Time to wrap up... Here’s today’s main stories:

Goodnight. GW

Britain’s blue-chip stock index has closed at a 20-month high tonight, rounding off its best week in five months.

The FTSE 100 closed 26 points higher at 7,234, up 0.37% today.

That takes its gains this week to around 2%, the best since the first week of May.

The index has now recovered most, but not all, of the losses since the pandemic hit Europe in February 2020:

Online grocery firm Ocado (+3.8%) finished as top riser, followed by steelmaker Evraz (+3.75).

British Airways parent company IAG (+3.2%) and Intercontinental Hotels (+2.6%) also rallied, as England’s move to allow fully vaccinated international passengers from non-red list companies to take a lateral flow test rather than a PCR boosted travel and hospitality stocks.

Property firms, banks and oil companies also rallied.

So far this year, the FTSE 100 is up almost 12%, as it clambers back towards its pre-pandemic levels.

Russ Mould, investment director of AJ Bell, says:

“It is interesting to see markets continue to press ahead despite the whirlwind of pressures from supply chain disruption, higher energy prices, rising wages and the threat of rising interest rates.

“Investors seem to be taking the view that central bank monetary stimulus will remain in play and that we aren’t going to be punished by sharp inflation for a long time and interest rates reaching punchy levels.

“Yes, the cost of living has gone up, but rates are coming from such a low base than it would take a very overheated economy to warrant central banks putting the cost of borrowing at such a level that becomes uncomfortable.

“Equally, investors might actually be too complacent. It wouldn’t take much to cause a shock across markets and equity valuations are looking very rich in many places. Bad news and high ratings tend to result in sharp share price declines.

“For now, strong results from banks, a decline in new jobless claims and lower than expected producer price inflation all from the US have served to put investors in a more positive mood.

European markets also ended higher with the Stoxx 600 up 0.7%.

For the week, European markets gained 2.6%, the best week since March.

Rishi Sunak is set to confirm that the “pause” on public sector pay that affected 2.6 million teachers, police and civil servants will be lifted in April, as the economy bounces back from Covid.

The chancellor imposed the freeze last November and it came into force in April. At the time, he said it was unfair for public sector workers to get a rise while many of their private sector counterparts were being furloughed or losing their jobs.

With wages in many sectors rising, and the prime minister using his party conference speech to highlight the prospects for a “high-wage economy”, Treasury sources said that argument no longer applied.

However, each Whitehall department will have to fund any pay increases from within its own budget, and TUC analysis shows that the pay of many public sector workers has fallen significantly in real terms after years of tight settlements.

Sunak will set out the funding for each individual department as part of a three-year spending review, which he will deliver alongside the budget on 27 October.

Here’s the full story:

The price of petrol at UK pumps has passed £1.40 a litre, its highest point in almost a decade, increasing the pressure on consumers as inflation bites.

Average forecourt prices were last this high in September 2012, and are 2.5p a litre from the all-time high in April of that year when global oil prices soared.

Rapidly rising wholesale oil prices have compounded the supply chain problems hitting forecourts. After the queues for fuel and shortages of the past few weeks, petrol is once again largely freely available – but costing an average 5p a litre more than in September.

According to AA figures, the average price of unleaded petrol is now 140.22p a litre, with diesel at 143.42p.

US retail sales have risen unexpectedly, despite the supply chain holdups which are hitting the economy.

Retail sales rose by 0.7% last month, beating expectations of a 0.2% fall, and were 13.9% stronger than a year ago.

Stripping out car sales, retail sales were up 0.8% during the month, and 15.6% up year-on-year, as consumers shrugged off signs that the US recovery might be slowing.

Andrew Hunter of Capital Economics says there are some signs that the Delta variant had a lingering impact, with spending on food & drink services up by a modest 0.3% m/m, following a 0.2% gain in August.

Rising car prices also boosted retail spending, Hunter flags:

Despite reports of increasingly widespread shortages, spending on goods apparently held up relatively well, with furniture sales edging up by 0.2%, sporting & leisure goods sales jumping by 3.7%, clothing sales up by 1.1%.

The latter may have been boosted by the reopening of most schools and some offices, however, which is probably a one-off. The 0.5% m/m rise in autos spending is, at face value, hard to square with the further 6.4% plunge in unit sales reported by manufacturers last month. But part of that gap is explained by the continued surge in vehicle prices and the bottom line is that real spending on autos is falling sharply.

UK petrol prices have risen to their highest level in nine years, as rising crude prices feed through to the pumps.

New data from the AA shows that petrol hit 140.22p per litre yesterday, the highest since September 2012, while diesel touched 143.42p.

The rise follows the recent jump in oil prices (Brent crude hit $85/barrel today for the first time since 2018), as the energy crunch feeds through to motorists and transport firms.

Higher fuel prices will add to the cost of living squeeze facing households, and the inflation pressures which could lead to higher interest rates.

Luke Bosdet, the AA’s fuel price spokesman, says:

“We are particularly concerned about where diesel is going.”

The wholesale price of diesel has gone up by 10p per litre since mid-September, Bosdet explained.

That’s partly driven by demand for heating oil (as a substitute for gas which has soared in price) which comes from the same part of the oil barrel as diesel.

Pump prices for diesel (which lag wholesale prices) have only risen by 5p per litre since the end of September, which suggests diesel prices could continue to rise, Bosdet says.

Rising fuel costs, and the recent petrol shortages, could encourage consumers to shift to electric cars, as some electricity suppliers such as Octopus Energy and EDF offer specialist tariffs aimed at electric car drivers.

One of Britain’s most important electricity import cables will not return to full service for another two years after a fire forced it to shut, compounding the UK’s energy woes ahead of a looming winter crunch.

The blaze at the Sellindge converter station in Kent forced a shutdown of the high-voltage cable that brings electricity from France to the UK last month as energy markets rocketed to all-time highs amid global energy supply difficulties.

National Grid, which owns the 2,000 megawatt cable, expects half of its capacity to return to service on Wednesday but said “extensive work” would be needed to bring the power link back to full service.

The FTSE 100 energy company hopes to bring another 500MW of capacity back to service between October 2022 and May 2023, meaning the cable will be running at three-quarters of its capacity through that winter.

The cable, known as the IFA Interconnector, will finally return to full service after further work, which National Grid hopes to complete by October 2023.

“We are completely focused on getting IFA safely returned to service as soon as possible and ensuring we are able to support security of supply.”

Soaring energy costs have taken a bite out of the eurozone’s trade surplus.

The euro area’s trade in goods surplus dropped to €4.8bn in August, down from €14.0bn in August 2020. While goods exports rose 18.2% year-on-year, that was more than countered by a 26.6% jump in imports.

The wider European Union racked up a €5.0bn trade deficit in August, down from a surplus of €10.8bn in August 2020.

Eurostat’s data shows that the EU’s trade deficit in energy has swelled notably -- to €151.9bn in January-August, up from €108.7bn in the first eight months of 2020.

Total EU goods imports from Russia, a major supplier of oil and gas to Europe, have jumped almost 50% so far this year. That has widened Europe’s trade deficit with Russia, to €37bn in January-August from €12.9bn.

Trade with Norway, which also supplies the EU with energy, swung to a deficit of €2.4bn from a €3.6bn surplus.

The report also shows that trade with the United Kingdom is much more subdued than with other major partners, in the first eight months since the Brexit free trade deal came in.

EU exports to the UK have risen just 5.7% year-on-year, compared to 11.9% to the United States and 15.3% to China.

Imports of UK goods are down -16.7% in January-August compared to the previous year, according to Eurostat’s data, while US imports are up 7.1% and imports from China have swelled 15.2%.

The chair of Britain’s financial watchdog is leaving early.

Charles Randell has decided to step down as chair of the Financial Conduct Authority and the Payment Systems Regulator next spring, a year before his term expires.

Randell took up his role as Chair of the FCA and PSR Boards in April 2018, for a five-year term.

He says today that it’s time for a new chair.

“As the FCA prepares to implement its new wholesale, retail and data strategies under an established new executive [Nikhil Rathi], now is the right time for a new Chair to carry on the close and continuous oversight of our transformation.

“During the pandemic, the FCA stood up for consumers and businesses, while the markets we oversee proved resilient, laying the foundations for record capital raising to support the recovery.

“The PSR has been working to ensure payment systems – the lifeblood of the economy – work well for all.

“Being Chair of the FCA and PSR has been a great privilege.”

The FCA is going through a turbulent time, as Financial News’ Lucy McNulty explains:

Under the leadership of Rathi since October 2020, the FCA has been grappling with mounting workloads as Brexit gives more powers to UK regulators.

It is also tasked with restarting initiatives derailed by the pandemic, all while undergoing significant structural changes, as well as changes to its top ranks, as part of the new chief’s ambitious transformation agenda.

Here’s some reaction, from consumer finance campaigner Mark Taber:

And Simon Harrington of the Personal Investment Management & Financial Advice Association:

Earlier this week, the Unite union launched a staff petition to secure the right to be formally recognised to represent workers across the organisation.

Unite said FCA employees were “demoralised”, and unhappy with chief executive Nikhil Rathi’s transformation plans, which they believe will see their wages cut but are unlikely to affect the FCA’s leadership team.

The number of companies in England and Wales choosing to be liquidated has risen to its highest in over two and half years.

The Insolvency Service reports that there were 1,328 Creditors’ Voluntary Liquidations (CVLs) in September, filed by companies who couldn’t repay their debts.

That’s the highest level since January 2019 -- up from 1,256 CVLs in August.

HMRC says:

The number of registered company insolvencies was similar to pre-pandemic levels, driven by this higher number of CVLs, although other types of company insolvencies, such as compulsory liquidations, remained lower.

Companies can choose to enter a CVL if they cannot repay their borrowing, rather than being being forced to do so by a winding-up petition filed by a creditor.

In total, there were 1,446 registered company insolvencies in England and Wales during September, up from 1,348 in August:

That is:

• 56% higher than the number registered in the same month in the previous year (928 in September 2020), but
• 4% lower than the number registered two years previously (pre-pandemic; 1,510 in September 2019).

John Bell, senior partner at Clarke Bell Insolvency Practitioners in Manchester, fears that more companies will collapse in the coming months -- especially if Christmas is tough:

“As we head towards the Budget it is interesting to see that the number of company insolvency procedures have increased again - with the number of Creditors’ Voluntary Liquidations at the highest level since January 2019. I wonder if this will influence any of the government’s plans.

“Business owners have been hit by a range of additional problems recently – including the end of furlough and the temporary restrictions relating to winding-up petitions and statutory demands. I think we are going to see the number of company liquidations increase in the coming months, as the burdens on some companies just become unbearable.

“March 2022 sees the end of the ban on landlords evicting firms for unpaid commercial rent, which I think is really going to shake things up for a lot of companies. Many businesses will be relying on a profitable Christmas period to enable them to pay all the historic debt they have built up – including all their rent arrears. However, I’m not confident that this is going to be a bountiful Christmas for everyone.”

Sales of new cars across Europe slumped by a quarter last month, as shortages of semiconductors hit the industry.

New passenger car registrations fell 25.2% in the European Union, Britain and the countries of the European Free Trade Association (EFTA) compared to last year, figures from the European Automobile Manufacturers’ Association (ACEA) showed.

ACEA said the global chip shortage left dealers with fewer cars to sell:

“This decrease in sales was largely caused by a lack of supply of vehicles due to the ongoing semiconductor shortage.”

Within the EU, registrations shrank by 23.1% - the worst September since 1995.

All major EU markets recording double-digit declines: Italy (-32.7%), Germany (-25.7%), France (-20.5%) and Spain (-15.7%).

Figures this month showed UK car sales plunged by 34% in September, the worst since 1998.

The energy crisis, the easing of travel restrictions, and the prospect of rising interest rates all helped drive up the London stock market to 20-month highs today.

Neil Wilson of Markets.com explains:

Key is energy – BP and Shell among the top performers of the last month and have a big index weighting. That’s BP and Shell, which are both up more than 20% in the last month as oil and natural gas prices have soared.

Next is the two big reopening stories – IAG and Rolls Royce, they are the best performers of the last month among the blue chips. Reopening of travel has been a major factor and we see more good news today with the move to lateral flow tests for international arrivals.

Then third we have the big banks – HSBC, Lloyds, StanChart and NatWest have all rallied over 10% in the last month as rates have risen and the macro environment has held up pretty well. Bets the Bank of England is far closer to raising rates have helped, but global bond yields have also been moving higher.

The FTSE is exposed to the winds of the global economy and trade, which despite it all are holding up well, and UK shares remain heavily discounted to peers. The FTSE 250, a better gauge of the UK economy, has ticked higher in the last few sessions but is down by around 5% from its Sep high.

There’s no let up in the energy crunch, as oil prices climb again.

Brent crude has just struck a new three-year high this morning, jumping 1% to hit $85 per barrel, as rising demand and surging gas prices drive up oil.

US crude also touched a new seven-year high, around $82.20 per barrel.

These rollicking energy prices are adding to the inflationary pressures hitting households and businesses.

Jim Reid of Deutsche Bank told clients:

Inflation concerns are still very much with us...yesterday saw Bloomberg’s Commodity Spot Index (+1.16%) advance to yet another record high, exceeding the previous peak from early last week. That was partly down to the continued rise in oil prices.

Back in the City, the FTSE 100 index has hit its highest level since the market crashed almost 20 months ago.

The index of blue-chip stocks jumped to 7242.73 in early trading, up 35 points, above the previous pandemic high set in August.

Oil stocks are driving the rally, as crude prices continue to be driven up in the energy crunch. BP has gained 1.7%, with Royal Dutch Shell up 1.3%.

Banks, airlines, and hospitality companies are also among the risers.

That’s the FTSE 100’s highest level since late February 2020, when global markets began to plunge as coronavirus cases and deaths rose in Europe, and Italy’s Lombardy region imposed a lockdown.

Despite today’s gains, the FTSE 100 has still not recovered to its pre-pandemic levels yet, unlike the US and European markets which have hit a series of record highs this year.

Transport minister Grant Shapps says he’s confident people would be able to buy gifts at Christmas, despite problems at the ports.

Fears about Christmas stock shortages grew this week after Felixstowe, the UK’s biggest container port, was forced to turn away ships from Asia because of a backlog of containers caused by the HGV driver shortage.

That fueled concerns that toys and electrical goods diverted from Felixstowe wouldn’t reach the shops in time.

But Shapps told Sky News that “People will be able to get things for Christmas,” adding:

“When I talk to the ports they said it is a busy picture, but if you compared us with lots of other ports around the world, we need to keep this in proportion, things are flowing.”

Shapps also points to the queues of ships off the Port of Los Angeles in California, which is moving to 24-hour operations to clear the backlog, as evidence that the supply chain crisis is a global one.

Shapps also pledged that there will be “no issues” seeing family and loved ones this Christmas -- and that the cabotage changes will support supply chains.

Britain’s haulage industry has heavily criticised the government’s plan to relax cabotage rules for overseas drivers.

Rod McKenzie, managing director of Policy and Public Affairs at the Road Haulage Association, has told the Today Programme that his members are appalled by the plan to allow foreign drivers make unlimited deliveries within the UK during a fortnight.

“Ridiculous, pathetic, gobsmacked” were some of their more broadcast-able comments, McKenzie says (with an eye on the early morning audience):

The government has been talking about a high-wage, high-skill economy, and not pulling the lever marked ‘uncontrolled immigration’, and to them [RHA members], this is exactly what it looks like.

The plan would allow overseas haulage firms to undercut UK hauliers, McKenzie fears, at a time when they face ‘acute driver shortages’, rising costs and staff wages, as well as poor roadside facilities.

This is about taking work from British operators and drivers and giving to Europeans who don’t pay tax here and pay peanuts to their drivers.

Q: But this is trying to address those driver shortages, and it’s temporary - isn’t it a neat solution to the supply chain crisis?

McKenzie replies that the government wants to save Christmas, and to be seen to be saving Christmas. Extra drivers will clearly help with Christmas deliveries.

So from a “simple populist point of view”, you can see what the government is doing... but it doesn’t help hard-working UK hauliers, McKenzie says.

We don’t want cabotage to sabotage our industry.

The government, though, says the plan will bolster the UK’s supply chain. Under the proposals released last night:

• thousands more HGV deliveries could be made each month thanks to temporary changes to ‘cabotage’ to help ensure resilience of country’s supply chains
• consultation launching today would allow foreign transport operators to make unlimited journeys for 2 weeks before returning home

More here: Government set to bolster supply chains by extending cabotage rights

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Britain’s stock market is heading for a pandemic high today, as investors shrug off worries that the global energy crunch will slow the recovery.

The FTSE 100, which has lagged other major markets since the pandemic, is on track to open at its highest level since the crash of February 2020. That would take it closer to its levels before Covid-19 hit.

The Footsie has been lifted by heavyweight oil and mining stocks in recent sessions, as the prices of oil, gas, and a range of other commodities have surged to multiyear highs.

Surging energy prices and supply chain tensions are eating into corporate earnings, and already forcing some factories around the world to suspend production. But the mood today seems brighter.

Michael Hewson of CMC Markets explains:

There still seems to be an element of complacency amongst investors that rising energy prices won’t prompt a wave of demand destruction, especially if supply chain snarl-ups also feed into higher prices, which consumers then can’t absorb.

Yesterday’s US PPI prices [factory gate prices] for September still came in at a record high, but there was evidence that the trend was starting to slow, however in recent months we have seen evidence that US retail sales, has been slowing, while consumer confidence has also fallen sharply from the peaks we saw at the start of, and during Q2.

With that in mind today’s US retail sales numbers for September and University of Michigan confidence numbers could be key indicators as to whether we’ve seen a trough after the Delta related slowdowns seen during Q3.

Meanwhile, UK businesses are digesting two more government u-turns on overseas workers yesterday. Faced with the prospect of a mass pig cull, it gave the go-ahead for 800 foreign butchers to come and work in Britain on seasonal visas.

And with Britain’s supply chains badly stretched, foreign lorry drivers could soon be allowed to make more deliveries in the UK.

Ministers have launched a consultation on extending cabotage rights, allowing foreign HGV drivers to make unlimited journeys for two weeks within the UK before returning home. Under the current rules drivers can only make two trips within seven days.

If approved after the one-week consultation, the proposals would come into force before the end of the year and last for six months. Will that be in time to address pre-Christmas shortages?...

The agenda

• 7am BST: EU new car sales in September
• 9.30am BST: Monthly UK insolvency statistics
• 10am BST: EU trade data for August
• 1.30pm BST: US retail sales for September
• 3pm BST: University of Michigan survey of US consumer confidence