ECB shocks markets with biggest interest rate rise in 20

    HomeBusinessECB shocks markets with biggest interest rate rise in 20

    ECB shocks markets with biggest interest rate rise in 20

    ECB President Christine Lagarde interest rates negative bond turmoil eurozone inflation - Daniel Roland/Pool via REUTERS/File Photo

    ECB President Christine Lagarde interest rates negative bond turmoil eurozone inflation – Daniel Roland/Pool via REUTERS/File Photo

    Christine Lagarde brought the era of negative European interest rates to an end with the biggest rise in more than two decades on Thursday, in a move that failed to quell market panic over a looming crisis in Italy.

    The European Central Bank shocked markets with a bigger-than-expected interest rate rise of 50 basis points to 0pc – its largest increase since 2000 – despite previously guiding markets to expect a more cautious 25 basis point increase.

    The euro initially climbed following the announcement, but dropped again after Ms Lagarde was criticised for providing little detail on future rate hikes. Doubts also grew over the new bond-buying programme announced by the bank (ECB).

    It came as Italian prime minister Mario Draghi handed in his resignation, sparking a fresh wave of political chaos across the bloc.

    Shares listed on Italy’s main stock exchange fell, while the yield on the country’s 10-year bonds, which influence government borrowing costs, jumped to 3.6pc – its highest since June – in a sign that investors fear a looming economic crisis.

    The euro climbed as much as 0.8pc against the dollar following the surprise rates decision before retreating.

    The aggressive increase comes as ECB officials grapple with inflation that has surged to more than four times its 2pc target, with the threat of a recession looming.

    A recent slump in the euro, which dropped to parity with the dollar earlier this month for the first time in 20 years, also boosts inflation and adds to the case for a bigger rise.

    The ECB said: “The front-loading today of the exit from negative interest rates allows the governing council to make a transition to a meeting-by-meeting approach to interest rate decisions.”

    It hinted at further interest rate rises at future meetings, although it gave no guidance on the size of those increases.

    The central bank also unveiled a new tool, dubbed the Transmission Protection Instrument (TPI), aimed at calming turmoil in the bond market amid concerns about another eurozone debt crisis.

    As the central bank raises interest rates, borrowing costs increase disproportionately for countries like Italy, Spain or Portugal as investors demand a bigger premium to hold their debt. This spread between southern and northern countries was a sign of instability that almost destroyed the monetary union during the eurozone crisis.

    The bond-buying scheme has “no limitation”, the ECB said, and is aimed at capping the rise in borrowing costs for the bloc’s more vulnerable governments.

    In a statement, the ECB said: “The scale of TPI purchases depends on the severity of the risks facing policy transmission.

    “The TPI will ensure that the monetary policy stance is transmitted smoothly across all euro area countries.”

    Meanwhile Ms Lagarde, president of the ECB, said: “The ECB is capable of going big.” SHe later added: “We would rather not use [the new programme], but if we have to use it, we will not hesitate.”

    However, analysts said the announcement of the new tool lacked clarity.

    Andrew Kenningham, chief economist at Capital Economics, said: “There is little detail on the circumstances in which the TPI will be activated.

    “We suspect that policymakers will find this hard to agree. Given the mounting risks of a recession and concerns about Italian debt and political stability, this will leave the bond market vulnerable to another sell-off.”

    Kaspar Hense, a portfolio manager at Bluebay Asset Management, said: “The market is trying to force Lagarde into giving clear guidance on when they will use the tool and a stronger ‘whatever it takes’ commitment, whereas Lagarde still does not want to give too much away.”

    Countries will be eligible for TPI only if they comply with EU’s fiscal rules and do not face “severe macroeconomic imbalances”.

    The ECB’s 0.5 percentage point rate hike still leaves the bloc lagging behind the Bank of England and the US Federal Reserve, with the latter hiking rates by 0.75 percentage points last month.

    Analysts expect a similar rise from the Fed in July, while Andrew Bailey suggested earlier this week that Threadneedle Street is poised to raise rates by 50 basis points, which would mark the biggest increase in nearly 30 years.

    06:21 PM

    Wrapping up

    That’s all from us today, we shall see you tomorrow for the last instalment of the week! Before you go, have a look at the latest stories from our reporters:

    06:19 PM

    Airbnb co-founder to step back from full-time role

    Airbnb co-founder Joe Gebbia is stepping back from a full-time role at the home-sharing company to spend more time with his family and explore new projects.

    Gebbia said his first new venture “is a startup called parenthood, at which I’ll be taking on the role of Dad.” Other projects involve a “complementary product to Airbnb, documentary filmmaking, and various philanthropic initiatives,” he added.

    Airbnb was founded in 2008 by Gebbia, who is chief product officer, Brian Chesky, who is chief executive, and Nathan Blecharczyk, chief strategy officer.

    05:58 PM

    ScottishPower appoints new head of electricity networks business

    Energy company ScottishPower has appointed a new boss for its electricity networks business.

    Vicky Kelsall joins from the company’s parent, Iberdrola, where she worked for Avangrid, an electricity company serving 3.3m customers in the US.

    She takes over from Frank Mitchell, who has been in charge of SP Energy Networks since 2009 and retires after 30 years with the company.

    05:31 PM

    FTSE 100 ends barely in the green

    The FTSE 100 crawled higher today as gains in financial stocks offset the weakness in energy and healthcare shares. The index rose 0.1pc to 7,270.

    “Peaking inflation dynamics and rising global recession risks will likely lead to a rotation back into quality and, to some extent, growth names,” said Mathieu Racheter, head of equity strategy research at Julius Baer.

    “We, therefore, see more downside risks to UK equities compared to their US and European peers from current levels in case a recession materialises.”

    05:07 PM

    Ford boosts battery production for electric car ramp-up

    Ford has announced a series of initiatives to strengthen its supply of batteries and raw materials needed for electric vehicles, as the US automaker ramps up production to meet booming demand.

    The company has signed contracts for battery cells to ensure it can boost output to 600,000 electric vehicles a year by the end of 2023.

    Ford aims to manufacture 270,000 Mustang Mach-E SUVs, 150,000 F-150 Lightning pick-ups, 150,000 Transit vans and 30,000 units of a new SUV for Europe.

    The carmaker said it has secured 70pc of its battery capacity needs to reach a manufacturing target of two million vehicles a year by 2026.

    Bloomberg reported yesterday that Ford plans to cut up to 8,000 jobs to fund its EV push.

    04:42 PM

    Transport for London to keep Central Line open after complaints

    The UK’s summer of travel chaos plumbed new depths today when Transport for London (TfL) said it would close one of its most crucial lines during rush hour — only to reverse the decision little over an hour later.

    TfL said at lunchtime that the Central Line would close from 5:30pm because staff in its control room had called in sick.

    The announcement triggered protests from commuters on social media and politicians.

    Amid growing discontent, TfL quickly said that it had, in fact, found some other workers to cover in the control room so the services will now operate to all destinations until the end of the evening.

    04:22 PM

    Cambridge gaming company Jagex expands US footprint with new acquisition

    Jagex, the Cambridge gaming company owned by Carlyle Group, has bought Pipeworks Studios from Sumo Group, now owned by Tencent. 

    Jagex is behind the hit online game Runescape and had been eyeing a flotation in London. Pipeworks has 200 employees and is based in Oregon.

    Phil Mansell, chief of Jagex, said: “Pipeworks presents an incredible opportunity to bring onboard world-class game development talent. The studio brings elite-level game development expertise, specifically in AAA games-as-a-service, with an exemplary track record of collaborations with the world’s best game creators.”

    04:12 PM

    Handing over

    That’s all from me for today – thanks for following! Giulia Bottaro will take things from here.

    03:59 PM

    Britvic gets Brazil boost

    Soft drinks maker Britvic said its revenue in the third quarter rose 11pc to £431m, driven in part by a strong increase in Brazilian sales.

    The Robinson’s squash and 7up owner said revenue in Brazil had risen more than 24pc, compared to a 9.2pc jump in the UK. Its sales in Ireland and France also increased.

    Chief executive Simon Litherland said the company had performed well so far this financial year, but he has one eye on the cost-of-living crisis.

    “We remain focused on mitigating the impact of inflationary pressures on our business; soft drinks is a resilient category, within which we have a well-invested business, a flexible operating model and a robust supply chain,” he said.

    03:36 PM

    Tui puts five jets on standby to repatriate stranded holidaymakers

    Tui travel chaos -  REUTERS/Peter Nicholls/File PhotoTui travel chaos -  REUTERS/Peter Nicholls/File Photo

    Tui travel chaos – REUTERS/Peter Nicholls/File Photo

    Tui is putting five jets on standby to fly mercy missions for stranded holidaymakers to prevent travel chaos as millions of Britons prepare to jet off abroad.

    Oliver Gill has the story:

    Britain’s biggest tour operator said it had also hired hundreds more colleagues at airports and customer call centres.

    Its airline was forced to cut one in four flights at Manchester Airport in June as last-minute cancellations sparked anger among holidaymakers.

    Tui would typically have up to two jets on standby in case of technical difficulties with their fleet during the summer months.

    However, bosses today said that five have been set aside over the coming weeks.

    Andrew Flintham, Tui managing director, insisted that despite chaotic scenes at airports up and down the country, “we want our customers to know they can trust in Tui this summer”.

    Read Ollie’s full story here

    03:17 PM

    Amazon pushes further into health with $3.5bn One Medical deal

    Amazon has snapped up primary care firm One Medical in a $3.49bn (£2.9bn) as the tech giant pushes further into healthcare.

    The all-cash deal marks a dramatic expansion of Amazon’s healthcare ambitions and adds brick-and-mortar doctors’ offices to its portfolio.

    One Medical is a care provider that offers both telephone health services and options to meet doctors in person at its 182 offices, which are scattered across 25 markets in the US.

    Its customers include Airbnb and Google, according to its website.

    Neil Lindsay, senior vice president of Amazon Health Services, said: “We think healthcare is high on the list of experiences that need reinvention.”

    03:01 PM

    UK’s biggest gas storage site to reopen by autumn

    Rough gas storage site - CentricaRough gas storage site - Centrica

    Rough gas storage site – Centrica

    After the reopening of the Nord Stream pipeline this morning, there’s another bit of relieving news for energy markets.

    Rachel Millard explains:

    Britain’s largest gas storage site is a step closer to reopening after regulators approved a new licence, boosting Western efforts to cut reliance on Russian gas.

    Centrica has been approved by the North Sea Transition Authority to store gas at the Rough storage site off the coast of Yorkshire, five years after closing it down because it was uneconomic.

    There are hopes the facility could be reopened as soon as this autumn, but ministers are still in talks with Centrica about possible financial support to help it reopen. That could see a levy added to consumer bills, deepening the cost of living crisis.

    Efforts to reopen the site come amid concern over gas supplies this winter as Russia restricts flows to Europe.

    The EU yesterday told member states to cut their gas demand by 15pc in a bid to avoid rationing and blackouts this winter.

    Moscow restarted flows through the Nordstream 1 pipeline on Thursday after a shutdown for maintenance, dismissing fears that it would not restart.

    The latest figures showed Russian gas was flowing to Germany at about 40pc of capacity between 7am and 8am, roughly the same as before the maintenance work began.

    Read Rachel’s full story here

    02:52 PM

    Wall Street falls after ECB decision

    Meanwhile, the ECB’s big interest rate rise is weighing on Wall Street.

    The benchmark S&P 500 fell 0.2pc – its first decline in three days – while the Dow Jones shed 0.5pc. The tech-heavy Nasdaq was the only one to buck the trend, ticking up 0.1pc.

    Traders will be weighing up the impact of the interest rate rise on economic growth, as well as the ECB’s prospects for staving off another debt crisis – especially as Italy is plunged into political turmoil.

    02:48 PM

    Reaction: Forward guidance is dead in Europe

    Charles Hepworth, investment director at GAM, says the ECB may need to deploy its new anti-fragmentation tool soon.

    The last time ECB Governor Lagarde gave forward guidance to the markets, she said 0.25pc hike would be appropriate in July.

    But it seems forward guidance is now dead in Europe, just as it now is in the US, as the ECB surprised with a rate rise of 0.5pc to bring an end to the negative rate environment that has been in place since 2014.

    This is the first rate hike in 11 years, as it finally addresses the inflation dynamic across the Eurozone.

    As part of the triage policy against a fragmenting bond market, the ECB announced a new antifragmentation tool – the Transmission Protection Instrument.

    This may well need to be deployed soon given the direction of travel in Italian bonds right now following PM Draghi’s resignation this morning.

    European bonds are predictably shifting higher in yields across the curves with the Euro catching more of a bid, but the real action is in Italian debt with the 10 year yield rising 0.2pc to 3.57pc – that’s 2.2pc higher than German equivalent debt and now yields more than Greece. Fragmentation?

    02:46 PM

    That’s a wrap

    That’s it folks, Christine Lagarde brings the press conference to an end.

    We won’t be hearing from her again in an official capacity until September’s meeting.

    02:44 PM

    Lagarde welcomes ‘historic’ moment

    Christine Lagarde is asked if this is a historic moment, and she agrees.

    She says it’s it’s a gratifying moment for her personally due to the unanimous backing for today’s action.

    The ECB chief adds that this will make it easy to communicate.

    02:40 PM

    ECB ‘would rather not use’ new tool

    Here’s some great equivocation from Christine Lagarde.

    She says the ECB would “rather not use” its new emergency tool but “won’t hesitate” if it has to do so.

    Some of her colleagues have previously said the very existence of the tool means it won’t have to be use, as it instills so much confidence.

    02:31 PM

    Lagarde shrugs off questions about Italy

    Unsurprisingly, the ECB boss is getting a lot of questions about Italy after Mario Draghi handed in his resignation this morning.

    They’re not getting very far, though, with Ms Lagarde simply saying that the central bank doesn’t take a stance on political matters.

    02:28 PM

    Lagarde: ECB ‘very attentive’ to energy crisis

    Christine Lagarde has said the ECB is “very attentive” to surging gas prices and the wider energy crisis gripping Europe.

    She insists that the baseline case is for no recession in the eurozone this year. But she adds: “Is the outlook clouded? Of course it is.”

    02:18 PM

    Euro gains go into reverse

    The euro’s gains have been all but wiped out.

    After gaining as much as 0.8pc against the dollar in the aftermath of the interest rate decision, the common currency has pared back its gained to just 0.2pc.

    That suggests markets are less than convinced by the ECB’s efforts to tackle the widening gap between bond yields across the bloc.

    02:13 PM

    Lagarde: Forward guidance ‘no longer applicable’

    It seems the ECB has thrown out all its guidance.

    The central bank previously said it would raise rates by 25 basis points at this meeting and by 50 basis points in September. Clearly, it hasn’t stuck to that.

    Asked about what this means for the next meeting, Christine Lagarde says the prior guidance on September no longer applies.

    Instead, the ECB will take decision on a meeting-by-meeting basis.

    She clarifies that this doesn’t mean the ultimate end point has changed… it’s just about how quickly the ECB gets there.

    02:11 PM

    When will the TPI be used?

    Christine Lagarde is giving a bit more detail on the so-called Transmission Protection Instrument, which is designed to prevent chaos in bond markets.

    She says TPI is a programme that is designed to address a specific risk that all eurozone countries can face – i.e. a big spread in bond yields.

    All countries are therefore eligible, but Ms Lagarde says the Governing Council will use its discretion for activating it where there are “unwarranted, disorderly” bond market dynamics.

    02:04 PM

    ECB ‘unanimous’ on emergency tool

    Christine Lagarde says the ECB’s decision on its new emergency tool was unanimous.

    That’s a victory for the central bank chief in securing a new way to stem off another eurozone bond crisis.

    She adds that this tool allowed the Governing Council to opt for a larger interest rate rise. That’s because it should help to cushion the impact of higher borrowing costs on bond yields across the bloc.

    02:00 PM

    Lagarde: Inflation risks have intensified

    Christine Lagarde says that the risks to inflation across the eurozone economy have intensified – especially in the short term.

    She says price pressures are spreading across more sectors, and inflation is expected to remain “undesirably high for some time”.

    The ECB chief warns signs of higher inflation expectations need monitoring and points to the weakness in the euro as a threat.

    Still, Ms Lagarde says easing supply troubles and energy prices should help bring inflation back to its 2pc target in the long term.

    01:56 PM

    Christine Lagarde gives press conference

    ECB President Christine Lagarde has taken to the stage for a press conference after the big interest rate decision.

    01:52 PM

    Reaction: Too little, too late?

    Hinesh Patel at Quilter Investors is equally sceptical about the ECB’s actions.

    The European Central Bank has at long last joined the rate hike club with this afternoon’s 50 basis-point increase – the first ECB interest rate rise for 11 years.

    However, the ECB is pushing on a string with rate hikes that will do little to quell what is predominantly an energy crisis. The ECB has waited far too long relative to the Fed and the Bank of England, thereby creating additional pressure on the EUR which is adding to inflationary pressure.

    The stall in industrial activity indicates that this rate hike is likely to have minimal impact. Headline inflation is now creeping into core which will be gravely concerning to the ECB, especially as costs now represent the most pressing problem for corporates in the region – particularly for the likes of Italy.

    Inflation is a major issue and will be for some time yet and the balancing act faced by the ECB remains a difficult one. The bloc is faced with inflationary shock combined with ongoing uncertainty driven by the war in Ukraine, but the ECB’s previous inaction means today’s rate hike could well be too little too late.

    01:49 PM

    Reaction: No central bank is in a worse position than the ECB

    Seema Shah at Principal Global Investors gives this damning assessment of the ECB’s approach to monetary policy so far.

    The ECB’s era of negative rates has finally come to an end, and with quite a bang – but it’s not against a backdrop of strong economic growth and certainly not accompanied by celebratory smiles. Quite the contrary.

    The ECB is hiking into a drastically slowing economy, facing a severe stagflationary shock that is quite beyond its control, while also facing an Italian political crisis which presents a difficult sovereign risk dilemma.

    There is no other developed market Central Bank in a worse position than the ECB.

    01:43 PM

    ECB unveils new emergency tool

    The ECB has confirmed its approval of a new emergency tool, which it’s calling the Transmission Protection Instrument.

    We’ll be listening out for more details on this when we hear from Christine Lagarde, but it’s designed to curb the gap between bond yields in different EU countries as borrowing costs rise.

    Italian bond yields extended their rise following the decision, with the 10-year yield last up 20 basis points on the day to 3.7pc – the highest since June 28.

    The closely-watched spread to German peers widened briefly to 239 basis points, but was last back to pre-decision levels near 235 basis points.

    01:39 PM

    ECB: Further rate rises to come

    Here’s the central bank’s own explanation of today’s decision:

    The frontloading today of the exit from negative interest rates allows the Governing Council to make a transition to a meeting-by-meeting approach to interest rate decisions.

    There’s no detail about how big these future increase will be, however.

    01:37 PM

    Reaction: R.I.P forward guidance

    It seems the ECB is facing the same criticism that’s dogged the Bank of England in recent months.

    Frederik Ducrozet at Pictet Wealth Management tweets laconically: “R.I.P forward guidance.”

    It’s a dig at President Christine Lagarde, who previously suggested that rates would rise by just 25 basis points today, with a further jump pencilled in for September.

    Mr Ducrozet adds that the ECB needs to preserve its credibility. That’s something we’ve heard said about the Bank of England a lot recently, too…

    01:31 PM

    Money markets bet on bigger increase in September

    Money markets are betting on 60 basis points of interest rate rises at the ECB’s next meeting in September. That’s up from under 50 basis points before today’s decision.

    The repricing suggests investors think the ECB will have to get more aggressive to deal with sky-high inflation, which is more than four times over the 2pc target.

    01:30 PM

    ECB joins rate hike club

    The ECB’s decision marks the first time it’s moved out of negative territory and the biggest jump since 2000.

    The decision highlights urgency among policy makers to tackle surging inflation across the bloc, which is being fuelled in part by the escalating energy crisis.

    But there’s criticism that the ECB has acted too late. Even today’s double rate rise lags behind the Federal Reserve’s recent 75 basis-point rise.

    The rate on the ECB’s main refinancing operations climbed to 0.5pc and on its marginal lending facility to 0.75pc.

    In terms of forward guidance, the ECB said future rate hikes “will be appropriate”, while the size of the moves would be “data-dependent”.

    01:27 PM

    Euro spikes as ECB unveils huge rate hike

    The euro has hit fresh highs as traders responded to the ECB’s surprisingly aggressive interest rate rise.

    The common currency rose 0.6pc against the dollar to 1.0247 as the central bank dragged the bloc out of its era of negative rates.

    01:05 PM

    ​HSBC agrees deal to sell Russia business to Expobank

    HSBC has reportedly agreed a deal to sell its Russian operations to Expobank, securing the sale shortly before Moscow said it would block such transactions.

    A spokesman told Reuters: “Following a strategic review, HSBC has signed an agreement to sell 100pc of its participating interests in HSBC Bank (RR) LLC to Expobank JSC.”

    Completion of the deal would represent HSBC’s formal exit from Russia but the bank said the transaction was still subject to regulatory approvals in Russia.

    It comes after deputy finance minister Alexei Moiseev said the Kremlin would block the sale of foreign banks’ Russian businesses while Russian banks abroad were also unable to function normally. It is unclear whether this policy could yet scupper HSBC’s plans.

    12:52 PM

    Energy firm SSE gets windy weather boost

    Energy giant SSE has reported better than expected performance after higher wind speeds boosted output of its turbine farms, writes Rachel Millard.

    The FTSE 100 company said its renewables output was around 5pc higher than expected in the three months to the end of June “mainly due to weather conditions.”

    SSE co-owns and runs the Beatrice wind farms off the Caithness coast, as well as Greater Gabbard off the coast of Suffolk. It is also building several new sites including Dogger Bank off the north-east coast, set to be the world’s largest wind farm.

    In a trading statement this morning, SSE said the output of its wind farms and hydropower station rose from 1,722 gigawatt-hours in April-June 2021 to 2,129 gigawatt-hours in the same period this year.

    “Performance has slightly exceeded our expectations and further demonstrates the strength and stability provided by SSE’s balanced mix of regulated and market-facing businesses,” bosses added.

    12:17 PM

    Rishi Sunak ‘doesn’t plan income tax cuts before autumn 2023’

    Rishi Sunak is said to have dismissed the idea of cutting income tax before next autumn 2023 at the earliest if he’s chosen as the next prime minister.

    The former Chancellor has repeatedly said he wouldn’t cut taxes until inflation is under control. His conclusion – based on Treasury analysis – is that that won’t happen on a consistent basis until the middle of next year, Bloomberg reports.

    Based on the usual timing of Budget statements and the April-April tax year, Mr Sunak’s position could mean any changes might not take effect until Spring 2024, though a faster timeframe is not impossible.

    It’s a risky tactic for the leadership hopeful and contrasts starkly with Liz Truss, who has made about £34bn of tax cuts the central pledge of her campaign.

    12:09 PM

    US futures slip as markets brace for ECB deicion

    US futures slipped this morning as markets brace for the first ECB interest rate rise in more than a decade.

    Stocks initially pushed higher as Russia resumed gas flows through the Nord Stream pipeline, but sentiment turned negative as traders looked ahead to the ECB meeting.

    There’ll also be a focus on the ECB’s promised crisis management tool as widening bond yields spark fears of another eurozone debt crisis.

    Futures tracking the S&P 500 dipped 0.2pc, while the Dow Jones shed 0.3pc. The tech-heavy Nasdaq was little changed.

    12:02 PM

    Zara owner sees real estate fortune rise to $16bn

    Amancio Ortega with daughter Marta - fotopress/Getty ImagesAmancio Ortega with daughter Marta - fotopress/Getty Images

    Amancio Ortega with daughter Marta – fotopress/Getty Images

    The billionaire Spaniard behind the Zara fashion chain has seen his real estate fortune surge over the last year.

    Amancio Ortega’s family office enjoyed an 8.4pc increase in the value of its property holdings to €15.3bn (£13bn). That’s similar to the value record prior to the pandemic in 2019.

    The 86-year-old Zara founder saw his fortune recover after dividends slumped last year due to Covid. Most of Mr Ortega’s income comes from his 59pc stake in Zara owner Inditex.

    Mr Ortega’s wealth has enabled him to build one of the biggest real estate portfolios in the world and has become landlord to some of the world’s largest corporations, including Amazon in Seattle.

    His latest deals including the C$1.2bn acquisition of the Royal Bank Plaza in Toronto and an agreement to buy 19 Dutch, a luxury apartment complex in Manhattan.

    11:50 AM

    HSBC unit installs Chinese Communist Party committee

    HSBC CCP China communist - ISAAC LAWRENCE / AFPHSBC CCP China communist - ISAAC LAWRENCE / AFP

    HSBC CCP China communist – ISAAC LAWRENCE / AFP

    HSBC has installed a Chinese Communist Party (CCP) committee for workers in its investment banking unit in the country amid escalating tensions between Beijing and the West.

    Patrick Mulholland has the story:

    The bank’s subsidiary HSBC Qianhai Securities was set up in 2015 to drive expansion across mainland China and in April the lender raised its stake in the joint venture to 90pc, up from 51pc.

    Under Chinese law, companies are required to have CCP committees with three or more employees who are also members of the Chinese Communist party appointed to roles.

    They function like a workers’ union but are also a way of installing a party representative within a company’s top ranks, sometimes in a director or management role.

    HSBC is believed to be the first foreign finance group to have a CCP committee, in a move likely to have a ripple effect across the financial services industry.

    Read Patrick’s full story here

    11:34 AM

    Pfizer and Flynn fined £70m for overcharging NHS for epilepsy drugs

    Pharmaceutical firms Pfizer and Flynn have been fined almost £70m after they overcharged the NHS for a life-saving epilepsy drug.

    The Competition and Markets Authority said the two companies “abused their dominant positions” in the market to charge unfairly high prices over a four-year period.

    NHS costs for the phenytoin sodium capsules jumped from £2m in 2012 to £50min 2013 after prices were hiked. The CMA said it has fined Pfizer £63m and Flynn £6.7m.

    Pfizer has said it will appeal.

    The new fine comes after the firms challenged the CMA’s previous decision of an £84m penalty.

    Andrea Coscelli, chief executive of the CMA, said:

    Phenytoin is an essential drug relied on daily by thousands of people throughout the UK to prevent life-threatening epileptic seizures.

    These firms illegally exploited their dominant positions to charge the NHS excessive prices and make more money for themselves – meaning patients and taxpayers lost out.

    Such behaviour will not be tolerated, and the companies must now face the consequences of their illegal action.

    11:11 AM

    Regulators warn airlines to obey rules amid travel chaos

    The competition and aviation regulators have warned airlines they have to follow rules on not overselling seats and offering compensation as the summer holiday season is plagued by travel chaos.

    The Civil Aviation Authority and Competition and Markets Authority wrote an open letter saying the were monitoring airline practices and passenger experiences.

    They warned they’d consider enforcement action if they saw evidence of “consumers continuing to experience these serious problems”.

    11:07 AM

    Elon Musk ditches most of Tesla’s Bitcoin

    Elon Musk Tesla Bitcoin - Angela Weiss / AFPElon Musk Tesla Bitcoin - Angela Weiss / AFP

    Elon Musk Tesla Bitcoin – Angela Weiss / AFP

    Elon Musk has claimed “cryptocurrency is a sideshow” as Tesla ditched three quarters of its Bitcoin holdings and the billionaire appeared to cool on digital coins.

    Matthew Field has more:

    Mr Musk, who previously promised Tesla would never sell its Bitcoin and would take the digital currency as a form of payment, performed the sudden u-turn on a call with investors.

    “Cryptocurrency is not something we think about a lot,” he said. “The fundamental goal of Tesla, and the reason we’re doing this, which is my primary motivation here, is to have the day of sustainable energy come sooner. That’s our goal.

    “We’re neither here nor there on cryptocurrency.”

    The Tesla chief executive said the company had sold its position in Bitcoin due to Covid related shut downs in China, which forced it to pause production at its facility in Shanghai.

    Tesla sold 75pc of its coins for $936m, recording an impairment charge of around $106m. At one point, its Bitcoin holdings had been worth more than $2bn.

    10:40 AM

    Long-running Night Tube strikes suspended

    Long-running strikes on London’s Night Tube have been suspended, offering relief for the capital’s late-night workers and revellers.

    Members of the RMT union have been taking industrial action over weekends in a dispute over shifts.

    Nick Dent, London Underground’s director of customer operations, said: “We are pleased that the RMT has suspended their industrial action on Night Tube services.

    “This is good news for London and we will continue to work closely with all our trade unions.”

    Strikes were planned on Night Tube services on the Central, Victoria, Jubilee, Northern and Piccadilly lines each weekend until December.

    TfL said it has run a good service on the Victoria, Jubilee and Northern lines, and also a regular service on the Central line, despite recent strikes.

    10:34 AM

    BT Sport and Sky ‘consulted over freelance rates’

    BT Sky sports freelance broadcasters - Michael ReganBT Sky sports freelance broadcasters - Michael Regan

    BT Sky sports freelance broadcasters – Michael Regan

    Staff at BT Sport are said to have consulted with rivals at Sky about pay rates for freelancers in a move that could suggest collusion between the broadcasters.

    In an email from July 2018, a senior executive at BT Sport, seen by the Financial Times, wrote: “After consultation with Sky Sports, BT Sport will increase the daily rate . . . by £10 per day to £380.”

    The executive was responding to requests for higher pay from freelance EVS operators, who create slow-motion replays and voice tape packages for broadcasters.

    It comes after the competition watchdog last week into whether BT, IMG Media, ITV and Sky had fixed the day rates paid to freelancers, saying it had “reasonable grounds” to suspect a breach of competition law.

    10:22 AM

    Blow to M&S as top executive joins Primark owner

    A top executive from Marks & Spencer is leaving to join Primark owner Associated British Foods.

    Eoin Tonge, currently chief financial and strategy officer at M&S, will replace John Bason as finance director at AB Foods.

    Mr Bason, who has worked at AB Foods for 23 years, will become chairman of a newly constituted strategic advisory board and a senior adviser to Primark.

    The move is a blow to M&S as Mr Tonge was given an expanded role only a few weeks ago and billed a key part of a top management team of three charged with running M&S following the departure of Steve Rowe.

    Mr Tonge was named chief strategy officer, in addition to his finance role, alongside co-chief executives Stuart Machin and Katie Bickerstaffe, who only works four days a week.

    Shares in M&S fell 2pc following the announcement, while AB Foods was up 1pc.

    10:14 AM

    Tesla’s profits knocked by China factory shutdowns as it sells Bitcoin

    Tesla China Bitcoin - TANG KE/ Feature China/Future PublishingTesla China Bitcoin - TANG KE/ Feature China/Future Publishing

    Tesla China Bitcoin – TANG KE/ Feature China/Future Publishing

    ICYMI – Tesla has fallen victim to supply chain chaos in China and a damaging bet on Bitcoin, bringing a record run of profits at Elon Musk’s car company to a sudden end.

    Here’s more from Matthew Field:

    The electric vehicle maker also sold off a chunk of its Bitcoin holdings, the company said on Wednesday, as its bet on the cryptocurrency soured.

    Revenues at Tesla dropped by 9pc between the second and first quarter to $16.9bn (£14.1bn), though were still 42pc higher than a year earlier.

    Its revenues were down on the record three-month revenues of $18.8bn it posted earlier this year amid supply chain woes and a factory shut down in China due to Covid restrictions.

    Telsa said it “faced certain challenges, including limited production and shutdowns in Shanghai for the majority of the quarter” but claimed it “continued to make significant progress across the business during the second quarter of 2022”.

    Earlier this month, Tesla reported it had delivered more than 254,000 electric vehicles, down from around 300,000 in the previous quarter.

    ​Read Matt’s full story here

    09:59 AM

    Heathrow fuel workers halt strike after pay offer

    Refuelling workers at Heathrow have called off a strike that was due to begin today.

    The Unite union said the walkout was suspended after Aviation Fuel Services made a “sustainably improved offer”. The roughly 50 employees involved will now be given time to consider the proposal.

    AFS is a joint venture among fuel companies that supplies fuel to more than 70 airlines, including American Airlines, United Airlines and Emirates.

    The threatened strikes were one of a number of disputes that have added to transport chaos across the UK and Europe this eummer.

    Earlier this month, British Airways reached an agreement with check-in employees to avoid a strike after the carrier scrapped thousands of flights amid a staffing crisis.

    09:46 AM

    Government used P&O Ferries despite condemning sackings

    P&O Ferries government MoD - REUTERS/Clodagh KilcoyneP&O Ferries government MoD - REUTERS/Clodagh Kilcoyne

    P&O Ferries government MoD – REUTERS/Clodagh Kilcoyne

    The Government has admitted P&O Ferries was used by the military even as ministers condemned the firm for sacking 800 workers without notice.

    The Department for Transport cancelled a contract with P&O after conducting a review of government business with P&O in the wake of the sackings in March.

    But the Ministry of Defence said it used P&O to support a recent exercise, the BBC reports.

    It came after the RMT union said it saw evidence the MoD had bought slots on P&O’s Dover-Calais service.

    In March, P&O replaced its sacked staff with foreign agency workers paid less than the minimum wage. Its services were suspended and several of the company’s vessels failed safety inspections before being cleared to resume operating.

    09:35 AM

    Pound falls ahead of Huw Pill speech

    Sterling lost ground against the dollar this morning as investors turned their attention to the political drama and another Bank of England speech.

    Chief economist Huw Pill is due to give another speech later today, which will be analysed for hints about further interest rate rises.

    Markets will also have a close eye on Liz Truss and Rishi Sunak for details of potential polices as they go head to head in the race to become the next prime minister.

    The pound fell 0.4pc against the dollar to $1.1923. Against the euro it was also down 0.4pc at 85.35p.

    09:23 AM

    Italian markets in chaos as Mario Draghi resigns

    Italy Prime Minister Mario Draghi - Roberto Monaldo /LaPresse via APItaly Prime Minister Mario Draghi - Roberto Monaldo /LaPresse via AP

    Italy Prime Minister Mario Draghi – Roberto Monaldo /LaPresse via AP

    Italian markets are in chaos this morning as Prime Minister Mario Draghi handed in his resignation.

    The former ECB chief announced his decision to President Sergio Mattarella. The government will continue as a caretaker to handle ongoing business.

    The collapse of Draghi’s Government was inevitable after three of his coalition partners withdrew their support in a confidence vote yesterday.

    Italy’s benchmark FTSE MIB index slumped more than 2pc, led by sharp falls for banking stocks. Italy’s 10-year bond yield surged 20 basis points to 3.57pc.

    09:18 AM

    Go-Ahead bidder drops out of £650m takeover race

    An Australian bidder has dropped out of the race to snap up transport group Go-Ahead – a week after the board picked a rival offer.

    Kelsian said falling share prices in its home country tied its hands and meant it had to walk away.

    Kelsian is one of Australia’s biggest bus and ferry companies; it also has operations in Singapore and London.

    It tried to muscle in on a deal to buy Go-Ahead, which co-runs the Govia Thameslink Railway, but its shares have fallen by more than 15pc in recent weeks.

    It comes after Go-Ahead reached an agreement with Australian rival Kinetic and Spain’s Globalvia. The £650m deal will pay shareholders £15 for each share they own in the company.

    Go-Ahead said it will go ahead with the Kinetic and Globalvia deal. Shares dropped 3pc in early trading to around 16p below the offer price.

    09:11 AM

    S4 Capital shares crash 50pc after profit warning

    Martin Sorrell S4 Capital - REUTERS/Eric GaillardMartin Sorrell S4 Capital - REUTERS/Eric Gaillard

    Martin Sorrell S4 Capital – REUTERS/Eric Gaillard

    Shares in Sir Martin Sorrell’s S4 Capital crashed this morning after the advertising firm slashed its profit expectations for the full year.

    Shares slumped as much as 50pc – their biggest fall on record – to reach their lowest since 2020.

    The latest collapse follows a plunge in later March after the digital ad group delayed its annual results, wiping about £1.2bn off its market value.

    S4 said it expects earnings before interest, tax, depreciations and amortisation to be about £120m, well below analysts’ forecasts of between £154m and £165m.

    The company blamed the reduced numbers on a sharp rising in hiring and staff costs. It added that cost-cutting measures, including a brake on hiring, have now been introduced.

    08:58 AM

    Mike Ashley’s Frasers Group posts jump in profits

    Mike Ashley Frasers Group - Kirsty O'Connor/PA WireMike Ashley Frasers Group - Kirsty O'Connor/PA Wire

    Mike Ashley Frasers Group – Kirsty O’Connor/PA Wire

    Mike Ashley’s Frasers Group booked a sharp rise in profits for the full year, despite warning over the cost-of-living crisis and supply chain pressures.

    The company, which owns Sports Direct and House of Fraser, posted pre-tax profits £344.8m for the year to April, up from a £39.9m loss in the previous year. Revenue jumped 31pc to £4.75bn.

    That was despite a “significant increase” in running costs.

    Frasers also lifted its forecasts for the current year, saying it now expects to post a pre-tax profit of between £450m and £500m over the current financial year.

    Still, the retail giant warned the cost-of-living crisis and supply chain troubles could impact its business, and made fresh calls for the Government to overhaul “a fundamentally flawed business rates system”.

    08:42 AM

    FTSE risers and fallers

    The FTSE 100 has started the day on the back foot as the latest public borrowing figures added to investor concerns about the economic outlook.

    The blue-chip index fell 0.3pc, with losses for a number of staple consumer and pharmaceutical stocks.

    Ocado sank to the bottom of the index after reporting a £211m loss for the first half, but reversing course and pushing back into the green.

    On a busy day for results, there was positive momentum for both Howden Joinery and 3i Group, which rose more than 4pc and 2.4pc respectively.

    The domestically-focused FTSE 250 rose 0.4pc, with Frasers Group jumping almost 12pc after reporting a surge in profits.

    08:35 AM

    A third of households to plunge into energy poverty by October

    Surging energy prices will push one in three UK homes into energy poverty by October, according to damning new predictions.

    The number of homes spending more than 10pc of their total income on energy bills will jump to 8.2m that month, according to the National Energy Action charity.

    Bills are set to jump by about 60pc in October when the new price cap kicks in, and the forecasts take into account a £400 discount for all consumers.

    The surge in energy bills is also set to drive inflation to above 11pc, piling more pressure on British households.

    Peter Smith, director of policy at NEA, said: “The soaring cost of energy, particularly for low-income and vulnerable households, is one of the biggest issues facing the country.”

    08:22 AM

    Ocado losses hit £200m as cost-of-living crunch weighs

    Ocado retail loss - Hollie Adams/BloombergOcado retail loss - Hollie Adams/Bloomberg

    Ocado retail loss – Hollie Adams/Bloomberg

    Ocado has reported a wider loss for the first half of the year as it feels the heat from the UK’s worsening cost-of-living crisis.

    Revenue dropped 4pc while pre-tax loss ballooned to £211m. Shares fell as much as 4.5pc to the bottom of the FTSE 100.

    Ocado has been hit by a sharp drop in demand at its online joint venture with Marks & Spencer as consumers tighten the purse strings. The average basket size for the company was £120, down 13pc on last year.

    Ocado Retail has slashed its forecast twice this year and yesterday announced the departure of boss Melanie Smith.

    Despite the widening loss, Ocado reiterated its forecast for at least £6.3bn in revenue and £750m in profits.

    08:15 AM

    Gas prices fall as Nord Stream flows return to 40pc

    Gas prices across Europe have dropped this morning after Putin restarted supplies through the Nord Stream pipeline.

    The latest figures showed Russian gas was flowing to Germany at about 40pc of capacity between 7am and 8am. That’s roughly the same as before the maintenance work began.

    Benchmark European gas prices fell as much as 6.5pc, while the UK equivalent was down 5.3pc.

    08:13 AM

    Putin resumes gas flows through Nord Stream pipeline

    Nord Stream pipeline Russia - Stefan Sauer/dpa via APNord Stream pipeline Russia - Stefan Sauer/dpa via AP

    Nord Stream pipeline Russia – Stefan Sauer/dpa via AP

    There’s relief across energy markets this morning as Putin resumed pumping gas through the Nord Stream pipeline after a 10-day outage.

    Europe has been on tenterhooks about whether flows would restart after planned maintenance on the link, which accounts for more than a third of Russia’s exports to the EU.

    A spokesperson for the operator said: “We are in process of resuming gas transportation. It can take few hours to reach the nominated transport volumes.”

    There’s still uncertainty over how much gas will be pumped, though. Russia last month slashed supplies to 40pc of capacity, sparking accusations it was using energy supplies as a weapon.

    The EU yesterday told member states to cut their gas demand by 15pc in a bid to avoid rationing and blackouts this winter.

    08:05 AM

    Reaction: Borrowing overshoot will hold back new PM

    Ruth Gregory, senior UK economist at Capital Economics, says the new prime minister will have their work cut out in tackling the cost-of-living crisis.

    June’s public finances figures provided more evidence that the government’s fiscal position is worse than the OBR predicted back in March.

    This may limit the ability of the next prime minister to provide more relief for households when a further rise in CPI inflation from 9.4pc in June to around 12pc in October worsens the cost of living crisis.

    That means after three months of the 2022/23 financial year, borrowing is £3.6bn higher than the OBR expected at this stage. And that’s before taking into account the net £10.3bn handout by the Chancellor in May, a possible further fiscal loosening in the autumn as well as the further upward impact on borrowing from rising interest rates and weaker real GDP growth coming down the line.

    So while borrowing will probably still fall from last year’s (downwardly revised) £141.8bn, we think it will be closer to £110bn in 2022/23 rather than the OBR’s forecast of £99bn.

    This further deterioration in borrowing in June provides a timely reminder to the next prime minister (Sunak or Truss) that the public finances are weaker than the OBR’s forecasts suggest.

    08:02 AM

    FTSE 100 dips

    The FTSE 100 has opened lower this morning after borrowing figures highlighted the strain on the public finances.

    The blue-chip index slipped 0.1pc into the red at 7,258 points.

    07:59 AM

    What does this mean for the Tory leadership hopefuls?

    The latest numbers highlight the challenge faced by either Rishi Sunak or Liz Truss when they succeed Boris Johnson as prime minister.

    Britain is grappling with a deepening cost-of-living crisis as prices across everything from food to energy bills continue to surge. In turn, that’s starting to take its toll on the economy.

    With inflation forecast to peak above 11pc later in the year, pressure is mounting on the Treasury to provide more support to households, while it’s been forced into bigger-than-planned wage increases for public sector workers.

    What’s more, Liz Truss has promised more than £30bn of debt-funded tax cuts for workers and businesses. Rishi Sunak has taken a more cautious approach.

    Either way, however, ballooning debt costs mean the next prime minister will have less fiscal headroom than they would have liked.

    07:52 AM

    Zahawi: There are risks to public finances

    Here’s Chancellor Nadhim Zahawi’s response to the latest public borrowing figures:

    We recognise that there are risks to the public finances including from inflation, with debt interest costs in June more than double the previous monthly record.

    That’s why the Government has taken action to strengthen the public finances, and in their latest forecast the OBR assessed that we are on track to get debt down.

    07:51 AM

    Inflation drives up budget deficit

    The overshoot in public borrowing is being driven by the surging cost of living, as debt payments on around a quarter of all government bonds are linked to the retail price index.

    Figures out yesterday showed RPI jumped to 11.8pc in June – the highest level in 40 years.

    Last month alone, interest costs amounted to £19.4bn. That’s more than double the previous monthly record. In the last three months they’re up 82pc compared to last year.

    Debt costs are always higher than normal in June due to the way index-linked payments are calculated, and the figure is likely to fall back in July.

    Still, continued high inflation and rising interest rates mean they are likely to overshoot the OBR’s forecast of £87bn for the year as a whole.

    07:46 AM

    Debt costs surge in blow for next PM

    Good morning.

    A record interest bill drove the budget deficit up to £22.9bn in June, limiting the next prime minister’s fiscal firepower as borrowing for the month hit the highest level outside of Covid times.

    Debt interest payments, which are being pushed up by inflation on the huge stock of index-linked government bonds, hit an all-time high of £19.4bn in worse-than-expected figures.

    Economists said the deterioration in the public finances would “limit the ability of the next PM to provide more relief for households”.

    However, inflation and Rishi Sunak’s raid also drove tax receipts £8bn higher.

    5 things to start your day

    1) Gas rationing will not save Europe from a winter crisis  Putin’s willingness to weaponise energy supplies means EU will struggle to fill storage

    2) Green energy shift gives China ‘leverage’ over Britain, Lords warn  Overreliance on Beijing’s critical minerals market is a ‘national security concern’

    3) Guardian editor handed inflation-busting £150,000 pay rise  Katharine Viner’s base salary increased by 42pc despite newspaper’s criticism of ‘profiteering bosses’

    4) Robot camera deal with China blocked in first use of new national security law  University of Manchester prevented from sharing technology used in children’s toys, drones and other surveillance equipment

    5) Gatwick hires 400 security staff to tackle travel chaos  Hiring spree aims to ease queues as school summer holidays begin

    What happened overnight

    Hong Kong stocks opened slightly down this morning, with the Hang Seng Index dropping 0.4pc.

    The Shanghai Composite Index eased 0.2pc while the Shenzhen Composite Index on China’s second exchange also fell 0.2pc.

    Tokyo stocks also opened lower, the benchmark Nikkei 225 index dipping 0.04pc

    Coming up today

    • Economics: Interest rate decision (EU), GfK consumer confidence (UK), initial jobless claims (US), Philadelphia Fed Manufacturing Survey (US)

    • Corporate: IG Group (full-year results); Howden Joinery, Moneysupermarket Group, Ocado (interims); 3i Group, AJ Bell, Anglo American, Brewin Dolphin, Britvic, Close Brothers, Diploma, Dunelm, Euromoney Institutional Investor, Frasers Group, Intermediate Capital Group, QinetiQ, SSE, Workspace Group (trading update)

    Read The Full Article Here

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