Julia Kollewe 

UK economy grows faster than expected; prices drop as US mulls big oil reserve release – as it happened

Joe Biden expected to announce release of up to 180m barrels to cool oil market, as gas prices rise amid standoff over rouble payments
  
  

Pipelines run to Enbridge Inc.'s crude oil storage tanks at their tank farm in Cushing, Oklahoma.
Pipelines run to Enbridge Inc.'s crude oil storage tanks at their tank farm in Cushing, Oklahoma. Photograph: Nick Oxford/Reuters

Reuters reported earlier that the Kremlin has said customers won’t have to switch to roubles for gas payments straight away, as “payments and delivery is a time-consuming process”.

The full story will be up shortly. Good-bye!

Updated

Putin threatens to turn off gas supplies unless 'unfriendly' states start paying for gas in roubles

Some breaking news before I go: Vladimir Putin has indicated that he could turn off gas supplies to Europe overnight unless “unfriendly” states drop their refusal to start paying for gas in roubles from Friday, reports Rob Davies.

“To buy Russian gas, they need to open rouble accounts in Russian banks,” Putin said in a televised appearance.

“It is from those accounts that gas will be paid for, starting 1 April. If such payments aren’t made, we will consider this a failure by the client to comply with its obligations.”

According to an order signed by Putin, gas buyers should open accounts with state-controlled Gazprombank to facilitate currency exchange on gas purchases.

The G7 group of advance economies – the US, UK, France, Germany, Italy, Japan and Canada – has so far refused to countenance meeting Putin’s demand for rouble payments.

The impasse has already led to Germany and Austria making preparations for potential gas rationing, activating an emergency plan designed to help it cope with any disruption in supplies from Russia.

There are fears that Putin could extend the rouble payment plan to include exports of oil, grain, fertilisers, coal, metals and other key commodities.

Updated

Closing summary

Oil prices have sunk after White House officials said the US was considering a record-breaking release of crude oil reserves – of up to 180m barrels over several months – to allay fears of shortages after the Russian invasion of Ukraine. Brent crude is trading about $5 lower at $108.52 a barrel, while US light crude is at $104 a barrel.

Gas prices in Europe are continuing to rise, amid uncertainty over supply sparked by a stand-off between Russia and the wests over rouble payments for gas.

Britain’s economy grew faster than previously thought in the last three months of 2021, but the increase was largely due to Covid-related activity in the health sector – visits to doctors, more test and trace and vaccinations – which won’t last, and masked the impact of the cost of living crisis. Consumer spending was revised sharply lower to 0.5% from 1.2%.

European shares are trading lower, with the UK’s FTSE 100 down 0.6% and Germany’s Dax and France’s CAC both losing 1%. The Dow Jones on Wall Street has fallen 0.6%.

Our other top stories today:

Thank you for reading. We’ll be back tomorrow with the latest news. Take care – JK

Updated

Britain has sanctioned 14 more Russian entities and individuals, including the state media organisations behind Rossiya Television and Sputnik and some of their senior figures, for pushing out “Putin’s fake news and narratives,” Reuters reported.

They are the latest sanctions against Moscow to punish it for its invasion of Ukraine. The UK government is sanctioning Kremlin-funded TV-Novosti, which owns RT, and Rossiya Segodnya, which controls news agency Sputnik. Among the individuals sanctioned are RT’s managing director, Alexey Nikolov, Sputnik’s editor-in-chief Anton Anisimov, and Sergey Brilev, a prominent news anchor at RT.

Foreign secretary Liz Truss said:

Putin’s war on Ukraine is based on a torrent of lies.

Britain has helped lead the world in exposing Kremlin disinformation, and this latest batch of sanctions hits the shameless propagandists who push out Putin’s fake news and narratives.

Gas prices rise amid standoff over rouble payments

Gas prices in Europe are continuing to rise, amid uncertainty over supply sparked by a stand-off between Russia and the wests over rouble payments for gas.

British gas for next-day delivery is up 8p at 286p per therm, a 2.9% rise, while the Dutch May contract rose €2, or 1.7%, to €121 per megawatt hour.

Moscow is expected to set out publicly its plans for rouble payments today, although the Kremlin has said customers won’t have to switch to roubles straight away, as “payments and delivery is a time-consuming process”.

The G-7 group of nations has resisted the demand, and Germany and Poland, which are highly reliant on Russian gas, have accused Moscow of breaching existing contracts.

Vladimir Putin told the German chancellor Olaf Scholz during a phone call yesterday that nothing would really change for European customers: payments would still be made in euros and transferred to Gazprombank, which is not affected by sanctions, and then converted into roubles, Reuters reported, quoting a German spokesperson.

The spokesperson said:

Scholz did not agree to the procedure in the conversation, but asked for written information to better understand the procedure.

Analysts at Fitch Solutions doubt that Russia will turn off the taps as this would hurt Russian gas producers.

The EU is Russia’s largest gas consumer and there are no other customers that could readily replace their demand.

We do not expect Russia to shut off gas supplies, as it would be a major escalation from its previous position that this would be a response to an oil embargo. If Russia were to shut off gas supplies, it would mark a serious step-change from Russia’s deference to long-term contracts as the model for gas supply agreements.

Companies led by women disproportionately attract less investment than those led by men, according to a large-scale study of female entrepreneurship in the UK, reports Joanna Partridge.

The Gender Index, which was launched on Thursday, is a research study of all 4.4m active UK companies and allows users to track the impact of female-led firms on the economy via an online, interactive tool.

The data identified that just under 17% of all active companies are led by women, but they only managed to attract less than 12% of 1.3m investments made in UK firms.

In comparison, 61% of active companies are led by men, and those firms attracted two-thirds (66%) of all investment. The remainder recorded 17% of investment obtained by firms led by a gender-balanced team, while 4.7% of investments were directed to companies where there was no information about gender of the leadership.

More on our main story: oil prices have fallen sharply on expectations that the US will tap its strategic oil reserves for the third time since November, by a massive amount.

The International Energy Agency’s member countries are due to meet tomorrow at 1pm BST and will decide how much more oil to release from reserves to cool the market.

The US is considering releasing up to 180m barrels of oil over several months from the Strategic Petroleum Reserve, Reuters reported, citing four US sources. This would be the biggest in its 50-year history. The reserve holds 568.3m barrels, its lowest level since May 2002. The release would increase oil supplies by 1m barrels per day for six months.

Oil prices hit 14-year highs this month after Russia’s invasion of Ukraine amid supply fears, but have since fallen back. Brent crude, which spiked to $139 a barrel immediately after the invasion, the highest since 2008, fell more than $6 to $107.39 a barrel today, down 5.3%, while US light crude is at $102.35 a barrel, a 5% drop.

The Opec oil cartel and its allies including Russia will meet next Thursday, but have so far resisted demands to pump more oil, sticking to its plan to gradually boost production.

Updated

The British wealth manager Brewin Dolphin has received a £1.6bn takeover offer from Royal Bank of Canada, and its directors have unanimously backed the deal. The news sent its share price 61% higher to a record 511.26p.

RBC has offered to pay 515p a share. It is the latest of a series of foreign takeovers of British companies, including some wealth management firms.

David Thomas, chief executive of RBC Capital Markets Europe, said:

The UK is a key growth market for RBC, and Brewin Dolphin provides us with an exceptional platform to significantly transform our wealth management business in the region.

The deal will make RBC Wealth Management the third-biggest wealth manager in the UK and Ireland, as well as the market leader in Canada and give it a bigger presence in the United States.

Energy supplier websites crash as customers rush to submit meter readings

The 54% hike in energy prices tomorrow has led to chaos, it seems.

The websites of several energy suppliers have crashed, as customers rushed to send in meter readings before prices rise by more than 50% at midnight, report Rob Davies and Rupert Jones.

British Gas, EDF, E.ON, SSE and Scottish Power all appeared to be struggling with the volume of submissions from households looking to beat the deadline.

With energy bills due to rise by an average of 54% from Friday, millions of households have been urged to take gas and electricity meter readings the day before, to ensure they get the current, cheaper rates for all the energy they use right up until close of play on Thursday.

European stock markets have turned negative, giving up earlier gains.

  • UK’s FTSE 100 index down 0.1% at 7,570
  • Germany’s Dax unchanged at 14,606
  • France’s CAC down 0.1% at 6,734
  • Italy’s FTSE MiB down 0.25 at 25,249

In Italy, inflation rose to an annual rate of 6.7% in March, according to a preliminary estimate from Istat, Italy’s statistics office.

Here’s a ranking of European inflation rates, based on the EU’s harmonised index of consumer prices (HICP) measure:

Charlotte de Montpellier, economist for France and Switzerland, has looked at the jump in French inflation to 4.5% in March.

Inflation rose more than expected in France in March, reaching 4.5%. This is a figure that has not been seen since the 1980s, but it is still much lower than in neighbouring countries. Inflation will continue to rise in the coming months, before falling sharply.

For the next few months, we expect inflation to continue to rise, driven by energy and food prices, but also by inflationary pressures that are increasingly spreading to all sectors of the economy. The 5% mark for the national inflation indicator could be exceeded in the second quarter, even without further increases in energy prices. Indeed, all business indicators suggest that companies expect to set higher prices in the coming months.

That said, it is likely that the inflation peak is near and that inflation will start to fall again in a few months, probably as early as the summer.

Eurozone unemployment rate falls to record low of 6.8%

The eurozone unemployment rate fell to a record low of 6.8% in February, from 6.9% in January, according to Eurostat, the statistics office of the European Union.

However, economists cautioned that the recovery in the jobs market will slow in coming months, and also noted that wage growth has not kept up with rising inflation.

The youth unemployment rate remained high at 14% (down from 14.3% in January), as 2.1 million people under 25 were out of work.

Bert Colijn, senior eurozone economist at ING, said:

Germany has hit very low levels of unemployment and has seen the pace of decline slow, while France, Italy and Spain are still seeing rapid improvements in people returning to work. This helps boost nominal income growth, somewhat dampening the negative effects of inflation on real household incomes.

Still, we haven’t seen much evidence so far of improving wage growth and the war is likely to dampen wage growth improvements further.

The rapid recovery of the job market is set to slow from here on. The war adds uncertainty to the employment outlook and could result in delayed new hiring. This is especially the case in manufacturing, as the industrial sentiment survey already revealed declining hiring expectations in March. Still, the labour market remains very robust at current levels of unemployment.

The Financial Times’ Frankfurt bureau chief Martin Arnold tweeted:

Let’s have a look at this morning’s economic data out of the eurozzone.

In Germany, the number of unemployed people declined by 20,400 in February from January to 1.34 million, according to official figures. The unemployment rate stayed at 3.1%.

Employment increased for the tenth month, by 668,000 people to 45 million.

German retail sales recovered less than expected in February when some pandemic restrictions remained in place, separate figures showed. They rose just 0.3% from January, compared with analysts’ expectations of a 0.5% gain.

En+ warns of supply problems due to sanctions

As it announced a tripling in 2021 profits, EN+, the mining company part-owned by the sanctioned Russian oligarch Oleg Deripaska, has flagged equipment supply problems due to western sanctions. It also warned that the likely need to replace foreign currency credit facilities with debt denominated in roubles will negatively affect its financial position.

At the start of the month, the company halted production at its refinery in Ukraine, which produced 1.8m tonnes of alumina (substances for the smelting of aluminium) last year.

2021 was a bumper year for En+. Revenues climbed 36% to $14bn last year on the back of a 41% increase in the average aluminium price per tonne. The firm’s annual net profit more than tripled to $1.5bn from 2020. The En+ share price rose almost 15% in Moscow after the results were released.

Referring to the impact of western sanctions against Moscow, En+ said:

There has been a significant increase in volatility on the securities and currency markets, as well as a significant depreciation of the rouble against the US dollar and the euro. The quantitative effect of these events cannot be accurately estimated at the moment with any degree of confidence.

Due to all these circumstances, the group may potentially face difficulties in supply of equipment, which may lead to the postponement of investment projects. The likely necessity of having to replace foreign currency credit facilities with debt nominated in roubles may negatively affect the financial position of the company due to high interest rates in the local rouble market caused by general instability and the key rate set by the Bank of Russia at 20%.

The recently announced intention by the Russian Government to change regulation of domestic metals’ sales prices may have an adverse effect on the company’s profitability.

The Conservative peer Greg Barker, an energy minister in David Cameron’s government, resigned as chairman of the aluminium and hydropower group on 7 March. He was replaced last week by Christopher Bancroft Burnham, who has sat on the En+ board as a senior independent director, and is a former undersecretary-general of the United Nations.

Another En+ board member, Joan MacNaughton, has also quit since Russia’s invasion of Ukraine. The war has prompted a number of resignations of UK directors from Russian company boards.

Updated

News round-up

Time for a quick round-up of today’s main stories.

The UK economy was only 0.1% below pre-pandemic levels after growing faster than previously thought at the end of 2021 because of an increase in visits to GPs and a rush of coronavirus test-and-trace activities, the latest official data has shown.

UK house prices grew at the fastest annual pace since 2004 in March, continuing the ascent to new record levels – a fifth higher than at the start of the coronavirus pandemic.

Private jets linked to Russian oligarchs and officials appeared to continue flying into and out of EU and UK airports despite flight bans and sanctions imposed after Russia’s invasion of Ukraine, a Guardian data investigation found.

Vladimir Putin has demanded payment in roubles for Russian gas sold to “unfriendly” countries, setting a deadline of 31 March. Why is he demanding payment in roubles? The switch to rouble payments could extended to include exports of oil, grain, fertilisers, coal, metals and other key commodities.

Eight Russian oligarchs on the UK sanctions list over their links to Vladimir Putin were granted “golden visas” to live in Britain.

The eight individuals, who Boris Johnson described as having “the blood of the Ukrainian people on their hands”, were granted the right to live in the UK after promising to invest at least £2m under the controversial tier 1 investor visa scheme.

The UK video games market hit a new record of £7.16bn last year as the pandemic continued to fuel an unprecedented boom in home entertainment, with gamers rushing to stock up on new consoles and virtual reality kit even as overall sales of games fell.

Lockdown conditions have made gaming one of the biggest pandemic winners with the value of the UK market now a third higher than in 2019 before the coronavirus crisis hit and worth more than the music and video streaming markets combined.

Almost 500 “ghost flights” a month departed from the UK between October and December 2021, data has revealed.

The information, obtained through a freedom of information request by the Guardian, shows Heathrow, Aberdeen, Manchester, Stansted and Norwich were the top five airports for such flights during the period.

More than a third of all compost sold in the UK in 2021 was peat dug from carbon-rich habitats, new data has revealed.

Today is the day to read your gas and electricity meters in the UK.

With energy bills due to rise by an average of 54% on Friday 1 April, millions of households are being urged to take gas and electricity meter readings today, writes my colleague Rupert Jones.

The aim is to ensure you get the current, cheaper rates for all the energy you use right up until close of play on Thursday. Otherwise your supplier might charge some of it at the new higher unit prices.

Gareth Kloet, the energy spokesperson at the comparison site GoCompare, says: “We would urge all bill payers to take both gas and electricity meter readings on 31 March and make sure you submit these to your supplier.”

Money-saving guru Martin Lewis is encouraging people to do the same, to “draw a line” in terms of their usage.

Shares in Sir Martin Sorrell’s advertising business S4 Capital plummeted yesterday, after it said its auditor had not been able to sign off on its results, a day before they were due to be published.

The S4 share price fell by 36% on Wednesday afternoon, wiping £1bn off the company’s market value. This morning, the shares bounced 6.6% but the gains were short-lived. The shares are now up just 0.9% at 312.9p.

The company said in a statement yesterday:

PwC informed us that they were unable to complete the work necessary for S4 Capital to release the preliminary statement tomorrow morning.

As a result, the company will release its preliminary results for 2021 as soon as PwC have completed their work. The company believes that the results for 2021 remain within the range of market expectations and continued to trade strongly in the first two months of 2022.

It is the second time this month that S4 has postponed its results. On 1 March, S4 said PwC had asked for more time to complete its audit “because of the impact of Covid and Omicron on travel and resource allocation, particularly in the Netherlands”.

Sorrell set up S4 in 2018 after he left the advertising giant WPP, the company he founded, after staff made allegations of personal misconduct. Sorrell has denied any wrongdoing.

Updated

UK house prices rise at fastest pace since 2004

UK house prices grew at the fastest annual pace since 2004 in March, continuing the ascent to new record levels – a fifth higher than at the start of the coronavirus pandemic, reports my colleague Jasper Jolly.

Prices rose by 14.3% in the year to March, the strongest pace of increase since November 2004 when the UK experienced a housing boom that preceded the financial crisis, according to Nationwide, the UK’s largest building society.

The price of an average UK home hit £265,312, more than £33,000 higher than March 2021. Price rises were evident across the country, with prices in Wales soaring by 15% over the year. House price growth accelerated in every region of England and Scotland.

Detached homes have gone up nearly £68,000 in price since the start of pandemic, a 22% rise, as people working from home sought out bigger properties, while average flat prices have increased by £24,000, or 14%.

Introduction: UK economy grows faster than thought; oil prices drop ahead of expected US reserve release

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

Britain’s economy grew at a faster clip than previously thought in the last three months of 2021 when the country was hit by the Omicron wave.

GDP in the world’s fifth-biggest economy rose by 1.3% in the fourth quarter from the previous three months, the Office for National Statistics said, stronger than a preliminary estimate of growth of 1.0%.

The ONS said the biggest contributors to the increase were from human health and social work activities, driven by increased GP visits at the start of the quarter, and a large increase in coronavirus testing and tracing activities, and the extension of the vaccination programme.

However, consumer spending growth was revised lower from 1.2% to 0.5%. Some economists said it looks as though the upward revision was driven by higher inventories, which is not a sustainable source of growth.

Paul Dales, senior UK economist at Capital Economics, said:

The upward revision to GDP growth in Q4 of last year may not be as encouraging as it looks as a lot of it appears to be due to inventories while consumer spending was revised down. The latter suggests the squeeze on real incomes is starting to bite, although the fall in the saving rate is providing a cushion.

Overall, the data leave the economy just 0.1% smaller than the Q4 2019 pre-pandemic level. The 9.4% drop in GDP in 2020 was revised to a smaller 9.3% fall, while the 7.5% rise in GDP in 2021 was revised down to a 7.4% increase. GDP growth will probably be around 4.0% this year, if not a bit weaker, said Dales.

Oil prices have fallen as much as $5 a barrel this morning on news that the United States is considering the release of up to 180 million barrels from its strategic petroleum reserve over several months, which would be the biggest ever, Reuters reported.

Brent crude is now trading $4 lower at $109.44 a barrel, while US light crude is at $103.28 a barrel.

Activity in Chinese manufacturing and services simultaneously contracted in March for the first time since the start of the Covid-19 pandemic in 2020, adding to the urgency for more policy intervention to stabilise the economy. Chinese authorities have already indicated they will step in with more support measures.

The official manufacturing Purchasing Managers’ Index fell to 49.5 from 50.2 in February, China’s National Bureau of Statistics said, while the non-manufacturing PMI eased to 48.4 from 51.6 in February.

Asian stocks fell after the data. Japan’s Nikkei closed down 0.7% while Hong Kong’s Hang Seng dropped 1% and the Shanghai composite index lost 0.45%.

European shares have opened higher after yesterday’s declines. The FTSE 100 index is 0.2% higher at 7,594 while Germany’s Dax rose 0.6% and France’s CAC advanced 0.3%.

Inflation in France has climbed to 4.5% in March, from 3.6% in February, because of higher energy, food and services prices, the French statistics office said.

The Agenda

  • 8.55am BST: Germany unemployment for March (forecast: -20,000)
  • 10am BST: Eurozone unemployment rate for February (forecast: 6.7%)
  • 10am BST:: Italy inflation for March (preliminary) (forecast: 6.4%)
  • 1.30pm BST: US PCE price index for February

Updated

 

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