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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Elon Musk joining Twitter’s board; US stops Russian dollar debt payments; inflation worries rise – as it happened

United Kingdom United States SMMT
The Bank of England and City of London skyline.
The Bank of England and City of London skyline. Photograph: Thomas Krych/SOPA Images/REX/Shutterstock

Closing post

Time to wrap up.... with a quick summary.

The US government has ratcheted up the financial pressure on Russia, by halting its ability to make debt payments in dollars through US banks.

The move increases the risk that Russia defaults on its loans, and could also restrict Moscow’s ability to fund the Ukraine war, experts say.

The EU has proposed a fresh package of sanctions on Russia, including a ban on Russian coal and on Russian ships entering EU ports, following the horrific scenes from Bucha of dead civilians.

EC president Ursula von der Leyen also said the EU was “working on additional sanctions, including on oil imports”.

Inflationary worries have continued to mount today, with the head of the BIS group saying the world may be on the brink of a new inflationary era that would demand action from central banks.

The OECD reported that inflation among its rich nations had reached a 30-year high, as energy and food prices rise across the board.

The latest PMI surveys showed that firms in the UK, US and eurozone were raising prices sharply as they passed on higher energy costs, commodity prices and wage bills to consumers -- even as activity continued to rise.

Russia’s economy, though, shrank sharply last month as sanctions hit companies, with new orders and employment levels down.

The cost of living crisis, and problems sourcing computer chips, both hit UK car sales last month. But with fossil fuels at record prices, more motorists turned to electric cars:

Elon Musk is joining the board of Twitter, just a day after surprisingly becoming its largest shareholders.

Musk said he was looking forward to making “significant improvements to Twitter in coming months!”, suggesting this story has a long way to run....

Several UK housebuilders have signed a pledge to fix fire safety problems at blocks of flats, with some setting aside millions of pounds more to cover cladding costs.

Stocks have fallen in Paris, as investors react to the possibility that Marine Le Pen wins the French presidential election.

In other news, the managing director of Manchester airport has quit following weeks of chaos in which thousands of passengers have missed their flights because of queues lasting up to seven hours.

Gambling and betting companies will be banned from using advertising featuring top-flight footballers and other sports personalities, as well as reality TV and social media stars, under new rules designed to protect under-18s and other vulnerable groups.

The total wealth of the world’s billionaires has dipped from a record high last year amid a drop in global stock markets since Russia’s invasion of Ukraine, despite the planet’s richest people still holding a combined $12.7tn (£9.7tn) in assets.

A cyber-attack targeting The Works has caused the closure of some of the retailer’s stores, delayed the resupply of stock and online order deliveries to customers.

Sunflower oil is running low in the UK, as the Ukraine war drive up the price of cooking oil.

The World Bank warned that Russia’s invasion of Ukraine has further dampened the economic prospects for developing countries in east Asia and the Pacific, meaning lower economic growth and higher poverty in the region this year.

Travel disruption continues for lorry drivers and holidaymakers on the Easter getaway, after the ferry company Stena Line was forced to suspend all sailings between Fishguard in south Wales and Rosslare in Ireland to fill the gaps left by the continued suspension of P&O Ferries services.

Amazon will compete directly with SpaceX and the UK government-owned OneWeb to set up a constellation of broadband-providing satellites, the company has announced.

And a Kent woman who has invited a Ukrainian family of refugees into her home has been told to pay an extra £41 a year by John Lewis Home Insurance:

Goodnight. GW

Updated

World may be on cusp of new inflationary era, BIS central bank group says

The world economy may be on the cusp of a new inflationary era with persistently higher growth in consumer prices due to the retreat of globalisation, a leading central bank chief has warned tonight.

Agustín Carstens, the head of the Basel-based Bank for International Settlements – which is known as the central bank of central banks – said there was a strong risk that prices would rise uncontrollably without a sharp rise in interest rates above existing plans.

In a speech setting out risks for persistently higher rates of inflation, Carstens said higher borrowing costs could be required for several years to curb the risk of spiralling prices wreaking long-term damage on the economies of the industrialised world.

Carstens warned that higher inflation may prove persistent, causing long-term problems for central banks:

“A key message is that we may be on the cusp of a new inflationary era

“We need to be open to the possibility that the inflationary environment is changing fundamentally.

“If my thesis is correct, central banks will need to adjust”.

However, other experts have warned that high inflation will probably choke consumer spending and economic growth – reducing the urgency for significantly higher interest rates.

Here’s the full story:

French stock market falls as Le Pen closes in on Macron

France’s stock market fell today after investors started to price in the possibility that far-right candidate Marine Le Pen wins this month’s presidential elections against Emmanuel Macron.

The CAC 40 share index dropped by 1.3%. Banks were among the fallers, with Societe Generale losing 5.6%, Credit Agricole off 5% and BNP Paribas down 4.5%.

Shares in infrastructure groups also dropped, with traders citing Le Pen’s pledge to nationalise French toll road operators.

French government bond prices also weakened, widening the gap in borrowing costs against Germany on jitters that a Macron win was no longer a foregone conclusion.

A poll yesterday showed that Le Pen was now within the margin of error of beating Macron in a second-round runoff, with 48.5% of the vote.

Jonas Goltermann, senior markets economist at Capital Economics, says:

The recent polling shift in favour of far-right candidate Marine Le Pen ahead of France’s presidential election is starting to affect financial markets.

If the experience of the last election in 2017 is anything to go by, there would be more to come if the perceived chance of a far-right win were to rise further.

In the City, the FTSE 100 share index has closed at its highest level in almost eight weeks.

The blue-chip index finished the day 55 points higher at 7613, its highest close since Friday 11th February.

Defensive stocks led the risers, such as utility firms National Grid (+3.6%), SSE (+3.5%) and United Utilities (+3.5%), along with specialty chemicals firm Croda (+3.4%) and pharma group Glaxo (+3%).

Passengers queuing for security screening in the departures area of Terminal 2 at Manchester Airport yesterday
Passengers queuing for security screening in the departures area of Terminal 2 at Manchester Airport yesterday Photograph: Phil Noble/Reuters

The managing director of the troubled Manchester Airport has stepped down, after weeks of travel disruption and delays caused by staff shortages.

Karen Smart quit following chaotic scenes at UK’s third busiest airport in recent days.

Passengers have suffered hours-long queues and packed security lines, leading them to miss flights, and long waits at the baggage carousel for their luggage.

ITV News has more details:

Karen Smart has been in charge since August 2020, but has quit on the day political leaders and unions met with the airport bosses to discuss the “concerning” situation.

Long delays, queues trailing outside terminals to reach check-in and piles of abandoned suitcases left by travellers are among the airport’s recent problems.

In one case, a mother whose terminally ill daughter needs monthly treatment in Germany said she is dreading their next journey after experiencing chaotic queues.

Some staff have even quit their jobs out of fear for passenger safety.

Manchester Airport say they have struggled to recruit staff made redundant after the pandemic shutdown airports and travel.

Housebuilders sign up to fire safety pledge

Several UK housebuilders have today signed a government-led pledge to fix fire safety problems in apartment blocks built since 1992 following the Grenfell Tower fire in London.

Persimmon, Taylor Wimpey, and Berkeley Group told shareholders today that they had signed to the new Building Safety Pledge, and Crest Nicholson said it will sign it.

The pledge commits developers to remove unsafe cladding and address fire-safety issues on all buildings of 11 metres tall or higher which they have developed in the last 30 years, and not to claim any funds from the Government’s Building Safety Fund to fund cladding work.

Taylor Wimpey set aside another £80m to cover its fire safety remediation work, raising the total amount to around £245m. It had previously committed to fix buildings built over the last 20 years, but will now include all sites built since 1992.

Crest Nicholson estimated that fulfilling the pledge will cost it between £80m and £120m, on top of £47.8m already set aside.

Crest told shareholders:

In January 2022 the Secretary of State for the Department for Levelling Up, Housing and Communities (DLUHC) announced the Government’s intention to widen and lengthen the definition of legal obligation on developers to fund the remediation of affected buildings between 11 and 18 metres high.

Failing to agree to these new guidelines would carry further consequences, implemented by DLUHC, that would impact the Group’s ability to operate and trade normally within the housing market.

Persimmon, though, said it could meet the pledge without adding to its £75m provision. It says four of its 33 developments requiring remediation work now have new fire safety certificates, and it is working to complete any necessary works at the remainder as soon as possible.

Persimmon CEO Dean Finch said:

“Over a year ago we said that leaseholders in multi-storey buildings Persimmon constructed should not have to pay for the remediation of cladding and fire related issues. We are pleased to reaffirm this commitment today and sign the Government’s Developer Pledge.

“We made this commitment last year as we believed it was not only fair for leaseholders but also the right thing to do as one of the country’s leading homebuilders. We are pleased that we were able to work constructively with the Government to secure this agreement.”

In January, housing secretary Michael Gove said developers should pay the estimated £4bn cost of fixing cladding problems. Housebuilders, though, argued that the government and companies that sold combustible materials should also shoulder the cost.

Construction News reported yesterday that the £4bn demand had been dropped from the current negotiations between government and builders. The two sides are trying to agree a fully costed plan to fix any buildings between 11 and 18 metres tall built within the past 30 years. Instead, additional funding talks would be put off until later in the year.

Developers are also paying a 4% tax on their profits to fund cladding work on buildings over 18m tall.

But, today’s pledges from developers don’t appear to address how fire safety work will be funded at so-called ‘orphan blocks’, where the company that built them cannot be traced or no longer exists.

Here’s our news story on Elon Musk joining Twitter’s board:

US companies are raising their prices at the fastest rate since at least 2009, as inflationary pressures build across the Atlantic.

The latest survey of purchasing managers at US companies paints a similar picture to the UK and the eurozone (see earlier posts) -- with activity continuing to rise, but input and output pressures worsening.

Data firm S&P Global reports that:

  • New business expansion accelerates to fastest since June 2021
  • Selling prices rise at sharpest pace on record
  • Backlogs of work grow at series-record rate

US firms also said that the easing of COVID-19 restrictions boosted footfall, while shortages of raw materials and staff made it harder to complete orders.

World's billionaires are poorer, and fewer

The total wealth of the world’s billionaires has dipped from a record high last year amid a drop in global stock markets since Russia’s invasion of Ukraine, despite the planet’s richest people still holding a combined $12.7tn (£9.7tn) in assets.

According to the annual Forbes magazine ranking of the world richest people, the number of billionaires worldwide fell by 329 to 2,668, with the total value of their combined assets falling slightly from $13.1tn on the 2021 list.

It said that Putin’s invasion of Ukraine – and the avalanche of sanctions that followed – sent the Russian stock market and the rouble plummeting, resulting in 34 fewer Russian billionaires on the list.

Those from the country with billionaire status almost all saw their fortunes stagnate or decline, with their total wealth dropping by more than $260bn compared with a year earlier.

Forbes said the decline in the total number of billionaires from 2,755 to 2,668 was the largest since the 2009 financial crisis, but followed an increase of more than 600 in 2021 when global stock bounced back from pandemic lows.

Here’s the full story:

Twitter co-founder Jack Dorsey has welcomed his friend Elon Musk’s move onto the company’s board:

Elon Musk’s move onto Twitter’s board will fuel expectations that he wants, and will have, greater involvement in decision making at the social network.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, says this could eventually backfire:

This may lead to some nervousness about Mr Musk getting too much influence about the way Twitter is run, with a view to bolstering his own personal brand and that of his companies.

Although his involvement has already sparked a share surge with expectation that it could lead to higher levels of participation on the platform, over the longer term Twitter investors will want to see that high levels of governance are adhered to, otherwise the independence of Twitter could be questioned, and the risk is that users may start to drift away.

Mr Musk has also made no secret of his desire to launch a social media platform of his own so this new role will put him in an ideal position to glean knowledge about the opportunities and risks of a possible future venture.”

Shares in Twitter have jumped over 6% in early trading, after the company announced Elon Musk will join its board.

They’re up 6.8%, or $3.41, to $53.38 each.

That’s on top of yesterday’s 27% surge after Musk became Twitter’s largest shareholder.

EU Commission proposes banning Russian coal imports, ships from entering EU ports

The European Commission has proposed new sanctions against Russia over its invasion of Ukraine, including a ban on buying Russian coal and on many Russian ships entering EU ports.

The EC also said it was working on banning oil imports too.

In a speech posted on Twitter, EC president Ursula von der Leyen said:

“We all saw the gruesome pictures from Bucha and other areas from which Russian troops have recently left.

Yesterday I conveyed to president Zelenskiy my condolences and assured him of the European Commission’s full support in these terrible times.

These atrocities cannot and will not be left unanswered,”

Von der Leyen says the EC’s four existing packages of sanctions have hit hard and limited the Kremlin’s political and economic options. In view of the latest events, pressures on Russia need to be increased further, she adds, so the EU will make its sanctions “broader” and” sharper”.

The proposal include an EU ban on imports of coal from Russia worth €4bn per year, and a full transaction ban on four key Russian banks, including the country’s second-largest, VTB.

The EU will also ban Russian vessels and Russian-operated vessels from accessing EU ports, though there would be exemptions for essential items -- agricultural and food products, humanitarian aid and energy.

Russian and Belarusian road transport operators will also be barred.

The new sanctions package will also prohibit the sale to Russia of quantum computers, advanced semiconductors, sensitive machinery and transportation equipment worth €10bn euros annually.

Imports of Russian wood and cement as well as seafood and liquor worth in total some €5.5bn euros annually will also be banned.

And sixth, Russian companies will be banned from public procurement tenders in EU countries, so that European taxpapers money will not go to Russia. Also, further individuals will be added to a list of people whose assets in the EU will be frozen and who will not be allowed to enter the EU.

Von der Leyen also says that the EU could yet go further:

“We are working on additional sanctions, including on oil imports, and we are reflecting on some of the ideas presented by the member states, such as taxes or specific payment channels such as an escrow account.”

Elon Musk says he is looking forward to making “significant improvements to Twitter in coming months!” once he’s taken up his board seat.

Elon Musk to join Twitter board after becoming top shareholder

Elon Musk is joining the board of Twitter, a day after revealing he had built up a 9.2% stake in the social media company.

Twitter CEO Parag Agrawal has tweeted that he’s “excited to share the news”, and that the Tesla CEO will bring “great value to our Board.”

Agrawal adds:

“He’s both a passionate believer and intense critic of the service which is exactly what we need on Twitter, and in the boardroom, to make us stronger in the long-term.”

A release filed with the SEC shows that Musk will be appoined to serve as a Class II director, with his term expiring at the Company’s 2024 Annual Meeting of Stockholders.

It adds:

For so long as Mr. Musk is serving on the Board and for 90 days thereafter, Mr. Musk will not, either alone or as a member of a group, become the beneficial owner of more than 14.9% of the Company’s common stock outstanding at such time, including for these purposes economic exposure through derivative securities, swaps, or hedging transactions.

Musk has been highly critical of Twitter, saying last week he was “giving serious thought” to building his own social media platform after questioning whether it was adequately supporting free speech.

Analysts had speculated that Musk might become an activist investors at Twitter, or even potentially launch a buyout sometime in the future.

Last night, Musk launched a poll on whether Twitter should add an ‘edit’ function, allowing users to change tweets once they’d been published.

UK optical equipment maker Gooch & Housego has warned that annual profit would miss expectations because staff have been off ill with Covid-19, adding to supply chain problems.

The Somerset-based manufacturer of photonics components & systems says it has a record order book, with £119.9m of business booked at the end of March (half way through its financial year).

Demand for industrial lasers remains high, while medical lasers continue to benefit from the strong return of elective surgery and demand for its medical diagnostics has remained robust too.

However, pandemic-related problems had curbed output in the first half of the year, with sickness among UK staff a recent factor. Gooch says:

We are working hard to mitigate these factors and good progress has been made with recruitment and securing our supply chain, though COVID absences impacted our US sites earlier in the financial year and more recently our UK facilities have been affected.

Pre-tax profits this financial year are expected to be £2.5m lower than previously forecast, Gooch warns.

Last year Gooch made adjusted profit before tax of £12.6m, but reported pre-tax profits of £4.7m.

Gooch & Housego financial results
Gooch & Housego financial results Photograph: AJ Bell

AJ Bell investment director Russ Mould says the 30% jump in Gooch & Housego’s order book is very encouraging, but the AIM-listed company is struggling to process them.

“Since the company listed in 1997, year-on-year drops in profit have been relatively rare.

“Prior stumbles came in 2002 (bursting of the tech bubble and a US recession), 2009 (great financial crisis), 2012 (European debt crisis), 2016 (global growth pause) and then 2020 as the pandemic swept around the world.

“Chief executive Mark Webster’s acknowledgement that the current problems could mean adjusted pre-tax profits come in some £2.5 million below analysts’ consensus forecasts of £13.6 million suggests that earnings could drop again this year.

The European Union is planning to propose a mandatory phaseout on coal imports from Russia in a direct response to reports that Russian forces committed apparent war crimes in Ukraine, sources have told Bloomberg.

The action on coal would be added to a package of steps aimed at strengthening existing measures and correcting loopholes that was already set to be debated this week by EU ambassadors.

The details of the ban and the timing of the coal phaseout are still under discussion, the people said. The European Commission is also expected to propose banning most Russian trucks and ships from entering the bloc, the people said.

Reuters says the new sanctions woulc hit imports of Russian coal, wood, chemicals and other products worth about €9bn a year.

Updated

Whether it’s chips, stir-fry or curry on the menu, the financial shock from the war in Ukraine is being felt keenly in the kitchen as cooking oil prices hit record highs.

The cost had already rocketed even before Vladimir Putin’s invasion, but now vegetable oil goes for £1.30 a litre at the supermarket, up 23p, or 22%, on a year ago. Sunflower oil – of which Ukraine and Russia are major producers – is up sharply too, by 17p to £1.34 a litre, according to NielsenIQ Scantrack data.

Three out of four households buy cooking oil, and in the UK they spend almost £400m a year on the stuff. Shoppers stock up every eight to 10 weeks, says NielsenIQ’s Mike Watkins, meaning there could be “shelf shock for many” when they return.

Besides being a cupboard staple, cooking oil is used throughout the food industry – from biscuits to ready meals to long-life cream – so cost rises and shortages have knock-on effects.

Inflation across wealthier economies has hit a 30-year high.

The OECD reports that annual inflation across its member countries rose to 7.7% in February 2022, the highest since December 1990. That’s up from 7.2% in January 2022. A year before, it was just 1.7%.

The figures, which only cover the early days of the Ukraine war, show that consumers in richer nations across the globe are being hit by higher energy and food prices.

The OECD says:

While energy continued to boost inflation in a majority of OECD countries, food price inflation also showed a notable increase.

This increase was partly due to Turkey’s soaring inflation rate, which increased from 48.7% in January to 54.4% in February. Excluding Turkey, inflation in the OECD area rose to 6.3%.

OECD inflation rates
OECD inflation rates Photograph: OECD

We learned yesterday that Turkey’s inflation rate rose to 61% in March, as food and energy prices continued to climb and the fall in the lira puhed up import costs.

The OECD says:

In February, year-on-year inflation increased in all G7 economies. The largest increases, by 0.9 and 0.8 percentage point, were recorded in Italy and France, and the lowest increase, by 0.2 percentage point, was recorded in Germany.

In the United States, year-on-year inflation, at 7.9%, reached its highest rate since January 1982. Inflation excluding food and energy was the main driver of overall inflation in Canada, Germany, the United Kingdom and the United States, while energy was the main contributor to inflation in France and Italy.

The UK’s CPI inflation rate hit a 30-year high of 6.2% last month, and is on track to reach 8% this spring.

OECD inflation rates
OECD inflation rates Photograph: OECD

British drivers bought more electric cars in March alone than in the whole of 2019 even as the broader market slumped, according to new figures that underline the accelerating pace of the UK’s transition away from internal combustion engines.

There were 39,315 new battery electric vehicle registrations during the month, according to the Society of Motor Manufacturers and Traders (SMMT), a lobby group. In 2019 there were 37,850 electric sales.

More here:

IoD: 9 in 10 UK business leaders expect to be hit by the Ukraine crisis

Nine in 10 UK company bosses expect the Ukraine war to damage their companies.

A poll of 689 business leaders carried out by the Institute of Directors found only 11% agreed with the statement that the Ukraine crisis ‘won’t significantly impact my business’.

The poll found that higher energy costs was the top concern, with executives also worried about the damage to business confidence and the economy.

  • 71% expect to be impacted through higher energy prices
  • 52% through higher prices of other global commodities
  • 61% through its general impact on confidence and/or UK economic growth
  • 41% through its impact on global financial markets

Despite the negative impact of the conflict, 8 in 10 business leaders believe UK companies should completely stop conducting business in the Russian market or trading with Russian companies.

Kitty Ussher, Chief Economist at the Institute of Directors, said:

“The devastating human impact of this conflict is, rightly, at the forefront of all our minds and today’s data shows our members support our stance from the outset that ceasing business with Russia is the right thing to do, over and above any financial interest of individual firms.

“What we now realise, however, is the extent to which the whole of the UK economy is affected by the war through indirect channels as well. The primary mechanism is via higher energy prices closely followed by the general impact on confidence and through that the macroeconomic environment in the UK.

Our members, who tend to be ambitious SMEs, also expect to be affected through their high exposure to other globally traded commodities such as wheat, oil and metals, that have also been affected by the conflict.

Here’s our news story on the slump in Russian business activity last month:

It points out that home rental firm Airbnb confirmed on Tuesday that it would be among many services firms to pull out of Russia after an announcement of its intentions last month.

It said guests would no longer be able to make new reservations and those starting on or after 4 April had been cancelled.

Experts: Russia's dollar repayment ban could hurt ability to fund Ukraine war

The US Treasury’s ban on Russia making debt payments in dollars from its accounts at US banks could make it harder for Moscow to keep financing the Ukraine war, experts say.

Paul Donovan, chief economist at UBS Global Wealth Management, explains that if Russia can’t use dollars in US banks, it has three options:

Russia can default on its debt, use dollars held in Russia, or use income from energy sales to meet debt payments.

Thus, this de facto freeze on Russia’s cash could divert energy revenues away from war finance.

David Wolber, a sanctions lawyer at Gibson Dunn in Hong Kong, said (via Reuters):

“What they’re basically tying to do is force their hand and put even more pressure on (to deplete) foreign-currency reserves back home,.

“If they have to do that, obviously that takes away from Russia’s ability to use those dollars for other activities, in essence to fund the war.”

It may also put pressure on Russian demands to be paid roubles for gas by European customers, Wolber added.

Marios Hadjikyriacos, senior investment analyst at XM, agrees that the Russian war effort could be significantly hampered:

The prospect of another round of economic sanctions against Moscow is back on the table following reports of atrocities against civilians in Ukraine. The US Treasury has already made its move - cutting off the Russian government from using its ‘frozen’ US dollar reserves for making coupon payments on bonds.

This means Moscow must now drain the foreign currency revenue it earns from exports to make coupon payments or make them in rubles, which would correspond to a technical default. Either way, the aim is to cripple the war effort. The ball is now in Europe’s court, with pressure growing to impose a total energy embargo.

US stops Russian dollar bond payments in bid to raise pressure on Moscow

The US government has ratcheted up the financial pressure on Russia, by halting its ability to make debt payments in dollars through US banks.

The move could bring Moscow a step closer to potentially defaulting on its obligations to international investors.

The US Treasury prevented Russia from paying holders of its sovereign debt more than $600m from reserves held at American banks yesterday, Reuters reports.

It would force Russia to choose between using dollar reserves held in its own country to service its debts, or spend new revenue, or miss bond payments and go into default.

This puts more pressure on Moscow, at a time when its economy is already weakening (today’s PMI report showed company growth contracting).

A US Treasury spokesperson said late on Monday that:

Beginning today, the US Treasury will not permit any dollar debt payments to be made from Russian government accounts at US financial institutions.

Russia must choose between draining remaining valuable dollar reserves or new revenue coming in, or default.”

The move came just as Russia was due to make a $552.4m payment on a maturing bond yesterday, and after the discovery of mass graves and bodies of bound civilians shot at close range in the town of Bucha, prompting calls for more sanctions.

An earlier debt payment had been allowed last month, despite the freeze on Russia’s foreign exchange reserves. But the US Treasury now seems to have changed its position, blocking Moscow from tapping its dollars held in US banks to service its debts.

Bloomberg explains:

A carve-out in U.S. policies has allowed overseas and U.S. investors so far to receive payments on Russian foreign-currency debt, even as restrictions complicate the process. The exemption is set to expire on May 25.

“It seems to me that it is a U-turn of what the U.S. government allowed on March 17, when Russia paid a $117 million coupon,” said Carl Wong, head of fixed income at Avenue Asset Management Ltd. in Hong Kong, which doesn’t own any Russian dollar debt.

JPMorgan Chase & Co, which had been processing payments as a correspondent bank so far, was stopped by the Treasury, a source familiar with the matter told Reuters.

The correspondent bank processes the coupon payments from Russia, sending them to the payment agent to distribute to overseas bondholders.

The country has a 30-day grace period to make the payment, the source said.

Updated

Russia's private sector shrinks at fastest pace since May 2020

Russia’s private sector is contracting at the fastest rate since early in the Covid-19 pandemic, as sanctions hit its economy and many Western firms withdrew or suspended business following the invasion of Ukraine.

Private sector business activity in Russia shrank at the fastest pace since May 2020, according to the S&P Global Russia Composite PMI Output Index.

The survey of Russian firms found that manufacturers and service providers recorded substantial declines in activity last month.

Output slumped following a marked fall in new business across the private sector, as foreign client demand also fell substantially.

Inflationary pressures intensified, with both input prices and output charges soaring to record levels following the slump in the rouble and rising costs of energy and raw materials.

Employment contracted at a faster pace as private sector firms reacted to sharp declines in backlogs of work and expectations towards future output.

Business confidence slumped to the lowest since March 2020, as the economic outlook crumbled.

This pulled the Russia Composite PMI down to 38.1 in March, down from 52.1 in February. Any reading below 50 is a contraction, and this highlights that Russia is heading into a deep recession.

Russia’s PMI
Russia’s PMI Photograph: S&P Global

UK services firms hike prices at record pace

UK services sector firms lifted their prices at the fastest rate in at least 25 years last month, adding to the cost of living squeeze.

The latest survey of UK purchasing managers found that “an unprecedented 40%” of firms raised their average prices charged in March, while only 3% cut them.

That shows the fastest rate of price inflation since the PMI survey began in July 1996.

Firms also reported severe cost pressures, due to rising raw material costs, energy bills, and wages. Around 65% of the survey panel reported a rise in their operating expenses in March, while less than 1% noted a decline.

Business confidence fell to the lowest since October 2020, due to uncertainty over the Ukraine war and fears that escalating inflationary pressures are hitting household budgets.

The overall services PMI rose to 62.6 in March from 60.5 in February, a level that shows rapid growth as pandemic restrictions were eased last month.

But Tim Moore, economics director at S&P Global, which compiles the survey, warned that the near-term growth outlook weakened in March.

Service providers experienced the second-fastest rise in business expenses since this index began in 1996, driven by higher wages, energy bills and fuel prices.

Soaring costs meant that output charges were increased to the greatest extent for more than 25 years in March. Many survey respondents commented that the full extent of the recent spike in their operating costs had yet to be passed on to customers.”

Business confidence in the eurozone has slumped to a 17-month low as rising geopolitical tensions and inflation weighed on the outlook, the latest survey of purchasing managers shows.

The PMI report also shows that eurozone companies raised their prices for goods and servics at the fastest rate on record.

Firms passed on a record rise in their own input costs, as energy, fuel and commodity prices all soared.

The PMI report also showed that the eurozone private sector kept growing last month, but the outlook has deteriorated.

Chris Williamson, Chief Business Economist at S&P Global says firms face a spike in energy and other commodity prices due to Russia’s invasion of Ukraine, worsening supply chain issues and a marked deterioration in business optimism about prospects for the year ahead.

“Exports are already back in decline as the war has directly hit travel and transport, and the downturn in confidence suggests that domestic demand conditions across the eurozone could also come under pressure, notably from consumers via the soaring cost of living, at the same time as companies struggle with a lack of materials.

The outlook for growth has therefore deteriorated at a time when the inflation outlook has worsened.

UK car sales fall 14%: what the experts say

The squeeze on household budgets is hitting the car sector, says James Fairclough, CEO of AA Cars:

“The cost of living crisis is having an impact on people’s purchasing power, which coupled with the continued interruption in the global supply of parts means new car dealers are facing challenging times.

“Even the arrival of the new number plates at the start of March could not unwind the difficulties the new car market is facing.

“While the volume of sales is down, there is a rapid transformation underway in what drivers are buying. Diesels continue to fall out of favour, and during the first quarter of 2022 they accounted for barely 5% of all new cars sold - half the market share they enjoyed during the first three months of 2021. At this rate, new diesel sales will be all but over long before they are banned in 2030.

“At the other end of the spectrum, electric vehicle (EV) sales continue to go from strength to strength, posting their best ever month in March. More battery EVs were sold in March than were sold in the entirety of 2019.

Richard Peberdy, UK Head of Automotive, KPMG, says the Ukraine war, and Covid-19 lockdowns in China, are leading to ongoing supply problems:

“It was widely anticipated that the automotive sector would take most of 2022 to sufficiently increase component capacity and put an end to the supply shortages that have limited car production during the pandemic.

But the implications of war in Ukraine and heightened restrictions in China add further complexity and exacerbate this challenge.

“Whilst supply shortages persist, production volumes will remain lower than pre-pandemic, and car makers will continue to focus on higher margin models, as well as the electric vehicles market.

Up until now, this has kept forecourt sales relatively healthy, and also driven up prices of used cars. But the rising cost of living poses significant questions about whether consumers will delay, or even curtail, larger investments, such as on a car. The coming months will tell.”

UK car sales to March 2022

Alex Buttle, co-founder of used car marketplace Motorway.co.uk, says these problems may last months:

“Considering that car showrooms remained shut in March 2021 due to lockdown restrictions, and last month should have seen a boost from the release of the new ‘22 reg plate, a 14% drop in sales in March 2022 is disappointing.

““With little evidence to suggest that supply chain and microchip challenges will ease any time soon, buyers are likely to face lengthy delivery times for new car purchases for the foreseeable future.

Weakest March for new car sales since 1998

Just in: UK car sales in March were their weakest in 24 years, in a ‘deeply disappointing’ result for the industry.

Sales fell 14.3% year-on-year (as flagged earlier) to 243,479 units.

The shortage of semiconductors continues to hurt new vehicle production, meaning there were fewer models on sale...at a time when the cost of living crisis is hitting household spending.

It was a record month for battery electric car sales, with registrations of BEVs up almost 79% compared with a year ago to 39,315.

Diesel sales continued to shrivel, down 55% year-on-year to 13,736 cars.

Industry body SMMT reports that:

  • New car registrations decline -14.3% to 243,479 units – the weakest March since 1998, before the UK went to two annual number plate changes – as supply chain shortages constrain deliveries.
  • Best ever month for battery electric vehicles with 78.7% growth to 39,315 units, while all electrified vehicles account for one in three registrations.
  • March decline results in overall Q1 registrations fall of -1.9% despite rollback of pandemic restrictions.

Mike Hawes, SMMT chief executive, said,

“March is typically the biggest month of the year for the new car market, so this performance is deeply disappointing and lays bare the challenges ahead.

While demand remains robust, this decline illustrates the severity of the global semiconductor shortage, as manufacturers strive to deliver the latest, lowest emission vehicles to eagerly awaiting customers. Placing orders now will be beneficial for those looking to take advantage of incentives and lower running costs for electric vehicles, especially as the Ukraine crisis could affect supply still further.

With increasing household and business costs, government must do all it can to support consumers so that the growth of electric vehicles can be sustained and the UK’s ambitious net zero timetable delivered.”

Updated

A cyber-attack targeting The Works has forced the retailer to shut some stores, and delayed the resupply of stock and online order deliveries to customers.

The cut-price seller of books, crafts and toys, which operates 520 stores across the UK, said that the security breach of its computer systems has not given hackers access to any customer payment data.

“There has been some limited disruption to trading and business operations, including the closure of some stores due to till issues,” the company said this morning.

“Replenishment deliveries to the group’s stores were suspended temporarily and the normal delivery window for the fulfilment of online orders was extended, but store deliveries are expected to resume imminently and the normal online service levels are progressively being reintroduced.”

World Bank cuts 2022 growth forecast for east Asia and Pacific

Russia’s invasion of Ukraine has further dampened the economic prospects for developing countries in east Asia and the Pacific, meaning lower economic growth and higher poverty in the region this year, the World Bank has warned.

The Ukraine factor came on top of the existing risks that the region – home to 2.1 billion people and stretching from China to Papua New Guinea – has been facing in recent years. They included the ongoing Covid-19 pandemic, the financial tightening in the US, and the pandemic resurgence amid China’s zero-Covid policies.

China, which accounts for 86% of regional output, is forecast to expand 5% in 2022, 0.4 of a percentage point less than the World Bank’s October estimate. But in the Bank’s downside scenario, the world’s second-largest economy could grow at just 4%.

P&O Ferries’ sacking of 800 workers last month is continuing to cause disruption.

The BBC reports that sailings on a Welsh ferry route to the Republic of Ireland have been suspended as the operator tries to plug gaps left in Northern Ireland.

That follows P&O’s suspension of services, such as its route between Cairnryan, in Scotland, and Larne, in Northern Ireland.

Here’s the BBC’s story:

Stena Line has cancelled all crossings between Fishguard, Pembrokeshire and Rosslare, Republic of Ireland until 12 April.

This was due to the suspension of P&O’s services, after it sacked 800 staff saying the business was not “viable”.

Stena Line has now moved a ship to Northern Ireland, following concerns food supplies could be affected.

Passengers who usually travel from Fishguard are being advised to travel on the Pembroke service instead, as Irish Ferries is accepting Stena Line customers.

“Due to the suspension of P&O’s services into Northern Ireland there were supply fears in the region,” Stena Line’s Simon Palmer explained.

More here: Stena Line: Fishguard route suspended as ship plugs P&O gap

Increased sales of electric vehicles will also mean more demand for electric charging points.

In January, Volkswagen warned that the lack of a widespread electric vehicle charging network in the UK was holding back the mass adoption of zero-emission cars.

Auto Trader’s Ian Plummer says:

“At the current rate, sales of new EVs will overtake both traditional petrol and diesel sales by 2025. But ministers need to make sure we can accommodate that predicted growth. The government’s recent plan on charging infrastructure set out ambitions for a ten-fold increase in charging points, which is just the kind of commitment we need to reassure buyers thinking about making a purchase.

It would also be good to see a mixture of other incentives offered to consumers, perhaps tax exemptions, free parking zones or exclusive road lane access to make the transition an easier one.”

In February, Resolution Foundation warned that 10m homes don’t have access to off-street parking or a personal garage, so will miss out on lower costs from charging the cars using cheaper overnight electricity.

Rocketing fuel prices drive EV demand

The rise in petrol and diesel prices to record highs in the last few months have encouraged drivers to switch to electric cars.

The surge in the oil price since the Ukraine war began will have boosted EV demand further, as Ian Plummer, director at Auto Trader, explains:

“Encouragingly sales of electric vehicles (EVs) have doubled compared to last year, but we should also bear in mind the lack of available new car stocks means these figures reflect orders often made several months ago. There was already massive growth in this segment and, if anything, the demand for EVs is now even stronger as prices at the pumps rise on the back of the Ukraine crisis.

Our own marketplace data shows a bigger share of would-be drivers considering EVs since the war began as the resulting rocketing fuel prices make electric cars a more attractive option, despite the upfront price premium.

Introduction: Chip shortages and household squeeze hit car sales

Good morning, and welcome to our live rolling coverage of business, economics and financial markets.

Semiconductor shortages and the cost of living squeeze have hit UK car sales last month, despite more motorists turning to electric vehicles.

British new car registrations fell about 14% in March from a year earlier, despite the lifting of Covid-19 restrictions last month, preliminary industry data released this morning showed.

That would take registrations to below 250,000, a long way shy of the March average of 450,000 in the decade before the pandemic.

March is usually the biggest month for the auto sector, because the ‘new’ number plates come in. But the pressures on household finances will mean some families will put off getting a shiny new car, as rising food, fuel and energy costs eat into budgets.

Chip shortages continue to hit the sector too, as supply chains continue to struggle after two years of pandemic disruption. UK car production fell 41% year-on-year in February, data last month showed.

As well as struggling to source chips, manufacturers have also been hit by soaring metal costs as the war in Ukraine pushed commodity prices sharply higher.

UK car sales had risen year-on-year in January and February (compared to weak sales in 2021, when the pandemic was hitting the sector), so March’s fall reverses that trend.

EV vehicles are in growing demand, though, as motorists shun diesel.

Today’s report is expected to show that March was the best ever month for sales of battery electric vehicles, with registrations last month surpassing those for the whole of 2019.

The SMMT will release the final figures for March at 9am.

Also coming up today

The latest PMI surveys will show how firms in the UK, eurozone and US fared last month, in the face of rising energy and commodity prices and the ongoing pandemic.

Oil prices are rising, as the US and France call for a significant escalation of sanctions against Russia following the shocking discovery of hundreds of bodies of civilians in towns surrounding Kyiv. Brent crude has gained 1.5% this morning to around $109.

The agenda

  • 9am BST: UK car sales for March
  • 9am BST: Eurozone services sector PMI for March (final reading)
  • 9.30am BST: UK services sector PMI for March (final reading)
  • 1.30pm BST: US trade report for February
  • 3pm GMT: US services sector PMI for March (final reading)
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