Time to wrap up, with just one trading session to go in the City before Christmas.

Here’s today’s main stories.

UK private sector growth has slowed to its weakest pace since lockdowns were lifted in the spring, with service sector firms hit by uncertainty over Omicron. Growth is expected to keep slowing in the next few months.

UK car production slumped again last month, with fewer cars built than in any November since 1984 due to supply chain shortages. Output of engines also fell.

Dining out numbers have tumbled, as people avoid restaurants and pubs for fear of catching Covid, as infections hit record levels. Spending at Pret branches has also dropped, as more workers stay at home.

British consumers have been warned that energy bills could rise by 50% next April, intensifying the cost of living crisis.

In the US, the PCE measure of consumer inflation has jumped to 5.7%, the highest in almost 40 years.

But jobless claims remain low, and consumer confidence has risen this month.

European markets have hit one-month highs, as fears that omicron would badly hurt global growth faded. On Wall Street, stocks are near record levels.

And the Turkish lira has continued to rally, after a new ‘savings scheme’ was launched, and the central bank moved to prop up the currency.

In other news:

Good night.... GW

In the City, shares have closed near to their highest levels this year.

The blue-chip FTSE 100 index has ended nearly 32 points higher at 7373 points, up 0.4% today. That’s only 11 points shy of the pandemic closing high set six weeks ago.

European stock markets also rallied, hitting one-month highs, as investors welcomed two studies suggesting people infected with Omicron are at less risk of being hospitalised than people infected with Delta.

Airline group IAG was the top riser on the FTSE 100, gaining 2%, as travel and hospitality stocks gained ground.

Edward Moya of OANDA says:

Omicron is looking more like a short-term disruption to the economic outlook and not a destructive headwind that knocks the economy off its course. A wrath of US economic data, which was mostly pre-Omicron painted a picture that showed the economic was moderating, but growth and inflation remained strong.

Jobless claims continue to head into the right direction, higher prices dragged down both incomes and spending, and the Fed’s preferred inflation measure came in much hotter-than-expected.

If the US was not battling the Omicron variant, US stocks would be dancing higher as the Santa Clause rally would have kept the climb going into uncharted territory. It is too early to say for sure if we will get a Santa Claus rally, but given all the short-term risks of Fed tightening, Chinese weakness, fiscal support uncertainty and COVID, Wall Street is not complaining as the S&P 500 is less than a percentage point from record highs.

Gas prices have dropped back sharply from this week’s record highs.

The next-day price of UK gas is down 20% today at 320p per therm, having hit an all-time high of 457p on Tuesday.

That’s still remarkably expensive - gas cost under 60p per therm at the start of the year, but it will bring some relief to suppliers who are facing unprecedented pressures.

News that some ships carrying gas are rerouting from Asia to Europe, lured by record prices, may be helping.

But Europe still faces a severe energy crunch this winter. Kozovo is to start rolling two-hour blackouts for most consumers from Thursday, electricity distributor KEDS says. More here:

US consumer prices rose at the fastest pace in 39 years, as inflation continues to ripple through America’s economy.

The US personal consumption expenditures index, which tracks price changes in consumer goods and services, jumped by 5.7% per year in November. That’s the fastest rise since 1982, up from 5.1% in October.

The PCE is the Federal Reserve’s preferred inflation measure. This surge will reassure the Fed it was right to speed up the tapering of its stimulus programme last week.

In a pre-Christmas splurge of data, the Commerce Department reports that consumer spending rose by 0.6% in November. That follows a 1.4% rise in October when consumers started their Black Friday and Christmas shopping early.

Durable goods spending jumped 2.5% in November.

But personal incomes lagged behind both inflation and consumer spending, rising 0.4% in the month.

The US chipmaker Intel has apologised for telling its suppliers not to source products or labour from Xinjiang, a province that human rights groups and governments including the US allege uses forced labour, after facing a backlash across China.

Intel, which derives more than a quarter of its $80bn (£60bn) in annual revenues from the Chinese market, apologised to the people of China and its local partners on Thursday for telling suppliers to avoid the region in accordance with restrictions imposed by “multiple governments”.

“We apologise for the trouble caused to our respected Chinese customers, partners and the public,” said Intel in a post on the social media site WeChat, hours after its annual letter to suppliers was made public, prompting fury across China.

“To clarify, the paragraph about Xinjiang in the letter is only for expressing the original intention of compliance and legality, not its intention or position.”

The US and Amnesty International have accused China of widespread human rights abuses in Xinjiang against the province’s majority Muslim Uyghur population, including forced labour, mass internment and torture, which Beijing denies. More here:

The UK public’s appetite for eating out has plunged to its weakest since the spring amid growing evidence of the impact of the Omicron variant on the hospitality sector during its crucial pre-Christmas period.

The number of seated diners fell by 14 percentage points in the week ending 20 December to 88% of the level in the same period of 2019, before the start of the pandemic, according to the weekly digest of flash economic indicators from the Office for National Statistics (ONS).

Using data from the online restaurant booking site OpenTable and other sources, the ONS said Britons were eating out less and working from home more in response to rising infection rates and the government’s plan B measures.

Amid widespread reports of bookings being cancelled, the drop in the number of diners in the latest week was the sharpest since early September and the lowest level since restaurants reopened indoors in England, Scotland and Wales in May after last winter’s lockdown. It was also the first time the weekly comparison with 2019 has dropped below 100% since May.

Here’s the full story:

Last-minute Christmas shoppers are being warned that scam delivery text messages are on the increase, PA Media reports.

With many people ordering online this Christmas, huge numbers of parcels are being expected by households in the coming days.

UK Finance, a trade association representing banks and other financial firms, said just over half (55.94%) of all reported “smishing” text messages in the final three months of this year have claimed to be from parcel delivery firms.

This has more than tripled since the same period in 2020, when 16.37% bogus texts were about parcels.

UK Finance obtained the figures from cybersecurity company Proofpoint, which operates the 7726 text message system on behalf of mobile phone operators. The system allows customers to report suspect texts.

The reports are being used by the National Cyber Security Centre to take down fraudulent website URLs and prevent further losses to scams.

Fake texts often claim the courier has been unable to make a delivery and ask the recipient to pay a fee or provide additional details in order to rearrange delivery.

There is then a link to a fake website asking for personal and financial information.
UK Finance is also warning shoppers to look out for purchase scams.

It said social media platforms and auction websites are increasingly being used by criminals to carry out these scams, in which a customer pays in advance for goods or services that are never received.

Turkey’s lira has surged in value today, adding to big gains this week after the government announced a new lira savings scheme to encourage people to hold the national currency.

The lira has jumped up to 14% this morning, to 10.2 against the US dollar, with Turkish government bonds also rallying hard.

Before this week, the lira has shed over half its value during 2021, after a series of interest rate cuts had weakened the economy. But it all turned around this week after president Recep Tayyip Erdoğan announced savers would be compensated for exchange rate losses if they hold their money in lira.

The unorthodox scheme was dubbed a stealth rate hike by analysts, and one which could threaten Turkey’s currency reserves and undermine the public finances.

Refet Gurkaynak, a professor of economics at Ankara’s Bilkent University, described the new scheme as “in effect, a powerful interest rate hike”, the FT explains. He said that it could bring stability to the currency but warned that it could also have “dangerous consequences”.

Interactive Investor’s Victoria Scholar warns that the lira will remain volatile while Turkey sticks to its policy cutting interest rates despite soaring inflation.

The Turkish lira is surging once again against the US dollar by nearly 15%, extending gains to a rally of almost 40% this week alone. It has now retraced almost the entirety of its 60% slump seen since 17^th November on its fourth consecutive day of significant gains, sparked by proposals from President Erdogan and Turkey’s central bank to stem its freefalling currency. However stability is yet to be restored with one-month implied volatility for the lira hitting record highs this week.

The government wants to restore confidence in the lira and encourage its citizens to hold more domestic currency once again after many shifted their wealth into foreign currency and gold. However as long as President Erdogan decides to defy basic economic policy by sticking with ultra-low interest rates in the face of spiralling inflation, volatility for the lira shows no signs of abating amid the ongoing FX crisis.

Currency market interventions by the Turkish central bank also supported the lira this week:

UK restaurants suffered a plunge in customers last week, as concerns over omicron led people to avoid restaurants and pubs and Christmas parties were cancelled.

The number of UK seated diners tumbled by 14 percentage points in the week to Monday 20th December, to just 88% of the same week in 2019, the Office for National Statistics reports.

That’s that lowest reading since the week ending 17 May 2021, when indoor dining resumed in the UK, down from 102% last week, according to weekly data from OpenTable published by the ONS.

It shows the damage being suffered by hospitality firms, who normally rely on busy December trading to tide them through the quieter months.

The ONS’s weekly economic indicators also show that transactions at Pret A Manger stores fell at six of the seven urban locations tracked, as the pandemic hit commuter and visitor numbers.

In London City, where many employees are now working from home, stores transactions decreased 29 percentage points to the lowest level since the week ending 2 September 2021.

That left them at just 52% of the level seen in January 2020.

And footfall at UK shops dipped to just 81% of its pre-pandemic levels.

Energy bills could rise as much as 50% in the spring as the UK faces a “national crisis” over soaring wholesale gas and electricity prices, the energy industry has warned.

The trade body Energy UK has called on the government to intervene to help cut the cost of bills as soaring wholesale prices drive dozens of energy companies out of business.

“Domestic energy prices are going to go up 45% to 50% in the spring,” warned Emma Pinchbeck, the chief executive of Energy UK, speaking on BBC Radio 4’s Today programme on Thursday.

“It is looking pretty serious for the spring. This is a system-wide issue now. We are asking for the Treasury in the UK to intervene as others have [in Europe],” Pinchbeck said.

The pound has hit its highest level against the US dollar in a month.

Sterling has gained 0.25% this morning to $1.339 for the first time since 23th November, two days before the UK placed six Southern African countries on its travel red list due to concerns over the B.1.1.529 variant (now called Omicron).

Lee Hardman, currency analyst at MUFG Bank, says encouraging news over Omicron’s severity is encouraging risk taking, pulling money out of safe haven assets like the dollar.

The recent improvement in global investor risk sentiment reflects less concern over the potential disruptive impact from the rapid spread of the new Omicron COVID variant on the outlook for global growth next year.

A number of studies have been released in recent days analysing healthcare data from South Africa, Denmark and the UK that show that a lower share of people infected with Omicron are likely to require hospital treatment.

UK car factories suffered their weakest November since 1984 last month, despite a surge in demand for battery electric vehicles.

Industry body the SMMT reports that car production tumbled by -28.7% year-on-year in November to 75,756 units, the fifth monthly decline in a row as UK car makers continue to wrestle with the worldwide shortage of semiconductors.

Production for domestic customers fell 18.8%, while cars for overseas markets slumped over 30%.

The SMMT says:

Exports accounted for more than 80% of all cars produced last month, reinforcing the need for smooth international trade, especially with the EU, as new customs controls with the bloc come into effect on 1 January 2022.

Six-in-ten (60.3%) cars shipped overseas in November headed into Europe. Asia, meanwhile, took 15.6% of UK car exports, the US 13.4% and Australia 1.2%.

British production of battery electric, plug-in hybrid and hybrid cars made up almost a third of production in November, which is a record, with battery electric vehicle output jumping nearly 53% year-on-year.

Mike Hawes, SMMT chief executive, warned that car makers could suffer from delays at borders next year when full custom checks between Great Britain and the EU come in:

“These are incredibly worrying figures, underscoring the severity of situation facing the automotive industry. Covid is impacting supply chains massively, causing global shortages - especially of semiconductors - which is likely to affect the sector throughout next year. With an increasingly negative economic backdrop, rising inflation and Covid resurgent home and abroad, the circumstances are the toughest in decades. With output massively down for the past five months and likely to continue, maintaining cashflow, especially in the supply chain, is of vital importance. We have to look to government to provide support measures in the same way it is recognising other Covid-impacted sectors.

“The industry is as well prepared as it can be for the implementation of full customs controls at UK borders from 1 January but any delays arising from ill-prepared freight or systems will place further stress on businesses that operate ‘just in time’. Should any problems arise, contingency measures must be implemented immediately to keep cross border trade flowing smoothly.”

Nurses, care home staff and police officers working on Christmas Day will be thousands of pounds worse off than they were a decade ago as a result of wages failing to keep pace with prices, Trades Union Congress analysis has shown.

Urging the government to raise the minimum wage to £10 an hour, the TUC said the key workers expected to keep Britain going on 25 December had taken real pay cuts since 2010.

Police sergeants and constables have had the biggest reduction, with inflation-adjusted pay £5,595 a year lower than a decade ago. Nurses have had an effective wage cut of £2,715 and local authority care workers a cut of £1,661, the report found.

A chef would be earning £1,050 more a year this Christmas had pay kept pace with price rises, while a waiter would be £859 better off, the TUC said. More here:

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

Economic growth across the UK has slowed to its weakest point since last spring’s lockdowns, as the omicron variant of Covid-19 hits confidence.

The CBI’s latest survey of private sector growth, released this morning, shows that growth in the three months to December dipped to its lowest since April.

Its index of private sector growth fell to +21% vs +32% last month, with business and professional services, consumer services and distribution firms all reported slower growth.

The slowdown coincided with the discovery of Omicron, and the introduction of measures to slow its spread which have hit hospitality and retailers hard.

And looking ahead, growth is expected to keep slowing, with consumer services firms expecting activity to decline in the next three months. That would drag on the economy, which is still 1.5% below its pre-pandemic levels, and was already slowing over the summer before Omicron hit:

Alpesh Paleja, CBI Lead Economist, says the UK’s growth outlook has deteriorated - and struggling firms may need more help.

“Substantial challenges remain for businesses heading into Christmas: labour and materials shortages, rising costs and new Covid measures are restricting business’ ability to trade during this crucial period.

“With uncertainty rising – associated with the sharp rise in Omicron cases – it’s no surprise that the near-term growth outlook has dampened. The new support measures announced by the Chancellor provided welcome breathing space to boost confidence and will help hospitality and leisure businesses to keep their doors open.

“But with the potential of further measures still weighing on firms, the Government must monitor the situation closely and ensure that any new restrictions go in lock-step with further targeted cashflow support to those struggling firms.”

Yesterday, Ryanair more than doubled its annual loss forecast and cut its January traffic capacity by 33%, warning that the latest travel restrictions have hit takings.

But investors are hopeful that this latest variant may be less virulent than feared, after two studies indicated that people with Omicron are less likely to be hospitalised than those with the Delta variant.

In what was described by scientists as a “qualified good news story”, two studies on Wednesday pointed to a lower risk of hospitalisation with Omicron. A UK study showed that Omicron has a 20%-25% reduced chance of a hospital visit and at least a 40% lower risk of being admitted overnight.

A separate, preliminary analysis of Omicron cases in Scotland concluded that the risk of hospitalisation may be 70% lower with Omicron than Delta.

Shares have rallied in Asia-Pacific markets today, following gains on Wall Street and in Europe last night. Japan’s Nikkei has jumped 0.8%, while China’s CSI 300 is 0.6% higher, and South Korea’s Kospi has gained 0.5%.

European markets are set to open higher too.

Europe’s energy crisis is deepening too, with suppliers warning that “stratospheric” wholesale gas and power prices threaten a “national crisis” in Britain (more on that shortly).

The agenda

• 9am GMT: Italian business confidence for December
• 9.30am GMT: Economic activity and social change in the UK, real-time indicators
• 1.30pm GMT: US weekly jobless claims
• 1.30pm GMT: US Personal Consumption Expenditure index of price rises in November
• 3pm GMT: University of Michigan survey of US consumer confidence