Russia’s budget surplus has shrunk significantly in the latest sign that its public finances are feeling the strain from sanctions and the Kremlin shutting off gas supplies to Europe.
The budget surplus narrowed to 137bn roubles (£1.9bn) in the first eight months of 2022, a sharp fall from 482bn roubles in year-to-date data the previous month.
Russia’s public finances have been bolstered by soaring energy prices boosting revenues since it invaded Ukraine.
But economists warned Russia’s surplus will likely turn to a deficit in September as government revenues are hit by shrinking energy sales to Europe. Revenues from energy could be squeezed further as gas prices continue to slide.
Benchmark gas prices in Europe fell a further 9pc to their lowest level in a month today as the EU drew up proposals to avoid a winter energy crisis, including measures to curb power demand.
Gas prices slipped to €192 per megawatt hour, down more than 40pc on the highs reached in August.
That’s all from us today, we shall see you tomorrow morning! Before you go, have a look at the latest stories from our reporters:
Euro briefly surges
The euro has climbed 1.4pc against the dollar as the ECB prepares to raise interest rates even further to tame soaring inflation.
The euro’s surge comes a day after German central bank chief Joachim Nagel signalled that the ECB would probably continue raising its key rate.
The ECB raised the key rate by a historic 75 basis points last week, and markets expect a similar hike at an October meeting.
Supermarkets boost FTSE 100
The FTSE 100 has closed 1.66pc higher, driven by supermarkets and retailers.
Tesco, Sainsbury’s, Kingfisher – owner of B&Q – and Ocado all rose by more than 5pc. Meanwhile, housebuilder Berkeley Group rose by 4.9pc to 3,716p.
Billionaire Issas warned over debt-fuelled swoop for Co-op petrol stations
The billionaire brothers behind Asda have been warned that their debt-fuelled acquisition of Co-op’s petrol stations will heap fresh pressure on the finances of Britain’s third-biggest supermarket.
Oliver Gill reports:
Ratings agency Fitch said that taking on more loans to acquire Co-op’s 129 forecourts, coupled with falling profits, will leave Asda laden with debts for longer than previously anticipated and risked a downgrade of the rating of the supermarket’s financial strength.
Co-op announced last week that it had struck a deal with Asda to offload the sites for £600m. Mohsin and Zuber Issa, Asda’s owners, plan to fund the deal with £200m of debt, Fitch said.
Asda is already carrying £6.8bn of debt after the Issas and their private equity fund backers stumped up less than £800m in equity to buy the supermarket in 2020.
Fitch said taking on £200m of additional loans to fund the Co-op swoop meant that there would be “no debt reduction in 2022”.
Duchess of Sussex pauses Spotify podcast for Queen Elizabeth II
The Duchess will not air new episodes of her podcast, Archetypes, during the official mourning period for Queen Elizabeth II, according to an alert on her platform on Monday.
Harry and Meghan stepped down from their royal duties in 2020, and have since signed contracts with the likes of Netflix and Spotify.
The couple appeared alongside the Prince and Princess of Wales outside Windsor Castle on Sunday to meet well-wishers in honour of their late grandmother.
That’s all from me for today – thanks for following! Handing over now to Riya Makwana.
Iron miner Ferrexpo jumps on Ukraine’s counter-attack
Shares in iron ore producer Ferrexpo have rallied following reports of the Ukrainian army’s ferocious counter-attack against Russian forces in the Kharkiv region.
Matt Oliver reports:
The FTSE 250 company, which operates mines in central Ukraine, has roughly halved in value since Russia attacked Ukraine in February.
But on Monday Ferrexpo’s shares surged as much as 18pc higher amid hopes that the Ukrainian fightback was gathering pace.
After months of deadlock on the eastern battlefronts, Kyiv claims its forces have recaptured more than 1,160 square miles of territory in just a few days.
The lightning counteroffensive in the Kharkiv region has deprived Moscow of crucial staging posts and left Russian president Vladimir Putin’s military facing its most serious defeat since being driven back from the outskirts of the capital Kyiv in the spring.
The Ukrainian advance has raised the prospect of more normal operations for Ferrexpo, one of the world’s biggest exporters of iron ore pellets, which has major operations near the mining city of Horishni Plavni.
DFS chairman to step down
The chair of DFS Furniture will step down at the company’s annual shareholder meeting in November.
Ian Durant plans not to seek re-election to the board at the company’s AGM, the company said today. DFS added that it plans to appoint Steve Johnson to succeed Mr Durant.
Mr Johnson currently chairs the business’s remuneration committee. He has a career under his belt in British retail, including at Asda and Matalan.
Chief executive Tim Stacey said: “I am delighted by the board’s announcement of Steve’s appointment as chair. His detailed knowledge of our group and wider retail experience will continue to be invaluable as we move forward with our strategy to lead furniture retailing in the digital age.”
Ladbrokes owner to face money laundering investigation
The owner of Ladbrokes is being investigated in Australia to ensure that it’s following money laundering and terrorism financing rules, writes Laura Onita.
The Australian Transaction Reports and Analysis Centre (Austrac) is looking at whether Entain, which also owns Coral, “has complied with its [gambling] obligations” under Australia’s laws.
Nicole Rose, the watchdog’s chief executive, said: “Reporting entities have a responsibility to ensure they identify, assess and manage risks of money laundering and terrorism financing, develop adequate processes and devote the necessary resources to comply with their obligations.”
The probe began after an “extensive supervisory campaign” covering the whole bookmaking sector. Entain is the first UK company to be singled out for more intensive investigation but the watchdog did not rule out further action against other operators.
Entain said in a statement it was cooperating with the investigation.
Austrac carried out a standard assessment of the company’s Australian business, Entain added, relating to its operations between July 2016 and June 2020.
Wall Street gains with inflation in focus
Wall Street’s main indices have pushed higher at the open as investors gear up for crucial inflation data.
All eyes will be on tomorrow’s consumer prices data for any signs that inflation is easing and hints about the Federal Reserve’s plan for interest rates.
The S&P 500 rose 0.4pc, while the Dow Jones edged higher. The tech-heavy Nasdaq was up 0.5pc.
Talk of UK deficit crisis is ‘scaremongering’, says Barclays
Warnings that the UK is heading for a balance of payments crisis are “scaremongering” and “fairytales”.
That’s according to strategists at Barclays, who argued that deficit worries are largely overblown.
They said the UK and Europe were facing the same energy price spike that make both less competitive on trade, adding that it made sense for the pound to trade around its current level of 87p per euro – the weakest since early 2021.
Barclays wrote: “Crisis fairytales aside, the extent to which GBP will depreciate versus the EUR will clearly depend on the preferences of the central banks.”
The UK’s ailing economy and the soaring cost of energy imports have sparked new concerns about how the country will fund its current account deficit, which widened to a record 8.3pc of GDP in the first quarter.
Apple to allow iPhone users to delete and edit text messages
Apple is to allow iPhone users to unsend and edit embarrassing or typo-filled texts sent within its Messages app, writes Matthew Field.
The tech giant will on Monday update its iPhone iOS so that users can edit a message for 15 minutes, which will appear for both the sender and the receiver. Users will have two minutes to withdraw and delete the message entirely.
If a user recalls a text, the recipient will instead see a message saying that the contact “unsent a message”. Texts will still be dispatched immediately when a user presses “send”, meaning the recipient could still read the message before the sender deletes it.
Users can also edit messages after they have been sent to remove typos or grammatical errors. The recipient will know the text has been edited and will be able to click a button to see previous versions of the note.
Government still planning fiscal event this month
The Government still plans to make a fiscal statement this month to explain how an unprecedented package of support for energy bills will be funded, according to the Prime Minister’s spokesman.
There’s been confusion about plans to outline the energy support and no date has yet been set.
Parliamentary business has been postponed until after September 21, but Parliament is due to rise for recess on September 22.
The spokesman said: “What we’ve said is that we are still planning to deliver a fiscal event this month. We wouldn’t do that in recess. Beyond that, we haven’t set out a date.”
He added that recess dates would have to be discussed with the Speaker but there was no current plan to change them.
Twitter says whistleblower payment doesn’t breach Musk takeover terms
Twitter has insisted payments made to a whistleblower did not breach any terms of its $44bn buyout by Elon Musk, after the world’s richest man cited the move as another reason to scrap the deal.
In a letter to Twitter on Friday, lawyers for Musk said the company’s failure to seek his consent before paying $7.75m to whistleblower Peiter Zatko and his lawyers violated the merger agreement.
Zatko, who was fired by Twitter in January as the company’s security head, last month accused the social media firm of falsely claiming it had a solid security plan and making misleading statements about its defences against hackers and spam accounts.
The whistleblower will meet the US Senate Judiciary committee tomorrow to discuss the allegations. Separately, Twitter is holding a special meeting for shareholders to vote on the merger.
Musk has accused Twitter of misrepresenting the prevalence of spam or bot accounts on its platform and has sought to terminate the deal citing those reasons.
US futures rise ahead of inflation data
Wall Street looks set to open higher this afternoon amid a falling dollar as traders bet inflation is nearing its peak.
The dollar fell for a second day, marking its biggest two-day drop in almost three months, while the euro and pound both surged.
Investors are looking ahead to US inflation data due tomorrow, with the headline consumer price index expected to ease to 8pc while the core measure excluding food and energy accelerates.
Markets are pricing in a third consecutive 75 basis-point increase in interest rates by the Federal Reserve next week.
Futures tracking the S&P 500 rose 0.6pc, while the Dow Jones rose 0.5pc. The tech-heavy Nasdaq gained 0.7pc.
AstraZeneca to more than double new cancer drugs
British pharma giant AstraZeneca is planning to more than double its portfolio of new cancer drugs by the end of decade amid concerns the “massive backlogs in the NHS” have delayed diagnosis for many.
Hannah Boland has more:
AstraZeneca executive Dave Fredrickson said the company had the potential to be “the No.1 oncology player”, after developing seven new cancer medicines in the past eight years.
Around a third of the company’s revenues come from cancer drugs. Mr Fredrickson, AstraZeneca’s executive vice president of oncology, said: “The strategy’s working that we have in place.”
Pascal Soriot, chief executive of the FTSE 100 company, told the Telegraph last month that his team had made “great progress in oncology”, with cancer a “very big issue and a really important topic” for the business.
AstraZeneca played a key role in the development of Covid vaccines, with its jab among the most widely used in the world.
Retailers drive FTSE higher on energy support
The FTSE 100 has pushed sharply higher this morning, driven by gains for retailers and supermarkets.
The blue-chip index rose 1.3pc as markets took comfort from Liz Truss’s planned energy bills support for consumers and businesses.
Sainsbury’s and B&Q owner Kingfisher were the biggest risers, gaining more than 4pc. Tesco, JD Sports and B&M were also among the winners.
The domestically-focused FTSE 250 was also up 1.2pc, with Marks & Spencer and Asos gaining ground.
Hotel Chocolat to shut US direct-to-consumer business
Hotel Chocolat has said it will stop sales to customers through its own websites in the US.
The London-based chocolate retailer said it will end “US direct-to-consumer sales” via its website and stop its own warehousing and fulfilment operations in the country.
It comes two months after the group said it was paring back its growth plans as customers grapple with the cost-of-living crisis.
Hotel Chocolat said it would report a bottom-line loss for the year to June 26 after taking action amid the wider economic uncertainty.
The company previously announced plans to shut its US retail stores and halt investment in its joint venture in Japan.
Truss’s energy plan threatens pound, warns former BoE official
There’s a risk the pound will drop further if the Government’s energy support package is more than a temporary measure, a former Bank of England policymaker has warned.
Andrew Sentance said for now the Government has room to borrow more and is right to provide short-term relief from soaring energy prices.
But he added: “What markets would be concerned about is if it’s somehow going to be a long-term addition to public borrowing that would be difficult to reverse.”
He told Bloomberg: “That would be the trigger for more concern and perhaps more decline for sterling.”
Mr Sentance said the Bank will probably have to raise interest rates to 3pc or 4pc this year from the current level of 1.75pc as it tries to bring inflation under control.
Disney rejects calls from activist investor to spin off ESPN division
Disney has seen off pressure from an activist investor to spin off the company’s ESPN sports division as the entertainment group’s chief Bob Chapek continues to rebuild his reputation.
Matthew Field has more:
Billionaire activist investor Dan Loeb has backed away from his demand to force Disney to divest its sports broadcasting arm, which holds rights to show games from the NFL and Major League Baseball.
Mr Loeb, whose Third Point fund owns $1bn in Disney stock, said on Sunday he had come to the conclusion that ESPN could generate “considerable synergies as part of the Walt Disney company”.
The US investor had previously called for the Star Wars producer to carve off its ESPN business, which he said would then be able to add new streams of revenues such as sports betting, which would prove challenging as part of family-friendly Disney.
The retreat by Mr Loeb is a victory for Mr Chapek, who came under pressure earlier this year over his handling of Disney’s response to Florida’s controversial “Don’t say gay” law.
Mr Chapek won the backing of Disney’s board in June, effectively ending speculation about his future, and has impressed with strong subscriber growth at Disney+ in a recent update.
Oil prices rise on weaker dollar
Oil has wiped out its earlier decline as a slump in the dollar offset mounting concerns about weaker global demand.
Benchmark Brent crude rose to almost $94 a barrel after earlier shedding as much as 1.8pc. Markets across Europe are largely higher this morning and the dollar fell as traders bet inflation is near its peak.
Still, there are persistent concerns that a slowing economy and efforts by central banks to tackle inflation will hurt demand for oil.
Prices have fallen by almost a third since June, shedding all the gains made since the invasion of Ukraine.
Rouble and Russian stocks rise as Kremlin eases rules
The rouble reversed early losses and Russian stocks pushed higher as the Kremlin eased some of the financial restrictions put in place following the invasion of Ukraine.
The Moscow Exchange resumed its early morning FX session for the first time since late February and non-resident “friendly” investors were allowed to return to stocks trading.
The dollar-denominated RTS index was up 1.6pc, while the rouble-based MOEX index was 1.3pc higher.
The rouble was 0.4pc stronger against the dollar at 60.33 but had lost 0.6pc to trade at 61.32 versus the stronger euro.
Nissan extends Russian factory shutdown
Nissan will extend its suspension of an assembly plant in Saint Petersberg for three months until late December.
A spokesman for the Japanese car brand said: “Production is suspended at St Petersburg until the end of December and employees have been informed. We continue to monitor the situation closely and will take actions as needed.”
The plant, which was shut down in March after Russia’s invasion of Ukraine, was originally set to resume in late September.
Local media reported that the extension was caused by continuing difficulties obtaining parts from Europe and Japan.
How the botched banking hub rollout left people struggling to get cash
Lutterworth, in Leicestershire, is a typical English market town.
There is a Church Street, which leads to the 13th century parish church. A High Street, with a town hall in the neoclassical style. A Market Street, with a thatched roof, timber-framed pub and brightly painted shops. And a Bank Street – even though soon, the community will have no bank.
Lloyds, the last remaining branch in Lutterworth, will close next month. It will be the eighth bank to shut its doors in the area over the past five years.
Patrick Mulholland reports on the demise of the high street bank. Read his full story here.
Gas prices fall as EU plans market intervention
Natural gas prices were lower this morning as the market awaits details of a huge intervention by the EU to tackle the energy crisis.
Benchmark European prices declined as much as 5.8pc, though they’re still around eight times higher than normal for the time of year.
EU energy ministers last week called for urgent measures to halt the rise in prices and provide liquidity to the market. European Commission President Ursula von der Leyen is expected to set out details of the action this week.
The bloc’s members are divided on how to implement price caps for gas and mandatory reductions in energy use.
Euro surges on plans for more ECB interest rate rises
The euro has pushed sharply higher this morning as traders gear up for further interest rate rises by the ECB.
Joachim Nagel, president of the Bundesbank, yesterday signalled that more rate rises were coming to fight sky-high inflation.
The euro jumped 0.6pc against the pound to 87.22p – its highest since February 2021. It was up more than 1.4pc against the dollar and 1.6pc versus the yen.
Power supply issues disrupt London Underground
There are severe delays across some London Underground lines this morning due to power supply issues.
Transport for London said the Piccadilly line was suffering severe delays, while the Victoria line was suspended completely earlier this morning.
The problems come amid warnings from TfL of busy services and possible station closures as visitors flock to London following the death of Queen Elizabeth.
Serco boss Rupert Soames to step down
In the corporate world this morning, Serco has announced that chief executive Rupert Soames will step down by the end of the year.
Mr Soames, the grandson of Sir Winston Churchill, said it was “now time to outsource myself” after nearly a decade at the helm.
He will be replaced by Mark Irwin, a private equity veteran who has been at the outsourcer since 2013.
Mr Soames led a turnaround at Serco, which holds millions of pounds worth of government contracts and was rocked by scandal when he took the reins nine years ago.
Chairman John Rishton said the company was “unrecognisable from the business that he joined in 2014.”
Shares in Serco dropped 4.5pc following the update.
FTSE risers and fallers
The FTSE 100 has started on the front foot this morning, tracking a bounce in global markets.
The blue-chip index rose 0.6pc in early trading, though gains were capped by weaker than expected GDP data for July.
Mining stocks including Glencore, Anglo American and Rio Tinto were the biggest boost, tracking metal prices higher amid supply risks in China and a weaker dollar.
Ladbrokes owner Entain was the biggest faller after Australia’s financial crimes regulator said it would be investigating the betting firm’s compliance with anti-money laundering and counter-terrorism financing laws.
The domestically-focused FTSE 250 also rose 0.5pc, with Swiss miner Ferrexpo jumping 16pc.
IoD: Businesses will be reassured by GDP growth
Kitty Ussher, chief economist at the Institute of Directors, strikes a more upbeat tone on the latest economic figures.
Given all the talk of recession, businesses will be reassured to hear that the economy grew in July, at around its long-term trend rate.
When looking at the last three months together, it shows the economy flatlining as the impact of higher inflation works its way through the system.
Consumer spending was reasonably strong, as hot weather, a strong sporting schedule and holiday bookings boosted retail and recreation activities.
Set against this is weakness in some parts of the manufacturing sector, although it is notable that this is concentrated in pharmaceutical production which would be expected to be more volatile coming out of a pandemic.
The data also shows early signs of reduction in demand for energy, possibly because of the higher prices.
The key judgement the Bank of England will make when it meets is whether an essentially flat economy is sufficient to squeeze homegrown inflation out of the system or whether further tightening is needed.
PwC: Services sector props up economy
Jake Finney, economist at PwC, says growth in the services sector helped to offset declines in both production and construction.
The UK economy grew by a modest 0.2pc on a month-on-month basis in July, following its 0.6pc contraction in June 2022.
However, looking beneath the headlines it’s clear this positive growth rate was primarily led by the performance of the services sector. Two of the other main engines of economic growth – production and construction – contracted in July.
Consumer-facing services grew by 0.6pc in July, following a flat month in June. The sector was helped by record-high temperatures and one-off events, such as the UK’s hosting of the Women’s Euros and the Commonwealth games.
This saw the ‘sports activities and amusement and recreation activities’ sub-sector grow by 8.1pc. However, this strong growth rate was partially offset by a fall of 4.5pc in other personal service activities, in part owing to the cost-of-living crisis that is starting to weigh on consumer demand.
Despite today’s positive growth figures, our expectation is that the UK economy will contract in Q3 2022, following its -0.1pc contraction in Q2 2022. This would mean that the UK enters a technical recession for the first time since lockdown restrictions ended.
Brits cut energy use as prices soar
With energy bills continuing to soar, it seems some Brits are starting to take action.
The ONS said there was anecdotal evidence that people had begun to cut their gas and electricity usage in response to the higher prices.
The Bank of England has previously warned that higher energy bills – alongside a wider cost-of-living crisis – would tip the UK into recession.
FTSE 100 opens higher
The FTSE 100 has started the week on the front foot, even as the latest GDP figures fell short of expectations.
The blue-chip index gained 0.5pc to 7,383 points.
UK economy stagnates
We begin the week with more gloomy economic data as Britain edges further towards recession.
GDP expanded just 0.2pc in July after slumping 0.6pc in June due to the Platinum Jubilee bank holiday, according to new ONS stats.
That was weaker than expected, with Yael Selfin, chief economist at KPMG, describing the performance as “feeble”.
The figures highlight the challenge facing the economy as energy bills soar and inflation continues to climb.
Prime Minister Liz Truss last week unveiled a package of support measures estimated to cost more £100bn. While this should help to ease inflation slightly, the Bank of England has predicted the UK will be pushed into recession.
5 things to start your day
1) Truss told to speed up energy help for business Industry figures say details of support package must be hammered out in days to take effect this winter.
2) City net-zero rules slowing electric car switch, warns battery chief Investors are unable to fund new mining projects because they are perceived as dirty.
3) British pigs in blankets off the menu this Christmas as UK pork industry shrinks There has been a significant drop-off in Britain’s breeding pig herd.
4) NHS day-to-day budget faces £20bn inflation blackhole, Truss warned Higher costs threaten to derail efforts to reduce record backlogs.
5) Gen Z’s dislike of gifs threatens our future, says Giphy Business seeks to prevent competition watchdog from unwinding sale to Met
What happened overnight
Tokyo stocks opened higher, tracking rallies on Wall Street as investors came to terms with the prospect of more central bank interest rate hikes.
The benchmark Nikkei 225 index gained 1pc in early trade, while the broader Topix index was up 0.8pc.
The US dollar fetched 142.53 yen in early Asian trade, against 142.56 yen on Friday in New York.
Coming up today
Corporate: No scheduled updates
Economics: July GDP estimate and trade figures; construction output data (UK)
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