The Guardian

Markets slide as US manufacturing struggles; record demand at UK government debt auction – as it happened

By Graeme Wearden,

7 days ago

https://img.particlenews.com/image.php?url=1NVYiw_0vIjc4Hs00 — The London financial district and Canary Wharf. Photograph: Shomos Uddin/Getty Images

4.39pm BST

Closing post

Time for a recap.

Global markets have dropped today after weak US manufacturing data revived concerns about the health of America’s economy.

Economic activity in the manufacturing sector contracted in August for the fifth consecutive month, according to data from the Institute of Supply Management.

It found that new orders fell last month, and that both production and employment deteriorated.

Stocks have fallen sharply in New York, where the S&P 500 is currently down 1.3% and the Nasdaq Composite has lost 2.2%, as shares in tech stock such as Nvidia and Intel slide.

Oil has hit its lowest level since last December:

In the UK, there was record demand at an auction of govenment debt , as investors signalled their desire to hold British debt was undimmed.

Cathay Pacific has identified 15 Airbus A350 aircraft that need component replacements after a part failed on one of its Rolls-Royce engines minutes after takeoff from Hong Kong on Monday.

A second carrier, Singapore Airlines, said on Tuesday it was also inspecting the engines of its Airbus A350 aircraft “as a precautionary measure”.

Great Britain’s renewable energy auction has secured enough new clean electricity projects to power 11m UK homes after the Labour government made record funding available to suppliers.

Organised criminals are behind the recent rise in shoplifting and violence against shop workers rather than people stealing to survive, one of the UK’s largest grocery chains has told a parliamentary inquiry.

The trial into the “dieselgate” emissions scandal , which plunged Volkswagen into disrepute nine years ago, has opened with the German carmaker’s former chief executive appearing in the dock for the first time.

Workers in London have been slower to return to the office than those in other global cities such as Paris and New York, a report has found.

Updated at 4.46pm BST

4.36pm BST

FTSE 100 closes in the red

The London stock market is closed… and the blue-chip FTSE 100 share index has posted its biggest drop in two weeks.

The FTSE 100 has dropped by 0.8%, or 65 points, to 8298 points.

EasyJet is the top riser, up 2.7% – today’s drop in the oil price is good for its profits.

Rolls-Royce gained 1.7%, as traders concluded that the problem that hit a Cathay Pacific flight yesterday is not as serious as first thought.

Rightmove led the fallers, down 6.7%, a day after surging on hopes of a takeover approach from Australia’s Rea Group.

Updated at 4.37pm BST

3.56pm BST

The tech-focused Nasdaq composite index has now slumped by 2.35%; it’s down 416 points at 17,297 points.

Chip stocks are leading the selloff. Nvidia (-7.6%) are the top faller on the Nasdaq, followed by Intel (-6.9%) and semiconductor designer Arm Holdings (-6.7%).

Updated at 3.57pm BST

3.52pm BST

3.42pm BST

Oil price hits lowest since December

The oil price has fallen to its lowest level since December, dogged by fears of weak demand and rising supply.

Brent crude is down 4.5% to $74 per barrel, its weakest level this year.

The fall began after Bloomberg reported that a Libyan central banker believes a deal appears imminent to resolve a dispute that has hit oil output.

Sadiq Al-Kabir, the governor whose attempted ousting by the nation’s western government prompted eastern authorities to cut crude production, said today there were “strong” indications political factions are nearing an agreement to overcome the current deadlock. More here .

The duo of US manufacturing reports from S&P Global and the ISM today are also bad for the oil price, as weakening factory activity will mean less demand for energy.

Updated at 3.51pm BST

3.36pm BST

US manufacturing is “stuck in a rut”, says Capital Economics, having digested today’s PMI survey from the ISM ( see earlier post ).

They told clients:

The ISM manufacturing index was essentially unchanged in July, leaving it consistent with manufacturing output and GDP growth losing momentum in the third quarter, and a sharp drop in the new orders index reduces the likelihood of a turnaround in September.
The small gain in the ISM manufacturing index to 47.2, from 46.8, was arguably weaker than it first looked. Most of the increase was driven by the inventories index rising by 5.8-points to 50.3, from 44.5, while the employment index only partly rebounded to 46.0, from 43.4. The latter may somewhat soothe concerns that the labour market is rapidly deteriorating, but still points to looser labour market conditions.
The bigger concern might be the further fall in the new orders index to 44.6, from 47.4, although we are not yet at the sub-42 mark that has historically coincided with recessions.

3.26pm BST

3.21pm BST

Markets drop after PMI disappointment

Stock markets on both sides of the Atlantic have dropped deeper into the red, following the weak surveys of US manufacturing released in the last few minutes.

On Wall Street the S&P 500 has now shed 1.3%, dropping 73 points to 5,574 points.

US tech stocks are among the big fallers, with Nvidia now down over 6% and Intel dropping by 5%.

In London, the FTSE 100 is on track for its biggest fall in nearly two weeks. It’s down 66 points at 8,297 points, a drop of 0.8%.

The pan-European Stoxx 600 is down around 1%.

3.18pm BST

3.13pm BST

ISM: economic activity in the US manufacturing sector contracts again

A rival PMI survey from the Institute of Supply Management confirms that US factories struggled last month.

The ISM reports that economic activity in the US manufacturing sector contracted in August for the fifth consecutive month and the 21st time in the last 22 months.

ISM’s Manufacturing PMI has come in at 47.2 percent for August, up from the 46.8 percent recorded in July, but still below 50 points – indicating a contraction.

Manufacturers reported a drop in new orders, and a contraction in both production and employment levels.

Timothy Fiore , chair of the ISM’s Manufacturing Business Survey Committee, says:

Demand remains subdued, as companies show an unwillingness to invest in capital and inventory due to current federal monetary policy and election uncertainty.
Production execution was down compared to July, putting additional pressure on profitability. Suppliers continue to have capacity, with lead times improving and shortages not as severe. Sixty-five percent of manufacturing gross domestic product (GDP) contracted in August, down from 86 percent in July.

2.56pm BST

S&P Global: US manufacturing production slips

US manufacturing production decreased for the first time in seven months during August, a new survey of purchasing managers from S&P Global shows.

The S&P Global US Manufacturing Purchasing Managers’ Index, which tracks activity in the sector, has dropped to 47.9 in August, down from 49.6 in July. That’s the second month running that the PMI has come in below the 50-point mark showing stagnation.

The survey found that firms scaled back production in response to falling sales as demand across the sector waned, with new export orders falling for the third month running.

This led to a drop in staffing levels for the first time this year.

Chris Williamson , chief business economist at S&P Global Market Intelligence , says:

“A further downward lurch in the PMI points to the manufacturing sector acting as an increased drag on the economy midway through the third quarter. Forwardlooking indicators suggest this drag could intensify in the coming months.
Slower than expected sales are causing warehouses to fill with unsold stock, and a dearth of new orders has prompted factories to cut production for the first time since January. Producers are also reducing payroll numbers for the first time this year and buying fewer inputs amid concerns about excess capacity.
The combination of falling orders and rising inventory sends the gloomiest forward-indication of production trends seen for one and a half years, and one of the most worrying signals witnessed since the global financial crisis.

Updated at 3.13pm BST

2.43pm BST

Back in the airline sector, Singapore Airlines has said that it is inspecting the engines of its Airbus A350 aircraft, after a Cathay Pacific flight suffered an engine failure in a flight from Hong Kong .

A spokesperson for Singapore Airlines said that it was inspecting the Rolls-Royce Trent XWB-84 engines that power its Airbus A350-900 fleet “as a precautionary measure”. It is also in contact with Rolls-Royce and Airbus.

Cathay Pacific has said that it has identified 15 aircraft that need component replacements after the part failure , forcing it to cancel some flights. However, Singapore Airlines said there has not been any impact so far on its schedule.

The Singapore Airlines spokesperson said:

As a precautionary measure, SIA is inspecting the Rolls-Royce Trent XWB-84 engines that power our Airbus A350-900 fleet.
There is currently no impact on SIA flights operated with our Airbus A350-900 aircraft.
The safety of our customers and staff is always our top priority.

2.40pm BST

As expected, Wall Street has opened in the red, with the S&P 500 index down around 0.6%.

Chipmaker Nvidia has made a bad start to trading, with its shares down around 5%.

Traders continue to digest last week’s results which showed a surge in revenues, but also delays to deliveries of its Blackwell chips.

2.06pm BST

The eagerness of international investors to bid for UK debt raises new questions over the wisdom of cutting winter fuel allowance payments for some pensioners.

Chancellor Rachel Reeves defended her controversial decision today, telling MPs that the cut should be offset by increases to pensions and lower energy prices this winter compared with last year.

Reeves told the House of Commmons:

“We inherited a £22 billion blackhole from the previous government who made unfunded spending commitments with no idea how to pay them.
“When I became Chancellor I took an immediate audit of the spending situation to understand the scale of that challenge, and I made difficult decisions to put the public finances on a sustainable footing. They were tough decisions, but they were the right decisions.
“This includes the decision to make the winter fuel payment better targeted so pensioners who need it most, will get it alongside pension credits.”

But, the decision was criticised by some MPs, with Conservative MP Dame Harriett Baldwin saying cutting winter fuel payments was a “chilling political choice” by the Chancellor.

1.35pm BST

In the energy sector, experts have been reacting to the latest renewable energy auction.

Results announced this morning show that the auction has secured enough new clean electricity projects to power 11m UK homes.

The £1.5bn auction will support 131 new projects including windfarms, solar farms and tidal power projects after ministers increased the amount of funding available to seven times the sums offered last year.

Consultancy Cornwall Insight point out that this year’s auction will deliver 9.6GW of renewable capacity, which is “a substantial increase” on the 3.7GW secured at last year’s auction.

Cornwall adds:

The greatest success came from solar PV and offshore wind, which saw 3.3GW and 4.9GW secured respectively.

But there is disappointment that the auction secured only half the offshore wind capacity needed every year for the rest of this decade if the government hopes to meet its green energy targets. That’s because almost two-thirds of the new offshore wind capacity that was eligible to bid in the auction failed to bid low enough to secure a contract.

Greenpeace UK’s political campaigner, Ami McCarthy , says:

“The government clearly needs to take a hard look at how this system is working. 5GW of offshore wind is of course welcome, but it is only about half of what is required each year to meet the government’s 2030 target .

The Unite union is disappointed that many of the offshore wind farms were awarded to the Danish multinational Orsted, rather than helping to create UK jobs.

Unite general secretary Sharon Graham says:

“Creating sustainable green jobs must be at the heart of the UK’s renewable energy strategy.
The government will continue to fall at the first hurdle in providing a just transition for oil and gas workers, unless we ensure that the towers, blades and nacelles needed for new wind farms are manufactured in the UK.
Not only has the government got to play catch up to meet its renewable energy targets, but it must also develop a UK wind manufacturing industry, or it is simply exporting green jobs abroad.”

12.58pm BST

The strong demand for UK government debt today adds to signs of strong demand for British bonds from investors attracted by their higher yields compared with global peers.

Reuters says this is driven in part by expectations that the Bank of England will cut interest rates by less than the U.S. Federal eserve or European Central Bank over the next year.

Regular weekly gilt auctions have also shown no shortage of bidders, they add.

12.34pm BST

BBVA gets regulatory approval to control TSB

Banking News: City regulator the Prudential Regulation Authority has given Spanish lender BBVA the green light to take indirect control of British high street lender TSB, clearing another hurdle in its hostile takeover of the UK bank’s parent company, Sabadell.

Sabadell rejected BBVA’s original all-share offer worth €12.2bn (£10.5bn) in May, saying it significantly undervalued the bank and its “standalone prospects”.

BBVA is now trying to circumvent the board by taking the same offer straight to Sabadell investors.

Part of that process has involved getting approval from regulators to potentially take over Sabadell subsidiaries and local operations from regulators in different countries - including the UK.

BBVA said on its website :

The UK’s Prudential Regulation Authority has given green light to BBVA to take indirect control of TSB Bank plc, Banco Sabadell’s banking subsidiary in the United Kingdom. The authorization is one of the conditions to which the purchase offer to Banco Sabadell shareholders is subject and a necessary step to complete it, since TSB would become part of BBVA.

The PRA declined to comment. TSB was contacted for comment.

12.08pm BST

UK’s bond sale sees strong demand in boost for Labour

Investors have rushed to take part in an auction of UK government debt today, in an sign that the new government has not upset the bond vigilantes in the City.

An auction of a new bond today has attracted a joint record of bids from investors.

The debt sale attracted over £110bn of orders, which Bloomberg reports matches a record set in June and is the biggest-ever demand compared to the size of the sale.

The Debt Management Office will raise £8bn from the bond, or gilt, which matures in January 2040 and has a 4.375% coupon (the interest payment which bondholders receive).

This could calm concerns that investors could be spooked by the new Labour government, which has said it discovered a £22bn “black hole” in the public finances.

The UK national debt is already at its highest since the early 1960s, at almost 100% of GDP, after Britain borrowed £3.1bn, more than expected , in July.

Bloomberg explains:

The latest deal looks like an endorsement for a new government under pressure to fill a gap in the budget, two years after a blowout in yields on concerns about the country’s deficit.
The bumper orders come as the UK’s bonds have rallied in recent months on the prospect of more interest-rate reductions from the Bank of England following a cut last month.

The popularity of today’s bond auction is the second piece of good news for the UK today, after Bank of America raised its growth forecasts ( see earlier post ).

That, though, was countered by the drop in M&A activity in June (see here ).

Updated at 1.17pm BST

11.40am BST

Good news for Turkish consumers: inflation has fallen to its lowest level in a year.

Bad news for Turkish consumers: prices are rising by more than 50%.

Turkey’s CPI inflation rate has fallen to 52% per year in August, down from almost 62% in July.

This slowdown in price rises comes after Turkey’s central bank surprisingly hiked interest rates to 50%, in an attempt to cool inflation pressures.

11.33am BST

Markets in the red

Global stock markets are dropping today, as investors brace for economic data that may show whether the US economy is weakening.

In London, the FTSE 100 shares index is down 50 points, or 0.6%, at 8314 points, away from the three-month highs set last week.

European markets are also in the red, with the pan-European Stoxx 600 index off 0.5%.

Concerns about Germany’s economy led to a “bumpy start” for Europe’s markets today, says Joshua Mahony , chief market analyst at Scope Markets .

The prospective closure of German Volkswagen factories serves to highlight the downfall of Europe’s largest economy, with yesterday’s PMI survey confirming another month of contraction to add to the two-years behind us.

Wall Street is heading for falls too, with the futures market indicating the S&P 500 index will fall by around 0.55%.

Traders are also on edge ahead of a healthcheck on the US manufacturing sector this afternoon (3pm UK time).

And Friday will bring the latest US jobs report for August. July’s report showed a surprise slowdown in hiring and a rise in the unemployment rate, which may signal a recession.

11.04am BST

Drop in UK M&A activity as high rates hit dealmaking

Takeovers involving UK companies have fallen to their lowest level since early in the Covid-19 pandemic.

New data from the Office for National Statistics shows there were 93 domestic and cross-border M&A deal involving UK companies in June, the lowest since May 2020.

This includes a fall in domestic M&A activity (where one UK company buys another), inward M&A deals (where a foreign company buys a UK one), and outward M&A (where a UK firm buys an overseas company) in June.

Sam Fuller , managing director at global investment bank Houlihan Lokey’s Consumer Group, says high interest rates are hitting dealmaking:

Whilst there is a recognition amongst both sponsors and corporates that financing conditions have improved on last year, this morning’s data suggests that key constraints on dealmaking, such as elevated interest rates and prevailing market uncertainty, are continuing to hamper overall activity in the UK.
Despite showing an openness to quality assets and still having significant capital to deploy, sponsors are often pursuing smaller, buy-and-build strategies rather than new platform acquisitions, reflecting a continued trend towards strategic consolidation and expansion within existing portfolios.
As we look ahead to the remainder of the year, further BoE interest rate cuts could act as a catalyst for larger, buy-out deals to return to the market, but only if buoyed by increasing confidence and still cheaper financing costs.
The upcoming Budget is feeling increasingly seismic and will almost certainly impact M&A activity levels. Changes in corporate and capital gains tax rates, in particular, could impact company valuations and seller incentives, meanwhile an increased tax burden will further hurt an already struggling consumer economy.”

10.51am BST

BofA raises UK growth forecasts

Bank of America has raised its forecast for UK economic growth this year, and next, in a boost to the new Labour government.

In a new report, BofA says recent growth has been stronger than expected. It now expects GDP to rise by 1.1% in 2024 and 2025, with “upside risks” that growth could be stronger.

That’s a rise on BofA’s previous forecasts of 0.8% growth this year and 1% next.

Faster growth should translate to higher tax receipts, and lower unemployment, which would help to address the ‘black hole’ in the UK public finances which means this autumn’s budget is likely to be tough.

BofA also expects a small increase in unemployment, but not as much as previously expected, saying:

We expect the labour market to ease from tight levels, though slightly less than previously expected and unemployment to increase from 4.2% currently to 4.4% by end 2024 and 4.6% by end 2025 (less than 4.5% and 4.7% before).

10.08am BST

BMW recalling Mini Cooper SE electric cars over fire risk

Rolls-Royce isn’t the only European manufacturer involved with a technical problem today.

BMW , the German carmaker, is recalling its electric Mini Cooper SE vehicles due to problems in their batteries, which could lead to a fire.

The recall could potentially affect more than 140,000 autos worldwide, a company spokesperson told Reuters last night.

In a statement, BMW epxlained that problems in the battery system can lead to overheating, adding:

“A vehicle fire, even when the vehicle is parked, cannot be ruled out.”

There have been claims that fires are more common in electric cars, and are more damaging when they break out. However, as our EV Mythbusters series explained last November, the evidence suggests there is no reason to think that EVs are more likely to go up in flames….Indeed, the opposite appeared to be true.

Updated at 10.43am BST

9.26am BST

Some Hong Kong passengers affected by Cathay Pacific Airways’ flight cancellations have complained about “poor customer service and confusion”, reports the South China Morning Post.

The SCMP says :

Travellers told the Post they were informed of the cancellations at around 9:30pm on Monday, with many panicking to make last-minute travel arrangements.
Some of those who were supposed to travel on the cancelled flights to Singapore managed to rebook seats with the city state’s airline on the same day.
Hairstylist Shum Sai-cheong, who was travelling with six others to attend an expo event in the city state, said he had liaised with Cathay’s customer service until midnight.
“We were supposed to take the 8am flight to Singapore and were getting ready to sleep when we received notice of the cancellation,” he said.
“The email provided no alternatives and we were left waiting on the hotline for over an hour.”

Updated at 9.26am BST

8.46am BST

Analysts at Morgan Stanley are optimistic that the problem with Rolls-Royce’s XWB-97 engine is not a repeat of the issues which hit its Trent 1000 and Trent 900 engines.

They told clients:

The issue appears to be isolated to the engine fuel nozzle, according to a person familiar with the matter contacted by Reuters, rather than a more widespread issue covering multiple parts or systems like we saw with the Trent 1000 (blades, etc). This should allay concerns of a Trent 1000 2.0.
Cathay is only planning for the grounded aircraft to remain out of service for ‘several days’, suggesting the issue requires a fairly minor and quick fix, and therefore does not call into question the engine’s design or architecture like we saw with the Trent 1000. Indeed, Cathay has noted that spare parts have been secured and repair work is underway.

In 2018, Rolls-Royce took a £554m charge to cover the cost of inspecting Trent 900 and 1000s, after cracks were discovered in turbine blades.

Updated at 8.47am BST

8.33am BST

Reuters has pulled together a handy ‘what you need to know’ piece about the Cathay Pacific engine part failures.

It explains that there are 88 A350-1000 jets in operation worldwide, according to Swiss aviation intelligence provider ch-aviation.

The top six operators are Qatar Airways with 24 planes, British Airways with 18, Cathay Pacific with 18, Virgin Atlantic with 12 and Etihad Airways and Japan Airlines (JAL) with five each.

There are 520 A350-900s in operation worldwide, ch-aviation data shows.

It is not clear whether other airlines are inspecting their engines.

Updated at 8.35am BST

8.27am BST

Airbus says:

“We are working closely with Rolls-Royce and Cathay Pacific. At this time it would be inappropriate for us to comment further, pending the ongoing investigation.”

8.27am BST

Cathay Pacific's cancellations in full

Here’s a full list of the flights cancelled by Cathay Pacific so far this week as it scrambes to inspect its fleet of A350s following the problem suffered by flight CX383 from Hong Kong to Zurich.

Monday 2 September

Hong Kong to Sydney: CX 139
Sydney to Hong Kong: CX 138
Hong Kong to Singapore: CX 735 / CX 711

Tuesday 3 September

Hong Kong to Bangkok: CX 705 / CX 717 / CX 755
Bangkok to Hong Kong: CX 750 / CX 754 / CX 712
Bangkok to Singapore: CX 717
Singapore to Bangkok: CX 712
Hong Kong to Singapore: CX 659 / CX 691 / CX 759 / CX 739 / CX 735 / CX 711 / CX 715
Singapore to Hong Kong: CX 690 / CX 734 / CX 716 / CX 692 / CX 710 / CX 658
Hong Kong to Tokyo (Narita): CX 524 / CX 526 / CX 500
Tokyo (Narita) to Hong Kong: CX 527 / CX501 / CX 509
Hong Kong to Osaka(Kansai): CX 596 / CX 502
Osaka (Kansai) to Hong Kong: CX 595
Hong Kong to Taipei: CX 464
Taipei to Hong Kong: CX 469

Wednesday 4 September

Hong Kong to Tokyo (Narita): CX 524
Tokyo (Narita) to Hong Kong: CX 509
Hong Kong to Osaka(Kansai): CX 566
Osaka (Kansai) to Hong Kong: CX 597 / CX 503
Hong Kong to Taipei: CX 464 / CX 466 / CX 494
Taipei to Hong Kong: CX 469 / CX 461 / CX 495
Hong Kong to Singapore: CX 659
Singapore to Hong Kong: CX 714 / CX 710 / CX 658 / CX 692
Hong Kong to Bangkok: CX 705
Bangkok to Hong Kong: CX 750
Hong Kong to Beijing: CX 332
Beijing to Hong Kong: CX 331
Hong Kong to Shanghai(Pudong): CX 368 / CX 360
Shanghai (Pudong) to Hong Kong: CX 367 / CX 369
Hong Kong to Kuala Lumpur: CX 723
Kuala Lumpur to Hong Kong: CX 722
Hong Kong to Kaohsiung: CX 432
Kaohsiung to Hong Kong: CX 431
Hong Kong to Manila: CX 919
Manila to Hong Kong: CX 918
Hong Kong to Seoul (Incheon): CX 416

Thursday 5 September

Seoul (Incheon) to Hong Kong: CX 417

8.17am BST

Deutsche Bank reckons Rolls-Royce’s shares are still worth buying, despite the problems at Cathay Pacific.

It told clients this morning that it has a target price of 555p for Rolls’s shares – they fell to 464p last night, but have now risen to 480p this morning.

Deutsche analyst Christophe Menard says:

Cathay Pacific announced that it was inspecting its Airbus A350 fleet as a precautionary measure after discovering an engine issue on a Rolls-Royce Trent XWB-97 engine on 2 September.
While the news raises some concerns, our preliminary analysis is that the financial liability could be contained. Hence, our positive view of the equity story is unchanged.

Updated at 8.17am BST

8.08am BST

Rolls-Royce shares rise

London’s stock market is open…. and shares in Rolls-Royce are recovering some of yesterday’s losses.

Rolls-Royce has jumped by around 3% in early trading, having lost 6.5% on Monday as traders reacted to the news that Cathay Pacific flight CX383, powered by RR’s XWB-97 engines, had a problem.

8.06am BST

Cathay to cancel 10 additional regional return flights tomorrow

Looking ahead to tomorrow (4 September), Cathay Pacific says it expect to cancel “10 additional regional return flights” on top of what’s already been announced. Long-haul services should not be affected, though.

For the remaining cancellations up to Saturday (7 September), further details will be provided tomorrow.

Updated at 9.05am BST

8.03am BST

Cathay Pacific finds 15 A350s need engine parts replaced

We have fresh news from Cathay Pacific.

Cathay says the maintenance activity on its A350 fleet is “progressing well”, and that its engineers have thoroughly inspected the fleet.

It has found 15 aircraft with components that needed to be replaced.

Three of the planes have already been repaired, and they are all expected to resume operations by Saturday.

Updated at 8.27am BST

7.54am BST

Rolls-Royce adds that as well as providing support and guidance to Cathay Pacific, it will keep other airlines that operate Trent XWB-97 engines “fully informed of any relevant developments as appropriate”.

7.46am BST

Rolls-Royce has confirmed that the Cathay Pacific flight that encountered problems yesterday was powered by one of its Trent XWB-97 engines.

It says:

Rolls-Royce also notes that an investigation has been launched by the relevant authorities in Hong Kong under ICAO Annex 13, which restricts Rolls-Royce from commenting on the investigation.

Rolls adds that it is “committed to working closely” with the airline, aircraft manufacturer and the relevant authorities to support their efforts.

Rolls also notes that if any components need replacing, spare parts have been secured and the replacement can be completed “whilst the engine is on-wing”.

Updated at 7.48am BST

7.38am BST

Other airlines who use A350-1000 jets are awaiting more information about the problem.

Reuters reports:

Tokyo-based Japan Airlines (JAL) , which has five A350-1000s that are all less than a year old, said it had asked Rolls-Royce for more information and had not stopped A350 flights in the meantime.
“If the engine manufacturer takes any further action, we will respond accordingly,” a JAL spokesperson said.

7.35am BST

Introduction: Cathay Pacific cancels flights over RR engine problem

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

A problem with a Rolls-Royce engine has forced Hong Kong carrier Cathay Pacific to cancel at least 24 return flights.

Eight of Cathay’s nine flights from Hong Kong to Singapore have been cancelled today, along with other services across Asia, as the airline races to inspect its fleet of Airbus A350s, powered by Rolls-Royce engines.

Last night, Cathay said “a number of aircraft will be out of service for several days” while checks are carried out as a “precautionary measure”.

The only Cathay flight left from Hong Kong to Singapore today, at 15:15pm local time, uses a Boeing 777-300 jet.

Three flights to Bangkok, three to Tokyo and one to Taipei have also been scrapped.

Cathay acted after a part failed on one of its A350-1000 widebody planes shortly after take-off from Hong Kong, on a route to Zurich, on Monday. The plane dumped its fuel over the sea before returning safely to Hong Kong, where an engine component failure was identified.

Keith Brown , the Cathay Pacific engineering director, said yesterday:

“Each aircraft is undergoing a rigorous inspection. Upon completion, the aircraft cleared for operation will return to service, while those identified with technical issues will undergo further repair and maintenance work.
Meanwhile, we are liaising with the Hong Kong civil aviation department and the aircraft and engine manufacturers. We sincerely apologise for the inconvenience caused and appreciate our customers’ patience and understanding.”

The A350-1000 uses Rolls-Royce’s XWB-97 engine.

The problem is suspected to be deformed or degraded fuel lines, Bloomberg reports.

Shares in Rolls-Royce fell by 6.5% on Monday, after news of Cathay’s problems emerged.

Other airlines, though, have not grounded their own A350s; data flight tracking service FlightRadar24 shows other major operators of the A350-1000 and A350-900 planes appear to be flying their aircraft normally on Tuesday, Reuters reports.

The agenda

8am BST: Switzerland’s Q2 2024 GDP report
9.30am BST: ONS data on mergers and acquisitions involving UK companies
10.30am BST: South Africa’s Q2 2024 GDP report
1pm BST: Brazil’s Q2 2024 GDP report
3pm BST: ISM survey of US manufacturing for August