Closing summary
A recap –
Stock markets in Europe and the US are deep in the red as Wednesday’s rally proved short-lived. The UK’s FTSE 100 index has lost 110 points, or 1.5%, to 7,080, while the German and French markets have closed almost 3% lower, the Italian market has lost more than 4% and the Spanish index fell 1.3%. On Wall Street, the Dow Jones and S&P 500 are both trading 1.3% lower while the Nasdaq is down 2.2%.
The ECB’s announcement that it will terminate its asset purchase programme – a massive economic stimulus– sooner than expected has sent eurozone bond yields soaring. The central bank now intends to end it in the July to September quarter, depending on how economic data turn out, and said it would raise interest rates some time after that. Increases will be “gradual,” it said.
The central bank raised its inflation projections while cutting its growth outlook because of the war in Ukraine, which has sparked a surge in energy and other commodity prices. The ECB described it as a “watershed for Europe” and president Christine Lagarde said central bankers were working hard on a package of support measures for Ukraine, possibly including a currency swap line.
Propelled by surging costs for gas, food and housing, US consumer inflation climbed to an annual rate of 7.9% last month, the sharpest rise since 1982, with even higher price increases to come.
The Chelsea football club owner, Roman Abramovich, is among seven of Russia’s wealthiest and most influential oligarchs who have been hit with sanctions by the UK, in an effort to further punish allies of Vladimir Putin over the invasion of Ukraine. The asset freeze means the sale of Chelsea FC has been halted.
Shares in the Russian steel company Evraz that is 29% owned by Roman Abramovich have been suspended on the London Stock Exchange by the City watchdog.
A host of major companies have joined the corporate exodus from Russia, including the Japan’s Uniqlo, Sony, Nintendo and Hitachi, as well as the Wall Street bank Goldman Sachs.
Our other main stories:
Marks & Spencer’s chief executive, Steve Rowe, is stepping down in May after nearly 40 years at the business he joined straight from school.
Rowe, who has spent six years overseeing the beginnings of a turnaround in the retailer’s fortunes after years in the doldrums, is to be replaced by the boss of its food business, Stuart Machin.
Thank you for reading. We’ll be back tomorrow. Take care – JK
Updated
The ECB’s announcement that it will end its asset purchase programme – a massive economic stimulus designed to help European economies weather the Covid-19 pandemic – sooner than expected has sent eurozone bond yields soaring.
The central bank now intends to end it in the July to September quarter (depending on how economic data turn out), and said it would raise interest rates some time after that. Increases will be “gradual,” it said.
Eurozone bonds sold off, and yields (returns to investors, which move inversely to prices) rose after the announcement. Two-year bond yields in Italy – a key beneficiary of the bond-buying programme – surged more than 20 basis points while German 10-year bond yields jumped 10 basis points to three-week highs.
The euro rose initially before dipping, and stock markets remained deep in the red.
The central bank raised its inflation projections while cutting its growth outlook because of the war in Ukraine, which has sparked a surge in energy and other commodity prices. The ECB described it as a “watershed for Europe” and president Christine Lagarde said it was working hard on a package of support measures for Ukraine, possibly including a currency swap line.
Updated
As touched on earlier, the European Central Bank is looking at providing Ukraine with a currency swap line and other measures as part of a wider EU support package in the coming days.
Its president Christine Lagarde said at a press conference:
We have conditions under which we can extend swap lines and repo lines. And if those conditions are not satisfied, we need to find alternative ways of providing support.
We are really working hard. I hope that in the next few days we’ll be able to provide tools and means to extend support to both the people and to the authorities, together with the Commission and sometimes in some cases, national authorities.
Goldman Sachs first major Wall Street bank to quit Russia
Goldman Sachs has become the first major Wall Street bank to pull out of Russia.
It said today that it would close its operations in Russia.
Goldman Sachs is winding down its business in Russia in compliance with regulatory and licensing requirements.
In its annual filing earlier today, the US bank disclosed a credit exposure to Russia of $650m (£495m).
Also today, Switzerland’s Credit Suisse said it had a 848m Swiss franc (£694m) exposure to Russia.
Updated
Turning to the ECB, Antonucci said:
Russia’s invasion of Ukraine has triggered a surge in commodity prices. The main impact on the economy is via energy, especially in Europe – which is more exposed to Russian oil and gas, and where supply-chain linkages with Ukrainian producers of parts, components and some food ingredients are bigger. Other regions look less vulnerable but, of course, not immune.
The ECB sees near-term risks to growth on the downside, while risks to inflation are on the upside. Given how fluid the geopolitical situation is, and very different possible endgames. Surging energy prices in the wake of Russia’s invasion are likely to delay any inflation normalisation.
Even though the ECB hasn’t eased today and decided to discontinue the pandemic purchases as expected, it sounded slightly hawkish, perhaps reflecting divergences of views within the Governing Council.
Of course, the central bank is data-dependent and is maintaining optionality to deal with any deterioration of the outlook. Having only recently opened the door to a rate hike at some point this year, we think the central bank will remain fairly flexible and avoid committing to a pre-set path.
Fiscal relief to cope with higher energy costs would be helpful, too, and probably likely. For the EU, this could be funded via joint debt sales, to support higher defence spending too.
Both the European Central Bank and the US Federal Reserve face a balancing act between taming sky-high inflation and avoiding a sharp economic slowdown – a dilemma also known as ‘stagflation’. Inflation was soaring even before Russia invaded Ukraine and surging commodity prices will push it even higher.
Daniele Antonucci, chief economist & macro strategist at Quintet Private Bank, said:
Today’s [US] inflation print will have done little to dissuade markets from pricing ever tighter monetary policy. Another bumper print will put significant pressure on the Fed to hike by 25 bps at its March meeting. We also expect the Fed to start shrinking its balance sheet this month.
Things are getting more complicated. On the one hand, policymakers had been expecting an acceleration in inflation during the first quarter of the year. On the other hand, the inflation reading shows a significant squeeze in household budgets, with rising gasoline, food and utility costs eating into disposable incomes, which is particularly relevant for lower-income families. So, while the Fed will stay committed to fighting high inflation, it will have to balance any action with the need to avoid a sharp economic slowdown.
Before the Russia/Ukraine conflict, market expectations were projecting what we considered too many rate hikes. These expectations are now converging to our slightly more dovish view. So, while front-loaded, we suspect the sum of rate hikes in this cycle is likely to be relatively low, to reach 2-2.5% in the US over the next two years. This should cap the rise of bond yields across the board.
Sell-off on stock markets deepens
The sell-off on stock markets has deepened. The UK’s FTSE 100 index has lost nearly 100 points to 7,092, a 1.4% drop. Germany’s Dax has lost 450 points, or 3.3%, while France’s CAC has slid almost 200 points, a 3.1% fall, and the Italian borsa tumbled 941 points, a 4% decline.
On Wall Street, the Dow Jones, S&P 500 and Nasdaq have all opened 1% lower.
The ECB press conference has finished.
In the meantime, the Russian central bank has been (temporarily) kicked out by the Bank for International Settlements as a result of western sanctions. A spokesperson for the central bank umbrella group said:
The Bank for International Settlements is following international sanctions against the Central Bank of Russia, as applicable, and will not be an avenue for sanctions to be circumvented.
The access of the Central Bank of Russia to all BIS services, meetings, and other BIS activities, has been suspended.
The BIS, based in Basel, Switzerland, is owned by 63 central banks, including Russia. It was founded in 1930 to carry out research and allow central banks to exchange information at meetings.
ECB president Christine Lagarde said at the press conference that the central bank is looking at how it can use its tools to help Ukraine – for example refugees who need to swap their hryvnia for other currencies when they get to the border.
She also said that the central bank is in no rush to raise interest rates, and won’t hike them until some time after it has ended its asset purchase programme, which is due to end in the July to September quarter. Any increases in rates will be “gradual,” as reported earlier.
The boss of Marks & Spencer, Steve Rowe, is stepping down. He will leave after results on 25 May, but stay on as an adviser to the new leadership for up to 12 months.
Updated
ECB raises inflation forecasts, cuts growth outlook due to Ukraine war
The European Central Bank has raised its inflation projections and cut its economic growth outlook, as war in Ukraine is likely to keep commodity prices high, holding back households’ ability to spend and businesses’ ability to invest.
Inflation is now forecast to average 5.1% this year, above the 3.2% predicted in December. Next year’s forecast has been raised to 2.1% from 1.8%.
ECB president Christine Lagarde warned that the war
will have a material impact on economic activity and inflation through higher energy and commodity prices, the disruption of international commerce and weaker confidence.
The extent of these effects will depend on how the conflict evolves, on the impact of current sanctions, and on possible further measures.
The US Inflation Rate rises to 7.9%, its highest level since 1982. Core Inflation (excludes food/energy) rises to 6.4%, also the highest we've seen since 1982.
— Charlie Bilello (@charliebilello) March 10, 2022
Charting via @ycharts pic.twitter.com/YNtwUnLmNh
Paul Ashworth, chief US economist at Capital Economics, said US inflation will probably peak above 8% next month.
Rising energy prices pushed the CPI inflation rate up to a 40-year high of 7.9% in February and, given the spike in crude oil and gasoline prices since Russia’s invasion of Ukraine, it will climb well above 8% in March.
Nevertheless, an eventual drop back in energy prices, gradually easing supply constraints and more favourable base effects mean that March should be the peak, with both headline and core inflation falling to nearer 3% by the end of this year.
Headline prices increased by 0.8% m/m last month, driven by a 6.6% m/m increase in gasoline prices. As things stand now, we anticipate an additional 20% m/m jump in gasoline prices in March, which will, alone, will add 0.8% points to the CPI this month.
Food prices increased by 1.0% in February, with the extreme drought across much of the West and South translating into a 2.3% m/m increase in prices for fruit and vegetables. The most recent post-invasion surge in crop prices means food prices are headed even higher.
Updated
As various experts have just pointed out, the rise in US inflation to 7.9% last month came before Russia’s invasion of Ukraine two weeks ago sparked dramatic surges in oil, gas, wheat, metal and other commodity prices.
John Leiper, Chief Investment Officer at Titan Asset Management, said:
US inflation is going to go up before it peaks and comes down again. The Fed is way behind the curve and markets are on edge. We see the current environment of heightened volatility lasting for some time.
If you can stomach the dramatic price swings (oil soared 10% before plunging as much earlier this week) then we continue to recommend real asset exposure across investment portfolios to hedge against inflation. We continue to like commodity equities and dividend paying equities within a diversified multi asset class portfolio.
Updated
US inflation hit fresh 40-year high of 7.9% in February. And that was before the commodity price surges due to Russia’s invasion in Ukraine…
— Shawn Donnan (@sdonnan) March 10, 2022
No wonder some people are invoking the 1970s.https://t.co/5Pjy8nHXYd
Just In: US inflation was +7.9% (y/y) In February – another new 40-year high. (January inflation was +7.5%)
— Heather Long (@byHeatherLong) March 10, 2022
Gas, food and rent drove the increase. The rise in gas prices accounted for almost a third of the February increase.
Inflation is only expected to get worse as gas rises pic.twitter.com/nUGpOgEqPh
(AP) -- US inflation soared 7.9% over past 12 months, biggest spike since 1982.
— Carl Quintanilla (@carlquintanilla) March 10, 2022
US inflation rises to 7.9%, another 40-year high
BREAKING: US inflation rose to an annual rate of 7.9% in February from 7.5% in January, as expected. It marks another 40-year high.
Excluding food and energy, which tend to be volatile, inflation was 6.4%.
Updated
Carsten Brzeski, global head of macro at ING, said:
The European Central Bank just announced how it will reduce QE in the coming months. Net asset purchases will now be brought down to €20bn per month in June rather than in October. In light of the stagflation risk and high uncertainty, this decision gives the central bank maximum flexibility and keeps the option open for a rate hike before year-end.
The European Central Bank has put a very gradual normalisation of monetary policy in place.
All in all, today’s decisions are a good compromise, keeping maximum flexibility in a very gradual normalisation of monetary policy. A first rate hike before the end of the year is still possible. We will hear more about the ECB’s take on the latest developments and economic implications for the eurozone, including a new set of already outdated staff projections, [at 1.30pm GMT].
On interest rates, which remained unchanged today, the ECB said:
Any adjustments to the key ECB interest rates will take place some time after the end of the Governing Council’s net purchases under the APP and will be gradual.
The path for the key ECB interest rates will continue to be determined by the Governing Council’s forward guidance and by its strategic commitment to stabilise inflation at 2% over the medium term.
Accordingly, the Governing Council expects the key ECB interest rates to remain at their present levels until it sees inflation reaching 2% well ahead of the end of its projection horizon and durably for the rest of the projection horizon...
The ECB said in its statement today:
The Russian invasion of Ukraine is a watershed for Europe. The Governing Council expresses its full support to the people of Ukraine. It will ensure smooth liquidity conditions and implement the sanctions decided by the European Union and European governments.
The Governing Council will take whatever action is needed to fulfil the ECB’s mandate to pursue price stability and to safeguard financial stability.
Based on its updated assessment and taking into account the uncertain environment, the Governing Council today revised the purchase schedule for its asset purchase programme for the coming months. Monthly net purchases under the APP will amount to €40bn in April, €30bn in May and €20bn in June. The calibration of net purchases for the third quarter will be data-dependent and reflect its evolving assessment of the outlook.
Alex Livingstone, head of trading of FX and ETFs at Titan Asset Management, said:
The ECB decided to leave rates at 0% today amongst the worrying socio-economic climate, despite the gorilla in the room that is surging inflation. Christine Lagarde’s decision to keep policy flexible comes as the latest US consumer price index numbers are expected to print at 7.9%, a stark reminder as to the costs of ultra-accommodative policy.
Economists now need to question the tragic reality of if the Ukraine/ Russia conflict deteriorates or even stagnates how much more growth can central banks stimulate to avoid rife stagflation.
The latest US inflation numbers for February are out in 30 minutes’ time. Also at 1.30pm GMT, ECB president Christine Lagarde will hold a press conference, and no doubt discuss rising inflation along with the war in Ukraine.
ECB keeps rates unchanged, announces faster winding down of QE
The European Central Bank has left interest rates unchanged at zero at its policy meeting, as expected, but is winding down its quantitative easing programme faster than expected – it may end in the third quarter.
OOPS! #ECB delivers hawkish surprise: Rates at Present Level Until 2% Inflation in Sight, Drops Wording That Rates Could Be Lower Than Currently. ECB Announces Faster Winding Down of Asset Purchase Program. Says It May End APP in the Third Quarter. pic.twitter.com/2SDruP8yMe
— Holger Zschaepitz (@Schuldensuehner) March 10, 2022
Updated
A sale of Chelsea FC would require an additional licence, according to a spokesman for Boris Johnson, who also said that the government is open to the sale of the Premier League club.
The Japanese retailer Uniqlo is the latest international brand to suspend operations in Russia in a U-turn after pressure to take action over the war in Ukraine, reports our retail correspondent Sarah Butler.
Earlier this week Fast Retailing, the clothing chain’s owner, said it intended to keep its Russian shops open because clothing was a “necessity of life”, even as a string of brands from McDonald’s and Starbucks to Burberry and Asos suspended operations in the country.
On Thursday, Fast Retailing issued a statement saying it was suspending its operations as it had “recently faced a number of difficulties, including operational challenges and the worsening of the conflict situation”.
Meanwhile, Netflix has put up its prices.
The cost of watching Netflix hits from Bridgerton to The Crown is to increase, as the streaming platform raises its prices for subscribers in the UK and Ireland for the second time in less than 18 months, reports our media business correspondent Mark Sweney.
The move, the latest sign of the financial toll the growing competition is taking on the world’s most popular service, follows a round of price rises for UK subscribers in December 2020 and those in Ireland in March last year.
Netflix, which has about 14 million UK subscribers and 600,000 in Ireland, according to Ampere Analysis, is to raise the price of its most popular package, which offers simultaneous viewing on two screens, HD and the ability to download shows and films to two devices, to £10.99 a month.
Updated
Here is our full story:
Conrad Wiacek, head of sport analysis at analytics firm GloblalData, has looked at the sanctions, and what they mean for Chelsea FC.
Sanctions placed on Chelsea owner Roman Abramovich by the UK government casts a shadow over Chelsea’s many commercial agreements, including its $52.5m front-of-shirt deal with Telecom’s brand 3 and its $72m kit deal with Nike. While Chelsea has a sporting licence to continue trading as a soccer club, many brands will be wary of guilt by association.
Chelsea FC is still one of the biggest clubs in the world and its on-field success still makes it an attractive commercial partner. However, given the rate at which many brands are looking to dissociate themselves from the Russian state, some may be wary of continuing partnerships. Nike’s deal with Chelsea runs until 2032, so the apparel brand may decide to wait the situation out until the club’s sale is able to continue. However, brands such as Hyundai and Hublot, which have deals worth over $20m combined expiring at the end of 2021/22 season, may not have that luxury.
Evraz shares suspended after Abramovich sanctions
Shares in the Russian steelmaker Evraz have been suspended, after the company’s biggest shareholder Roman Abramovich was sanctioned by the UK.
The shares fell sharply on the news, down 12%, but have now been suspended “in order to protect investors pending clarification of the impact of the UK sanctions,” according to the Financial Conduct Authority.
Abramovich holds a 30% stake in Evraz. His assets have been frozen along with those of six other Russian oligarchs. His planned sale of Chelsea FC is also on hold, but the Premier League club can continue to play under a special licence granted by the UK government.
Updated
Natural gas prices, which have soared in recent days, have stabilised following earlier declines, amid profit taking and stable Russian gas flows.
The British day-ahead price dropped 13p to 329p per therm earlier, and is now trading at 350p. The Dutch April contract edged lower by €2 to €146 per megawatt hour, and is now at €145.50.
However, prices are still far higher than they were a year ago.
Shell faces a potential $400m writedown related to the closure of its 500 service stations in Russia and other operations announced on Tuesday.
Those “downstream” operations are worth $400m, and it flagged in its annual report there would be impairments.
On March 8, Shell announced its intent to withdraw from its involvement in all Russian hydrocarbons, including crude oil, petroleum products, gas and LNG (liquefied natural gas) in a phased manner, aligned with new government guidance. As an immediate first step, Shell will stop all spot purchases of Russian crude oil. It will also shut its service stations, aviation fuels and lubricants operations in Russia.
It is expected that these decisions to start the process of exiting ventures with Gazprom and related entities, to end the involvement in the Nord Stream 2 pipeline project and to shut down its service stations, aviation fuels and lubricants operations in Russia will impact the carrying value of the related assets and lead to recognition of impairments in 2022.
This writedown is on top of a potential $3bn writedown related to the company’s exit from several joint ventures with Gazprom. British rival BP faces a $25bn writedown for its planned exit from Russian assets.
Meanwhile, France’s TotalEnergies is holding on to its Russian investments, but will no longer provide capital for new projects in Russia. It holds a 19.4% stake in Novatek, Russia’s largest producer of liquefied natural gas.
UK fuel prices hit fresh record highs
Yesterday saw another round of record average pump prices in the UK, the RAC motoring group reports – taking the cost of a tank of petrol to almost £88 while diesel is over £92.
The average price of both petrol and diesel climbed to new records again on Wednesday. Unleaded is now 159.57p a litre while diesel increased by another 2p to 167.37p – making for a rise of more than 5p in two days.
RAC fuel spokesman Simon Williams said:
A tank of petrol is now almost £88 while diesel has now gone over £92.
Diesel unfortunately appears to be on a clear path to £1.70 a litre. As this is an average price, drivers will be seeing some unbelievably high prices on forecourts as retailers pass on their increased wholesale costs.
But there was a hint of better news yesterday on the wholesale market with substantial drops in both petrol and diesel which could lead, in a week or so, to a slight slowing in the daily pump price increases and records being broken less frequently.
China refuses to supply Russian airlines with parts – Russian reports
China has refused to supply Russian airlines with aircraft parts, an official at Russia’s aviation authority was quoted by Russian news agencies including Interfax as saying.
This comes after US planemaker Boeing and Europe’s Airbus halted supply of components.
Russia’s aviation sector is being squeezed by western sanctions, with Russia’s foreign ministry warning this week that the safety of Russian passenger pflights was under threat.
Valery Kudinov, an official responsible for maintaining airplane airworthiness, said Russia would look for opportunities to source parts from countries including Turkey and India, after failing to obtain them from China.
He was also quoted as saying that Russian companies are now registering their aircraft – many of which had been registered abroad – in Russia after western sanctions. He expects some other planes to be returned to the western companies they are leased from.
Separately, a draft law published today showed the Russian government plans to order domestic airlines to pay for leased aircraft in roubles and could bar them from returning planes to foreign firms if leases are cancelled.
Sony, Nintendo and Hitachi join exodus from Russia
Aside from Japan’s Hitachi suspending business in Russia, Sony and Nintendo have halted shipments of gaming consoles and games to Russia, joining a global corporate exodus from Russia following its invasion of Ukraine two weeks ago.
Sony, whose movie studio had already stopped releases in Russia, said it had suspended the launch of its racing game “Gran Turismo 7” and shut its PlayStation Store in Russia. It also made a $2m donation to the United Nations High Commissioner for Refugees and Save the Children “to support the victims of this tragedy”.
Japanese rival Nintendo has delayed the global release of “Advance Wars 1+2: Re-Boot Camp,” a strategy game with a military theme, because of “recent world events”. It was due to launch on its Switch console on 8 April. The company said it was suspending shipments of all products to Russia
for the foreseeable future... due to considerable volatility surrounding the logistics of shipping and distributing physical goods.
Rio Tinto has become the first major mining company to sever ties with Russia, throwing into doubt an aluminium joint venture between it and Rusal, which was founded by oligarch Oleg Deripaska.
Food companies Nestlé, Mondelez, Procter & Gamble and Unilever have halted investment in Russia but said they would continue to provide essentials.
Coca-Cola and McDonald’s also bowed to public pressure and paused business in Russia this week, while hoteliers Hilton and Hyatt suspended development of new hotels there.
Among luxury brands, Japan’s Shiseido suspended exports of its cosmetics to Russia from Europe, and German fashion house Hugo Boss, which generated 3% of its sales in Russia and Ukraine last year, temporarily stopped business in Russia.
Updated
Chelsea FC sale halted after sanctions on Abramovich
The asset freeze imposed on Roman Abramovich means his planned sale of Chelsea FC has been halted. The Russian oligarch had put the club up for sale but Britain’s asset freeze and sanctions on him bar that process.
However, the English Premier League club can continue to play under a special licence, according to Nadine Dorries, Britain’s minister for sport.
1/ 4🧵Putin’s attack on Ukraine continues & we are witnessing new levels of evil by the hour. Today the Government has announced further sanctions against individuals linked to the Russian Government. This list includes Roman Abramovich, the owner of Chelsea Football Club.
— Nadine Dorries (@NadineDorries) March 10, 2022
2/4 Our priority is to hold those who have enabled the Putin regime to account. Today’s sanctions obviously have a direct impact on Chlesea & its fans. We have been working hard to ensure the club & the national game are not unnecessarily harmed by these important sanctions.
— Nadine Dorries (@NadineDorries) March 10, 2022
3/4 To ensure the club can continue to compete and operate we are issuing a special licence that will allow fixtures to be fulfilled, staff to be paid and existing ticket holders to attend matches while, crucially, depriving Abramovich of benefiting from his ownership of the club
— Nadine Dorries (@NadineDorries) March 10, 2022
4/4 I know this brings some uncertainty, but the Government will work with the league & clubs to keep football being played while ensuring sanctions hit those intended. Football clubs are cultural assets and the bedrock of our communities. We're committed to protecting them.
— Nadine Dorries (@NadineDorries) March 10, 2022
Here is our full story:
Britain adds Abramovich, Sechin to sanctions list
Britain has added seven more Russian oligarchs to its sanctions list, including Chelsea FC owner Roman Abramovich and Putin’s close ally and de facto deputy Igor Sechin, the chief executive of the state oil company Rosneft. It means they have their assets frozen.
Also included are Oleg Deripaska, who has stakes in the Russian hydropower firm En+ Group, and Dmitri Lebedev, chairman of the board of directors of Bank Rossiya.
UK prime minister Boris Johnson said:
There can be no safe havens for those who have supported Putin’s vicious assault on Ukraine.
Updated
Rishi Sunak is also facing intense pressure from Conservative colleagues to take action in this month’s spring statement to alleviate the cost of living crisis, which has been dramatically exacerbated by the Russian invasion of Ukraine, write our political editor Heather Stewart and political correspondent Peter Walker.
Asked about the impact of sanctions on Russia for consumers at home, the business secretary, Kwasi Kwarteng, told MPs on Wednesday he believed the public was “willing to endure hardships” in solidarity with the people of Ukraine.
But many Conservative MPs are privately and publicly urging the chancellor to do more to soften the blow, and one source suggested Treasury officials were already drawing up possible policy options.
Sunak’s February package of a £200 energy bill cut, to be paid back over five years, and a £150 council tax rebate had been criticised already as too meagre to cushion the blow significantly for many households.
The CBI also called for government measures to help businesses invest, ahead of the chancellor Rishi Sunak’s spring statement, expected on 23 March.
The crisis is likely to have a negative impact on investment intentions of UK firms following Brexit and Covid. This is the worst timing possible, as business investment intentions were high coming into 2022. So the Government must move now to stimulate business investment to maintain UK growth, thereby demonstrating true independence from Russia.
CBI calls for urgent government support amid 'looming crisis' in energy bills
UK businesses have called on the government to provide urgent support to firms and consumers, as global energy prices surge.
The CBI, the biggest business lobby group, said with sanctions against Russia rightly being put in place, “the next phase of economic actions must be to secure greater economic independence from Russia and to build a far more resilient UK economy”.
The group called for faster action on big policy issues around energy, supply chains and cybersecurity, as it spoke of a “looming crisis in domestic and business energy bills”.
Tony Danker, CBI director-general, said:
The actions of this Russian government are making their country an economic no-go area.
Sanctions have been a successful start to global efforts to isolate the Putin regime. But the next phase will require global economies, including Britain, to be economically resilient to further threats.
This conflict shows us quite clearly that we need to start bolstering the UK’s future economic resilience, from our supply chains and energy sources to our cyber security.
To do that, the government will need to fast-track progress on some of the big policy issues and help firms invest. Business stands ready to support them in that endeavour.
Turning to energy, he said the UK must “move far faster towards clean energy solutions” to lessen reliance on Russia for oil and gas.
We need to double down on successful strategies for wind power and nuclear.
We need to move immediately towards energy efficiency in homes to dampen down demand. And government will need to think urgently about consumers as bills go higher still later in the year.
We also need to support energy intensive industries that lie at the heart of our critical supply chains but are threatened by soaring prices. And we must recognise that smaller firms unprotected by the energy price caps will face significant cashflow constraints.
European stock markets extend losses; oil prices climb again
European stock markets are extending losses, as yesterday’s rally proved to be short-lived.
At lunchtime we will get the European Central Bank’s interest rate decision (no change expected) as well as US inflation data for February (we are expecting a rise in the annual rate to 7.9% from 7.5%).
- UK’s FTSE 100 down 1%, or 75 points, at 7115
- Germany’s Dax down 213 points, or 1.5%, at 13,636
- France’s CAC down 85 points, or 1.3%, at 6,302
- Italys’s FTSE MiB down 554 points, or 2.3%, at 23,333
Crude oil prices are climbing after yesterday’s decline. Brent crude, the global benchmark, has gained $6 to $117.26 a barrel while US light crude is up more than $4 at $112.92 a barrel.
The world’s biggest tourism company Tui said Tui Russia can no longer use the Tui brand name.
Tui Russia isn’t part of the Tui Group any more, but was allowed to use the Tui brand in various countries, including Russia, Ukraine, Belarus, Kazakhstan and Uzbekistan. This brand licence agreement has now been terminated by the Anglo-German company.
Fritz Joussen, chief executive of Tui, said:
TUI condemns Russia’s attack and war against Ukraine. Our position is clear. The TUI brand must no longer be used by TUI Russia for its business and the company’s presence.
Tui was initially slow to act, allowing its single biggest shareholder Alexei Mordashov to stay on its supervisory board, before making a U-turn. The Russian billionaire resigned from the board over a week ago after he was hit by EU sanctions over Moscow’s invasion of Ukraine. His 34% share in Tui has been frozen.
Shell CEO's pay rises 25% to £6m
Shell chief executive Ben van Beurden’s pay rose by a quarter in 2021 to £6m, as the fossil fuel producer benefited from soaring energy prices amid calls for a windfall tax on energy companies, reports my colleague Jasper Jolly.
It’s his first pay rise since he received a bumper €20m for 2018, Shell’s annual report showed.
The FTSE 100 company reported record profits during 2021 thanks in part to a gas price surge in the final three months of the year amid a rebound in demand for commodities as the global economy recovered from coronavirus pandemic lockdowns.
Van Beurden’s pay rise, to €7.4m (£6.1m) in 2021 from €5.8m the year before, came amid widespread calls, including from Britain’s Labour party, for booming energy companies to face a windfall tax on profits as people in Britain and beyond face up to a cost-of-living crisis.
Russia’s invasion of Ukraine has caused energy prices to rise further since the start of the year, suggesting that even higher bills could be on the way for households and businesses.
John Lewis restores staff bonus
Good news for John Lewis employees: The John Lewis Partnership has restored its staff bonus after narrowing losses to £26m last year, reports our retail correspondent Sarah Butler.
The department store group, which is staff-owned and also operates Waitrose supermarkets, said it would pay a 3% bonus to workers, equivalent to 1.5 weeks pay.
A year ago it said it would not be paying a bonus to staff, known as partners as they jointly own the company via a trust, for the first time in 67 years and was unlikely to pay a bonus this year, after slumping to a £517m loss for 2020.
JLP also said it would pay all partners at least the independently verified living wage of £9.90 across the UK, a 2% pay rise.
European shares have mostly slipped at the open after yesterday’s rally.
- UK’s FTSE 100 down 30 points, or 0.4%, at 7,161
- Germany’s Dax down 0.1%
- France’s CAC down 0.1%
- Spain’s Ibex up 0.4%
- Italy’s FTSE MiB down 0.3%
Rouble stabilises ahead of foreign minister talks
The Russian rouble has stabilised at 120.1 per dollar in early trading in Moscow, before the first talks between the Russian and Ukrainian foreign ministers since Russia invaded Ukraine exactly two weeks ago. Sergei Lavrov and Dmytro Kuleba are due to to meet in Turkey later today.
Against the euro, the rouble weakened slightly to 128. The Russian currency has tanked since Russian forces marched into Ukraine, prompting severe economic sanctions from the west. Yesterday, the rouble went over 120 per dollar for the first time in Moscow trading, and reached a record low of 131 per euro.
The Moscow stock exchange remains closed. It has been shut for almost two weeks, as sanctions against Russia were widened.
Introduction: IMF approves $1.4bn in emergency funds for Ukraine
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The International Monetary Fund’s executive board has approved $1.4bn in emergency financing for Ukraine, and predicted a “deep recession” in Ukraine this year. In a statement, it expressed its “strong support for the Ukrainian people”.
IMF managing director Kristalina Georgieva said once the war is over, the country is likely to need additional “large support”.
The Russian military invasion of Ukraine has been responsible for a massive humanitarian and economic crisis.
Financing needs are large, urgent, and could rises significantly as the war continues.
Vladyslav Rashkovan, Ukraine’s alternate executive director, gave an emotional speech at the board meeting about the devastation caused by the war and the impact on Ukrainians, Reuters reported. His remarks were met with spontaneous applause, a rare event at these meetings.
Russian executive director Aleksei Mozhin, who is the board’s most senior member and serves as its honorary dean, spoke only briefly, saying: “I pray for peace.”
The Ukrainian authorities have cancelled the previous stand-by arrangement and expressed their desire to work with the IMF to design an economic programme aimed at rehabilitation and growth, when conditions permit.
The World Bank’s executive board approved a $723m package of loans and grants for Ukraine on Tuesday.
Meanwhile, US House lawmakers voted to rush through a $13.6bn aid package that would increase military and humanitarian support to Ukraine and its European allies. The aid includes $6.5bn for the US costs of sending troops and weapons to eastern Europe and equipping allied forces there, and $6.8bn to care for refugees and provide economic support to allies. Senate approval is expected within days. The House also passed a bill banning Russia oil imports.
Asian stocks joined yesterday’s European and US market rally after recent heavy losses, with markets in Europe seeing their biggest one-day gain since March 2020, with the DAX standing out, while US markets rose at their fastest rate since November 2020. Japan’s Nikkei closed nearly 4% higher while South Korea’s Kospi is 2.2% ahead and Hong Kong’s Hang Seng rose 0.5%.
Oil prices also dropped sharply yesterday after an aide to Ukraine president Zelenskiy said the country is open to Russia’s demand of neutrality, assuming its gets cast-iron security guarantees. Today, Brent crude has risen about 3% to $114.58 a barrel while US light crude is 1.7% ahead at $110.6 a barrel.
European stock markets are expected to open lower after yesterday’s rebound. While Ukraine will undoubtedly remain the focus, markets will also be eyeing today’s European Central Bank rate decision at lunchtime, as well as US inflation for February, where we are expecting an annual rate of 7.9%, up from 7.5% the month before.
Joining the growing number of companies that are pausing business in Russia, Japan’s Hitachi said today it would suspend operations there – but stopped short of linking the decision to pressure from Ukraine. Two days ao, the Ukrainian vice prime minister Mykhailo Fedorov on Twitter urged the conglomerate to take action, with an image of his letter to Hitachi boss Toshiaki Higashihara attached.
The company, which produces and sells construction machinery in Russia, said it would stop exports and cease most operations in the country with the exception of vital electrical power facilities.
A spokesperson told Reuters:
We took multiple factors including the supply chain situation into account when we came to the decision.
The Russian government plans to order local airlines to pay for leased aircraft in roubles and bar them from returning planes to foreign companies if leases are cancelled, according to a draft law published today. Western sanctions have forced Russian airlines to cancel international flights.
The rouble has dropped sharply in value since Russia’s invasion of Ukraine.
The Agenda
- 12.45pm GMT: European Central Bank interest rate decision
- 1.30pm GMT: ECB Press conference
- 1.30pm GMT: US inflation for February (forecast: 7.9%)
- 2.30pm GMT: ECB Macroeconomic projections
Updated
