Closing summary
Financial markets were sanguine about the delay to the government’s autumn statement from 31 October to 17 November, while the Liberal Democrats attacked the “damaging cloud of uncertainty” and analysts flagged concerns that the Bank of England will have to set interest rates before the anticipated spending cuts and tax rises.
At his first prime minister’s questions, Rishi Sunak refused to commit to raising benefits in line with inflation.
The pound hit a fresh six-week high of $1.1619 and traded 0.8% higher at $1.1553 on Wednesday afternoon. It was also given a leg up by a weaker dollar, amid expectations that the Federal Reserve may be less aggressive in hiking interest rates given the slowdown in the housing market, where mortgage rates hit a 21-year high.
UK borrowing costs have fallen sharply since Jeremy Hunt was appointed chancellor and reversed most of Liz Truss’s unfunded tax cuts. The yield, or interest rate, on 10-year government bonds fell just below 3.6% today, while the 20-year bond yield declined to 3.8% and the 30-year yield dropped to 3.6%. After the mini-budget on 23 September, the 10-year yield jumped to 4.5% while the 20- and 30-year yields surged beyond 5%.
Hargreaves Lansdown analyst Susannah Streeter said:
Sunak’s new cast for the cabinet, including the continuity chancellor Jeremy Hunt, was aimed at demonstrating to the markets that financial stability is top priority for the government and for now it doing the trick. His choice of words in his maiden speech were also reassuring, with a promise to set limits on borrowing.
Investors are mindful that it was the unnecessary rush to announce big tax cuts which caused such tumultuous times for the Truss administration and what they crave now is caution and stability. The premium slammed on UK assets by reckless policies of his predecessor appears to be slowly lifting, but hefty challenges for team Sunak remain, as the economy heads into recession and the productivity puzzle remains as cryptic as ever to solve.
Meanwhile, Viraj Patel, senior currency and macro global strategist at Vanda Research, tweeted:
This doesn’t change anything. Probably buys Sunak & Hunt time to get a proper plan together that restores fiscal credibility. But this makes the Bank of England’s job a lot harder next week. They may choose caution over aggression.
The Bank of England is due to announce its interest rate decision on 3 November and is expected to raise rates by 75bps to 3%.
Our main stories today:
Ministers are to re-examine the pensions triple lock and increasing benefits in line with inflation over the next fortnight, according to No 10, after Rishi Sunak delayed the announcement of the government’s fiscal plans from 31 October to 17 November.
The Bank of England will next week consider how much to raise interest rates without having received any guidance from the government about its tax and spending policies, after Jeremy Hunt pushed back the date for this year’s “autumn statement”.
Fracking will in effect remain banned under Rishi Sunak’s government, his spokesperson confirmed on Wednesday, saying the new prime minister was committed to the policy in the 2019 manifesto.
The confirmation came after the prime minister told the Commons that he “stands by” the manifesto, which put a moratorium on shale gas extraction.
Heathrow has said passengers may have to fly outside peak times on some days in the run-up to Christmas to avoid further travel chaos, as Europe’s busiest airport admitted it was still short of 25,000 staff to meet high demand.
Barclays has become the second big bank to breeze past profit forecasts this week after an increase in borrowing costs and bond trading during the UK’s market meltdown pushed earnings to £2bn this quarter.
A charity founded by the chancellor, Jeremy Hunt, paid more than £110,000 – two-thirds of its income – to his former political adviser Adam Smith, who lost his job over a lobbying scandal.
Patient Safety Watch, which was set up to research preventable harm in healthcare, paid Smith as its sole employee and chief executive about 66% of its income in the year ending January 2022.
Staff at a therapists’ trade union are threatening to strike over plans to make one in 10 of them redundant which have driven many to seek therapy themselves.
Workers at the Royal College of Occupational Therapists (RCOT) said they were given just three days to decide whether to accept redundancy or reapply for other jobs on worse terms in a process criticised as “fire and rehire”.
Nova Scotia touted its huge ‘green’ energy plant. Turns out it’s powered by coal
A peanut butter, dried thyme and garlic pasta dish is Nigella Lawson’s answer to money-saving as part of a suite of £1.25-a-portion recipes she has created under a partnership with online grocer Ocado.
Thank you for reading. We’ll be back tomorrow bright and early. Good-bye! -JK
Updated
Bank of Canada increases interest rates by 50bps, less than expected
The Bank of Canada has increased its policy interest rate by 50 basis points to 3.75%, less than the 75bp move expected by analysts.
It said in a statement:
Given elevated inflation and inflation expectations, as well as ongoing demand pressures in the economy, the Governing Council expects that the policy interest rate will need to rise further. Future rate increases will be influenced by our assessments of how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding. Quantitative tightening is complementing increases in the policy rate.
Lisa Abramowicz of Bloomberg TV and radio tweeted:
The Bank of Canada reinforces the narrative that central banks will start tempering their rate hikes. Short-term yields around the world, including the U.S., take a sharp leg lower: https://t.co/Dpl6BDN6jG pic.twitter.com/FiBnluIK7U
— Lisa Abramowicz (@lisaabramowicz1) October 26, 2022
Updated
Southampton Airport faces shutdown during one-day strikes
Southampton Airport faces shutdown as workers prepare to strike after a three-year pay freeze.
The Unite union said workers at the airport who haven’t had a pay increase since 2019 will carry out a series of one-day strikes beginning on 5 November after months of delays by airport bosses.
Airside operations controllers, firefighters, technicians and engineering workers intend to go on strike on 5 November, 12 November and 19 November.
Unite general secretary Sharon Graham said:
During the pandemic workers at Southampton Airport made huge sacrifices, accepting reductions in pay and conditions while working around the clock to keep the airport safe and running.
Inflation is now at a 40 year high. It’s completely wrong for the employers, AGS, to refuse these safety critical workers a decent pay increase after a three year freeze. The workers have had enough. The airport bosses need to make a realistic pay offer to the staff if they are to avoid an escalation of the dispute. They should do that now.
Annual consumer price inflation was 10.1% in September. The union says AGS airports, which also owns Aberdeen and Glasgow airports, is offering workers a real terms pay cut between 4% and 6% depending on when the workers began employment. It also says workers doing the same jobs are being paid different rates because the pay structure “is a complete mess”.
Unite regional officer, Ian Woodland said:
Southampton Airport has a good future ahead. Not only did the workers go beyond the call of duty during the pandemic but they campaigned to help secure the runway extension. It’s time to recognise the workers’ contribution with a fair pay deal.
AGS, whic is owned by Australia’s Macquarie and Spain’s Ferrovial, has been contacted for comment.
Updated
Professor Costas Milas of Liverpool university’s Management School, said:
Rising sterling and declining costs of UK borrowing over the past few days is a welcome economic development after the disastrous “Trussonomics”. Nevertheless, the government’s decision to postpone the fiscal event until November the 17th reversed, somewhat, this trend.
The best way forward is for the Bank of England to also delay its interest rate decision until November the 17th! This has two advantages.
First, assuming that the Bank’s officials are updated by the Treasury prior to that very date, the Bank’s Monetary Policy Report (and its forecasts) will be fully up to date in terms of government policy. Second, the government’s fiscal plan will therefore be accompanied by OBR forecasts as well as the Bank of England’s forecasts. That is, investors will appreciate the very fact that two forecasting bodies (OBR and the Bank of England) will comment on government policy.
Viraj Patel, senior currency and macro global strategist at Vanda Research, was more sceptical.
*UK GOVERNMENT DELAYS FISCAL STATEMENT TO NOVEMBER 17
— Viraj Patel (@VPatelFX) October 26, 2022
This doesn't change anything. Probably buys Sunak & Hunt time to get a proper plan together that restores fiscal credibility. But this makes the BoE's job a lot harder next week. They may choose caution over aggression $GBP
Ben Zaranko, economist at the Institute for Fiscal Studies, said:
A delay is sensible. There’s a lot riding on this, so important to get the details right. But the challenge remains the same: find a way to somehow reconcile 2019 manifesto public service objectives (which Sunak has recommitted to) with likely cuts to public spending.
Updated
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, said about the postponed of the government’s fiscal plans:
The two-week delay of plans to reveal detail of the UK government’s spending plans on Halloween hasn’t caused investors to take fright, with the markets cutting prime minister Rishi Sunak some slack, given that he’s just a day into the new job. The pound has remained above $1.15, retreating only a little from the mornings highs, but sterling is still up overall.
UK borrowing costs remain significantly lower with 10-year gilt yields hovering around 3.6%. Rishi Sunak’s new cast for the cabinet, including the continuity chancellor Jeremy Hunt, was aimed at demonstrating to the markets that financial stability is top priority for the government and for now it doing the trick. His choice of words in his maiden speech were also reassuring, with a promise to set limits on borrowing.
Early rewards have come with the sharp rise in the pound, back up to six-week highs earlier today, but sterling was also given a leg-up by a slightly weaker dollar, amid expectations that the Fed won’t go so hard and fast with rate rises with given the record slowdown in house prices.
Investors are mindful that it was the unnecessary rush to announce big tax cuts which caused such tumultuous times for the Truss administration and what they crave now is caution and stability. The premium slammed on UK assets by reckless policies of his predecessor appears to be slowly lifting, but hefty challenges for team Sunak remain, as the economy heads into recession and the productivity puzzle remains as cryptic as ever to solve.
New Treasury committee chair to be announced on 9 November
The hunt for a new chair of the Treasury committee is underway. It comes after the Tory MP Mel Stride, a staunch supporter of Rishi Sunak, was appointed as work and pensions secretary in Sunak’s new cabinet.
The position comes with the power to haul in ministers, central bank officials, regulators, and City executives in front of MPs to answer questions on the economy and issues affecting banking and financial services. The committee is currently scrutinising a number of issues including Russian sanctions, venture capital markets, risks surrounding cryptocurrencies, as well as the wider impacts of the pending Financial Services and Markets Bill.
Stride’s successor will have an opportunity to ratchet up the pressure on City officials, who some believe have been given an easier run than under his predecessors, which have included now-Baroness Nicky Morgan and the former Competition and Markets Authority boss, Lord Andrew Tyrie.
The chairing role is only open to MPs from the Tory party which holds a majority in the House of Commons, and hopefuls will have to secure 15 signatures from their own party to qualify before nominations close on 8 November. The results will be announced the same day, unless there are multiple candidates, in which case it will go to a vote on 9 November.
Updated
US average mortgage interest rate jumps to 7.16%, highest since 2001
Over in the US, the average interest rate on the most popular US home loan has risen to its highest level since 2001.
Data from the Mortgage Bankers Association showed the average rate on a 30-year fixed-rate mortgage rose by 22 basis points to 7.16% for the week ended 21 October. Mortgage applications fell by 1.7% from the previous week.
Joel Kan, MBA vice-president and deputy chief economist, said:
The ongoing trend of rising mortgage rates continues to depress mortgage application activity, which remained at its slowest pace since 1997.
Mortgage rates have more than doubled since the start of the year, as the Federal Reserve hiked interest rates aggressively to try and tame high inflation. The central bank is expected to raise borrowing costs by a further 75 basis points at its next meeting on 1-2 November.
The yield on the 10-year Treasury bond acts as a benchmark for mortgage rates. It fell slightly to 4.05% today.
Updated
Markets will no doubt be reassured by the announcement that the government’s autumn statement – a full budget – will be published alongside full forecasts from the Office for Budget Responsibility, the fiscal watchdog.
The lack of an independent assessment by the OBR was one of the main reasons why Kwasi Kwarteng’s mini-budget of unfunded tax cuts on 23 September caused market turmoil.
Ed Conway, Sky’s economics editor, has tweeted:
As I said on @skynews a moment ago, so far markets seem sanguine about the decision to delay the fiscal statement. No panic. Normally you’d take that for granted but not after the past few weeks… pic.twitter.com/tTGjKxO7L3
— Ed Conway (@EdConwaySky) October 26, 2022
As I wrote last night, part of the rationale was that since the market stress has now diminished there was no longer any reason to get the fiscal statement in before the BoE decision next Thurs. https://t.co/YB6wOC9qN2
— Ed Conway (@EdConwaySky) October 26, 2022
Updated
The Treasury spokesperson for the Liberal Democrats, Sarah Olney, said:
This delay risks leaving mortgage borrowers, pensioners and struggling families under a damaging cloud of uncertainty.
Rishi Sunak must confirm now that benefits and pensions will be up-rated in line with inflation, and there will be no cuts to our NHS and other crucial public services.
Sunak was installed by Conservative MPs into Number 10 without anyone voting for him, and without telling anyone about his plans for the country.
The public deserve to know immediately what lies in store, and that they will not be made to pay for the Conservative Party trashing our economy.
ITV’s political editor Robert Peston says the uncertainty is “unhelpful” for the Bank of England, which will make its interest rate decision on 3 November.
This delay in the fiscal plan - now rebranded as an Autumn Statement - by more than two weeks to 17 November is to see whether the post Hunt/Sunak rise in bond prices and fall in market interest rates has significantly reduced the hole in the public finances, such that tax… https://t.co/HfzTjQrFDV
— Robert Peston (@Peston) October 26, 2022
rises and public spending cuts may not need to be as humongous as originally thought. The point is that if Sunak/Hunt are regarded as responsible stewards of the public-sector balance sheet, in practice investors and the market cut them more slack. There is a cost…
— Robert Peston (@Peston) October 26, 2022
though. The Bank of England will make its interest rate decision on 3 November without knowing what kind of retrenchment Hunt is planning. That degree of uncertainty is unhelpful.
— Robert Peston (@Peston) October 26, 2022
Markets have taken the news in their stride.
Sterling is still 0.8% ahead at $1.1562, and up 0.3% versus the euro at €1.1541. The FTSE 100 index has sold off 27 points, or 0.4%, to 6,986.
There has also been little impact on the government bond markets, which determine the long-term cost of government borrowing. UK borrowing costs remain significantly lower than under Liz Truss, with 10-year gilt yields hovering around 3.6%.
The yield (or interest rate) on the 30-year gilt has edged up 7 basis points today to 3.75% while the 20-year is yielding 3.9%, up 6bps. The two-year gilt yield has dropped slightly to 3.36%.
Prime Minister @RishiSunak & Chancellor @Jeremy_Hunt have agreed the Autumn Statement will be delivered on 17 November with an @OBR_UK forecast. It will contain the UK’s medium term fiscal plan to put public spending on a sustainable footing, get debt falling & restore stability. pic.twitter.com/3wiSAU1iaK
— HM Treasury (@hmtreasury) October 26, 2022
Updated
UK's fiscal plan postponed until 17 November
Britain’s fiscal plan has been moved (again), from 31 October to 17 November and will be a full budget.
The chancellor, Jeremy Hunt, told reporters:
Our number one priority is economic stability and restoring confidence that the United Kingdom is a country that pays its way and for that reason, the medium-term fiscal plan is extremely important.
It’s also extremely important that statement is based on the most accurate possible economic forecasts and forecasts of public finances, and for that reason the prime minister and I have decided that it is prudent to make that statement on 17th of November when it will be upgraded to a full autumn statement.
I’ve discussed this last night with the governor of the Bank of England. He understands the reasons for doing that, and I’ll continue to work very closely with him.
Updated
Mercedes-Benz to sell Russian assets
Germany’s Mercedes-Benz is to sell its Russian assets to a local investor, becoming the latest carmaker to pull out of the country since Moscow sent troops to Ukraine in late February.
The Russian ministry of industry and trade said in a Telegram statement:
Mercedes-Benz intends to sell its shares in Russian subsidiaries to a local investor.
The new owner of the Russian divisions of Mercedes-Benz, Avtodom, will be able to attract other companies as partners for joint productions.
Mercedes-Benz confirmed it intended to sell in a separate statement. The general director of Mercedes-Benz Russia, Natalya Koroleva, said:
The fulfilment of obligations to customers in Russia... as well as the preservation of jobs for employees of the Russian divisions of the company
were the main priority in concluding the deal with Avtodom. No financial details of the transaction were provided by either side, but the German carmaker estimated the value of its Russian assets at €2bn.
Many foreign companies left Russia for ethical or logistical reasons in recent months, including carmakers Renault and Nissan. Western sanctions imposed on Russia since the beginning of the Ukraine offensive have heavily disrupted supply chains, with the technology and automotive sectors badly hit.
Updated
World Bank chief calls for more targeted energy support
The head of the World Bank has warned that Covid debt will take decades to pay off, and that governments can’t afford to help everyone with their soaring energy bills.
The bank’s president David Malpass said Covid support schemes had not been targeted enough at the most vulnerable and that governments were making the same mistake with energy support measures. He told the BBC’s World Service:
They went to everyone... and now the consequences are coming home.
People will be left for years and even decades paying for that debt.
He said the same approach was being adopted to help people cope with rising energy bills.
Governments are saying we will take care of everyone, which is just too expensive.
This is pushing global debt to record levels and people at the bottom will be hardest hit, he said.
Updated
Virgin Wines expects boost from people staying at home
While times are tough, Virgin Wines, one of the UK’s largest wine retailers, expects a boost from people ditching the pub and staying at home to save money.
Trading was positive in August but softer than anticipated in September, impacted by the national period of mourning in light of the death of Her Majesty the Queen and the Group’s decision to desist from any marketing and promotional activity during this period.
Looking ahead, there will continue to be pressure on consumers’ disposable income and as such we are mindful of the potential impact on frequency of order and average order values.
However, as consumer spending comes under pressure, we are also aware that people are more likely to stay in and socialise at home rather than taking the more expensive option of going out. We expect top line performance will be relatively resilient and therefore now expect revenue growth to be broadly flat for the financial year 2023.
The company’s profit before tax, excluding exceptional costs, was little changed from last year at £5.1m (2021: £5.2m), and up £2.3m (+83%) from 2020. Revenues fell to £69m from nearly £74m in 2021.
Mark Brumby, leisure analyst at Langton Capital, has tweeted:
Hard to fault the logic when Virgin Wines says “as consumer spending comes under pressure…people are more likely to stay in and socialise at home rather than taking the more expensive option of going out”
— Mark Brumby (@brumbymark) October 26, 2022
Photograph: Gabriel Bush/REX/Shutterstock for BAFTA
Updated
The auction of seven-year UK government bonds attracted weakish demand. Andy Bruce at Reuters has the details:
UK auction of 2029 gilts a touch on the weak side.
— Andy Bruce (@BruceReuters) October 26, 2022
Bids worth 1.96 times amount on sale - lowest since ratio since March.
Although other countries would love that sort of figure, fairly uncommon these days to see that figure drop below 2 for the UK. pic.twitter.com/IMDPvAWFzI
Rishi Sunak’s new government could raise up to £37bn to help pay for public services and the energy bills support scheme if it introduced a string of “wealth taxes”, according to tax equality campaigners.
Tax Justice UK called on the government to introduce five tax reforms targeting the very wealthy, who the campaign group said had done “really well financially” during the coronavirus crisis and national lockdowns, rather than seek to save money with further cuts to public services.
“Tax is about political choices. At a time when most people are being hit hard by the cost of living crisis it would be wrong to cut public services further,” said Tom Peters, Tax Justice UK’s head of advocacy. “The wealthy have done really well financially in the last few years. The chancellor should protect public spending by taxing wealth properly.”
The campaign group, which is calling for a “fairer tax system that actively redistributes wealth to tackle inequality”, suggests five “wealth tax reforms” that it said could bring in an additional £37bn in tax income. It said:
Equalising capital gains tax with income tax could raise up to £14bn a year. At present many well-paid people collect their salaries via sole trader or business partnership companies, and can pay capital gains tax at a rate of 20% rather than income tax, which is as high as 45% for earnings over £150,000. CGT also applies to income from selling a second home or stocks and shares.
Sterling hits fresh six-week high
The pound’s rally has gathered pace. It has gained 1.07% to $1.1587, a fresh six-week high.
Rishi Sunak, the new British prime minister, is holding his first cabinet meeting right now, and will later make his first Commons appearance as prime minister.
We still don’t know whether Sunak and the chancellor Jeremy Hunt, who was reappointed yesterday, will go ahead with the fiscal statement scheduled for Monday (Halloween). Foreign secretary James Cleverly said this morning that it wouldn’t be “a bad thing” if there is a short delay “to make sure that we get this right”.
As he entered No 10 yesterday as PM, the fifth in six years, Sunak vowed to fix the “mistakes” of his predecessor Liz Truss and pledged to bring “integrity and accountability” into his government. His cabinet reshuffle was billed as returning experienced hands to the top jobs, but Sunak gambled by restoring Suella Braverman to the Home Office less than week after she was forced to resign for a security breach.
More on our politics live blog here:
Updated
A peanut butter, dried thyme and garlic pasta dish is Nigella Lawson’s answer to money-saving as part of a suite of £1.25-a-portion recipes she has created under a partnership with online grocer Ocado.
The celebrity cook has been signed up as the upmarket delivery firm’s answer to the cut-price food blogger Jack Monroe in her first sponsorship deal with a retailer.
Lawson has created several recipes for Ocado including “dreamy creamy” peanut butter pasta, apparently a family favourite in the Lawson household, and feta, black bean and clementine couscous, all of which can be cooked for no more than £1.25 a portion.
The deal with Ocado Retail, which is part-owned by Marks & Spencer, comes as households across the UK look for ways to save money on rapidly rising food bills. Inflation in the UK has climbed above 10% amid the sharpest annual rise in food prices for more than 40 years
The cost of budget food items in supermarkets soared by 17% on average in the year to the end of September, according to data released on Tuesday by the Office for National Statistics, while the cost of vegetable oil shot up 65% and pasta 60%.
Banks buoyed by rising interest rates despite higher bad loan provisions
The bank earnings season is in full swing. UK banks Barclays and Standard Chartered have reported better-than-expected profits today, while Germany’s biggest lender Deutsche Bank smashed market expectations.
Italy’s UniCredit reported a record €1.7bn profit for the three months to the end of September and upped its outlook for the year to profits above €4.8bn. Santander, the eurozone’s biggest lender, also beat forecasts with an 11% rise in profits to €2.4bn despite a rise in bad loan provisions.
Banks are raking in more income because of rising interest rates, although the cost of living crisis means that they could be hit by a wave of customers defaulting on their loans in the coming months.
Neil Wilson, chief market analyst at Markets.com, said:
Barclays beat expectations thanks to surging revenues at its trading business. FICC (fixed income, currencies and commodities) trading operations revenues rose 93% but there was still nearly £1bn hit from a trading error in the US. Shares not seeing much uplift from this – usual concerns about trading revenues being one-off perhaps but also investors are not confident of seeing any returns. Whilst the report card is good there is a good deal of economic uncertainty and worries about a windfall tax on banks.
Same goes for Standard Chartered, which posted a 40% rise in profits thanks to rising interest rates. Shares fell with no fresh buybacks – banks will need to wait until the windfall tax is known or no longer a risk before they can really start distributing to shareholders.
Standard Chartered shares fell 2.2% while Barclays dropped 1.1%.
Updated
Gas prices 70% below August peak
Gas prices on wholesale markets have fallen in recent months and are now 70% below their August peak. The big question is when this will feed through to consumers and small businesses.
British natural gas is currently trading at 188.96p per therm, up 2% on the day but well below the 637p hit in late August. Dutch gas, the European benchmark, which peaked at €339 per megawatt hour then, is now at €99.75. The price fell below €100 per megawatt hour on Monday for the first time since June.
Speaking on BBC radio 4’s Today programme, Mary Starks, a former Ofgem official who is now a partner at the consultancy Flint Global, said:
Prices have been yo-yoing around a lot over the past year, but certainly over the last couple of months we are seeing a significant downswing. I’d hesitate to say its’s the end of this crisis but certainly down is better than up.
W’re still seeing prices of around £2 per therm. We are used to 50p or 20p a therm, so they are pretty high compared to pre-Covid levels.
Why are prices coming down?
We’ve had a mild autumn in Europe so gas storage is pretty full, and there are good volumes of gas heading into Europe on ships. We’ve paid high prices on the world markets for that but we have secured alternative supplies to Russian gas.
But there are still risks ahead: there is always the weather. A cold winter could certainly see demand for gas spike again, this would be worse if it’s not very windy then you need more gas to generate electricity, and of course the geopolitical risk is still very much with us.
Robert Buckley of Cornwall Insight explained that:
The spot price is an important market indicator but it’s not really relevant to prices paid by the consumer [and small businesses] because they come through the default tariff cap.
There has been a fall in those prices too. Our cap forecast for April to June 2023 is now £4,200, which is £1,000 down on where it was back in August when the market was at its height.
At the moment, if the market stood still as it is today if the market dynamics continue, it could well fall further.
Cornwall Insight recently lowered its forecast:
Under the energy prices bill that is going through parliament, the energy secretary Grant Shapps will have the power to switch off the default tariff cap. Buckley explains that this would be a good thing.
The default tariff cap obliges suppliers to buy in a particular way and not be able to take advantage of the slow spot prices. It may be that the Secretary of State wants to talk to suppliers about changing their hedging strategies to take advantage of these low spot prices. Certainly if I was in his shoes that’s one thing I’d want to do.
The lower gas prices are having a positive impact on European fertiliser production, tweeted Deepika Thapliyal, deputy managing editor at ICIS (Independent Chemical & Energy Market Intelligence).
European fertilizer and #ammonia producers are restarting as gas prices drop 80% in October so far. Short term outlook for #gas is weak on mild temperatures in Europe, full storage and improving supply outlook. Longer term still very uncertain #ICIS #Energy #Russia #Fertilizer
— Deepika Thapliyal (@IcisFertDeepika) October 25, 2022
Updated
Here are our full stories on Heathrow and Barclays.
Heathrow has said that passengers may have to fly outside peak times on some of the busiest days in the run-up to Christmas to avoid further travel chaos, as Europe’s busiest airport admitted it is still short of 25,000 staff to meet demand at peak times.
The airport operator also warned that it will take “a number of years” before air travel returns to pre-pandemic levels.
Headwinds of a global economic crisis, war in Ukraine and the impact of Covid-19 mean we are unlikely to return to pre-pandemic demand for a number of years, except at peak times.
A rise in borrowing costs for mortgage and loan customers has helped Barclays increase key revenues by almost 60%, pushing its latest quarterly profits higher to £2bn.
The UK bank, which had been expected to reveal a slight dip in earnings, said pre-tax profits instead rose 6% in the three months to the end of September.
Updated
Pound continues its rally
On the markets, the FTSE 100 index has opened a tad lower. It is down 0.1% at 7,005. Germany’s Dax is down by a similar amount while France’s CAC is flat and the Italian borsa has lost 0.4%.
The pound continues to rally, rising 0.7% to $1.1546. It’s back to where it was before Liz Truss’s disastrous mini-budget on 23 September. Against the euro, sterling has gained 0.26% to €1.1540.
Sunak considers delaying 31 October fiscal statement – report
Britain’s new prime minister Rishi Sunak is considering delaying next week’s planned fiscal statement to plug a gap of £40bn in the country’s finances, The Times reported.
Sunak is expected to meet finance minister Jeremy Hunt today to discuss his proposals to increase taxes and squeeze public spending.
The statement had been brought forward by the Liz Truss government from 23 November because of the market turmoil sparked by her chancellor Kwasi Kwarteng’s mini-budget. But it could even be pushed back again and turned into a full budget, the newspaper reported.
Foreign secretary James Cleverly said a short delay to the announcement wouldn’t be a bad thing. He told BBC radio 4’s Today programme:
What we want to do is make sure that we get that right. If that means a short delay, in order to make sure that we get this right, I think that that is not necessarily a bad thing at all.
Our economics editor Larry Elliott thinks the fiscal plan should be delayed.
Updated
Introduction: Heathrow says it needs 25,000 more staff; Barclays beats forecasts with £2bn profits
Good morning, and welcome to our live, rolling coverage of business, economics and financial markets.
Heathrow has warned that a cap on passenger numbers could be reintroduced on some of the busiest days to avoid travel chaos over Christmas.
Europe’s busiest airport also admitted it is still 25,000 staff short to cope with passenger numbers at peak times.
The airport operator, which is due to lift the current 100,000 passenger per day cap introduced during the summer holiday travel chaos from Sunday, said it was in talks with airlines over a cap on “peak days in the lead up to Christmas”. It explained:
We are working with airlines to agree a highly targeted mechanism that, if needed, would align supply and demand on a small number of peak days in the lead up to Christmas. This would encourage demand into less busy periods, protecting the heavier peaks, and avoiding flight cancellations due to resource pressures.
Speaking on BBC radio 4’s Today programme, Heathrow’s chief executive John Holland-Kaye said:
We don’t want to have a cap at all, we want to get back to full capacity as soon as possible. The reason for having a cap is to make sure we keep supply and demand in balance. It was absolutely the right thing to do over the summer.
It’s been a better summer than people had expected. The service was much better than people expected, almost back to 2019 levels, based on the feedback people give us. The passenger numbers were also better and we went from being one of the quietest airports in Europe to the busiest airport in Europe. Unfortunately we are still loss making but I hope if we can get the right regulatory settlement that can change. But it’s not been easy, it’s definitely been challenging.
A number of banks have reported bumper profits for the three months to the end of September. Barclays has made a pretax profit of £2bn for the third quarter, up 6% from a year earlier, while analysts had expected a dip to £1.8bn. Deutsche Bank, Germany’s biggest bank, smashed market expectations with a net profit of €1.1bn for the third quarter. London-based Standard Chartered, which focuses on Asia, has also reported better-than-expected profits, of $1.4bn, up 40%.
Higher income from fixed income trading helped offset the £381m Barclays put aside to deal with potential defaults, as it prepared itself for a potential rise in bad debts, as customers struggle with soaring food and energy bills. The bank said:
Delinquencies remained below historical levels and coverage levels have been broadly maintained at the portfolio level in light of an uncertain macroeconomic backdrop. The deteriorating macroeconomic forecast resulted in an increased charge, partially offset by consuming economic uncertainty post-model adjustments, which were established in prior periods in anticipation of the future deterioration, which is now captured within the modelled output.
Yesterday the FTSE 100 was hit by HSBC putting aside $1.1bn to protect itself against potential defaults in the third quarter, more than expected.
Asian stock markets have moved cautiously higher, with Japan’s Nikkei rising 0.7% and Hong Kong’s Hang Seng up 0.8%.
In the US, the Nasdaq closed 2.25% higher on Tuesday, despite disappointing numbers from Google owner Alphabet. Revenue fell below analysts’ expectations in the third quarter, as it continues to battle an industry-wide tech slowdown.
Michael Hewson sums up Tuesday’s action on Wall Street.
The Nasdaq 100 led last night’s gains for US stocks, with a third successive positive daily close, however there was still some apprehension around the results from Microsoft and Google owner Alphabet, both of whom closed higher, not only around how much of a slowdown we might see in their latest quarterly numbers, but also what sort of outlook these big two tech giants would paint.
In any event it was a mixed bag with Alphabet missing expectations, while Microsoft managed to outperform, however the shares of both still slid back after hours, although this weakness doesn’t look set to weigh unduly on today’s European open, due to strong gains in Asia markets.
The miss from Alphabet was less of a surprise given the slowdown seen in Snap’s numbers last week, with misses across all of its core businesses.
The Agenda
10am BST: UK 7-year Treasury gilt auction
12pm BST: US MBA mortgage applications for week of 21 October
1.30pm BST: US trade for September
3pm BST: Bank of Canada interest rate decision (forecast: 75bps hike to 4%)
3pm BST: US New home sales for September
Updated
