German exports threatened by trade war tariffs, and weak demand
Germany’s exporters are warning today that their overseas sales will shrink this year, due to weakening global demand, higher domestic costs and rising protectionism.
The BGA trade association has predicted that German exports will slump by 2.5% this year, and warned that many firms are reporting stagnant or falling sales.
“The situation remains fragile,” BGA President Dirk Jandura warned, adding:
“Foreign trade will remain the engine of our economy only if policymakers act decisively now.”
Jandura cited rising barriers to commerce, geopolitical tensions and a slowing world economy as key risks to global trade.
Germany’s exporters have been hurt by the disruption caused by Donald Trump’s trade wars, which has resulted in most EU goods entering the US being subject to a 15% baseline tariff.
Key events
The slowdown in German exports may be on the European Central Bank governing council’s mind when it sets interest rates later today.
The ECB is expected to leave eurozone interest rates on hold, as it weighs up the state of the eurozone economy and the outlook for inflation.
Michael Field, chief equity strategist at Morningstar, says:
“It seems the ECB will be holding interest rates steady at 2%, for the third straight month, if economists’ expectations are anything to go by. A decision we can certainly the logic in, given where inflation, and the health of the underlying economy currently.
The ECB’s calls on interest rates have been a large success, cutting fast and hard over the last year or so. Particularly considering recent criticism of the US Federal Reserve by the current administration. GDP is incrementally improving across the Eurozone, while inflation has been moving in the other direction.
Investors will not be overly disappointed that the incremental cuts to rates will remain halted. 2% represents a very reasonable level for interest rates, one which should be very supportive of businesses across Europe looking to borrow and invest in the coming months and could potentially bolster equity markets here.”
German exports threatened by trade war tariffs, and weak demand
Germany’s exporters are warning today that their overseas sales will shrink this year, due to weakening global demand, higher domestic costs and rising protectionism.
The BGA trade association has predicted that German exports will slump by 2.5% this year, and warned that many firms are reporting stagnant or falling sales.
“The situation remains fragile,” BGA President Dirk Jandura warned, adding:
“Foreign trade will remain the engine of our economy only if policymakers act decisively now.”
Jandura cited rising barriers to commerce, geopolitical tensions and a slowing world economy as key risks to global trade.
Germany’s exporters have been hurt by the disruption caused by Donald Trump’s trade wars, which has resulted in most EU goods entering the US being subject to a 15% baseline tariff.
London commuters have increasingly been cycling to work because of this week’s Tube strike, new figures show.
New figures from employee benefits provider YuLife showed that cycling miles tracked across London have jumped by 32% this week, from 3,878 to 5,120 miles, as workers turn to their bikes to beat the chaos, PA Media reports.
Ryanair boss warns Russia-Ukraine war will be issue for airlines for years
Michael O’Leary, the chief executive of budget airline Ryanair, has warned that the Russia-Ukraine war will be an ongoing issue for all European airlines for years to come.
Speaking after Poland shot down suspected Russian drones in its airspace, O’Leary told Ryanair’s annual general meeting:
“This is going to be an ongoing issue for all airlines and all European citizens for the next number of years.”
O’Leary added that Ryanair’s board discussed safety issues at a meeting yesterday.
BAE Systems leads FTSE 100 risers
City traders who have braved the underground strike are pushing share prices higher in London this morning.
The FTSE 100 index has risen by 34 points, or 0.37%, to 9259 points.
Defence company BAE Systems is the top riser, up 2.9% at £18.85. Other European weapons makers’ shares are also rising today, with tensions rising after 19 Russian drones entered Poland’s airspace on Tuesday evening.
London’s Metropolitan Line is now running a minor service, despite today’s strike.
Trains are operating with minor delays between Harrow-On-The-Hill and Baker Street – which will help passengers looking to travel to/from the west of London.
British consumer confidence is currently subdued ahead of the government’s budget on 26 November which could bring further tax increases, the boss of retailer the John Lewis Partnership has warned.
Speaking to reporters this morning, chairman Jason Tarry said:
“There’s no doubt consumer confidence is subdued…
We’ll focus on what we can control and what we can do.”
Back on the London underground, there’s some action on the District Line.
District Line services are now operating with minor delays between Upminster (the eastern end of the line) and Whitechapel (in the East End).
John Lewis results: What the analysts say
Retail analyst Nick Bubb has predicted that John Lewis will grow its full-year pre-tax profits (before exceptional items) to £200m this year, from £126m a year earlier.
He says today:
Well, JLP seem confident about second half prospects, but the first half results were badly affected by the surprisingly high £29m cost of the new Packaging Levy (£22m at Waitrose and £7m at John Lewis)…
Victoria Scholar, head of investment at Interactive investor, suggests John Lewis may have benefitted from the cyber attack on Marks & Spencer:
“John Lewis reported a loss before tax and exceptional items of £34 million in the six months to 26th July, widening from a loss of £5 million in the same period last year. It blamed the Extended Producer Responsibility (EPR) packaging levy, higher National Insurance contributions, and additional investment for the deepening loss.
John Lewis might have got a boost from disruptions at its rival M&S during its cyber attack in April. While its 36 physical bricks and mortar retail stores have been operating in a challenging space for many years, Waitrose has been a bright spot which continues to prioritise quality while also focusing on competitive pricing, particularly in the face of intense competition from the likes of Aldi and Lidl.
The partnership said it remains ‘well positioned’ to deliver full-year profit growth despite the challenging macro backdrop. The final quarter of the year is seasonally important for John Lewis and its supermarket Waitrose because of typically strong sales in the build up to Christmas.”
Robyn Duffy, consumer markets senior analyst at RSM UK, says John Lewis Partnership’s turnaround strategy is maintaining momentum, adding:
“Waitrose’s performance has been a key driver, benefiting from a renewed focus on its food proposition, including a greater emphasis on lower prices and a more effective adoption of technology to improve the customer experience.
“Meanwhile, the John Lewis retail arm is successfully drawing in customers through a combination of revitalised physical stores, a focus on meaningful brand partnerships, and the reintroduction of its Never Knowingly Undersold price matching strategy. The retailer is clearly thinking smart with its partnerships, tapping into the current nostalgia trend with the announcement that Topshop will return to UK high streets.
Additionally, new collaborations with brands like Waterstones are designed not only to get the right products in-store, but also to increase dwell time and boost add-on sales.
The Docklands Light Railway is also suspended today, due to the strike action.
That could hit attendance at the DSEI UK defence show, where weapons manufacturers are showing off their wares this week.
A full DLR service is expected to run for the rest of the week, though.
Speaking of Heathrow…. London’s largest airpost has reported that it handled more than eight million passengers in August, a record high.
Heathrow says it is the first major European airport to hit the 8m passenger mark.
It adds that this “milestone achievement” further cements its role as “the UK’s gateway to growth”, before warning that it is now operating at “full capacity”.
It adds:
With record numbers choosing Heathrow this summer, we hit our busiest ever day on 1st August with over 270,000 passengers, we eclipsed our previous record departures and arrivals days and Terminal 5 set a new single-day record on 22nd August – successfully welcoming more than 112,000 travellers.
Heathrow says it welcomes the government’s commitment to expanding the airport – last month, it submitted plans for a third runway.
Heads-up, London commuters: the Piccadilly Line is stirring into life.
Having been listed as ‘suspended’ this morning, the Piccadilly Line has been upgraded to “part suspended, minor delays’.
This is because trains are now running with minor delays between Acton Town and South Harrow, two stations on the west side of the capital. There is still no service on the rest of the line due to strike action.
That’s only of limited use for travellers hoping to get all the way into London. It also won’t get passengers out to Heathrow airport (where one leg of the Piccadilly Line terminates, when it’s running).
Waitrose, John Lewis’s upmarket grocer, racked up record sales in the last six months.
JLP reports that Waitrose performed ahead of the market with sales surpassing £4bn in the first half of the year for the first time.
Sales rose by 6% to £4.124bn, up from £3.909bn in the 26 weeks to 27 July 2024, with sales volumes up 3% (implying that rising prices were also a factor).
John Lewis reports that its investments have helped build momentum over the first half, “delivering growth in sales, customer numbers, loyalty and satisfaction”.
It cautions that it expects the macroeconomic environment to remain challenging, but insists it is “well-positioned” to deliver full year profit growth.
The Metro newspaper predicts another day of “commuter hell” in London, with long queues for buses, higher prices on Uber and Bolt, and the risk of “miserable cycling journeys” with rain forecast.
They point out that most of the Elizabeth line – which runs from as far as Reading in the west to Shenfield and Abbey Wood in the east – is running today, along with the buses and Overground trains.
However, Elizabeth line trains were not expected to stop at Bond Street, Tottenham Court Road, Farringdon, Liverpool Street and Whitechapel stations before 8am today.
John Lewis’s profits were also hit by £30m of “investment in operating costs” spent on its technology, financial services, and its head office and distribution teams.
The partnership says this spending is needed to accelerate its growth, explaining:
While this impacts profitability in the short term, it is a foundational part of our strategy for the benefit of our customers and Partners. Our strong cash generation and liquidity, combined with our ability to take a long-term perspective, enables us to make these crucial investments to support our growth in the second half and for years to come.
Tube lines suspended as final day of strike gets underway
Travellers in the UK capital are facing another day of disruption, as staff on the London Underground continue to hold a strike.
All 11 underground lines are currently suspended this morning, meaning commuters will be attempting to squeeze onto busus, cycling, or walking to the office.
There were already crowds building at the bus stops outside Kings Cross as I cycled into the office early this morning – good luck to all attempting to get to work today.
Yesterday, some limited tube services did run, and Transport for London (TfL) had hoped to run more trains again today.
Yesterday, RMT general secretary Eddie Dempsey called on the London mayor, Sadiq Khan, to meet the union.
He told the TUC Congress:
“Stop going on social media, invite us to the meeting, let’s have a discussion, because I want to know what is going on in London.”
Introduction: Losses widen at John Lewis amid rising costs
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Losses have widened at John Lewis, as the high street bellwether is hit by rising costs as it tries to nail its turnaround plan.
The John Lewis Partnership has reported an £88m pre-tax loss for the first half of its financial year this morning, up from £30m a year ago.
It points the finger at the higher National Insurance Contributions (NICs) brought in by chancellor Rachel Reeves in last year’s budget, plus £29m of costs from the UK’s new packaging levy.
On a brighter note, sales across the partnership – which includes Waitrose and John Lewis department stores – rose by 4% in the 26 weeks to 26 July 2025, to £6.2bn. That may indicate that the turnaround strategy is paying off.
Chairman Jason Tarry insists that the Partnership is on track to deliver profit growth for the full year, saying:
“Our clear focus on accelerating investment in our customers and our brands is working: more customers are shopping with us, driving sales, and helping Waitrose and John Lewis outperform their markets. We achieved our highest recorded levels of positive customer satisfaction, a testament to the great service of our Partners.
The investments we are making, combined with our plans for peak trading, provide a strong foundation for the remainder of the year. While we are reporting a loss in the first half, we’re well positioned to deliver full year profit growth, which we’ll continue to invest in our customers and Partners.
Last year, the company tripled its profits to £126m; earnings are higher in the second half of the year due to Christmas and Black Friday.
Also coming up today.
The European Central Bank is expected to leave eurozone interest rate on hold, at a governing council meeting overshadowed by the political crisis in France.
Investors will also be watching the latest US inflation report, which is expected to show the cost of living rose at a faster pace in August. Headline inflation is forecast to rise to 2.9%, up from 2.7% a month earlier.
Kathleen Brooks, research director at XTB, sets the scene…
We are reaching the apex of the week, US CPI and to a lesser extent the ECB meeting, will determine the direction of markets in the short term.
As we lead up to these key events, the dollar is mixed, market enthusiasm for stocks remains high, the S&P 500 made a fresh record on Wednesday, and futures suggest that the US and European stocks could open slightly higher later today.
The agenda
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9am BST: IEA’s monthly oil market report
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1.15pm BST: European central bank interest rate decision
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1.30pm BST: US inflation report for August
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1.45pm BST: ECB press conference
