Closing summary
Time for a quick recap.
The economic outlook has “deteriorated materially”, the Bank of England has warned, as pressures including the Russian invasion of Ukraine hit households and families.
In its latest Financial Stability Report, the BoE said:
The Russian invasion of Ukraine could cause more disruption to global energy and food markets. There are also risks from abroad that could indirectly affect the UK.
Risks for borrowers with higher levels of debt will be greater if prices increase faster than expected, growth is weaker than expected or it becomes harder to borrow. In the past we have highlighted that lending to businesses with higher debt burdens, including in the US, could be a particular risk to the UK financial system.
The BoE was confident, though, that UK banks have capacity to weather global uncertainty; they must set aside more capital to weather the economic storm.
In the cost of living squeeze ...
The boss of Sainsbury’s warned that the pressure on households will “only intensify” through the rest of this year, as the supermarket pledged to invest £500m in attempting to keep prices low.
Pet food brands Whiskas, Dreamies and Pedigree are caught up in a row over price rises between supplier Mars and supermarket chain Tesco.
Supplies of some of the brands are running low in stores and online in the supermarket chain’s second falling-out with a major supplier in a fortnight.
Single mothers warned that soaring bills have hit their finances – and explained why one-off payments aren’t enough, in our latest special report on the crisis.
The children’s commissioner for England has called on the government to develop urgent plans to tackle child poverty, amid the cost of living crisis that is hitting the most vulnerable in society hardest.
The European gas crisis has intensified after one of Norway’s biggest operators was forced to shut three oil and gas fields after workers went on strike.
UK gas prices reached three-month highs on Tuesday as the energy company Equinor said that the fields on Norway’s continental shelf, which produce the equivalent of 89,000 barrels of oil a day, would suspend production.
Norway’s Gassco, the state-owned pipeline operator, told the Financial Times on Tuesday that “in a worst-case scenario, deliveries to the UK could stop totally”.
Rising worries about a European recession hit stock markets, as the euro slumped to a two-decade low.
The pound has fallen to its lowest since the start of the pandemic, shedding almost two cents to as low as $1.192.
Shares tumbled in London and across Europe as the jump in natural gas prices intensified the strain on the European economy.
Oil also tumbled as recession fears mounted, with Brent crude diving 6% to below $107 per barrel, the lowest since mid-May.
Mining stocks, oil producers and airlines are among the big fallers in London, where the FTSE 100 share index had lost 182 points or 2.5% in afternoon trading. Anglo American and Glencore shed 7%, while BP and Shell fell 6%.
Germany’s DAX index, and France’s CAC, are both down around 2.4%.
British Airways is to cancel more than 1,000 additional flights this summer from Heathrow and Gatwick as staff shortages continue to affect its operations.
Floating windfarms could be built off the coasts of Cornwall and Pembrokeshire after the Queen’s property manager identified a clutch of sites in the Celtic Sea that could host them.
Sales of new cars in the UK fell by almost a quarter last month, the worst June since 1996, as global chip shortages hammered the industry.
Royal Mail managers across the UK are poised to take industrial action in the next two weeks in a dispute over jobs and pay.
Unite, the union that represents the workers, said 2,400 managers would work to rule between 15 and 19 July, followed by strike action between 20 and 22 July over Royal Mail’s plan to cut 700 jobs and slash pay by up to £7,000.
The logistics firm DHL is to expand in the UK in response to the growth in home deliveries, setting up new depots and enlarging others, which will create more than 4,000 jobs.
We’ll be back tomorrow....GW
Updated
Pound falls to lowest since March 2020 against US dollar
The pound has now hit a two-year low against the US dollar, dropping to just $1.192.
Recession concerns, risk-off sentiment and today’s gloomy outlook from the Bank of England are taking their toll on sterling, explains Victoria Scholar, head of investment at Interactive Investor.
Cable was under pressure during the month of June with many analysts becoming increasingly bearish on the pound as we enter the second half of the year.
Headwinds from a UK economic slowdown, rising interest rates and rampant inflation are expected to take their toll on the British currency as the descending trendline looks set to extend itself.
The pound-dollar exchange rate is now below psychological support at $1.20 which has now become the major near-term resistance level to watch with weakness exacerbated by strong demand for the greenback.
$GBPUSD under pressure today breaking below psychological support at $1.20 pic.twitter.com/76cEctubcM
— Victoria Scholar (@VictoriaS_ii) July 5, 2022
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