In the City, shares have dropped back from yesterday’s 22-month highs.

The blue-chip FTSE 100 index has closed 18 points lower at 7403, down 0.25% today.

Electrical rentals business Ashtead led the fallers, down 1.8% - although it has been the best-performing Footsie stock this year. Housebuilder Berkeley Group (-1.5%), the London Stock Exchange (-1.5%) and telecoms group BT (-1.2%) followed.

Europe’s energy crisis has eased this week, thanks to warmer weather and a flotilla of tankers carrying natural gas heading over from the US:

Germany’s DAX index has closed for the year, having gained almost 16% after a strong year for stocks.

The DAX hit a series of record highs this year, before easing back from its most recent peak in November after Omicron caused markets to wobble.

That roughly matches the UK’s performance (the FTSE 100 has gained about 15%), but lags Paris’s 29% surge.

British Airways has scrapped flights to Hong Kong until March, Bloomberg reports, as the territory further tightens aircrew quarantine restrictions to contain the spread of the omicron coronavirus variant.

The earliest available flights from London to Hong Kong are from March 1, according to a search on the carrier’s website. The carrier had previously temporarily suspended services to Hong Kong at the end of November after one employee tested positive for Covid-19 and staff were sent into quarantine.

On Wednesday, Hong Kong-based Cathay Pacific Airways said it will make “significant” changes to its flight schedule from now through the first quarter of 2022, and only operate a skeletal service in January.

A spokesman for BA said.

“Like other airlines, due to the continuing coronavirus pandemic we are operating a reduced and dynamic schedule. We apologize to customers whose travel plans are disrupted.”

More here.

Back on Wall Street, the S&P 500 index has hit a new record high.

The US stock index has had a very strong year, ralling by 28% during 2021 thanks to America’s economic recovery, solid corporate profits, and economic and fiscal stimulus.

Victoria Beckham’s fashion and beauty business remained lossmaking in 2020, as the former pop star, her husband David and other shareholders pumped in millions of pounds to keep it afloat during the pandemic.

Sales fell 6% compared with a year earlier to £36m, according to accounts filed for Victoria Beckham Holdings (VBH), which owns the former Spice Girls member’s fashion business, as well as the majority stake in her beauty range, which launched in 2019.

However, the company’s £6.8m pre-tax loss was less than half the £15.6m loss for 2019, which the company attributed to better management of its supply chain, and a new business model whereby the brand sold more of its goods directly to consumers.

More here.

Inflation has accelerated in Spain, with prices rising at the fastest pace in around 30 years.

Spanish consumer prices in December rose 6.7% from the same month last year, flash data from the National Statistics Institute (INE) showed this morning.

That’s up from 5.5% in November, and rather higher than the 5.7% rate expected by economists. Prices rose by 1.3% in December alone.

Electricity fees drove the annual price index, as Europe’s energy crisis hit families, with the price of food also rising significantly in 2021.

The drop in the number of Americans applying for unemployment benefits (see last post) is more evidence that the US job market remains strong in the aftermath of last year’s coronavirus recession, says Associated Press:

The weekly claims numbers, a proxy for layoffs, have fallen steadily most of the year. Employers are reluctant to let workers go at a time when it’s so tough to find replacements. The United States had a near-record 11 million job openings in October, and 4.2 million Americans quit their jobs — just off September’s record 4.4 million — because there are so many opportunities.

The job market has bounced back from last year’s brief but intense coronavirus recession. When COVID hit, governments ordered lockdowns, consumers hunkered down at home and many businesses closed or cut back hours. Employers slashed more than 22 million jobs in March and April 2020, and the unemployment rate rocketed to 14.8%.

But massive government spending — and eventually the rollout of vaccines — brought the economy back. Employers have added 18.5 million jobs since April 2020, still leaving the U.S. still 3.9 million jobs short of what it had before the pandemic. The December jobs report, out next week, is expected to show that the economy generated another 374,000 jobs this month.

The biggest shake-up to the insurance industry for decades takes place on Saturday, when insurers will be banned from quoting policyholders a higher price to renew their home or motor insurance than they would offer a new customer.

After years of complaints that customers who regularly switched insurer were paying significantly lower premiums than those who renewed, the Financial Conduct Authority (FCA) has said they must be offered the same price.

The move is expected to be bad news for households that chase the lowest new-customer premiums annually.

However, the FCA expects it to result in lower renewals for loyal customers who renew automatically, typically saving them £120 a year each...

Elon Musk has rejected criticisms that his SpaceX company is taking up too much room in space, by dominating radio frequencies and orbital slots.

In an interview published by the Financial Times, Musk insisted that SpaceX’s network of tens of thousands of low-orbiting “Starlink” satellites wasn’t crowding out other operators, saying:

“Space is just extremely enormous, and satellites are very tiny.

This is not some situation where we’re effectively blocking others in any way. We’ve not blocked anyone from doing anything, nor do we expect to.”

Josef Aschbacher, head of the European Space Agency, said earlier this month that Musk was “making the rules” in space. Aschbacher called for coordinated action from the EU and other countries to ensure that SpaceX’s constellation did not prevent other countries or companies from launching their own satellites.

Musk compared the number of satellites with the 2bn vehicles on the Earth’s surface, suggesting there was room for “tens of billions” of satellites. The FT cited an astrophysicist disputing that claim on the grounds that satellites need large gaps to be able to safely avoid collisions.

More here:

Restrictions to curb a Covid-19 outbreak in China’s technogy hub Xi’an could cause further supply chain disruption.

The city of 13m people is under lockdown, while multiple rounds of tests have been carried out, with over 100 new Covid-19 cases reported today.

All non-essential businesses in Xi’an have been closed, while residents are barred from leaving their houses except to buy living necessities every other day or for emergencies.

Samsung Electronics and Micron Technology, two of the world’s largest memory chip makers, have said their chip manufacturing bases in the area will be affected, potentially adding to the existing semiconductor shortages.

Samsung says it will “temporarily adjust operations” at its Xian manufacturing facilities which produces NAND flash memory chips, used for data storage in data centres, smartphones and other tech gadgets. It pledged to take all necessary steps to ensure customers are not affected.

Micron said it was also looking to source memory chips from other sources:

“We are tapping our global supply chain, including our subcontractor partners, to help service our customers for these DRAM products.

“We project that these efforts will allow us to meet most of our customer demand, however there may be some near-term delays as we activate our network,”

Japan’s Topix index, which covers a broader range of companies than the benchmark Nikkei, had a strong year too.

The Topix jumped by 10.4% this year, and also finished at its highest year-end close since 1989.

Pulling together a deposit is the biggest challenge for many new housebuyers, Nationwide’s report shows.

A 20% deposit in London is now nearly £88,000 (based on the average first time buyer house price) -- that’s 183% of average annual gross income in the capital.

That’s up from 130% of income a decade ago, and works out at an extra £36,000 -- a high hurdle, especially as most buyers will be paying rent.

While all regions have seen an increase in their deposit requirements, the rises are much more pronounced for the South and Midlands, Nationwide adds.

The Chinese ride-hailing firm Didi Global has reported widening losses and a decline in third-quarter revenue, after its domestic business took a hit from a regulatory crackdown by Beijing.

The company said operating losses hit $6.3bn (£4.68bn) in the nine months to the end of September, while revenue fell nearly 2% in its third quarter.

Chinese authorities have come down hard on Didi since its New York Stock exchange listing in June, demanding that it take down its software from mobile app stores while the Cyberspace Administration of China (CAC) investigated its handling of customer data.

The restriction came as a blow for Didi – co-founded in 2012 by former Alibaba employee Will Wei Cheng and backed by SoftBank Group – which was the dominant ride-hailing company in China. The company now faces stiff competition from ride-hailing services by automakers Geely and SAIC Motor.

Retailers are likely to increase their prices early next year, intensifying the cost of living squeeze on households.

The trend is already underway, with the UK branch of IKEA announcing price increases; due to higher costs across the supply chain, including raw materials, transport and logistics.

More will follow in 2022, as analysts at Saxo Bank explain:

Most companies cannot absorb the costs anymore and will pass them on to consumers. In the case of the United Kingdom, the situation is even worse due to post-Brexit supply chain disruptions. In these circumstances, it is unlikely that inflation will significantly move downward in the short term, at least.

The London-based think tank the Resolution Foundation estimates that UK households will face a £1,200 hit to their budget on average in 2022 due to higher inflation, soaring energy prices and big tax rise to come in April. Supply chain disruptions will also remain.

The president of the UK Food and Drink Federation, Ian Wright, indicated that it is likely UK consumers will not find the great variety of products they used to in supermarkets in the post-Brexit era.

Pent-up demand could keep house prices high in 2022, argues Gareth Lewis, commercial director of property lender MT Finance:

“Covid focused the minds of buyers like nothing else, persuading people to move further out of urban centres in the search for more space, aided by remarkably low mortgage rates. Unsurprisingly, house prices performed most strongly in Wales, the north of England and the south-west as working patterns changed. However, affordability in London remains incredibly stretched, making it very difficult for a young workforce to buy in the capital.

Although many people have made their move, there is still plenty of pent-up demand, which will keep property prices high. An easing of stamp duty for downsizers looks increasingly necessary in order to encourage them to move, free up larger family homes and keep property price growth at a more manageable level.”

North London estate agent Jeremy Leaf reports that activity slowed this month.

Potential buyers digested the rise in UK interest rates, while the Omicron variant deterred some homeowners from putting their homes on the market:

’The Nationwide survey not only demonstrates the underlying strength of the market after the withdrawal of the stamp duty holiday and furlough but gives a broad hint of the direction of travel for 2022.

‘We are seeing much the same at the sharp end, too, including in the run up to Christmas with rising Omicron cases, inflation and interest rates resulting in reduced activity but not a significant correction.

‘Further Covid restrictions will only lead to a build-up of more pent-up demand. But momentum will continue to be compromised by lack of supply as we have found sellers tend to be more put off than buyers because they are concerned about having people in their homes for viewings.’

Getting on the housing ladder has become even harder in the last decade.

Housing affordability has worsened in most UK regions since 2011, meaning new buyers need to stretch themselves even more to buy their first house, Nationwide’s house price report shows.

Nationwide calculated affordability by working out where in the income distribution a prospective purchaser would sit if they were purchasing the typical first-time buyer property in each region, with a 20% deposit and borrowing four times their income.

In East Anglia and the East Midlands the typical buyer has moved from the 50th percentile to the 70th percentile.

Those in the South East and South West now need to be in the top 80th, from the 60th a decade ago, while hypothetical first-time buyers in London need to be in the 90th percentile.

This means even more people are priced out of the market, or need to borrow a greater multiple of their income to buy a home - putting them at greater risk if interest rates rise, or their incomes fall.

Or, they could get a helping hand from family (which may not be an option for those from less wealthy backgrounds).