Grocery inflation surges to 13-year high – live updates

If Vladimir Putin had any doubts over who his friends and foes are, he just needed to scan the room at Russia’s annual business summit in St Petersburg last week, writes Tom Rees.

JPMorgan boss Jamie Dimon and European leaders including Nicolas Sarkozy have attended the “Russian Davos” in previous years. 

But it was down to a roster of oligarchs, Russian ministers and Chinese president Xi Jinping to fill the programme for this year’s more subdued affair as Western delegates boycotted en masse.

​Read Tom’s full story here

Ukraine may need as much as €1 trillion (£858m) in outside assistance to repair the damages inflicted by Russia’s invasion, according to the head of the European Investment Bank.

Werner Hoyer, who runs the EU’s lending arm, said: “I’ve put the trillion out there because I saw figures in the public space that I consider completely unrealistic when I look at the level of destruction.”

He added that Europe “will have to play the biggest role” in this effort.

The price tag comes ahead of a meeting of EU leaders in Brussels later this week to discuss Ukraine’s reconstruction plan and its bid for membership of the bloc.

The European Commission first proposed the latest aid package in mid-May to cover part of Ukraine’s financial needs of around €5bn per month. 

It looks like even more travel chaos is on the horizon after yet another wave of strikes was announced.

Spain-based cabin crew at easyJet plan to go on strike for nine days in July to demand higher pay from the budget airline.

The local USO union said workers will walk out on July 1-3, 15-17, and 29-31.

The airline’s flight attendants in Spain are demanding a 40pc increase in their basic salaries. The union said their basic salary, which excludes bonuses and extra pay, stands at €950 euros (£816), which is much lower than in countries such as France and Germany.

But USO, which says it represents 80pc of the 450 staff based in Spain, still hopes an agreement can be reached to avoid the strike during a meeting with management today.

Energy bills are on track to pass £3,000 for the first time ever, deepening the cost-of-living crisis for millions of households. 

Rachel Millard has the details:

Experts at energy consultancy Cornwall Insight expect the price cap on annual bills to hit £2,980 when it is next reset in October before rising to £3,003.20 in January. 

It means household heating bills will have more than doubled in less than 18 months. The price cap stood at £1,278 in October 2021, before soaring gas prices sent its rising rapidly.

Wholesale gas prices have been exceptionally high for several months due to global gas shortages worsened by Russia’s war on Ukraine. 

The Government has stepped in to help households with rebates on energy bills and council tax, worth about £1,200 for the most vulnerable households. 

However, it is likely to face pressure to go further given the predicted scale of future increases, with households also facing rising costs for fuel, food and other expenses. 

Read Rachel’s full story here

The Government could be forced to pay £40bn in compensation if a legal challenged launched today over the overhaul of the retail price index is successful.

Analysts estimated that the Treasury could have to pay out to holders of index-linked government bonds tied to the RPI if the Government loses the legal battle, the Times reports. The figure is equal to the entire defence budget.

The BT, Marks & Spencer and Ford UK pension schemes have launched their challenge against Rishi Sunak after the Chancellor announced in 2020 that he was changing the definition of RPI.

The move, which was requested by the UK Statistics Authority, would make it identical to CPIH – the consumer price index adjusted for housing.

RPI has long been discredited as a measure on inflation, but holders of index-linked bonds – whose interest rate is determined by RPI – are pushing back over the change in terms.

Tesla is cutting its salaried workforce by about 10pc over the next three months, Elon Musk has said.

The billionaire founder confirmed plans to cut jobs, but said it would result in an overall headcount reduction of only 3.5pc as hourly staff numbers are still expected to grow.

Tesla, now headquartered in Austin, Texas, has grown to about 100,000 employees globally, hiring rapidly as it built new factories in Austin and Berlin.

But the cuts, which have affected human resources representatives and software engineers, caught many by surprise, with several employees told they were being terminated immediately. 

If you’re reading this, you’re evidently not in Russia.

The website of The Telegraph has been blocked in Russia following a request from the prosecutor general.

It’s the latest crackdown on the free press by the Kremlin. Since the invasion, Putin has banned 49 journalists from entering the country and introduced 15-year prison sentence for those who spread “fake” news about the war.

Indian giant Tata Steel is said to have imported about 75,000 tonnes of Russian coal in the second half of May, weeks after it pledged to stop doing business in the country.

Tata Steel said in April that all its manufacturing sites in India, the UK and the Netherlands had sourced alternative supplies of raw materials, adding it was taking “a conscious decision to stop doing business with Russia”.

But the company shipped about 75,000 tonnes of PCI coal, which is used in steelmaking, from Russia’s Vanino port, Reuters reported.

A spokesman for Tata Steel said the deal to import coal from Russia was made before the company’s announcement to cut business ties with Moscow.

Here’s some more from a speech by the Bank of England’s chief economist this morning:

Huw Pill said policy makers would sacrifice growth in order to bring down inflation, saying there’s a risk price rises will develop a “self-sustaining momentum”.

Speaking at a web event this morning, the Bank official reiterated that the MPC would need to raise interest rates further in the months ahead and that it was ready to act “more aggressively”.

It’s an admission that tighter monetary policy may tip Britain into recession. Mr Pill said the Bank’s tools were “blunt instruments” that can bring inflation back to target but can’t solve other problems.

China is considering providing “extraordinary” support for manufacturers as they grapple with surging prices of raw materials and continued Covid restrictions.

Giulia Bottaro reports:

The Ministry of Industry and Information Technology is “studying the introduction of a new round of extraordinary stable growth policies”, according to local media reports.

It comes as Chinese manufacturers face continued restrictions amid a brutal zero-Covid policy, which has disrupted production, and rising costs.

The OECD and World Bank both recently downgraded forecasts for global growth, citing a slowdown in China caused by Covid restrictions as a key factor.

Beijing should boost consumer spending on new energy cars, environmentally friendly construction materials and home appliances to stabilise investment, Li Hongtu at financial information provider Bolan Finance told Shanghai Securities News. 

The report helped revive the price of copper, which has suffered a seven-session losing streak on concerns about global growth.

The company behind Cadbury has announced it’s buying US energy bar brand Clif for $2.9bn (£2.4bn) as it looks to expand its global snack bar business.

Mondelez said it will get the Clif, Luna and Clif Kid brands of bars in its portfolio through the acquisition, creating a $1bn-plus global snack bar franchise for itself.

It will continue to manufacture products at its facilities at Twin Falls in Idaho and Indianapolis in Indiana.

The takeover is Mondelez’s ninth deal since 2018 as the Toblerone and Oreo maker works towards reshaping its portfolio for higher long-term growth.

Sterling has extended gains in early trading amid hawkish comments from Bank of England chief economist Huw Pill.

In a speech this morning, Mr Pill reiterated that the Bank was ready to act “more aggressively” if needed.

He warned there was a risk of inflation developing a “self-sustaining momentum” and that policy makers should lean against the second-round effects.

The pound gained 0.5pc against a weaker dollar to $1.2291. Against the euro it was little changed at 85.93p.

Natural gas prices have risen further this morning as Moscow’s supply cuts spread chaos across the continent.

Benchmark European prices rose as much as 5.2pc as shipments through the Nord Stream pipeline remained at about 40pc of capacity. UK equivalent was up more than 6pc.

Germany, Austria and the Netherlands have all reversed policy to rely on coal-powered plants to ensure the lights stay on. Major German industries are also bracing for rationing to ensure there are enough stockpiles for winter.

The deep Russian cuts are threatening the European economy just as it struggles with sky-high inflation and slowing growth.

The impact is also spreading, with Sweden and Denmark both declaring an “early warning” on shortages.

Regulators are launching a pair of market reviews to examine rising card fees charged by Visa and Mastercard.

The Payment Systems Regulator will look at whether higher charges levied on merchants are an indication of market failure.

One review will look at scheme and processing fees on the networks while another will examine fees charged on some overseas transactions.

Natalie Timan at the PSR said they would “inform any decisions on the steps we might need to take to promote effective competition or to address any harm”.

Visa and Mastercard together accounted for around 99pc of all UK debit and credit card payments in 2020 by both volume and value.

The US is in talks with allies to put further pressure on Moscow’s energy revenues by imposing a price cap on Russian oil.

Treasury Secretary Janet Yellen said: “We are talking about price caps or a price exception that would enhance and strengthen recent and proposed energy restrictions by Europe, the United States, the UK and others, that would push down the price of Russian oil and depress Putin’s revenues, while allowing more oil supply to reach the global market.

“We think a price exception is also an important way to prevent spillover effects to low income and developing countries that are struggling with high costs food and energy.”

Ms Yellen said a price exception was an effective cap that could be achieved through a mechanism to restrict or ban insurance or financing for Russian oil shipments above a certain amount.

The US, UK, Canada and some other countries have banned imports of Russian oil, but the EU remains highly dependent on imports from the country.

Let’s take a closer look at Ocado, which has slumped to the bottom of the FTSE 100 in early trading.

It comes after the ecommerce group said it had raised £575m to fund its expansion plans, even as the pandemic-era online shopping boom fades amid surging inflation.

Ocado sold 72.3m shares in an accelerated placing, priced at 795p each – a 9.4pc discount to yesterday’s closing prices. Shares dropped as much as 6pc in early trading.

The company also raised about £3m from retail investors and some members of its management team.

Ocado, which has seen its share price fall by almost half this year, said the funds will give it enough liquidity to drive further group.

It also agreed a new £300m credit facility with a group of banks, and reiterated its outlook for this year.

After a tentative start to the day, the FTSE 100 has now pushed higher.

The blue-chip index rose 0.5pc, driven by gains for energy stocks as oil prices continued to jump.

Shell and BP were both up 1.2pc, while miners Glencore, Rio Tinto and Anglo American all boosted the index.

Packaging firm DS Smith was the biggest riser, up 1.8pc as it benefited from higher demand despite the impact of inflation.

Ocado was the biggest laggard, down more than 4pc after it said it had raised £575m through a share placing to fund its expansion.

The domestically-focused FTSE 250 was up 0.4pc, led by Telecom Plus jumping as much as 4pc following its full-year results.

A record numbers of Londoners are cycling into work amid a wave of Tube strikes that have brought the capital to a standstill.

An all-time annual high of 12m trips were taken on Santander Cycles over the last year, according to data from Transport for London. Usage is still going up, with a new record broken in each of the last nine months.

A TfL spokesman said: “The cycle hire scheme plays an important role in ensuring Londoners have as many transport options as possible.

“During strike action, TfL provides additional staffed Santander Cycles hubs to guarantee customers can hire and dock bikes.”

This week’s rail and Tube strikes come just weeks after industrial action after the Platinum Jubilee weekend, when a string of major Tube lines were disrupted or closed entirely.

The FTSE 100 is treading water at the open following strong gains to kick off the week.

The blue-chip index inched only marginally higher to 7,124 points.

With many workers opting to stay at home to avoid the disruption, hospitality and retail firms are expected to be hardest hit by the loss of trade.

Kate Nicholls, chief executive of UKHospitality, has warned that the rail strike could cost the sector up to £540m.

She said:

Fragile consumer confidence will take a further hit, thousands of people able and willing to spend money in hospitality venues across the country will be prevented from doing so, while staff will undoubtedly struggle to even get to work.

We should all be pulling in the same direction if we’re to get the UK economy back on track, and want to see urgent and productive talks to avoid widespread disruption, next week.

James Hardiman, senior analyst at the British Retail Consortium, said:

Unsurprisingly, the upcoming rail strikes will be damaging for retail, as the strikes limit commuter and customer traffic.

UK footfall is already down on pre-pandemic levels, and this will only slow the progress retailers have made to bring people back in-store.

The CEBR has predicted that almost 50pc of the impact of the strikes will be felt today, when both Tube and rail workers are involved in strike action.

However, disruption is set to continue for the rest of the week. What’s more, bosses fear there could be a repeat of the walkout later in the year.

Richard Burge, chief executive of the London Chamber of Commerce and Industry, said:

While this strike will be damaging, a recession is looking likely regardless; as such, I wouldn’t pin an eventual recession on this strike.

However, what is very worrying is the possibility that this dispute continues through the year and we see multiple strikes into the future.

A week lost every month for the foreseeable future is going to do incredible short-term and long-term damage to the economy and the UK’s reputation as an attractive destination for investment.

Good morning.

Bosses have warned continued strikes will cause “incredible” damage to the UK in both the short and the long term.

Businesses are braced for disruption as the biggest walkout on Britain’s railways kicks off today.

The Centre for Economics and Business Research have warned that the three strikes taking place today, on Thursday and on Saturday will have a fallout worth at least £91m to the UK economy.

There’s also expected to be disruption on the days in-between, while industry leaders have warned of further economic damage as workers opt to stay at home.

5 things to start your day 

1) German firms pay the price for Russian energy reliance as distress soars  Berlin’s companies are at greatest risk of default compared with European counterparts 

2) Online sales tax would cost families £175 extra a year, Sunak told  The proposed levy would be passed straight on to shoppers, according to think tanks 

3) Ocado hit with ratings downgrade as it raises £575m for international push  Grocer taps market despite signs of inflation slowing the online retail revolution 

4) Winter blackout fears spark dash for coal across Europe  Netherlands, UK and Germany scramble to stock up on dirtiest fossil fuel

5) How the labour squeeze is changing the food we eat  A lack of seasonal workers is putting pressure on farmers and altering what is on offer in supermarkets

What happened overnight 

Hong Kong stocks opened slightly higher on Tuesday morning, with the Hang Seng Index rising 0.5pc.

The Shanghai Composite Index dropped 0.05pc, while the Shenzhen Composite Index on China’s second exchange was flat.

Tokyo shares similarly opened higher. The benchmark Nikkei 225 index inched up 1pc.

Coming up today

• Corporate: DS Smith, Monks Investment Trust, Telecom Plus (full-year results); Safestore (interims)
• Economics: Existing home sales (US)