Closing post
Time for a recap.
The chairman of Britain’s largest supermarket group has urged the government to implement a windfall tax on energy giants, to help fund more support for struggling families.
In a notable intervention, Tesco chairman John Allan said there was an “overwhelming case” for a windfall tax on the earnings of energy firms, who have benefitted from the surge in oil and gas prices.
Allan also warned that the UK is now seeing “We are seeing real food poverty for the first time in a generation”.
Allan’s comments came as British Gas said it hiring more people to deal with a rise in the number of distressed customers who are struggling to cope with soaring energy bills.
But its owner, Centrica, also predicted annual profits this year will hit the top end of expectations.
The UK’s soaring cost of living and last month’s record increase in household energy bills have slammed the brakes on consumer spending, retail sector figures show.
Stock markets have rebounded from their worst session in almost two years yesterday.
In London, the FTSE 100 index has recovered almost half of Monday’s losses, up 70 points at 7208 points, while Wall Street has also rebounded.
Tuesdays apparently auspicious days for the S&P 500. Bespoke Investment Group: 'On average, SPY has gained 0.52% on the trading day after 3%+ drops. Tuesdays have seen by far the biggest upside response with an average gain of 1.86%. Fortunately for bulls, today is Tuesday.'
— Naomi Rovnick 歐蜜 (@naomi_rovnick) May 10, 2022
It follows a heavy tumble on Monday, in which stocks, bonds, industrial and precious metals, oil and crypto currences had all fallen.
Elswhere....
Heathrow has lifted its forecast for passenger growth this year by 16% after a rise in holidaymakers over Easter. The airport now expects 53 million passengers this year, up from 45.5m, following an increase in passengers in April due to “outbound leisure travellers and Brits cashing in airline travel vouchers”.
Shares in Peloton have dropped 12% in early trading to around $12.36, after the home exercise equipment firm reported a larger loss than expected.
The chief executive of Stellantis, one of the world’s biggest carmakers, has warned battery shortages could affect the industry as soon as 2025 as the transition towards electric vehicles accelerates.
The warning comes as UK secondhand electric car sales more than double, as demand surges.
Tesla has halted most of its production at its Shanghai plant because of problems securing parts for its electric vehicles.
Big high street pharmacy chains including Boots and Superdrug have run out of some hay fever medicines, with the manufacturer, GlaxoSmithKline, blaming temporary supply issues.
And Sanjeev Gupta’s GFG Alliance faces a fight against insolvency for some of its key companies after Credit Suisse withdrew from a long negotiation over debts.
Bundesbank boss urges ECB to raise rates in July
Germany’s central bank boss has called for eurozone interest rates to rise in July.
Joachim Nagel said in a speech there was a growing risk that policymakers act too late, as consumers and businesses’ inflation expectations rise.
Nagel fears that central bankers could be forced into “strong and abrupt” increases in borrowing costs, as occured in the US under Paul Volcker.
As central banks consider how to bring inflation back down to target, it is worth recalling the conditions under which the last, most prominent disinflation episode – the Volcker disinflation at the end of the 1970s – played out. Over the course of this policy, nominal interest rates in the US rose above 20%.
Of course, at that time the situation was different in many respects. Debt ratios were much lower than they are today, for both public and private debt. Inflation had already been higher in the 1960s and early 1970s. And arguably, before this episode, the Fed may have been less independent and less focused on inflation than it is today.
There is one lesson I would draw from this: Delaying a monetary policy turnaround is a risky strategy. The more inflationary pressures spread, the greater the need for a very strong and abrupt interest rate hike.
Bundesbank President #JoachimNagel on #monetarypolicy in the #euroarea at the International Economic Symposium co-hosted by Bundesbank and @business_econ #inflation #interestrates #ECB https://t.co/cu3nNuZHDz pic.twitter.com/QNg5Hln93k
— Deutsche Bundesbank (@bundesbank) May 10, 2022
Citigroup is overhauling the leadership of one of the teams linked to the ‘flash crash’ that sent European stock markets at the start of last week, three sources have told Reuters.
European markets briefly plunged on the morning of Monday 2nd May, in a short tumble that saw Sweden’s benchmark OMX 30 fall by nearly 8%.
Citi confirmed that one of its traders had made an error when inputting a transaction, and that the mistake was quickly corrected [the UK market was closed for the Bank Holiday break].
• This post was amended on 11 May 2022 to remove a section from a Reuters report relating to Ali Omari leaving his position as EMEA Head of Delta One Forwards and Sectors at Citigroup. Reuters reported in an update to that story later on 10 May that Omari “left the US bank in a decision unrelated to the [flash crash] event”. Omari told Reuters he was not at work for three weeks prior to the May 2 event, and only returned to the office the next day to tender his resignation before taking up another opportunity.
Updated
Wall Street opens higher
It looks like Turnaround Tuesday on Wall Street, as investors move back into stocks after Monday’s losses.
The S&P 500 index of US stocks has gained 56 points, or 1.4%, in early trading to 4047 points, after hitting a 13-month low yesterday.
Tech stocks are having a strong start, with the Nasdaq Composite up 1.8%.
But the worries about slowing growth, China’s lockdown, the Ukraine war and inflation haven’t all gone away, as Craig Erlam, senior market analyst at OANDA, writes:
We’re seeing a small recovery in stock markets on Tuesday, as investors dust themselves off following the rout at the start of the week.
There’s clearly a huge amount of worry about a recession in the markets at the minute as central banks continue to aggressively tighten against the backdrop of a slowing economy and a cost-of-living crisis. There’s a lot of pressure on household budgets and it’s only going to intensify as the year progresses which will take its toll.
The Bank of England alluded to that last week, with a recession now expected later this year as energy prices surge once more. While the Fed and others may still be more optimistic about their prospects, with a soft landing still the base case in the US, many are sceptical it can be achieved.
Electric car battery shortage looms in 2025, warns Stellantis boss
The chief executive of Stellantis, one of the world’s biggest carmakers, has warned battery shortages could affect the industry as soon as 2025 as the transition towards electric vehicles accelerates.
Carlos Tavares, the Stellantis chief executive, said that current plans for battery production may not address the demand from carmakers as they ramp up electric car sales in the coming years, even with significant new investments in European “gigafactory” battery plants and suppliers already at scale in China, South Korea and Japan.
Warning that battery components could be the next bottleneck facing the industry, Tavaress said:
“I can anticipate that we will have around 2025, 2026, a short supply of batteries, and if there is no short supply of batteries then there will be a significant dependence of the western world vis-a-vis Asia,”
Speaking on Tuesday at a car industry conference run by the Financial Times, the boss of Stellantis (whose brands include Peugeot, Vauxhall, Fiat, Chrysler and Jeep) explained:
“That’s something that we can easily anticipate.
“The speed at which everybody is building manufacturing capacity for batteries is possibly on the edge to be able to support the fast-changing markets in which we are operating.”
Wall Street’s still on track for a rebound....
US Opening Calls:#DOW 32587 +1.05%#SPX 4051 +1.47%#NASDAQ 12488 +2.40%#RUSSELL 1787 +1.50%#FANG 5085 +2.90%#IGOpeningCall
— IGSquawk (@IGSquawk) May 10, 2022
Back on Peloton’s struggles, CEO Barry McCarthy has told shareholders that the firm is “thinly capitalised” for a business of its scale -- and has lined up loans from JP Morgan and Goldman Sachs.
McCarthy wrote:
We finished the quarter with $879 million in unrestricted cash and cash equivalents, which leaves us thinly capitalized for a business of our scale.
Earlier this week we took steps to strengthen our balance sheet by signing a binding commitment letter with JP Morgan and Goldman Sachs to borrow $750 million in 5-year term debt.
Peloton is also struggling with a stock of unsold equipment, McCarthy added:
The balance sheet challenge has been managing inventory. We have too much for the current run rate of the business, and that inventory has consumed an enormous amount of cash, more than we expected.
A US central bank policymaker has pledged that the Federal Reserve can bring inflation down while maintaining a strong economy this year.
New York Fed President John Williams told an economic conference in Germany that “While the task is difficult, it is not insurmountable”.
We have the tools to return balance to the economy and restore price stability, and we are committed to using them.
Williams explains that the Fed’s actions (higher interest rates and unwinding its stimulus) will cool the demand side of the equation, while supply problems should ease.
The New York Fed chief outlined a scenario in which higher interest rates would help bring the inflation rate down to “nearly 4%” before declining to “about 2.5%” in 2023 and returning close to the Fed’s 2% target in 2024.
Meanwhile, the US job market and economy should “continue to show strength and resilience,” with growth of “around 2%” this year and “the unemployment rate to remain around its current low level” of 3.6%, he said.
🇺🇸 *#FED WILLIAMS SEES U.S. GDP GROWTH AT ABOUT 2% IN 2022 - BBG
— Christophe Barraud🛢🐳 (@C_Barraud) May 10, 2022
*WILLIAMS SEES Y/Y PCE INF AT NEARLY 4% IN '22, '23 ABOUT 2.5%
*WILLIAMS SEES INFLATION EASING CLOSER TO 2% FED GOAL IN 2024
*WILLIAMS: #FOMC TO MOVE `EXPEDITIOUSLY' TO NORMALIZE RATES
Summary of #Fed Governor Williams on economy's prospects indicate the need to understand that a soft/softish landing is like baking a cake, you need to break some eggs.
— Kate's Dad (@KASDad) May 10, 2022
An abrupt halt of Russian gas exports could see economies in emerging Europe, central Asia and north Africa slide back to pre-pandemic GDP levels, the European Bank for Reconstruction and Development (EBRD) warned today.
Many countries in the EBRD’s region of operation, which covers some 40 economies stretching from Mongolia to Slovenia and Tunisia, depend on Russian gas and a sudden ceasing of supplies would lower output per capita by 2.3% this year and 2% in 2023, according to the lender’s latest report.
“Europe is discussing to stop purchases of hydrocarbons from Russia,” chief economist Beata Javorcik told Reuters.
“There is also the possibility that Russia would stop supplying its gas.”
The EBRD predicts that Ukraine’s GDP will contract 30% in 2022, worse than the 20% annual decline it estimated at the end of March [the World Bank forecast a 45% plunge last month].
Russia’s economy is expected to shrink 10% and stagnate in 2023.
Back in the UK, high street pharmacy chains including Boots and Superdrug have run out of some hay fever medicines, with the manufacturer, GlaxoSmithKline, blaming temporary supply issues.
Piriton and Piriteze tablets, made by GSK, are out of stock at Boots and other chains because there is an industry-wide shortage of the active ingredient, chlorphenamine maleate, which is also used to treat eczema and food allergies.
The products are expected to be back on shelves within the next few weeks, according to the industry.
GSK said its Piriteze allergy syrup, which is given to children, was not affected by the problems. More here.
It sounds like people want to work from home but not exercise there. Peloton shares fall 29% after company posts huge loss. https://t.co/RcTevgoC4m #fitness #healthclubs
— Joe Connolly (@JoeConnollybiz) May 10, 2022
Peloton’s share price is a drastic example of the rise and fall of the ‘pandemic winners’
Having floated at $29 per share in 2019, Peloton soared during the lockdowns to hit $171 by February 2021.
That valued the home exercise kit maker at $50bn, as demand for its web-enabled connected bicycles was boosted by the closure of gyms.
But as vaccine rollouts led to lockdown restrictions, shares sank - and are now just $10 each in pre-market trading, after today’s earnings miss.
Peloton shares slide after earnings miss
More pain at Peloton!
The exercise bikes and tread machine maker has missed Wall Street forecasts, sending its shares slumping 25% in premarket trading.
Peloton reported third-quarter revenes of $964m, missing estimates for $970m, and down from $1.26bn a year earlier.
It made a loss of $2.27 a share, much worse than estimates of an 83 cent loss per share.
Yikes $PTON pic.twitter.com/05pg8d7IxZ
— Tom Hearden (@followtheh) May 10, 2022
Peloton also forecast revenue growth below forecasts, blaming “softer demand” and recent hardware price reductions as the end of lockdown restictions hit demand for its home workout equipment.
- Peloton on Tuesday reported a wider-than-expected quarterly loss and a steep decline in sales, as inventories piled up in warehouses and ate away at the company’s cash.
- The connected fitness equipment maker also offered up a weak sales outlook for the fourth quarter, citing softer demand.
- The company anticipates planned subscription price hikes may lead some users to cancel their monthly memberships.
Updated
Wall Stret is set to open higher, after the worst day for global markets since June 2020:
FUTURES MOVING HIGHER BEFORE MARKET OPEN
— Papertrade (@papertrade_gg) May 10, 2022
DOW +0.76% 🟢
S&P 500 E-MINI +0.87% 🟢
NASDAQ +1.34% 📈
Alarm bells are sounding in Greece where the country’s inflation rate has hit double digits for the first time in 28 years.
The Hellenic Statistical authority, Elstat, says the consumer price index - already heightened by spiralling energy costs on the back of Russia’s invasion of Ukraine - increased by 2.1 % during April, compared with the previous month.
That lifted the annual inflation rate to 10.2 % for the first time since 1994.
Inflation Rate in Greece increased to 10.20 percent in April from 8.90 percent in March of 2022. https://t.co/Y7kCvTSjSC pic.twitter.com/Et8fyzSvH6
— Trading Economics (@tEconomics) May 10, 2022
Elstat attributed the monthly jump in the overall CPI partly due a 2.5 % increase in the cost of food and non-alcoholic beverages and 14.1 % jump in the cost of clothing and footwear. Greeks earn some of the lowest wages in the 27-member EU.
On an annual basis, the cost of housing (which includes rent, heating and power) rose 35.2% year-on-year, transportation prices were up 15.4% with foods and non-alcoholic beverages were 10.9% more expensive.
The centre right government, following other member states, has announced fiscal measures to ease the cost of living crisis including subsidies for electricity bills. Last week it announced a €3.2bn euro support package for households struggling to make ends meet.
In parliament, the Prince of Wales is delivering the Queen’s speech.
In it, Charles says Her Majesty’s Government’s priority is to grow and strengthen the economy and help ease the cost of living for families.
And on the economy, he says:
Her Majesty’s Government will drive economic growth to improve living standards and fund sustainable investment in public services. This will be underpinned by a responsible approach to the public finances, reducing debt while reforming and cutting taxes.
Her Majesty’s Ministers will support the Bank of England to return inflation to its target.
[reminder, UK inflation is already a 30-year high of 7%, and expected to hit 10% by the end of the year]
Andrew Sparrow’s Politics Live blog has all the details:
In the US, small business confidence has stabilised after falling three months in a row, but owners remained worried about high inflation and worker shortages.
The National Federation of Independent Business (NFIB) said its Small Business Optimism Index was unchanged at a reading of 93.2 last month. The index had declined since January.
Thirty-two percent of owners reported that inflation was their single most important problem in operating their business, the highest reading since 1980 (and understandable, given US inflation is a 40-year high of 8.5%).
🇺🇸The NFIB survey shows that underlying inflation pressure remains high
— Danske Bank Research (@Danske_Research) May 10, 2022
The Fed can't feel comfortable just yet pic.twitter.com/X3QlsgqdYH
Full story: Tesco chairman backs energy windfall tax to fight living costs crisis
The chairman of Tesco has said there is an “overwhelming case” for a windfall tax on energy companies to help those suffering the most from the cost of living crisis, as some customers have started rationing the amount of food they buy at the supermarket.
John Allan said the country was facing “real food poverty for the first time in a generation,” and that people were finding it even harder to mitigate soaring energy costs.
“There’s an overwhelming case for a windfall tax on profits for those energy producers, fed back to those most in need of help with energy prices,” Allan told BBC Radio 4’s Today programme.
In a striking intervention, Allan also criticised the chancellor, Rishi Sunak, for raising national insurance at a time when so many households were struggling with squeezed budgets.
“If I’d been the chancellor, I wouldn’t have done it,” Allan said.
“It’s hitting people on modest incomes disproportionately and it’s absolutely the wrong time to do it. If I were in government, I’d roll that back.”
More here:
Sanjeev Gupta’s GFG Alliance faces a fight against insolvency for some of its key companies after Credit Suisse withdrew from a long negotiation over debts.
GFG will face an insolvency hearing in private on Tuesday, after more than a year of trying to hold off its creditors and find a source of new funding after the collapse of its main lender, Greensill Capital.
Funds run by Credit Suisse were in turn significant backers to Greensill. Companies in GFG Alliance owe the Swiss investment bank more than $1bn (£810m).
The first hearing will decide whether GFG’s problems were primarily caused by Covid-19 and so whether it qualifies for more leeway, according to a person familiar with the matter. The Financial Times first reported on the planned hearings. More here:
In Germany, investors are slightly less pessimistic about the outlook for Europe’s largest economy.
The ZEW economic research institute’s measure of investor confidence has picked up, but remains negative, as Germany is hit by high inflation, soaring energy costs and supply chain disruption due to the Ukraine war and China’s Covid-19 lockdowns.
ZEW’s index of economic expectations increased to -34.3 in May from -41.0 in April, better than forecast.
That shows the economic outlook is still expected to deteriorate, but at a lower pace than expected before, said Achim Wambach, president of the ZEW institute.
*GERMAN ZEW MAY INVESTOR EXPECTATIONS AT -34.3; EST -43.5
— Credit From Macro to Micro 🇺🇦 (@Credit_Junk) May 10, 2022
Zew bounced in may, better than expected pic.twitter.com/E9JQry9zbW
An index for current conditions fell to -36.5 from -30.8, showing how the economic situation has weakened.
ZEW current conditions deteriorated, but expectations improved more than expected:
— CITY INDEX (@CityIndex) May 10, 2022
*German May ZEW Economic Expectations -34.3 vs. -41.0 last and -43.0 expected
*German May ZEW Current Conditions -36.5 vs -30.8 previously
EUROZONE ZEW: COVID RESTRICTIONS IN CHINA CONTRIBUTE TO DETERIORATION IN ASSESSMENT OF ECONOMIC SITUATION THERE, THIS IS A HEAVY BURDEN FOR FUTURE ECONOMIC GROWTH IN GERMANY.
— Breaking News | FinancialJuice (@Financialjuice1) May 10, 2022
Elsewhere, Philippines government bonds are weakening after Ferdinand Marcos Jr, the son and namesake of the late dictator, won the country’s presidential election, prompting protests on the streets.
Bonds due in 2030 fell 1.3 cents to 130 cents on the dollar, according to Tradeweb data flagged by Reuters.
PHILIPPINES SOVEREIGN DOLLAR BONDS FALL AS MUCH AS 1.3 CENTS IN THE DOLLAR AFTER PRESIDENTIAL ELECTION WIN FOR FERDINAND MARCOS JR. SPARKS PROTESTS #News #Forex #PRESIDENT #DOLLAR #BOND #PPI
— Capital Hungry (@Capital_Hungry) May 10, 2022
Marcos Jr, better known as “Bongbong”, won in a landslide - a remarkable return for the ousted dictator’s family, which has prompted protests on the streets.
My colleague Rebecca Ratcliffe explains how it happened:
Marcos Jr, 64, ran with the slogan “Together we shall rise again”, invoking nostalgia for his father’s authoritarian regime, which the family and its supporters have portrayed as a golden era in a campaign fuelled by online disinformation as social media has been flooded with false stories that have swept aside the atrocities and corruption widespread during the period.
Such portrayals have horrified survivors of Marcos Sr’s brutal regime. Thousands of political opponents were tortured, arrested and disappeared under his rule, while as much as $10bn (£8bn) was plundered.
Marcos Sr was ousted in the People Power revolution in 1986, when the family was humiliatingly airlifted from the presidential palace by helicopter, and fled into exile.
Back in the financial markets, European stock are holding their earlier gains as some traders look for bargains after Monday’s rout.
But the mood is still tense, as Russ Mould, investment director at AJ Bell, reports.
“After yet another miserable session in the US yesterday, Europe and pockets of Asia managed to avoid the rout and push ahead on Tuesday. This is unexpected given market sentiment is weak and the VIX ‘fear’ index yesterday jumped to its second highest closing price in the past 12 months.
Most well-known indicator of market sentiment is the CBOE Volatility Index or "VIX Index" (Expected volatility in the market for the next 30days). As markets (S&P500 here) decline, VIX increase and vice versa, often depicting extremes and potential opportunities.
— DFM (@DFMGlobal) May 10, 2022
(Bloomberg Data) pic.twitter.com/c3Or2l64ZR
“Stocks in general have struggled this year, with investors worrying about inflation, rising interest rates, a slowdown in the world economy, war in Ukraine, new Covid flare-ups in China, weakness in consumer spending and concerns that business investment might take a back seat.
“The narrative has gone from ‘how can I make money?’ to ‘how can I protect my money?’.
In London, the FTSE 100 is up 56 points, led by industrial software maker Aveva (+4%), engineering firm Melrose (+4%) and tobacco group Imperial Brands (+2.9%).
John Allan’s call for an energy windfall tax comes as British Gas’s owner, Centrica, predicted annual profits will hit the top end of expectations.
And in a sign of economic hardship caused by the energy crisis, British Gas is taking on hundreds more staff to deal with the sharp rise in the number of distressed customers who are struggling to cope with soaring bills.
My colleague Julia Kollewe explains:
The company is to recruit another 500 people to field calls from the growing number of people who are facing higher energy bills at a time when the wider cost of living is outpacing wage growth, piling pressure on household budgets.
A spokesperson for Centrica said demand for customer services had been “phenomenal” over the past year. “We’re taking on extra employees to manage that demand,” they said.
“Customers are very concerned about rising energy costs and we want to help them as much as we can.”
The average household dual fuel tariff jumped to just under £2,000 a year on 1 April, when the UK’s energy regulator raised the price cap by 54% to reflect sky-high wholesale gas prices. Bills are poised to rise further at the next energy price cap review in October.
Centrica said in a trading statement on Tuesday that it expected 2022 operating profits to come at the top end of City forecasts, which range from £739m to £1.4bn.
Shares in Centrica have jumped 4.5%.
Centrica results fuel calls for windfall tax as British Gas owner gets boost from strong nuclear and gas production. #Centrica https://t.co/ubK5tyvvUr
— Andrew Duncan (@andrewsduncan1) May 10, 2022
Tesco chairman: We're seeing real food poverty
John Allan also warns that the UK is seeing ‘real food poverty’ for the first time in a generation.
Tesco’s chairman tells Today that many of the supermarket chain’s customers are struggling to both heat their homes and feed their families, with inflation the number one worry.
More and more are resorting to food banks, including people who never had to use a food bank before.
Allan warns:
“We are seeing real food poverty for the first time in a generation”
"We are seeing real food poverty in this country for the first time in a generation"
— Andrew Pakes (@andrewpakes_) May 10, 2022
Tesco Chair John Allen pretty damning about #CostOfLivingCrisis & on need for a windfall tax on energy companies @BBCr4today
This should be priority for #QueensSpeech
In another broadside at the government, Allan also criticises recent tax increases such as the rise in national insurance.
Frankly, if I’d been the chancellor, which is an extremely unlikely event, I wouldn’t have done it.
It may be more sensible in the longer term, but right now... “If I were in government I’d roll that back”, Allan adds.
Updated
John Allan also urges ministers to reform business rates:
If business rates were reformed and pulled down, it would help a lot of small and medium-sized businesses in particular, who if we’re not careful will not see out this current crisis.
The Tesco chairman argues that non-food retailers are most at risk, as customers will make deeper cuts to their discretionary spending rathe than on essentials like food.
Tesco is one of several retailers, along with Sainsbury’s, Greggs and Waterstones, who have formed a new group pushing for business rates to be cut, possibly funded by an online sales tax.
More here: High street giants form sector ‘jobs alliance’ in fresh push for rates overhaul
Tesco chairman calls for energy windfall tax
The chairman of Tesco has called for a windfall tax on energy producers to help struggling families in the cost of living crisis.
John Allan told Radio 4’s Today Programme that he hopes today’s Queen’s Speech will include support for people in need, including help with the jump in energy prices.
And he throws his personal support behind a windfall tax on energy producers, which many groups including the Labour Party have been pushing for.
Allan says:
I think there’s an overwhelming case for a windfall tax on profits from those energy producers, fed back to those most in need of help with energy prices.
I think that would be the single biggest thing that could be done.
Q: The argument against that is that it might deter companies from investing in sources of energy [as the government has argued].
Allan, who is expressing a personal view rather than a Tesco view, brushes this aside:
I think they are expecting it, and I doubt they would actually be much phased by it. And it should be short-term only.
[Last week, BP’s CEO Bernard Looney undermined Boris Johnson’s argument against a windfall tax, saying it would go ahead with investment in Britain even if a levy were imposed]
Chairman of Tesco John Allan tells BBC R4 there's an “overwhelming case” for a windfall tax,“fed back to those most in need of help” with energy prices.
— Ashley Cowburn (@ashcowburn) May 10, 2022
Allan says his personal view is energy companies “are expecting it and I doubt they would actually be much phased by it”.
Allan also explains that he visited a Tesco store over the weekend, and heard people telling checkout staff to stop scanning products when the bill reached a certain amount, such as £40.
That’s a sign of just how stretched some families are, he adds.
A lot of people are feeling something of a pinch, and lots of people are actually feeling extremely stretched.
Tesco chairman John Allan on @BBCr4today calling for a windfall tax on energy firms to ease cost-of-living crisis...
— Hannah Uttley (@huttleyjourno) May 10, 2022
Updated
Tesla has halted most of its production at its Shanghai plant because of problems securing parts for its electric vehicles, according to an internal memo seen by Reuters, the latest in a series of difficulties for the factory.
The plant plans to manufacture fewer than 200 vehicles on Tuesday, according to the memo, far fewer than the roughly 1,200 units it has been building each day since shortly after it reopened on 19 April after a 22-day closure.
Two sources familiar with the matter had earlier said supply problems had forced the factory to halt production on Monday.
Shanghai is in its sixth week of an intensifying Covid-19 lockdown that has tested the ability of manufacturers to operate amid hard restrictions on the movement of people and materials.
European stock markets have opened higher after yesterday’s rout.
The FTSE 100 index has gained 0.8%, or 63 points, recovering some of Monday’s 171 point slide.
Germany’s DAX and France’s CAC are both around 1% higher.
But there may be more volatility ahead, warns Mark Haefele, chief investment officer at UBS Global Wealth Management.
“Despite our expectation of falling inflation and sustained growth, we believe investors should brace for further equity volatility ahead amid significant moves in key economic variables and bond markets.
We continue to favor areas of the market that should outperform in an environment of high inflation.”
European Session rally📈
— CN Wire (@Sino_Market) May 10, 2022
🇩🇪DAX +1.31%
🇬🇧FTSE100 +0.62%
🇫🇷CAC40 +1.02%
🇪🇺STOXX50 +1.20%
🇮🇹FTSE MIB +0.92%
🇳🇱AEX +0.81%
🇪🇸IBEX35 +0.64%
🇨🇭SMI +0.80%
🇸🇪OMXS30 +1.28%#stockmarkets pic.twitter.com/h7d0s9QqYZ
Oil prices are down around 0.5% this morning, adding to Monday’s tumble.
Brent crude is trading around $105 per barrel, having dropped from $113 to $106 yesterday.
Coronavirus lockdowns in top oil importer China, a strong dollar and growing recession risks are all feeding worries about the outlook for the global economy, and demand for energy.
#OIL UPDATE: #Brent crude oil reached $104.70 per barrel on Tuesday while #US benchmark #WTI crude oil reached $101.87 per barrel at 08:04 a.m. Saudi time #OOTT pic.twitter.com/m2kDk62g34
— Arab News | Business (@ArabNewsBiz) May 10, 2022
Asia-Pacific shares have hit their lowest in nearly two years, as investors shed riskier assets on worries that higher interest rates will sink the recovery.
Hong Kong’s Hang Seng index is down 1.7% in late trading, as it caught up with Monday’s global selloff after a one-day holiday.
Alibaba is down 5%, as tech stocks are pummelled by the prospect of higher global interest rates.
Japan’s Nikkei has lost another 0.6%, on top of yesterday’s 2.5% swoon.
Concerns that China’s economy is slowing are hitting stocks, as Covid-19 lockdowns continue to hit activity.
Song Seng Wun, an economist at CIMB Private Banking, says:
“Chinese growth is facing significant headwinds, whether you look at official or private sector Purchasing Managers’ Index.”
Heathrow lifts 2022 passenger forecast after busy April
Heathrow Airport has lifted its forecast for passenger growth this year by 16% after seeing a rise in holidaymakers over Easter.
Heathrow now expects to see 53 million passengers this year, up from 45.5m forecast previously, after five million passengers travelled through the airport in April.
It says the recovery in passenger demand was driven by “outbound leisure travellers and Brits cashing in airline travel vouchers”.
That fits with the latest data from Barclaycard, which shows that April was the best month for airlines and travel agents since the onset of the pandemic two years ago.
But, despite this pick-up, Heathrow only expects demand to reach two-thirds of pre-pandemic levels.
It says “unpredictability remains the harsh reality”, pointing to the cost of living squeeze, recession fears and the Ukraine conflict.
The ongoing war in Ukraine, higher fuel costs, continuing travel restrictions for key markets like the United States and the potential for a further variant of concern creates uncertainty going forward.
Together with last week’s warning from the Bank of England that inflation is set to pass 10% and that the UK economy will likely ‘slide into recession’ means we are taking a realistic assessment that travel demand will reach 65% of pre-pandemic levels overall for the year.
Heathrow facing ‘significant challenges’ despite increasing passenger forecasts https://t.co/r8bNv2sTMm
— Travel Weekly (@travelweekly) May 10, 2022
Heathrow says it will reopen Terminal 4 by July and are already recruiting up to 1,000 new security officers. It still expects to remain lossmaking throughout this year.
Introduction: Markets on edge after ‘everything rout’
Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.
Markets are on edge after their worst session in almost two years, as fears grow that the world economy is slowing... just as central bankers raise interest rates and unwind their stimulus packages.
Asia-Pacific stocks have hit two-year lows overnight, while oil has dipped another 1% after a sharp fall on Monday (more on both shortly).
Yesterday, global markets posted their biggest one-day drop since June 2020, early in the pandemic. In London, the FTSE 100 shed 2.3% while the US S&P 500 slid 3.2% to a one-year low.
European markets could recover some ground this morning:
European Opening Calls:#FTSE 7215 -0.02%#DAX 13424 +0.32%#CAC 6095 +0.14%#AEX 665 -0.23%#MIB 22850 +0.07%#IBEX 8154 +0.19%#OMX 1921 +0.32%#SMI 11419 -0.22%#STOXX 3532 +0.13%#IGOpeningCall
— IGSquawk (@IGSquawk) May 10, 2022
But with the cost of living crisis hitting UK housholds, the economic outlook is looking weaker.
Retail sales fell 0.3% in April, the first decline in 15 months, as rising prices forced people to slam the brakes on consumer spending, according to the latest industry data from KPMG and the British Retail Consortium.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, has dubbed yesterday’s sell off the ‘everything rout’:
The selloff in stocks, bonds, and Bitcoin deepened on Monday. Even commodities sank and crude oil tumbled more than 8% on the back of mounting worries of a seriously tighter, and potentially ineffective Federal Reserve (Fed) policy that would, to fight back the skyrocketing inflation, pull back support aggressively enough to cause recession.
Another worry is that, even with a significantly tighter monetary policy, the Fed may not be able to tame inflation as much as desired. This is what the inflation expectations tell us.
Hebe Chen, market analyst at IG, says the deadlock in the Russia-Ukraine peace talks, rising price pressures, and the tightening lockdown in Shanghai are all hitting markets.
Everything that the market has been worrying about since the early days of 2022 has entered a deadlock this week—war, inflation, and China.
President Vladimir Putin on Monday defended Russia’s invasion of Ukraine in his annual ‘Victory Day’ speech. He even referred to Russia’s triumph over Nazi Germany in World War II --a clear message to the west that the wide range of economic sanctions on the country, companies and individuals will not stop the war.
Another issue that entered a deadlock is the argument about China’s Covid strategy and its economic health. Shanghai re-entered into the strictest lockdown on the weekend, following orders from President Xi Jinping to double down on efforts to eliminate the COVID-19 outbreak regardless of the economic and social costs.
As data released on Monday showed, the ‘unquestionable’ strategy has dragged China’s export growth to its weakest pace since June 2020
With the UK economy at risk of recession, the government will use today’s Queen’s Speech to outline new legislation to support growth. This year’s theme will be growing the economy, easing the burden on families and levelling up - with the Prince of Wales delivering the government’s plans.
The agenda
- 9am BST: Italian industrial production report for March
- 10am BST: ZEW index of German economic confidence
- 11am BST: NFIB index of US business optimism
- 11.30am BST: Queen’s Speech
Updated
