The surge in energy prices is forcing industrial giants to cut production, threatening the economic recovery, points out Bloomberg tonight:

With energy costs spiking to fresh records day after day, financial strain is mounting for industries including metals and fertilizers. Aluminium Dunkerque Industries France, Europe’s top smelter of the metal, curbed output in the past two weeks.

Trafigura’s Nyrstar will pause zinc production in France in early January and Romanian fertilizer maker Azomures temporarily halted activity.

Back in the gas sector, Ukraine’s Naftogaz said today it has asked the EU competition watchdog to stop what it says is abuse by Russia’s Gazprom of its dominant position in the European gas market, Reuters reports.

Europe’s gas prices hit an all-time high this week after a pipeline bringing Russian gas to Germany switched to flow east. Moscow said this had no political implications, but has said that its domestic market is a higher priority.

Gazprom, which accounts for around a third of total gas supplies to Europe, did not respond to a request for comment on Ukrainian energy company’s move.

A spokesperson for the European Commission said it had received the complaint which would be assessed based on its standard procedures.

Naftogaz head Yuriy Vitrenko said Gazprom had stopped selling gas through its electronic platform, refused to fill gas storage facilities in the European Union or to use capacity in Ukraine’s pipeline system to supply larger volumes, despite Kyiv’s offer of a 50% tariff discount.

Vitrenko said in a statement that Gazprom was also blocking exports of gas produced by private companies in Russia and the transit of gas from Central Asia to Europe.

More here: Ukraine’s Naftogaz calls for EU anti-monopoly action against Gazprom

Here’s some expert reaction to Ryanair’s news, from Danni Hewson, AJ Bell financial analyst:

Omicron is taking a toll and an update from Ryanair clearly shows the impact it’s having on the travel sector.

The no-frills airline has slashed its January schedules and more than doubled its annual loss forecast. Passenger numbers will be down in December as many will have been forced to put plans on hold as countries like France re-introduced restrictions.

But there is a glimmer of hope woven between the lines that time may yet bring a positive update from those clever scientist types that could flick the switch of consumer confidence back to on.

... and Victoria Scholar, head of investment at interactive investor:

Airline stocks have had a torrid time during the pandemic, with no let up in the face of the latest Omicron variant. Ryanair has cut its full-year earnings guidance in yet another sign of pain for the embattled travel sector.

The low-lost carrier itself admits that its fortunes are highly sensitive to any further negative Covid news flow. Nonetheless Ryanair is holding off from further schedule cutbacks for February or March for now until the extent of the fallout from the latest wave becomes clearer. Ryanair has revised its January passenger traffic guidance from 10 million to 6-7 million with a full-year net loss forecast for €250-450, more than double its prior estimate of between €100-200m.

Ryanair, which delisted from the LSE last week amid increased costs and reduced volumes after Brexit, saw shares soar as much as 11% on Tuesday amid a rebound in travel and leisure on optimism towards Moderna’s booster vaccine. However the stock has been under pressure since the November peak, shedding 15% off the high, dampening a tepid year-to-date recovery.

Here’s our news story on Ryanair’s forecast that Omicron, and the latest travel restrictions, leave it facing a much higher loss than previously hoped:

The latest ONS consumer trends report shows UK household spending grew by 2.7% quarter-on-quarter in the July-September period.

That’s a 5.3% rise year-on-year, thanks to a 38.1% jump in spending on restaurants and hotels, as interactive investor’s Victoria Scholar explains:

However third quarter household spending was still 2.1% below the same period pre-pandemic. The staycation boom this summer supported demand for domestic holidays with many consumers able to spend their cash windfall saved in the previous year when there were reduced spending opportunities during the pandemic.

Plus with interest rates at rock-bottom and inflation on the rise, the impetus to spend rather than save has increased.

Over in Italy, premier Mario Draghi has said his government has accomplished most of what it set out do to in fighting the pandemic and restoring economic growth.

It could be a signal that Draghi, the former head of the European Central Bank, is ready to run for the Italian presidency and return the running of the government back to political parties.

Associated Press explains all:

Italian media have been speculating for weeks about Draghi’s possible presidential ambitions, given that the seven-year mandate of President Sergio Mattarella expires in February and the broad-based support that Draghi had enjoyed as premier from Italy’s fractious political parties has begun to erode.

The Italian presidency has limited powers and is largely ceremonial. But the president plays a key role in resolving political impasses, and having the internationally respected Draghi in the Quirinale Palace would send a signal of Italian stability and credibility for seven more years.

Draghi, 74, didn’t respond directly Wednesday when asked repeatedly about his future at a year-end news conference.

“My personal destiny matters absolutely not at all,” he said. “I don’t have particular aspirations of one type or another. I’m a man, a nonno (grandfather) if you like, at the service of institutions.”

But he stressed that neither he nor his government were essential to Italy’s continued fight against the pandemic or its implementation of its 261 billion-euro ($294 billion) recovery plan, which envisages billions in investments in sustainable development, digital transformation and structural reforms.

“We have created conditions so that work on the (plan) can continue,” he said. “The government has created these conditions, independent of who will be (in charge). People are always important, but the other aspect is that it’s also important that the government is supported by the majority” in parliament.

Pawel Adrjan, economist at the global job site Indeed, has flagged that job opportunities at hospitality companies across Europe have slumped in recent weeks:

The US economy grew a little faster than previously thought in the third quarter of the year, new figures show.

US GDP grew at an an annualised rate of 2.3%, or nearly 0.6% on a quarter-on-quarter basis. That’s up from the previous estimate of 2.1%, but still slower than the 6.7% annualised growth in Q2.

From the second quarter to the third quarter, spending for goods turned down (led by motor vehicles and parts) and services decelerated (led by food services and accommodations), the Commerce Department reports.

Wall Street is set for a mixed start, with the futures market showing the Dow Jones industrial average slightly higher but Nasdaq futures a little lower.

Investors continue to weigh up the likely impact of the fast-spreading Omicron variant which has led to new restrictions in parts of Europe:

Rabobank macro strategists Bas van Geffen and Elwin de Groot told clients in a note that:

Despite more reports that European governments are introducing new measures to curb the spread of COVID, market participants already seem to have made up their minds that the threat of the quick advancing Omicron variant is manageable, for now.

The UK’s advertising regulator has banned two promotions for “fan tokens” from Arsenal Football Club, saying they were misleading supporters over the risks of investing in cryptocurrencies.

The Advertising Standards Authority (ASA) said that the north London club was “taking advantage of consumers’ inexperience or credulity, trivialising investment in crypto assets, misleading consumers over the risk of investment and not making it clear the ‘token’ was a crypto asset”.

Arsenal said it would seek an independent review of the ruling “to seek greater clarity on the ASA’s current position”. More here:

In the US, mortgage applications have dipped for the second week running, despite a drop in borrowing costs.

Applications to take out a new home loan fell 3% last week, the Mortgage Bankers Association reports, while refinancing applications were up 2%.

Mortgage interest rates fell last week, which could encourage people to apply for loans. However, shortages of homes on the market is hitting mortgage demand, and also driving prices to record levels over the last year.

Victoria Scholar, head of investment at Interactive Investor, has more details:

Adam Parton, partner at accountancy network MHA, agrees that the £1bn support package for UK hospitality firms announced yesterday doesn’t go far enough.

The sector also needs a reduction in VAT and a return of furlough as well as grants for the self-employed, he explains, with very little time to lose:

Unlike government support in the earlier phases of COVID-19 we aren’t seeing the much-needed reduction in VAT (which should go back down to 5%) or furlough support for businesses and employees and grants for the self-employed. Without these measures, which proved effective last time, the sector will struggle.

“It could be that yesterday’s initiative is only the first part of a new wave of support by the government. This will be what the sector is hoping for. Alternatively, yesterday’s measures might just be there to balance out the ‘bad news’ as more restrictions are introduced, with no intention of building on them in the coming months.

“If there are more measures on the way the Chancellor needs to hurry up. In the next couple of weeks and in 2022 cash flow will be a major concern as many venues are now seeing a more than 50% cancellation in their bookings. This could prove a devastating and costly blow for businesses in terms of employee wage commitment in addition to wasted food stocks.”

Back in the energy markets, gas prices have eased back from Tuesday’s record levels, but remain painfully high for users.

The day-ahead UK gas price has dipped by 5% today to 434p per therm, from last night’s close of 457.5p. That’s still around 6 times higher than at the start of the year.

The European month-ahead price has also dipped, down 3.6% at around €175 per megawatt hour, having surged 20% yesterday to close at a record €181/MWh.

Kit Juckes, currency expert at Societe Generale, says such high prices could threaten the recovery:

The natural gas price surge, and the threat of even higher prices if tensions on the Russian/Ukrainian border escalate, are another threat to European growth. While they make a rapid reversal in inflation even less likely, they will not help the euro.

A £14 own-label champagne from Aldi has become a hit in the UK and is second only to Moët & Chandon in sales as shoppers seek luxury but without the hefty price tag.

Veuve Monsigny, available only at the discounter, has overtaken Lanson, one of France’s most storied names, according to figures from the data firm IRI.

Veuve Monsigny is made for Aldi by the French producer Philizot & Fils. The company, run by the married couple Stéphane and Virginie Philizot, is based in Champagne’s Marne valley and has had to expand rapidly to keep up with demand.

As well as soaring energy bills, almost 5 million families in social housing in England are facing the biggest rent hike for a decade from April.

The move will add to the mounting cost of living squeeze, a new report from the Resolution Foundation thinktank shows.

Resolution said 4.75 million families would see rent on their local authority or housing association home rise by up to 4.1%, adding to the pressure on living costs by an average £202 extra a year.

It warned the increase would coincide with significant tax rises planned by the government to come in from April and a further jump in household utility bills when Ofgem’s consumer energy price cap is raised. The Bank of England also forecasts inflation will peak at about 6% the same month, the highest level since 1992.

It warned:

“Rising social rents on top of these increases will be very damaging for living standards indeed,”

Britons are many times more likely to have experienced shortages of food and fuel than people in half a dozen EU member states, according to a poll, my colleague Jon Henley reports.

Global supply chain problems prompted by the pandemic have disrupted the international trade network since the summer, with transport backlogs combining with labour shortages to create scarcities of various goods around the world.

The government has argued that the shortages are part of a worldwide pattern and no worse in the UK than elsewhere, although logistics experts and other professionals – particularly in the food sector - have said the problems are amplified in Britain by a shortage of east European workers, including drivers, since Brexit.

The YouGov poll showed residents of the UK were multiple times more likely to have experienced, or to know people who have experienced, shortages of food and fuel than people in France, Germany, Spain, Italy, Sweden and Denmark, and somewhat more likely to have experienced them than those in the US.

Here’s the full story.

Online food delivery company Just Eat Takeaway.com has struck a deal with One Stop, a British convenience store chain owned by Tesco to handle orders and deliveries on its platform.

It’s their second deal in a week, after Just Eat entered the fast grocery delivery market by partnering with Asda in its first tie-up with a supermarket in the UK.

Shares in Just Eat are up 4% this morning.

The pound has nudged a little higher this morning, after Boris Johnson last night ruled out bringing in new Covid restrictions before Christmas.

Sterling is up 0.3% against the US dollar to $1.33 for the first time this week, and also gained 0.3% against the euro to €1.178.

The prospect of new curbs to contain omicron, and the drop in trading at hospitality firms and retailers, has weighed on the pound in recent weeks.

Further restrictions could be introduced after Christmas.

Gillian Keegan, the care minister, refused to rule out lockdown measures being introduced in England shortly after Christmas and said 129 people had been hospitalised and 14 had died with Omicron in the UK.

She said:

“There is uncertainty. So, if you can’t change your [New Year’s Eve] plans quickly, then maybe think about it. There is uncertainty. We can’t predict what the data is going to tell us before we’ve got the data.”

The surge in energy costs has driven up prices at the factory gate in Spain by a third in the last year.

Spanish industrial production prices in November hit a record high for the second month in a row the Spanish National Statistics Institute (INE) reports.

Prices jumped 33.1% year on year in November, the fastest annual pace since the data series began in January 1976, INE said, up from 31.9% in October.

Soaring energy costs drove the increase, rising 88.3% per year in November, due to higher prices for gas production, distribution and oil refining.

The Bank of England has fined Metro Bank nearly £5.4m for regulatory reporting failures, over an accounting blunder in which it misclassified the riskiness of some commercial loans.

The BoE’s Prudential Regulation Authority (PRA) imposed the penalty on Metro, for failing to report its capital position with due skill, care and diligence, and for failings in its regulatory reporting governance, controls and investment between May 2016 and January 2019.

Metro admitted in January 2019 that it had made a major blunder in how it classifies its loan book. Hundreds of millions of pounds of commercial property loans and loans to commercial buy-to-let operators had been treated as less risky than they actually were.

That admission wiped nearly 40% off Metro’s share price, at a time when it was trying to challenge the UK’s major lenders.

Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer of the PRA said:

“We expect firms to invest appropriate and adequate resources to ensure that they submit accurate regulatory returns. In this case, Metro Bank failed to meet the standards of governance and controls expected of it, resulting in today’s enforcement action.”

Here’s some background:

Iain Hoskins, who runs Liverpool’s Ma Pub Group, has warned that yesterday’s £1bn hospitality bailout doesn’t go far enough, and is only a start.

Further help will be needed from the chancellor after Christmas, Hoskins says:

“Well it’s a start at least – our industry has been asking this question for weeks. So it appears without furlough for now the plan is to let us stay open but the reality remains that trade has dropped hugely at the busiest time of the year for hospitality. It’s devastating.

“The point is that it costs me more to stay open than when we are closed and while I don’t think anyone is expecting to have all lost Christmas sales reimbursed by the government, the £6k grant is a drop in the ocean at this time of year. That’s not being ungrateful – that’s the truth.

“But it’s a start if follow up packages are to come after Xmas. But it simply doesn’t go anywhere to address the issue of our staff as most rotas are being cut the bone to keep our overheads down as a means of survival. Unfortunately this doesn’t help our staff who like anyone else who work want the hours and the money, especially at this time of the year.”

Jeffrey Halley of OANDA says the jump in European gas prices is an ominous sign:

Notably and ominously, natural gas prices hit record highs in Europe overnight as Russian gas stopped flowing through a major pipeline. Ironically, the US has natural gas coming out of its ears, with prices languishing.

Europe may yet pay the price for its strategic ineptitude in Q1 if the winter turns brutal, and that’s without omicron.

US natural gas prices tumbled earlier this month, as warm weather and higher production boosted supplies.

The surge in Europe’s gas prices means that ships carrying liquefied natural gas destined for Asia are changing tack mid-voyage to supply European consumers willing to pay a large premium, the Financial Times reports.

The FT also flags that gas buyers were spooked after gas flows from Russia to Europe on the Yamal-Europe pipeline stopped.

In the UK, where more than two dozen energy suppliers have already gone bust this year, prices climbed 20 per cent on Tuesday to a record 450 pence per therm.

“These are astounding moves,” said Tom Marzec-Manser, head of gas analytics, at consultancy ICIS, adding that traders were racing to close positions ahead of Christmas with “so many risks on the air”.