Oil prices climbed to their highest level since 2014 on Tuesday after a drone attack on production facilities in the United Arab Emirates raised fears of supply chain disruption.
Brent futures traded in London hit $88.13 per barrel as the threat of new geopolitical tensions added to a strong rally driven by booming demand around the world.
Traders are already being hammered by disruption to global shipping channels, while a range of outages including in Libya have further hit production.
Meanwhile, the omicron variant has had a more limited impact on demand than expected as many countries avoided lockdown. Analysts at Opec, the cartel of oil producers, have said they expect the effect of the variant to be “mild and short-lived”.
Goldman Sachs analysts have raised their forecast for oil and now expect it to now break through $100 a barrel by the third quarter.
Brent prices rose 50pc last year after dropping more than a fifth in 2020. Prices were driven up on Tuesday after fighters from Yemen’s Houthi movement claimed to be behind a drone strike that led to an explosion and fire at a facility on the outskirts of Abu Dhabi, the UAE’s capital.
Warren Patterson, an ING analyst, said the potential impact of escalating tensions between Russia and Ukraine was adding to price pressure, but that disruption to demand from China could drag Brent lower again.
He said: “Fundamentally we also believe that the market is being too complacent about demand risks around China and its zero-Covid policy.”
It came as Exxon Mobil, the US energy giant, set out an ambition to eliminate some of its greenhouse gas emissions by 2050 – the first time it has made such a pledge. The company will develop a plan to eliminate emissions from Exxon’s refineries and other facilities, but will not aim to address the carbon produced by drivers and the others who use its fuels.
06:07 PM
Wrapping up
It’s time to close the blog, thank you for reading! Here are some of the latest stories from the business desk:
06:05 PM
KPMG director fined £150,000 for misleading audit inspectors
A KPMG boss said he was responsible for misleading the UK audit watchdog during an inspection of the financial statements of data services company Regenersis.
Stuart Smith, a former audit director, took responsibility for misleading the Financial Reporting Council’s audit quality review and that he was “reckless” as to whether he was misleading inspectors, according to a statement announcing the settlement.
Smith was fined £150,000 and will be excluded from the Institute of Chartered Accountants in England and Wales, the professional body, for three years.
The FRC is currently in the midst of a disciplinary hearing involving six former employees at the auditing giant. It opened an investigation after KPMG self-reported concerns related to an audit for collapsed Carillion, and later widened it out to include Regenersis. KPMG admitted to the misconduct.
05:46 PM
Imperial College spin-out Pathfinder Medical raises £8.5m in new funding round
A company spun out of Imperial College has raised £8.5m to make medical devices designed to significantly cut the risk of death from kidney failure. Hannah Boland has more:
Pathfinder Medical, which was formed out of engineering research in 2014, said it will now be accelerating work to get its medical devices through patient trials, with the aim of soon getting regulatory approval for the kit to help those with kidney disease prepare for dialysis.
The process to prepare for this procedure requires surgeons to connect up an artery and a vein. Currently they do this through open surgery.
However, Pathfinder’s devices work by using electric fields, which are able to guide surgeons to perform procedures such as connecting up arteries and veins without having to do an open surgical procedure. The electric fields mean that surgeons can instead connect these up via small incisions, which Pathfinder said would avoid the surgical trauma that comes with open surgery.
According to Pathfinder, open surgery to prepare patients for dialysis has a high failure rate, which can “present a serious danger to life and require repeat procedures”.
The company said this can mean dialysis patients undergo as many as three repeat procedures every year.
05:29 PM
Airbnb boss to shift to digital nomad lifestyle
Airbnb boss and co-founder Brian Chesky said that from today his home “will be an Airbnb somewhere” as he hops to city from city so that the accommodation rental company can improve its offer for digital nomads.
He said: “I think the pandemic has created the biggest change to travel since the advent of commercial flying. For the first time, millions of people can now live anywhere… This trend is kind of like a decentralization of living, and it’s changing the identity of travel.”
He added that this is shown in Airbnb data, as 20pc of summer bookings for stays of a month or longer, and nearly half for stays of a week or longer. During 2021, 100,000 customers booked stays of 3 months or longer.
9. More people will start living abroad, others will travel for the entire summer, and some will even give up their leases and become digital nomads
— Brian Chesky (@bchesky) January 18, 2022
05:11 PM
FTSE 100 closes lower amid growing bets of tighter monetary policies
The FTSE 100 has been weighed down by shares of consumer companies and industrial stocks, while improving employment conditions in the UK and rising US Treasury yields signalled growing bets of tighter monetary policies.
The blue-chip index fell 0.6pc to 7,563, with Unilever dropping 4pc.
Meanwhile, Nasdaq traders were braced for a fresh pounding as a seven-year high for oil prices drove up global borrowing costs to pre-Covid levels, with even sub-zero German Bund yields at the brink of positive territory again.
“The recent swings in the U.S. Treasury have created a flutter in the global financial markets with market participants bracing for the beginning of a tighter monetary policy era, most likely from March 2022,” Kunal Sawhney, chief executive at research firm Kalkine, told Reuters.
04:47 PM
Lloyd’s of London mulls moving out of ‘inside out’ City headquarters
Lloyd’s of London is considering moving out of its Richard Rogers-designed City headquarters in a sign that the shift to remote working is here to stay. Simon Foy reports:
The world’s largest insurance market has been based at the “inside-out” building at 1 Lime Street since 1986, but a pandemic-induced hit to office footfall has left it mulling a move to another location.
A spokesman for Lloyd’s said it was considering a number of options. “As we adapt to new structures and flexible ways of working, we are continuing to carefully think about the future requirements for the spaces and services our marketplace needs.”
Lloyd’s lease on the 298ft building runs until 2031 with a break clause in 2026. It is owned by Chinese insurer Ping An.
04:15 PM
Standard Chartered hikes savings to afford higher salaries for talent
Standard Chartered boss Bill Winters said the lender is chopping costs so it can afford to fund workers’ rising pay expectations.
Speaking in an interview with Bloomberg Television, Winters said the emerging markets-focused bank was having to “pay up,” though he’s hopeful that the jump in staff attrition over recent years has leveled off.
He said: “We’ve found ways to save money in other areas so that our expenses were more or less flat.
“I hope that we can continue with that trend, i.e. find the savings to pay for ever more pricey talent.”
The London-headquartered lender will report its full-year earnings next month. In its third-quarter results, the bank said expenses were up 5pc, partly due to a rise in performance-related pay.
Winters added: “We know that the Great Resignation is touching every industry, in every part of the world.
“We are speculating endlessly on what’s driving this: is it lifestyle changes on the back of the pandemic? Is it the fact that the world is flush with cash?”
04:08 PM
Handing over
That’s all from me for today – thanks for following! Handing over now to Giulia Bottaro.
03:46 PM
Productivity in focus as firms trial four-day week
There could be good news for anyone hoping to spend less time at work for the same pay, as British companies gear up for a trial of a four-day week.
The six-month pilot, which will begin in June, will allow staff to work 32 hours per week while leaving their compensation and benefits unchanged. Companies may ask staff to spread the 32 hours over five days, however.
Around 30 firms have signed up so far for the trial, which will focus on productivity, as well as other factors such as workers’ wellbeing and the programme’s effect on the environment and gender equality.
Joe Ryle, director of the Four Day Week Campaign, told Bloomberg: “Moving to a four-day week would be a win-win for companies.
“Studies have shown that productivity improves along with corresponding gains in workers’ wellbeing.”
03:37 PM
Soros and Winklevoss invest in $5bn NFT firm
Soros Fund Management and the Winklevoss twins’ venture capital firm have thrown their weight behind Animoca Brands, a non-fungible token and metaverse company.
They were among the investors in a new funding round that’s more than doubled Animoca’s valuation to $5bn (£3.7bn).
The $359m funding round, led by existing backer Liberty City Ventures, is more than it raised in the whole of 2021.
Hong Kong-based Animoca offers NFTs and games tied to blockchain platforms – both its own creations and collaborations with outside brands – spanning mobile devices, home consoles and the web.
03:24 PM
Together Energy collapses
It’s confirmed: Together Energy has become the 27th UK energy supplier to go bust since August.
Regulator Ofgem said the company, which is half-owned by Warrington Borough Council, has ceased trading. It follows the Telegraph’s report earlier this afternoon that Together Energy was on the brink of collapse.
Together Energy supplies around 176,000 domestic customers.
Read more: Council-backed energy supplier on the brink of going bust
03:20 PM
Ikea trims carbon footprint despite record sales
Ikea says it’s on track to become climate positive by 2030 after the flatpack furniture giant cut its carbon emissions by 6pc from pre-pandemic levels.
Parent company Inter Ikea said emissions in the value chain – from raw material production to customers’ use and disposal of products – dropped in 2021 compared to 2019, when emissions fell for the first time.
Compared to 2020, when stores were shuttered during the pandemic, emissions rose 6pc.
While emissions from raw materials kept growing, Ikea said the reduction in its carbon footprint came mainly from the use of more renewable energy across operations, and a larger share of sales of more energy efficient light bulbs and plant based food.
It came as the Swedish retailer’s sales hit a record €41.9bn (£35bn) in 2021 despite global supply chain disruptions as consumers spent more on their homes.
03:11 PM
Council-backed energy supplier on the brink of going bust
New from Rachel Millard:
A council-backed energy supplier is set to become the latest to collapse due to soaring wholesale gas costs.
Ofgem, the regulator, is seeking rivals to take on Together Energy’s customers under its supplier of last resort process for failed companies, the Telegraph understands.
Clydebank-based Together Energy, which has 170,000 customers, is half-owned by Warrington Borough Council.
Ofgem is understood to have approached suppliers about taking on customers from three providers – Together and two smaller operators – that have either ceased trading or are expected to fail soon.
The supplier of last resort process is designed to ensure customers are not left without energy when a company collapses.
Together Energy is set to be the 27th supplier to fold since August, affecting almost 4m customers.
02:58 PM
Gas prices swing amid Russia tensions
Natural gas prices have fluctuated today as investors grapple with a slew of issues roiling the market.
Norwegian supply has dropped to its lowest since September, but shipments of liquefied natural gas on cargo ships has helped to ease the crisis.
Meanwhile, German Chancellor Olaf Scholz urged Russia to take steps to de-escalate the situation on the Ukraine border, raising hopes that a military conflict will be avoided. However, he warned Germany could halt the Nord Stream 2 pipeline if Russia did attack its neighbour.
This kept trading volatile, with benchmark gas prices surging as much as 10pc before swinging between gains and losses.
02:37 PM
Tech stocks drag Wall Street lower
While it’s good news for Activision, the sentiment is rather less positive elsewhere on Wall Street.
US stocks continued their decline as markets opened, with tech firms proving a major drag as bond yields surge. Banks were also in decline following Goldman Sachs’ disappointing fourth-quarter numbers.
The tech-heavy Nasdaq slumped 1.5pc, while the S&P 500 and Dow Jones were down 1pc and 1.1pc respectively.
02:33 PM
Activision shares surge on Microsoft takeover
Shares in Activision have leapt by almost a third after it revealed a £50bn takeover by Microsoft.
The shares surged as news of the takeover emerged, before shares were halted pending a formal announcement.
Meanwhile, shares in Microsoft dipped 1.8pc.
The merger, which is the largest tech deal in history, is the latest example of consolidation in the booming video game market.
Last week Take-Two Interactive, which makes Grand Theft Auto, agreed a $12.7bn deal to buy FarmVille maker Zynga.
01:57 PM
Microsoft to buy Activision in £50bn gaming deal
Microsoft is buying video game giant Activision Blizzard for $68.7bn (£50.5bn) in its biggest ever deal.
The US tech giant will pay $95 per share in cash for Activision, which is behind hit titles including Call of Duty and World of Warcraft.
The deal will help Microsoft expand its own offerings for its Xbox console and pile pressure on rival Sony’s PlayStation. The two firms already have a history of partnerships, with most of Activision’s games published on Xbox.
Microsoft said the takeover will “accelerate the growth in Microsoft’s gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse”.
It comes as Activision battles controversy amid several lawsuits that allege gender discrimination and harassment. Chief executive Bobby Kotick, who has led the firm for three decades, has come under pressure from employees to resign.
The scandal has taken a toll on Activision, which saw its shares plunge in November after it delayed the release of two major titles and said fourth-quarter sales would miss expectations.
Microsoft said Mr Kotick will continue to lead Activision, which will report to Phil Spencer, who heads Microsoft Gaming.
01:43 PM
BlackRock is not ‘woke’, insists Larry Fink
The chief executive of the world’s biggest money manager has denied claims his firm is “woke”, while warning that companies rolling back flexible working patterns after the pandemic “do so at their peril”.
Simon Foy has more:
Larry Fink of BlackRock used his annual letter to chief executives to deny accusations his firm has pushed a progressive political agenda, arguing that investors should focus on wider societal issues such as climate change.
“Stakeholder capitalism is not about politics. It is not a social or ideological agenda. It is not ‘woke’. It is capitalism, driven by mutually beneficial relationships between you and the employees, customers, suppliers, and communities your company relies on to prosper. This is the power of capitalism.”
Mr Fink also called on governments to provide guidance on sustainability policy and regulation because companies “can’t be the climate police. When we harness the power of both the public and private sectors, we can achieve truly incredible things.”
12:55 PM
EU to extend UK’s post-Brexit clearing waiver until 2025
The EU’s commissioner for financial services said she will propose extending a temporary waiver that allows its banks and money managers to clear trades in the UK to June 2025.
The bloc has been pushing for more financial activity to move to the continent but both British and European banks, investment managers and hedge funds have called on the Commission to extend their access, warning of significant market disruption.
The extension to the current waiver, due to expire in June, marks a post-Brexit victory for London, highlighting the critical role it plays in Europe’s financial infrastructure.
But Ms McGuinness reinforced the EU’s desire to bring more clearing inside the bloc’s borders to strengthen its own markets.
12:40 PM
Goldman Sachs slides on weak end to year
Shares in Goldman Sachs dropped in pre-market trading as a fall in fourth-quarter profit took the shine off its record year.
The Wall Street behemoth reported net profit of $3.8bn (£2.8bn) in the last three months of the year – down from $4.4bn last year and below expectations.
The decline reflected weaker trading activity as a more stable economy resulted in less volatility on financial markets.
However, Goldman reported a 45pc rise in investment banking revenue to $3.8bn in the quarter. Dealmakers raked in record revenues from advising on some of the world’s biggest mergers and IPOs.
Shares in Goldman Sachs fell 2.8pc ahead of markets opening.
12:27 PM
Toyota slashes forecasts as chip troubles deepen
Toyota has said it’s unlikely to reach its target of manufacturing 9m cars in the current financial year as chip shortages continue to hammer the industry.
The world’s largest car maker is cutting production to 700,000 vehicles in February – around 150,000 units lower than its original goal for the month. It didn’t set a new annual target, saying only that output would be lower than expected.
Toyota had already slashed its annual production outlook in September as Covid lockdowns in Southeast Asia disrupted its ability to procure key parts from the region.
It’s the latest car brand to warn on the impact of semiconductor shortages, which have showed signs of worsening in recent weeks.
12:14 PM
Surging bond yields drag down Wall Street
US stocks are poised for a sluggish open this afternoon as Treasury yields surged and expectations rose that central banks will have to lift interest rates sooner than expected.
Treasuries fell across the curve, pushing two-year and 10-year yields up to levels last seen before the pandemic roiled markets.
The change in course is particularly damaging for tech stocks, whose valuations are pinned on future growth expectations.
Futures tracking the tech-heavy Nasdaq led losses, falling 1.9pc. The S&P 500 fell 1.2pc, while the Dow Jones was down 0.8pc.
12:04 PM
5G networks will trigger travel chaos, warn US airlines
My colleague Ben Woods has more on the 5G crisis facing airlines:
US airlines have warned of looming travel chaos as 5G mobile networks due to go live on Wednesday threaten to cause significant disruption across America.
The chief executives of its biggest carriers have called for immediate action to halt the upgrade to prevent large numbers of planes being “indefinitely grounded”.
A letter signed by 10 airlines including United Airlines, American Airlines and Delta called on the transportation secretary, Pete Buttigeg, to create a two-mile exclusion zone around airport runways to prevent upheaval for passengers, freight, supply chains and vaccine distribution.
United said 5G would cause disruption affecting 1.25m passengers and 15,000 flights a year if the mobile operators are allowed to turn on the 5G signals.
Mobile giants Verizon and AT&T are poised to press the button after a series of delays due to fears the C-Band wireless spectrum could interfere with aircraft equipment.
They had vowed to carry out the upgrade regardless before bowing to pressure from US authorities to delay it until January 19.
11:52 AM
888 boosted by lockdown gambling demand
888 has posted a rise in revenues for 2021 as lockdown fuelled demand for online casinos.
The London-listed firm, which is based in Gibraltar, said sales were up 14pc to $972m (£714m) year on year. It was also helped by growth in the US as a number of states continue to relax their gambling laws.
However, 888 suffered a slowdown in the final three months of the year, which it blamed on strong comparable figures in 2020. Shares slipped 2.3pc in morning trading.
It comes after the company agreed to buy William Hill’s international arm for £2.2bn, handing it control of about 1,400 high street sites. The deal is expected to complete in the second quarter of this year.
11:40 AM
UK to crack down on crypto ads
The Government has launched a crackdown on misleading cryptocurrency adverts amid concerns consumers don’t fully understand what they’re buying.
Crypto ads have become increasingly common in recent months, with billboards flooding the London Tube network. But the Treasury is planning to regulate the market like other financial products and ensure promotions and “fair, clear and not misleading”.
It comes amid growing scrutiny of the notoriously volatile asset type. The FCA has issued frequent warnings about digital assets, with chair Charles Randell taking aim at an Instagram ad posted by Kim Kardashian.
Spain yesterday made a similar announcement following clashes with celebrities including footballer Andres Iniesta.
Chancellor of the Exchequer Rishi Sunak said:
Cryptoassets can provide exciting new opportunities, offering people new ways to transact and invest – but it’s important that consumers are not being sold products with misleading claims.
We are ensuring consumers are protected, while also supporting innovation of the cryptoasset market.
11:23 AM
Crossrail on track to open in first half of the year
Passenger services on London’s new Elizabeth Line will start in the first half of 2022, Transport for London has confirmed.
Initial services will run between Abbey Wood and Paddington stations, with the outer reaches of the line to Shenfield and Reading not opening until a later date.
The Crossrail project was originally due to open in full in 2018, with a budget of £14.8bn. But a string of problems means it’s now heavily delayed and the cost has ballooned to an estimated £18.9bn.
11:11 AM
Davos goes digital
Usually, at this time of the year, the world’s business and political elite would be ensconced in the snowy luxury of Davos.
But Covid has got in the way once again, so the great and the good will have to settle for Zoom as they chew the fat about some of the biggest issues facing the world today.
Among the items up for debate at this year’s World Economic Forum are the race to net zero, cyber resilience, strengthening global supply chains and bridging the vaccine manufacturing gap.
11:03 AM
VC firm Blossom targets crypto after £316m fresh funding
London-based venture capital firm Blossom is eyeing investments in the cryptocurrency market after raising £316m in its latest funding round.
Bosses said they plan to invest a third of the latest cash injection into crypto firms as it moves more and more into the mainstream.
The VC’s previous bets include Checkout.com, which is now the UK’s most valuable fintech firm, and crypto infrastructure provider Moonpay.
Managing partner Ophelia Brown, who previously worked for VC giant Index Ventures, said she has secured funding from some of the biggest US universities and endowments.
She added: “They share our conviction that early-stage capital can have outsized impact on the trajectory of a company.
“With this new fund, we are continuing with our high-conviction strategy of providing foundational capital to entrepreneurs.”
10:51 AM
Pound slips after jobs figures
Sterling has drifted lower against the dollar following data showing employers added record numbers of employees in December, though a squeeze on wages looms.
Payrolls added 184,000 workers while unemployment fell – moves that could fuel expectations of another Bank of England interest rate rise. But wages were stagnant in real terms as inflation surged, which could reassure dovish policymakers.
Sterling has rallied more than 4pc from its December lows, but a further interest rate rise is now largely priced in.
The pound fell 0.3pc against the dollar to $1.3614. Against the euro, it slipped 0.07pc to 83.62p.
10:38 AM
German investor confidence jumps amid hopes for 2022
Confidence among German investors has jumped to its highest level since July on hopes for a strong recovery once the current wave of omicron infections passes.
The ZEW institute’s gauge of expectations jumped to 51.7 in January from 29.9 the previous month. An index of current conditions, however, dropped to a eight-month low of -10.2, reflecting tighter virus restrictions and curbs on activity.
ZEW president Achim Wambach said: “The economic outlook has improved considerably with the start of the new year. The main reason for this is the assumption that the incidence of Covid-19 cases will fall significantly by early summer. ”
German GDP shrank in the fourth quarter as omicron hit. It’s likely to contract again in the first three months of the year, putting Europe’s economy on track for its second recession of the pandemic.
But investors are hoping the recovery will get back on track in the spring, while the Bundesbank is forecasting growth of 4.2pc for 2022 as a whole.
I worry that ZEW panellists may be getting a bit ahead of themselves with the sharp bounce in expectations on reduced Omicron worries. But taken at face value, the January composite PMI may surprise to the upside. pic.twitter.com/bDfDGMnb7i
— Oliver Rakau (@OliverRakau) January 18, 2022
10:23 AM
InterContinental Hotels chairman Patrick Cescau to retire
Patrick Cescau, chairman of InterContinental Hotels Group, is retiring after nine years in the role.
Mr Cescau, who previously served as chief executive of Unilever, will step down on 31 August, the company said. He will be replaced by Deanna Oppenheimer, who is currently chair of Hargreaves Lansdown.
The leadership change comes as IHG, which owns the Crowne Plaza and Holiday Inn chains, begins to stage a recovery from a pandemic-induced slump.
Ms Oppenheimer is an experience City figure. She sits on the board of Thompson Reuters and has held senior roles at Premier Inn owner Whitbread, Tesco and Barclays.
Keith Barr, chief executive of IHG, said:
I would like to thank Patrick for his counsel and support during his tenure as chair. His dedication and stewardship has left the company in a strong position for high-quality future growth and I am certain the wealth of experience Deanna will bring to the IHG board will make her an excellent successor.
10:12 AM
Sadiq Khan mulls London daily car charge in Ulez expansion
Mayor of London Sadiq Khan is considering a further expansion of charges for petrol and diesel vehicles in the capital as he ramps up efforts to tackle climate change.
One proposal would replace the existing system with a daily fee of up to £2 for all motorists driving a polluting vehicle in London.
The Mayor is also considering expanding the current ultra-low emission zone (Ulez) across all 33 London boroughs.
A third option would include both the Ulez expansion and the so-called clean air charge. Mr Khan is also considering controversial plans that would charge motorists from outside London around £3.50 per day for travelling into the city.
The Mayor is aiming to pick one of the proposals – which are likely to face backlash from motorists and businesses — before his second term ends in May 2024.
09:54 AM
Petrol station owner Motor Fuel Group plots £5bn sale
The owner of Motor Fuel Group (MFG) is said to have kicked off a sale process that could value the petrol forecourt operator at £5bn.
MFG, which is owned by private equity firm Clayton, Dubilier & Rice (CD&R), has invited investment banks to pitch for a role selling the company, Sky News reports.
The petrol station group, which has around 900 sites across the UK, has focused on the shift to electrification – a move that could make it appeal to infrastructure investors or oil companies.
According to the report, a listing of MFG is also possible, but less likely than a sale.
09:47 AM
Hotel Chocolat cashes in as consumers go nuts
Chocolate lovers went nuts for nuts over Christmas, shunning novelty options in favour of nutty alternatives.
That’s according to the boss of Hotel Chocolat, who said hazelnuts, pistachios, peanut butter and pecan-based chocolates were all the rage over the festive period.
Customers also upgraded to bigger boxes of treats as families celebrated, while novelty chocolates suffered.
Overall, Hotel Chocolat reported a 37pc rise in sales in the 13 weeks to Boxing Day compared to last year.
Chief executive Angus Thirlwell told PA the company saw a shift from store to online sales as the omicron variant spread throughout the country in December but sales held up strongly.
09:33 AM
Investor confidence in UK growth hit by inflation
Investor confidence in UK economic growth has taken a bit of a beating as inflation and a squeeze on incomes rattles markets.
There’s been a 2pc drop in confidence in the last month, according to a survey by Hargreaves Lansdown, likely reflecting the surge in prices and a looming cost of living crisis.
Still, optimism about UK assets has grown, with investor confidence up 4pc from November amid expectations that heavyweight FTSE stocks in the mining, energy and financial sectors could begin to pay off.
The only area to suffer a fall in confidence was North America, which fell 3pc. This is likely due to worries about the fate of highly valued tech firms in a higher interest rate environment.
Meanwhile, the number of investors who expect interest rate rises in the next six months has fallen back slightly to 78pc, compared to 83pc in November, though the majority still expect another move soon.
09:24 AM
Chip shortages drive EU car sales to new low
EU car sales crashed to a new low last year as the pandemic and global chip shortages took their toll.
Car registrations dropped 22pc in December to 950,218 vehicles, marking the sixth consecutive month of decline, according to the European Automobile Manufacturers’ Association.
New car sales fell 1.5pc in 2021 as a whole, marking the worst showing since the body started tracking the market in the early 1990s.
Despite hopes the semiconductor shortage would ease, manufacturers’ expectations have in fact deteriorated, with troubles expected to linger in 2022.
Germany – the continent’s biggest car maker and home to BMW and VW – led the decline with a 27pc slump in December, making in the only major country to suffer an annual decline.
09:16 AM
Oil prices hit seven-year high
Oil has extended its gains to hit its highest level in seven years as omicron fears eased and geopolitical tensions returned in the Middle East.
Brent crude climbed past $87 a barrel for the first time since 2014 while West Texas Intermediate also rose above $85 for the first time since October.
Prices have climbed since the start of the year as demand remained high despite the impact of the omicron variant.
Adding to the pressure, Yemen’s Houthi fighters claimed to have launched a drone strike on the United Arab Emirates – the third biggest Opec producer – that caused an explosion and fire on the outskirts of the capital Abu Dhabi.
Goldman Sachs is now expecting Brent to hit $100 in the third quarter.
09:08 AM
Insurer Just Group posts jump in sales
The biggest market mover this morning is Just Group, which has gained as much as 8.4pc on the back of a strong trading update.
The insurer, which specialises in retirement products and services, reported a 25pc increase in sales to £2.7bn. The firm said new business profits grew by a low double-digit percentage.
Just Group also doubled underlying organic cash generation, exceeding its 2022 target a year early. Analysts said this should have a positive impact for the resumption of dividends.
09:01 AM
Hugo Boss slips despite smart sales
Shares in Hugo Boss tumbled as much as 3.6pc as investors turned their focus to omicron troubles – even as the brand beat sales estimates.
The German fashion house reported fourth-quarter sales of €906m (£757m), ahead of expectations of €861m. Earnings also beat forecasts at €100m.
Hugo Boss reported faster sales growth in all regions, with particular strength in Europe and the Americas.
But analysts warned of a slowdown in growth in 2022 given the potential disruption from omicron in the first half of the year.
08:50 AM
Rio Tinto’s iron ore shipments hit by labour troubles
Meanwhile, Rio Tinto’s latest production numbers have left investors a little disappointed.
The mining giant forecast weaker-than-expected iron ore shipments this year, blaming labour shortages and delays at a major project in Australia.
The world’s biggest iron ore producer said it expects to ship between 320m and 335m tonnes in 2022 from the Pilbara region in Western Australia. Last year’s shipments were down 3pc.
Rio Tinto said it had suffered from the delay in production from the new greenfields mine at Gudai-Darri as well as labour shortages in the region.
The FTSE 100 firm said it was “encouraged” by growth prospects for the coming year, though it warned of potential disruption from rising Covid cases and geopolitical tensions.
Shares fell 0.4pc following the update.
08:43 AM
The Hut Group slides as profits miss expectations
Shares in The Hut Group tumbled in early trading after warning its full year profit margin would miss expectations.
The embattled online retailer said earnings before interest, tax, depreciation and amortisation margin would come in between 7.4pc and 7.7pc – below the 7.9pc expected – due to adverse foreign currency movements.
Shares dropped more than 7pc.
Still, THG recorded its highest ever annual sales of £2.2bn, which it pinned on “significant” growth over the festive period.
It said the new year had “started well” but flagged challenges ahead as it comes up against tough comparisons from a year earlier, when the UK was in lockdown, as well as record commodity prices and the knock-on effect on its nutrition division.
08:36 AM
FTSE risers and fallers
After a strong start to the week, the FTSE has eased off as investors digest the latest employment data.
The blue-chip index is down 0.7pc, with mining stocks such as Rio Tinto proving the biggest drag. Consumer-focused firms Diageo and British American Tobacco also fell.
It comes after ONS stats show payrolls rose in December and unemployment fell. However, vacancies rose to a record high as more people exited the workforce.
The domestically-focused FTSE 250 dropped just shy of 1pc. Insurer Just Group bucked the trend, rising as much as 8pc after reporting 25pc growth in sales.
08:30 AM
Airlines warn of ‘catastrophic disruption’ from 5G
Airlines have called on the Biden administration to delay the rollout of 5G near airports amid fears it could spark thousands of flight cancellations and global disruption.
Industry body Airlines for America warned of “catastrophic disruption” if the new frequencies were put into service within two miles of where aircraft fly in the US.
Airlines are worried the signals could interfere with instruments that measure an aircraft’s altitude and have warned the rollout could hold back the industry’s recovery from the pandemic.
The letter signed by airline bosses, seen by Politico, reads: “Immediate intervention is needed to avoid significant operational disruption to air passengers, shippers, supply chain and delivery of needed medical supplies.”
It echoes calls by Airbus and Boeing to delay the switching on of so-called C-band frequencies, which officials are worried are enough to those used by altimeters to cause interference and make the readings unreliable.
Frequencies used in other countries are less likely to cause disruption, according to the FAA. British authorities have said there’s no evidence that 5G networks in the UK pose any risk to aircraft.
Read more on this story: Airbus and Boeing call for 5G delay over aircraft safety fears
08:17 AM
Government mulls payments to energy firms
Ministers are said to be considering making payments to energy suppliers in a radical intervention aimed at softening the blow of higher wholesale costs on consumers.
Under the proposals, energy suppliers would receive payments from the Government when wholesale gas prices exceeded a certain threshold so they would not then have to pass the increase on to household bills, the Financial Times reports.
Suppliers are backing the move, with some arguing it would be self-funding in the long run, as companies would have to return the money when wholesale prices fell back below a certain level.
Government insiders reportedly view the plans as “plausible” and “logical”, though admit there are some downsides.
08:09 AM
IoD: Economic inactivity is ‘legacy’ of pandemic
A final bit of reaction now from the Kitty Ussher, chief economist at the Institute of Directors:
The good news is that the unemployment rate is now back to within a whisker of its pre-pandemic level but the same cannot be said for the number of people actually employed.
The reason for this difference is an increase in the number of people who say they are not available for work – in fact, the legacy of the pandemic appears to be this rise in economic inactivity. Today’s data shows inactivity is particularly pronounced in people over the age of 50 with, sadly, a rise in long-term sickness in this group the driving factor.
It is also now becoming clear that the Office of Budget Responsibility’s forecast that the unemployment rate would be 4.8pc by the end of 2022 is way off the mark. We expect it to be running at under 4pc in the not-too-distant future.
08:07 AM
More expert reaction: Staff shortages will outlive the pandemic
Neil Carberry, chief executive of the Recruitment & Employment Confederation, says capacity constraint will impact the economic recovery.
The strength of the UK jobs market remains remarkable by any historic comparison, as vacancies rise and unemployment drops. It’s clear that temporary and part-time work is playing a key role as people find new roles in different sectors as the economy changes rapidly. More short-term and part-time roles may also reflect greater flexibility from firms as they struggle to hire in this market.
The big issue now is capacity constraint – there are hundreds of thousands fewer workers in the labour market than before the pandemic. Over time, that will affect the economy’s ability to drive prosperity.
Firms need to be looking at new approaches to developing their workforce, while Government needs to work with businesses on the skills and job matching support necessary to address rising economic inactivity.
Staff shortages will outlive the pandemic as an economic issue – recruiters are well placed to support businesses in this market with the latest insight and advice.
08:05 AM
Expert reaction: Supply struggling to keep up with demand
Paul Dales, chief UK economist at Capital Economics, says labour supply is struggling to keep up with demand.
The labour market appears to have remained tight both after the end of the furlough scheme and the start of the omicron wave, which supports our view that interest rates will be raised from 0.25pc to 0.50pc on 3 February.
The more timely data suggest that it won’t be long before Labour Force Survey employment is rising again. Indeed, demand for labour remained strong as omicron struck. In December, PAYE employees rose by 184,000 and the claimant count fell by 43,300.
Strong demand for labour and limited supply pushed up the number of vacancies to a record high of 1.247m in the three months to December. That said, the single-month data show that vacancies fell in both November and December, which could be an early sign that job shortages are easing.
Overall, these data suggest that labour demand has remained fairly strong, that supply is struggling to keep up and that the squeeze on households real wages is only just beginning.
08:01 AM
FTSE 100 opens lower
The FTSE 100 has fallen back at the open as it takes a breather following Monday’s gains.
The blue-chip index fell 0.3pc to 7,588 points.
08:00 AM
Vacancies soar to record high
Another concerning point is vacancies, which soared to a new record high of 1.25m.
This came alongside another increase in the number of people leaving the workforce. Inactivity in the quarter rose to 8.78m – an increase of 66,000. There were also 459,000 fewer people in work than at the end of 2019, before the pandemic.
The shortfall is driven in particular by fewer older people in the labour market, with more people out of work due to long-term ill health. It explains why vacancies are rising and companies are struggling to fill jobs, even as unemployment falls.
It also poses a threat to the economic recovery, with staff shortages holding back businesses.
07:54 AM
…but Brits suffer real-terms pay cuts
However, inflation seems determined to crash the party.
Regular pay (excluding bonuses) increased 3.8pc over the three-month period. That’s down from 4.3pc growth in the previous quarter. Including bonuses, pay was up 4.2pc, down from 4.9pc growth.
To put that into context, annual inflation in November stood at a decade-high of 5.1pc. In October, house prices rose 10.2pc, according to the ONS.
So the numbers suggest the squeeze on living standards is likely to intensify, as pay growth struggles to keep up with inflation.
07:50 AM
Unemployment closes in on pre-pandemic levels
Let’s focus on the positive numbers in the latest jobs release.
First, company payrolls rose 184,000 in December – that’s stronger growth than was expected.
Also, the unemployment rate dropped to 4.1pc in the quarter to the end of November, marking the best reading since June 2020.
These figures will be taken as positive signs of the economic recovery and suggest the labour market was in rude health despite the outbreak of omicron.
The numbers are also likely to bolster the argument for further interest rate increases by the Bank of England, which meets to make its decision next month.
07:42 AM
Wage growth lags behind inflation
Good morning.
Fresh figures from the ONS this morning give a mixed picture of the labour market.
While jobs numbers strengthened – payrolls increased by 184,000 in December and the unemployment rate fell to 4.1pc between September and November – there are worries about a looming cost of living crisis.
A surge in inflation meant wage growth was wiped out in real terms over the three-month period. What’s more, in November, pay fell 1pc in real terms.
Job vacancies also hit a record high of 1.25m, highlighting the skills shortage facing businesses.
5 things to start your day
1) Start-up plans driverless deliveries for Ocado and Asda this year Wayve raises $200m from investors including Sir Richard Branson
2) Nicola Sturgeon reaps £700m from auction to triple UK’s offshore wind power Shell, BP and Scottish Power want to build more floating and fixed turbines but face opposition from fishermen and conservationists
3) Antonio Horta-Osorio could pocket £3.8m on way out of Credit Suisse Former Lloyds boss is replaced over trip to Wimbledon in breach of Covid rules
4) Sadiq Khan threatens to take Boris buses off London’s roads in funding row Boris Johnson’s fleet of New Routemasters in jeopardy as TfL seeks further Government financing
5) Online car auction site threatens ‘dinosaur’ rivals High-end buyers raced to snap up new toys on the Collecting Cars website, often without even viewing them first
What happened overnight
With Wall Street closed, Asian markets recovered slightly from Monday’s travails as investors took some of their lead from Europe. Tokyo was among the best performers, rallying 0.9pc in the morning, while Hong Kong, Shanghai, Sydney, Singapore, Taipei and Manila were also up. Seoul, Jakarta and Wellington dipped slightly.
Coming up today
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Corporate: Marshalls, Elementis, Qinetiq, Energean, IntegraFin, 888 Holdings, The Hut Group (Trading update)
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Economics: Unemployment rate (UK), claimant count change (UK), average earnings (UK), ZEW economic sentiment (EU)
