Time to wrap up….

The IMF has upgraded its forecast for the UK economy this year after strong growth in recent months. The Fund now forecasts UK GDP will increase by 1.2% this year, up from a forecast of 1.1% last month.

Following its annual assessment of the UK, the IMF says:

1. An economic recovery is underway. Growth is projected at 1.2 percent in 2025 and will gain momentum next year, although weak productivity continues to weigh on medium-term growth prospects.

2. The authorities’ fiscal plans strike a good balance between supporting growth and safeguarding fiscal sustainability. It will be important to stay the course and deliver the planned deficit reduction over the next five years to stabilize net debt and reduce vulnerability to gilt market pressures. Further refinements of the fiscal framework could help minimize the frequency of fiscal policy changes. In the longer term, the UK will face difficult choices to align spending with available resources, given ageing-related expenditure pressures.

The IMF also recommended that Rachel Reeves should refine her fiscal rules to prevent the need for emergency spending cuts. This would help the chancellor avoid making short-term savings when there is a downturn in economic forecasts.

Stock markets in the UK and the US have rallied, as trading resumes after a long weekend on both sides of the Atlantic.

Share prices jumped on relief that Donald Trump has delayed planned 50% tariffs on European goods until July, sending the FTSE 100 to its highest since early March. Germany’s DAX hit a record high.

The US president has posted today that the EU has “called to quickly establish meeting dates”.

In other news:

• Africa’s growth forecast for the year have been cut, due to tariff uncertainty

• UK retailers are gloomier about business prospects, after reporting a drop in sales

• Sales of Tesla cars across Europe have fallen sharply again, down around 50% in April.

• Food inflation across the UK has risen again

Donald Trump has claimed that his threat last Friday to impose 50% tariffs on European Union imports has had an effect.

Posting on his Truth Social site this morning, the US president says the EU has been in touch to agree dates for a meeting to discuss a trade deal.

Trump says:

I was extremely satisfied with the 50% Tariff allotment on the European Union, especially since they were “slow walking (to put it mildly!), our negotiations with them. Remember, I am empowered to “SET A DEAL” for Trade into the United States if we are unable to make a deal, or are treated unfairly. I have just been informed that the E.U. has called to quickly establish meeting dates.

This is a positive event, and I hope that they will, FINALLY, like my same demand to China, open up the European Nations for Trade with the United States of America. They will BOTH be very happy, and successful, if they do!!!

Stocks have jumped in New York as trading resumes after yesterday’s Memorial Day holiday.

Investors appear relieved that Donald Trump has agreed to delay his threatened 50% tariffs on EU goods until July 9, while trade negotiations take place.

The Dow Jones industrial average, which tracks 30 large US companies, has risen by 0.8% at the start of trading, up 333 points at 41,936 points.

The broader S&P 500 index is up 0.95%, and the tech-focused Nasdaq has gained 1.3%.

Wall Street (like the City of London this morning) is catching up with yesterday’s gains across many European markets yesterday, as Bob Savage, head of markets macro strategy at BNY, explains:

Risk sentiment steadies after the long weekend in the U.S. and U.K., with tariffs, long-end yields and lower inflation driving equities higher.

On Sunday, President Trump delayed his 50% tariffs on the EU until July 9. The EU, in turn, gave “fast-track” status to trade negotiations. This action led to a relief rally in shares on Monday…

Donald Trump’s trade war is expected to hurt Africa’s economic growth this year.

The African Development Bank has cut its forecast for growth across the continent to 3.9% this year, down from an earlier estimate of 4.1%. That would still be stronger growth than in 2024, when the region grew by 3.3%.

The African Development Bank also cut its initial 2026 growth forecast by 0.4 percentage points to 4.0%, citing trade tariff uncertainty.

In its latest African Economic Outlook report, it says:

“Since January 2025, the world has experienced additional shocks, exacerbating an already complex global macroeconomic landscape.

“These shocks include a plethora of new tariffs imposed by the United States and retaliatory measures announced and implemented by its trading partners.”

Over in the US, meanwhile, demand for durable goods has dropped amid the economic uncertainty caused by the Trump trade wars.

Orders for durable goods — items meant to last at least three years — fell 6.3% in April, driven by weaker demand for commercial aircraft.

Core capital goods orders- which strip out volatile items such as aircraft orders - decreased by 1.3% last month, new data from the US commerce department shows.

On monetary policy, the IMF recommends that the Bank of England continues to ease interest rates “gradually”, while remaining flexible due to elevated levels of uncertainty.

The Fund says:

The pickup in inflation that began in 2024 is expected to last through the second half of this year, with a return to target later in 2026 as underlying inflationary pressures continue to recede.

Although monetary policy calibration has become more difficult due to still-weak growth, the temporary rise in inflation and high long-term interest rates, staff sees the BoE’s gradual pace of easing as appropriate.

Given the elevated uncertainty, the MPC is encouraged to retain flexibility to adjust the monetary stance in either direction if needed.

In what looks like a significant intervention, the International Monetary Fund is recomending that Rachel Reeves loosens her fiscal rules to prevent the need for emergency spending cuts.

Adding to the clamour from backbench Labour MPs incensed by the government’s welfare cuts, the Washington-based organisation said the chancellor should examine ways to avoid making short-term savings when there is a downturn in economic forecasts, my colleague Phillip Inman reports.

An easing of to the fiscal rules would potentially give the chancellor more breathing space on potential spending cuts.

The IMF said the current system inherited from the previous Conservative government of twice-yearly assessments of the public finances by the Office for Budget Responsibility (OBR) was ripe for an overhaul.

It said:

“There is still significant pressure for frequent fiscal policy changes, given that small revisions to the economic outlook can erode the headroom within the rules, which is the subject of intense market and media scrutiny.”

The IMF said Reeves could downgrade the significance of spring OBR report, give a broader outlook for the public finances – “de-emphasising” the single cash figure for spending headroom – or “establish a formal process so that small rule breaches do not trigger corrective fiscal action outside of the single fiscal event”.

More here.

Newsflash: The International Monetary Fund has lifted its forecast for UK economic growth this year.

Following an annual check-up on the British economy, the IMF has upgraded the UK’s expected growth rate this year to 1.2% from 1.1%, and reassured us that an “economic recovery is under way”.

This reverse some of the IMF’s downgrade last month, when it cut the UK’s predicted growth this year from 1.6% to 1.1%.

It follows the UK economy’s decent start to 2025, with growth of 0.7% recorded in the January-March quarter.

Luc Eyraud, the IMF’s mission chief to the United Kingdom, told reporters in London this morning:

“These revisions reflect the strong GDP performance in the first quarter, reflecting the resilience of the UK economy despite the complex external environment.”

However, looking ahead, the IMF also warns that trade tensions linked to US tariff plans will reduce UK economic growth next year.

It expects global trade tensions will wipe 0.3 percentage points off growth for the year, but is still predicting growth will increase to 1.4% in 2026.

Trade tensions will weigh on growth through “persistent uncertainty, slower activity in UK trading partners, and the direct impact of remaining US tariffs on the UK”, the IMF warns.

Ouch. Confidence among British retailers has fallen at the sharpest pace in five years.

The latest healthcheck on UK retailing from the CBI shows that a decline in sales volumes gathered pace this month, and that stores expect conditions to worsen.

The CBI’s quarterly gauge of business sentiment has dropped at its fastest rate since May 2020 this month. A net balance of -29% of firms expect their business situation to worsen over the coming three months, compared with -19% in February.

The CBI’s monthly gauge of how retail sales compared with a year earlier fell to -27 this month - the lowest since March - from -8 in April, which had been its highest since October.

A measure of expected sales for June fell to -37, the lowest since February 2024.

Ben Jones, lead economist at the CBI, says:

“This was a fairly downbeat survey and highlights some of the challenges facing the retail and wider distribution sector. In contrast to other recent retail data, this survey suggests parts of the sector are still struggling with fragile consumer demand, though online sales seem to be holding up better.”

However, the official retail sales figures from the Office for National Statistics have been more optimistic laterly – they’ve shown a rise in sales volumes in recent months, helped by sunny weather.

Economic sentiment across Europe has risen this month, the latest data from the European Commission shows.

The EC’s economic sentiment indicator (ESI) has improved in both the EU (+0.6 points to 95.2) and the euro area (+1.0 points to 94.8).

That’s an encouraging pick-up, following two months of declines, but both gauges are still below their long-term average.

The EC reports that:

The rise in the ESI for the EU was primarily driven by a partial rebound of confidence in the retail trade sector and among consumers, with a moderate contribution also from the construction sector. Confidence in both the industry and services sectors remained broadly stable.

Among the largest EU economies, the ESI increased in Italy (+2.8) and in Germany (+1.5), but fell in France (-3.5), the Netherlands (-0.8), Poland (-0.6), and Spain (-0.4).

Relief that Donald Trump has delayed new higher tariffs on EU imports has pushed Germany’s DAX share index up to a new record high!

The DAX has touched a new peak of 24,161 points this morning, up around 0.5%. It’s now up around 21% so far this year, outpacing other markets.

Boom! Britain’s FTSE 100 share index has hit its highest level since early March.

The UK’s blue-chip share index has risen over the 8,800 point mark for the first time in two and a half months, up 86 points or almost 1%.

The UK government is pledging to create tens of thousands of apprenticeships and training opportunities, as part of its push to increase workers’ skills and cut net migration.

Ministers have promised a total of 120,000 new training opportunities for construction workers, engineers, healthcare staff and other trades in England before the next general election.

Up to 45,000 training places will be funded by hiking the charge paid by employers for bringing in foreign workers by a third.

Announcing the push, education secretary Bridget Phillipson said:

“A skilled workforce is the key to steering the economy forward, and today we’re backing the next generation by giving young people more opportunities to learn a trade, earn a wage and achieve and thrive.

When we invest in skills for young people, we invest in a shared, stronger economic future - creating opportunities as part of our plan for change.

But everyone has a role to play in a thriving economy, and we’re taking our responsibility seriously providing more routes into employment, it’s now the responsibility of young people to take them.”

European bond prices are rising this morning, pulling down government borrowing costs.

The yield, or interest rate, on German 10-year bonds has dropped by four basis points (0.04 percentage points) to 2.519%.

UK 10-year gilts are down almost 8 basis points, at 4.6%, while shorter-dated two-year gilt yields are down four basis points at 3.96%, the lowest in over two weeks.

This follows a recovery in US Treasury prices this morning.

Over the last couple of weeks, bond yields had been rising as prices fell amid a global debt sell-off.

The Financial Times is reporting this morning that the UK government is shifting to shorter-term borrowing to lower its interest bill, and to lift some of the pressure on its tax and spending plans.

Jessica Pulay, head of the UK’s Debt Management Office, told the FT that the DMO is softening Britain’s reliance on long-term borrowing.

Short-term borrowing is typically cheaper than issuing longer-term debt, but it also means a country has to return to the markets more often.

Stocks have jumped in London as trading resumes after the Bank Holiday weekend.

City investors are relieved that Donald Trump has delayed his threatened hike on EU tariffs to 50% until July, cooling trade war fears.

The FTSE 100 index of blue-chip shares is up 75 points, or 0.85%, to 8792 points, close to a two-month high.

Engineering group Melrose (+3.8%) are the top FTSE 100 riser, followed by technology firm DCC (+2.4%) and Rolls-Royce (+2%).

Food inflation in the UK has risen for the fourth month in a row, figures show, driven by increases in the cost of fresh produce, including steak.

The annual rate of food price rises hit 2.8% this month, after a 2.6% rise in April, according to the latest shop price data from the British Retail Consortium (BRC).

However, prices overall remained in deflation – 0.1% cheaper than a year ago and unchanged from last month – with the cost of non-food goods falling, particularly for electricals as retailers cut prices to drum up business before a potential hit from Donald Trump’s tariffs.

More car news: Japanese manufacturer Toyota is moving some production of its GR Corolla sports car to Britain.

According to Reuters, Toyota will spend around $56m on a dedicated production line at its Burnaston plant in Derbyshire, to produce 10,000 cars annually for export to North America from the middle of 2026.

Reuters reports:

By shifting some production from Japan, Toyota aims to use excess capacity in Britain to help it cut delivery wait times for the car, said the people, who spoke on condition of anonymity.

The move was not in reaction to U.S. President Donald Trump’s tariffs on automobile imports, they said.

Reuters adds that the Burnaston site has suffered a decline in production since Brexit.

The news should cheer the UK government, as it

There’s a sense of relief in the financial markets after Donald Trump delayed his threatened 50% tariffs on all European Union imports into the US.

Trump had shocked investors last Friday when he announced he planned a 50% tariff on EU imports from the start of June.

But following a call with European Commission president Ursula von der Leyen, that hike in levies has been delayed until 9 July, to give both sides more time to negotiate.

Stocks are set to rally in London today, with Wall Street also set to rise, as trading resumes after the bank holiday break

Yesterday, France’s CAC index rose by 1.2% while Germany’s DAX gained 1.7%, and the euro hit a one-month high against the US dollar.

Tony Sycamore, market analyst at IG, reports that “risk sentiment improved” after Trump announced the delay to his 50% tariffs on the EU.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, cautions that market rallies are on “thin ice”. She explains:

European markets are flirting with ATH [all time high] levels, US futures were also up yesterday — but the reality is that with every piece of incoming information, the collective welfare deteriorates.

Today, we are in a worse position than we were a month ago. And a month ago, we were in a worse position than we were three months ago. The global trade negotiation period was supposed to last 90 days—and now, it ends all of a sudden.

The tariffs won’t be brought below the 10% ‘universal’ level and market rallies are triggered not by good news, but by the least bad of the options — once Trump or his administration softens a previously crazy stance.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Tesla’s sales across Europe halved last month, as the backlash against Elon Musk continues to hurt his electric car company.

The latest sales figures from industry body ACEA, released this morning, show that sales of Tesla cars fell by 52% year-on-year in the European Union in April, down to 5,475 units, from 11,540 a year before.

They fell 49% in the wider “EU + EFTA + UK” area.

The decline follows falls in Tesla sales in Europe in January, February and March, suggesting Musk’s controversial politics and association with the Trump White House are hurting the brand’s popularity, as anti-Musk protests have popped up at Tesla showrooms this year.

The overall EU car market grew slightly in April, ACEA reports, with new car registrations rising by 1.3% year-on-year, “despite the ongoing unpredictable global economic environment”.

So far this year, new battery-electric car sales have grown by 26.4%, to 558,262 units, capturing 15.3% of the total EU market share.

Sigrid de Vries, ACEA’s director general, says:

“The share of battery-electric vehicles is slowly gaining momentum, but growth remains incremental and uneven across EU countries.”

Tesla’s sales in Europe this year have been disrupted by model changes, as it refreshed its offer with a new Model Y vehicle.

But it also faces tough competition from China’s BYD, which sold more EVs than Tesla in Europe for the first time last month, according to market researcher Jato Dynamics.

After several months shaking up US bureaucracy through the DOGE initiative, Musk appears to be refocusing on his day job.

Last weekend Musk posted that he was “back to spending 24/7 at work and sleeping in conference/server/factory rooms”, as he became “super focused” on his social media company X, artificial intelligence initiative xAI, Tesla and SpaceX.

The agenda

• 10am BST: Eurozone economic sentiment report

• 11am BST: CBI distributive trades survey of UK retailing

• 1.30pm BST: US durable goods orders data

• 2pm BST: US house sales