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.
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.
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”.
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”.
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.
Tesla shares slide after SEC reportedly opens probe into solar panel defects
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.
The upcoming Hollywood blockbuster Spider-Man: No Way Home is set to be a box office hit after breaking the UK record for advance ticket sales, which are being snapped up at three times the rate of those for the James Bond movie No Time to Die.
Odeon, the biggest operator in the UK and Ireland with more than 120 cinemas, said it had sold many more than 200,000 tickets for the film in the first seven days since release.
The rate of ticket sales to see the film, which stars British actor Tom Holland as Peter Parker, has broken the presale record set by 2019’s Avengers: Endgame. Odeon also said that the Spider-Man presales rate in the first seven days was three times that amassed by Daniel Craig’s eagerly anticipated, much delayed and final outing as James Bond.
Carol Welch, the managing director of Odeon Cinemas UK and Ireland, said:
As we head into the festive period, we are really pleased with the advance booking numbers for Spider-Man: No Way Home.
It shows guests are loving being back at cinemas and are excited about the magic that our big screen experience brings to movies.
A Franco Manca Pizza Restaurant in Muswell Hill Photograph: Greg Balfour Evans/Alamy
Back in the UK, the owner of the Real Greek and Franco Manca restaurant chains has said business is booming and is ahead of pre-pandemic levels as office workers and theatregoers return to city centres. Parent company the Fulham Shore reported a doubling of revenues and a return to profit in the six months to 26 September, with many of its 75 restaurants “continuing to break weekly trading records”. “We have seen continued trading momentum in recent weeks, with revenues in October and November ahead of 2019 comparatives,” said David Page, chairman of the Fulham Shore.
This includes our office and theatre district-located restaurants, which are continuing to trade positively over the four weeks in November, achieving revenues ahead of the same weeks in 2019.
Gig economy stocks plunge amid EU regulatory crackdown fears
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%.
U.S. stock benchmarks traded mostly higher early Monday, as investors digested the latest news on the spread of the coronavirus and prepared for new inflation data later in the week. https://t.co/xb2UQjMd6Hpic.twitter.com/VXEahJxUls
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.
A Tesco supermarket in Slough, Berkshire. Photograph: Maureen McLean/REX/Shutterstock
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.
The supermarket chain has offered staff a pay rise of 4%, which Unite has said is “offensive” given that the retail price index rate of inflation stands at 6%. The offer is also below the more commonly used consumer price index, which is at a 10-year high of 4.2%.
Discussions are understood to be taking place in an effort to avert action that would add to the countrywide supply chain disruption that has already triggered warnings of shortages of food and drink at Christmas.
If the company does not improve its offer, Unite said warehouse workers and HGV drivers at depots in Doncaster, Didcot, Belfast and Antrim would start a series of rolling strikes from 16 December
Deutsche Bank predicts that the UK economy is slowing this quarter, as the Omicron variant hits the recovery.
Sanjay Raja, Deutsche’s senior economist, predicts that October’s GDP report, due on Friday, will show growth slowed to 0.3%, from 0.6% in September
Risks to the projection are finely balanced, if slightly tilted to the downside, Raja says, adding:
Looking ahead, Q4 GDP growth should more clearly signal an even slower quarter after growth disappointed in Q3 (1.3% q-o-q).
With supply constraints lingering, household spending easing, fiscal support waning, and the labour force remaining smaller than its pre-pandemic level, the recovery should slow further, impacted further by news of Omicron and some modest disruption from Storm Arwen.
Bank of England deputy governor Ben Broadbent doesn’t know how the Omicron variant will affect his vote on UK interest rates later this month.
Asked how Omicron will influence his thinking, Broadbent told his audience at Leeds University that:
I go into these meetings not knowing very often what I’m going to vote myself.
I think the best way to look at it is to look at our last set of forecasts, think about the economics of this, think about the data we’ve had since then.
Last month Broadbent voted to leave interest rates at record lows of 0.1% - along with six other policymakers, while just two voted to hike to 0.25%. One of the latter two, Michael Saunders, suggested last week that Omicron could delay a rise in borrowing costs.
BOE'S BROADBENT: I DO NOT KNOW HOW OMICRON WILL AFFECT MY DECISION ON INTEREST RATES :
BOE'S BROADBENT: BOE'S NOVEMBER FORECASTS SHOW VERY, VERY CLEARLY THAT IF YOU DO NOT RAISE INTEREST RATES, INFLATION WILL BE COMFORTABLY ABOVE TARGET IN 2-3 YEARS :
BoE's Broadbent: inflation could comfortably exceed 5% next spring
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.
Photograph: Bank of England
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.
🏦🇬🇧 The transitory headlines from Broadbent's speech:
🗣️ "What is their prospective contribution to inflation in eighteen, twenty-four months and beyond? This is the horizon that matters for policy and against which the word “transitory” should be measured." pic.twitter.com/HsDEU5Ik2I
Broadbent spells out that in the BoE's view, "transitory" refers to factors affecting inflation at 18-24 months' time (its forecast horizon). On this measure, labour market is a bigger concern than goods pic.twitter.com/wRnXzaDPcL
The emergence of the new coronavirus Omicron variant is starting to impact UK shopper behaviour and deter some people from returning to the office.
Researcher Springboard has reported there was a 3.8% drop in footfall in regional cities outside of London last week.
And while footfall in the capital rose by +0.5%, Springboard’s “Central London Back to the Office” index dropped by 2%, suggesting some commuters have return to home working.
Overall, footfall in UK retail destinations rose by +0.7% last week. Visits rose 2.3% at shopping centres and 1.3% at retail parks, but were down 0.4% at high streets.
Diane Wehrle, Insights Director at Springboard, says the data provide “the first evidence of an early impact on footfall of the Omicron variant”
Springboard’s Central London Back to the Office benchmark (comprising only those areas in close proximity to offices) declined last week from the week before, whilst footfall across Central London as a whole - which is clearly being supported by the Christmas trading period – increased, rising by even more in those areas with a predominance of retail stores.
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