Russia is poised to default on its international debts for the first time in a century this Sunday, after time runs out for Moscow to make about $100m of overdue payments.
After narrowly swerving a default in April, Vladimir Putin faces a symbolic blow after failing to pay international creditors in time.
A 30-day grace period on coupon payments due last month will run out this weekend.
A default has looked inevitable for weeks after the US Office of Foreign Asset Control removed an exemption allowing US bondholders to receive payments from Russia – leaving the Kremlin out of options.
It would likely stop Russia from raising money on Western markets, a situation that could become more damaging if the contagion spreads to corporate bonds.
Russia has responded angrily to the situation, claiming the default has been engineered by Washington. It has insisted it is willing and able to pay.
Anton Siluanov, its finance minister, called the situation a “farce”.
06:01 PM
Wrapping up
That’s all from us this week, we shall see you on Monday! Before you go, check out the latest stories from our reporters:
06:00 PM
US companies renew commitment to pay travel expenses for staff seeking abortions
US companies such as Disney, JP Morgan and Alaska Airlines have reiterated they will continue reimbursing travel expenses for employees seeking medical procedures in other states, if they can’t get them where they live, after today’s US Supreme Court abortion ruling.
A growing number of companies are paying for employees to get access to reproductive health services if home states ban them.
JP Morgan said: “We’re focused on the health and well-being of our employees, and want to ensure equitable access to all benefits.”
Alaska Airlines said it is “reimbursing travel for certain medical procedures and treatments if they are not available where you live. Today’s Supreme Court decision does not change that.”
Other major corporations such as Amazon, Citigroup and Levi Strauss & Co publicly pledged to cover travel expenses for staff seeking abortion after Politico published the court’s draft opinion earlier this year.
05:37 PM
FTSE 100 ends higher
The FTSE 100 was on the rise today, lifted by defensive stocks at the end of a choppy week that saw investor anxiety over hawkish central banks, weak economic readings and heightened risks of a global recession.
The blue-chip index climbed 2.7pc to 7,208 with Hikma, Ashtead and Croda leading the gains.
Data showed British retail sales volumes slid by 0.5pc in May, while separate figures showed consumer confidence in the UK hit a record low this month.
“It is not just the rising bills of today that are worrying us, it is the prospect of even higher bills tomorrow, and fears of a looming recession, which might cause our finances to unravel entirely,” Hargreaves Lansdown analyst Sarah Coles said.
05:16 PM
Start-up backed by WeWork billionaire Adam Neumann lays off half its staff
WeWork co-founder Adam Neumann has been dealt a blow after a home buying platform he backed just months ago was forced to lay off half its workforce. Lucy Burton reports:
Washington-based real estate site Doorsey has reduced its staff from 24 to nine people after allegedly struggling to raise a new round of financing, according to Business Insider.
The cuts come just months after the business said it had received $4.1m (£3.3m) in funding from 166 2nd Financial Services, Mr Neumann’s family office.
The billionaire set up co-working space WeWork in 2010. He stood down nine years later following a botched attempt at a stock market listing and amid concerns over the internal culture and opaque corporate governance at the company.
04:51 PM
Toblerone to drop “Switzerland” from its packaging as new site opens in Slovakia
Toblerone will have to drop “Switzerland” from its packaging as the mountain-shaped chocolate will no longer be exclusively produced in its home country from 2023.
Established in 1908 in the Tobler family factory, the triangular chocolate has been produced in Bern, in the heart of the Alpine country.
But the brand’s owner, American food giant Mondelez International, said Toblerone will open a new production line in Slovakia by the end of the year “to respond to the growing demand”.
Mondelez International told AFP that it was continuing to invest in the Bern plant. It said: “For legal reasons, the changes we are bringing to our production require us to adjust our packaging to comply with the Swiss law, particularly to remove the word ‘Switzerland’ from the packaging front.”
04:29 PM
House prices to fall in the West as rising rates and cost of living crisis collide
The pandemic property boom across the developed world is coming to an abrupt halt as climbing mortgage rates bring an end to record prices. Tom Rees writes:
Major economies including France, Canada and the US will suffer a tumble in property prices in the coming years, according to Goldman Sachs. The UK’s ultra-tight market means it should escape the worst of a global slump.
Housing markets have been pumped up by government stimulus, low mortgage rates and a dash for space during Covid, with price growth hitting double digits in the UK.
04:08 PM
Lamprell tanks as it mulls heavily discounted takeover
Oilfield servicing firm Lamprell saw shares nosedive after the cash-strapped firm said it is considering a heavily discounted takeover move by a major shareholder.
Shares dropped by around 80pc in early trading after it received the approach by Blofeld Investment Management, which owns a 25.06pc stake in Lamprell.
The approach comes as Lamprell seeks to meet a funding requirement worth around $75m (£61.1m) over the next two months in order to ensure its liquidity.
The two firms have been in discussions for more than two months and Lamprell said it will continue with efforts to work with Blofeld to find a funding solution.
03:59 PM
Handover
It’s time for me to hand over to my colleague Giulia Bottaro, who will steer the blog into the evening. Thanks for following along today!
03:44 PM
Khan caves to unions in pensions row
Sadiq Khan has handed striking Tube workers a major victory by signalling he accepts union demands not to cut staff pensions.
My colleague Oliver Gill reports:
The London mayor said he had not been convinced “that there are any grounds” to change Transport for London’s lucrative final salary retirement schemes, despite his own advisers branding the pension benefits “expensive and unreformed”.
Mr Khan’s remarks come amid an ongoing row with Grant Shapps, the Transport Secretary.
Refusing the London mayor’s demands for a multibillion-pound funding settlement from central government, Mr Shapps said that using the threat of Tube and bus cuts serves as a “political weapon in your campaign for a long-term capital funding deal”.
03:24 PM
US new home sales rise unexpectedly
There was surprising strength in May’s US new home sales, which rose to an annualised rate of 690,000 purchases in the first gain of the year.
Bloomberg reports:
While growing affordability concerns have limited demand since the start of the year, many Americans still have the desire and wherewithal to buy a home.
The pickup in sales may also reflect some buyers locking in their mortgage rate in anticipation of even higher borrowing costs. Earlier this month, the average rate for a 30-year loan posted its largest one-week increase since the 1980s. It’s risen even further since then.
02:53 PM
ECB’s de Guinos says it is ‘firm’ on July rate hike
Luis de Guindos, the European Central Bank’s vice president, says it has clearly signalled its plans to increase interest rates by a quarter point next month.
Responding to a question at a UBS panel over whether officials could go further, faster with a 50 basis point increase, he said:
The communication is firm. What happens later on we will see in September and it will depend on the outlook.
02:28 PM
Deadline nears for Russia to swerve default
Russia is poised to default on its international debts for the first time in a century this Sunday, after time runs out for Moscow to make about $100m of overdue payments.
After narrowly swerving a default in April, Vladimir Putin faces a symbolic blow after failing to pay international creditors in time.
Joseph Marlow from Capital Economics said it looks “all but certain” that Russia will default:
There is unlikely to be a major economic impact. Russia is, after all, already locked out of international capital markets and the relatively strong public finances mean that the government is not dependent on foreign financing. And as strains in Russia’s balance of payments dissipate, the central bank will cut interest rates further and scale back capital controls.
01:51 PM
Copper heads for worst week in a year as recession fears mount
Copper is on track for its steepest weekly loss in a year, a sign that traders are bracing for a global slowdown.
The versatile metal – known as ‘Dr Copper’ for its bellwether properties – has fallen more than 7pc in the last five days, taking prices to the lowest since February 2021.
Investors are curbing their expectations for growth as central banks around the world tighten interest rates, predicating an expected global slowdown.
01:27 PM
Russia ‘worsening’ food crisis with Black Sea blockade
Vladimir Putin’s blockades at key Ukrainian ports and his targeting of infrastructure are making the global food crisis even worse, the G7 said today.
Reuters reports:
Russia is exacerbating food insecurity with its blockades and bombing attacks on key infrastructure in Ukraine, according to a statement released by the foreign ministers of the Group of Seven (G7) major economies on Friday.
The ministers called on Moscow “to cease its attacks and threatening actions and un-block the Ukrainian Black Sea ports for food exports”.
01:14 PM
Strikes and staff shortages hit European flights
Britain is suffering acute travel chaos this summer, amid a week of rail strikes and as airlines cancel flights due to severe staff shortages.
But it is far from the only country, as some Ryanair cabin crew staff in Belgium, Spain and Portugal began a three-day strike today in a dispute over pay and working conditions, forcing the airline to cancel dozens of flights. More staff in France and Italy are expected to walk out over the weekend, too.
Ryanair could only guarantee 30-40pc of its scheduled flights at Brussels’ South Charleroi Airport.
Meanwhile, easyJet’s Spain-based cabin crew are set for a nine-day strike in July unless the budget airline agrees to a demand for a 40pc basic pay rise.
Lufthansa has cancelled more than 3,000 flights too – not due to strikes, but a wave of Covid infections worsening staff absences. The announcement today of 2,200 cancellations, on top of 900 earlier this month, sent its shares down as much as 3.4pc in Frankfurt.
12:19 PM
Europe’s top asset manager warns of slowdown
Europe’s top asset manager has warned rampant inflation and dwindling consumer confidence are creating a painful cocktail for companies that will lead many to cut into their margins.
Kasper Elmgreen, head of equities at Amundi, said a transatlantic slowdown isn’t yet being reflected in company earnings.
He said said Amundi is currently cautious on buying stocks:
The shoe to drop will be on margins. Companies are still very confident, but the market, the buyside, have seen these clouds and they’re not buying it. You can’t have these three clouds without having some kind of rain…
It seems more likely to me than not that this is not going to be a deep recession, but the reason we are not jumping into equities is because of that uncertainty.
11:54 AM
FTSE up strongly
The FTSE 100 is notching up solid gains amid a broad rally across European equities – one which defies the pretty gloomy backdrop.
Still a little while until Wall Street trading opens, but its top indices are also set to climb solidly today.
11:41 AM
Money round-up
Here are some of the day’s top story from the Telegraph Money team:
11:17 AM
BP paid tax on North Sea operations for first time in years
BP has paid tax on its UK North Sea business for the first time in more than half a decade, according to documents released today.
The energy giant’s latest payments to governments report shows it paid $127.3m to HMRC in 2021, after having received a $42m refund the previous year.
It is the first time BP has reported a tax payment to the UK since it first starting producing the report in 2014.
It comes amid tensions between the oil industry and the Government over Rishi Sunak’s new 25pc windfall tax on North Sea producers, which is intended to fund support to help households weather the cost-of-living crisis.
11:03 AM
Petrol hits ‘miserable milestone’ as average price passes £1.90
Road fuel prices are at a another grim new record – average petrol prices passed £1.90 yesterday, according to the RAC – which called it a “miserable milestone”.
The average cost of a litre of petrol was 190.22p on Thursday, while diesel rose half a penny to 198.46p.
RAC spokesperson Simon Williams said:
The cost of petrol at the pumps should really have stopped rising by now and should in fact be going into reverse. For some strange reason, the supermarkets continue to push unleaded higher very much against the trend on the wholesale market. Drivers have every right to be angered by this.
While there is no doubt wholesale costs increased dramatically a few weeks ago this is not the case now, so pump prices must start to fall for fuel retailers to retain credibility with their customers as well as not attracting the negative attention of the Competitions and Markets Authority.
10:57 AM
Pound stronger as dollar dips
The pound is up about 0.35pc today, after an upwards push in the past couple of hours.
A lot of the move seems to be coming from the dollar side (the US currency is broadly weaker today), rather than being spurred by the domestic news (retail sales weakness, Government electoral disasters).
10:53 AM
TUI boss steps down after 10 years at the helm
Fritz Joussen, chief executive of TUI, is set to step down 10 years at the helm of the world’s biggest travel operator.
The 59-year-old will leave the German tour giant at the end of September, it said in a statement that took nearly 4pc off its share price.
He will be replaced by Sebastian Ebel, currently chief financial officer.
Mr Joussen said:
Now that the existential crisis has been overcome, now is the right time for a change at the top of TUI.
The company was mired in financial difficulties when Mr Joussen took the helm in 2013. He improved its fortunes with an expansion into hotels and cruises.
10:29 AM
European gas prices set for second weekly gain
Benchmark natural gas prices for Europe are likely to mark their second consecutive week of advances as Russia’s supply cuts rattle markets.
Bloomberg reports:
Benchmark futures slipped Friday but still are about 12pc higher this week. The crisis is centered around European powerhouse Germany, which moved to the second-highest phase of an emergency plan and warned the cuts could trigger a Lehman Brothers-like collapse of the energy market.
In a note, consultancy Eurasia Group’s Henning Gloystein said:
Germany has become the hotspot of the EU energy crisis following Russia’s invasion of Ukraine… A total supply cut from Russia to Germany would therefore risk the security of supply throughout the EU, possibly triggering a recession and, in the worst case, widespread winter energy rationing.
10:09 AM
Reaction: Stagflation may be best Germany can hope for
Responding to that disappointing business confidence reading from Germany, ING’s Carsten Brzeski says the figures are a reminder that stagflation is now essentially the base case for Europe’s biggest economy.
He said:
The German economy will definitely not plunge as it did during the 2020 lockdowns. However, consumer confidence is already in clear recession territory and today’s Ifo reading, as well as yesterday’s PMI reading, both suggest that the manufacturing sector is quickly following suit. Stagflation for the rest of the year remains our base case scenario for the German economy, and an outright recession is our risk scenario.
09:48 AM
Lufthansa scrap 2,200 flights amid travel chaos
More bad news for Germany: its flagship airline, Lufthansa, has cancelled 2,200 flights amid chaos at Europe’s airports.
The massive wave of cuts comes on top of 900 cancellations announced earlier this month.
The company’s shares fell as much as 3.3pc.
Lufthansa had been hoping for a boom summer, but shortages of staff and ground handlers are causing problems right across the sector.
09:23 AM
German business confidence drops unexpectedly
German business confidence has fallen unexpectedly amid rising concerns over energy supplies from Russia, soaring inflation and supply chain difficulties.
Ifo’s gauge of business expectations fell to 85.8 in June, from 86.9 last month. It ends two months of moderate gains following the initial shock from Russia’s invasion of Ukraine.
The overall business climate index fell from 92.8 to 92.3.
Surveys released yesterday showed Germany’s economy is expanding at the slowest pace in the eurozone. Consumer price inflation in the country hit 8.7pc last month.
Clemens Fuest, the Ifo president, said:
Companies were somewhat less satisfied with their current business situation. Their expectations turned markedly more pessimistic. Rising energy prices and the threat of gas shortages are of great concern to German business.
08:56 AM
Zalando profit warning rattles online retailers
Zalando, Europe’s biggest online retailer, has sent a chill through the sector after after slashing its profit forecast.
The group warned on worsening macroeconomic conditions as it lowered its forecast for adjusted profits to €180m to €260m, versus the €430m to €510m previously predicted.
Guido Lucarelli, a Citi analyst, said:
After some promising signs of improving consumer demand between the end of April and May things seem to have deteriorated significantly in June.
Shares in UK-based web retailers Asos and Boohoo have fallen sharply in response, with the former down nearly 4pc at present.
08:37 AM
Belgian PM: European countries must buy energy collectively
EU countries need to band together to buy energy to avoid a winter fuel crisis, Belgian prime minister Alexander De Croo said today.
Speaking ahead of a meeting of EU leaders in Brussels, her said:
We need to form an energy bloc. If we all operate on our own, we will go down on our own… We need to start buying energy collectively, we need to implement price caps and we need to make plans together to get through the winter.
08:22 AM
Ultra Electronics shares jump as Kwarteng ‘minded’ to approve Cobham takeover
Shares in Ultra Electronics have popped higher with Kwasi Kwarteng set to approve a takeover of the defence and security company by Cobham.
The FTSE 250 group’s shares have risen as much as 13pc, after a statement by the Department for Business, Energy and Industrial Strategy said the Business Secretary was “minded” to allow the transaction though.
Cobham, owned by US private equity group Advent, has agreed to address concerns about the takeover by creating two new UK legal entities to encompass facilities which do sensitive work for the Government.
08:13 AM
Barclays boosts mortgage offer with £2.3bn Kensington takeover
Barclays has bought Kensington Mortgage Company for £2.3bn, expanding its position in Britain’s home lending market.
The Maidenhead-based company, which has around 600 employees, was behind about £1.6bn of mortgages in the year to March. It is currently owned by Blackstone and Sixth Street.
Kensington, which specialises in catering to the self-employed, was previously a listed company between 2000 and 2007.
Barclays said it would fund the takeover from its “existing resources”.
07:55 AM
FTSE set to rise
The FTSE 100 is set to rise 0.5pc at the open, futures trading indicates, after a fall of nearly 1pc yesterday.
07:47 AM
German network regulator says energy costs could triple
Adding to a gloomy day for Germany, the head of its network regulator has warned consumers could see their energy costs double or even triple as a result of the current crisis.
Klaus Mueller from Bundesnetzagentur told broadcaster ARD the regulator had considered various scenarios, and that most “are not pretty and mean either too little gas at the end of winter or already very difficult situations in autumn or winter”.
It comes after Germany moved into phase two of its three-stage emergency gas plan – with the threat of rationing looming.
07:38 AM
Inflation squeezes food spending
Retail sales dropped in May as squeezed households cut back on food spending amid the fastest price increases in over a decade.
The volume of goods sold in store and online fell by 0.5pc between April and May, Office for National Statistics figures showed, driven by a slump in food sales which dropped 1.6pc.
Heather Bovill, an ONS deputy director, said: “Feedback from supermarkets suggested customers were spending less on their food shop, because of the rising cost of living.”
April’s sales growth was also sharply downgraded from 1.4pc to 0.4pc, raising the spectre of a consumer spending slowdown tipping Britain into a contraction during the second quarter.
Emma-Lou Montgomery from Fidelity International said: “With prices for even the most basic foods and goods rising substantially, many consumers are already adopting more defensive spending behaviours, such as self-imposed checkout limits.”
The drop was only marginally better than economists had feared, with City consensus pointing towards a 0.7pc decline. It adds to a dire set of economic figures for May, which have also included bigger-than-expected borrowing and a new 40-year high for overall inflation.
Sales at supermarkets fell by 1.5pc, while sales of tobacco, alcohol and other drinks tumbled 4pc. Non-food store sales were unchanged, with a 2.2pc increase in clothing sales offset by a 2.3pc decline in household goods.
Nicholas Farr from Capital Economics said: “With a further rise in inflation over the coming months set to exert a bigger squeeze on households’ real incomes, retail sales will probably continue to struggle ahead.”
07:19 AM
Agenda: German minister warns of looming industrial shutdown
Good morning. Germany faces an industrial shutdown unless Russian gas supplies improve, one of its top ministers warned today.
In a interview, economy minister Robert Habeck said: “Companies would have to stop production, lay off their workers, supply chains would collapse, people would go into debt to pay their heating bills, that people would become poorer”.
The head of German utility group RWE also warned the continent faces “chaos” if the Kremlin cuts off energy supplies.
“The real fear I have is that European solidarity will come under significant stress if we don’t sort it out before the situation happens,” Markus Krebber told the Financial Times.
Meanwhile, retail sales fell by 0.5pc in May as Britons cut back on food spending amid the fastest price rises in over a decade.
Overall, sales volumes are still above pre-Covid levels, but have steadily slipped since last summer.
It came as the deepening cost of living crisis drove household confidence down to a fresh record low in June, prompting warnings that Britain “faces a stark new economic reality”.
GfK’s closely watched confidence tracker slipped for a sixth consecutive month, dropping from minus 40 to a new all-time low of minus 41.
5 things to start your day
1) Employers across the country are preparing to slash pay for home workers One in ten companies plan on reducing pay or benefits for employees who work from home
2) Debt time bomb a disaster for Tory hopes of economic revival The country’s finances risk running away from Sunak as the economy teeters on the brink of reversal
3) Oil executives turn on Chancellor in private meeting over windfall tax Rishi Sunak warned levy will make the UK a less attractive prospect
4) Retired public sector workers to get £2,000 pension boost as inflation surges Incomes of former civil servants to rise 10pc as ministers call for working people to accept real-terms pay cut
5) Klarna and Barclays in row over buy now, pay later It comes as Government prepares to hit the fast-growing sector with stricter rules
What happened overnight
Stocks and bonds were both headed for their first weekly gain in a month on Friday as investors wagered on central banks bringing inflation to heel, though growth fears dragged on commodities.
Copper, a bellwether for economic output with its wide range of industrial and construction uses, slid 3pc in Shanghai and is down more than 7pc for the week – its sharpest weekly fall since the pandemic-driven financial markets meltdown in March 2020.
Oil also fell overnight, and Brent crude futures are down 2pc on the week to $110.62 a barrel, while benchmark grain prices sank with Chicago wheat off nearly 9pc for the week and at its lowest since March at $9.42 a bushel.
The price falls have made for some relief in equities since energy and food have been the drivers of inflation. After some heavy recent losses, MSCI’s World equities index is up 2pc on the week.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose one per cent on Friday, flattered by short sellers bailing out of Alibaba – which rose 5pc – amid hints that China’s technology crackdown is abating.
Japan’s Nikkei rose 0.8pc for a 1.6pc weekly gain and S&P 500 futures were flat after the index rose about one per cent overnight.
Coming up today
Corporate: No scheduled updates
Economics: Retail sales (UK), EU leaders summit (EU), Michigan consumer sentiment (US), new home sales (US)
Source: https://finance.yahoo.com/news/markets-live-latest-coronavirus-news-061918450.html