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Msg  491133 of 493250  at  6/23/2022 6:47:17 AM  by



Prepare now for Putin to cut off gas supply, Europe warned
Wed, 22 June 2022, 1:13 pm
Russia gas supplies winter pipeline IEA Europe energy crisis Fatih Birol - Mikhail METZEL / POOL / AFP
Russia gas supplies winter pipeline IEA Europe energy crisis Fatih Birol - Mikhail METZEL / POOL / AFP
The three charts that show inflation is only going to get worse

Union barons blasted for 'sense of entitlement' as rail strike talks resume

FTSE 100 falls 0.9pc as inflation rises again

Jeremy Warner: Strike chaos and high inflation, yes, but this is not the 1970s in redux

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Europe has been urged to prepare for a complete cutting off of Russian gas supplies as the continents energy crisis deepens.

The International Energy Agency warned Putins decision to curtail flows through the Nord Stream pipeline over the last week could be a precursor to a full shutdown this winter.

Fatih Birol, head of the IEA, told the Financial Times: Europe should be ready in case Russian gas is completely cut off.

He said European countries should take measures to reduce demand ahead of the key winter period. This included firing up old coal-fired power stations despite concerns about emissions.

Bloomberg reported that Germany was preparing to trigger the second phase of its emergency gas plan known as the alarm stage amid rising fears that Putin could turn off the taps.

06:13 PM

Wrapping up

That's all from the blog today, thank you for following! Before you go, check out the latest stories from our reporters:

Sir Jim Ratcliffe to bring gas to Europe as bloc scrambles for supplies

Unilever secretly fought ban on plastic sachets it branded evil

Union barons blasted for 'sense of entitlement' as rail strike talks resume

Joe Biden pushes fuel tax cut ahead of midterm elections

The three charts that show inflation is only going to get worse

06:07 PM

High taxes could halve number of London new-builds, warns developer Berkeley

Inflation and rising taxes on developers risk making Britains home shortage worse, according to the boss of London's largest housebuilder. Helen Cahill has more:

Berkeley Group's chief executive Rob Perrins said the number of new properties built in the capital could halve unless more was done to lessen the burden on builders.

"The last year has seen increases in taxation for all businesses and our sector in particular which has also faced further regulatory changes, he said.

The housing industry faces a new 4pc tax on profits made from residential properties. The so-called Residential Property Developer Tax was introduced in the aftermath of the Grenfell fire to fund the restoration of buildings with unsafe cladding. Mr Perrins also complained about new carbon-related taxes.

The FTSE 100 closed in the red after traders digested another 40-year-high for UK inflation levels.

A consumer price index inflation reading of 9.1pc was in line with expectations for May, but rocketing producer prices showed inflationary woes are not likely to reverse any time soon.

The FTSE 100 ended the day down 0.9pc at 7,089.

Michael Hewson, chief market analyst at CMC Markets UK, said: "The fragile nature of this week's rebound has been laid bare today, with a sharp slide in oil prices in Asia, spilling over into broader market weakness, with the Dax sliding below last week's lows, before rebounding, while the FTSE has also slipped back sharply.

"Today's inflation numbers from the UK came across as rather mixed in the same way as the US inflation numbers a couple of weeks ago, with core prices softening, however PPI prices continued to push higher, suggesting that there is still a lot of price pressure still in the pipeline."

Time Out London is publishing its last print magazine tomorrow, 54 years from its launch, after announcing plans to go digital-only earlier this year.

The publication will focus on revamping its Instagram profile, producing video content and a daily newsletter for people in London.

It will still publish a cover digitally every two weeks. The first one will celebrate Pride and feature trailblazing Black trans supermodel Munroe Bergdorf, who bounced back from a high-profile controversy to become a celebrated spokesperson with a global following.

Chris Ohlund, chief of Time Out Group, said: Our new digital initiatives across social and video especially will enable us to deliver deeper, engaging storytelling that we know our audience will love and our advertising clients are seeking. It is a strategy that has already been hugely successful for us in the US and will be key to further drive our growth and profitability.

Time Out is a global brand with a national footprint and a local voice; we are constantly and quickly innovating to reach, engage and grow our audience across the right channels with the right content that delivers our brands core purpose we do this via an impactful combination of digital and in real life that no other brand can offer.

Miner De Beers has posted an uptick in sales in the past two weeks as demand in China picked up following the end of Covid lockdowns, while the US market continues to perform well.

The group said sales in the period between June 6 and 21 came in at $650m (528m), compared to $604 in the previous sales cycle, which was between May 2 and 17.

Chief Bruce Cleaver said: Diamond jewellery demand continues to perform well in the key US market, and this was reinforced by positive sentiment following the influential JCK Las Vegas jewellery trade show held in mid-June.

"The continued strength of US demand for diamond jewellery and the gradual reopening of retail outlets in China following Covid-19-related lockdowns have supported the sales momentum of De Beers Groups rough diamonds in the fifth sales cycle of the year.

Sir Jim Ratcliffes chemicals giant is to supply Europe with American liquified natural gas (LNG) as concerns mount over supplies following EU sanctions on Russia. Matt Oliver writes:

The US Food and Drug Administration is getting ready to order Juuls e-cigarettes off the market, the Wall Street Journal has reported.

The decision could be announced as early as today.

The FDA has already banned the sale of fruity and sweet flavours for e-cigarettes. The agency allowed some products made by Juul rival NJOY to remain on the market earlier this year, and last year authorised British American Tobaccos e-cigarette Vuse.

That's all from me for today thanks for following! Giulia Bottaro is in the hot seat for the rest of the day.

Wall Street is staging something of a comeback after Fed chair Jay Powell said the US central bank was "strongly committed" to bringing down inflation.

In his prepared remarks before the Senate Banking Committee, Mr Powell reiterated that ongoing increases in the policy rate would be appropriate, but the pace of the changes will continue to depend on the incoming data and the evolving outlook for the economy.

The comments come a week after the Fed raised interest rates by 75 basis points the biggest increase since 1994.

The S&P 500 and Dow Jones pared early losses, while the tech-heavy Nasdaq turned positive with gains of 0.4pc.

JD Sports is overhauling its business after a string of run-ins with the City watchdog led to the exit of its long-serving boss, writes Lucy Burton.

UK food price inflation looks set to surge to 20pc in the first quarter of next year, according to dire forecasts from US bank Citi.

The predictions come after the latest official data showed consumer prices jumped to a new 40-year high of 9.1pc in May, as rising food costs took over from energy as the main driver of inflation.

While Russia's invasion of Ukraine is disrupting supplies of grain and vegetable oil, food prices more broadly have been pushed up by poor weather and rising energy prices, which increase the cost of fuel, shipping and fertiliser.

Food and non-alcoholic drinks prices paid by consumers in May were 8.7pc higher than a year ago their biggest increase since March 2009 and manufacturers' ingredient costs are rising even more rapidly.

The prices manufacturers paid for domestic food materials is up 10.3pc, while imported food costs which account for almost half Britain's consumption were 20.5pc higher, the largest rise since December 2008.

Benjamin Nabarro, economist at Citi, said: "Food inflation overshot our forecasts. We now expect price growth here to peak at a little over 20pc in the first quarter of 2023, with producer price inflation here continuing to accelerate."

The predictions are even steeper than forecasts from the Institute for Grocery Distribution, which last week said food price inflation would peak at 15pc over the summer and said some households were already skipping meals.

Federal Reserve chair Jay Powell has said the US central bank will keep raising interest rates to tackle inflation, but said policy makers must be "nimble" amid the risk of a recession.

In text of his testimony to the Senate Banking Committee, Mr Powell said: "We anticipate that ongoing rate increases will be appropriate.

"Inflation has obviously surprised to the upside over the past year, and further surprises could be in store. We therefore need to be nimble in responding to incoming data and the evolving outlook."

His prepared remarks largely mirror comments made last week after the Fed raises interest rates by 75 basis points the biggest increase since 1994.

He added: "We understand the hardship high inflation is causing. We are strongly committed to bringing inflation back down, and we are moving expeditiously to do so."

Wall Street's main indices dropped at the opening bell as traders turned their attention to testimony from Fed chair Jerome Powell amid jitters about inflation and a potential recession.

The S&P 500 fell 0.8pc, while the Dow Jones was down 0.6pc. The tech-heavy Nasdaq shed 1.2pc.

Mark Carney's Brookfield Asset Management has raised $15bn (12.2bn) for a fund dedicated to investing in the global transition away from fossil fuels.

The cash injection will be used to create Brookfield Global Transition Fund, which the company described as the largest private vehicle of its kind.

The fund, led by Brookfield vice chair Mark Carney and its renewables chief Connor Teskey, will invest in solar power and other technologies that reduce greenhouse gas emissions.

Mr Carney said: "With the global carbon budget being rapidly run down, now is the time for comprehensive, determined actions.

"That means deploying capital across the economic spectrum from scaling clean energy generation, to transforming traditional utilities and to providing sustainable solutions for heavy industries like steel and cement."

Rail chiefs are not wildly optimistic of a breakthrough to avoid strikes on Thursday as they criticised a sense of entitlement among trade union leaders.

Oliver Gill reports:

Canadian inflation has surged to its highest level in four decades in a further sign price rises are setting in across the globe.

Consumer price inflation rose to 7.7pc last month, up from 6.8pc in April, according to official data. That's well above forecasts and the highest since January 1983.

The inflation gauge rose 1.4pc from a month earlier with fuel, hotel rates and cars among the biggest contributors.

The figures highlight the pressure on the Bank of Canada to continue with aggressive interest rate rises in the coming weeks.

Prime Minister Justin Trudeau's government has also come under pressure from opposition parties and economists to do more to ease the strain of soaring inflation on households.

Joe Biden will on Wednesday urge US lawmakers to suspend federal taxes on petrol and diesel for three months to help drivers facing surging costs at the pumps, writes Matt Oliver.

Europe must double down on energy efficiency and renewables as it faces a "scramble" to wean itself off Russian energy.

That's according to the International Energy Agency, which has issued its latest grim warnings over the continent's energy crisis.

Gas prices have hit record levels as a slowdown in flows from Russia in recent days has deepened worries over supply in higher-demand winter months.

The IEA said: "In the near term, the scramble for alternative sources of fossil fuels creates clear openings for non-Russian suppliers."

It added that Europe must react to the crisis "with a determined acceleration of investment in efficiency, renewables and other clean technologies".

Wall Street looks set to follow the FTSE 100 into the red this afternoon as investors get increasingly worried about the risk of a recession.

Aggressive interest rate rises by central banks around the world are fuelling fears of a slowdown in economic growth.

Citigroup now reckons there's almost a 50pc chance of the global economy being tipped into a recession.

Futures tracking the S&P 500 fell 1.6pc, while the Dow Jones was down 1.4pc. The tech-heavy Nasdaq slumped 1.8pc.

Petrol prices soared to a fresh record yesterday, just as the biggest rail strike in 30 years forced more workers to get behind the wheel.

The average cost of petrol rose to 189.33p a litre, pushing the cost of filling an average family car above 104, according to the RAC. Diesel climbed to 197.11p a litre also a new high.

A recent fall in wholesale prices means petrol may have reached its peak. However, diesel keeps moving closer to 2 a litre.

JD Sports has unveiled a record profit for the full year, but warned earnings will remain flat in the months ahead as the cost-of-living crisis bites.

The scandal-hit retailer posted pre-tax profits of almost 950m more than double the previous year.

But JD said profit growth was expected to be held back in the year to next January, due to pressures of the cost-of-living crisis in the UK and wider economic woes.

Helen Ashton, interim chair of JD Sports, said: "Whilst we are encouraged by the resilient nature of the consumer demand in the current year to date, we remain conscious of the headwinds that prevail at this time, including the general global macro-economic and geopolitical situation."

It comes weeks after Peter Cowgill resigned as executive chairman after 18 years in the role.

That followed a storm of negative publicity and a fine from the competition watchdog over his clandestine meeting in a car park with the boss of Footasylum, which it had agreed to buy for 90m.

Louis Ashworth and the production team have put together three charts showing the dangers ahead.

There's only one sale, but it's not happening yet.

Harrods has delayed its famous summer sale by two weeks as the new season's goods have been caught up in supply chain troubles.

Michael Ward, the luxury department store's managing director, told Bloomberg: "Our supply chain is running two to three weeks behind where it should be.

"A good example of that is we've just delayed the summer sale for two weeks because I need another 10pc of new-season stock to allow me to function into the new year."

Businesses have been battling with supply snags, which have been exacerbated by the war in Ukraine and China's zero-Covid strategy. Labour shortages have also hit industries ranging from retailers to airlines.

Germany is preparing to trigger the next stage of its emergency gas plan a decision that may mean passing higher prices on to industry and households.

Talks over the move show there are serious concerns that the supply situation may deteriorate further after Moscow slashed flows through the Nord Stream pipeline last week.

The Government may soon move to its second "alarm" phase, Bloomberg reports. It enacted the "early warning" phase at the end of March, when the Kremlin first demanded gas payments in roubles.

If Germany moves to its highest "emergency level", the state would seize control of the country's entire distribution network.

The UK is extending a plan to sell more of its 11.3bn stake in NatWest for another year.

The Government currently owns about 48.5pc of the high street bank a hangover from the costly bailout of RBS during the financial crisis.

UK Government Investments, which oversees state holdings, said its trading plan will now terminate in August 2023 as it looks to further reduce its stake in the lender. Shares were up more than 3pc.

Since the plan was established in 2021, the Government has sold about 703.5m shares in NatWest for around 1.6bn.

Ministers have pledged to cut the holding, which once stood at 80pc. However, the Treasury is likely to take a hefty loss after a drop in the bank's share price.

Rishi Sunk has said the Bank of England will "act forcefully" to combat rising prices as inflation hit a new 40-year high of 9.1pc.

The Chancellor told reporters: "I want people to be reassured that we have all the tools we need and the determination to reduce inflation and bring it back down."

He added that the Government would be responsible for borrowing and debt, and work to improve productivity.

Drivers are now paying an extra 500 a year to fill up as record inflation piles further pressure on household budgets.

This morning's ONS figures showed fuel prices have surged 32.8pc over the latest year the fastest rate in records going back to 1989 as Russia's war in Ukraine sparks supply fears.

This has driven up prices at the pumps, with a full tank now costing more than 100 on average, and fuelled demand for electric vehicles.

Erin Baker at Auto Trader, which compiled the figures, said:

ICYMI Jab maker Moderna plans to open first vaccine factory in Britain, as it hailed the UKs world-class life sciences and research community which came to the fore during the pandemic.

Hannah Boland has more:

Mike Ashley's Frasers Group has increased its stake in Hugo Boss once again.

Frasers said it now has 3.4m shares a 4.9pc stake in the luxury German fashion chain and holds buy options over another 26pc shareholding.

The company said its investment is now worth around 900m (770m).

Frasers, which owns chains including Sports Direct and House of Fraser, has been building up its holding in Hugo Boss for the past two years, having first bought a holding in the fashion firm in 2020.

It also owns a stake in British luxury handbag maker Mulberry and has been leading a push into the upmarket retail sector.

That's alongside an aggressive acquisition spree in the retail sector, with the latest deal seeing it buy fast fashion retailer Missguided out of administration.

Jeremy Leaf, former RICS residential chairman, says the slowdown in demand in the housing market is not yet showing in the data.

UK house prices rose 12.4pc in the year to April to new record highs, with growth surging to the second-highest on record as people tried to secure purchases ahead of interest rate rises.

The average UK house price was 281,000 in April, marking a 31,000 increase on this time last year. The pace of growth was the second highest (after April 2021) in data going back to 2006.

Chris Jenkins at the ONS said:

Experts on the European economy don't expect the region to suffer 1970s-era stagflation, according to the European Central Bank.

While growth forecasts were cut and inflation expectations raised after Russia's invasion of Ukraine, economic activity is still expected to increase next year. Inflation is set to drop blow 2pc in the second half of 2023.

The ECB said: "Current expert forecasts remain far from a stagflation scenario". But it admitted there was greater uncertainty, leading to a greater range of forecasts.

The central bank also pointed to differences between now and the 1970s. Dependence on oil has decreases since then, workers have become less unionised and the economy is still benefiting from a post-pandemic boost.

Rail operators and union bosses will meet for talks today to try to resolve the impasse thats fuelling the biggest strike in three decades.

While around 40,000 rail workers are due back after yesterdays initial walkout, further strikes planned for tomorrow and Saturday mean only 60pc of trains are expected to run, according to the BBC.

Further negotiations between companies and the RMT are set to take place today, though any agreement is unlikely to come soon enough to call off the next strike.

It's worth noting that RMT chief Mick Lynch has called for pay rises to be pegged to the retail price index. After today's data, that would mean an increase of 11.7pc.

Oil prices have gone into reverse this morning as traders grow increasingly jittery about a global recession.

Benchmark Brent crude slumped more than 5pc to below $109 a barrel its lowest level since mid-May. West Texas Intermediate to below $104.

Crude prices have soared in recent months amid concerns about the war in Ukraine and a rapid rebound in demand as the world emerges from the pandemic.

But central banks are now ramping up interest rates to tackle soaring inflation, fuelling concerns of a global recession that would dent demand for fuel.

There are more dire warnings this morning as Citigroup said the probability of the global economy falling into a recession is now nearly 50pc.

Economists said supply shocks were pushing up inflation and stunting growth, while central banks are now raising interest rates aggressively and consumer demand is waning.

They wrote: The experience of history indicates that disinflation often carries meaningful costs for growth and we see the aggregate probability of recession as now approaching 50pc.

Central banks may yet engineer the soft or softish landings embodied in their forecasts (and in ours), but this will require supply shocks to ebb and demand to remain resilient.

Citigroup now expects the world economy to grow 3pc this year and 2.8pc in 2023.

It's a torrid start to the day for the FTSE 100, which is feeling the heat from the latest inflation figures and recession fears.

The blue-chip index is down 1.3pc, dragged lower by energy and commodity shares.

BP and Shell tumbled 2.7pc and 3.5pc respectively as oil prices dropped sharply amid concerns about a global economic slowdown.

Glencore, Rio Tinto and Anglo American all shed around 3pc.

NatWest was one of only four blue-chip companies that escaped the red. It rose more than 2pc after the Government extended a plan to sell more of its 11.3bn stake.

The domestically-focused FTSE 250 fell 1.4pc, with software company Micro Focus slumping 12pc after it first-half results.

Let's take another look at those factory gate prices, which spell trouble for consumers in the month ahead.

The producer price index, which measures the cost of goods leaving factory, jumped 15.7pc in May, according to the ONS figures.

That's well ahead of forecasts of 14.7pc and marks the biggest rise since 1977.

It comes as manufacturers grapple with soaring input costs for raw material and labour as Russia's war in Ukraine and Covid-related staff issues take their toll.

Factory gate prices reflect the costs that have to be shouldered by retailers, but these are usually passed on to consumers in the form of higher shop prices.

The British Chambers of Commerce said the number of businesses reporting that they plan to raise prices was "far beyond anything we've seen since our records began in 1989".

Hussain Mehdi at HSBC Asset Management also sounds the alarm over a looming recession.

Tom Stevenson at Fidelity International warns the Bank's efforts to curb inflation could tip Britain into a recession.

Traders are scaling back their bets on future Bank of England interest rate rises after the latest inflation figures matched estimates.

Money markets are now pricing in 147 basis points of rate rises by November, which suggests they're no longer betting on three aggressive 50 basis-point increases.

By the end of the year, though, 177 basis points of rate rises are priced in. This would take the base rate to 3pc.

Kitty Ussher, chief economist at the Institute of Directors, warns bosses are pessimistic about the outlook for inflation.

The FTSE 100 has fallen sharply at the open after the latest data showed another increase in inflation to a new 40-year high.

The blue-chip index dropped 1.3pc to 7,059 points.

Mike Bell at JP Morgan Asset Management says sky-high inflation leaves the Bank of England facing a dilemma.

Thomas Pugh, economist at RSM UK, warns UK inflation has further to run.

The latest figures once again showed how surging energy costs are driving inflation.

Housing and household services, which includes gas and electricity prices, and transport, which includes petrol and diesel, together made up around half the annual consumer price index.

Food and non-alcoholic beverages were another big driving force as Russia's war in Ukraine continues to drive up grocery prices.

One positive note, however, came from clothing and footwear, which posted a slightly smaller increase in May.

Samuel Tombs at Pantheon Macroeconomics points to the fall in core CPI, which strips out volatile food and energy components from the headline inflation figure.

This is an encouraging sign, he says, as it shows the squeeze on household budgets may be hitting demand, which in turn should cool surging prices.

Paul Dales, chief economist at Capital Economics, says the modest rise in inflation may encourage the Bank of England to raise interest by just 0.25pc again at its next meeting.

Sterling has extended its decline against the dollar this morning as traders digested the latest inflation data.

The consumer price index was in line with expectations at 9.1pc, while core prices were slightly below the forecast reading.

But the producer price index jumped to 15.7pc the biggest rise in 45 years.

The figures are likely to fuel expectations of further interest rate rises by the Bank of England.

Grant Fitzner, chief economist at the ONS, says:

Though still at historically high levels, the annual inflation rate was little changed in May.

Continued steep food price rises and record high petrol prices were offset by clothing costs rising by less than this time last year and a drop in often fluctuating computer games prices.

The price of goods leaving factories rose at their fastest rate in 45 years, driven by widespread food price rises, while the cost of raw materials leapt at their fastest rate on record.

The producer price index, which tracks the price of goods leaving factories, surged to 15.7pc in May. That's up from 14pc the previous month and well ahead of forecasts.

The PPI measures inflation before it reaches consumers, so it's a grim warning that further price rises are in the pipeline.

The Bank of England now expects inflation to peak above 11pc this year, with matters expected to worsen when another rise in the energy price cap kicks in in October.

Here's a first take on the numbers from my colleague Louis Ashworth:

Good morning.

There's no let-up in the latest inflation figures, which hit a new 40-year high in May.

The consumer price index rose to 9.1pc last month, according to the ONS. That's up from 9pc a month earlier.

Prices rose 0.7pc in the month alone, which marks a slowdown from the 2.5pc pace recorded in April when the new energy price cap came into effect. Still, the numbers show prices are rising across the economy.

The retail price index, which is used to determine train ticket prices and to which some index-linked bonds are pegged, surged 11.7pc.

All eyes will now be on the Bank of England, which is under pressure to do more to stop runaway inflation.

1) The IEA expects about $115bn to be invested on fossil fuel supply chains this year

2) The new site would allow a rapid response to future pandemics

3) RMT accused of calling strike to defend host of outdated practices

4) Industry leaders will be asked for suggestions on how to help struggling customers with rising bills

5) How one of Britain's biggest bribery scandals engulfed the Glencore billionaires

Equities struggled this morning after a brief respite from last week's painful rout across world markets, with recession fears continuing to build as central banks hike interest rates to combat decades-high inflation.

While Asia, Wall Street and Europe all enjoyed healthy gains on Tuesday, analysts warned the downbeat mood on trading floors means the selling is unlikely to end any time soon.

In early Asian trade, Hong Kong, Singapore, Sydney, Seoul, Taipei, Jakarta and Manila all fell, while Tokyo and Shanghai were barely moved. There were small gains in Wellington.

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