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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

UK credit card borrowing soars by most since 2005 as mortgage approvals slide – as it happened

Oil China European Union United States crude oil Charles Michel Shanghai Vladimir Putin GDP
A lady walks past an estate agents displaying houses for sale in Cheadle, England.
A lady walks past an estate agents displaying houses for sale in Cheadle, England. Photograph: Nathan Stirk/Getty Images

Summary

Time to wrap up....

UK mortgage approvals have fallen to their lowest level since June 2020 as higher interest rates and the cost of living squeeze cooled the market. There were below 66,000 mortgage approvals in April, below the pre-pandemic average.

Rising inflation also pushed people to borrow more on credit, with credit card borrowing rising at the fastest rate since 2005.

Pushpin Singh, economist at the CEBR thinktank, explains:

With inflation accelerating rapidly and wage growth unable to match its pace, consumers’ real spending power is weakening.

Moreover, an increase in living costs is likely prompting consumers to turn to borrowing to fund their expenditure, resulting in multi-year high growth rates for credit card borrowing. Meanwhile, net mortgage borrowing saw a stark downtick in April as borrowing costs have risen in recent months

Inflationary pressures continue to build in the eurozone, where consumer prices jumped by 8.1% over the last year - the fastest on record.

Updated growth figures showed that France’s economy shrank in the first quarter of the year, suggesting it could be falling into recession, while Italy managed modest growth.

Switzerland’s economy was supported by decent demand for manufactured goods, while India and Canada both slowed in Q1.

China’s factory slump may have bottomed out in May, as Covid-19 restrictions are eased.

Brent crude oil has hit a new two-month high, over $124 per barrel, after EU leaders agreed a partial ban on Russian imports.

Russia has further cut off gas supplies to Europe, after state energy giant Gazprom turned off the taps to a top Dutch trader, amid an intensification of the economic battle over Moscow’s invasion of Ukraine.

Elsewhere...

Shares in consumer goods maker Unilever have jumped 8.5% after activist investor Nelson Peltz joined its board.

But discount retailer B&M have now sunk 13%, after warning profits could drop as customers struggling with the cost of living crisis opt for cheaper products.

Virgin Atlantic is to allow its cabin crew to display tattoos, the first UK airline – and leading carrier worldwide – to do so.

But chaos continues at UK airports, with TUI cancelling more than 180 flights from Manchester airport until the end of next month.

The UK government has been accused of watering down efforts to combat economic crime after putting forward proposals that could reduce transparency around small company accounts.

And Ofcom is to investigate why Royal Mail has missed its delivery targets:

The US housing market remained hot in March despite rising mortgage rates

Nationally, home prices were 20.6% higher than they were in March 2021, according to the S&P CoreLogic Case-Shiller Home Price Index, up from 20% gain in February.

CNN reckons buyers were keen to lock in deals before rates rose, leading to particularly high price rises in Sun Belt cities:

Prices in Tampa, Florida, were up the most, rising 34.8% from the year before; Phoenix was up 32.4% from a year ago and Miami saw a 32% increase. Seventeen of the 20 cities reported higher price increases in the year ending March 2022 versus the year ending February 2022.

The holiday company Tui is cancelling more than 180 flights from Manchester airport until the end of next month as half-term travel chaos continues unabated.

Tui said they were axing six flights a day at the hub from 31 May until 30 June, adding to the chaos facing passengers at airports this week as they battle lengthy queues and cancelled takeoffs.

Tui, which had already announced some flight cancellations and delays at the weekend, blamed “ongoing disruption in our operation at Manchester” for the “incredibly difficult decision” to cancel 43 flights a week.

Manchester airport said they were “disappointed” to see travellers’ holiday plans disrupted by the move, which they put down to staff shortages at Tui and its ground handler Swissport, which manages its check-in and baggage handling.

The transport minister, Andrew Stephenson, said on Tuesday that the government was working to minimise disruption for travellers after passengers at airports including Gatwick, Heathrow and Manchester have reported significant delays.

He told Sky News the travel industry should have been better prepared for a surge in post-pandemic holidays, adding that the disruption was causing “a lot of distress” to those caught up in it.

Russia’s central bank is open to allowing the use of cryptocurrency for international payments, a senior bank official said on Tuesday as it presented its financial stability report, according to Reuters.

It’s a sign of a possible relaxation of its opposition to digital currencies.

But First Deputy Governor Ksenia Yudayeva reiterated that the bank, as the regulating authority, continues to see “relatively high risks” from wider use of cryptocurrency in Russia.

The Russian Central Bank headquarters in Moscow.
The Russian Central Bank headquarters in Moscow. Photograph: Maxim Shemetov/Reuters

Russia’s central bank has warned that the country’s financial market will be forced to rely primarily on domestic investors for an indefinite period of time, due to the ‘severe sanctions’ imposed since the Ukraine war began.

In its latest Financial Stability Review, it says:

The Bank of Russia will focus on maintaining the confidence of the population and businesses in the Russian financial market and ensuring that the financial sector is sufficiently stable to provide the necessary support in the restructuring of the Russian economy.

The Central Bank of the Russian Federation also flags that restrictions preventing Russian non-financial companies accessing foreign markets have led to disruptions in technological, production and logistics chains.

The sanctions affected almost all economic entities, both exporters that faced a ban on the import of their products into certain countries and enterprises that use imported components in production.

The redirection of trade flows is further complicated by restrictions on transport infrastructure, lengthy compliance procedures, foreign counterparties’ fears of secondary sanctions and a persistently unfavourable epidemic situation in a number of countries.

Updated

Canada's growth slows

A pier in North Vancouver, with the Navios Sphera bulk carrier ship sitting at anchor.
A pier in North Vancouver, with the Navios Sphera bulk carrier ship sitting at anchor. Photograph: Darryl Dyck/AP

Canada has joined the ranks of countries reporting slowing growth in the first quarter of 2022.

Canada’s economy expanded by 0.8% in January-March (or an annualized rate of 3.1%), below forecasts, and only half as fast as the 1.6% growth in Q4 2021.

In March alone, GDP rose by 0.7%, beating expectations, as both goods-producing and services-producing sectors grew. February’s gain was revised down.

India’s GDP report is out too... showing that growth slowed in the first three months of 2022.

India’s economic growth slowed to 4.1% year-on-year in the January-March quarter, the slowest pace in a year, official data on Tuesday showed, amid rising risks from higher prices of crude oil and commodities after Russia’s invasion of Ukraine.

Italy has stepped away from the brink of recession, after its economic performance in the last quarter was revised up.

Italian GDP rose by 0.1% in January-March, updated data show, up from a first estimate of a 0.2% decline.

This small uptick in growth was mainly driven by investment, while public expenditure and inventories were growth neutral, and private consumption and net exports both fell.

Britain’s communications regulator is investigating Royal Mail’s failure to meet its delivery targets across 2021-22.

Under Ofcom rules Royal Mail is required to deliver 93% of First Class mail within one working day of collection, and 98.5% of Second Class mail within three working days of collection.

But in the last year, only 81.8% of First Class mail was delivered within the target, compared with 95.4% of Second Class mail.

Ofcom said it would probe this “substantial lapse in performance” -- in a time in which Covid-19 hit the company.

“Ofcom takes compliance with quality of service targets very seriously.

“Our investigation ... will gather evidence to understand the reasons behind this substantial lapse in performance, and determine whether Royal Mail has breached its requirements.”

A Royal Mail spokesperson said the company would fully participate with Ofcom:

“We are disappointed with our 2021-22 Quality of Service performance and apologise to all customers that have been affected by any service issues.

Updated

The drop in UK mortgage approvals to their lowest since June 2020 shows that rising interest rates are hitting the housing market, says Bloomberg:

The Bank of England said approvals for new home loans totaled 65,974 in April, the lowest in almost two years. Economists had expected little change. The effective interest rate on new mortgages rose 9 basis points to 1.82%, the highest since August.

The figures point to a slowdown in the property market, which to date has managed to shake off the pandemic and recession to reach record prices. Consumers were buoyed by savings built up during the pandemic and a tax break on purchases but now will have to focus on increasing costs to service loans.

The jump in consumer credit swelling, and the drop in mortgage approvals, shows that its not an easy time to be making financial decisions.

Prices are rising, interest rates are rising, and a recession looks increasingly likely at some point this year, says Jayadeep Nair, chief product and marketing officer at consumer credit reference firm Equifax UK:

“What these figures from the Bank of England highlight, is how fluid the demand for credit currently is. In the mortgage market, net borrowing is down, as people opt to pay down debt to get ahead of anticipated interest rates rise.

Meanwhile, borrowing in the consumer credit space is above its pre-pandemic average for the third consecutive month, pointing to greater demand on shorter term forms of borrowing; some of this will be discretionary, but much of it will not.

UK credit card borrowing soars by most since 2005

Credit card borrowing jumped in April at the fastest annual rate in over 16 years, today’s data shows.

The Bank of England reports that credit card borrowing was 11.6% higher than in April 2021, marking the biggest increase since November 2005.

That will ring alarm bells at the Bank of England, says Andrew Montlake, managing director of the UK-wide mortgage broker, Coreco:

It shows the economic storm clouds are getting darker by the day. People can take out credit and loans if they are confident, but in this case it’s almost certainly because they are seeking extra cash to cover their bills and put food on their tables.

The drop-off in mortgage approvals is surprising as April and May have been exceptionally busy, although we do expect the combination of weaker borrower sentiment and lenders tightening their affordability to feed through in the months ahead.

Updated

Today’s money and credit figures suggest that UK consumers are increasingly borrowing more to protect their lifestyles from the surge in inflation, says Thomas Pugh, economist at RSM UK.

Normally, a rise in consumer credit is a good indication that consumption is growing strongly because it tends to expand when the economy is good. People feel confident enough to borrow and splurge on big tickets items, such as cars.

‘This time may be different, though. A rise in consumer borrowing over the next year is more likely to be a sign that high inflation is driving consumers to maintain their lifestyles by borrowing.

Eurozone inflation hits record 8.1%

The cost of living crisis has also intensified in the eurozone.

Inflation in the single currency block jumped to a new record high of 8.1% in May, beating forecasts of 7.7%, and four times the European Central Bank’s 2% target.

Energy cost almost 40% more than a year ago, following the Ukraine war, but food prices were 7.5% higher too - and goods and services prices also rose.

Bert Colijn, senior eurozone economist at ING, is particularly worried that core inflation (stripping out food and energy) rose too:

Inflation increased across the board thanks to continued energy market volatility on the back of sanctions, soaring food prices and core inflation increasing due to businesses pricing through high producer prices.

Oil prices have trended higher again over the course of the month and the oil sanctions announced by the EU yesterday add to expectations of oil prices remaining at an elevated level. That delays the decline in headline inflation, especially now that food and core inflation are also on the rise.

Food prices are a key concern globally at the moment and are also having an increasing impact on total inflation in the eurozone. In May, food, alcohol and tobacco inflation jumped further from 6.3% to 7.5%. We expect another big increase in June, and for shortages to continue.

The main concern is around core inflation. The jump from 3.5 to 3.8% today shows that high input prices are being priced through to the consumer at a fast pace.

Nicholas Farr of Capital Economics has analysed the Bank of England’s data, and reports:

The solid rise in unsecured borrowing in April suggests that households are using credit to support their spending as the cost of living squeeze has intensified.

But consumers do not yet appear to be drawing on the large stock of savings they built up during the pandemic, increasing the likelihood that consumer spending falls further in Q2 than the 0.2% q/q drop that we expect

It seems as though some of the heat is starting to come out of the housing market, Farr adds:

Indeed, the 65,974 mortgage approvals in April was down from the 69,531 approvals in March and may be an early sign of higher mortgage rates starting to take effect.

The average new mortgage rate has increased by 32bps (from 1.50% in November to 1.82% in April) and rises in Bank Rate will continue to filter through into rising mortgage rates in the months ahead.

Mortgages down, consumer credit up: snap reaction

The drop in mortgage demand last month, and the rise in consumer credit, shows the cost-of-living squeeze is hitting households, says Victoria Scholar, head of investment at Interactive Investor:

Following the lifting of the energy price cap and amid the rising rate environment, demand for mortgages appears to be slowing as the cost-of-living crisis starts to bite.

We saw consumer credit increase by £1.4 billion in April ahead of market expectations in the third consecutive above average figure with a notable increase in demand for credit cards as households scramble to cover their costs, worryingly relying more and more on debt.

Here’s David Milliken of Reuters:

Rosie Hooper, chartered financial planner at Quilter says the cost-of-living crisis has been the straw that has broken the camel’s back for the housing market:

While the heat has finally come out of the property market, borrowers are now back to spending on their credit cards and it is the third consecutive month where borrowing has been higher than the 12-month pre-pandemic average with individuals borrowing an additional £1.4 billion in consumer credit in April, on net.

However, with inflation running riot at the moment and interest rates on the rise to try to placate it, increased borrowing could be cause for concern. Credit cards have some of the highest interest rates and if the borrowing is to pay for the current higher cost of living or paying for essential bills then people could very quickly spiral into unmanageable debt.

Consumer credit rises in cost of living squeeze

While mortgage demand is falling, people are borrowing more on credit -- as rising inflation makes it harder for some families to pay bills and buy food.

Individuals borrowed an extra £1.4bn in consumer credit in April, on net, up from a £1.3bn rise in March.

It was split evenly between £700m extra on credit cards, and £700m on other forms of consumer credit (such as car dealership finance and personal loans).

The annual growth rate for all consumer credit increased to 5.7% in April from 5.2% in March; the highest rate since February 2020.

This is the third consecutive month where borrowing has been higher than the 12-month pre-pandemic average up to February 2020 of £1bn, the Bank of England says.

Demand for credit slumped during the first pandemic lockdowns, as spending was curtailed.

But it has been rising in recent months, as inflation put more pressures on household budgets, as this chart shows:

UK consumer credit
UK consumer credit Photograph: Bank of England

Updated

The drop in UK mortgage approvals shows that potential housebuyers are more nervous about taking on debt, says Jeremy Leaf, north London estate agent.

‘Mortgage approvals are always a good lead indicator of housing market direction.

This latest reduction confirms what we have been seeing at the sharp end over the past few months – successive monthly increases in the cost of living as well as interest rates are compromising confidence to take on additional debt and having an inevitable knock-on effect on price growth.

’The continuing shortage of houses in particular means that we’re unlikely to see significant changes in prices but certainly there is less competition, which is also resulting in more time being taken to exchange contracts.’

UK mortgage approvals fall to lowest since June 2020

The number of mortages approved by UK lenders has dropped to its lowest since June 2020, in a sign that the housing market could be cooling.

There were 65,974 mortgages appoved in April, Bank of England figures show, down from 69,531 in March.

Economists had expected a small rise in mortgage approvals, to around 70,000.

Net borrowing of mortgage debt by individuals also fell, to £4.1bn in April from £6.4bn in March.

Both measures are now below their 12-month pre-pandemic averages up to February 2020, before the stamp duty holiday and the ‘race for space’ in the pandemic led to a housing market boom.

The cost of living squeeze, and the rise in UK interest rates, could now be dampening the market.

Hina Bhudia, Partner at Knight Frank Finance, says:

“Activity among purchasers is ebbing as the cost of living squeeze shrinks the pool of buyers.

Rates on certain products have doubled in the past twelve months and there is a real sense of urgency among many borrowers who sense they must act soon or reassess what they can afford.

“Demand to remortgage remains very strong as borrowers seek to beat rising interest rates. Certain lenders allow you to book rates up to nine months in advance, so thousands of borrowers are bringing forward decisions that in normal circumstances would have been put off. Lenders are struggling to stay on top of the flow of new applications and are withdrawing and repricing product lines to maintain service levels.”

France on brink of recession after GDP downgrade

Paris, including the Sacred Heart basilica at Sacre Coeur.
Paris, including the Sacred Heart basilica, Sacre Coeur. Photograph: Emmanuel Dunand/AFP/Getty Images

France’s economy is at risk of falling into a recession after shrinking in the first three months of this year.

French GDP fell by 0.2% in January-March, updated figures from statistics body INSEE shows, worse than its initial estimate that GDP was unchanged. That follows 0.2% growth in Q4 2021.

INSEE reported that growth this year was dragged down by weak consumer spending, which fell by 1.5% as households were hit by higher inflation.

Spending on transport equipment (–2.3%), other manufactured goods (–2.1%) and on accommodation and catering ( –3.9%) was particularly weak.

Investment (or gross fixed capital formation [GFCF]) rose by 0.6%, while foreign trade made a positive contribution (with exports rising faster than imports).

French GDP

French households’ gross disposable income fell by 0.5% in the first quarter, partly because they received a one-off €100 handout last autumn to help with rising prices.

INSEE says:

This decline is partly mitigated by the revaluation in January of basic pensions, and by the sharp increase in the use of sick leave following the Omicron wave.

In another blow, French inflation continued to rise this month.

France’s national consumer price index rose to 5.2% in May from 4.8% in April, hitting its highest since September 1985.

On an EU-harmonised basis, consumer prices by 5.8% over the year, the highest rate since France began using European Union methodology to calculate the readings in the early 1990s.

That’s lower than the UK, where inflation hit 9% in April, with France rolling out a €25bn package of support to cap gas and electricity price increases.

European stock markets have opened lower, with the pan-European Stoxx 600 down 0.5% despite London’s small rally.

Shares in oil giants Shell (+1.5%) and BP (+1.3%) have been lifted by the rising oil price.

That’s helped to push the blue-chip FTSE 100 index up by 23 points or 0.3% to 7623.

While consumer non-cyclicals (inc. Unilever) and technology stocks are higher in London, real estate, consumer cyclicals and industrial stocks are dipping.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, says it’s a ‘lethargic start’ after EU leaders agreed their plan to block more than two-thirds of Russian oil imports.

Given Russia currently supplies 27% of the EU’s imported oil and 40% of its gas, the FTSE’s tepidness is reflecting anxiety over supply.

The UK is in a better position than some European countries when it comes to reliance on Russia for energy supply, but this doesn’t mean supply concerns will be completely glossed over. The move is likely to create a permanent hike in EU oil prices, and the cost of sourcing is going to rise.

The copper price has touched its highest level in nearly four weeks, after China’s factory slowdown eased.

The relaxation of Covid-19 restrictions could also lead to higher demand for metals such as copper (seen as a gauge of global economic demand).

Three-month copper on the London Metal Exchange rose to $9,587 per tonne this morning, its its highest since May 5.

A B&M HGV travelling on the M56 motorway in Cheshire.
A B&M HGV travelling on the M56 motorway in Cheshire. Photograph: AKP Photos/Alamy

Discount retailer B&M has sunk to the bottom of the FTSE leaderboard, down 9%, after warning that its profit margins will be squeezed by the cost-of-living crisis.

B&M, which sells a wide range of goods including homeware, DIY, food and gardening equipment, says it may need to mark down prices this year.

Customers may also shift from buying general merchandise (where profit margins are higher) in favour of food and fast-moving consumer goods, says B&M, which saw a boost in sales during pandemic lockdowns when some rivals shops were forced to close.

Trading patterns are expected to remain unpredictable in the year ahead, B&M warned

Given the uncertain macroeconomic outlook, it is difficult to predict the net impact of a number of factors such as customer down-trading, category mix shift and the impact of inflation on sales volumes.

It also announced that finance chief Alex Russo would succeed CEO Simon Arora.

Shares in Unilever have surge 7.5% in early trading, after activist investor Nelson Peltz joined its board, pledging to help drive its strategy, operations, sustainability, and shareholder value.

Updated

An aerial view of Zurich old town along the Limmat river.
An aerial view of Zurich old town along the Limmat river. Photograph: Prasit Rodphan/Getty Images/iStockphoto

Switzerland’s economy continued to grow in the first quarter of the year, as its industrial sector led its recovery.

Swiss GDP grew by 0.5% in the first quarter of 2022, accelerating from a 0.2% rise in the last quarter of 2021.

Despite the Ukraine war, and rising inflation, Switzerland’s manufacturers continued to see solid demand for goods such as watches and machinery.

Manufacturing grew by +1.7%, but the services sector was held back by the Omicron wave.

Switzerland’s Federal Statistics Office says:

While growth slowed in the chemical and pharmaceutical sector, other industries gained significant momentum, underpinned by rising demand in key trading partner countries. This was accompanied by stronger growth in goods exports (+1.4%) than the historical average.

Exports were up for numerous goods including precision instruments, watches and jewellery, machinery and metals.

Goods imports (+6.1%) saw an even sharper rise, largely driven by stronger imports of chemical and pharmaceutical products

Gazprom cuts off supplies to Dutch GasTerra

Russian energy giant Gazprom says it has fully cut off gas supplies to Dutch gas trader GasTerra because it refused to pay in roubles, as president Putin demanded.

Reuters has the details:

The new requirements for countries which Moscow deems “unfriendly” were introduced following sweeping sanctions imposed by the West on Russia for what it calls a “special military operation” in Ukraine.

Gazprom said on Tuesday the payments should be made in line with the gas-for-roubles scheme.

“Payments for gas supplied from April 1 must be made in roubles using the new bank details, about which the counterparties were informed in a timely manner,” Gazprom said.

GasTerra, which buys and trades gas on behalf of the Dutch government, said it had made alternative arrangements to cover the 2 billion cubic meters (bcm) of gas it had expected to receive from Gazprom through October.

GasTerra said on Monday it had decided not to adopt the new payment system, which involved setting up accounts to convert euro payments to roubles.

Updated

Nelson Peltz takes Unilever board seat

Nelson Peltz, founding partner of Trian Fund Management.
Nelson Peltz, founding partner of Trian Fund Management. Photograph: Mike Blake/Reuters

The billionaire investor Nelson Peltz has joined the board of consumer goods company Unilever, in the latest sign that he will push the maker of brands ranging from Dove soap to Marmite to shake up its sprawling operations.

Peltz is the founder and chief executive of Trian Fund Management, a $7.4bn (£5.9bn) investment firm that has previously mounted activist campaigns at Unilever’s rivals, including Procter & Gamble, Heinz and Mondelēz.

His investment was widely seen to add pressure on Unilever’s leadership under chief executive Alan Jope. The company has been under pressure after years of poor returns for shareholders: shares in the company are still near a five-year low hit in March, and it did not benefit from the rally in shares during the recovery from the coronavirus pandemic lockdowns.

Unilever said that Trian controls 37.4m Unilever shares, or about 1.5% of the company, as it announced Peltz’s appointment as a non-executive director.

Trian says:

The Investment Manager has informed the Company’s Board that it believes Unilever has significant potential and Trian looks forward to working collaboratively with Unilever’s management and board to help drive the company’s strategy, operations, sustainability, and shareholder value for the benefit of all stakeholders.

Japan’s factories stumbled in April, in a sign that China’s lockdowns and general supply chain problems hit maufacturers.

Factory output across Japan dropped by 1.3% in April, driven by weaker production of items such as electronic parts and production machinery.

It was the first fall in three months and much weaker than a 0.2% decline expected.

GSK’s logo.

Acquisition news: UK pharmaceuticals group GSK is taking over biopharmaceutical firm Affinivax in a $3.3bn deal.

Affinivax is pioneering the development of a novel class of vaccines, GSK says, the most advanced of which are next-generation pneumococcal vaccines for infections such as pneumonia, meningitis and sinusitis.

Dr Hal Barron, Chief Scientific Officer and President R&D, GSK, said:

“The proposed acquisition further strengthens our vaccines R&D pipeline, provides access to a new, potentially disruptive technology, and broadens GSK’s existing scientific footprint in the Boston area.”

The deal comes as GSK prepares to spin off its consumer healthcare unit, and become an R&D-focused biopharma company.

GSK will pay $2.1bn up front and up to $1.2bn if certain milestones are met.

Updated

Oil’s jump to a two-month high will not be welcome news for policymakers already grappling with higher energy prices, says Jim Reid of Deutsche Bank.

Part of that increase has come amidst the easing of Covid restrictions in China, but the prospect of an EU embargo on Russian oil has also played a role.

Brent crude hits two-month high of $124 after EU's Russia import ban

The oil price has jumped after European leaders agreed a partial ban on Russian oil imports.

After lengthy talks in Brussels, the EU agreed to an embargo on most Russian oil imports, to cut the finances flowing to Moscow.

But it won’t stop the flow completely. The embargo covers Russian oil brought in by sea. but there’s a temporary exception for pipeline imports, to appease countries such as Hungary who opposed a full ban.

The president of the European Council, Charles Michel, says it will immediately impact 75% of Russian oil imports.

Our Brussels correspondent Jennifer Rankin reports:

Volodymyr Zelenskiy had earlier appealed to EU leaders to show unity against Vladimir Putin. At a summit in Brussels, EU leaders had been attempting to find a way to placate the Hungarian prime minister, Viktor Orbán, who has been holding up a deal on the latest sanctions against Putin’s war machine.

Under a compromise plan that was discussed at the summit, Russian oil transported through the Soviet-era Druzhba pipeline for Hungary, the Czech Republic and Slovakia would be exempt from the EU embargo.

In a press conference on Monday night, Michel acknowledged talk of a lack of European unity, adding: “I think that more than ever it is important to show that we are able to be strong, that we are able to be firm, that we are able to be tough in order to defend our values and our interests.”

This, and the encouraging signs from China’s economy, has pushed Brent to its highest since early March.

The Brent crude oil price this year
The Brent crude oil price this year Photograph: Refinitiv

Introduction: China’s private sector decline slows as Covid curbs ease

Residents in Shanghai line up for nucleic acid tests on a street as the city prepares to end the lockdown placed to curb the coronavirus disease.
Residents in Shanghai line up for nucleic acid tests on a street as the city prepares to end the lockdown placed to curb the coronavirus disease. Photograph: Aly Song/Reuters

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

The slump in China’s economy caused by Covid-19 lockdowns may be bottoming out, as authorities prepare to end the restrictions imposed in Shanghai two months ago.

Activity across China’s companies shrank at a slower rate this month -- after falling sharply as virus outbreaks led to restrictions in several cities earlier this year-- according to the latest survey of purchasing managers across China’s businesses.

China’s factory sector only dipped last month, with its PMI rising to 49.6, from 47.4 in April. That lifted it back towards the 50-point mark showing stagnation.

The services sector struggled more, with the ‘non-manufacturing PMI’ jumping to 47.8 after plunging to 41.9 a month ago. That shows the sector continued to contract, but not as fast.

Zhao Qinghe, senior statistician at China’s National Bureau of Statistics, says:

“This showed manufacturing production and demand have recovered to varying degrees, but the recovery momentum needs to be strengthened.

The data has lifted hopes for a recovery next month, as Jeffrey Halley of OANDA explains:

Both numbers remain below 50.0 and are thus in contractionary territory. But are markedly less so thanks to an easing of restrictions in Beijing and Shanghai.

A less worse than expected set of data has prompted a modest rally in China equities today, holding the promise of an accelerating recovery in June if the virus situation remains benign

The recovery should get a lift this week as Shanghai prepares to end its two-month lockdown at midnight.

My colleague Helen Davidson in Taipei explains:

Shanghai authorities have begun dismantling fences around housing compounds and ripping police tape off public squares and buildings, to the relief of the city’s 25 million residents, before a painful two-month lockdown is lifted at midnight.

On Monday evening, some of the people allowed out of their compounds for brief walks took advantage of suspended traffic to congregate for a beer and ice cream on deserted streets, but there was a sense of wariness and anxiety among residents.

Most will be stuck indoors again until midnight, as they have been for the past two months under a ruthlessly enforced lockdown that has caused income losses, stress and despair to millions struggling to access food or get emergency healthcare.

The prolonged isolation has fuelled public anger and rare protests inside Shanghai and battered the city’s manufacturing and export-heavy economy, disrupting supply chains in China and around the world, and slowing international trade.

Life is set to return to something more like normal from Wednesday, when the passes issued by residential buildings for people to go out for a few hours will be scrapped, public transport will resume and residents can go back to work.

Also coming up today

Inflation in the eurozone is expected to hit a new record high, as the surge in energy costs drive up the cost of living.

The Bank of England will report how many mortgages were approved in April.

Russia’s central bank is releasing an economic stability report. We also find out how Canada, India, Poland and Switzerland’s economies fared in the first three months of the year:

The agenda

  • 7.45am BST: French inflation report for May
  • 8am BST: Switzerland’s Q1 GDP report
  • 8.55am BST: German employment report for May
  • 9am BST: Poland’s Q1 GDP report
  • 9.30am BST: UK mortgage approvals and consumer credit data for April
  • 10am BST: Eurozone inflation report for May
  • 1pm BST: India’s Q1 GDP report
  • 1pm BST: Bank of Russia holds press conference on Financial Stability Review
  • 1.30pm BST: Canada’s Q1 GDP report
  • 2pm BST: US house price index
  • 3pm: US consumer confidence report from the Conference Board

Updated

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MusicRadar
MusicRadar
“Very Creepy”: Katy Perry Fan Sparks Fury By Pulling Her Hair Extension And Allegedly Framing It
“I’d sell it and then never need to work again." The post “Very Creepy”: Katy Perry Fan Sparks Fury By Pulling Her Hair Extension And Allegedly Framing It first appeared on Bored Panda.
Bored Panda
Bored Panda
As Arcane nears its end, its creators tease the Black Rose is still 'an integral part of season 2', but they won't confirm if the group is the hit Netflix show's main villain
Arcane's showrunners haven't ruled out the possibility of some Black Rose members making physical appearances in season 2's last three episodes.
TechRadar
TechRadar
As AI and megaplatforms take over, the hyperlinks that built the web may face extinction
The original idea for the world wide web emerged in a flurry of scientific thought around the end of World War II. It began with a hypothetical machine called the “memex”, proposed by US Office of Scientific Research and Development head Vannevar Bush in an article entitled As We May…
The Conversation
The Conversation
Beyonce to Perform Halftime Show of Netflix's NFL Ravens-Texans Christmas Day Game
Beyonce will be giving a performance at halftime during the Christmas Day clash between the Houston Texans and Baltimore Ravens, streamed on Netflix.
Sports Illustrated
Sports Illustrated
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