Markets endure global sell off as US stocks tumble
FTSE 100 closes 0.8pc lower
UK gas prices for next month surged 16pc on Monday, after Russia opted to cap additional flows to Europe.
State-owned Gazprom opted not to flow more gas to Europe via Ukraine in October, according to the results of an auction on Monday.
There were also signs that Russian flows via the key Yamal- Europe pipeline will remain limited, with traders booking just a fraction of the capacity offered to flow gas next month into Germany via the Mallnow compressor station.
The cap on additional Russian supplies is leaving Europe starved for the fuel just as it needs to boost buffer inventories before the winter.
UK prices jumped to 188.10p a therm while benchmark European gas prices - traded in the Netherlands - also surged 16pc to 75.33 euros a megawatt-hour.
With just a few weeks to go before the start of the heating season, storage sites are less than 72pc filled - the lowest level for this time of year in more than a decade.
That's all from us today – here are some of our top stories:
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Ireland to include fuel bill support in budget
Ireland will include measures in its upcoming budget to support people struggling to pay their fuel bills this winter amid a global surge in wholesale power and gas prices.
Environment minister Eamon Ryan said the government will look at ongoing allowances aimed at protecting people against fuel poverty as well as "potentially other larger measures".
"We will have to intervene in the budget. We'll come forward with specific measures to address this very significant but hopefully short-term problem," he told national broadcaster RTE.
Households across Europe face much higher energy bills in the coming months after energy suppliers began passing on the soaring prices to consumers in recent months through hikes to retail tariffs.
Oil prices drop on China crackdown fears
Oil prices have resumed their decline amid growing concerns over the health of China's economy that have sparked major losses in equities.
US crude fell as much as 2.8pc to its lowest level in a week amid fears of a crisis in China's property sector that could impact the country's demand for oil.
John Kilduff, a partner at Again Capital, told Bloomberg: “China is the global swing demand center. If we lose China, we will lose much of the recent price gains.”
Crude prices have performed well this month, spurred on by lingering supply disruptions caused by storms in the US.
But crude oil benchmarks could suffer if a key US Federal Reserve meeting this week signals a scaling back of stimulus measures.
Boris Johnson calls on rich countries to meet $100bn climate pledge
Boris Johnson has called on wealthy nations to meet a pledge to spend $100bn a year to tackle climate change ahead of hosting the key COP26 summit next month.
Reuters has more details:
Johnson and UN secretary-general António Guterres will hold a roundtable of world leaders on Monday to get rich countries to deliver on the unmet pledge, made in 2009.
"Richer nations have reaped the benefits of untrammelled pollution for generations, often at the expense of developing countries," Johnson said in a statement.
"As those countries now try to grow their economies in a clean, green and sustainable way we have a duty to support them in doing so – with our technology, with our expertise and with the money we have promised."
A report released on Friday by the Organisation for Economic Co-operation and Development said that rich countries likely missed a goal to contribute $100bn last year to helping developing nations deal with climate change after increasing funding by less than 2pc in 2019.
Kwarteng: Gas prices may be higher for longer than expected
Natural gas prices “could be high for longer than people anticipate just as they could fall very quickly,” Business Secretary Kwasi Kwarteng told parliament today.
Addressing concerns about a looming energy crisis this winter, Kwarteng said there was “a considerable amount of volatility in these markets and it would be rash of me to predict their course”.
It's a misconception that the UK was reliant on Russian gas, he added.
Speaking in the House of Commons, Kwarteng said gas storage was "definitely an issue" for the UK, but cautioned against creating panic about supplies of the fuel.
Kwarteng was responding to a question from Tory MP John Redwood, who had asked if he’d talk to the industry about increasing the UK’s currently “tiny” gas storage capacity to act as a “buffer to smooth supplies and keep prices down.”
Kwarteng said he’d “hit the nail on the head” and that “clearly this is a situation that needs to be reviewed.”
FTSE closes 0.8pc lower
The FTSE 100 has closed at a two month low this afternoon, following a sell off which roiled markets around the world on Monday.
The blue-chips dropped 0.8pc or 55 points from Friday's close, finishing the day at 6,908.5 points.
However the index lifted slightly from lows of 6828.5 points after a late-afternoon rise from British Airways owner IAG.
IAG's shares rose 11.2pc after the White House announced it would relax travel restrictions between the US and the UK.
Also among the top risers was AstraZeneca (up 6.1pc) after announcing “groundbreaking” results for its new breast cancer drug and Rolls Royce (up 4.2pc).
Weighing on the index was Prudential (down 8.4pc) and Standard Chartered (down 7pc).
The FTSE Mid-250 index closed down 257.2 points at 23401.72.
Among the mid-caps, food service group SSP jumped 5.9pc while publisher Reach and Money Supermarket ended the day 9pc lower.
Global microchip shortage to last until 2023
The world's microchip drought, which has led to car factories freezing production, is set to finally end in 2023 according to analyst predictions.
My colleague Matthew Field reports:
Higher prices and political concerns around the shortage are prompting chipmakers to invest in new plants, with a huge wave of supply due to hit the market the year after next.
Analysts IDC said they expected the industry to reach overcapacity in 2023 after growing by 17.3pc this year and as further expansion of chip foundries come online.
Manufacturers of cars and electronics have been left scrambling for key semiconductor parts as demand outstripped supply during the pandemic.
PM to challenge Bezos on Amazon tax
Prime Minister Boris Johnson said he will tell Jeff Bezos that e-commerce giant Amazon must pay its fair share of taxes in the country when the two meet on Monday.
Speaking to reporters on the way to the US, Johnson also said he would speak with the Amazon chairman about working conditions for UK based employees while also congratulating Bezos on his efforts to plant trees around the world.
The relative low figures Amazon pays in tax in the UK has for years been a point of controversy in Westminster.
Asked if the Prime Minister would raise Amazon’s tax record with Mr Bezos, Mr Johnson’s official spokesman said: “You can expect the Prime Minister to raise this important issue. We have been an advocate for an international solution to the tax challenges posed by digitalisation of the economy… we will very much be looking to raising that.”
Shell facility hit by hurricane damage
Shell has said a facility in the Gulf of Mexico which is majority-owned by the oil giant has suffered "significant structural damage" due to Hurricane Ida.
The PA news agency has the details:
Shares in Royal Dutch Shell A and B stock were both lower after it confirmed that pars of the West Delta-143 site are likely to be offline until the end of its year.
However, Shell stressed that roughly 60pc of its producing assets in the Gulf of Mexico are back online since Hurricane Ida struck at the end of last month.
The oil major has a stake of just less than 72pc of the site, while BP's exploration and production operation owns the remaining portion of the facility.
London Tube gets two new stations as Northern Line extension opens
Two new tube stations opened to commuters on Monday in the first major extension to the London Underground this century, reports Sam Hall and Melissa Lawford.
The expansion, which brings the total number of stations to 272, could help generate as many as 25,000 jobs and 20,000 homes, according to Transport for London (TfL).
The new stations offer access to the West End and City within 15 minutes and are key to the regeneration of an area of southwest London that now houses the US Embassy.
PM says reopening of transatlantic travel 'boost for business and trade'
I am delighted that from November, @POTUS is reinstating transatlantic travel so fully vaccinated UK nationals can visit the USA.
It’s a fantastic boost for business and trade, and great that family and friends on both sides of the pond can be reunited once again.
— Boris Johnson (@BorisJohnson) September 20, 2021
Expert reaction: Volatile day for global markets
Chris Beauchamp, chief market analyst at IG, comments:
It is definitely a ‘sea of red’ kind of day for global markets, the first time that phrase has been used for quite a while. US markets opened the day firmly in the red, joining their already heavily-beaten down European cousins, with no sign as yet that the wave of selling has come to an end.
Given the strength of this move to the downside it looks like we have at least a couple days more of selling to go before any kind of counter-wave develops, especially with a potential game-changer of a Fed meeting on Wednesday.
After months of relative quiet, the market has finally woken up, providing an opportunity in due course for dip buyers, perhaps once the Fed meeting is out of the way.
Growth stocks of all kinds have been hard hit today, and those with any kind of connection to China have been at the forefront of the declines.
Fortunately there was some good news for airlines, which have seen a sudden and impressive rebound thanks to the US decision to relax the rules around vaccinated travellers from the UK. IAG has been the big beneficiary, but easyJet has posted a 3.5pc rise on hopes that this move will prompt an additional easing of restrictions in due course for other nations.
Aldi to open store with no checkout in London
Aldi is the latest supermarket to plan stores with no checkouts as the discounter follows in the footsteps of Amazon, reports Laura Onita.
The German chain is testing the technology at a store in London that allows shoppers to pick up their shopping and simply walk out.
Aldi said employees were experimenting with the new format and it would soon open to the public. It declined to give further details on how its system works.
After coming to the UK just two decades ago, Aldi is now Britain’s fifth-largest grocer.
The announcement comes days after Amazon opened its sixth UK supermarket in east London. In March the American online giant chose west London for its first physical shop outside the US with no checkout.
No bail outs for failed energy companies, says Kwarteng
Business Secretary Kwasi Kwarteng added that the government will not "bail out failed companies".
He said it it is "not unusual" for small energy firms to collapse" when wholesale prices rise, adding it is a "feature of a highly competitive market".
"There will be no reward for failure, or mismanagement," Kwarteng said.
"The taxpayer should not be expected to prop up businesses which have poor business models and are not resilient to fluctuations in price."
Energy crisis: 'No throwback to 1970s', says business secretary
The Business Secretary Kwasi Kwarteng said this afternoon he does not expect energy supply emergencies this winter, assuring MPs he is not "complacent".
He added that the UK has a diverse range of supply partners that deliver gas to the country.
The UK has an "excellent relationship with Norway", which delivers nearly 30 per cent of our total gas supply, he said.
"Obviously the global situation has had an impact on some of our energy suppliers," he adds, adding there may be "further companies exiting the market in the coming weeks".
He said he had met with representatives of Ofgem and energy companies over the weekend and held a roundtable discussion this morning.
He said there was no prospect of a shortage of gas, saying there will be "no three-day week or throwback to the 1970s".
Kwarteng blames the spike in prices on the recovery in demand coming out of lockdowns, strong LNG demand in Asia and shortfalls in exports of LNG out of US due to weather events.
UK government refusing to even acknowledge Russia exists, interestingly
— David Sheppard (@OilSheppard) September 20, 2021
BA owner surges 10pc
British Airways owner IAG is helping the FTSE 100 pare its losses, after reports that the US plans to relax travel restrictions for vaccinated passengers from the UK and European Union.
The company's shares have jumped 11pc after the White House said fully vaccinated Britons will be able to travel to the US from November.
My colleagues Nick Allen and Ben Riley-Smith report:
They will have to show proof of vaccination before boarding a US-bound plane and a test with a negative result within three days of departure.
There will also be contact tracing, with airlines collecting phone numbers and email addresses of passengers.
Jeff Zients, the White House Covid-19 coordinator, said: "That will allow the CDC to follow up if someone around them has tested positive."
There will be no quarantine for vaccinated travelers arriving in the US. Mr Zients confirmed: "This applies to all international travel starting early November."
Why is the crisis at Chinese developer Evergrande affecting global markets?
The sell off reverberating through global markets today has partly been attributed to the liquidity crisis at Chinese property developer Evergrande.
But how is China's most indebted developer able to impact markets around the world?
According to UBS' estimates, Evergrande holds about 6.5pc of the total debt held by China's property sector.
The company's size are contributing to fears that this is China's "Lehman moment" that could spark volatility in financial markets around the world - similar to the failure of the Lehman Brothers in 2008.
"As a systemically important developer, an Evergrande bankruptcy would cause problems for the entire property sector, which has been an important source of economic growth and jobs in China," Ed Yardeni, president of Yardeni Research, wrote in a note to clients Monday.
Tories must cut tax before next election, says Treasury committee boss
The Conservatives are in a “painful place” after Boris Johnson’s latest £36bn tax raid and should consider reversing hikes before the next general election, Treasury Select Committee chairman Mel Stride has said.
Russell Lynch reports:
The MP’s intervention comes as Chancellor Rishi Sunak looks to impose a straitjacket on Whitehall in next month’s spending review after the fight against Covid triggered the highest deficit since the Second World War.
Mr Stride said he was a “pragmatist” as the Government searches for revenues to fund the NHS and social care in the wake of the pandemic, but added: “I don’t want us to be a party and a government that is putting up taxes, particularly on business.”
He said: “There are things that the Government’s doing that I think are important, and pro-business, but this is a very painful place.”
Airline shares take off after travel rules overhaul
Airline shares are on the rise this afternoon as investors welcomed the government’s overhaul of UK travel rules, reports James Warrington.
British Airways owner IAG led the FTSE 100 risers as its shares jumped 9.8pc, while Easyjet gained 3.7pc, helping to claw back some of its losses after it announced a fundraising round earlier this year.
Wizz Air rose 2.3pc, Ryanair was up 1.4pc and Jet2 gained 3.7pc, while travel agency TUI ticked up 2.9pc.
It builds on strong gains for travel stocks at the end of last week as Grant Shapps confirmed a shake-up of travel rules that raised hopes of increased demand for autumn and winter holidays after Brits were largely grounded over the summer.
From 4 October the amber list will be scrapped, while fully-vaccinated travellers will no longer need to take a PCR test before returning to the UK.
US stocks tumble at open
US stocks tumbled this morning in New York, amid a global sell off and ahead of a Federal Reserve meeting this week about pandemic-era stimulus
The Dow Jones Industrial Average fell 0.4pc at the open, the S&P 500 dropped 0.7pc and the Nasdaq Composite slumped 1.9pc.
“The edges of the bullish narrative cover are being pulled and the darker underlying reality is coming to the fore,” Sebastien Galy, a senior macro strategist at Nordea Investment Funds, told Bloomberg.
“It is taking the market more time to price in these shocks than I had expected, and the market is far more realistic as the buy-on-dip mentality fades with the fear of inflation.”
Dollar approaches a year-to-date high
The dollar is approaching a 2021 high, as currency traders confront a global slump in equities spurred by worries over China’s real estate sector, a brewing energy crisis in Europe and the prospect that the Federal Reserve will hint this week at plans to curb stimulus.
The only Group-of-10 currencies outperforming the dollar today are the yen and the Swiss franc - both traditional haven currencies that tend to rally during periods of market turmoil.
The Canadian and Australian dollars were among the biggest losers, as commodities sank in response to angst about the global growth outlook.
Markets endure global sell off
Time for another check in on the FTSE 100.
The blue-chip index has slumped 1.8pc today, as markets endure a global sell off.
Gains made by BA owner IAG (up 3pc) have been outweighed by heavy losses from mining and financial stocks.
Prudential has dropped 8.6pc, Standard Chartered is down 6pc and Anglo American also shed 6pc.
The FTSE 250 also lost 1.2pc, the pound was down 0.5pc against the dollar and Brent fell 1.3pc.
US stock futures point to losses at the open and the Stoxx Europe 600 index is on track for the biggest decline since July, falling 2pc.
Even Bitcoin hasn't escaped the global rout, with the cryptocurrency falling 7.3pc to $44,127.
Tech sector on track for biggest year for investment
Britain's tech sector is on track for its biggest year for tech investment ever, after raising £13.5bn in the first six months of the year - almost three times more than the same period a year ago, according to new data by the UK's Digital Economy Council and Tech Nation by Dealroom.
The research found that during the first six months of the year the biggest fundraising rounds included fintech Revolut raising £577m, car marketplace Cinch with £1bn, cybersecurity platform Snyk raising £289m and video conferencing platform Hopin banking £289m.
According to the data, the investment is more than double that achieved in the next biggest market, Germany, which managed to raise £6.2bn.
The UK now has 105 unicorns - businesses worth more than $1bn (£720m) - with 20 created in the past six months alone including Tractable, Zego and Depop.
By comparison, it took 24 years - from 1990 to 2014 - to create the UK's first 20 unicorns.
Fed expected to announce bond taper in November
The Federal Reserve will likely hint at its meeting next week that it is moving toward scaling back monthly asset purchases and make a formal announcement in November, according to a Bloomberg survey of 51 economists.
The survey results also predicted the US central bank would hold interest rates near zero through 2022 before delivering two quarter-point increases by the end of the following year.
The Federal Open Market Committee meets for two days starting tomorrow and will issue a policy statement at 7pm UK time.
Two-thirds of economists surveyed expect the bond-buying announcement at the Fed’s November 2-3 meeting, with more than half seeing the tapering starting in December.
That’s earlier than the July survey, when a plurality expected the decision in December and four fifths were looking for tapering to start in 2022. The survey was conducted between September 10-15.
Energy crisis: Kwarteng says energy price cap to stay
Business secretary Kwasi Kwarteng has said today that "consumers come first" amid complaints from the energy sector that the energy price cap currently in place is "suffocating" the sector.
Kwarteng said the government is "looking at options to protect consumers, and meetings continue across government today and this week".
He added: "The Energy Price Cap protects millions of consumers. It will remain in place."
Earlier today the boss of Ecotricity criticised Britain's energy price cap for 'suffocating' the industry, following the collapse of five small operators in the last five weeks.
Dale Vince told the BBC: "We have a price cap that sets the energy price super low which allows a margin of about two per cent for energy companies which is suffocating."
This morning I led a roundtable with UK energy companies & consumer groups.
I reiterated the need for us all to prioritise consumers.
I will update the House of Commons this afternoon on the global gas price situation (1/3)
— Kwasi Kwarteng (@KwasiKwarteng) September 20, 2021
My task is to ensure that any energy supplier failures cause the least amount of disruption for consumers. Consumers come first.
We are looking at options to protect consumers, and meetings continue across government today and this week (2/3)
— Kwasi Kwarteng (@KwasiKwarteng) September 20, 2021
In any scenario, we will ensure UK consumers have continuity of supply - through a Supplier of Last Resort or a special administrator if needed.
The Energy Price Cap protects millions of consumers. It will remain in place (3/3)
— Kwasi Kwarteng (@KwasiKwarteng) September 20, 2021
Prezzo latest to announce Boxing Day closure
Italian themed restaurant chain Prezzo has become the latest business to announce it will remain closed on Boxing Day following M&S, Sainsbury's, Morrisons and Pets at Home.
Prezzo said it will also raise wages for all its 2,500 staff by an average of 4pc.
"As a result of the increases, every Prezzo team member will be paid above the national minimum wage," the company said.
Raspberry Pi attracts $45m after lockdowns fuel demand for PCs
The organisation behind Britain's bestselling personal computer - the Raspberry Pi - has sealed a $45m (£33m) investment after demand surged during the pandemic, reports Ben Woods.
The trading arm of the Raspberry Pi Foundation has offloaded stakes to Lansdowne Partners and the Ezrah Charitable Trust in a move that values the operation at around $500m. The foundation is a charitable organisation whose profits are used to promote computing. Raspberry Pi was founded in 2009 by Eben Upton, who created a singleboard computer that has been widely used to champion programming in schools.
In March, The Telegraph reported that it was exploring ways to raise capital - including a potential London stock market flotation - as the move to working from home during lock down prompted strong sales of its $70 keyboard-based PC, the Raspberry Pi 400.
Mr Upton said: "In the past 13 years we have transitioned from just an aspiration - to get more computers into schools - to shipping over 42m PCs to more than 100 countries, while contributing over £30m in donations to our parent charity. We are pleased to welcome Lansdowne Partners and the Ezrah Charitable Trust as our first outside shareholders to help us achieve the next steps in our growth."
Yo! Sushi considers October IPO
The owner of restaurant Yo! Sushi will take another step towards a London IPO that could value the business at more than £750m, Sky News is reporting today.
According to Sky, the Snowfox Group will give a presentation to City analysts this week as it prepares to announce its formal intention to float in London as early as next month.
Snowfox, which also supplies retailers such as Tesco and Waitrose in the UK with sushi, is majority-owned by Mayfair Equity Partners.
AstraZeneca leads FTSE 100 risers
AstraZeneca is leading the FTSE 100 risers after announcing “groundbreaking” results for its new breast cancer drug, writes James Warrington.
The British pharmaceutical firm said trials of its new treatment Enhertu showed a 72pc reduction in the risk of disease progression and death when compared to an existing drug.
AstraZeneca pushed 2.5pc higher, bucking a wider fall in the blue-chip index.
Sainsbury's surges on takeover defence plans
Sainsbury's has surged 2.6pc today, after it was reported to have hired a top M&A boutique to help defend the supermarket from a potential takeover.
The Times reported over the weekend that Sainsbury's had appointed Robey Warshaw amid growing speculation that it could follow Asda and Morrisons in being taken over.
Last month the supermakret's shares reached seven-year highs following reports suggesting that private equity firm Apollo could turn its attention to Sainsbury’s.
One senior retail source told The Times: “Any boardroom worth their salt would be working on defences and game-planning what they would do if they were on the receiving end of an approach, given the level of interest in the sector and low market values.”
US futures slide
US futures have dropped more than 1pc as investors worried about rising Covid cases and stalling economic growth ahead of a key Federal Reserve meeting this week, reports James Warrington.
Futures tracking the Dow Jones were down 1.5pc this morning. S&P 500 e-minis were down 1.2pc, and Nasdaq 100 e-minis were down 1pc.
Wall Street’s main indices have suffered this month amid fears about rising corporation tax and have shrugged off signs inflation may have peaked.
The Fed will hold a policy meeting on Wednesday, where it is expected to lay the groundwork for a tapering of stimulus measures, though an actual announcement is not expected until later in the year.
British Gas to take 350,000 customers from failed energy firm
British Gas has agreed to take on an extra 350,000 domestic customers from collapsed energy firm People's Energy, regulator Ofgem confirmed today.
Scotland-based People's Energy became one of four British energy companies to fail in the last five weeks, as soaring wholesale gas prices put smaller suppliers under intense pressure.
Another small energy supplier, Green, said this morning it may not survive the winter without government help.
Business secretary Kwasi Kwarteng is expected to answer questions on the energy crisis later today.
— ofgem (@ofgem) September 20, 2021
Here's the daily round- up from The Telegraph's Money team:
What happens if my energy provider goes bust? We explain why prices for gas and electricity have soared in recent weeks and how to get the best deals
Money Makeover: 'I only have £350k saved, can I retire at 56?' Local government worker Paul Marsh has a good pension but wants to stop working as soon as possible
'Estate agents will always try to cheat landlords – here's how to protect yourself': The Secret Landlord reveals their top tricks to avoid dodgy agents in the unregulated industry
Stripe to expand London office
Irish-American Fintech Stripe is planning to hire dozens of new employees for its London office next year, ahead of the company’s potential initial public offering.
Matthew Henderson, Stripe’s European Middle East and Africa (EMEA) business lead, has been bullish about London's ability to maintain its title as the world's fintech hub post Brexit.
“Brexit will continue to present uncertainties and complications, but many of the structural reasons for London’s emergence as a fintech hub will remain post-Brexit," he told The Telegraph last year.
The 12-year-old company started adding engineers in the UK capital about a year ago and now has nearly 200 employees in the city.
London-based engineers are planning to pilot a “pay-by-bank” feature next month.
Igas shares double on geothermal deal
Shares of energy company Igas have leapt 89pc to 35.90p this morning, after the company announced a partnership with energy giant SSE to develop a geothermal heating network in Stoke-on-Trent.
Geothermal is currently a niche power source which extracts low-carbon energy from the heat below the earth’s surface.
“Deep geothermal has the potential to become a world leading industry here in the UK, provide a stable transition away from oil and gas, and help meet the Government's net zero ambitions by decarbonising heat on a mass scale," said Igas chief executive Stephen Bowler.
Price cap 'suffocating' energy industry, says Ecotricity boss
The boss of green power supplier Ecotricity has criticised Britain's energy price cap for 'suffocating' the industry, following the collapse of five small operators in the last five weeks.
Dale Vince told the BBC the electricity and gas shortages the county faces this week cannot be resolved short-term.
It's a question of what sticking plasters we can apply to get through the winter.
The energy market is in crisis anyway. Small suppliers have been going bankrupt at the rate of one in every six weeks for the last two years.... We have a price cap that sets the energy price super low which allows a margin of about two per cent for energy companies which is suffocating.
We've got a Government stealth tax amounting to 25 per cent on everybody's electricity bill, which really needs to be removed. And, of course, we're dependent on foreign markets for oil and gas.
We need to build renewable energy as if there's no tomorrow. In the next 10 years we could go 100 per cent energy independent in our country for electricity and gas.
City minister hints at cut to financial services tax surcharge
City minister John Glen has hinted at a cut to the 8pc tax surcharge on financial services firms as he vowed the sector will enjoy “competitive tax rates”, writes James Warrington.
Glen said Chancellor Rishi Sunak was “thinking very carefully” about tax rates for financial services ahead of his Budget on 27 October 27.
“To be competitive, we have to have competitive tax rates and that’s what’s on the Chancellor’s mind at the moment,” he told the Financial Times.
He also pledged to “keep under review” the cap on bankers’ bonuses, introduced when the UK was a member of the EU, as part of efforts to maintain the City of London’s status as a “booming” financial hub.
In his March Budget Sunak announced a hike in corporation tax from 19pc to 25pc – a move he admitted would harm the competitiveness of UK banks.
But he said he would review the 8pc surcharge, which raised £1.5bn last year.
Glen did not confirm the surcharge will be cut in the upcoming Budget, but said: “We want to bring certainty to the industry.”
European stocks fall to two-month low
European stocks have also fallen to their lowest level in two months, as China’s real estate crackdown and concerns about this week’s Federal Reserve policy meeting weighs on investor sentiment.
The Stoxx Europe 600 index fell 2pc to its lowest level since July 21.
Germany’s DAX also slumped 2.3pc on the day, with banks and automotive shares under-performing.
“Worsening sentiment out of China, and a ratcheting up of geopolitical tensions has led to the pullback,” Altaf Kassam, State Street EMEA head of investment strategy & research, told Bloomberg.
“With a raft of central bank meetings and announcements this week and soon after, the market is becoming nervous that the ‘transitory’ inflation narrative will be undermined by continued strong inflation data, leading to an earlier-than-expected policy tightening.”
FTSE 100 down 1.7pc
The FTSE 100 has extended its losses this morning, with the index now just six points off three month lows.
Chinese property developer Sinic halts trading
Chinese property developer Sinic has halted trading after its shares plummeted 87pc, reports James Warrington.
The Shanghai-based company did not give any reason for the suspension, which comes amid wider jitters in China’s property market as investors fear a crackdown on Hong Kong developers.
The company has a 9.5pc $246m bond due on 18 October and Fitch Ratings revised its outlook to negative last week.
The sharp sell-off in the two hours leading up to suspension was accompanied by a surge in trading volume that was about 14 times its average in the last year, according to Bloomberg data.
Sinic’s market value now stands at just $230m.
The move comes as Hong Kong’s property gauge dropped the most since May 2020 amid growing investor angst about China’s real estate crackdown and worries that Beijing may tighten grip on the city’s property sector in its “Common Prosperity” campaign.
Coal prices surge
Prices for coal are surging around the world as a shortage of natural gas spurs demand for the dirtiest fossil fuel to generate electricity.
Bloomberg has the details:
Benchmark prices in Asia are at a 13-year high and within striking distance of a record. Stockpiles are plunging ahead of a northern hemisphere winter that forecasters predict could be unusually cold, indicating the crunch is unlikely to ease anytime soon. Increased costs for electricity providers threaten to put further pressure on inflation that’s already running at the fastest in years.
And of course it’s a disaster for the effort to curb global warming as officials from around the world prepare for the United Nations General Assembly this week and climate talks known as COP26 set for November.
“When you have demand surging and you don’t have supply responding, this is what happens,” said Andrew Cosgrove, mining analyst with Bloomberg Intelligence.
Newcastle thermal coal, Asia’s benchmark, has more than doubled this year to about $180 a metric ton, and Goldman Sachs Group Inc. expects it will average $190 from October to December. Prices in Europe have surged to $169, up from $65 in mid-March.
Tight gas supplies are the underlying trigger for coal’s rapid gains. Gas stockpiles in Europe were already smaller than usual this year after a cold winter, and supplies have been short in recent months after Russia limited deliveries so it could boost its own inventories. Gas output from Norway was also low because of maintenance.
CMA puts firms on notice over greenwashing
The UK competition watchdog said it’s put businesses “on notice” over misleading green marketing claims, writes James Warrington.
The Competition and Markets Authority (CMA) has told companies they have until next year to clean up their environmental claims and ensure they comply with the law.
The watchdog will carry out a full review at the start of 2022, looking at claims made both online and offline.
It will prioritise industries such as textiles and fashion, travel and transport, and fast-moving consumer goods – where it said consumers seem most concerned about misleading claims – and take action against any offending firms.
Andrea Coscelli, chief executive of the CMA, said:
More people than ever are considering the environmental impact of a product before parting with their hard-earned money. We’re concerned that too many businesses are falsely taking credit for being green, while genuinely eco-friendly firms don’t get the recognition they deserve.
The Green Claims Code has been written for all businesses – from fashion giants and supermarket chains to local shops. Any business that fails to comply with the law risks damaging its reputation with customers and could face action from the CMA.
We’ve launched the Green Claims Code to help businesses get their green claims right.
If you’re using environmental credentials to sell a product or service, your customers need to know they can trust them.
Read the Code: https://t.co/WVqiDF6XZw#GreenClaimsCode pic.twitter.com/0kXFezPkxj
— Competition & Markets Authority (@CMAgovUK) September 20, 2021
Why are UK gas prices so high?
The price of natural gas is soaring due to a supply crunch after fields were shut down for maintenance, key sites went offline during the Covid crisis and producers slashed investment.
A lack of wind for turbine sites combined with the winding down of coal mines by governments seeking to cut down their emissions has also contributed to the energy crisis.
Meanwhile, the British government has blamed disruption caused by the economic reopening and high demand in Asia.
"As the world comes out of COVID-19 lockdowns and economies reopen, we are seeing an uptick in global gas demand this year… combined with a cold winter (which has an impact on gas demand as gas is often used for heating homes) this has led to a much tighter gas market with less spare capacity," said The Department for Business, Energy & Industrial Strategy.
"In particular, high demand in Asia for Liquified Natural Gas (LNG), natural gas transported globally by ship, means less LNG than expected has reached Europe".
Russia has also been accused of increasing gas prices in a bid to undermine Britain and the EU’s economic recovery from the Covid-19 pandemic.
Gazprom, Russia’s state-owned energy corporation, is facing an investigation into a spike in the cost of natural gas and a knock-on effect that threatens to disrupt the supply of meat in the food chain within a fortnight.
Gazprom has denied manipulating the supply to drive up prices.
Russia says its newly completed Nord Stream 2 gas pipeline to Germany will alleviate any winter shortages.
However both the US government and EU ally Ukraine are deeply opposed to the project.
More on the energy crisis here:
EUROPEAN ENERGY CRUNCH: Natural gas prices opening sharply up this morning (again). UK NBP up nearly 7%, approaching last week's record. Dutch TTF up 8%. UK Prime Minister Boris Johnson said en route to New York that the problem was "temporary" | #CommodityInflation
— Javier Blas (@JavierBlas) September 20, 2021
Sterling drops to one-month low
Sterling tumbled to a one-month low against the dollar this morning as a global sell-off, uncertainty over the Bank of England’s interest rate decision and surging gas prices all weighed, reports James Warrington.
The pound slid 0.5pc to around $1.3662 – its lowest level since 23 August.
Against the euro, it fell 0.3pc to 0.8561p.
It came as growing fears about indebted property developer Evergrande roiled global markets, with European stocks falling 1.9pc and the FTSE 100 down 1.5pc.
Investors turned to the safe haven of the dollar, which was trading at four-week highs.
Domestic concerns have caused a further drag on sterling, with surging wholesale gas prices sparking fears of a winter energy crisis.
Traders are looking ahead to a Bank of England meeting on Thursday for an indication of the future of monetary policy.
Eurowag confirms London IPO
The Czech digital payments platform Eurowag this morning confirmed its plans to float on the London Stock Exchange.
The company, which processes toll and fuel payments for truckers across Europe, said the offer is expected to comprise of both new Ordinary Shares to be issued by the Company and existing Ordinary Shares to be sold by Eurowag shareholders.
The Offer would target "certain institutional investors".
Eurowag added it is targeting a free float of at least 25pc of issued share capital and expects it would be eligible for inclusion in the FTSE UK indices.
Evergrande plunges to 11-year low on default fears
Shares in Chinese property developer Evergrande have plummeted to more than 11-year lows amid growing default fears, roiling global markets, reports James Warrington.
Evergrande has been scrambling to raise funds to repay its lenders, suppliers and investors, with regulators warning its $305bn of liabilities could pose broader risks to the country’s economy if not stabilised.
Shares closed down 10.2pc at HK$2.28, after earlier dropping 19pc to its weakest level since May 2010.
Kington Lin, managing director of Asset Management Department at Canfield Securities Limited, told Bloomberg: “The stock will continue to fall, because there’s not yet a solution that appears to be helping the company to ease its liquidity stress, and there are still so many uncertainties about what the company will do in case of a restructuring.”
Evergrande’s troubles have compounded wider concerns about the health of China’s economy amid a regulatory crackdown on the country’s tech sector.
The broader property section has also been dragged down by the crisis, while the yuan fell to a three-week low against the dollar. Hong Kong’s Hang Seng index fell 3.3pc.
Read more on this story here:
Energy company Green says it may not survive winter
Small energy supplier, Green, said this morning it may not survive the winter without government help.
“I feel without any support methods being put in place from the government is unlikely that we will see the winter through,” chief executive Peter McGirr told the BBC.
The Newcastle-based company - which says it relies 100pc on renewable energy sources - serves more than 250,000 households.
Unfortunately, small energy suppliers are facing pressures due to sudden increases in global gas prices. Four small suppliers have ceased to trade in recent weeks.
If a supplier fails, Ofgem will ensure customers’ gas and electricity supply will continue uninterrupted (2/7)
— Kwasi Kwarteng (@KwasiKwarteng) September 19, 2021
Prudential to raise $2.89bn in Hong Kong share sale
Prudential has unveiled plans to raise up to $2.89bn through a share placement in Hong Kong as the insurance giant shifts its focus to Asia, reports James Warrington.
The FTSE 100 company said it will raise up to 5pc of its issued share capital – or around 130.8m shares – via a concurrent Hong Kong public offer and international placing.
Around 95pc of the new shares will be from the share placing, while the remaining 5pc will be an offer of new shares available exclusive to Hong Kong residents, with a preferential offer for some Prudential employees.
The cash raise comes after Prudential completed the demerger of its US business Jackson Financial, with the group now looking to target growth opportunities in Asia and Africa.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said:
Prudential is closing the book on a messy chapter, with the breakup of the American and Asian businesses now complete, it’s looking to make the most of opportunities in Asia.
The addressable market here is huge, so coming to the market cap-in-hand does make sense. The scale of the amount needed might be a bit disappointing, but it also adds risk. When you’ve asked for money, the reaction will be harsh if things don’t go to plan.
Oil has dropped this morning, as risky assets start the week fell back and the dollar gained ahead of a Federal Reserve meeting that’s expected to see stimulus scaled back.
Brent dropped 1.4pc to $74.30 amid a broader decline in stock markets, while WTI was also down 1.7pc at $70.73.
“Oil prices are down as the new week of trading gets underway,” Carsten Fritsch, an analyst at Commerzbank, told Bloomberg.
Prices are facing a “headwind today from the firm US dollar in particular, which is showing signs of strength ahead of the Fed’s meeting.”
However traders are closely watching Europe's energy crunch and discussions around switching from gas to oil.
There are expectations diesel demand will expand in Asia during winter, while the use of oil to generate power in the US may also rise. Prices for fuels used in heating like liquefied petroleum gas have surged to multi-year highs.
Gas price rise hits meat processors
Britain's meat processors are also suffering from the record rise in gas prices, with the head of the industry's lobby group warning that his members could run out of carbon dioxide within five days, forcing them to halt production.
Nick Allen of the British Meat Processors Association told Sky News. "My members are saying anything between five, ten and 15 days supply".
Carbon dioxide is crucial in the meat industry to stun animals before slaughter and to extend food's shelf life.
However a record jump in gas prices has forced several domestic energy suppliers out of business and has shut fertiliser plants that also produce carbon dioxide.
House prices hit new record, says Rightmove
House prices in the UK have lifted 0.3pc this month, pushing the price of an average home to £338,462 - a new record high.
New figures from property website Rightmove showed that the average house was priced 5.8pc higher than last year and £15 higher than the previous record set in July.
However despite the increase, Rightmove said there were signs that the market was becoming better balanced.
“There are signs of a return of some normality,” Tim Bannister, Rightmove's director of property data, said today.
“The property market remains stock starved despite the summer lull lessening activity.”
Price rises differ from region to region. While Wales and southwest England have noted a house-price inflation of over 8pc in the past year, London has inched up only 0.8pc.
Finsbury Food jumps 2pc
Finsbury Food Group said this morning the business is expecting "persistent challenges" from a shortage of skilled workers and drivers.
However despite those challenges, the group said pre-tax profit had grown around sixfold to £17m, after it invested £6.2m in a series of new projects, including a frozen dough ball factory in Manchester. It also launched a set of vegan doughnuts and a new range of gluten-free bread.
Revenue also grew by 9.1pc in the first six months of 2021 and by 2.3pc in the past 12 months to £313.3m.
"Whilst we are likely to face persistent challenges around inflation and skilled labour and driver shortages, our long-term growth ambitions remain unchanged," said chief executive John Duffy.
Shares in the company rose by 2pc in early trading.
Iron ore sell off weighs on London-listed miners
The dramatic selloff in iron ore is continuing to weigh on London-listed miners this morning, following the commodity's worst performance on record last week.
The material - which is used to make steel - fell 22pc last week to below $100 a ton.
This morning, futures in Singapore fell to $95, responding to concerns that China’s push to rein in its steel output will drastically curb demand.
The fall in prices has prompted Anglo American's share price to plunge 20pc in the past five days. BHP has slumped 11pc in the same period, after being downgraded by Barclays.
Worker shortage concerns at five-year high, says CBI
Three-quarters of businesses fear the shortage of workers is so severe that it is a key threat to the economy’s competitiveness, reports Tim Wallace.
Booming growth as the economy reopens risks being undermined as companies struggle to find staff with the right skills and in the right locations.
The Confederation of British Industry (CBI) found worries over worker shortages are at their most intense since the business group began surveying its members in 2016.
Problems are so serious that they could affect the economy for years to come, said Matthew Fell, chief policy director at the CBI.
“After a challenging year it’s encouraging to see the jobs market rebound. With demand returning, businesses both small and large, have put their recruitment plans into action. But as the UK’s labour market emerged from one crisis, it’s been plunged into another, with shortages holding back growth,” he said.
“While firms have been stepping up to address labour shortages through further investment and training, these steps take time and do little to ease the pressure firms are facing now. From logistics to hospitality, firms are feeling strain across the whole economy, and expect this to continue not just for two months but two years.”
FTSE risers and fallers
The FTSE 100 has tumbled 1pc in early trading, with miners among the stocks leading losses as iron ore extends its slump below $100 a ton after China stepped up restrictions on industrial activity.
Anglo American plunged more than 7pc on opening, while Glencore shed 4pc and Rio Tinto was down 3pc.
Prudential also lost 3.4pc after the company said on Saturday it plans to raise HK$22.5bn through a concurrent public offer and international share placing on the Hong Kong Stock Exchange.
The top risers were Rolls Royce (up 2.3pc), BA owner IAG (up 1.9pc) and Unilever (up 0.5pc).
Investors now await the BoE's policy meeting this week for a timeline on its plan to ease its massive pandemic stimulus, against the backdrop of rising price pressures due to supply chain disruptions and higher energy prices.
Government considers emergency loans for energy companies
The government is considering offering emergency state-backed loans to energy companies as wholesale gas prices soar - they are up 250pc since January.
The loans are expected to be offered to encourage firms to take on customers, the BBC is reporting this morning.
The process for dealing with failing firms has come under pressure as price rises make taking on new customers unattractive for surviving companies.
The leap in gas prices has already forced several domestic energy suppliers out of business and has shut fertiliser plants that also produce carbon dioxide, used to stun animals before slaughter and prolong the shelf-life of food.
Read more about this story here: Government plans gas rescue package as a million families face energy bill price hike
FTSE 100 falls
The FTSE 100 has opened 0.9pc down this morning at 6,897.16 points.
The FTSE 250 has also tumbled 0.7pc to 23,489.70 points.
SSE says no decision has been made to split company
SSE said that no decision has been made to split the company following speculation that the energy giant was close to being split into two separate blue-chip companies following pressure from Wall Street activist Elliott.
“There has been no decision to break up the SSE Group,” the company said in a statement this morning. “SSE’s strategic focus is on renewables and regulated electricity networks.”
Elliott is understood to have amassed a stake worth more than £500m in SSE and is said to be putting pressure on SSE management to split its renewables and networks businesses to create two separate companies that would get a higher value.
Alistair Phillips-Davies, chief executive of SSE, said in response:
We have been making excellent progress with our clear net zero-aligned strategy, centred on electricity networks, renewables and other carefully chosen businesses that help provide the low-carbon electricity infrastructure that government and wider society requires.
SSE is the UK's national low-carbon energy champion, delivering for both our shareholders and society and we look forward to updating investors on our plans to accelerate growth and create value in due course.
Read more about this story here: SSE close to being split up after activist pressure
FTSE set to open down
The combination of the UK's supply-chain crisis and spiralling energy costs are expected to hit investor sentiment today.
The FTSE 100 fell below the 7,000-mark on Friday and is set to open this morning around 53 points lower at 6,910 - its lowest level since July - as markets also brace for the Bank of England rate decision on Thursday.
John Roe, head of multi-asset funds at Legal & General Investment Management, told Bloomberg there are a lot more risks facing the UK Gas and power prices are breaking records day after day, and money markets are pricing in rate hikes after inflation surged to the highest in more than nine years.
5 things to start your day
1) Mounting fears of a 1970s-style three-day week as Britain's energy crunch deepens: Rocketing power prices and a gas storage crisis threaten the recovery and leave the UK at the mercy of Russia's Vladimir Putin
2) Government plans gas rescue package as a million families face energy bill price hike: Ministers held talks with energy suppliers amid fears smaller firms could collapse
3) Brussels mulls OneWeb stake to challenge Elon Musk's Starlink: Potential investment would strengthen hand of British satellite broadband player in race to blanket Earth in internet signal
4) Roger Bootle: The Merkel era is over, but her economic legacy will linger on: The Chancellor's fiscal conservatism has had a baleful effect on the German economy, but her successors cannot escape her shadow
5) Sterling under threat from stagflation bets: Currency markets are bracing for a choppy week as central banks make decisions on interest rates
What happened overnight
Shares fell nearly 4pc in Hong Kong on Monday in holiday-thinned trading in Asia, with other big markets in Tokyo and Shanghai closed.
Other regional benchmarks also fell after Wall Street wrapped up last week with another decline.
Hong Kong property companies and banks lost ground on persisting concerns over the potential for ripple effects from the financial troubles of Chinese developer Evergrande.
The company was expected to miss interest payments, as ratings companies forecast it may default on its debt. Its shares fell 17pc Monday.
Henderson Land Development dropped 12pc and New World Development lost 11pc amid reports that China would tighten oversight over the property sector in Hong Kong.
The Hang Seng in Hong Kong dropped 3.9pc to 23,955.18 and Australia's S&P/ASX 200 shed 2pc to 7,254.10. Markets were closed in mainland China, South Korea, Japan, Taiwan and Malaysia.
Coming up today
Corporate: Redde Northgate (Trading update)
Economics: Rightmove monthly house price index (UK)