman for the social media firm said:
We are continuing a reorganisation that we started last year to strengthen our global operating model for trust and safety, which includes concentrating our operations in fewer locations globally to ensure that we maximise effectiveness and speed as we evolve this critical function for the company with the benefit of technological advancements.
TikTok has increasingly been harnessing AI to moderate content shared on the app.
More than 85% of the content removed for violating its community guidelines is identified and taken down by automation, according to the platform.
UK consumer confidence hits highest 12-month high
The closely-watched GfK consumer confidence survey shows that optimism among UK consumers has hit its highest level since December, as the benefits of Bank of England rate cuts start to filter out to everyday Britons.
Confidence around personal finances over the next 12 months rose to 5 in August, up 3 points from July.
It helped overall consumer confidence rise 2 points to -17, which was better than analyst expectations for no change. This was also the best reading since December 2024.
Neil Bellamy, consumer insights director at GfK, said that while sentiment had improved, there were “clouds on the horizon”:
The biggest changes in August are in confidence in personal finances, with the scores looking back and ahead a year each up by three points.
This is likely due to the Bank of England’s August... cut in interest rates, delivering the lowest cost of borrowing for more than two years.
The improved sentiment on personal finances is welcome, but there are many clouds on the horizon in the form of inflation - the highest since January 2024 - and rising unemployment.
There’s no shortage of speculation, too, about what the autumn budget will bring in terms of tax rises.
He added:
While August’s overall index score of minus 17 is the best this year, consumer confidence continues to move in a very narrow band, and there’s no sense that it is about to break out into fresher, more optimistic territory.
The UK’s consumers are still in wait-and-see mode, and any surprises could result in sudden and sharp changes in sentiment.
Updated
Powell may find his speech overshadowed by a growing row between Trump and Fed governor Lisa Cook, after the economist declared she had “no intention of being bullied” into stepping down.
Cook has been accused of mortgage fraud, for allegedly claiming multiple properties were her primary residence when applying for home loans.
None of the allegations have been confirmed.
The unfounded allegations were published by Bill Pulte, head of the US Federal Housing Finance Agency, who is a staunch critics of Powell and the Fed.
Pulte has claimed that:
In June 2021, Cook entered into a 15-year mortgage agreement on a property in Ann Arbor, Michigan, and declared her intention to use it as her principal residence;
In July 2021, Cook bought a property in Atlanta, Georgia, and also committed to use that property as her primary residence when taking out a 30-year mortgage.
On Wednesday morning, Pulte said his agency was investigating a third property owned by Cook.
In a statement, Cook has said:
I do intend to take any questions about my financial history seriously as a member of the Federal Reserve and so I am gathering the accurate information to answer any legitimate questions and provide the facts.
For months, the Federal Reserve chair, Jerome Powell, has ignored demands from Donald Trump to cut interest rates and defied the US president’s calls to resign, Callum Jones reports.
On Friday, as Trump ramps up his extraordinary attack on the central bank’s independence, Powell will set out where he thinks the world’s largest economy is headed in a closely scrutinised speech at the Jackson Hole symposium in Wyoming.
As Trump’s erratic trade strategy continues to enshroud the US economy in a fog of uncertainty, investors, economists and officials hope Powell will provide hints of the Fed’s plans for the months ahead.
At five consecutive meetings, the Fed has left rates unchanged, despite the president’s calls for rapid cuts. Before moving, most policymakers wanted more clarity on the economic impact of his policies, including sweeping tariffs on imports, and deportations.
Things might be about to change. At the Fed’s next rate-setting meeting, in September, traders currently put the chances of a rate cut at 73.5%, according to CME’s FedWatch tool.
It would be the first in nine months.
Read more:
UK two-year gilt yields hit highest level in more than two months
Yields on two-year gilts have jumped to their highest level since 9 June, rising three basis points to around 3.999%, as markets priced in later rate cuts by the Bank of England.
Investors have been digesting data released earlier this week, showing that inflation in Britain rose to 3.8% in the 12 months to July. That was up from June’s 3.6% reading, sitting above the central bank’s 2% target for the 10th consecutive month.
Markets are no longer pricing in another rate cut this year, with expectations having been pushed back to spring 2026, with many investors pointing to a cut in April next year.
Exclusive: Elon Musk’s company, Tesla, should have its application to supply energy to UK homes blocked on national security grounds, Ed Davey has told ministers.
The Liberal Democrat leader argued that giving the electric car manufacturer a foothold in the British energy market would be “a gravely concerning move considering Elon Musk’s repeated interference in UK politics”, our political correspondent Eleni Courea reports.
Tesla has a clean energy arm and applied in July for a licence to supply power to British homes.
If the licence is granted by the regulator, Ofgem, the US company could be competing with big UK domestic energy suppliers such as British Gas and Octopus as soon as next year.
In a letter to the energy secretary, Ed Miliband, Sir Ed cited comments by Musk on social media appearing to encourage violent riots in the UK last summer, and accused the Tesla CEO of “peddling misinformation to millions”.
Read more:
Updated
Powell’s speech could end up being “legacy defining” and, potentially, his last, according to some analysts, who expect the central bank may not be able to hold onto its leader much longer amid pressure from the Trump administration.
But some are also worried that his comments could end shattering expectations for a September rate cut.
Kevin Ford, FX & Macro Strategist at foreign exchange platform Convera says the conviction for a September cut is based on some shaky foundations, with the market odds of a September Fed cut having fallen from 95% to around 70% in two weeks
Ford says:
The problem is, the market’s conviction is built on some shaky foundations, and Powell’s speech could be the thunderbolt that shatters the calm.
The current atmosphere feels eerily similar to last year, with markets fixated on a September cut. But the underlying data is starkly different. In 2024, the Fed was facing a different beast: a rising unemployment rate and the specter of recession.
This year, after cutting 100 basis points, core inflation is still stubborn and the labor market, while showing some signs of cooling, isn’t screaming for emergency intervention. The economic context is simply not the same, yet the market is pricing in a cut with near-certainty.
This disconnect is what makes Powell’s speech a high-stakes event.
Updated
FTSE 100 dips on Friday open after third consecutive record close
The FTSE 100 dropped 0.2% at the start of trading, following its third consecutive record high on Thursday afternoon.
It appeared to reflect a mix of profit taking, as well as investors taking a bit of a breather ahead of Powell’s speech.
There was a mix of stocks at the bottom of the index, with property sales platform Rightmove, software firm Sage Group and wealth manager St James’s Place all down 1% at the market open.
Introduction: Asia shares edge higher as markets await key Jackson Hole speech by US Fed's Powell
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Asian stocks have cautiously edged higher as global markets turn attention to a much-anticipated speech by US Fed chair Jerome Powell at the central bank’s annual symposium in Jackson Hole, Wyoming.
Powell will be addressing an audience of central bankers, academics and journalists gathered in the Rocky Mountains resort to discuss the finer points of monetary policy. They will be scouring the Fed chair’s speech for any hints about the policy outlook, which could help confirm expectations that a rate cut is on the cards.
This all comes while Powell continues to fend off threats from Trump, who has been calling for Powell’s removal, amid claims he has failed to cut rates fast enough to support Trump’s policy agenda.
Powell has repeatedly argued that the best approach for the Fed right now is to wait and see the impact of Trump’s aggressive tariff strategy before cutting rates.
As for what we can expect from the speech, Gabriele Foà, portfolio manager at Algebris Investments, says Powell is likely to stop short of shutting down expectations for a September rate cut:
Jackson Hole will mark a key opportunity for Fed Chair Powell to signal the policy outlook ahead of September.
Since tariffs were announced, the Fed has leaned toward the side of caution due to the potential impact on inflation.
However, July’s labour market data changed the picture, as large revisions to May and June’s data triggered concerns about the economy. As a result, the market is now fully pricing in a rate cut in September.
Chair Powell will need to use his Jackson Hole speech to balance inflation risks with signs of softer activity. July inflation data show some impact of tariffs on selected components, but not enough to outweigh recent macro weakness.
As such, we expect chair Powell to avoid pushing back against market expectations for a September cut, while remaining more cautious about future meetings.
In the hours ahead of Powell’s speech Asian stocks have edged higher, with the Hang Seng up 0.4%, the Shanghai Composite up 1.2%, and the Japan’s Nikkei 225 nearly flat but up marginally at 0.05%.
The Agenda
3pm BST: Jerome Powell to give speech Jackson Hole Symposium in Kansas
