Royal Mail to cut deliveries under regulator proposals; Shell hikes investor payouts – business live

Germany’s economy contracted by more than expected in the fourth quarter of 2024, according to data that suggest the Eurozone economy as a whole may not have expanded.

Germany’s GDP dropped by 0.2% quarter-on-quarter in the last three months of the year, according to preliminary data from the statistics office. That was worse than the 0.1% contraction expected by economists polled by Reuters.

France’s economy shrank by 0.1% in the quarter, while Italy’s economy also recorded zero growth.

The figures underline the rationale for interest rate cuts from the European Central Bank later today.

Andrew Kenningham, chief Europe economist at Capital Economics, a consultancy, said:

With national data now available for all larger euro-zone countries, it looks as if GDP growth in the region slowed to 0.1% q/q or even zero in Q4 last year. The region’s two largest economies both contracted and Italy recorded no growth. With the major economies set to remain lacklustre this year even if a major tariff war is avoided, we expect the ECB to cut its deposit rate by 150bp this year to 1.50%, starting with 25bp later today.

One of the driving forces of market gyrations this week has been concerns over the emergence of DeepSeek, a Chinese artificial intelligence company that appears to have blown rivals out of the water with an AI model that used a fraction of the resources of others.

That threatened to undermine the narrative of ever-increasing use of resources – particularly computing power – that had fuelled the AI boom. Chip maker Nvidia’s share price duly plummeted on Monday in the biggest one-day fall in notional value in stock market history.

There has been a notable round of briefing since then from the US competitors led by OpenAI as they try to reassure investors. The latest news reported by the Financial Times, with very helpful timing, is that Japanese investor SoftBank is in talks to invest as much as $25bn in OpenAI.

Donald Trump last week announced a data centre joint venture, dubbed Stargate, between SoftBank and OpenAI – only for it to be overshadowed by DeepSeek.

Yet SoftBank, led by Masayoshi Son, wants to break into AI. The FT cited a person familiar with the matter saying:

The talks are ongoing and the amount that SoftBank could invest in primary equity into OpenAI is a moving target.

That followed briefing yesterday that OpenAI has alleged that DeepSeek “distilled” data from its model, allowing it to skip much of the expensive effort of training AI models. If confirmed, that would violate OpenAI’s terms of service.

Owners of the data used by the American company to train its model may be forgiven for at least one eyebrow hitting the ceiling at that complaint. OpenAI has argued in submissions to the UK’s House of Lords that it would be impossible for its technology to exist without training on copyrighted material – without the consent of the owners of that material. Tech website Gizmodo wrote: “OpenAI Claims DeepSeek Plagiarized Its Plagiarism Machine”.

It has started off as a fairly mild trading day across European stock markets. All the major indices have gained ground in early trading. But that has still pushed the Euro Stoxx 600 index to its latest record high.

The Stoxx 600 reached 535.9 points on Thursday morning. It has risen from below 500 in mid-December as investors expect the European Central Bank to act to support the economy.

The FTSE 100 is up by 0.1%, or eight points, at 8,566.3. That leaves it 20 points short of its all-time high of 8,586.68 from a week ago. Could the ECB also help it to a new record later?

Good morning, and welcome to our live coverage of business, economics and financial markets.

Royal Mail is set to be allowed to deliver second-class letters only on alternate weekdays and not on Saturdays after the industry regulator announced a shake-up of postal service rules.

Communications regulator Ofcom has proposed that Royal Mail would still be required to deliver first-class letters six days a week and the price cap on second-class stamps would remain, but the company will be allowed to make cost savings by cutting the number of days it goes to every address.

The changes could save Royal Mail between £250m and £425m each year. The cuts would be a boon to Czech billionaire Daniel Křetínský’s EP Group, as it nears a £3.6bn takeover of Royal Mail’s FTSE 250-listed parent company, International Distribution Services.

Shell profits fall, but investor payouts rise

Shell has handed its investors a multibillion-dollar windfall despite reporting weaker than expected profits of $23.7bn for last year as global oil and gas prices tumbled.

Shareholders of Europe’s biggest oil company are in line for a 4% dividend hike alongside share buybacks of $3.5bn for the last three months of the year.

This marks the thirteenth consecutive quarter in which Shell has handed its investors buy backs of more than $3bn, despite falling earnings from its oil and gas.

European Central Bank expected to cut interest rates

The European Central Bank, led by Christine Lagarde, is widely expected to cut interest rates today in an effort to support economic growth.

We will get a good picture of the economy’s momentum this morning, with Eurozone GDP figures.

Reuters reported:

The European Central Bank is all but certain to cut interest rates on Thursday and is likely to keep open the door to further policy easing as concerns over lacklustre economic growth supersede worries about persistent inflation.

The agenda

• 9am GMT: Germany GDP growth (fourth quarter; previous: 0.1% quarter-on-quarter; consensus: -0.1%)

• 10am GMT: Eurozone GDP growth (fourth quarter; prev.: 0.4% ; cons.: 0.1%)

• 1:15pm GMT: European Central Bank interest rate decision

• 1:30pm GMT: US GDP growth (fourth quarter; prev.: 3.1% annualised; cons.: 2.6%)

• 1:45pm GMT: ECB press conference