Here are today’s main stories:

The Bank of England’s monetary policy chief has said inflation is likely to soar “comfortably” above 5% next spring when the energy regulator Ofgem raises a price cap affecting millions of households.

Record high levels of vacancies are also likely to persist for longer than previously expected as the jobs market adjusts to changes in the economy brought on by the pandemic, said Ben Broadbent, the central bank’s deputy governor with responsibility for monetary policy.

Economists have cut their forecasts for the UK economy, warning that the Omicron variant and supply chain disruption will weigh on growth.

Growth at UK construction companies has hit a four-month high, as builders report that supply chain problems have eased.

UK car sales grew in November, led by rising demand for electric vehicles, but were still nearly a third below their pre-pandemic levels.

But German factories have suffered a sharp fall in orders, down 6.9%, driven by a tumble in overseas demand.

Markets have rallied, with investors hopeful that the Omicron variant will not be severe enough to derail the recovery.

But Tesla shares were hit by a report that the SEC has opened a probe into whether it properly disclosed fire risks with its solar power systems.

Strike action at Tesco could lead to empty shelves in the run-up to Christmas, the Unite trade union has said, after its members voted to walk out unless they are offered a pay deal that keeps pace with inflation.

Tributes have poured in for John Barton, the chairman of the fashion chain Ted Baker and the former chair of easyJet and Next, after his death was announced this morning.

As Helena Feltham, the senior independent director at Ted Baker, put it:

John combined a generosity of spirit with insight, humility and humour, and we will all miss him.

He led the board with great skill and it was a privilege to have worked with him. Our hearts go out to his family.

The vice-chair of Yorkshire Building Society is facing a call to resign over her role pushing through the sale of the fellow member-owned firm LV= to a US private equity buyer, amid concerns that it could kickstart a wave of demutualisation.

This year is on course to be the strongest for home-buying activity since 2006, according to the main trade body for UK banks.

UK Finance said while the first few months of the pandemic, during which the property market shut down for a time, led to predictions that sales would slump, the reality was very different, with “Covid-era activity set to eclipse everything since the credit crunch”.

Despite worries about the pandemic, the owner of the Real Greek and Franco Manca restaurant chains has said that business is booming …

… as is demand for Hollywood blockbuster Spider-Man: No Way Home.

Goodnight. GW

European stock markets have ended the day sharply higher, as investors hope that Omicron will not be as severe a threat as feared.

The UK’s FTSE 100 index has closed nearly 110 points higher, or 1.5% up, at 7,232, its highest level since the market tumbles over a week ago.

Airline group IAG jumped 8%, with gambling group Flutter gaining 6%, and jet engine maker Rolls-Royce finishing 3.8% higher.

Investors were cheered by the White House’s chief medical adviser, Dr Anthony Fauci, who said on Sunday that preliminary data about the severity of the Covid omicron variant is “a bit encouraging”.

Europe’s Stoxx 600 gained around 1.4%.

Oil had a strong day too, with Brent crude up almost 3% tonight.

Michael Hewson of CMC Markets says:

It’s been a positive start to the week for the FTSE 100, and European markets more generally as concerns over the Omicron variant continue to diminish on further evidence of mild symptoms and so far, no deaths reported because of getting the virus.

The biggest beneficiaries are in travel and leisure with British Airways owner IAG shrugging off the tighter rules around testing and quarantine, on reports that the EU could consider easing Omicron travel restrictions to South Africa in the next week or so.

BP and Shell are seeing decent gains on the back of the recovery in the oil price, as both approach three-week highs.

Shares in electric carmaker Tesla have fallen 3.5% today, following a report that the SEC has opened an inquiry into whether it properly disclosed fire risks with its solar power systems.

Reuters has the story:

The US securities regulator has opened an investigation into Tesla Inc (TSLA.O) over a whistleblower complaint that the company failed to properly notify its shareholders and the public of fire risks associated with solar panel system defects over several years, according to a letter from the agency.

The probe raises regulatory pressure on the world’s most valuable automaker, which already faces a federal safety probe into accidents involving its driver assistant systems. Concerns about fires from Tesla solar systems have been published previously, but this is the first report of investigation by the securities regulator.

The US Securities and Exchange Commission disclosed the Tesla probe in response to a Freedom of Information Act request by Steven Henkes, a former Tesla field quality manager, who filed a whistleblower complaint on the solar systems in 2019 and asked the agency for information about the report.

“We have confirmed with Division of Enforcement staff that the investigation from which you seek records is still active and ongoing,” the SEC said in a response on 24 September to Henkes, declining his request to provide its records. The SEC official said the letter should not be taken as an indication by the agency that violations of law had occurred. Reuters independently confirmed the SEC letter was legitimate.

Henkes, a former Toyota Motor quality division manager, was fired from Tesla in August 2020 and he sued Tesla claiming the dismissal was in retaliation for raising safety concerns. Tesla did not respond to Reuters’ emailed questions, while the SEC declined to comment.

More here: Exclusive: SEC probes Tesla over whistleblower claims on solar panel defects

Shares in Tesla have fallen to around $979 today, or roughly 20% off their record high last month, putting them into a bear market.

Just last week, Tesla’s Elon Musk appeared to joke about whistleblowers on Twitter with the launch of a $50 (£38) stainless steel whistle …

Speculation that the European Commission is set to propose stricter labour rules to regulate the gig economy have sent shares of companies in the sector sharply lower today.

Investors fear the business models of these companies might be jeopardized should the EU’s executive arm require them to directly employ drivers and riders, Reuters reports.

Danni Hewson, a financial analyst at AJ Bell, explained:

The thorny question of whether or not delivery drivers are employees is about to be answered by the EU Commission later this week and reports suggest the answer will be yes.

For food delivery businesses like Deliveroo and Just Eat that could mean a huge spike in costs, costs which many expect will be passed on to consumers across central Europe.

Shares in Deliveroo are down 3%, with Just Eat Takeaway diving 6.6% and Delivery Hero losing 5.5%

The regulatory uncertainty about gig economy stocks was illustrated last March when a number of investment funds declined to participate in Deliveroo’s initial public offering adding pressure to the stock which plunged when it made its London debut. Deliveroo floated at 330p, but are now changing hands at just 233.50p.

The New York stock exchange has made a mixed start to trading.

The Dow Jones industrial average has jumped by 325 points, or 0.95%, to 34,906 points. The index of 30 large US firms is rallying after posting its fourth straight weekly loss last week, for the first time since September 2020.

But technology stocks are under pressure again, pulling the tech-focused Nasdaq index down by 0.5%.

Fiona Cincotta, senior financial market analyst at City Index, says the prospect of higher interest rates and inflation are weighing on tech stocks [because they make the future earnings of growth stocks less valuable today]

US stocks are set for a mixed start with the high tech Nasdaq under performing as Treasury yields rise. Easing Omicron fears are making way for investors to position for a more hawkish Fed.

The markets are dialing back on the potential economic damage that Omicron could cause as initial reports suggest that the new Covid variant is less severe.

US medical advisor Anthony Fauci said that the early signs suggest that Omicron doesn’t have a great degree of severity. His comments came as Omicron spread to around one-third of US states.

Bank of England deputy governor Ben Broadbent has warned that UK inflation could be ‘comfortably’ over 5% next spring, when energy bills rise again.

In a speech in Leeds, Broadbent says the UK is in an “extremely challenging period for monetary policy”.

Inflation is already more than double the Monetary Policy Committee’s target, and heading higher - as regulator Ofgem is likely to lift the UK’s price cap sharply higher next April.

Broadbent says:

Despite relatively weak growth over the past two years as a whole, domestically and globally, inflation has risen very significantly. In this country it was over 4% in October.

In the spring of next year, when the next rise in the Ofgem cap on gas and electricity bills comes through, it will probably climb comfortably through 5%, a long way north of the MPC’s 2% target.

Broadbent also explains that rising goods prices, driven up by supply chain problems and high demand in the lockdown, have pushed inflation over target.

He argues that those pressures on traded goods are ‘more likely to subside than intensify’ over the next couple of years.

So if they are transitory, they would dissipate before any rise in interest rates (to dampen demand) had taken effect. Indeed it’s quite possible that, in a couple of years, some of these tradable goods prices will be falling, pulling down on inflation, Broadbent says.

Instead, a tight labour market could be a bigger driver of inflation, if wages keep rising as firms compete for workers.

Broadbent says:

Although it’s possible that these strains too could pass – there’s a chance these frictions are simply the result of the sheer speed of hiring, and will ease of their own accord – there’s also an upside risk to wage costs from currently high inflation.

If wage earners’ expectations of future inflation rise in response, of if they seek compensation for the rises in the costs of living that have already occurred, wages could also accelerate further, even without any additional decline in unemployment.

Growth in Britain’s construction industry hit its strongest pace in four months in November, as delays obtaining materials such as timber eased.

Data firm IHS Markit reports there was a sharp increase in business activity at building firms last month. It was led by an upturn in commercial work, as the economic recovery led to new projects and infrastructure work.

Encouragingly, the proportion of firms reporting longer delivery times fell to 47% in November, from a peak of 77% in June, according to Markit’s latest survey of purchasing managers.

Port delays and a severe lack of transport availability due to haulage driver shortages did still hold back suppliers, but firms noted an improvement in the availability of specific items (especially timber).

Prices kept rising, although at the slowest rate since April with 72% of firms reporting an increase in purchase prices in November, while only 3% a decline.

Tim Moore, director at IHS Markit, says UK builders saw a welcome combination of faster output growth and softer price inflation last month.

“Input price inflation remains extremely strong by any measure, but it has started to trend downwards after hitting multi-decade peaks this summer.

The latest rise in purchasing costs was the slowest since April, helped by a gradual turnaround in supply chain disruption and a slight slowdown in input buying. Port congestion and severe shortages of haulage capacity were again the most commonly cited reasons for longer lead times for construction products and materials.”

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, says supply chains seem to be improving, given the fall in companies reporting longer waiting times.

Even with this glimmer of hope that the pressure on deliveries was easing, purchasing remained at higher level to counteract disruptions from ongoing driver shortages and port delays as supply chain managers bought more than their immediate need.

Job hiring growth was still maintained in November but was the weakest since March. Builder optimism was somewhat flat as the costs of building still remained high and firms struggled to stay competitive.”

Shortages of semiconductors continue to hit UK car sales, industry body SMMT warns.

It just reported that sales of new cars in the UK rose by 1.7% year-on-year in November to 115,706, the first monthly rise since June.

That still left registrations nearly a third below their pre-pandemic five-year average, with chip shortages hampering the supply of new cars to forecourts.

More motorists turned to electric cars last month; the number of battery electric vehicle registrations more than doubled year-on-year to 21,726.

Overall, plug-in cars represented 28.1% of market in November, with 10,796 plug-in hybrids also sold.

Sales to individuals jumped by 41.7% compared to November 2020, when England was entering its second lockdown.

However, the number of new cars registered to large fleets declined by nearly a quarter.

Mike Hawes, SMMT chief executive, said:

“What looks like a positive performance belies the underlying weakness of the market. Demand is there, with a slew of new, increasingly electrified, models launched but the global shortage of semiconductors continues to bedevil production and therefore new car registrations.

The industry is working flat out to overcome these issues and fulfil orders, but disruption is likely to last into next year, compounding the need for customers to place orders early.

John Barton, the chairman of the fashion chain Ted Baker and the former chair of easyJet and Next, has died.

Ted Baker said the veteran businessman, who was appointed non-executive chairman of the troubled fashion retailer last year, died suddenly.

“John was a source of great wisdom for me and for so many of us at Ted Baker and we will hugely miss his support and guidance,” said Rachel Osborne, the chief executive of Ted Baker, who joined a month before Barton’s appointment in April 2020.

“Our thoughts and deepest sympathies are with his wife, Anne, and their family.”

Last week, the 77-year-old stood down as chairman of easyJet, ending a near nine-year stint during the most tumultuous period in the low-cost airline’s 26-year history.

Barton last year weathered an attempted ousting by Sir Stelios Haji-Ioannou, the airline’s founder and largest shareholder, who threatened to requisition a series of shareholder meetings after the coronavirus pandemic hit to force easyJet to abandon £4.5bn of planes from Airbus he believed would bankrupt the business.

At an extraordinary general meeting, Barton came through an attempt to oust him, winning 58% of the vote.

“I am truly shocked and extremely saddened to hear of John’s passing,” said Johan Lundgren, the chief executive of easyJet.

“I was very fortunate to have worked closely with him over the years and benefited greatly from his wise counsel. He was a man of huge integrity who was very much liked and respected by everyone across the airline.

On behalf of all of his former colleagues at easyJet, we send our heartfelt sympathies to John’s family at this time. He will be greatly missed.”

Stephen Hester, the former boss of Royal Bank of Scotland who took over from Barton as the chairman of easyJet, said he was a “distinguished chair who made an outstanding contribution to the company” and was “also a wonderful human being”.

The eurozone construction sector saw its fastest rise in activity in nearly four years in November, despite rising concerns over the pandemic.

Output and new orders both increased during the month, according to the latest survey of building firms across the euro area from data firm IHS Markit, with construction activity rising at a series record pace in Italy.

There was a sustained rise in home building activity, as well as a second successive rise in commercial construction, but civil engineering work fell again.

However, the report also found that severe supply chain delays kept pushing up builders’ costs, while business confidence fell to a seven-month low.

Usamah Bhatti, economist at IHS Markit, said:

Notably, input costs continued to increase at a substantial pace amid ongoing severe supply chain disruption. These lingering issues weighed on business sentiment, with the degree of optimism regarding the year-ahead outlook easing to the softest since April.

At the national level, Italian firms reported a tenth consecutive rise in activity that was the sharpest on record, while firms in France noted the quickest expansion since June 2020. At the same time, German firms signalled a sustained fall in activity, albeit one that was the softest for 15 months.”

Shares of China’s Evergrande Group have tumbled to a record low on Monday on fears that the property giant it is on the verge of a potentially disastrous default, and could be forced into a full-blown restructuring.

Evergrande’s shares slumped by up to 19.5% in Hong Kong trading, after the firm said there was no guarantee it would have enough funds to meet debt repayments.

My colleague Martin Farrer explains:

The company has lurched from one crisis to another in recent months as it faced a series of repayments on debts – three times waiting until the last possible moment to stump up the cash needed to stay afloat.

But a statement from the company over the weekend said that there was “no guarantee” that the group could meet its obligations and added that creditors had demanded immediate repayment of a total of $260m (£196m).

Its most pressing problem is how to repay $82.5m due on Monday – a deadline pushed back 30 days when it failed to meet the obligation on the due date back in November.

“Since September 2021, the group has been diligently reviewing its capital structure and liquidity condition with the help of its financial and legal advisors, evaluating all available strategic options, and maintaining ongoing dialogue with offshore creditors,” said the statement.

European stock markets have started the new week on the front foot, as investors try to shake off worries about Omicron.

The UK’s FTSE 100 index has jumped by 45 points, or 0.65%, to 7168 points.

Travel and hospitality firms are in the risers, with InterContinental Hotels gaining 1.6%, IAG, which owns British Airways, are up 1.75%.

Primark owner AB Foods has gained 1.5%, while oil giants BP (+1.2%) and Royal Dutch Shell (+1.1%) are benefitting from a rise in crude prices this morning.

The pan-European Stoxx 600 has gained 0.8%.

Jeffrey Halley, senior market analyst at OANDA, explains that hopes that omicron is a milder variant is boosting the markets.

US equity index futures are performing another omicron U-turn this morning, limiting the fallout in Asian markets of another fairly gruesome Wall Street session on Friday. The driver of the whip-saw return of serve omicron headline tennis comes from South Africa, where an article from the South African Medical Research Council, suggests that omicron symptoms were milder than previous incarnations, with hospitalised patients mostly having comorbidities.

Of course, the sample size is small, but markets never let “the data” these days get in the way of narrative. Omicron variant milder = U-turn = buy everything.

But... South Africa’s president, Cyril Ramaphosa, has warned today that hospitals are preparing for more admissions, as the Omicron variant pushes the country into a fourth wave of Covid-19 infections. Our Covid-19 liveblog has more details.

The 6.9% slump in new order at German factories in October shows that supply chain woes are hitting industry, says Carsten Brzeski of ING:

Today’s industrial orders data is a cold shower for German industry.

When the global economy came out of the 2020/21 winter lockdown, German industrial orders jumped to unprecedented levels, growing on average by more than 2% per month. At the end of the summer, however, orders collapsed and dropped by more than 12% between July and October.

The sharp collapse over the summer is increasingly leaving its mark on industry - a reflection perhaps of ongoing supply chain frictions and companies simply delaying new orders or, worse, cancelling orders, knowing that delivery times are long anyway.

Oliver Rakau of Oxford Economics says October’s factory orders are terrible:

We also have bad economic news from Germany this morning.

Factory orders at Europe’s largest economy tumbled by 6.9% in October, much worse than expected, after a 1.8% rise in September.

Orders were 1% lower than in October 2020, the first year-on-year drop since September 2020, in the latest sign that Germany’s recovery is faltering at the end of 2021.

German manufacturers were hit by weaker overseas demand, figures from the Federal Statistics Office showed. Foreign orders slumped by 13.1% month-on-month, including a 3.2% drop in new orders from the euro area, while domestic orders rose by 3.4%.

The CBI is also gloomier about the UK’s economic outlook.

It has cut its growth forecasts for the UK’s growth this year to 6.9%, from 8.2% previously, and to 5.1% for 2022, down from 6.1%.

The downgrade mostly reflected weaker growth since its last forecasts in June, with supply chain problems continuing to bite.

With global supply chain problems hitting the economy, the CBI says the government must take fresh action to a steep fall in business investment in 2023, when temporary measures to help business are withdrawn

CBI’s director general, Tony Danker, says:

“We should be raising our sights on the economy’s potential and seizing the moment. I know from speaking with firms of all sizes that they have an ambitious investment mindset and are anxious to implement growth plans.

“But while intentions have thawed, we’re coming up to a cliff edge in 2023.”

Here’s the full story:

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

The UK’s economic outlook looks less bright this morning, as shortages, rising costs, and the possibility of more Covid restrictions all threaten growth.

KPMG has warned that GDP growth could more than halve next year if more restrictions are introduced to combat Omicron, depending on the severity of the new variant.

In its central scenario, the UK government would bring back social distancing restrictions in retail and hospitality venues, and encourages people to work from home if they can in January and February 2022.

If that happened, the economy would contract around 2% in the first quarter of 2022, slowing overall growth next year to 2.6%, down from 6.7% this year.

In KPMG’s downside scenario, the threat of a significant rise in acute Covid-19 cases triggers another lockdown in early 2022. That would trigger a sharp fall in GDP, around 4.2%, in January-March 2022, dragging growth next year down to just 1.8%.

While growth momentum is expected to decelerate until a booster is rolled out to halt the rise in cases, the full impact of the new variant will depend on the rise in the number of acute Covid cases and any social distancing restrictions that are introduced, it explains.

Yael Selfin, chief economist at KPMG UK, says:

“The Omicron variant has elevated the level of uncertainty about the recovery path from the pandemic.

While the impact is not expected to be as severe as at the start of the pandemic, or even the beginning of this year, increased uncertainty and the potential reintroduction of social distancing measures could see output fall this month and during the first quarter of 2022.”

Some sectors may remain significantly impacted by the pandemic, compared with the overall economy, the report adds:

Additional travel restrictions and new pandemic hot spots are expected to see a slower and more protracted recovery in the sector. Rail travel will also be affected by a slower return of commuters to their workplaces.

Commuter footfall was still down by 22% in late November compared to pre-pandemic levels and is likely to fall as people are encouraged to work from home.

KPMG also warns that supply chains would come under more pressure, if the pandemic again leads to more demand for goods from locked-down consumers. Labour shortages have become a significant impediment to growth, it adds, as well as pushing up wages.

These concerns could deter the Bank of England from raising interest rates at its next monetary policy meeting later this month. Deputy governor Sir Ben Broadbent gives his view of the economic outlook this morning.

We also find out how UK and eurozone builders fared last month.

The agenda

• 7am GMT: German factory orders for October
• 8.30am GMT: Eurozone construction PMI for November
• 8.30am GMT: UK construction PMI for November
• 11.30am: Bank of England deputy governor Sir Ben Broadbent gives a speech at Leeds University on “Outlook for growth, inflation and monetary policy”