UK inflation creeps back

Good morning from the Financial Times. Today is Thursday, November 21st, and this is your FT News Briefing. NVIDIA's latest earnings confirm that its chips are still hot, and inflation is on the rise again in the UK. Plus Beijing is ready to fight back against any tariffs from Donald Trump. You haven't seen anything yet when it comes to what China might be able to do in terms of hitting back against pressure from the US.

I'm Sonia Hudson, and here's the news you need to start your day.

Nvidia released its third quarter earnings yesterday, and the picture was kinda mixed. Revenue was almost double what it was a year ago, and way above analyst predictions. Sounds pretty dazzling, right? Well, the pace of growth was actually slower than the previous quarter. One possible reason has to do with Nvidia's latest Blackwell chips.

Investors have been chomping at the bit for them, but they've had a rocky start. There have been concerns about technical issues and reports of overheating. NVIDIA shares slipped a bit in after hours trading. UK inflation increased a lot in October.

It went from 1.7% to 2.3. The report out yesterday complicates the Bank of England's plan for interest rates. The BOE cut them by a quarter point earlier this month, but the new figure raises some questions about the path forward. My colleague, Sam Fleming, has been tracking the numbers and he's here with me now. Hi, Sam. Hi. So how significant is this bump in inflation? Give us some context here.

I mean, the overall picture is the UK is on a disinflationary path. I mean, you could take a look at the forecast from the Bank of England this time last year. It said that it thought inflation would take around two years to return to the 2% target.

And it only took six months and it's been around the 2% target really for a lot of this year. Now, October's reading did, as you say, reflect a big jump. A lot of it reflects an increase in the regulated energy prices that people pay. Good prices also helping to contribute. We saw slightly higher than expected services prices.

The overall story, I would say, is not derailed by this report. Broadly speaking, the UK is on a disinflationary path, but there are bumps in the road and this is definitely a bump. Now, this report is the first one to come out since the Labor government outlined its budget plans. Do we know what sort of impact they might have on inflation?

Yeah, the bank when it announced its latest rate decision this month also put out its latest set of forecasts. And what it shows is that broadly, the budget ends up increasing inflation by around a half a point at its peak around three quarters of a point in terms of extra GDP. It's an inflationary force, but not a dramatically inflationary force.

The question for the bank is, there are quite a lot of uncertainties in terms of how the budget measures play out. Most particularly, there was a very large 26 billion pound increase in national insurance contributions paid by employers. There's a payroll tax and the question for the bank is, how does that get passed through the economy? The companies effectively swallow it in terms of narrower margins. Do they try and pass it through to their customers? There's any number of ways it could be transmitted into the economy.

OK, so there's still some unknowns there. But how will this new inflation figure influence what the Bank of England does with interest rates going forward? The overall message, and it was reiterated by the bank governor Andrew Bailey earlier this weekend, testimony to the House of Commons Treasury Select Committee, is that the Bank of England doesn't want to precipitously slash interest rates. I think we cut rates, but we also, as you've seen in the language, emphasize the word gradual, looking forwards.

This means that it needs to be very careful as it eases it's cut twice, it's on track to continue to cut, but at a cautious pace.

The markets broadly interpret this as meaning that the bank isn't ready to cut again in December, and more likely that the bank will then proceed to cut again in the first quarter of next year. So readings like this don't help the case, particularly of those who are arguing for a hasty pace of interest rate cuts. But I wouldn't say it's completely off the table that the bank moves again before the end of the year. Sam Fleming is the FT's economics editor. Thanks, Sam. Thank you.

Archigos Capital Management founder Bill Huang has been sentenced to 18 years in prison. His hearing yesterday closed the book on one of the most dramatic falls for a Wall Street trader in years. During his trial back in July, we found out that Huang had used secret trading strategies to drive up the share price of major companies like Disney and Viacom.

But that all came crashing down in a fire sale that rocked global equity markets. Archigos' lenders, including Credit Swiss and Morgan Stanley, ended up losing a combined $10 billion in the sell-off. US prosecutors had asked the judge and Huang's case to sentence him to 21 years behind bars and order him to forfeit his assets. They argued that his fraud was, quote, pervasive and persistent.

To me, the most beautiful word in the dictionary is tariff. And it's my favorite word. It needs a public word. On the campaign trail, Donald Trump spoke a lot about tariffs, specifically tariffs on Chinese imports to the U.S. I said I'm going to put a 100, 200 or 300. I'm going to put the highest tariff in history, meaning I'm going to stop them from ever selling a guarantee.

And now Trump is on his way back to the White House. So these threats might actually become policy. The FT's Ed White has been looking into how Beijing might respond. He joins me now. Hi Ed. Hi, how are you? Doing well, thanks. So we've talked on the show before about how Trump is considering hitting Chinese goods with a 60% tariff. How damaging would that be for China?

Look, it would be hugely damaging. China is an export focused economy in many ways. It has exports valued at something like $500 billion each year going to the US. So any tariffs that are much higher than what we already see are going to impact that trade. They're going to make the price of Chinese goods sold into the US more expensive. And they're going to cause China to have to focus on new markets. And that's something that comes at a certain cost.

and it's something that would change their relations with other countries as well. Got it. And what do we know about what Beijing might do about the tariffs?

So one thing that's really interesting here is if you go back to when Trump first came into power, China, like much of the rest of the world, was really surprised by what they saw out of the US. This time around, they're going to be much more prepared they have at their disposal several new laws. And taken together, these laws basically mean that China has a legal avenue to make countermeasures against other companies, and particularly US companies, anyone that it deems to have undermined its national interests.

That means they're going to be able to weaponize their sort of dominance that they have over dozens of supplies of resources, things like rare earths, lithium, anything that might be crucial to modern technologies that China might have a big market share over. Okay, so it sounds like Beijing has been getting ready in some ways for Trump's return. Have we seen officials there put any of those measures that you mentioned into practice?

So we have seen particularly on the export control front that Beijing for some time now has been moving quite niche materials into an export control regime where they are doing things like requiring Chinese officials to improve who it's going to. And that is creating real world market impacts because

If you're a company that's reliant on China for a particular resource or a particular component, you now have to go through an application process in Beijing, which creates a large amount of uncertainty. We've also seen, on the sanctions front, quite a significant warning. Just in October, China imposed sanctions on a company called SkyDO, which is the biggest US drone maker, and this is a key supplier to Ukraine's military.

And they banned Chinese groups from providing that company with critical components, including batteries. Analysts that we've been speaking to say that you haven't seen anything yet when it comes to what China might be able to do in terms of hitting back against pressure from the US. Looking ahead then, where does a Donald Trump presidency leave trade between the world's two largest economies?

Basically, we're moving into a quite unprecedented area. And I think if these blanket tariffs of 60% which Trump has proposed go through, no one really knows how this is going to work out. So look, a final kind of key component for the Chinese thinking on this is they don't want to do anything that hurts the already slowing Chinese economy. So whether that's hitting back against American companies, whether that's

pushing trade into directions that's going to damage China's long-term interests. These are all things that China needs to think about in terms of responding to any blanket sanctions. And it may be that this is an area where there are no good options for Beijing.

You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News briefing. Check back tomorrow for the latest business news.

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