Markets have struggled this afternoon, although the bounce in oil prices has helped the FTSE 100 avoid the worst, said Chris Beauchamp, chief market analyst at online trading platform IG. The UK blue-chip index has edged down 9 points to 7,467, while Germany’s Dax has lost 1.3% and the Stoxx Europe 600 index is down almost 1%.

It’s back to risk-off for global markets, which are retreating this afternoon. Another upward move for oil prices isn’t helping matters either.

The surge in oil prices – Brent crude is up 5% at $121.29 a barrel – has lifted BP and Shell, up nearly 5% and 3.5% respectively.

The chancellor’s decision to cut fuel duty will be a small bit of welcome news, but in a sign how powerless governments are in the face of the oil price, WTI and Brent have both risen strongly once again, effectively wiping out some of the benefit from the Spring Statement for consumers.

The day looks to be a recurrence of war concerns, boosting oil prices while continental European markets fall sharply – those looking for the Dax and others to begin forming a short-term high after the recent bounce will be watching eagerly. BP and Shell have topped the table this afternoon as the standout beneficiaries from yet another surge in oil prices.

Meanwhile, housebuilders Taylor Wimpey, Barratt and Persimmon have retreated, on fears that the cost of living crisis will affect their ability to sell homes. Beauchamp said:

On the flipside it has been a depressing day for housebuilders, and indeed other stocks connected to consumer spending in the UK. Today’s inflation figures confirm that the squeeze on household incomes is here to stay, with the chancellor’s measures providing only a limited boost. Whether the recent bounce for stocks can withstand this gloomier outlook remains to be seen.

The credit rating agency Moody’s said that the risk of a default is rising for MHP, Ukraine’s leading food supplier which exports grains and sunflower oil around the world. The looming default comes at a critical time, ahead of the sowing season.

The London-listed company missed an interest payment on its 2029 bond, which was due on 19 March, but has a 30-day grace period for the payment. It is trying to postpone interest payments on its bonds, and has requested its bank lenders to postpone debt servicing.

Moody’s said:

MHP has started a consent solicitation process for its bonds to postpone first interest payments for 2022 on each bond. It has also requested its bank lenders to postpone debt servicing. For Moody’s, the non-payment will likely represent a default at the end of the 30-day grace period or upon conclusion of the consent solicitation process.

MHP is preserving liquidity to support its operations, most crucially the upcoming sowing campaign so that production and supply can continue. MHP is significantly impacted with some physical damage to facilities and products, supply chain disruptions, ceased exports and hence significant financial impact.

The company has $228m of cash but is unable to service its debts due to lack of poultry and sunflower oil exports, disruption to supply chains and the company’s humanitarian efforts, the ratings agency said.

British and Dutch wholesale gas prices jumped today, after Vladimir Putin said Russia would start selling gas to “unfriendly” countries in roubles.

The British price for day-ahead delivery rose by 18% to 259.50 pence per therm, while the winter 2022 price increased 11% to 264.01p per therm. In the Dutch gas market, the benchmark April contract rose 15% to €114 per megawatt hour.

The Russian president said during a televised meeting with top government ministers:

Russia will continue, of course, to supply natural gas in accordance with volumes and prices...fixed in previously concluded contracts.

The changes will only affect the currency of payment, which will be changed to Russian roubles.

As of late January, Gazprom’s sales of natural gas to Europe and other countries were primarily settled in euros, at around 58%.

Separately, the European Union proposed legislation on minimum gas storage levels.
This would require EU countries to fill their gas storage to at least 90% by 1 November each year from 2023, and 80% this year.

The legislation will need to be approved by EU countries and the European Parliament and traders said the target will be tough to meet, even in periods when demand is lower.

There are two additional witnesses who will appear before a joint session of the transport committee and the BEIS committee tomorrow morning, to give evidence on the sacking of 800 workers by P&O last week.

Professor Jason Chuah, professor of commercial and maritime law at The City Law School, and Mick Lynch, general secretary of the RMT union, will form part of the packed schedule.

US stocks on Wall Street are falling, with the Dow Jones industrial average down 0.7% and the S&P 500 and the tech-heavy Nasdaq both slipping 0.6%. The FTSE 100 index in London is now down just 0.1% at 7,466.

Sam Stovall, chief investment strategist of CFRA Research in New York, told Reuters the main factors were:

Oil prices being higher, taking profits from yesterday’s advance and I think investors just are uncertain as to what is the direction of the market right now.

I would say uncertainty fosters a lack of conviction or vice versa. Investors are looking at the market and trading more from a short-term perspective.

British Prime Minister Boris Johnson has said he believed that P&O Ferries had
broken the law by sacking 800 staff with immediate effect via video message and that the government would take action.

Johnson told PMQs:

We condemn the callous behaviour of P&O and I think that it is no way to treat hardworking employees....

We will not sit by because under section 194 of the Trades Union and Labour Relations Act of 1992 it looks to me as though the company concerned has broken the law, and we will be taking action, therefore, and we will be encouraging workers themselves to take action under the 1996 Employment Rights Act.

If found guilty, the company faces fines running into millions of pounds, Johnson added.

Johnson also told MPs that the government will close a loophole in legislation which allows some seafarers to be paid less than the minimum wage, and ensure everyone working in the UK exclusive economic zone is paid the living wage.

Labour leader Keir Starmer says that is what Johnson promised two years ago. More here.

P&O’s chief executive, Peter Hebblethwaite, will also appear before a joint session of the Transport Committee and the BEIS Committee on Thursday morning.

It’s a packed schedule, with the Nautilus seafarers union, the Insolvency Service, and ministers among those appearing as witnesses.

Panel 1 (at 9.30am):

• Professor Alan Bogg, Professor of Labour Law, University of Bristol

Panel 2 (at 10am):

• Mark Dickinson, General Secretary, Nautilus International

Panel 3 (at 10.30am):

• Dean Beale, Chief Executive Officer, The Insolvency Service
• Brian Johnson, Chief Executive, Maritime and Coastguard Agency
• Katy Ware, Director, UK Maritime Services

Panel 4 (at 11am):

• Peter Hebblethwaite, Chief Executive, P&O Ferries

Panel 5 (at 11.45am)

• Robert Courts MP, Parliamentary Under Secretary of State, Department for Transport
• Paul Scully MP, Parliamentary Under Secretary of State, Department for Business Energy and Industrial Strategy

Further witnesses may be added to the list too.

A quick look at the markets.

The FTSE 100 index of blue-chip shares is hovering around its levels before the Ukraine invasion began last month. It’s up 13 points at 7,489 points, having rallied over the last two weeks.

Energy companies BP and Shell are leading the rises, up around 3%, as the oil price rises by around 2% today (Brent crude is back at $118/barrel).

European stocks are weaker, with the Stoxx 600 down 0.5%.

Russ Mould, investment director at AJ Bell, says:

“The FTSE 100 has a spring in its step despite the UK inflation rate going up again, and a potential cut in the country’s economic outlook when Chancellor Rishi Sunak announces his mini-Budget at lunchtime.

“Headwinds for consumers and businesses linked to the rising cost of energy, raw materials and more would suggest the Office for Budget Responsibility will downgrade its forecasts for GDP growth this year.

“Shares in retail companies have been weak in recent months as investors speculate there could be a sharp drop in consumer spending once the energy price cap goes up in April. Any measures by Sunak to help with the cost-of-living crisis could trigger a relief rally in the retail sector on the stock market.

UK house prices have hit a new record high of £274,0000 in January.

Average prices climbed by 9.6% over the year to January 2022, an increase of £24,000, the latest Land Registry figures show.

That’s down from 10.0% in December 2021, but still much faster than wages (total pay grew by approximately 4.8% over the last year).

Prices rose across the UK: in England to £292,000 (9.4%), in Wales to £206,000 (13.9%), in Scotland to £183,000 (10.8%) and in Northern Ireland to £159,000 (7.9%).

London continued to lag, with annual growth of 2.2% -- but houses were still more expensive than other regions, at an average of £510,000.

Here’s a handy breakdown of the UK inflation report, from Newsnight’s Ben Chu:

In the travel sector, cruise operator Saga has reported that demand for its tour packages remained below pre-pandemic levels.

The over-50s cruise and insurance business also cautioned that the war in Ukraine may also reduce travel bookings in the short term, and add to inflationary pressures.

Saga’s Tour Operations bookings for 2022/23 are still 30% lower than before the pandemic, due to “continued customer caution” about overseas travel.

But Cruise bookings for 2022/23 are 46% higher than two years ago, due to “high levels of pent-up demand for cruises” (despite many families struggling to afford basics, let alone holidays).

Pre-tax loss narrowed over the last year, from £61.2m to £23.5m in 2020, as Saga resumed trips after the pandemic disruption.

Euan Sutherland, Saga’s Group chief executive officer, said:

“Looking to the future, I am both confident and excited about the opportunities ahead of us as we emerge stronger from the pandemic than we went in, whilst remaining mindful of the current challenging external environment.

Over 80% of people have reported their cost of living had increased in the previous seven days.

Of those, 92% reported an increase in the price of food shopping, 80% reported an increase in gas or electricity bills and 76% an increase in the price of fuel.

In a report on “recent drivers of UK consumer price inflation”, the Office for National Statistics adds:

• UK consumer price inflation has risen sharply in recent months, driven by a broad range of items, with particular pressure coming from food, durables, consumer goods and energy.
• Energy, motor fuels and used cars have put strong upward pressure on inflation while food prices have also risen.
• Recent inflation trends for the UK are broadly in line with those seen in other countries with similar pressures coming from crude oil and gas.
• An increasing proportion of business have reported that their costs have increased and that they have raised their prices.

Germany’s economy is also suffering from rising prices and slowing growth.

The IFO think tank has cut its forecast for German growth this year, and lifted its inflation forecasts, due to the impact of Russia’s invasion of Ukraine.

Ifo’s chief economist Timo Wollmershaeuser said in a statement.

“We expect growth of only between 2.2% and 3.1% this year.”

In December, Ifo had forecast 3.7% growth.

IFO also lifted its inflation forecast to between 5.1% and 6.1%, up from 3.3% predicted in December.

Wollmershaeuser explains:

“The Russian attack is dampening the economy via significantly higher raw material prices, sanctions, increasing supply bottlenecks for raw materials and increased economic uncertainty.”

Andrew Tully, technical director at insurance company Canada Life, agrees that the worst is yet to come on inflation -- and warns that the duration of the price surge is crucial:

“With inflation already at a record 30-year high, and tipped to reach 8% by the mid-year, the worst is yet to come. But focussing on the peak, when it comes, is only part of the story. It’s the duration of high inflation that will continue to deliver bad news.

How long inflation remains well above the 2% target will determine our real living standards for years to come. Especially for pensioners whose personal rate of inflation may be well above the headline rate.

“While the government has restated their commitment to the state pension triple lock, any rise reflecting the current high inflation will only take effect from April 2023, which offers little in the way of comfort for those pensioners struggling to make ends meet today.”

Inflation will rise significantly over the next two months, warns Martin Beck, chief economic advisor to the EY ITEM Club:

Petrol prices have increased in recent weeks in reaction to the rise in oil prices. Last week, pump prices were almost 15% above the February average. Inflation will then rise up again in April, as the 54% rise in the energy price cap takes effect, and the VAT rate for the hospitality sector returns to 20%.

It’s possible that the Chancellor will use today’s Spring Statement to mitigate these upward pressures, perhaps via a temporary cut in fuel duty. But it’s unlikely that any fiscal intervention will stop CPI inflation rising to well over 8% in April.

Paul Dales of Capital Economics predicts that UK inflation will peak around 8.3% (if not a little higher) in April, remain over 6% this year, and above 3% for most of 2023.

He points out that some of February’s jump in inflation was due to lower demand a year ago in the Covid-19 lockdown. That ‘base effect’ added to clothing, furniture, and recreation/culture inflation this year.

But...

Even so, genuine price rises in February meant that food/drink inflation rose from 4.3% to 5.1%, and we suspect it will soon climb above 6%. What’s more, the recent rise in the average petrol price to a new record high of £1.78 per litre will mean that fuel prices will jump by 12% m/m in March.

That would be the largest increase on record and would add 0.3ppts to CPI inflation. With petrol prices having risen by 50p since the start of the pandemic, a 5p fuel duty cut by the Chancellor today would feel like fiddling at the edges. And the 54% rise in utility prices on 1^st April will add an extra 1.4ppts to CPI inflation

The jump in inflation is a ‘complete disaster’ for living standards, points out Jack Leslie, senior economist at the Resolution Foundation.

“Another sharp rise in inflation last month offers a foretaste of the huge income squeeze coming this year, with inflation likely to hit at least 8 per cent this spring – which could be the highest it’s been in 40 years – along with a second spike this autumn.

“This prolonged period of high inflation – which millions of people have simply never experienced before – is a complete disaster for living standards. It will mean pay packets continuing to shrink, along with vital income support such as Universal Credit and the State Pension.

“The Chancellor will need to set out a bold response to this cost of living crisis in his Spring Statement today, starting with ensuring that benefits keep pace with inflation over the coming 12 months, rather than shrink by £10 billion as they are currently on course to do.”

The annual RPI inflation rate, which includes housing costs, jumped to 8.2% in February from 7.8% in January.

Although RPI is no longer an official national statistic, it’s still used as the basis for some pay claims, for student loans repayments, to set some bill increases, and for the interest rate on index-linked government bonds.

Here’s a breakdown of the price changes that pushed UK inflation to a 30-year high of 6.2% last month:

• Food and non-alcoholic beverages: +5.1%
• Alcoholic beverages and tobacco: +3.5%
• Clothing and footwear: +8.9%
• Housing, water, electricity, gas and other fuels: +7.2%
• Furniture, household equipment and maintenance: +9.1 %
• Health: +2.6%
• Transport: +11.5%
• Communication: +1.1%
• Recreation and culture: +4.7%
• Education: +4.5%
• Restaurants and hotels: +5.0%
• Miscellaneous goods and services: +1.9%

Household goods prices have also risen sharply over the year, reflecting rising global goods prices.

‘Furniture, furnishings and carpets’ were up 13.2% in the year to February, cookers cost 11.8% more, and the ‘refrigerators, freezers and fridge-freezers’ category saw a 13.4% jump.

Recreation and culture had the biggest monthly gain in prices, with games, toys and hobbies increasing by 2.5% between January and February.

That was due to price changes for a range of toys and games including both computer games and more traditional toys.

Over the year, recreational and cultural goods and services prices rose by 4.7%.

Clothing and footwear prices jumped by 8.9% in the year to February.

The ONS says this is principly due to ‘unusual price movements’ between January and February last year, when Covid-19 lockdowns disrupted the usual post-Christmas sales patterns.

On a monthly basis, prices rose by 0.8% between January and February this year, having dropped a year ago.

Food and non-alcoholic beverages prices rose by 5.1% in the year to February, highlighting how family budgets have been hit by inflation.

The ‘Bread and cereals’ category rose 4.2% over the last year, including a 9.4% rise in pasta and couscous.

Meat prices rose 5.2%, with ‘beef and veal’ up 7.9% and poultry 6.8% more expensive.

Prices in the ‘Milk, eggs and cheese’ category rose 6.1%, with low-fat milk 11.1% higher and eggs 8.1% pricier.

Fruit prices were up 6.2%, while ‘jams, marmalades and honey’ jumped 16.1%.

Non-alcoholic beverages prices are up 6.7% over the year, including a 10.3% jump in coffee and an 11.3% rise in mineral or spring waters.

These are based on the ONS’s ‘basket of goods’, which tracks a range of prices.

Food writer and campaigner Jack Monroe pointed out earlier this year that prices of budget food products had risen much faster than headline inflation showed, with many basic and value ranges vanishing.

Rising prices for second hand cars also pushed up inflation last month.

Increased demand, and the global semiconductor shortage which hit production of new cars has led more consumers to turn to the used car market.

The ONS adds:

Additionally, there have reportedly been concerns in the trade about the supply of second-hand cars because of a variety of factors.

These include fewer one-year-old cars coming to the market because of a fall in new car registrations a year earlier, and the extensions of lease contracts and fewer part exchanges caused again by delays in new-car supply.

These charts show how UK inflation has accelerated sharply over the last year, with price rising across the board: