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Introduction: Elon Musk tells BBC that Twitter is roughly breaking even
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Elon Musk has revealed Twitter is “roughly breaking even”, saying advertisers are returning after many quit following his takeover of the social media site.
In an interview with the BBC, on Twitter Spaces, Musk also said the criticism he’s faced recently has been “rough”.
Asked if he had any regrets after buying Twitter for $44bn last year, Musk said the pain level of Twitter has been “extremely high”, and that owning the company hasn’t been “some sort of party”.
Musk said:
So, it’s been really quite a stressful situation, for the last several months. Not an easy one.
He said that “of course” many mistakes had been made along the way, but argued that “all’s well that ends well”.
As Musk put it:
I feel like we’re headed to a good place. We’re roughly break-even, I think we’re trending towards being cashflow positive very soon, literally in a matter of months.
The advertisers are returning.
Musk, who cut almost half of Twitter’s workforce last autumn, said cutting the workforce had not been easy.
He said the company has made improvements to its recommended tweets, following feedback after Twitter made its recommendation algorithm open source.
Overall I think the trend is very good.
Elon Musk, boss of Twitter and CEO of Tesla and SpaceX, gives an interview to the BBC.
The billionaire admits he only bought Twitter because he had to, and describes running the firm as “quite painful” and “a rollercoaster”.https://t.co/zj6h1L9q4M pic.twitter.com/u0tXrbZSEI
— BBC Breakfast (@BBCBreakfast) April 12, 2023
Musk also opened up about why, in February, he had tweeted that he wouldn’t wish the pain of running Twitter on anyone.
Musk said he had been “under constant attack”, which hurt as he doesn’t have “a stone-cold heart”.
If you’re under constant criticism and attack, and that gets fed to you non-stop, including through Twitter, it’s rough.
But it’s important to get negative feedback, he added. Musk says he doesn’t turn off replies, and doesn’t block anyone on Twitter either.
So I get a lot of negative feedback.
Also coming up today
Investors are awaiting the latest US inflation data today, which may show that the cost of living squeeze eased last month.
The US consumer prices index is expected to have risen by 5.2% in the year to March, down from 6% in February. A sharp fall could encourage the US Federal Reserve to end its interest rate increases, which would be welcomed by traders.
The IMF will release its Fiscal Monitor, assessing public finances at countries around the world, today, after yesterday predicting the UK’s economy will shrink this year.
The agenda
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Noon: US weekly mortgage applications
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1pm BST: IMF publishes its Fiscal Monitor
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1.30pm BST: US inflation report released
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2pm BST: Bank of England governor Andrew Bailey speaks on ‘The shifting risk landscape’ at the Institute of International Finance in Washington DC
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3pm BST: Bank of Canada’s interest rate decision
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7pm BST: Federal Reserve’s FOMC releases minutes of its last meeting
Key events
The IMF also predicts that national debt in China and the US will rise over the coming years.
That trend means public debt is higher and growing faster than projected before the COVID-19 pandemic, the Fund says.
Vitor Gaspar, director of the IMF’s Fiscal Affairs Department, explains:
In the United States, public debt to GDP is projected to increase by almost 3 percentage points of GDP per year from 2024, about twice the pace projected before the pandemic.
By 2028 the United States’ public debt ratio is projected to exceed 135 percent of GDP, surpassing the pandemic peak. For China, the public debt to GDP ratio is projected to increase continuously to reach 105 percent in 2028.
UK national debt will continue to rise over next five years, says IMF
Larry Elliott
Britain’s national debt will continue to climb over the next five years, putting at risk one of Rishi Sunak’s key pledges to voters, according to an International Monetary Fund study.
The IMF said the cost of subsidies to consumers faced with rocketing energy bills meant repair of the UK’s Covid-battered public finances was taking longer than in other developed countries, our economics editor Larry Elliott reports from Washington DC.
In its Fiscal Monitor – one of its three flagship reports – the Washington-based body said it expected overall UK national debt to keep rising over the next five years. Public debt is forecast to increase steadily from 103% of the economy’s annual output, or gross domestic product (GDP), in 2022 to 113% by 2028.
Net debt – which strips out financial assets owned by the government – is also forecast to rise, from just under 92% of GDP in 2022 to just over 101% in 2027 and 2028.
Sunak promised to reduce debt as a share of GDP over an unspecified period earlier this year as he laid out five targets by which voters should judge his government. The others relate to inflation, growth, NHS waiting lists and stopping small boat crossings.
The UK’s independent forecaster the Office for Budget Responsibility – which uses a slightly different methodology to the IMF – said Sunak was just about on course to get debt on a downward path within five years. In its budget forecast last month, the OBR said the national debt would peak at just under 95% of GDP in 2026-27 and fall by 0.2 percentage points the following year.
More here:
US inflation, a preamble
European stock markets are holding their earlier gains, as tension builds ahead of the latest estimate of US inflation, due at 1.30pm UK time or 8.30am EST.
Economists predict that US inflation eased last month, with the consumer prices index forecast to have dropped to around 5.2% in the year to March, from 6% in February.
But core inflation could be stickier – it’s expected to have risen to 5.6% from 5.5%.
On a monthly basis, consumer prices are expected to have increased 0.2% in March alone.
Goldman Sachs trader John Flood has predicted that his week’s lull in the US stock market will be broken by the inflation data, in around 30 minutes time.
He reckoned the S&P 500 could drop at least 2% if the year-over-year inflation rate came in above the previous reading of 6%….
The Labour Party are launching a five-point plan today to “revitalise local high streets”, and warning that “thousands of pubs, shops and bank branches” have closed.
The plan includes launching a “Police Efficiency and Collaboration Programme” to combat anti-social behaviour, and cutting business rates for small businesses on the high street “paid for by properly taxing online giants”.
Labour is also promising “tough new laws to stamp out late payments and make sure more money gets to high street firms” and give councils “strong new powers to bring empty shops on their high streets back into use”.
And to help cut energy bills, Labour said it would introduce vouchers for energy efficiency measures including “double glazing at a local cinema, a new heat pump in a cafe or an electric vehicle for a takeaway”.
Tesco has cut the price of milk for the first time since May 2020, Reuters reports.
The move, by Britain’s biggest supermarket group, could be a welcome early sign that the surge in food inflation may abate in the coming months.
Here’s the details:
Tesco, which has a 27% share of Britain’s grocery market, said on Wednesday it was reducing the price of a four-pint carton of milk from £1.65 to £1.55, two pints from £1.30 to £1.25 and a pint from 95p to 90p.
“We’ve seen some cost price deflation for milk across the market in recent times, and we want to take this opportunity to pass that reduction on to customers,” Tesco UK CEO Jason Tarry said.
He said the price cut would not affect the price Tesco pays its milk farmers.
Rising food prices have been driving up UK inflation for months. Whole milk costs 34.4% more than a year ago, according to February’s inflation data.
Meanwhile in the US, demand for mortgages rose last week as the cost of borrowing eased.
Mortgage applications increased 5.3% last week, according to data from the Mortgage Bankers Association. This was driven by an 8% rise in applications to purchase a home, while refinancing requests flat.
The increase in demand came as the average interest rates on fixed-term loans fell, as the US jobs market slowed – which could encourage the US Federal Reserve to slow its interest rate increases.
Mike Fratantoni, MBA’s chief economist, explains:
“Incoming data last week showed that the job market is beginning to slow, which led to the 30-year fixed rate decreasing to 6.30 percent – the lowest level in two months.
“Prospective homebuyers this year have been quite sensitive to any drop in mortgage rates, and that played out last week with purchase applications increasing by 8 percent.
Thousands of UK households have a decision to make ahead of a bumper remortgaging deadline, Bloomberg UK reports today.
Borrowers have a dilemma – whether to lock in a pricier fixed-rate deal or bet on a Bank of England rate cut.
Bloomberg explains:
As many as 56,220 two-year fixed-rate mortgages are due to expire in September, according to data from industry body UK Finance. That’s on the back of a flurry of sales in September 2021 when homebuyers were racing to complete deals before a stamp duty holiday ended.
Mortgage holders can typically secure new deals up to six months before their fixed-rate loans expire. Since January, as many as 71,100 households have been shopping for deals ahead of another crowded deadline in June, tied to a separate sales rush in 2021.
More here: Britain’s Remortgaging Pain Is Only Getting Started
UK Base Rate is currently 4.25%, and the markets expect the Bank of England to raise it again to 4.5% in May… and keep it there until at least the end of the year.
Holidaymakers have been warned to look out for fraudsters advertising bogus travel deals and exploiting passport delays, PA Media reports.
The Chartered Trading Standards Institute (CTSI) warned that scammers were using increasingly sophisticated and convincing methods to dupe potential travellers into paying for non-existent holidays and services.
These included “entirely fabricated” social media ads featuring attractive pictures of holiday cottages and hotels accompanied by “too good to be true” prices.
By the time holidaymakers realised that the pictures and prices were fake, scammers had taken their money and disappeared, the CTSI warned.
In many cases scammers told their victims to pay by cash, via bank transfer or through services such as Western Union, which were difficult to trace and non-refundable.
Often victims did not realise they had been scammed until they arrived at the airport to find their flight reservation did not exist, or at a hotel to discover there was no record of their booking.
FTSE 100 hits one-month high
Britain’s blue-chip share index has risen to a one-month high this morning.
The FTSE 100 has gained 0.6% or 46 points to 7,831, the highest since 10th March – the day in which Silicon Valley Bank collapsed.
It’s on track for its fourth daily rise in a row, and the 10th in the last 11 sessions.
The upcoming US inflation figures are the key thing dominating the agenda today, says Russ Mould, investment director at AJ Bell.
Mould explains:
Markets have recently taken the view that the Fed needs to ensure stability in the financial system following the banking crisis. That means easing back on rate hikes which could topple the economy,” says
“However, the reason why rates have been going up so fast over the past 12 months is down to rising inflation, so today’s update on the cost of living in March will still matter to the Fed and its monetary policy. The consensus forecast is a 5.6% rise in core inflation year-on-year, up slightly on February’s 5.5% reading.
British homes sales recovered to within a whisker of pre-pandemic levels in March, data from property website Rightmove shows.
According to Rightmove, the number of sales agreed between sellers and buyers returned to pre-pandemic level last month, for the first time since September.
Sales were just 1% lower last month than in March 2019 as borrowing costs edged down from their leap after the September ‘mini-budget’.
That suggests the housing market is recovering from the turmoil last autumn.
Rightmove’s property expert Tim Bannister said:
“The market is remaining surprisingly robust given the economic headwinds that have affected movers over the last six months.
While the market is by no means at the exceptional level it has been over the last couple of years, it is a positive sign for agents that sales at a national level are being agreed at the same rate as the last more normal market of 2019, though there are regional differences across Great Britain.
European markets rally
European stock markets are rallying this morning, as investors put last month’s banking crisis behind them.
In Paris, the CAC 40 index of leading French shares has hit a record high, despite the ongoing protests against president Macron’s pension changes.
Shares are picking up ahead of the next US inflation report, due at 1.30pm UK time.
Pierre Veyret, technical analyst at ActivTrades, says:
Investor appetite for risk continues to rise, pushing the STOXX-50 index towards a new annual high and the French CAC-40 to a new historical summit, mostly led by energy, utilities, real estate and luxury shares.
Traders remain remarkably positive despite recession worries, inflation fears and the prospect of dented corporate profits for the next earning season starting on Friday.
Il CAC40 borsa di Parigi spacca nuovi record! Ricordiamoci che l’inflazione è un grande contributore del rialzo delle borse.. questo potrebbe essere un segno l’aumento salariale spinge al rialzo le stime degli utili. pic.twitter.com/61SAV9uhmO
— Menthor Q Italia (@menthorqitalia) April 12, 2023
Germany’s DAX has gained 0.3%, on track to close at a one-year high.
Video: Elon Musk interview
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