BUSINESS LIVE: Dollar soars as Trump declares victory; Hospitality price hikes; M&S smashes forecasts

A little-known insurance stealth tax is set to raise £46billion for the Government over the next five years – more than road tax.

Insurance premium tax (IPT) adds 12 per cent to the price of car, home and pet insurance, and 20 per cent on travel insurance and many forms of add-on cover.

The victory of Donald Trump in the US election is expected to boost defence and oil and gas stocks, and lift cryptocurrencies.

The FTSE 100 jumped as the news of his imminent triumph in the closely fought race broke this morning, while the dollar soared and bitcoin hit a new record.

AstraZeneca shares suffered their worst one-day drop in more than four years following reports executives in its China business are embroiled in a widening fraud probe.

The FTSE 100 pharma giant, one of the UK’s largest companies, saw £14.4billion wiped off its value after a Chinese state-controlled media outlet said dozens of managers at the business were implicated in a scandal.

Luke Bartholomew, deputy chief economist at Abrdn:

‘With the results of the Presidential race becoming clear fairly early on, the market implied expected volatility over coming days has collapsed.

‘More generally, financial markets are behaving in a manner consistent with a red wave. The dollar is stronger, treasury yields are higher, US stock futures are up, and oil is lower.

‘This implies the market is focusing on the reflationary aspects of Trump’s policies, with the prospect of tax cuts (and the avoidance of parts of Harris’ agenda) boosting risk sentiment.

‘However, as different aspects of his agenda move into focus over time, this reaction may evolve – especially given the prospects for higher tariffs, and the size of potential fiscal stimulus in an already full-employment economy.

‘Indeed, the latest survey data show the US economy remains solid. The services ISM index jumped to a near 18-month high of 56 in October and the employment component was particularly strong. The ISM survey now aligns quite closely with the services PMI, even as both the ISM and PMI manufacturing surveys are still weak.’

Workers at troubled Boeing have approved a pay deal, ending a bitter seven-week strike at its factory in Seattle.

Around 30,000 of the US aircraft-maker’s employees walked out on September 13, slowing aircraft production and plunging the company further into crisis.

Zoe Gillespie, investment manager at wealth manager RBC Brewin Dolphin, said:

‘M&S’s half year results had plenty of sparkle with a better than expected 17.2% rise in adjusted pretax profits. Its strategy to ‘reshape M&S for growth’ delivered an increase in sales, market share and profitability.

‘Both food and clothing, and homeware have grown for four consecutive years with clothing benefitting from recent collaborations with popular designers such as Bella Freud.

‘Chief executive, Stuart Machin, highlighted that the impact of the recent budget creates some uncertainty for customers and suppliers, however, did not provide further guidance on the implications.

‘The positive turnaround story has led to the share price trading close to an eight year high, rising 4% this morning in early trading.#’

JD Wetherspoon’s founder Sir Tim Martin has warned of looming price hikes across Britain’s hospitality sector in response to last week’s Budget.

Reeves revealed that employers will pay a National Insurance rate of 15 per cent on workers’ salaries exceeding £5,000 from April 2025, compared to the current 13.8 per cent on pay above £9,100.

Futures markets show a strong reaction when the US opens later today, with the Dow, S&P 500 and Nasdaq set to open 2.3, 2 and 1.7 per cent higher, respectively.

Hetal Mehta, head of economic research at St. James’s Place:

‘Given the focus of Trump’s campaign messaging on tariffs, as well as his use of the use of tariffs in international negotiations in his past term, we expect these to be a key feature of his second term.

‘This could have a short-term inflationary impact, especially on sectors such as traditional energy, financials and defence, as companies seek to pass on costs through price increases.

‘Looking ahead slightly further, Fed Chair Jerome Powell’s current term in office ends in 2026. As Chair, Powell’s policies are key to keeping inflation under control. With Trump potentially preferring an alternative Fed Chair, policy uncertainty could increase further.’

The crisis engulfing the car finance market could spread to other parts of the insurance sector, experts warned.

The Court of Appeal ruled last month that commissions paid between banks and brokers on car deals may be unlawful because they were not clearly flagged to the customer.

The decision plunged the car finance sector into turmoil.

Homebuilder Persimmon has flagged concerns around signs of build costs emerging in price negotiations for 2025.

British builders have recently seen an improvement in sales, but concerns that the Bank of England may delay interest rate cuts due to rising inflation, spurred by the UK’s ambitious new budget plans, are dampening hopes for an immediate recovery.

Financial markets are poised for the BoE’s rate decision due on Thursday, and a second rate cut in four months would offer a major boost for the housing sector.

Persimmon, which also told shareholders that sales rates since the start of the third quarter were well ahead of last year, said: ‘We are working closely with our supply chain to manage our costs, which will also be impacted by new building regulations and the employer national insurance increases announced in the recent (UK) budget.’

Aarin Chiekrie, equity analyst, Hargreaves Lansdown:

‘With Bonfire Night’s embers still cooling, Marks & Sparks lit up the market with a firework show of its own, delivering a dazzling set of first-half results. Its hot streak of better-than-expected results continued in the first half, driven by a strong uplift in food sales.

‘High quality and value propositions have both been sharpened, helping the group record volume growth for four years in a row. In Clothing & Home, performance was strong, with continued growth reflecting improved customer perceptions of value, quality, and style. That’s by no means an easy feat and is a key reason for M&S being able to sell more than 80% of clothes at full price, far higher than many of its rivals.

‘Credit where it’s due, M&S has done a great job breathing new life into the business over the past couple of years. Operational and strategic improvements mean the business is healthier than it has been in some time.

‘Debt levels are moving in the right direction, and there’s plenty of cash being generated to help fund the group’s store rotation plan, which focuses on opening new locations in high-growth areas. There’s even cash left over to support recently reinstated dividend payments, which means M&S could once again appeal to income-focused investors.’

Marks & Spencer profits soared 17.2 per cent in the first half, with the retailer continuing to beat expectations thanks to market share gains.

Chief executive Stuart Machin’s mission to reinvigorate the chain gained further momentum, amid a focus on improving its food and clothing lines, online operations and store estate.

The FTSE 100-listed group made a profit before tax and adjusting items of £407.8million in the six months to 28 September, ahead of analyst forecasts and head of the £348.1million profit at the same point a year ago.

Wetherspoon’s chair Tim Martin has warned over price rises after the autumn Budget, as he said the pub chain’s tax bill will jump by two thirds next year.

Martib said he believes ‘all hospitality businesses’ are planning to pass on higher costs through price hikes.

He said: ‘Cost inflation, which had jumped to elevated levels in 2022, slowly abated in the following two years, but has now jumped substantially again following the Budget.

‘All hospitality businesses, we believe, plan to increase prices, as a result.

‘Wetherspoon will, as always, make every attempt to stay as competitive as possible.’

Expectations of Donald Trump’s imminent US election victory have driven the dollar higher in early trading, with Treasury yields soaring as the so-called Trump trade returns.