Putin Russia France gas supplies energy crisis EU winter rationing – Mikhail Klimentyev / Sputnik / AFP
Putin has slashed gas flows to France, adding to fears of an energy crisis across Europe this winter.
Kremlin-controlled Gazprom has informed French utility Engie that it is reducing gas deliveries from today due to a disagreement on the application of some contracts.
Engie has reduced its reliance on Russian energy since the start of the war and said it had measures in place to reduce the impact of a cut to suppliers from Gazprom.
But the move piles further pressure on European gas flows that are already under strain after Putin cut capacity through the key Nord Stream pipeline.
Elisabeth Borne, France’s Prime Minister, yesterday urged companies to draft energy savings plans by next month, warning they would be hit first if ever France is left with no choice but to ration the supply of gas and electricity.
Meanwhile, the EU is drawing up emergency plans to reduce the cost of energy, increasing pressure on the UK to do the same.
Kremlin: Only sanctions stop Nord Stream from working
Nothing stands in the way of Russian gas exports to Europe through the Nord Stream pipeline apart from technological problems caused by western sanctions, the Kremlin has claimed.
Russian energy giant Gazprom has announced it will shut the pipeline for three days from tomorrow to undertake maintenance of a pumping unit.
EU leaders have accused Russia of using gas cuts as an economic weapon, with a looming crisis this winter threatening to plunge the bloc into recession.
Fears are also mounting that supplies through Nord Stream won’t resume once the work is complete.
Kremlin spokesman Dmitry Peskov said Russia was ready to fulfil its obligations on gas exports, but sanctions were preventing the maintenance and return of equipment.
Eurozone confidence hits 19-month low
Eurozone confidence dropped to its lowest level in a year and a half as inflation keeps rising and the energy crisis pushes the bloc closer to recession.
A gauge from the European Commission fell to 97.6 in August, from 99 the previous month. That was a deeper fall than economists had expected.
Sentiment declined in industry and services as energy shortages hamper output and soaring prices curb demand.
While consumer sentiment unexpectedly rebounded in August from a record low, households are more pessimistic about the outlook than they were during the pandemic.
Reaction: Sense of caution in mortgage market
Tomer Aboody, director of property lender MT Finance, says there are signs the cost-of-living crisis is hitting housing demand.
With mortgage lending decreasing, there’s a sense of caution emerging from buyers looking to purchase, due to increasing interest rates and inflation.
Although there is caution, we need to be realistic and also look at it in perspective to where the market was previously. Borrowing and sales are still higher than pre-pandemic levels, and borrowing rates are still lower than nearly a decade ago.
While society got used to cheap money and low cost of living, the new reality needs to set in with buyers and consumers managing their costs, and their ability to buy.
The ultimate dream home at that higher price point might not be achievable now but buyers should still have some leeway due to affordable rates.
Credit card borrowing hits highest since 2005
Borrowing on credit cards in July rose the most since 2005, according to the Bank of England, in a sign that more people may be using credit to fund spending on essentials.
Szu Ping Chan has more details:
Households took out an extra £1.4bn in credit in July. While this is slightly down on the £1.8bn borrowed in June, it is well above the pre-pandemic average of £1bn-a-month.
Credit card borrowing on an annual basis rose 13pc. This is the biggest jump since 2005 and the fifth month in a row where credit card borrowing has grown at double-digit rates, after dropping sharply during the pandemic.
Meanwhile mortgage approvals rose to 63,800 in July, from 63,200 in June. Economists expect approvals to slow in the coming months as interest rates continue to rise.
The Bank of England said the average rate paid on new mortgages climbed by 0.18 percentage points 2.33pc in July and is now the highest since June 2016. Savings rates also climbed slightly, although most accounts still pay well below the Bank of England base rate of 1.75pc.
The average rate on an instant access account was 0.32pc in July. While tying up your money in a fixed rate bond earned the average saver 1.01pc.
Analysis by the Office for National Statistics (ONS) suggests around six million people are using more credit than usual to fund spending. Middle earners are the most likely to spend this way, according to the ONS.
It said those earning between £10,000 and £50,000 were more likely to use a credit card to fund purchases than those earning more or less. “This may reflect differences in access to credit or in the need to use it,” it said.
No barrister will be starved back to work, says strike leader
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On a rainy morning before a murder trial in Leicester last week, criminal barrister Jo Sidhu QC was wondering how badly the case he had been working on for almost a year was about to be derailed by his own strike.
The Criminal Bar Association (CBA), which he chairs, had just voted in favour of an all-out indefinite strike over pay from September 5, the day the new prime minister takes over, in a move that will leave courtrooms across the country empty for an unknown length of time.
Fears are rising over a worsening case backlog as summer protests escalate, writes Lucy Burton.
Read her full story here
Lurpak owner warns prices will rise further
Lurpak has found itself at the centre of the cost-of-living crisis, with Brits bemoaning astronomical price rises for the Danish spread.
But now Arla Foods, which makes the costly butter, has warned prices will rise even further.
The dairy cooperative said sales in the first half of the year rose 17pc to €6.4bn (£5.5bn), driven by higher prices even as volumes declined.
But it said production wouldn’t increase due to higher costs on the farm, with the price of fertiliser up by 145pc, fuel by 134pc and cow feed by 36pc.
Arla said: “With on-going inflationary pressure and political unrest negatively impacting global growth, Arla expects the second half of 2022 to be even more challenging as the global milk production is expected to decline further and contribute to sustained high dairy prices, which will likely further diminish consumer confidence and consumption.”
Read more on this story: Supermarkets add security tag to Lurpak as price hits £9 a pack
TfL calls board meeting over funding deal
Transport for London funding deal – ANDY RAIN/EPA-EFE/Shutterstock
Transport for London is said to have called a board meeting today discuss the Government’s long-term funding deal.
Bosses will meet from noon, with talks taking place in private due to “commercially sensitive” details, the Evening Standard reports.
The Government’s offer is said to include £3.6bn for infrastructure projects and maintenance up to March 2024. It also includes assurances that it would “broadly cover” the difference between TfL’s revenue and costs.
TfL would be asked to raise at least £500m a year on top of fares and continue with projects including expanding London’s Ultra Low Emission Zone.
The transport body received about £5bn in short-term funding deals during the pandemic, but its finances are still under huge strain with fare revenue 20pc below pre-pandemic levels.
The most recent deal ran out earlier this month and Mayor Sadiq Khan has refused to accept the terms of a new funding deal, instead relying on reserves.
Pound struggles as recession fears weigh
Sterling in struggling against the dollar amid fears the UK is heading for a recession.
The pound edged 0.2pc higher to $1.1735, but stayed close to its lowest since March 2020, which was hit yesterday. Against the euro it was little changed at 85.40p.
The pound has lost ground as traders weigh up the prospect of further interest rate hikes, which could deepen an economic downturn.
It’s also on track to post a 1.6pc fall against the euro this month.
Asda tables £450m bid for Co-op’s petrol stations
Asda petrol station Co-op – Simon Dawson/Bloomberg
Asda is said to have emerged as the frontrunner in the race to buy up Co-op’s petrol stations after tabling a bid worth £450m.
The supermarket chain is in talks to buy the assets as it prepares to move further into the UK convenience store market, Sky News reports.
The deal could be announced as soon as this week, although other suitors are said to be in interested in tabling bids.
Asda, which runs 320 petrol stations across the UK, was taken over by the billionaire Issa brothers and TDR Capital last year.
It agreed to sell 27 of its forecourts in order to secure the acquisition following competition concerns by the regulator. The Issa brothers and TDR Capital also own EG Group, one of Europe’s largest independent fuel retailers.
Bunzl lifts profit outlook after strong first half
Distribution giant Bunzl has raised its outlook for profitability for the second half of the year after it ramped up prices to offset higher costs.
The FTSE 100 group, which makes products including coffee cups and food labels, said inflation became “more widespread” across the business over the first half of 2022.
But it said this had been more than offset by moves to increase the prices it charges customers globally, as well as efforts to make savings across the business.
It posted a 12.4pc rise in underlying pre-tax profits to £380.5m for the six months to the end of June as revenues rose 16.1pc to £5.7bn.
Bunzl raised its expectations for group operating margin thanks to the first-half performance, though it warned of an “increasingly uncertain” economic outlook.
Shares fell 4.4pc.
Morgan Stanley orders lawyer to supervise traders
Morgan Stanley lawyer block trading – REUTERS/Andrew Kelly/File Photo/File Photo
Morgan Stanley is said to have ordered an internal lawyer to supervise traders in its division caught up in a federal investigation into block trading.
The Wall Street bank has placed one of its lawyers on its US equity syndicate desk to supervise bankers and answer their legal questions, the Financial Times reports.
The decision was made after the bank placed Pawan Passi, head of the desk, on leave last year.
It’s the latest fallout from US investigations into Morgan Stanley’s block trading business, which picked up momentum after the collapse of Archegos Capital Management last year.
Gas prices rise on signs of deeper energy crunch
Natural gas prices are back on the rise this morning amid concerns of a deepening supply crunch after Russia slashed supplies to France.
Benchmark European prices jumped as much as 4.2pc after dropping 20pc yesterday due to the Bank Holiday. The market has been highly volatile, with prices hitting record highs last week.
As well as Gazprom’s cuts to Engie, Russia plans to halt deliveries through the Nord Stream pipeline to Germany for three days of planned maintenance starting tomorrow.
Ursula von der Leyen, European Commission President, yesterday said the bloc will try to develop an emergency instrument to break the link between gas and electricity prices.
Read more on this story: EU draws up emergency plan to cut energy costs
FTSE risers and fallers
The FTSE 100 has reversed its early losses to push higher as traders returned after the Bank Holiday weekend.
The blue-chip index rose 0.7pc, having opened in the red.
Banking stocks were the driving force behind the rise, with HSBC, Lloyds and Barclays all up at least 2pc.
It comes after hawkish comments from ECB speakers and US Federal Reserve chair Jay Powell lifted expectations of further interest rate rises.
Oil giants Shell and BP also gained ground. That offset a decline for miners including Rio Tinto and Glencore amid concerns of an economic slowdown.
The domestically-focused FTSE 250 rose 0.2pc. Publisher Future sank to the bottom of the index with a decline of 3.5pc.
Australia’s Woodside Energy cashes in on higher gas prices
Australia’s biggest oil and gas producer saw its profits surge more than fivefold in the first half of the year thanks to higher prices and its takeover of BHP’s energy assets.
Woodside Energy said net profit jumped 417pc to $1.6bn (£1.4bn) as the average realised price more than doubled from a year earlier to $96.40 a barrel of oil equivalent.
The completion of its takeover of BHP’s petroleum business in June also helped lift production by 19pc to 55m boe.
Woodside has faced criticism over its fossil fuel development following the BHP deal, which made it Australia’s largest energy firm and one of the world’s biggest liquefied natural gas suppliers.
The company has also used the global energy crisis to defend its decision to continue to invest in production such as the Scarborough project, which is set to supply its first LNG cargo in 2026.
Woodside also said it would pay a first-half dividend of $1.09 per share – more than three times last year’s level.
Pubs warn over mass closures as energy bills surge 300pc
Pubs closures energy bills – Dominic Lipinski/PA Wire
British pubs have warned of a swathe of closures ‘within months’ amid a surge in energy bills of as much as 300pc.
Bosses of six of the UK’s largest pub and brewing companies have written to the Government urging it to act to avoid “real and serious” irreversible damage to the sector.
It comes after Ofgem last week confirmed an 80pc jump in the energy price cap from October.
However, businesses operate without a regulated price cap, with some venue owners warning their bills had quadruped or were even struggling to find suppliers willing to offer them a contract.
Greene King, JW Lees, Carlsberg Marston’s, Admiral Taverns, Drake & Morgan and St Austell Brewery all signed the letter.
FTSE 100 opens lower
The FTSE 100 has started the week on the back foot in a sign negative sentiment is lingering after the long weekend.
The blue-chip index slipped 0.2pc to 7,410 points.
Gas supplies slashed ahead of Nord Stream outage
The cuts to gas supplies to France comes as Russian prepares to shut down the crucial Nord Stream pipeline to Germany for three days from tomorrow for planned maintenance.
The pipeline is already operating at just 20pc of capacity due to Russia’s cuts, and there are fears flows may never resume after the work is completed.
But Engie insisted the impact of Gazprom’s latest cuts would have a limited impact on France.
It said deliveries from Russia had already decreased “substantially” since the beginning of the war in Ukraine, with recent monthly supply of about 1.5 terawatt-hours. That compares to the group’s total annual supplies in Europe above 400 terawatt-hours.
Putin slashes gas supplies to France
We start with yet another escalation in the energy crisis, as Putin slashed gas supplies to France.
Gazprom informed French utility Engie that it was reducing gas deliveries from today due to a disagreement on the application of some contracts.
The move piles further pressure on European energy supplies, which are already under strain. France has urged companies to draft energy savings plans by next month, while the EU is drawing up emergency plans to reduce the cost of energy.
Engie said: “As previously announced, Engie had already secured the volumes necessary to meet its commitments towards its customers and its own requirements, and put in place several measures to significantly reduce any direct financial and physical impacts that could result from an interruption to gas supplies by Gazprom.”
5 things to start your day
1) The Great Unretirement takes off as pensioners lose spending power – Return of older workers signals the severity of the cost-of-living crisis
2) British battery plant delays production again as energy costs soar – Britishvolt warns it will now not deliver batteries until late 2025
3) High street firms forced to pay energy suppliers millions upfront – Fears businesses will collapse as providers demand hefty deposits to secure supply
4) BAE in talks to build five more submarine-hunting ships – Ministry of Defence close to agreeing multi-billion pound warships deal
5) Elon Musk says civilisation will crumble without oil and gas – Billionaire also warns green energy transition will take decades to complete
What happened overnight
Stock and bond markets attempted to steady on Tuesday, as investors turned their focus to this week’s US labour market report, to gauge if interest rate hikes that have been priced in around the world are justified.
By mid-morning, MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.4pc, while Japan’s Nikkei stock index rose nearly one per cent, in part helped by a fresh round of weakness in the Japanese yen.
Wall Street indexes fell on Monday, but the pace of selling was reduced and US stock futures were steady in Asia. Besides interest rates, the health of China’s economy is also at the forefront of investor concerns.
China’s benchmark Shanghai Composite Index lost 0.4pc in early trade. Hong Kong’s Hang Seng index fell 1.8pc as investors start to walk back their enthusiasm about an agreement struck between China and the US for access to Chinese companies audit papers.
Coming up today
Corporate: Bunzl, Old Mutual (interims)
Economics: Inflation (Ger), business climate (EU), consumer confidence (EU, US), house price index (US), BRC shop price index (UK)