Russia faces oil price cap in fresh blow to Kremlin

G7 Russia oil ban Putin energy sanctions Ukraine inflation – AP Photo/Martin Meissner, File

The G7 is drawing up plans to punish Vladimir Putin with a cap on the price of Russian oil that could also calm inflation.

Wealthy nations would effectively create a buyer’s cartel to drive down the value of the Kremlin’s most lucrative export by only allowing Russian crude and petroleum products to be sold and stored at below a certain price.

Talks will aim to maintain Chinese and Indian access to cheaper crude from Russia, rather than attempting to bring about a full boycott that could send prices surging.

Countries are grappling with how to keep pressure on Putin through sanctions without exacerbating the inflationary crises many are facing at home.

Finding ways to lower the oil price could starve Russia of vital funding while also easing costs for businesses and households.

Officials in the US and German governments have said plans are being hashed together at the G7 summit in Bavaria, with hopes that a fully-fledged plan can be announced tomorrow.

12:01 PM

Fuel prices extend record highs

UK petrol diesel prices RAC – Joe Giddens/PA Wire

Fuel prices are still hitting new record highs across the UK even as wholesale prices behind to fall.

The average price of petrol at the pumps rose to 191.05p yesterday, according to the RAC. Diesel hit a record high on Saturday at 199,09p before edging lower a day later.

The numbers suggest retailers aren’t yet passing on savings from lower wholesale prices to drivers on the forecourt – something motoring bodies have criticised heavily.

Simon Williams, fuel spokesman at the RAC, said:

We are struggling to see how retailers can justify continuing to put up their unleaded prices as the wholesale cost of petrol as reduced significantly.

11:49 AM

Tech rally to drive Wall Street higher

Wall Street looks set to follow the FTSE 100 higher this afternoon thanks to a rally in tech stocks.

Story continues

US stocks look set to build on Friday’s 3pc rally that cemented the best week for global stocks in a month.

Investors are reassessing the outlook as inflation continues to surge and the threat of recession hangs over global economies.

Futures tracking the S&P 500 rose 0.3pc, while the Dow Jones gained 0.2pc. The tech-heavy Nasdaq rose 0.4pc.

11:24 AM

Kremlin denies Russian default

Russia has denied it’s defaulted on its foreign debts for the first time in a century after a grace period on $100m of missed interest payments ran out.

Kremlin spokesperson Dmitry Peskov said Russia made bond payments due in May but the fact they had been blocked by because of western sanctions was “not our problem”.

Moscow has struggled to make payments after the White House moved to block channels to creditors in the West, meaning Russia could not settle its debts despite the means and willingness to do so.

Mr Peskov added: “Our position is well known. Our reserves are blocked unlawfully and all attempts to use these reserves will also be unlawful and would amount to outright theft.”

The default marks the first time Russia has failed to make payments to international bondholders since the Bolshevik revolution in 1918.

Read more: Humiliation for Putin as Russia defaults on foreign debts

11:08 AM

Oil prices fluctuate as traders keep an eye on G7

Oil prices are wavering this morning as traders monitor the G7 for any signs of a price cap on Russian crude.

Benchmark Brent crude dipped slightly to just below $113 a barrel. West Texas Intermediate hovered at around $107 after posting its first back-to-back weekly loss since April.

World leaders are drawing up plans on a potential price cap on Russia oil imports that could help to ease the surge in prices while also punishing the Kremlin.

Meanwhile, mounting fears of a recession and a drop-off in demand are pushing oil prices towards their first monthly decline since November.

10:47 AM

Ukraine grain exports crash 44pc

Ukraine’s grain exports have tumbled by around 44pc so far this month as Russia’s warmongering cuts off key supplies and drives up food prices around the globe.

Exports stood at 1.1m tonnes in the first 22 days of June, according to the country’s agriculture ministry. This included 978,000 tonnes of corn, 104,000 tonnes of wheat and 24,000 tonnes of barley.

Prior to Putin’s invasion, Ukraine shipped as much as 6m tonnes of grain per month.

Britain has committed £10m in aid to help rebuild Ukraine’s railways as a blockade of Black Sea ports leaves millions of tonnes of grain stranded.

10:24 AM

G7 leaders plot $600bn rival to China’s Belt and Road

G7 China Belt and Road - Tobias Schwarz/Pool Photo via AP

G7 China Belt and Road – Tobias Schwarz/Pool Photo via AP

G7 leaders have outlined plans for a $600bn (£489bn) trade and infrastructure initiative that would rival China’s flagship Belt and Road project.

The Build Back Better World initiative, named after US President Joe Biden’s domestic spending and climate agenda, struggled to get off the ground because not enough G7 partners contributed financially when it was unveiled a year ago.

The project has now been dusted off and re-branded as the Partnership for Global Infrastructure and Investment (PGII).

The US is calling on leaders to agree to fund the launch of projects in middle- and low income countries to the tune of $600bn over the next five years.

The US has promised to raise $200bn of the total through grants, federal funds and private investment, while the EU has announced a further €300bn.

10:12 AM

British microchip factory faces shutdown if China deal approved, ministers warned

ICYMI – Britain’s biggest microchip factory is likely to be closed and production shifted to Shanghai if ministers allow a Chinese takeover of the business to go ahead, a report has warned.

Matt Oliver has the story:

Researchers at the Policy Exchange think tank claimed there was a “strong possibility” that Newport Wafer Fab’s new owner, Nexperia, will in future seek to move the company’s facilities out of South Wales.

This risks strengthening China’s stranglehold on the global semiconductor market, the think tank said, which has suffered huge disruption because of the country’s strict zero-Covid policy and subsequent lockdowns.

Semiconductors are a crucial component in electrical goods such as smartphones and televisions, and are essential in car manufacturing.

The Policy Exchange said Kwasi Kwarteng, the Business Secretary, should consider these implications when he is deciding whether to undo the deal, they said, alongside American concerns and the military applications of the company’s technology.

​Read Matt’s full story here

09:51 AM

Pound rises as markets regain composure

Sterling has strengthened against the dollar as markets regained some composure after days of losses fuelled by recession fears.

The pound pushed higher alongside the FTSE 100, which gained as an easing of Covid restrictions in China boosted commodity prices.

The pound rose 0.3pc against the dollar to $1.2319, after briefly touching a 10-day high. Against the euro it was steady at 85.95p.

Simon Harvey at Monex Europe said: “The pound is being buoyed by the more supportive risk backdrop this morning, as evidenced by equities, but moves are very limited and the pound continues to trade in recent ranges.

“With limited economic events pencilled in for today… equity performance is likely to continue driving broader FX price action.”

09:37 AM

France’s public finances ‘at alert level’

France public finances Macron - CLEMENS BILAN/POOL/EPA-EFE/Shutterstock

France public finances Macron – CLEMENS BILAN/POOL/EPA-EFE/Shutterstock

France’s public finances have reached an “alert level” amid rising interest rates, surging inflation and slowing growth, the country’s finance minister has said.

The warning comes as President Emmanuel Macron’s government looks to negotiate a revised 2022 budget with opposition parties after he lost his majority in the National Assembly in elections earlier this month.

Bruno le Maire told local media: “Not everything is possible, quite simply because we have reached an alert level for public finances.

“We used to be able to borrow at 0pc or at negative rates, but today we are borrowing at more than 2pc.”

The finance minister also said debt charges on inflation-linked bonds will rise by “several billion euros” as prices continue to surge.

09:18 AM

G7 prepares Russian oil price cap

The G7 is drawing up plans to punish Vladimir Putin with a cap on the price of Russian oil that could also calm inflation.

Louis Ashworth has the details:

Wealthy nations would effectively create a buyer’s cartel to drive down the value of the Kremlin’s most lucrative export.

Leaders and officials are mulling a mechanism that would only allow Russian crude and petroleum products to be sold and stored at below a certain price.

Talks will aim to maintain Chinese and Indian access to cheaper crude from Russia, rather than attempting to bring about a full boycott that could send prices surging.

Countries are grappling with how to keep pressure on Mr Putin through sanction without exacerbating the inflationary crises many are facing at home.

Finding ways to lower the oil price could starve Russia of vital funding while also easing costs for businesses and households.

Officials in the US and German governments have said plans are being hashed together at the G7 summit in Bavaria, with hopes that a fully-fledged plan can be announced tomorrow.

09:06 AM

Rouble weakens as Russia crashes into default

The rouble weakened in volatile trade in Moscow after Russia defaulted on its foreign debts for the first time in a century.

After narrowly swerving non-payment several times since launching an invasion of Ukraine in late February, Moscow failed to pay $100m of coupons on bonds due last month, for which a 30-day grace period ended on Sunday.

The rouble fell 0.5pc against the dollar to 53.68, at one point shedding around 2pc and touching its weakest since June 21. Against the euro it was down 0.6pc.

08:48 AM

Soap maker PZ Cussons to cash in on higher prices

Consumer goods group PZ Cussons has said it’s on track to boost revenue from raising prices even as shoppers swap in value ranges.

The maker of Carex and Imperial Leather said it expects full-year sales to rise 3pc, with full-year revenue set to hit £590m.

PZ Cussons said it had been boosted by higher prices, but warned that trading conditions remained challenging as soaring inflation piles pressure on household budgets.

Jonathan Myers, chief executive of PZ Cussons, said:

We have plans in place to mitigate the impact of this, as we continue to deliver great value for consumers, whilst also investing behind more premium innovations.

08:36 AM

UK takes stake in sex party planner Killing Kittens

Emma Sayle, chief executive of Killing Kittens - John Nguyen/JNVisuals

Emma Sayle, chief executive of Killing Kittens – John Nguyen/JNVisuals

The Treasury has taken a stake in a sex party planner founded by a schoolmate of the Duchess of Cambridge.

Killing Kittens, which was founded in 2005 by Emma Sayle, is known for its exclusive, hedonistic events in cities around the world, but was forced to cancel its in-person parties during the pandemic.

The taxpayer has now taken a stake through Rishi Sunak’s Future Fund programme, which was set up during Covid to help innovative firms, the Financial Times reports.

Loans granted through the Future Fund convert to equity at the company’s next fundraising. It’s offered support to hundreds of businesses, including Bolton Wanderers football club and the Black Sheep Coffee chain.

08:23 AM

FTSE risers and fallers

The FTSE 100 has pushed higher in early trading as an easing of Covid restrictions in China brought relief to commodity prices.

The blue-chip index rose 0.6pc, driven by gains for major mining stocks.

Rio Tinto rose 2.6pc after a US appeals court ruled that the Government may give the copper miner a right to lands in Arizona.

Anglo AmericanGlencore and Antofagasta all pushed higher thanks to a rebound in copper and iron ore prices as rules were eased in Shanghai and several other major Chinese cities.

BAE Systems also edged higher after the defence giant secured a $12bn contract from the US Department of Defence.

The domestically-focused FTSE 250 also gained 0.6pc, with cruise operator Carnival rising more than 5pc.

08:14 AM

Gas prices jump as Europe struggles to refill storage

Natural gas prices rose again this morning as Russia’s supply cuts threaten to spark shortages this winter.

European countries have found it difficult to replace Russian gas after the Kremlin cut flows through a major pipeline to around 40pc of normal levels.

This has slowed the pace of refilling storage sites, which are crucial to get the continent through winter.

Benchmark European prices rose more than 5pc in early trading after jumping 9pc last week.

08:08 AM

Humiliation for Putin as Russia defaults on foreign debts

Vladimir Putin Russia default - Mikhail Metzel/Sputnik, Kremlin Pool Photo via AP

Vladimir Putin Russia default – Mikhail Metzel/Sputnik, Kremlin Pool Photo via AP

Russia has defaulted on its foreign debts for the first time in a century, in a humiliating blow to Vladimir Putin that further freezes his country out of the Western financial system.

Louis Ashworth has more:

After narrowly swerving non-payment several times since launching an invasion of Ukraine in late February, Moscow failed to pay $100m of coupons on bonds due last month, for which a 30-day grace period ended on Sunday.

Payment had been rendered practically impossible after the White House moved to block channels to creditors in the West, meaning Russia could not settle its debts despite the means and willingness to do so.

The default – the first time Russia has failed to make payments to international bondholders since the Bolshevik revolution in 1918 – is mainly a symbolic event for now: Russia is already a pariah within the Western financial system and is unlikely to tap international markets for money in the near future.

But it will further tie Mr Putin’s hands as the country suffers its biggest economic shock in years, and could starve Russian companies of future funding options if the contagion spreads to corporate bonds.

Read Louis’ full story here

08:01 AM

FTSE 100 edges higher

The FTSE 100 has started the week on the front foot despite continued worries about a possible recession.

The blue-chip index rose 0.2pc to 7,221 points.

07:54 AM

World on ‘tipping point’ of permanently high prices

KPMG is not the only organisation warning over inflation this morning, as my colleague Tim Wallace reports:

The world is on the “tipping point” of falling into a period of runaway inflation in which soaring prices become embedded and difficult to control, the Bank for International Settlements (BIS) has warned.

In its annual economic report, the BIS said leading economies faced entering a world in which soaring prices become embedded and difficult to control.

It called on central banks to step up efforts to tackle soaring prices while limiting the impact to growth.

Agustín Carstens, general manager of the BIS, said: “The key for central banks is to act quickly and decisively before inflation becomes entrenched.

“If it does, the costs of bringing it back under control will be higher. The longer-term benefits of preserving stability for households and businesses outweigh any short-term costs.”

Central banks around the world, including in the UK and US, hoped last year that rising inflation would be “transitory”.

Read Tim’s full story here

07:48 AM

City watchdog investigates Wise boss after tax breach

Kristo Kaarmann, chief executive of Wise -  Jake Farra

Kristo Kaarmann, chief executive of Wise – Jake Farra

The Financial Conduct Authority has opened an investigation into the chief executive of Wise almost a year after he was fined by HMRC for deliberately defaulting on his taxes.

The Telegraph last year revealed that Kristo Kaarmann had been fined £365,651 for a deliberate default during the 2017/18 tax year on a £720,495 tax bill.

The City regulator has now said it’s examining the  “regulatory obligations and standards to which Kaarmann is subject”.

David Wells, chairman of Wise, said the company will “cooperate fully with the FCA as and when they require, while continuing to support Kristo in his role as CEO”.

The London-listed payments firm an investigation with an external legal counsel after Mr Kaarmann’s name was included on HMRC’s list of individuals and businesses receiving penalties for a deliberate default regarding their tax affairs.

It said the board shared details of the findings, assessment and actions with the FCA.

07:34 AM

KPMG: BoE must weigh recession risks

Yael Selfin, chief UK economist at KPMG, says the Bank of England will have to balance interest rate rises with the risk of recession.

We expect supply issues to gradually ease during the course of this year, although headwinds in the form of a potential deterioration in Russian energy supply or further lockdowns in China as a result of its zero Covid policy could worsen the outlook.

Combined with the pressures on household budgets, the Monetary Policy Committee will have to weigh the risk of high inflation spilling into pay growth against the risk of a recession.

07:31 AM

Britain at risk of ‘mild’ recession

Good morning.

The UK could be pushed into a recession as runaway inflation threatens to all but wipe out economic growth.

KPMG has become the latest organisation to sound the alarm, saying there was roughly a 50pc chance of Britain being tipped into a “mild recession”.

It warned the UK was particularly vulnerable to a downturn if a cut-off of Russian gas supplies caused a contraction in the eurozone economy, or if aggressive interest rate rises in the US sparked a recession there.

KPMG forecast that the UK economy will slow to 3.2pc this year from 7.1pc in 2021, before almost grinding to a halt at 0.7pc next year.

5 things to start your day

1) World is on ‘tipping point’ of permanently high prices Inflation risks becoming embedded in leading economies and difficult to control, Bank for International Settlements warns

2) French energy giants tell households to ration supplies ahead of looming winter shortage Households asked to ‘immediately’ limit energy consumption to preserve gas reserves

3) Jaguar Land Rover’s battle to stop dealers selling in China The car maker has strict rules for its dealers wanting a piece of the highly lucrative market

4) Train operators hit back at RMT assault on “fat cat rail bosses” Rail chiefs say annual profits average a third of what Mick Lynch claimed

5) Thousands of PwC staff to get inflation-matching pay rise PwC boosts pay to help attract staff amid warnings of wage increases fuelling inflation

What happened overnight

Asian markets rallied again this morning, building on last week’s advances and following a strong performance on Wall Street as speculation that inflation may have peaked tempered expectations about central bank interest rate hikes.

Hong Kong climbed more than 2pc thanks to a strong performance in Chinese tech firms. Indications that China’s crackdown on the sector could be coming to an end added to the upbeat mood in the city.

Tokyo, Shanghai, Seoul, Singapore, Sydney, Manila and Wellington were also well up.

Coming up today

Corporate: No scheduled updates

Economics: Durable goods orders, non-defence capital goods orders, pending home sales (US)