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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Shares, pound and oil slide as recession fears mount – as it happened

EC European Union Inflation United States European Commission Euro
A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul today
A currency trader watches monitors at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul today Photograph: Ahn Young-joon/AP

Summary

Time for a recap...

Fears of a global recession are sweeping markets again, driving oil down to its pre-Ukraine war levels.

Stocks have tumbled across Europe, as soaring inflation puts pressure on central bankers to raise interest rate even more aggressively. With the US dollar in demand, the pound has sunk below $1.18 for the first time since March 2020, early in the pandemic.

The FTSE 100 is down 110 points, or 1.5%, in late trading, while fears that Mario Draghi’s government could collapse have hit stocks hard in Milan.

The EU added to the gloom, slashing its growth forecasts and predicting that inflation will be even steeper than feared.

And with the boss of Shell warning of the possibility of fuel rationing this winter, the next few months look increasingly troubled.

Barratt, the UK’s biggest housebuilder, is handing all its staff below senior management a £1,000 payment to help them cope with the cost of living squeeze, as well as a 5% pay rise.

Here are the rest of today’s main stories:

Updated

Federal Reserve policymaker Chris Waller has signalled that he favours raising US interest rates by 75 basis points this month - matching June’s hike, which was the largest since 1994.

But Waller isn’t ruling out a 100bp (or 1%) rise, saying that upcoming retail sales and housing data will show just how strong the economy is.

Britain’s night time businesses such as bars, casinos and nightclubs fear that the latest rail strikes will be another blow to the sector.

Michael Kill CEO of the Night Time Industries Association says this summer is a critical moment for the sector:

“Our industry is suffering heavily from rising costs, as inflation reaches a high, with most reporting an estimated loss of up to 40% in trade from previous strike activity, we must come together to support a recovery we can all benefit from.”

“Any consideration of long term strike action would be catastrophic, sporadic weekly or daily planned strike action is eating into consumer confidence, and will lead to an irreparable loss of business and jobs, after so much hard work has been put into recovery in the last 12 months.”

“Our sector is at a critical point in building to pre covid business levels, as we embark on one of the most important summer festival seasons.”

The political instability in Rome has driven shares deeper into the red, with the FTSE MIB index down 3.5% in late trading.

Italy’s coalition government is teetering on the brink of collapse after the Five Star Movement refused to participate in a confidence vote, raising the spectre of a snap general election.

Five Star, headed by the former prime minister Giuseppe Conte, is a formerly anti-establishment party that has plummeted in the polls and lost parliamentarians since joining the government, hurt by policy U-turns and internal divisions.

The decision to sit out the vote – which political experts say is a tactical attempt to win back grassroots support – could push Mario Draghi’s already fractured coalition to collapse, and even force early national elections later in the year.

Mariolina Castellone, the leader of Five Star in the senate.

“We are not taking part in the vote on this measure today ... but this position of ours is not about confidence in the government,”

The government survived the confidence vote, but Draghi had previously warned on multiple occasions that he would not carry on as premier without Five Star’s support.

Water company bosses should face jail for the worst pollution incidents, the Environment Agency has said as it detailed the sector’s “shocking” performance in 2021.

The agency’s annual environmental performance report for water companies said it was the “worst we have seen for years”, as serious pollution incidents increased to 62 in 2021, the highest total since 2013.

There were eight of the very worst, category one, incidents, compared to three in 2020. More here.

Updated

Back in the transport world, rail services around Britain are expected to be severely disrupted by the hot weather next week.

Trains are expected to run slowly to reduce the risk of track and equipment failing in extreme heat, our transport correspondent Gwyn Topham reports:

Blanket speed restrictions are likely to be put in place around the south-east of England, with the air temperature forecast to possibly surpass the highest ever recorded in Britain, which was 38.7 in 2019.

Network Rail’s emergency weather action teams are meeting on Friday to examine detailed forecasts, and will be expected to limit train speeds for safety if temperatures pass 35C.

Passengers will be informed that trains are likely to run with severe delays, particularly on main lines in and out of London, where a 60mph speed limit would have a significant effect on fast services.

Updated

US crude oil has sunk to its levels when the Ukraine war began, down 5% to around $91.34 per barrel.

Britain’s FTSE 250 index, which contains medium-sized companies, is down 1.6% in afternoon trading, around a one-week low.

Each of the 30 members of the Dow Jones industrial average are in the red.

JP Morgan (-4.5%) are the top faller, followed by Goldman Sachs (-4%), after JPM and Morgan Stanley both disappointed with today’s earnings’ figures.

Chevron has lost 3.7% as the oil price drops to five-month lows.

Updated

Wall Street is taking an early tumble too.

The Dow Jones industrial average has fallen by 563 points in early trading to 30,209, down 1.8% today.

Traders have been jolted by yesterday’s jump in US inflation, which has led to speculatation that the Federal Reserve could raise interest rate by a whole percentage point later this month -- as Canada did, unexpectedly, yesterday.

Shares in JP Morgan have fallen over 4% after it reported a fall in profits.

Jamie Dimon’s warning that the global economy will be hit by the Ukraine war, rising inflation and falling consumer confidence will also be worrying traders.

The rise in US producer price inflation, and the jump in jobless claims to eight month highs today (see here), also suggest growth is weakening even as prices keep rising higher.

Updated

Shares, oil, pound and euro slide on recession fears

Shares, oil, the pound and the euro are all tumbling today as recession worries hammer markets again.

In London, the FTSE 100 index of blue-chip shares is down 119 points, or 1.6%, at 7035, a one-week low.

Mining companies and oil giants are along the fallers, with Anglo American falling 6% and Shell down 4.5%. Insurance company Admiral is the top faller,down 17%, after a profit warning from smaller rival Sable this morning.

The pound has sunk below $1.18 for the first time since March 2020, down a cent today...

The pound vs the US dollar over the last five years
The pound vs the US dollar over the last five years Photograph: Refinitiv

... while the euro has again fallen below parity with the US dollar, as it did yesterday for the first time in 20 years.

Recession fears have pushed oil down to its lowest levels since the Ukraine war began.

Brent crude, the international benchmark, has fallen 3.3% to $96.29 per barrel, the lowest since 25th February.

Wednesday’s surge in US inflation to 9.1%, a new 40-year high, has fuelled concerns that central banks will raise interest rates even faster -- despite signs of slowing growth.

Craig Erlam, senior market analyst at OANDA, says central banks are scrambling to hike aggressively in a desperate attempt to get it back under control and limit the shock to the economy.

Recession fears have fully gripped the markets and central banks are left with little alternative but to tighten aggressively into it...

Investors are clearly now of the view that the ship has sailed on that and the job now is ensuring any recession is shallow and brief. The expectation now is that the Fed will hike aggressively before reversing course in the middle of next year in order to stimulate the economy out of recession. Even that is looking optimistic at this point.

US jobless claims hit eight-month high

The number of Americans applying for unemployment benefits has hit its highest level in nearly 8 months.

New applications for jobless support rose by 9,000 last week to 244,000, the highest since last November.

That indicates firms may have cut more staff as the US economy was hit by soaring inflation.

Analysts had expected the number to remain flat from the previous week.

The four-week average for claims, which evens out some of the week-to-week volatility, rose by 3,250 from the previous week, to 235,750.

More encouragingly, the total number of Americans collecting jobless benefits has dropped, dowm 41,000 to 1,331,000. That’s around its lowest level in 50 years.

US producers continued to hike their prices last month, in a sign that inflationary pressures have not abated.

Producer prices jumped by 1.1% during June, driven by an increase in the cost of goods, the U.S. Bureau of Labor Statistics reports.

That drove producer prices up by 11.3% over the last year -- the largest increase since a record 11.6-percent jump in March.

Those costs feed through to consumers in higher prices.

Looks like Twitter might be returning to normal....

Today’s Twitter outages are one of its longest downtimes in years, reports our technology editor Alex Hern.

According to Downdetector.co.uk, which tracks site outages, the service became unavailable at 12:55pm UK time. The site appears to have failed globally, with outages reported in the UK, US and Europe.

Updated

Twitter is experiencing a service outage that is preventing many users from accessing the social media site.

Downdetector currently has almost 30,000 reports of problems accessing Twitter, since around 1pm UK time (so 30 minutes ago).

The issues are affecting Twitter web, mobile, and even the company’s TweetDeck app, which is refusing to load.

Updated

Here’s our news story on the latest UK rail strikes:

More banking news: Morgan Stanley has missed profit estimates for the first time in nine quarters on Thursday, as its investment banking unit struggled to cope with a slump in global dealmaking.

Reuters has the details:

The U.S. Federal Reserve’s aggressive actions to contain runaway inflation has rattled global financial markets, forcing corporates to curb their appetite for deals, while also slowing their efforts to raise cash through stock and debt offerings.

The turmoil has, in turn, upended a lucrative revenue stream for investment banks, whose results are also facing tough year-earlier comparisons when accommodative monetary policies led to record levels of deals.

Revenue from investment banking plunged 55% to $1.1 billion, with the bank’s advisory business taking a 10% hit. Equity and fixed income underwriting revenue also plunged 86% and 49%, respectively.

UK train drivers at eight rail companies to strike on July 30

Train drivers at eight rail companies will strike on July 30 in a dispute over pay, their union Aslef have announced.

ASLEF members at eight companies – Arriva Rail London; Chiltern Railways; Greater Anglia; Great Western; Hull Trains; LNER; Southeastern; and West Midlands Trains – will strike on Saturday 30 July.

Mick Whelan, general secretary at ASLEF, says train companies have not offered a pay deal that kept pace with inflation.

‘We don’t want to go on strike – strikes are the result of a failure of negotiation – and this union, since I was elected GS in 2011, has only ever been on strike, until this year, for a handful of days.

‘We don’t want to inconvenience passengers – not least because our friends and families use public transport, too, and we believe in building trust in the railways in Britain – and we don’t want to lose money by going on strike.

‘But we’ve been forced into this position by the train companies, driven by the Tory government. The drivers at the companies where we are striking have had a real terms pay cut over the last three years – since April 2019.

‘And these companies are offering us nothing, saying their hands have been tied by the government. That means, in real terms, with inflation running ahead at 9%, 10%, and even 11% this year, according to which index you use, that they are being told to take a real terms pay cut. And that is not acceptable.

‘Strike action is, now, the only option available but we are always open to talks if the train companies, or the government, want to talk to us and make a fair and sensible offer.’

Heathrow has hit back at Emirates’ refusal to cancel flights to reduce travel chaos at the airport this summer.

A Heathrow spokeswoman accused Emirates of focusing on profit instead of safety, and said airlines had not expanded their ground handling teams fast enough.

“While many factors have resulted in the delayed flights, misconnected bags, long waits for arriving bags and last-minute cancellations at Heathrow and airports across Europe in recent weeks, a key issue is airline ground-handling teams which are currently only resourced up to 70% capacity to serve passenger demand which has returned to 80-85% of pre-pandemic levels.

“For months we have asked airlines to help come up with a plan to solve their resourcing challenges, but no clear plans were forthcoming and with each passing day the problem got worse.

“We had no choice but to take the difficult decision to impose a capacity cap designed to give passengers a better, more reliable journey and to keep everyone working at the airport safe.

“We have tried to be as supportive as possible to airlines and our 100,000 cap on daily departing passengers is significantly higher than the 64,000 cap at Schiphol (in Amsterdam).

“It would be disappointing if instead of working together, any airline would want to put profit ahead a safe and reliable passenger journey.”

JP Morgan's Dimon cautious on global economy as profits fall

The logo of JP Morgan bank

The head of JP Morgan has warned that the global economy faces a bumpy path as the bank sets aside more money to cover bad debts.

JP Morgan’s latest financial results, just released, show net earnings fell 28% in the second quarter of the year, to $8.6bn.

It made a $1.1bn provision for credit losses (while a year ago it released $2.285bn), partly due to a “modest deterioration in the economic outlook”, as banks look to cover themselves from potential losses from a downturn.

Jamie Dimon, chairman and CEO, warned that the global economy will probably suffer negative consequences, as the Ukraine war continues, inflation stays high and confidence sinks.

“In our global economy, we are dealing with two conflicting factors, operating on different timetables. The U.S. economy continues to grow and both the job market and consumer spending, and their ability to spend, remain healthy.

But geopolitical tension, high inflation, waning consumer confidence, the uncertainty about how high rates have to go and the never-before-seen quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its harmful effect on global energy and food prices are very likely to have negative consequences on the global economy sometime down the road.”

JP Morgan is also temporarily suspending its share buyback programme so it can build up its capital buffers. That follows the latest US bank stress tests, which found JPM’s loan portfolio would be hit the hardest under a severe recession.

Investment Banking fees fell 54% compared to a year ago, when there was a flurry of dealmaking, while asset and wealth management revenues rose 5%.

Updated

Shell CEO Ben van Beurden also called for the next prime minister to stick to the UK’s net zero goals, our energy correspondent Alex Lawson reports from Oxford.

Shell CEO warns Europe faces 'really tough' winter

The head of energy giant Shell has warned that Europe faces a “really tough” winter as energy costs soar.

Shell CEO Ben van Beurden echoed the European Commission’s concerns about rocketing prices, speaking in Oxford this morning.

Reuters has the details;

Europe faces a “really tough” winter in the face of soaring energy costs which might require fuel rationing, Shell CEO Ben van Beurden said on Thursday.

“It will be a really tough winter in Europe.. We will all face very significant escalation in energy prices,” van Beurden told the Aurora Spring Conference in Oxford.

In the worst case, Europe will need to ration its energy consumption, he added.

Annual inflation in Ireland has accelerated to a 38-year high, as the cost of living squeeze hits households.

Inflation hit 9.1% in the year to June, the Central Statistics Office reports, up from 7l8% a month ago, driven by soaring energy prices.

It says:

  • This is the largest annual increase in the CPI since Quarter 2 1984 when annual inflation was 9.7%
  • The divisions with the largest increases in the year to June 2022 were Housing, Water, Electricity, Gas & Other Fuels (+22.5%) and Transport (+20.4%)

Prices were 1.3% higher month-on-month, up from the 0.9% registered in each of the previous two months.

Emirates rejects Heathrow’s demand to cancel summer flights

An Emirates Airbus A380 plane taking off from Heathrow airport in West London.
An Emirates Airbus A380 plane taking off from Heathrow airport in West London. Photograph: Steve Parsons/PA

In the travel sector, Emirates has announced that it will ignore an order from Heathrow Airport for it to cancel flights to comply with a cap on passenger numbers.

The airline said in a statement that Heathrow’s move was ‘entirely unreasonable and unacceptable’, so it was refusing to scrap flights.

On Tuesday, Heathrow announced a cap of 100,000 departing passenges per day, and asked airlines to stop selling tickets for this summer.

That limit is meant to reduce pressure on the airport, where passengers have suffered from chaos this year partly due to shortages of security and ground handling staff.

Emirates, though, won’t comply, saying:

“LHR (London Heathrow) last evening gave us 36 hours to comply with capacity cuts, of a figure that appears to be plucked from thin air.

“Their communications not only dictated the specific flights on which we should throw out paying passengers, but also threatened legal action for non-compliance.

“This is entirely unreasonable and unacceptable, and we reject these demands.”

It added:

“Until further notice, Emirates plans to operate as scheduled to and from LHR.”

European Commission summer forecasts
The top line from today’s Summer Forecasts Photograph: EC

Gentiloni: Russia's invasion sends shockwaves through global economy

Presenting today’s forecasts, Paolo Gentiloni, Commissioner for Economy, says:

Russia’s unprovoked invasion of Ukraine continues to send shockwaves through the global economy.

To navigate these troubled waters, Europe must show leadership, with three words defining our policies: solidarity, sustainability and security.

The EU also warns that the Ukraine war will heavily affect the outlook for economic activity and inflation.

Today’s Summer Forecasts say:

Further increases of gas prices could strengthen the stagflationary forces currently at play. Second round effects could amplify these forces and lead to a sharper tightening of financial conditions that would not only weigh on growth, but also on financial stability.

At the same time, recent downward tendencies of oil and other commodities’ prices could intensify, bringing about a faster deceleration in inflation. Moreover, private consumption could prove more resilient to increasing prices if households were to use more of their savings. Finally, COVID-19 remains a risk factor.

EU cuts euro zone growth forecasts, revises up inflation outlook

It’s official: the European Commission has cut its growth forecasts for the euro area, and hiked its inflation outlook.

In its summer forecasts, just released, the EC warns that economic shocks are hitting the European economy.

The Ukraine war is the major factor, along with soaring inflation, China’s latest lockdowns and the slowdown in America (US GDP shrank in Q1), it says.

The EC warns:

As the reality of a protracted Russian invasion of Ukraine sinks in, the assessment of its economic consequences for the global economy is turning grimmer. The shocks unleashed by the war are hitting the EU economy both directly and indirectly, setting it on a path of lower growth and higher inflation.

The rapid increase in energy and food commodity prices is feeding global inflationary pressures, eroding the purchasing power of households and triggering a faster monetary policy response than previously assumed. Furthermore, the deceleration of growth in the US is adding to the negative economic impact of China’s strict zero-COVID policy.

The EU executive now predicts growth of 2.6% this year for the 19-country currency bloc, slightly less than the 2.7% it had forecast in May.

The picture for 2023 is gloomier; growth is now forecast to slow to just 1.4%, instead of the 2.3% previously estimated, as higher energy prices take their toll.

Eurozone economic forecasts
Eurozone economic forecasts Photograph: EC

Inflation in the euro area is projected to peak at a new record high of 8.4% in the third quarter of 2022, prompting the EC to hike its inflation forecasts for this year.

It now expects eurozone inflation will average 7.6% in 2022, up from 6.1% forecast in May, amd by 4% in 2023 (as the draft predictions we covered earlier suggested).

Inflation in the wider EU is seen even higher, at 8.3% this year.

And the EC warns that confidence is weakening, due to soaring prices of energy, food, and other goods and services:

Whereas prices of some commodities are retreating from recent peaks, the EU economy remains vulnerable to developments in energy markets due to its high reliance on Russian fossil fuels. With gas prices nearing all-time highs energy inflation is on the rise.

Food inflation is also surging, but pressures are broadening further as higher energy costs are passed-through to services and other goods. Lower income households are especially hit by the protracted rise in prices.

Whereas businesses still eye an expansion of economic activity, they are less optimistic about the future, which will weigh on investment. Households are just as negative about the future as they were at the onset of the pandemic, which is set to drag on the recovery of private consumption.

Updated

UK lenders are expecting to cut the availability of mortgages and unsecured consumer loans this summer.

A quarterly Bank of England survey published this morning shows that major lenders expect the availability of secured credit to decrease slightly over the next three months to end-August.

Unsecured credit available to households (such as credit cards) is also expected to drop, after a rise in the previous quarter.

Major lenders also expected loan spreads over Bank Rate for mortgages and unsecured credit to widen in the three months to August.

And they expect the default rates on secured and unsecured loans to rise, as borrowers struggle to repay their debts as interest rates rise.

Fewer UK firms expecting to raise prices, as turnover drops

The number of UK firms planning to raise prices further has dropped, according to the latest real-time data, as demand softens.

Over a quarter of businesses surveyed by the Office for National Statistics expect to increase the cost of their goods or services in August, down from 31% estimated for April.

Energy prices remained the most commonly reported reason for considering doing so, with half of companies said they’d paid more for goods and services last month.

The ONS also found that 24% of firms said their turnover decreased in June 2022 compared with May 2022 -- a sign that the cost of living squeeze is hitting the economy.

Only 13% reported that their turnover had increased, while 54% reported that their turnover stayed the same.

There was also a drop in eating out, with UK seated diner numbers falling by 3 percentage points last week.

Updated

The pound has slipped against the dollar towards the two-year lows set on Tuesday, amid political and economic uncertainty.

Sterling has dropped by almost half a cent to $1.185, but is holding up better against the euro at €1.1821 (near a two-month high).

Global slowdown worries have pushed the oil price down.

Brent crude has dipped by 1% to as low as $98.27 per barrel, the lowest since mid-April, on concerns that red-hot inflation will force central banks to raise interest rates faster.

The scramble to find workers has boosted earnings at British recruitment agency Hays, which reported financial results today.

Hays reported a 23% jump in its fourth-quarter net fees, fuelled by ramped-up hiring across markets as companies rush to fill up vacancies.

Hays - London’s biggest publicly listed recruiter that primarily hires for white-collar jobs - is benefiting from the pick-up in demand for workers as economies recovered from the pandemic shock.

Chief executive officer Alistair Cox said in a statement.

“Fees and activity were stable at high levels through the quarter, driven by good client and candidate confidence.”

More here: Recruiter Hays quarterly fees jump on global hiring boom

Updated

An Upper Crust in Euston Station, London.
An Upper Crust in Euston Station, London. Photograph: James Manning/PA

The owner of the Upper Crust sandwich chain and Ritazza coffee shops doesn’t see any early respite from inflation.

SSP reported this morning that:

In common with the entire hospitality sector, we continue to face widespread and increasing inflationary pressures impacting our supply chain, labour and energy costs, and these are anticipated to persist well into next year.

SSP, which operates at transport hubs across the UK, also lifted its sales forecast, reporting that revenues were continuing to strengthen (running at 89% of 2019 levels)

However, airport disruption, labour shortages and the UK rail strikes are all hindering the recovery.

UK housebuilder Barratt has missed its target for home completions, as supply chain problems weigh on construction firms.

Barratt completed 17,908 homes in the year to 30 June, a little below its target of 18,000 to 18,250 homes, but still back to pre-pandemic levels.

CEO David Thomas says the company is focused on addressing the UK’s housing shortage, despite economic challenges:

While there are clearly macro-economic uncertainties ahead, the housing market remains robust, our forward order book is strong and we have the resilience and flexibility to react to changes in the operating environment.

Shares in Barratt are down 2.3%, despite it also beating forecasts for adjusted profits.

While rents are soaring, the UK housing market may be cooling.

British house prices rose at their slowest pace in more than a year last month as buyer demand softened slightly, according to the Royal Institution of Chartered Surveyors.

The latest RICS monthly house price balance - which measures the difference between surveyors reporting price rises and those seeing a fall - fell to +65 in June from a downwardly revised +72 in May.

UK rents grow at fastest annual rate in 16 years

Estate agent signs.

Back in the UK, average private rents in Britain have hit record highs, jumping by more than 20% in some areas such as Manchester.

The average advertised rent outside London is 11.8% higher than a year ago, while in the capital it is up by 15.8%, according to the property website Rightmove.

Shortages of properties on the market are leading to intense competition among tenants for what is available, while some landlords are raising rates following rising interest rates.

During the period from 1 April to 30 June, the average advertised asking rent outside London hit another new record of £1,126 a calendar month, Rightmove said. This figure has jumped by 19% – or £177 – in the two years since the pandemic started.

Here’s the full story, by my colleague Rupert Jones:

Rightmove’s Tim Bannister warned that inbalances between supply and demand will keep pushing prices up:

“The story of the rental market continues to be one of high tenant demand but not enough available homes to meet that demand. Last year we saw exceptional numbers of tenants looking to move and this year we have seen no let-up in this trend.

Whilst stock levels are beginning to improve, with June seeing the highest number of new rental listings coming to market so far this year, the wide gap that has been created between supply and demand over the last two years will take time to narrow. Until then, this imbalance will continue to support asking rent growth. This has led to our revised forecast of a 8% rise in asking rents by the end of the year up from 5%.”

Updated

Investors are expecting further sharp rises in interest rates, especially after Canada shocked the markets by raising borrowing costs by a full percentage point yesterday.

Could the US Federal Reserve follow suit with a 100bp rise this month, to get to grips with soaring inflation?

Stephen Innes of SPI Asset Management says:

Global stock markets seem to be ok with the Fed adding to the short sharp shock on rates – up above 3.5% but provided they quickly move back to 2.5%. At the same time, investors are coming to terms with global central banks hiking and accepting lower growth rather than allowing inflation to become entrenched.

The more prolonged inflation remains high, the more central banks will need to tighten, and the slower growth will become.

Italy’s political instability has hit stocks in Europe, dashing hopes of a recovery from yesterday’s falls.

The FTSE MIB index of Italian stocks has dropped 1% in early trading, while Germany’s DAX has lost 0.3%.

The FTSE 100 is flat in London.

Updated

Italian bond yields jump ahead of confidence vote

Italian Prime Minister Mario Draghi.
Italian Prime Minister Mario Draghi. Photograph: Johanna Geron/Reuters

Italian government bonds are weakening this morning ahead of a confidence vote that could bring down Mario Draghi’s government.

Bond yields have risen sharply in early trading, following the news that Italy’s government is close to collapse, which could prompt calls for early elections.

The populist 5-Star Movement said it would boycott a crucial vote on a cost of living package to help businesses and households with rising energy prices, arguing the funds are insufficient.

After negotiations with prime minister Draghi failed to reach a breakthrough, 5-Star’s leader, Giuseppe Conte, told reporters:

“The scenario has changed, we need a different phase.

“We are ready to support the government but not to sign a blank bill. Whoever accuses us of irresponsibility needs to look in their own backyard.”

Without 5-Star’s support, it will be very hard for the government to carry on (updated).

Mohit Kumar of Jefferies doesn’t expect the crisis to lead to early elections, though, even if Draghi does resign.

Our base case remains that the current crisis should not result in early elections as no party, including M5S, would want to go to polls when the country is facing a cost of living and energy crisis. However, the recent M5S stance has raised risks of political instability in the short term.

Currently, M5S is fairly divided and there is a possibility that a faction of M5S still votes for the Draghi government. If Draghi resigns today, President Mattarella would ask him to check if he still has a majority and could also start discussions with other political parties to find a solution. This could result in a period of volatility for a few days.

Updated

Global recession risk rising as economic outlook ‘darkens significantly’, IMF says

The head of the IMF has warned that the outlook for the global economy has “darkened significantly” in recent months.

Kristalina Georgieva said the commodity price shock from the war in Ukraine had exacerbated the cost-of-living crisis for hundreds of millions of people, and that the risk of recession was rising.

“The outlook remains extremely uncertain. Think of how further disruption in the natural gas supply to Europe could plunge many economies into recession and trigger a global energy crisis.

This is just one of the factors that could worsen an already difficult situation.

“It is going to be a tough 2022 – and possibly an even tougher 2023, with increased risk of recession.”

The IMF would be downgrading its growth forecasts for global growth for both 2022 and 2023 later this month, she said, having warned in April that its forecast of 3.6% was likely to be revised downwards.

Here’s the full story:

Introduction: EU expected to forecast lower growth, higher inflation

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

Europe’s economic outlook is deteriorating, as the Russia-Ukraine war continues to drive up oil and gas prices, hinder supply chains, and threatens full-scale disruption to energy supplies.

That’s expected to be the message from the European Commission, when it releases its latest economic projections this morning.

Those summer forecasts are due at 10am UK time, but Bloomberg has already seen a draft version. It show the euro area’s rebound from the pandemic will be weaker than anticipated, and that inflation will be even higher than feared, they say.

The Commission now expects eurozone inflation to jump to 7.6% in 2022, on average, sharply higher than its May estimate of 6.1% for the year, due to the surge in energy prices.

It also expects inflation to run around 4% next year -- still double the official targets -- up from May’s forecast of 2.7%.

The growth outlook has weakened too as rising prices hit demand, while fears of winter energy shortages hit confidence.

Eurozone GDP is now seen rising by 2.6% this year and 1.4% in 2023, Bloomberg reports, down from May predictions for gains of 2.7% and 2.3%.

The forecasts could still change before they’re officially published. But, Valdis Dombrovskis, executive vice president at the European Commission, has already warned that there will be some downward revisions, telling reporters on Monday that:

“What we see [is that] economic growth is proving quite resilient this year, still one can expect some downwards revision and even more so for the next year because of many uncertainties and risks.

“Unfortunately, inflation continues to surprise on the upside, so it’s once again going to be revised upwards.”

Europe fears that Russia doesn’t turn the Nord Stream 1 gas pipeline back on later this month, when its current maintenance is completed. That could lead to rocketing bills, energy rationing and economic turmoil this winter.

Recession fears helped to drive the euro below parity with the US dollar yesterday, for the first time since 2002.

The euro has risen back over $1, just. European stock markets are set to open slightly higher after taking a jolt yesterday when US inflation hit a new 40-year high of 9.1%.

We also get the latest real-time data on the UK economy today, plus weekly US jobless figures and data showing how rapidly America’s factories are raising their prices.

The agenda

  • 9.30am BST: Bank of England credit conditions survey
  • 9.30am BST: ONS’s latest real-time indicators of economic activity and social change
  • 10am BST: European Commission to publish latest economic forecasts
  • 1.30pm BST: US weekly jobless figures
  • 1.30pm BST: US PPI measure of producer price inflation

Updated

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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
These are the five most-hated side dishes to avoid this Thanksgiving
From cranberry sauce to pecan pie, don’t waste your time making these Thanksgiving side dishes this year
The Independent UK
The Independent UK
If reason can’t save the world, no wonder magic and superstition are on the rise
Exorcisms are booming, witchcraft is having a moment, Tucker Carlson says he was attacked by a demon. It makes as much sense as anything at a time of climate crisis, war and Trump
The Guardian - UK
The Guardian - UK
Map: Pearl Clutchers in Hot Spring County
A rural Arkansas county files more than twice as many FCC complaints per resident than anywhere else in the United States.
Reason
Reason
I'd Never Have Considered a Brown Bedroom Before — But These 11 Rooms Have Me Dreaming of One
Proof that brown is the dreamiest neutral for a calming sleep space
Livingetc
Livingetc
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