Gas prices have surged to a fresh record high after Russia halted flows to Europe via a key pipeline.
The amount of gas entering Germany’s Mallnow compressor station, where the Yamal-Europe pipeline terminates, dropped to zero early on Tuesday and Russian gas began flowing east towards Poland.
The drop in supplies will force European countries to keep withdrawing supplies from their already depleted stockpiles.
This is being compounded by freezing temperatures across the continent, which are driving up demand and inflating prices.
Benchmark European prices jumped as much as 11pc, while the UK equivalent rose 10pc, with both hitting new all-time highs.
Record gas prices could add 1.8 percentage points to inflation, warns Investec
Sustained record UK gas prices will impact consumers in April with a direct impact on inflation, according to analysts at Investec.
The rise in households’ utility bills will be substantial if the annual dual-fuel utility price cap to rises to £2,000 (a 56pc increase), the aggregate additional bill would come to about £18bn and potentially more given some consumers are still on fixed price deals priced below the tariff cap.
This would equate to about 0.8pc of 2021 GDP, or 1.4pc of total consumer spending and we estimate would add 1.8 percentage points to headline inflation in April 2022.
Bitcoin will replace the US dollar, says Jack Dorsey
Jack Dorsey has predicted that Bitcoin will replace the US dollar in the boldest statement yet from one of the cryptocurrency’s biggest backers, writes James Titcomb.
The Twitter founder, who recently resigned as the social network’s chief executive, made the prediction in a series of controversial exchanges online, in which he dismissed much of the hype surrounding cryptocurrency and blockchain technology.
However, responding to a question from the rapper Cardi B about whether cryptocurrencies will replace the dollar, Mr Dorsey tweeted:
British Airways signs Emma Raducanu as brand ambassador
British Airways has signed British tennis superstar Emma Raducanu as its latest global brand ambassador.
The airline will fly the 19-year-old, who was this week named BBC Sports Personality of the Year, to tournaments and training around the world, including next year’s French and US Opens and the Masters’ events in California and Rome.
BA is the first British brand partner for Ms Raducanu, who is poised for a string of lucrative deals after her victory in the US Open in September.
Tom Stevens at British Airways said:
As we look ahead to the world opening up again, we’re excited to be supporting the very best of British talent, Emma Raducanu.
We couldn’t have been prouder as a nation than when Emma won the US Open. Sport has the power to inspire and unite people all across the globe, so we are delighted to be supporting Emma as she represents Britain and takes on the world.
Expert reaction: Pent-up demand lingers despite doom and gloom
Gareth Lewis, commercial director of property lender MT Finance, says:
Naturally, the housing market took a breath in October, taking stock after the end of the stamp duty holiday with transaction numbers down, as you would expect. But November saw a return to positivity and an uptick in transactional flow. There is still a pent-up desire to transact and buy property, despite all the doom and gloom out there.
It is also encouraging to see diversity in the market, with non-residential transactions peaking again. In 2020 these were down because of the significant amount of caution towards commercial assets thanks to the move to work from home.
But provisional figures for this year show a good volume of non-residential transactions coming through. This may be partly down to speculation on permitted development and moving property into residential, or investors looking to diversify income streams because they see the benefit of owning a different type of stock.
What will be really interesting is what next year’s figures will show and whether the omicron variant will squeeze the market. Another lockdown may reduce buyer confidence, although so far it’s been remarkably resilient.
House sales rebound in November
House sales rebounded in November as the market picked up pace again following a drop-off in activity caused by the end of the stamp duty holiday.
Residential transactions stood at 96,290 last month, according to the latest figures from HMRC. That’s 16.4pc lower than in November 2020, but 24.3pc higher than the previous month.
Oil nudges higher after Monday’s sell-off
Oil prices have edged higher after a wider market sell-off on Monday as traders continue to asses the impact of the omicron variant on demand.
Benchmark Brent crude climbed close to $72 a barrel after shedding almost 5pc over the last two days. West Texas Intermediate ticked up 0.4pc.
While the rapid spread of the omicron strain is yet to have an impact, there are fears renewed lockdowns could hammer demand in the coming months.
There are also signs of over-supply in the market, which could prompt producer cartel Opec to act at its meeting next month.
Study: AstraZeneca jab protection wanes after three months
Protection from severe illness following two doses of AstraZeneca’s Covid vaccine starts to decline after about three months, according to a study that underlines the need for boosters.
Researchers found protection against hospitalisation and death began to wane three months after the second dose. They didn’t analyse the efficacy of the jab against the omicron variant, which wasn’t circulating at the time.
The study highlighted the need for booster shots for people who received a primary course of AstraZeneca’s vaccine, which was developed with the university of Oxford.
The UK, which relied on the Astra jab for the first vaccination programme of over 40s, is ramping up the rollout of booster jabs using vaccines made by Pfizer and Moderna.
Schroders takes £358m majority stake in Greencoat Capital
Asset manager Schroders has confirmed a £358m deal to take control of renewables investor Greencoat Capital.
The FTSE 100 firm said it had inked an agreement to take a 75pc stake. Shares rose 2.3pc.
Greencoat is one of Europe’s largest renewable infrastructure managers, with £6.7bn worth of assets under its management at the end of last month. Schroders said it has a shared ambition to be a global leader in the green investment sector.
Peter Harrison, chief executive of Schroders, said:
Greencoat is a market-leading, high growth business, with an outstanding management team, which provides access to a large and fast-growing market in high demand among our clients.
Its culture is an excellent fit with ours and Greencoat’s focus aligns very closely to our strategy, continuing our approach of adding capabilities in the most attractive growth segments we can provide to our clients.
Pound rallies as traders weigh lockdown risk
Sterling has pushed higher, wiping out Monday’s losses against the dollar as fears about an imminent lockdown eased.
The pound fell to its lowest level in a year yesterday amid expectations Boris Johnson would plunge the country back into a full lockdown.
The Prime Minister has delayed a decision, improving sentiment slightly, though focus remains on the likelihood of tighter restrictions in the coming weeks.
The pound gained 0.3pc against the dollar to $1.3247. Against the euro it slipped 0.1pc to 85.28p.
Rishi Sunak to say more about Covid support ‘shortly’
Chancellor Rishi Sunak will say more about potential economic support for businesses “shortly”, Cabinet Office Minister Steve Barclay has said.
Mr Barclay told the BBC the Chancellor was engaging “closely” with business leaders, adding that the Government was “acutely aware” that companies were suffering as Britons changed their behaviour due to the outbreak of omicron.
He added: “These are finely balanced judgements between protecting lives and livelihoods.”
Calls have been growing on Mr Sunak to bring back support for Covid-hit businesses, but the latest ONS stats highlight the challenges the Chancellor faces in balancing public finances amid surging inflation.
Gas prices surge as Russia cuts supplies to Europe
Gas prices jumped to their highest since reaching a record in October as Russia halted flows to Europe via a key pipeline.
Benchmark European prices rose as much as 5.5pc after the amount of gas entering Germany’s Mallnow compressor station, where the Yamal-Europe pipeline terminates, dropped to zero early on Tuesday, Bloomberg reports.
Lower supplies are piling further pressure on energy markets as freezing temperatures spread across Europe, boosting demand for gas and power. Renewable sources are also struggling to fill the gap.
FTSE risers and fallers
In a sign of just how fickle the FTSE can be, traders have shrugged off yesterday’s omicron jitters and driven the blue-chip index higher.
After dropping 1pc on Monday amid fears of a fresh lockdown, the FTSE 100 is now trading up around 0.8pc. It’s likely in part because the Government delayed any decision on new restrictions, although thin trading over the festive period can also fuel volatility.
Oil majors BP and Shell added nearly 1.4pc each, tracking crude prices, while miners including Rio Tinto, Anglo American and BHP helped drive up the index.
The domestically-focused FTSE 250 also gained 0.7pc. Schroders gained 1.8pc after confirming a deal to buy 75pc of Greencoat Capital for £358m.
Debt costs surge at fastest pace since 2010
The Government’s debt costs are rising at the fastest pace since the aftermath of the financial crisis, providing another headache for Rishi Sunak as he weighs up fresh emergency support.
The ONS data shows interest payments made by the Treasury jumped by £15bn — or 54pc — to £42.9bn in November. That’s the biggest rise for the period since 2010.
Costs are ballooning because a quarter of government debt is linked to retail prices, which have risen sharply this year. The numbers don’t take into account the latest increase in the retail price index to 7.1pc — a three-decade high — meaning debt costs are set to climb even further.
The Bank of England’s decision to raise interest rates last week will also result in higher payments for the Government..
FTSE 100 opens higher
The FTSE 100 has gained ground at the open, erasing much of yesterday’s losses amid uncertainty over fresh Covid restricitions.
The blue-chip index rose 0.9pc to 7,260 points.
Expert reaction: Borrowing figures are ‘sign of things to come’
Bethany Beckett, UK economist at Capital Economics, says the latest data is “unwelcome news for the Chancellor, who is once again facing the prospect of tighter Covid-19 restrictions and renewed government support to affected sectors”.
But that all seems like old news now. These data predate the recent surge in coronavirus infections caused by the omicron variant, with a near-term tightening of virus restrictions once again a possibility.
Although the economy has got better at coping with restrictions with each new wave, we still suspect it would prompt a deterioration in the public finances via lower tax revenues and the potential reintroduction of government support schemes.
Chart: UK borrowing remains elevated
Public sector borrowing may have fallen back from the highs seen last year, but it’s still £11.8bn more than in November 2019.
Lower tax receipts and hefty pandemic spending have forced the Government to borrow huge sums of cash.
In the year to March 2021, the public sector is estimated to have borrowed £321.9bn. At 15pc of UK GDP, that’s the highest ratio since the end of the First World War in 1946.
UK borrowing high ahead of omicron surge
Fresh figures out from the ONS this morning show UK borrowing remained high in November — even before the omicron variant began to wreak havoc.
Public sector borrowing excluding banks stood at £17.4bn last month. While this was down from November 2020, it’s still ahead of forecasts and the second highest level for the month on record.
The figure doesn’t bode well for the state of public finances as Chancellor Rishi Sunak braces for possible new Covid restrictions, which would likely require more Government support for individuals and businesses.
5 things to start your day
1) ‘Painful’ £2,000 energy bills price cap coming for consumers Rising gas prices and the costs linked to suppliers’ collapses are expected to pile pressure on households
2) Three and EE first to strike deal to roll out mobile coverage on London Underground The new Elizabeth Line will be among the first to benefit from 4G connectivity when it opens next year
3) Give single earner families a £2,500 tax break, says Tory think tank Onward The non-working parent would benefit from a full £12,570 tax allowance according to the proposal
4) SFO director faces fresh battle as second Unaoil bribery convict launches appeal Paul Bond was one of four men jailed in the Unaoil case alongside Ziad Akle, Stephen Whiteley and Basil Al Jarah
5) Maduro suffers legal blow over claim for gold held at Bank of England Supreme Court rules that the UK Government does not recognise Maduro as Venezuela’s president
What happened overnight
Asian shares advanced on Tuesday, shrugging off a bruising Wall Street session, as Chinese markets cheered Beijing’s move to help troubled property firms, although surging cases of the omicron coronavirus variant remain a worry for investors.
MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.8pc after declining on Monday to the lowest in a year.
Japan’s Nikkei rose 2pc after two sessions of decline with chip-related Tokyo Electron and Advantest leading the pack, as investors bought into Monday’s heavy selloff. Australian stocks were up 0.9pc.
Coming up today
- Corporate: Cheerios, Haagen-Dazs, General Mills (Interim results); Go-Ahead (AGM)
- Economics: Government borrowing (UK), consumer confidence (EU), HMRC house sales (UK), CBI Monthly Distributive Trades Survey (UK)