A full shut-off of Russian gas supplies looks increasingly likely, meaning the eurozone is set to be driven into a recession, Fitch has warned.
The ratings agency said a total shutdown of flows from Moscow “increasingly looks like a reasonable assumption” when making economic forecasts.
It said that outcome would hit eurozone GDP by 1.5-2 percentage points, rising to 2.5pp in Italy and 3pp for Germany.
The bloc would likely be tipped into recession in the second half of this financial year, with Italy and Germany suffering contractions in GDP in 2023, it added.
The EU is racing to refill storage sites and find alternative sources of energy as Putin continues to slash gas flows to the continent.
But Fitch warned the bloc was still vulnerable to the economic fallout despite these efforts, with the damage amplified if energy rationing is needed over winter.
Gazprom has shut down the critical Nord Stream pipeline to Germany for three days this week for planned maintenance, fuelling fears that supplies may not resume once the work is complete.
08:21 PM
Wrapping up
That’s all from us this evening, thank you for following! Before you go, have a look at the latest stories from our reporters:
05:39 PM
Union threatens to shut rail network with more strikes
Railway workers are set to go on strike again after talks between the rail industry and the Rail, Maritime and Transport union fell apart.
The union has said 40,000 members will strike on September 15th and 17th as they failed to make a breakthrough in talks with Network Rail and 14 train operators.
RMT general secretary Mick Lynch said: “Our members have no choice but to continue this strike action.
“Network Rail and the train operating companies have shown little interest this past few weeks in offering our members anything new in order for us to be able to come to a negotiated settlement.
“We will continue to negotiate in good faith, but the employers and Government need to understand our industrial campaign will continue for as long as it takes.”
Aslef and the Transport Salaried Staffs Association have also said in recent weeks that their members will stage a walk-out.
The Department for Transport said union leaders were choosing “self-defeating, co-ordinated strike action over constructive talks”.
Andrew Haines, chief executive of Network Rail, said employees had been offered a two-year 8pc pay rise.
He said: “Frustratingly, the RMT’s decision to call further action means we will again have to ask passengers to stay away from the railway on September 15 and 17, at a time when we should be focusing on building a railway fit for a 21st century, post-pandemic Britain.”
04:05 PM
Handing over
That’s all from me for today – thanks for following. Helen Cahill will take things from here.
04:01 PM
Pound falls below $1.15 for first time since March 2020
Sterling has continued its tumble this afternoon, falling below $1.15 for the first time since March 2020.
The pound was down as much as 1.1pc against the dollar to $1.1499 amid mounting concerns about inflation, energy supplies and a potential recession.
Traders have a close eye on the $1.1412 mark. If the pound falls below this, it would be the lowest level since 1985.
03:51 PM
Disney plots Amazon Prime-style subscription perks
Disney is exploring Amazon Prime-style membership perks for subscribers to its streaming service as competition for viewers intensifies, writes Ben Woods.
The Star Wars producer is weighing a new membership service to lure customers into spending more money across its streaming service, resorts, theme parks and stores.
It is thought that customers who pay a monthly fee to watch films and series would also get discounts for other Disney services.
The proposal will draw parallels with Amazon’s Prime subscription service, which offers access to its video streaming service, Amazon Music, Prime Reading, discounts with the takeaway app Deliveroo and free online shipping.
Amazon Prime Video is considered a loss leader designed to encourage people to sign up and spend more money through the company’s so-called everything store.
Bob Chapek, Disney’s chief executive, is pushing for the entertainment titan to cross-sell more of its products according to the Wall Street Journal, which first reported the story.
03:26 PM
Shell won’t take stake in new Russian LNG operator
Shell has said it won’t take an equity stake in the new entity that will operate the Sakhalin-2 liquefied natural gas project after the Kremlin moved to seize control of the asset.
The FTSE 100 energy giant has informed Moscow and partners in the company that previously operated the project.
It’s now assessing options under the new ownership.
It comes after Putin ordered the establishment of a new operator for Sakhalin-2 in July, throwing the future of Shell’s stake in the project into doubt.
02:50 PM
How an SNP fiasco became a £13m ‘laughing stock’
It was supposed to be a gleaming symbol of Edinburgh’s success as a modern city, but the long-awaited return of trams to the Scottish capital was so beset by missteps that even the man formerly in charge of the project once labelled it “hell on wheels”.
When the first tram began running on the 8.7-mile route in 2014, it was five years later than planned and £400m over budget. It proved such a fiasco that former first minister Alex Salmond ordered an inquiry.
Now, however, that investigation itself has turned into a white elephant. Taxpayers learnt this week that an official probe into the botched scheme will now cost the same as Sir John Chilcot’s investigation into the Iraq war.
Lucy Burton delves into Edinburgh’s disastrous tram project. Read her full story here.
02:37 PM
Wall Street opens lower as slowdown worries mount
Wall Street’s main indices have started the month on the back foot as weak economic data added to concerns about a looming recession.
The S&P 500 fell 0.5pc at the open, while the Dow Jones was down 0.2pc. The tech-heavy Nasdaq fell 0.9pc.
02:25 PM
Patisserie Valerie to shut nine cafes
Patisserie Valerie is to shut nine cafes that have not recovered “as well as expected” following the pandemic.
The coffee and pastries business, which is backed by Irish private equity firm Causeway Capital, said it has “faced a period of unprecedented challenges in recent times”.
It said it will now shut nine patisseries following a review of its store estate.
The group said it will shut its Belfast Donegal Square, Belfast Castle Lane, Belfast Forestside, Victoria Station London, Windsor, Dundee, Glasgow Central, Eastbourne and Exeter sites.
Patisserie Valerie said it had chosen the site as “we now do not feel they will recover sufficiently” amid further cost pressures.
02:01 PM
Twitter trials long-awaited edit button
After years of pressure, it seems Twitter has finally given in.
The social media platform is internally testing a widely-requested edit button, allowing users to amend errors in their tweets after publishing.
Users will be able to edit their tweets “a few times” within 30 minutes of publication, Twitter said.
Edited tweets will have an icon and timestamp to display when the post was last edited. Users will be able to click on the label of an edited tweet to view the edit history and previous versions of the post.
The company said the feature that will be rolled out to paid subscribers in the coming weeks.
01:51 PM
US jobless claims fall for third week
Applications for US unemployment insurance fell for a third week to a two-month low, suggesting healthy demand for labour even as economic growth slows.
Initial unemployment claims decreased by 5,000 to 232,000 in the week ending August 27, according to Labor Department data.
Continuing claims for state benefits rose to 1.44m in the week ending August 20 from 1.41m.
01:36 PM
China marriages plunge to record low amid fears of population crisis
Marriages in China have plunged to their lowest levels on record in an alarming sign of the deepening population crisis facing the world’s second-largest economy.
Tom Rees has more:
Official data revealed that marriage registrations slumped 6.1pc to 7.6m in China last year amid warnings that the economic consequences of an ageing population are already beginning to emerge.
It is the fewest marriages since public records began in 1986 and the rate has almost halved in the last decade to 5.4 marriages per 1,000 people. Almost half of those getting married were aged above 30 as people are forced to delay plans to start a family.
China’s brewing demographics crisis will have far-reaching consequences from economic growth to the housing market with the central bank warning that its population could peak this year.
Joanna Davies, head of China economics at Fathom Consulting, said China’s “demographic dividend is over”, warning population shifts “will soon act as a constraint on, rather than a driver of, its growth”. She said China’s deteriorating demographics can be explained by the one-child policy, some of the highest childcare costs in the world and net outward migration.
12:48 PM
UK to invest £700m in Sizewell nuclear power plant
Britain will invest £700m in the Sizewell C nuclear power project as part of its plan to secure future energy supplies.
Boris Johnson said he was confident the funding deal for EDF’s 3.2 gigawatt plant will get “over the line” in the next weeks.
While the project won’t help current pressure on energy prices, it’s key to the UK’s goal of tripling nuclear capacity by 2050.
It’s only the second nuclear power station to get government approval in the last three decades and will power 6m homes for the next 60 years if it secures funding.
In a speech outside the Sizewell B power station in Sussex, the outgoing prime minister said: “We need to pull our national finger out and get on with Sizewell C.”
He took aim at the “short-termism of successive British Governments” for not prioritising nuclear power in the past decades.
12:35 PM
Ovo Energy calls for 10-point plan to lower bills
Ovo Energy, the UK’s third largest supplier, has set out a plan it says would enable the Government to help homes facing soaring bills.
Stephen Fitzpatrick, founder of Ovo, set out 10 aims, ranging from bringing forward subsidies of bills to launching a national home insulation drive.
The 10-point plan in full:
Bring forward the £400 ($464) energy bill subsidy
Set up a fuel poverty task-force
Increase funding for debt advisory charities
Make prepayment meters the cheapest way to pay
Smooth bill hikes with a tariff-deficit fund, focusing on poorest households
Abolish the standing charge in bills
A national home insulation effort
Expand Future System Operator’s remit to procure energy for the country
Reinstate a single department of energy and climate change
Introduce a carbon tax
Read Stephen Fitzpatrick’s article for the Telegraph here: We must bail out households or squander another chance to fight the energy crisis
12:22 PM
Microsoft’s $69bn Activision takeover faces watchdog probe
Microsoft’s planned $69bn (£60bn) takeover of gaming giant Activision Blizzard is facing an in-depth review by the competition watchdog.
The Competition and Markets Authority said it was concerned about a substantial lessening of competition in the gaming consoles, multi-game subscription services and cloud gaming services markets.
The record-breaking deal for the maker of Call of Duty would turn Xbox manufacturer Microsoft into the world’s third-largest gaming company.
The CMA gave Microsoft until September 8 to offer acceptable remedies.
Sorcha O’Carroll, senior director of mergers at the CMA, said:
Following our Phase 1 investigation, we are concerned that Microsoft could use its control over popular games like Call of Duty and World of Warcraft post-merger to harm rivals, including recent and future rivals in multi-game subscription services and cloud gaming.
If our current concerns are not addressed, we plan to explore this deal in an in-depth Phase 2 investigation to reach a decision that works in the interests of UK gamers and businesses.
12:07 PM
US futures tumble as slowdown worries escalate
US futures have started September on a dour note as weak factory activity data from Europe and Asia added to fears about a global economic slowdown.
Rising interest rates, high inflation, the fallout from the Ukraine war and China’s Covid curbs all contributed to tepid manufacturing activity across the UK, Germany, Japan and China, although there were signs of easing cost pressures.
In the US, the Institute for Supply Management’s report due later today is expected to show manufacturing activity dropped to 52.0 last month from 52.8 in July – the lowest reading since June 2020.
Futures tracking the S&P 500 rose 0.7pc, while the Dow Jones was up 0.5pc. The tech-heavy Nasdaq gained more than 1.7pc.
11:52 AM
Diesel prices start to rise again in ‘ominous’ sign
Diesel prices have started to rise again after two months of falls in an “ominous” sign for motorists.
The average price of diesel rose for the second day yesterday, adding more than half a penny since Monday.
Yesterday, it averaged 183.71p a litre, having reached its lowest point on Monday at 183.19p a litre, according to figures from the AA. On 1 July, diesel had set a record of 199.07p a litre but had been falling since.
Average petrol pump prices continue to drop albeit at a much slower rate than earlier in the summer. Yesterday, they averaged 169.80p a litre, having crashed from the record high of 191.53p on 3 July.
Luke Bosdet at the AA said:
The rise in diesel costs is ominous and casts a shadow over transport costs and the fuel expenditure of businesses that rely on this workhorse fuel to deliver services, particularly in rural areas.
11:35 AM
University staff vote to strike in pay dispute
Thousands of British university staff have voted to strike in a dispute over pay, the trade union Unison has confirmed.
Staff including cleaners, administrators, library, catering and security workers will walk out after rejecting a 3pc pay offer from the University and Colleges Employers Association.
Mike Short, head of education at Unison, said: “This ludicrously low increase does nothing to ease the financial pressures for thousands of struggling staff.”
11:18 AM
Russian energy boss who criticised Ukraine war dies after falling from 6th floor window
The chairman of Russian energy giant Lukoil has died after falling from a hospital window in Moscow, months after his company criticised Putin’s invasion of Ukraine.
Ravil Maganov, 67, was found dead after allegedly falling from a ward on the 6th floor of the Central Clinical Hospital, where he was being treated, according to Russian news agency Interfax.
Local media also reported that law enforcement was on the scene and working to establish the cause of the incident.
Lukoil, which is Russia’s second-largest oil producer, was one of the few companies in the country to come out in opposition to the war in Ukraine.
In a statement in March it said: “Calling for the soonest termination of the armed conflict, we express our sincere empathy for all victims, who are affected by this tragedy.
“We strongly support a lasting ceasefire and a settlement of problems through serious negotiations and diplomacy.”
Mr Maganov had worked at Lukoil since 1993, shortly after the company’s inception, and had overseen its refining, production and exploration, becoming chairman in 2020. His brother Nail is the head of mid-sized Russian oil producer Tatneft.
10:51 AM
Lufthansa cancels ‘almost all flights’ on Friday due to strike
Lufthansa is cancelling “almost all” of its flights to and from its main German bases in Munich and Frankfurt tomorrow after pilots called a strike.
The airline will cancel 800 flights affecting 130,000 passengers on Friday after cockpit staff announced industrial action amid a pay dispute.
The main pilots’ union has demanded a “significantly improved offer”.
Lufthansa said it has “absolutely no understanding” for the decision to strike, after making what it called “a very good and socially balanced offer.”
10:28 AM
Barclays pulls out of Africa after selling Absa stake
Barclays has pulled out of Africa six years after first announcing its exit plans.
The bank said it has sold its remaining 7.4pc stake in South African lender Absa, signalling the end of its 97-year presence on the continent.
Barclays said it had raised around £538m from the sale of more than 63m shares in the business.
But it reported a loss of £31m through its income statement, suggesting it has taken a hit from selling off its stake.
In 2016, former chief executive Jes Staley led plans to make a strategic exit from Africa in a move to refocus the bank on its core UK and US markets.
This also involved proposals to close smaller operations in Asia, Brazil, Europe and Russia.
10:14 AM
Reaction: Manufacturers worried about how long they can last
Rebecca Shalom, UK head of manufacturing at KPMG, says some manufacturers will be worried about how long they can withstand price pressures.
The cost of manufacturing is rising significantly, at a time when some customer demand is dropping.
The consequence is a downturn for the UK manufacturing sector, with business confidence falling alongside orders.
Passing higher input costs on to customers is becoming increasingly difficult in this landscape, and the cost of borrowing is hard to manage.
Faced with a multitude of cost pressures alongside rising inflation, manufacturers are increasingly searching for efficiencies or delaying investments.
And some, particularly those who are energy-intensive, will be increasingly concerned about how long they can withstand these pressures.
09:59 AM
Manufacturing downturn deepens as demand falls
UK manufacturing production suffered its steepest downturn since May 2020 last month as demand from both domestic and overseas clients dropped sharply.
S&P Global’s PMI gauge fell to 47.3 in August, down from 52.1 in July and the first reading below the 50.0 mark since the early months of the pandemic.
Manufacturing production registered a steep decrease during August, with substantial contractions across the consumer, intermediate and investment goods sectors.
The decline reflected weaker intakes of new work, reduced new export business and shortages of both staff and raw materials.
09:40 AM
Earnings to collapse to 2003 levels as inflation batters living standards
The cost of living crisis will drag average earnings back to the same level as 2003 as Britain faces the biggest slump in living standards for a century, economists have warned.
Tom Rees and Howard Mustoe have more:
Real disposable incomes will slump 10pc over the next two years in a crushing blow to household finances that will severely damage the economy, according to the Resolution Foundation.
An extra 3m people will fall into absolute poverty as a result of the cost of living crunch.
Lalitha Try, researcher at the Resolution Foundation, said the outlook for living standards is “frankly terrifying” as households brace for a 80pc surge in the energy price cap in October and further jumps next year.
She said: “No responsible government could accept such an outlook, so radical policy action is required to address it.
“We are going to need an energy support package worth tens of billions of pounds, coupled with increasing benefits next year by October’s inflation rate.”
The Foundation said the latest setback to pay will cause average weekly earnings to retreat to levels seen in 2003.
09:18 AM
Pound slumps to 2.5 year low
Sterling has extended its declines, dropping to a two-and-a-half year low against the dollar.
The pound was on track for its fifth straight day of declines after August marked its worst month against the dollar since 2016.
It fell as low as $1.1568 this morning – its lowest since March 2020. A fall below $1.1412 would take the pound to its weakest since 1985. Against the euro it ticked up 0.2pc to 86.34p.
Investors are looking ahead to PMI data, which is expected to show that UK manufacturing and services activity remains weak.
09:05 AM
Gas prices slide again as stockpiles build
Natural gas declined for a fourth day after a recent surge to record highs eroded demand, while a rapid refilling of stage sites helped ease concerns over supply from Russia.
Benchmark European prices fell as much as 5pc, shedding about a third of the value since last week’s highs.
The EU has built inventories for the winter around two months ahead of schedule, helping to combat concerns that Russia could withhold flows even after the end of a three-day maintenance outage in the Nord Stream pipeline.
Still, the bloc is calling for drastic reductions in gas use now to avoid rationing and blackouts this winter.
08:48 AM
FTSE risers and fallers
The FTSE 100 is trailing this morning amid worries about interest rate rises and the outlook for the economy.
The blue-chip index slumped 0.9pc in early trading, dragged down by commodity stocks.
Glencore dropped 5pc, leading the losses for mining firms as metal prices dropped. Slowing factory data from Asia added to concerns about weaker demand.
Reckitt Benckiser was also down more than 5pc after it announced the shock departure of chief executive Laxman Narasimhan.
Barclays fell 1.2pc after it decided to sell its 7.4pc stake in South African bank Absa, completing its exit from an over nine-decade presence on the continent.
The domestically-focused FTSE 250 was also down 1pc.
08:14 AM
Reckitt Benckiser boss steps down
Shares in Reckitt Benckiser have dropped sharply this morning after the consumer goods giant announced the shock departure of its boss.
Chief executive Laxman Narasimhan will step down from the FTSE 100 group at the end of the month to pursue a new opportunity in the US.
The Dettol maker said Nicandro Durante, currently senior independent director, will take over as interim chief executive while the board looks for a longer-term replacement.
Shares dropped as much as 5.5pc.
Mr Narasimhan has led a turnaround of Reckitt since taking over in 2019, unwinding the missteps of predecessor Rakesh Kapoor.
He’s helped to deliver an improved performance at the company, thanks in part to sell parts of the business such as its infant formula division in China.
08:07 AM
Reaction: Energy efficient homes will be high on wish lists
Tomer Aboody, director of property lender MT Finance, says homebuyers will be looking for energy-efficient properties.
With less stock on the market and therefore lower transaction volumes, these price rises are not surprising as buyers have little choice and are therefore outbidding to secure a home.
However, while a few months ago these bids were above asking price, buyers now are more cautious due to rising rates and costs so are bidding around or below asking price, taking into consideration any work required and therefore delays in material and higher building costs.
With energy prices rocketing, an energy-efficient home will be higher up the pecking order on buyer’s wish lists, especially as lenders will be looking to reward borrowers on being more efficient by offering lower rates.
08:02 AM
FTSE 100 opens lower
The FTSE 100 has fallen further into the red after heavy losses on Wednesday as recession fears continue to rattle markets.
The blue-chip index fell 0.6pc to 7,239 points.
08:01 AM
Nationwide: Housing market set to slow further
Robert Gardner, Nationwide’s chief economist, warns of a further slowdown in the housing market amid surging energy bills and rising rates.
While annual house price growth softened in August, it remained in double digits for the tenth month in a row – at 10pc.
Prices rose by 0.8pc month on month, after taking account of seasonal effects – the thirteenth successive monthly increase. Indeed, in the past two years, the average house price has increased by almost £50,000.
There are signs that the housing market is losing some momentum, with surveyors reporting fewer new buyer enquiries in recent months and the number of mortgage approvals for house purchases falling below pre-pandemic levels.
However, the slowdown to date has been modest, and combined with a shortage of stock on the market, has meant that price growth has remained firm.
We expect the market to slow further as pressure on household budgets intensifies in the coming quarters, with inflation set remain in double digits into next year.
Moreover, the Bank of England is widely expected to continue raising interest rates, which will also exert a cooling impact on the market if this feeds through to mortgage rates, which have already increased noticeably in recent months.
07:55 AM
Thousands of households facing £7,000 energy bills
Good morning.
Thousands of households in Britain are facing energy bills of £7,000 as soon as October when the price cap rise comes into effect.
Forecasts from Nationwide show the least energy efficient households face a huge £2,700 rise in bills. That’s far more severe than the £1,250 rise facing the average household.
The figures also showed surprisingly resilient growth in house prices in August. They were up 0.8pc on the previous month after posting growth of just 0.2pc in July.
But a combination of higher interest rates and soaring energy bills means a slowdown in the market is still expected.
5 things to start your day
1) Executives working from holiday homes fear a tax crackdown – Britons on post-pandemic ‘workcations’ face threat of tax rules shake-up
2) ONS inflation ruling to cost households millions in higher fares, phone and broadband contracts – Official statistics body rules the £400 energy bill discount will not act to reduce inflation figures
3) John Lewis is giving free English breakfasts to Christmas workers – Retailer offers free meals as it embarks on a hiring spree of 10,000 festive workers
4) Earnings to collapse to 2003 levels as inflation batters living standards – Households facing worst hit for a century, warns Resolution Foundation
5) Gazprom hands Kremlin £8.5bn dividend after record profit – State-owned energy giant’s shares soar by 20pc as global surge in gas prices nets it a half-year profit of £36bn
What happened overnight
Tokyo stocks opened lower this morning, with the benchmark Nikkei 225 index down 1pc and the broader Topix index dropping 0.8pc.
Hong Kong stocks also opened with more losses. The Hang Seng Index plummeted 1pc.
The Shanghai Composite Index lost 0.2pc, while the Shenzhen Composite Index on China’s second exchange also eased 0.2pc.
Coming up today
Corporate: PPHE Hotel Group (interim results); Kainos (trading statement)
Economics: Manufacturing PMI (UK, US, EU), unemployment rate (EU), jobless claims (US), retail sales (Ger)
Source: https://finance.yahoo.com/news/thousands-households-face-7-000-065642498.html