Category: 3. Business

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Consumer inflation declined to 2.8% year-on-year in October from 2.9% YoY in September, creeping closer to the National Bank of Poland’s target of 2.5%. There were no major surprises with respect to gasoline and house energy prices, and both categories had a pro-inflationary impact on October’s CPI reading.

High frequency data suggested that this year food prices were relatively stable, and we expected only a slight increase, whereas seasonality was largely what drove food prices up last October. A flat reading for food prices (0.0% MoM) was surprisingly low this year. Still, the main surprise came from core inflation excluding food and energy prices. We don’t yet know the full CPI details, but we estimate that it dropped to around 3% YoY from 3.2% YoY in the last two months.

The flash October CPI may convince the Monetary Policy Council to consider yet another 25bp rate cut at the November meeting. Policymakers have cut rates at each policy sitting on the rates since July, but the Council still has room for further policy easing. The new macroeconomic projection may also provide rate setters with more confidence in a favourable inflation scenario for Poland over the medium term. Our baseline scenario had assumed that rates would remain unchanged in November, but the low October CPI reading puts the decision into a slightly different perspective.

Policymakers continue to stress upside risks to the mid-term inflation outlook, including expansionary fiscal policy, robust consumption growth, elevated wage dynamics and uncertainty about the impact of ETS2 on prices – but inflation is inevitably heading towards the central bank target of 2.5% and may even undershoot it temporarily. We think a 25bp rate cut in November is now more likely than a pause.

China’s official manufacturing purchasing managers’ index slowed to 49.0, down from 49.8. This marked a 6-month low, tying April for the lowest level of the year. It came in below expectations for a smaller moderation to 49.6.

The slowdown was seen across all the major subcategories. Production fell into contraction for the first time in 6 months, down to 49.7. This was the lowest level since May 2023. The new orders subindex also fell after two consecutive months of increases, down to 48.8, the lowest level since August 2024. New export orders contributed to this decline, falling to a 6-month low of 45.9. Employment remained in contraction for a 32nd consecutive month. Yet, it saw a relatively smaller downturn of just 0.2pp to 48.3.

We saw large, medium, and small-sized enterprises all sliding into contractionary territory for the first time since April. The trend of larger enterprises outperforming continued in the month.

The downturn in the PMI marks a poor start to the fourth quarter and may cause some concern, given that growth has been supported by external demand and industrial activity. On a brighter note, the PMI has been in contractionary territory since April, but this has not translated into weakness in hard activity data. Come next month’s PMI data, it will be interesting to see if the tariff reduction and extended trade truce with the US help support a recovery of new export orders.

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Gigaclear, a heavily indebted UK broadband provider, has launched a sale process as investors and creditors including NatWest, Lloyds and the National Wealth Fund try to resolve a £1bn debt pile. 

Potential buyers received teaser documents earlier this week, according to three people familiar with the matter. The process comes as Gigaclear’s creditors seek a solution to their investment, which soured after an expected equity injection from Equitix failed to fully materialise in 2023. 

Other options include writing down debt, a debt-for-equity swap or a further cash injection from investors that include main shareholder Infracapital and Railpen, according to a person familiar with the process. They added that Gigaclear’s operations would not be affected regardless of the outcome.

Gigaclear, which is available in more than 500,000 homes and has about 160,000 customers, could fetch between £500mn and £700mn, New Street Research has estimated. 

The dozens of small broadband companies or alternative network providers set up to challenge BT’s Openreach and Virgin Media O2 are now grappling with a collective £8bn debt pile, according to estimates from Enders Analysis, as well as fewer customers than hoped. 

Gigaclear’s restructuring process may involve the first major writedown of debt in the “altnet” sector, and would come after lenders including NatWest and Lloyds set aside provisions to account for losses in the sector. TMT Finance first reported the restructuring.

Taxpayers stand to take a hit in any writedown as the National Wealth Fund gave a £240mn guarantee as part of a wider £1.5bn debt package in 2023. The fund has committed more than £1bn to altnets, according to a person familiar with the matter.

The fund said it continued “to be supportive of the business in exploring ways to raise capital and deliver a sustainable capital structure for the company in order to grow value”.

Potential buyers for Gigaclear could include the industry’s largest player, CityFibre, according to a person familiar with the matter. Any buyer is likely to want a reduction of the altnet’s debt levels before any deal, they added.

The Financial Times reported earlier this week that Virgin Media O2 was in talks about acquiring the UK’s fourth-largest broadband network, Netomnia, in a potential £2bn deal. CityFibre has also expressed interest in the business.

New Street analyst James Ratzer said the “combination of high build costs and low customer take-up” meant the business was unlikely to have any equity value.

“Trying to sell a business with no equity value when equity backers and creditors both want a share of any proceeds is very challenging to complete,” he added.

Gigaclear said it continued to deliver “strong operational performance” and was “delivering on all key financial metrics”.

“Our existing stakeholders remain supportive of the business, and we continue to work constructively with them to explore a range of options that support the long-term success of Gigaclear and deliver the best outcome for all parties,” it added.

Equitix said it had invested £50mn in Gigaclear in late 2023 that had “unlocked £1bn in senior debt” and was disappointed that the “financial performance of the investment did not meet the targets that Gigaclear set itself”.

Infracapital, Railpen, Lloyds, NatWest and CityFibre declined to comment.

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Pick your poison: beer or cigarettes? Weak share prices are pushing cash yields on the biggest brewers closer to those of sin-bin stalwart, Big Tobacco. For investors with the bottle for a sector that seems to be sliding into pariah territory, that could spell opportunity. 

Recent news has contributed to investors’ sour mood. Shares in AB InBev, the world’s largest brewer and maker of Budweiser and Stella Artois beers, fell on Thursday despite an unexpectedly generous $6bn two-year share buyback. Numbers two and three, Heineken and Carlsberg, recently reported falls in quantity sold, and stuck with already-watered down profit forecasts.  

Over the past year, only shares in Carlsberg are in the black — and then, only barely. Its heftier rivals are each down roughly a tenth. Volumes have become a key metric for investors as brewers try to offset mature western markets with growth in less developed countries and in newer categories such as alcohol-free beer.

But key growth spots have gone flat, with Brazil hurt by bad weather and economic uncertainty — a factor in China too, which also this year banned alcohol from official events. Consumption in Vietnam, a market prized for its large, young population, has been slow to recover from the impact of a strict 2020 drink-driving law. 

Mega-brewers’ relegation from the premium to the bargain shelves has been a long process. From trading on at least 20 times expected earnings in 2020, the three brewers now trade on between 12 and 14 times 2026 forecasts. Investors appear to fear that consumption will flag under the influence of public health groups and a more alcohol-conscious younger generation. 

Investors gloomily peering into their half-empty glasses could choose to see things differently. Granted, neither Big Beer’s top nor bottom line have been effervescent of late. But managers have used a mix of price rises and cost cuts to boost free cash flow. AB Inbev, whose annual cash generation after investments is 9 per cent of its market capitalisation, is not far short of the 12 per cent yielded by tobacco stocks — a sector that has handsomely rewarded investors prepared to accept its sinful status.

Big Beer, for all its doubters, isn’t Big Tobacco. It still has growth potential if key markets steady. In the meantime, cash is a good consolation.

jennifer.hughes@ft.com

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Boots is being sued by a travel accessories company that claims travel pillows sold by the UK retailer imitate its “particularly ergonomic” design and breach its intellectual property rights.

Travel Blue has launched a lawsuit against Boots at the High Court in London, demanding the beauty and health retailer stop infringing its design. It has called for unquantified damages and wants Boots to destroy or hand over unsold pillows.

U-shaped pillows have existed since at least the 1920s, when Elizabeth Millson of New York patented one in the US for use in baths.

Together with noise-cancelling headphones, the modern version has become a fixture of long-haul economy class flights. The neck-supporting products offer a degree of comfort — and the promise of sleep — to passengers confronted with limited leg room and barely reclining seats.

Travel Blue’s lawsuit, which was filed in September, recognises that all travel pillows need to “fit around a person’s neck, to provide support for that person’s neck whilst travelling and to be transportable”.

However, the legal claim states that specific elements of some pillows sold by Boots mean they infringe on a design that Travel Blue has registered with the UK’s Intellectual Property Office.

Nicholas Caddick KC, representing the UK accessories company, said in court papers that Travel Blue’s design had “significant features” that created an “overall impression of a particularly ergonomic and comfortable travel pillow with flowing rather than rigid lines”.

He set out a range of similarities between Travel Blue’s design and Boots’, including legs that had “a bulbous appearance accentuating the support” to the sides of the user’s head.

Caddick continued: “When viewed from the rear, an undulating top profile with a concave centre section flanked by raised lateral support points, once again, giving the appearance of enhanced support for the wearer’s head and neck”.

A Boots spokesperson said “We don’t believe the claim has any merit and will be strongly defending our position.” According to court records the company has retained law firm Browne Jacobson to defend it in the case. Defence documents have yet to be filed with the court.

Boots operates stores in several UK airports among about 1,800 stores, selling travel essentials and health and beauty products.

The chain, formerly part of US-listed Walgreens Boots Alliance, became a standalone entity this year after private equity group Sycamore Partners took WBA private and split off the international health and beauty retailer and drug wholesaling business as The Boots Group.

Travel Blue, founded in 1987, is a family-owned business and sells its products through a wide range of airport duty free outlets as well as luggage and bag shops and department stores around the world, as well as online.

Microsoft CEO Satya Nadella emphasized that the tech giant must “earn our permission to operate every day, in every country, every community, and every customer interaction” in his annual shareholder letter, as the company navigates what he calls a generational AI platform shift.The message comes as Microsoft reported record financial performance with revenue reaching $281.7 billion, up 15 percent, and Azure cloud revenue surpassing $75 billion for the first time with 34 percent growth. Despite these achievements, Nadella stressed the company cannot take customer trust for granted.

“We take neither for granted,” Nadella wrote about the company’s performance and customer trust. “That’s why we remain grounded in our mission: to empower every person and every organisation on the planet to achieve more.”

Security and quality drive Microsoft‘s AI strategy

Nadella outlined three core priorities for Microsoft: security, quality, and AI innovation. The company dedicated resources equivalent to 34,000 full-time engineers to its Secure Future Initiative, strengthening identity protections and embedding security-by-design practices across all products.Microsoft’s AI infrastructure expansion included opening datacenters across six continents, now operating more than 400 facilities in 70 regions. The company announced Fairwater, positioned as the world’s most powerful AI datacenter in Wisconsin, delivering ten times the performance of today’s fastest supercomputer.Microsoft 365 Copilot surpassed 100 million monthly active users across commercial and consumer segments, while GitHub Copilot reached 20 million users. The company introduced Agent Mode, allowing users to orchestrate multistep tasks through simple prompts.

Microsoft commits $4 billion to AI education and skills

Looking beyond technology, Nadella announced Microsoft Elevate, a five-year initiative investing $4 billion in cash and AI cloud technology to schools and nonprofit organisations. The program aims to help 20 million people earn AI credentials over the next two years.“People want technology they can trust,” Nadella wrote, committing to responsible AI innovation guided by values of respect, integrity, and accountability.The CEO challenged employees to think long-term: “What are you working on today that, 15 years from now, you will look back on and say, ‘we got it right’?”