Ursula von der Leyen, the president of the European Commission, has admitted it will take the EU five years to wean itself off Russian oil and gas as the Kremlin continues to ravage war on Ukraine.
In a blow to Ukraine, which has called for an immediate embargo, Ms von der Leyen said the agreement to phase out dependence on Kremlin hydrocarbons by 2027 was needed to secure “reliable, secure and affordable” energy supplies to the continent.
The timescale is three years earlier than originally proposed but still well short of what was demanded by Kyiv, which has argued that Russia is financing its invasion of Ukraine with money from energy exports.
Ms von der Leyen said the proposals will be outlined by the end of May with measures for reducing the impact of higher energy bills for consumers by the end of the month. The US has put in place an embargo on Russian oil and the UK has vowed to phase out all purchases by the end of this year.
But in Europe, where more than a quarter of oil imports and two fifths of gas imports come from Russia, leaders have backed away from such a ban.
For its part, the Kremlin has also reassured the Continent that it is happy to carry on doing business and has no plans to renege on gas contracts, with pipeline flows through Ukraine continuing despite the raging conflict.
Critics say this leaves a gaping hole in what are otherwise tough sanctions on Russia, which has been blocked from international payment systems, excluded from debt markets and denied access to its foreign currency reserves.
The reluctance among EU leaders to push ahead with an all-out embargo helped to calm oil and gas prices on Friday as fears that it would trigger a rush for alternative supplies petered out.
Moscow also excluded energy from export bans it announced in retaliation for the crushing sanctions imposed on the Russian economy, which have been imposed by the West as punishment for the invasion of Ukraine.
Viktor Orban, Hungary’s prime minister, said the EU proposals had been “settled in a favourable way” for his country in a message to his followers on social network Facebook.
Hungary, which gets the majority of its oil and gas from Russia, had openly lobbied against an embargo.
Other nations including Germany and the Netherlands had also raised doubts about an all-out ban ahead of the EU summit in Versailles.
Olaf Scholz, the German Chancellor, said energy supplies “cannot be secured in any other way at the moment”, while Dutch premier Mark Rutte admitted Europe’s dependence on Russian oil and gas was for now an “uncomfortable truth”.
In a video posted on Facebook, Hungary’s Mr Orban said on Friday: “The most important issue for us has been settled in a favourable way: there won’t be sanctions that would apply to gas or oil, so Hungary’s energy supply is secure in the upcoming period.”
As the threat of an imminent European embargo receded, Brent crude traded at around $110 a barrel, marginally up from Thursday but far below the high of $130.50 on Tuesday.
It put the oil price on course for its biggest weekly drop since November.
Meanwhile, the EU natural gas price was hovering at about €127 per megawatt-hour after hitting a record of €345 at the start of the week when discussions of a possible embargo were first emerging.
In the UK, the gas price was about 300 pence per therm, down from the high of 800 pence just days earlier.
The EU decision to phase out Russian oil and gas over five years represents a setback for US diplomatic efforts to isolate Russia further, after Secretary of State Anthony Blinken first raised the prospect of an embargo last weekend.
“We are now in very active discussions with our European partners about banning the import of Russian oil to our countries, while of course, at the same time, maintaining a steady global supply of oil,” he told NBC on Sunday.
However, Boris Johnson has echoed the concerns of some European leaders, saying that the Continent cannot give up Russian oil and gas “overnight”.
That’s all from us today, the blog will resume on Monday! Before you set off for the weekend, check out the latest stories from our business team:
EU to ban export of luxury goods to Russia
Brussels will ban the export of luxury goods to Russia amid growing efforts to isolate the Kremlin.
EU chief Ursula von der Leyen has said: “We will ban the export of any EU luxury goods from our countries to Russia, as a direct blow to the Russian elite.
“Those who sustain Putin’s war machine should no longer be able to enjoy their lavish lifestyle while bombs fall on innocent people in Ukraine.”
Von der Leyen unveiled a series of new measures, including banning the import of key goods in the iron and steel sector from the Russian Federation as well as prohibiting new European investments across Russia’s energy sector.
She also said the EU will “make sure that the Russian state and its elites cannot use crypto assets, to circumvent the sanctions”.
UN to work on safe corridor for ships stranded by Ukraine conflict
The UN’s shipping agency will seek to create a safe maritime corridor to enable merchant ships and their crews stuck in the Black Sea and Sea of Azov to sail away without the risk of being hit, it said on Friday.
Russia’s military took control of waterways when it invaded Ukraine on Feb. 24, in what Moscow calls a “special operation”.
Ukrainian maritime officials have told Reuters fighting has left around 100 foreign-flagged vessels and hundreds of mariners stranded in Ukrainian ports.
Last week a seafarer was killed at the Ukrainian port of Olvia after a missile struck his Bangladesh-flagged cargo ship. Projectiles have hit four other vessels in recent days with one sunk.
Kwasi Kwarteng gives go ahead for North Sea gas field to ramp up production
A key North Sea gas field part-owned by Iran has been given permission to increase production by Kwasi Kwarteng. Rachel Millard writes:
The Business Secretary is allowing Serica Energy to produce more gas from its Rhum field, which it co-owns with the National Iranian Oil Company.
The move comes amid growing concern over gas supplies to Europe following Russia’s invasion on Ukraine, which has pushed up prices in Britain.
Mr Kwarteng gave the go-ahead after regulators said the move would not have a significant effect on the environment and recommended it be approved.
The Rhum field, about 400km north-east of Aberdeen, is an ageing but important field which first began producing in 2005.
FTSE 100 closes in the green
European stocks are in green territory as investors focus on the outlook for economic growth and talks between Russia and Ukraine, with Vladimir Putin stating there had been “certain positive developments”.
The FTSE 100 closed 0.8pc higher at 7,155 on the back of positive economic data.
“Investors are, as always, very eager to jump on the news, but I don’t see these talks prompting a rapid end to this war,” said Stefan Koopman, economist at Rabobank.
“After all, Russia is still insisting that Ukraine surrenders or risks being flattened. The undertone of the headline appears positive, so I get the market’s enthusiasm, but there really is a lack of details here.”
British American Tobacco makes U-turn as it plans to exit Russia
British American Tobacco has made a U-turn and announced plans to exit its operations in Russia, deemed “no longer sustainable in the current environment”.
The decision comes a day after it said it would scale activities “appropriate to the current situation, including rationalising our marketing activities”.
The cigarettes maker has major manufacturing plants and 2,500 employees in the country, whom it said will continue paying in full.
It also revised guidance for 2022, with revenue growth expected to come in between 2pc and 4pc.
In 2021, Ukraine and Russia accounted for 3pc of total sales.
Rihanna considers $3bn listing for Savage X Fenty brand
Singer-turned-fashion-entrepreneur Rihanna is working with advisers on an initial public offering that could value her Savage X Fenty brand at $3bn (32.3bn).
Savage X Fenty is working with banks including Goldman Sachs and Morgan Stanley, according to Bloomberg. A listing could happen as soon as this year.
Savage X Fenty hasn’t made a final decision on a listing and its plans, including the timing, could still change.
The company raised $125m in January in a funding round led by Neuberger Berman with participation from previous investors L Catterton, Avenir Growth Capital, Sunley House Capital Management and Jay-Z’s Marcy Venture Partners.
China’s Didi halts Hong Kong listing over cybersecurity investigation
Didi has suspended preparations for its planned Hong Kong listing after failing to appease Chinese regulators’ demands that it overhaul its systems for handling sensitive user data, Bloomberg reported.
The Cyberspace Administration of China informed Didi executives their proposals to prevent security and data leaks had fallen short. Its main apps, removed from local app stores last year, will remain suspended for the time being.
The company and its bankers have halted work on the Hong Kong listing. In addition to dealing with the CAC review, Didi is also working to finalize its fourth-quarter results as required for a listing prospectus.
That’s all from me – thanks for following along! Giulia Bottaro will see you through to the weekend.
What will the new US sanctions mean?
The US imports around $24.1m (£18.4m) in beverages, spirits and vinegar from Russia annually, with most Russian-branded vodkas produced in other countries.
However, it imported $1.2bn in seafood last year.
Suspending normal trade relations will allow the US to hit Moscow with significantly higher tariffs than it applies to other WTO members.
President Biden said the move “is going to make it harder for Russia to do business with the United States”, adding that it would be “another crushing blow to the Russian economy”.
The president can’t unilaterally change Russia’s trade status – the move will need approval from Congress.
Speaker Nancy Pelosi has said the House would consider legislation next week. The move has support from both Democrats and Republicans, meaning it’s likely to pass.
US bans imports of luxury goods
The US has announced it’s banning imports of a range of luxury Russian goods in the latest sanctions against Moscow.
Diamonds, seafood and vodka will all be included in the new bans. The US will also ban exports of luxury goods to Russia.
Russia’s most-favoured nation status revoked
Joe Biden has confirmed that Russia’s most-favoured nation status at the World Trade Organization will be revoked.
Most-favoured nation status means countries have to treat other members’ trade as the same in terms of tariffs and barriers unless there is a specific trade deal in place.
Removing this allows the West to treat Russian trade more unfairly. For the US, this would effectively relegate Russia down to the same status as countries such as Cuba and North Korea.
Joe Biden urges US and allies to cut off trade with Russia
US President Joe Biden is giving a speech on the latest in the Russia-Ukraine situation.
He urges the US and its allies to suspend normal trade with Russia.
How much does EU pay for Russian gas?
A lot, is the answer.
Despite a sweeping wave of sanctions against Moscow, the EU is still putting billions in the Kremlin’s coffers through its continued energy purchases.
In fact, spending has actually increased dramatically since the invasion, up from €190m per day at the start of the year to €600m last week.
EU’s von der Leyen: We’ll outline Russian energy plan by June
The EU has outlined its plans for weaning the bloc off Russian energy, but it’s said it’ll need another five years to do so.
Ursula von der Leyen, the European Commission President, said the proposals will be outlined by the end of May.
The bloc will also set out measures for reducing the impact of higher energy bills for consumers by the end of the month.
Pearson rejected two Apollo takeover bids
Pearson has revealed it rejected two takeover bids by private equity firm Apollo, saying the latest £6.5bn offer “significantly undervalued” the company.
The education giant said Apollo tabled a second “unsolicited, preliminary and highly conditional” 854.2p per share proposal this week, up from an initial 800p. The board unanimously rejected the offer.
Shares in Pearson rose as much as 26pc earlier after Apollo said it was considering a bid for the company.
Wall Street rises on Russia-Ukraine talk hopes
Wall Street has pushed higher at the opening bell on hopes of progress in talks between Russian and Ukraine.
Vladimir Putin said there were “certain positive shifts” in discussions, helping to stir up some optimism at the end of a turbulent week.
The S&P 500 rose 0.5pc, while the Dow Jones was up 0.3pc. The Nasdaq gained 0.8pc.
Rishi Sunak ‘won’t give more help’ over energy bills
Rishi Sunak isn’t planning fresh measures to help Britons cope with rising energy bills, even as calls grow for further action to tackle the cost-of-living crisis.
The Chancellor plans to stick with a £9bn package of support for domestic consumers unveiled in February, Bloomberg reports.
He’s said to have taken the decision because rising prices as a result of the war in Ukraine won’t affect the level of a new energy price cap that starts next month.
Mr Sunak is facing growing appeals from businesses, Labour politicians and even his own MPs to help ease the squeeze on household budgets as the conflict threatens to drive up inflation even further from a three-decade high.
Compounding the crisis, Britons are also facing a raid on National Insurance, as well being hit with a 54pc increase in the energy price cap.
The Chancellor is set to deliver his spring statement later this month, offering a chance to provide more help to households and businesses.
WhatsApp ‘may be left out of Russia ban’
It seems Moscow may be rowing back on its Meta ban already.
Russian state media reports that WhatsApp could be left out of the crackdown as it is a means of communication, not posting.
The Kremlin is moving towards a full block on parent company Meta, which it wants to designate as an “extremist organisation”.
Nestle halts shipments of non-essential products to Russia
Nestle has suspended shipments of non-essential products in the latest scaling down of its operations in the country.
The world’s largest food company will still supply Russians with necessities such as baby food, cereal and therapeutic pet food sold at veterinarian clinics.
However, exports of products like Nespresso coffee and San Pellegrino water have been stopped with immediate effect.
The move comes after the KitKat maker said it’s suspending all capital investments, as well as all advertising in Russia as part of a broader exodus in response to the Ukraine invasion.
Around 90pc of the products Nestle sells in Russia are manufactured locally. The company has more than 7,000 employees and six factories in the country.
Nestle has also stopped exporting its products out of Russia, which usually go to nations like Azerbaijan, Belarus or Kazakhstan.
Redrow founder to fund 1,000 Ukrainians in UK
Redrow founder Steve Morgan has pledged to pay for 1,000 Ukrainian refugees to come to the UK through his foundation. writes Ben Gartside.
Mr Morgan, who founded the UK housebuilder in 1974 and previously chaired Premier League football club Wolverhampton Wanderers, said the UK’s humanitarian response had been too slow.
“Watching the humanitarian crisis unfold in front of our eyes is absolutely devastating… We have to stop the suffering and Boris Johnson and Priti Patel have to stop the delays.
“Offering to sponsor 1,000 Ukrainian refugees to come to the UK through the Steve Morgan Foundation is one way we can help but we need to do more”.
“I felt so helpless watching the images of desperate families fleeing Ukraine that I knew I had to do something. This is not the time for delays. I hope other people will do the same.”
Mr Morgan has pledged to meet the cost of bringing the refugees to the UK and paying for their accommodation for up to six months.
Morgan said that while his foundation will fund the required aid to the refugees, it did not have the required experience to handle the relocation programme, and would be consulting MPs on how to proceed.
Russia to cut off comms with WhatsApp ban
Russia’s impending move to block access to WhatsApp and Instagram is the latest example of the severe fallout from the invasion for ordinary citizens.
WhatsApp is the most widely used messaging app in the country, reportedly taking up almost 60pc of all messenger internet traffic.
It’s likely the move will drive more users to encrypted messaging apps such as Telegraph.
Meanwhile, the ban on Instagram will likely have a big impact on small businesses, who rely heavily on the social media platform to promote their goods and services.
Gas prices swing as supply risks rattle market
Natural gas prices are swinging wildly as the market continues to face volatility over the risk to supplies from Russia.
Benchmark European prices jumped as much as 12pc to €141.50 a megawatt-hour, wiping out earlier losses, before easing back again.
However, it’s still on track for a weekly decline of about 34pc – the biggest this year – after plunging from record highs.
Niek van Kouteren at Dutch energy firm PZEM told Bloomberg:
Such fluctuations just show there is a tension in the market, and people are having a hard time in assessing the impacts the war in Ukraine will have on gas supplies.
Prices are expected to slow down, but the way will still be bumpy.
Prince Charles’s former top aide quits Abramovich’s steel company
Prince Charles’ former top aide is among the 10 directors who have resigned from the Evraz board after the Russian steelmaker’s largest shareholder, Roman Abramovich, was sanctioned and its shares were suspended.
Simon Foy has more:
Sir Michael Peat, who served as private secretary to the Prince of Wales and the Duchess of Cornwall between 2002 and 2011, resigned with immediate effect as part of a boardroom clearout.
He had been due to step down at the end of the month after sitting on the Evraz board for nine years. That is the longest recommended tenure for directors under the UK’s corporate governance code.
However, Sir Michael’s sudden resignation was prompted by the Government hitting Mr Abramovich with sanctions, leading to the City watchdog pausing trading of its London-listed shares “to protect investors”.
In a notice on Thursday, government officials said Mr Abramovich was closely associated with Russian president Vladmir Putin and had been involved in “destabilising” and “undermining and threatening the territorial integrity, sovereignty and independence” of Ukraine through his business interests.
The Chelsea FC owner holds a 28.6pc stake in Evraz and was handed a £345m dividend from the steelmaker last month.
US futures rise after Putin hints at ‘positive shifts’ in Ukraine talks
Wall Street is set to open higher this afternoon after Vladimir Putin said there were certain “positive shifts” in talks with Ukraine.
Negotiations have yielded little progress so far, but traders appear to be leaping on any signs that a diplomatic solution could be released.
Futures tracking the S&P 500 jumped 1.4pc, while the Dow Jones was up 1.3pc. The Nasdaq leapt 1.6pc.
BlackRock ‘takes $17bn of losses’ from Russian exposure
BlackRock is said to have suffered about $17bn (£13bn) in losses on its Russian holdings following the invasion of Ukraine.
Clients had more than $18.2bn in Russian assets at the end of January, but the war and a wave of western sanctions have left most of them unsellable, leading the world’s largest asset manager to write them down sharply.
The firm suspended all purchases of Russian assets on February 28 and disclosed at that time that its holdings related to the country had fallen to less than 0.01pc of assets under management, the Financial Times reports.
A BlackRock spokesperson said the total value had fallen to around $1bn, adding that the change was because of markdowns rather than asset sales.
Still, analysts pointed out that the $17bn hit was only a fraction of BlackRock’s total assets under management of almost $10 trillion.
France puts EDF nationalisation back on the table
As the war in Ukraine plunges energy markets in chaos, French plans to overhaul its biggest power supplier are back on the agenda.
The government is considering whether to revive plans to nationalise EDF and reorganise its business with a focus on nuclear production, Bloomberg reports.
Officials are said to have held early talks with potential advisers about the idea of buying out EDF’s minority shareholders and delisting the company from the stock market.
The French state is already the biggest investor debt-laden EDF, with an 84pc stake. If the plans go ahead, the government would likely hold on to its domestic business but could review plans for international operations.
It’s thought any move would only go ahead after the French elections, assuming President Emmanuel Macron remains in power.
Pearson shares surge as Apollo mulls takeover bid
Shares in Pearson surged after private equity firm Apollo Global Management said it was considering a cash offer for the firm.
The publishing giant jumped as much as 26pc to the top of the FTSE 100, marking its biggest one-day increase in 22 years.
Apollo now has until the end of April 8 to announce a firm intention to make an offer or withdraw.
Chief executive Andy Bird, a former Disney executive, has been pursuing an overhaul of Pearson’s business model as it shifts away from its traditional textbooks towards digital services.
The blue-chip firm has come under pressure from activist investor Cevian Capital, which has been gradually increasing its stake in recent months and now holds 10.2pc.
Pressure mounts on Bank of England as inflation expectations surge
British consumers are more pessimistic about inflation than at any time since the financial crisis, piling more pressure on the Bank of England to raise interest rates next week.
Brits expected shop prices to surge by 4.3pc over the next year, according to the Bank’s latest inflation attitudes survey. That’s the highest reading since 2008.
The figure was up sharply from 3.2pc in November. Even in five years, inflation is set to be well above the 2pc target. Satisfaction with how the central bank is doing its job also fell sharply last month.
With inflation already at a 30-year high and the Ukraine war driving energy prices ever higher, the Bank is expected to raise interest rates by 25 basis points at its meeting on Thursday.
Kremlin threatens to block Facebook over Putin death threats
Russia has threatened to block Facebook amid reports the social media giant will allow users in some countries to call for violence against Vladimir Putin and Russian soldiers.
Dmitry Peskov, spokesman for the Kremlin said the report was “just too difficult to believe”.
He added: “We hope it is not true because if it is true then it will mean that there will have to be the most decisive measures to end the activities of this company.”
Facebook has confirmed it’s temporarily eased its rules for political speech, allowing posts such as “death to the Russian invaders”, although it would not allow calls for violence against Russian civilians.
Property tycoon Nick Candy ‘still interested’ in Chelsea bid
Property tycoon Nick Candy is still interested in making a bid for Chelsea FC after the Government slapped sanctions on owner Roman Abramovich.
A spokesman for Mr Candy said: “We are examining the details of yesterday’s announcement and we are still interested in making a bid.
“Clearly this is a time of great uncertainty for all Chelsea fans. In our view, no one is the owner of a football club – you are the custodian of it for the fans and the community.”
The decision to freeze Mr Abramovich’s UK assets has derailed his plans to sell the club for as much as £3bn.
Chris Philp, digital and tech minister, has said anyone interested in buying Chelsea could approach the Government and make a proposal.
Putin’s threat to hold planes hostage leaves Lloyd’s of London facing billions in losses
ICYMI – Lloyd’s of London insurers risk suffering losses of up to $10bn if Vladimir Putin follows through on his threat to seize foreign-owned planes.
Oliver Gill has more:
Russia published a draft law on Thursday allowing it to hold about 500 foreign-owned aircraft hostage.
Western sanctions against the Kremlin have given leasing companies, many of which are based in Ireland, until March 28 to extricate themselves from deals with Russian carriers.
But under proposals drafted by the Russian transport ministry, its airlines will make lease payments in roubles for the rest of the year.
If leasing companies terminate their agreements, a new commission set up by the Kremlin will decide whether the aircraft can be returned or remain in Russia.
Deutsche Bank under fire as it refuses to ditch Russia
Deutsche Bank is facing stinging criticism from some investors and politicians over its decision to keep doing business in Russia even as other banks cut ties with the country.
Germany’s largest bank has insisted it needs to support multinationals in Russia and said leaving would go against its values.
In a note to staff this week, chief executive Christian Sewing said: “We are often asked why we are not withdrawing completely from Russia. The answer is that this would go against our values. We have clients who cannot exit Russia overnight.”
That’s in direct conflict with Wall Street giants JP Morgan and Goldman Sachs, who yesterday said they were pulling out of the country.
Bill Browder, an investor and arch-Kremlin critic, said the decision was “completely at odds with the international business community and will create backlash, lost reputation and business in the West.”
He told Reuters: “I would be surprised if they are able to maintain this position as the situation in Ukraine continues to deteriorate.”
Pound heads for third weekly decline
Sterling has slipped to a 16-month low against the dollar and is headed for its third consecutive weekly decline as strong January GDP figures did little to boost sentiment.
The economy grew 0.8pc at the start of the year – well ahead of expectations – but Russia’s invasion of Ukraine looks set to derail the post-pandemic recovery.
The pound fell to $1.3052 against a strengthening dollar – its lowest level since November 2020. Investors continue to flock to the safe-haven dollar, while surging inflation figures boosted expectations of a Fed interest rate rise.
Hope for drivers as wholesale fuel prices fall
There’s a glimmer of hope for motorists facing huge prices at the pumps, as wholesale petrol and diesel costs have fallen back below where they started the week.
Petrol wholesale costs that started the week at 75.84p a litre have dropped to 67.73p, while diesel now costs 77.34p compared to 89.78p, according to the latest AA figures.
This is yet to pass through to the forecourts, however, with pump prices still reaching record highs.
Diesel at one service station in Kent topped £2 yesterday as the war in Ukraine wreaks havoc in oil markets.
Ukraine poultry supplier warns over ‘catastrophic’ collapse
The boss of one of Ukraine’s largest food producers has warned of a “catastrophic” impact on the country’s military and wider population if the war drives it to collapse.
Poultry firm MHP, which is listed in London and has over 30,000 workers in Ukraine, is a major supplier to the Ukrainian army and has been involved in humanitarian efforts.
Dr John Rich, the company’s chairman, said there would be a “catastrophic effect” if it collapsed, adding that the next few weeks were critical for growing wheat and other crops as Russian forces took more land.
He told the BBC: “If this continues, of course our ability to sow rapidly diminishes, particularly if they (the Russian army) moves into the west of the country where a large part of our operations are based.”
Dr Rich said this could could lead to the complete failure of Ukraine to produce anything, but would also have implications globally.
“For the wider world, it’s simple. The price of wheat will continue to rise, the price of corn and other commodities will rise significantly, and you’ll have spiralling inflation at a time when we’ve already had problems with the global supply chain because of Covid.”
Facebook and Google defend ad deal
Facebook and Google have launched a staunch defence of their so-called Jedi Blue advertising deal after EU and UK regulators launched investigations.
The allegations made about this agreement are false. This is a publicly documented, procompetitive agreement that enables Facebook Audience Network (FAN) to participate in our Open Bidding program, along with dozens of other companies.
Facebook, which now calls itself Meta, said:
Meta’s non-exclusive bidding agreement with Google and the similar agreements we have with other bidding platforms, have helped to increase competition for ad placements.
UK and EU investigate Facebook and Google over ad deal
The UK and EU have launched parallel investigations into Facebook and Google over an advertising deal dubbed “Blue Jedi”.
The Competition and Markets Authority and European Commission are looking at whether the 2018 agreement shut out ad tech rivals and hampered competition.
The probes focus on whether the tech giants restricted or prevented the uptake of header bidding, which allows sellers such as news publishers to offer their online advertising space to multiple buyers at the same time, rather than receiving offers one by one.
The deal is already subject to a complaint in US courts.
Andrea Coscelli, chief executive of the CMA, said:
We’re concerned that Google may have teamed up with Meta to put obstacles in the way of competitors who provide important online display advertising services to publishers.
If one company has a stranglehold over a certain area, it can make it hard for start-ups and smaller businesses to break into the market – and may ultimately reduce customer choice.
EU to double military aid for Ukraine
The European Commission aims to double the EU’s military aid to Ukraine and has proposed earmarking another €500m in support.
Josep Borrell, the bloc’s foreign policy chief, said: “Everybody was completely aware that we have to increase our military support to Ukraine. I am sure the leaders will approve this money.”
Mr Borrell added that the EU was also considering imposing more sanctions on Russian oligarchs and the Russian economy.
Citigroup cuts eurozone forecasts as block shuns Russian energy
Citigroup has slashed its growth forecasts for the eurozone, saying the bloc’s plan to wean itself off Russian energy would stall the post-pandemic recovery and drag on the economy for years.
The investment bank now forecasts average eurozone GDP growth at 2.2pc this year, down from its previous estimate of 3.3pc. For 2023, it now expects 2.6pc, compared to 2.8pc projected previously.
Christian Schulz, an economist at Citigroup, said: “The latest geopolitical events will likely reduce eurozone exports, depress household real incomes, weigh on confidence and thus on business investment, disrupt production processes.”
The EU has said it plans to reduce its reliance on Russia energy imports by two-thirds this year and break away from Moscow completely “well before 2030”.
Mr Schulz added: “In the medium-term, the re-routing of supply chains away from Russia would add to the pandemic shock… and potentially lead to supply displacement and rising prices for several years.”
Ocado wins US patent case over warehouse robots
Away from Ukraine, Ocado has jumped to the top of the FTSE 100 this morning following success in a US court battle.
The grocery giant has won a trade case against Norwegian rival AutoStore Holdings that had threatened its plans to expand robotic warehouses in the US.
The companies have been locked in a series of legal battles for years over intellectual property rights linked to their robots.
The International Trade Commission has now upheld an initial decision from December, which held three of the four AutoStore patents as invalid and said that the fourth one was not infringed by Ocado.
AutoStore said it will appeal the ruling, while another patent case between the two firms is ongoing in the UK.
Avast pulls out of Russia and Belarus
Avast has said it’s withdrawn the availability of all its products from Russia and Belarus as the exodus of major companies continues.
The FTSE 100 cyber firm also said it had suspended all marketing and sales operations in the countries.
Meanwhile, it said it’s maintaining and bolstering its product offerings, giving paying users and extension on their licences for free.
Ukraine has been hit by a string of cyber attacks since the Russian invasion began, though fears of a full-blown cyber conflict have yet to materialise.
Gas falls further after Russia excludes energy from export ban
Natural gas has extended its decline for a fourth day after Moscow excluded energy from its sweeping ban on exports.
Russia announced an export ban for more than 200 products until the end of the year in retaliation against western sanctions. But it stopped short of curbing sales of energy and raw materials, the country’s biggest contribution to global trade.
This helped to ease concerns about a possible cut to European gas supplies. Russian gas flows through Ukraine continued as normal this morning, grid data showed.
Still, European governments are scrambling to find alternative sources and reduce their reliance on the Kremlin’s energy.
Benchmark European gas is now trading at less than half of its record high reached on Monday. It dropped as much as 8.2pc to €116 euros per megawatt-hour this morning – the lowest in almost two weeks.
FTSE risers and fallers
The FTSE 100 has pushed higher this morning as investors digest GDP figures for January.
The blue-chip index rose 0.7pc after data showed the economy rebounded more strongly expected after a festive omicron hit. That pushed its gains for the week to 2.5pc.
Energy stocks provided the biggest boost, with Shell and BP both higher as oil prices rose. Miners Glencore and Anglo American also gained ground.
Ocado was the biggest riser, gaining 4.5pc after it won a US court battle over its warehouse robots. Cyber security firm Avast initially dropped after saying it was pulling out of Russia, but shares soon turned positive.
Meanwhile, the domestically-focused FTSE 250 jumped 0.9pc, putting it on track for its best week since February 2021.
War and fuel prices threaten Heathrow’s recovery
Just as the aviation sector was beginning to emerge from the pandemic, there’s now a fresh crisis.
Heathrow airport has warned that the outbreak of war in Ukraine – and the resulting airspace bans and surging fuel prices – have added to lingering Covid worries, creating “huge uncertainty” over the recovery.
The airport said it had not seen as many passengers return last month as it expected, with 2.8m passengers travelling through the hub – just over half of pre-pandemic levels and 15pc below its forecast.
John Holland-Kaye, chief executive of Heathrow, said: “Aviation’s recovery remains overshadowed by war and Covid uncertainty.”
Heathrow said outbound traffic was recovering strongly but demand from inbound leisure and business travel remained suppressed by Covid testing and quarantine requirements in place in nearly two-thirds of the markets it served.
While we hope that these will be removed, we also face headwinds from higher fuel prices, longer flight times to destinations impacted by airspace closures, concerns from US travellers over war in Europe and the likelihood of new ‘variants of concern’, which together create huge uncertainty over the passenger forecasts this year.
Government opens door to Chelsea FC bidders
Anyone interested in buying Chelsea FC can approach the Government and make a proposal, a minister has said.
The UK has hit oligarch owner Roman Abramovich with sanctions, derailing his plan to sell the club for around £3bn.
Chelsea has been granted a special licence to continue operating, but tough restrictions on trading and an exodus of sponsor has put its future in doubt.
Chris Philp, digital and tech minister, told Sky News: “As the licence conditions are written today, the sale would not be allowed.
“However, if a buyer emerged it would be open to that buyer or to that football club to approach the Government and ask for the conditions to be varied in a way that allows that sale to take place.”
Entire board of Evraz quits after Abramovich sanctions
Almost the entire board of Russian miner Evraz has quit after Britain hit its largest shareholder Roman Abramovich with sanctions.
The company said 10 of its directors had stepped down, leaving only chief executive Aleksey Ivanov.
The Government imposed an asset freeze and travel ban on Mr Abramovich yesterday as part of a new wave of sanctions targeting oligarch.
Among other reasons, the UK said the Chelsea FC owner had destabilised Ukraine through his “effective control” of Evraz, which may have supplied steel to the Russian military to build tanks.
Evraz has insisted Mr Abramovich didn’t have control of the company because he did not hold more than 50pc of shares and had no right to appoint or remove a majority of the board. The tycoon has a stake of around 29pc.
The company also said it only supplied long steel to the infrastructure and construction sectors, meaning it didn’t think it would be subject to sanctions.
Still, this failed to stem a boardroom exodus. Shares in the company have also been suspended after the sanctions sparked a sharp sell-off.
FTSE 100 rises after GDP boost
The FTSE 100 has made a strong start to trading, clawing back much of yesterday’s losses after new data showed the economy rebounded more strongly than expected in January.
The blue-chip index rose 0.9pc to 7,165 points.
More reaction: Rise in GDP looks temporary
George Lagarias, chief economist at Mazars, says that while the headline GDP figures look good, a closer look shows growth looks temporary.
UK GDP rising 0.8pc for January significantly beat market expectations for a 0.1pc rise. Even more importantly, the services sector output is now above its pre-pandemic levels. The recovery was broad-based and encompassed both services and manufacturing.
However, a closer look at the numbers suggests that the January rise in GDP might be temporary, as a large part was driven by a rebound in wholesale trading, which had previously collapsed due to the rapid spread of the omicron variant. The number tells us that the economy was rebounding better than expected before February.
However, spiking energy and raw materials prices in February and March may significantly alter the growth calculus.
Until supply chains begin to normalise again, we would not expect financial markets to pay too much attention to historic GDP figures.
Sunak: Ukraine crisis causing ‘significant uncertainty’
Even Rishi Sunak has struck a cautious tone over the outlook.
The Chancellor – who’s usually bullish about the UK’s economic prospects – has warned Britain is facing significant uncertainty following Russia’s invasion of Ukraine.
He said: “We know that Russia’s invasion of Ukraine is creating significant economic uncertainty and we will continue to monitor its impact on the UK, but it is vital that we stand with the people of Ukraine to uphold our shared values of freedom and democracy and ensure Putin fails.”
The Chancellor is due to publish growth and borrowing figures at the mini budget later this month.
Expert reaction: This may be as good as it gets all year
Paul Dales, chief UK economist at Capital Economics, has a particularly sobering response to the latest figures:
The 0.8pc month-on-month leap in GDP in January shows that the economy rebounded with vigour from the 0.2pc decline in December caused by the omicron wave. GDP in February will probably be fairly good too.
But the cost of living crisis and the influence of the war in Ukraine probably means this is as good as it gets for the year.
Given that omicron cases were still very high in the first half of January, some of the rebound in activity may have flowed into February too (although storm Eunice may have been a drag).
But the hit to households’ real disposable incomes due to surging energy prices, partly due to the war in Ukraine, and higher taxes will start to be felt from March and April.
As such, GDP growth will probably slow throughout the year. With high inflation filtering into higher price/wage expectations, this won’t stop the Bank of England from raising interest rates further, with the next hike on Thursday (probably by 25bps from 0.5pc to 0.75pc).
Ukraine war could push GDP into reverse
January feels a long time ago now, and unsurprisingly the reaction from economists is somewhat muted.
My colleague Tim Wallace has a bit more detail:
The wholesale and retail industries bounced back from a Covid-crimped December, with information and communications output also rising strongly.
A rise in GP appointments helped push up health output despite a drop back in vaccinations after the booster push at the end of 2021, while the hospitality industry also recorded a robust expansion as consumers returned.
Economists have slashed their forecasts for the rest of the year in recent weeks, however, warning that soaring oil and gas prices as well as shortages of other commodities will severely limit growth while squeezing living standards.
GDP could even go into reverse with the combination of the war, inflation, rising interest rates and increased taxes potentially causing a recession, said Suren Thiru at the British Chambers of Commerce.
“The UK’s economy could stall in the near term as rising inflation, soaring energy bills and higher taxes increasingly drag on activity, despite a probable boost to output in February from the end of Plan B Covid restrictions,” he said.
“Russia’s invasion of Ukraine has increased the risk of a recession in the UK by exacerbating the already acute inflationary squeeze on consumers and businesses and derailing the supply of critical commodities to many sectors of the economy.”
ONS: All parts of economy bounce back
Darren Morgan at the ONS says the rebound in economic growth was felt across all sectors in January.
GDP bounced back from the hit it took in December due to the omicron wave and is now 0.8pc above its pre-pandemic peak.
All sectors grew in January with some industries that were hit particularly hard in December now performing well, including wholesaling, retailing, restaurants and takeaways.
Computing programming and film and television also had a good start to the year.
While supply chain issues persisted in certain sectors, output in both construction and manufacturing grew for the third month running.
Economy rebounds from omicron hit
There’s a hint of positivity in the latest data out this morning, with official figures showing the UK economy rebounded 0.8pc in January.
That’s a bigger increase than expected, with activity roaring back to life as omicron fears subsided. It means the economy is now 0.8pc bigger than its pre-pandemic peak.
The numbers reflect a sharp recovery from December, when a surge in omicron cases took its toll, while February should also show further growth.
There’ll be limited cheer among investors, though. Russia’s invasion of Ukraine and the wider geopolitical fallout have upended expectations for global growth, with energy prices soaring even further and a cost-of-living crisis on the horizon.
5 things to start your day
1) Putin’s threat to hold planes hostage leaves Lloyd’s of London facing billions in losses Russian president’s threat to seize 500 foreign-owned planes could cost insurer $10bn
2) How the French Riviera became a playground for the Russian elite Despite the focus on ‘Londongrad’, the Mediterranean coastline has long been popular with tycoons from Moscow
3) Russia facing ‘deep recession’ as sanctions cripple economy IMF warns of surging inflation and drop in living standards across country
4) Lush stores to stay open in Russia as company says staff share values of ‘social justice and peace’ Ethical cosmetics business cuts supplies to shops but licensee operator expected to keep trading
5) Marks & Spencer accused of ‘fudge’ after appointing joint chief executives Retailer names Stuart Machin and Katie Bickerstaffe as new leaders
What happened overnight
Shares fell on Friday in Asia as uncertainty over the war in Ukraine and persistently high inflation kept their sway over markets.
Hong Kong fell 3.2pc and Tokyo was 2.6pc lower.
Tokyo’s Nikkei 225 index was down 660 points at 25,032.61 and the Hang Seng in Hong Kong shed 667 points to 20,222.79.
The Shanghai Composite index lost 2.2pc to 3,224.92 after Chinese Premier Li Keqiang, the country’s No.2 leader, said the government hopes to generate as many as 13 million new jobs this year while trying to reverse a painful economic slowdown.
The Kospi in Seoul declined 1.1pc to 2,651.22. In Australia, the S&P/ASX 200 gave up 0.7pc to 7,079.10. India gained 0.2pc but other regional markets declined.
Coming up today
- Corporate: Berkeley (trading statement)
- Economics: GDP, industrial production, manufacturing production (UK); consumer prices index (Germany); Michigan consumer sentiment index (US)