Energy fears mount as European gas reserves head for record low

Gas price energy crisis Russia pipeline – Stefan Sauer

European gas stockpiles are on track to hit a record low this year, fuelling fears that the worst of the energy crisis is yet to come.

With Russian supplies low, storage inventories will drop below 15bn cubic metres by the end of March – their lowest level ever – according to research firm Wood Mackenzie.

Analysts said the risk of a cold winter and a dispute over Russia’s controversial Nord Stream 2 pipeline laid the groundwork for another volatile year, with the potential for gas prices to soar further and shortages to bite.

The surge in natural gas prices is set to fuel a cost of living crisis in 2022, with some household energy bills expected to jump 50pc.

06:24 PM

Wrapping up

It’s time to close the blog today, thank you for staying with us! Here are some of today’s key stories from our business reporters:

06:21 PM

Private equity firm TPG soars on first day of trading

Private equity firm TPG has started trading on the Nasdaq. Shares were priced at $29.50 in the initial public offering, which raised $1bn (£730m), but opened at $33 and rose as much as 14pc from the initial price.

The Texas-based firm comes to the public markets with a 30-year track record that includes early investments in Uber and Spotify.

Peers including Blackstone, KKR, Carlyle Group and Ares Management went public years ago. But timing is everything, founder Jim Coulter said, and now more than ever “the market understands private equity better.”

05:59 PM

Activists behind Shell climate verdict target 30 multinationals

The Dutch wing of environmental group Friends of the Earth, which won a landmark court case against Royal Dutch Shell last year, have demanded 30 corporations publish plans for big cuts in greenhouse gas emissions in a new campaign.

Milieudefensie has set its sights on large companies with legal bases in the Netherlands, where a court ruled in May that Shell must reduce its environmental footprint. Among leaders in finance, retailers, oil and energy majors, builders and industrial manufacturers on the list are KLM, the Dutch arm of airline Air France KLM, ABN Amro bank and supermarket operator Ahold Delhaize.

The heads of the companies were being sent letters demanding that they provide plans outlining how they will trim emissions of the heat-trapping gases by 45pc from 2019 levels by 2030. A failure to do so may result in legal action, said Peer de Rijk, policy officer at Milieudefensie.

“We are very clear that in the end, if needed, we are willing to go to court. But of course we are hoping these companies will be moving by themselves,” De Rijk told Reuters.

05:39 PM

FTSE 100 continues positive streak

The FTSE 100 has continued its positive streak, closing 0.2pc higher at 7,563.

The blue-chip index is on track for its fourth consecutive week of gains as heavyweight energy, mining and banking stocks have helped it outperform both the wider European index and the FTSE 250 this year.

Michael Hewson at CMC Markets commented:

“Today we’ve taken a bit of a pause with the FTSE 100 and DAX both treading water for the most part, trading either side of the flat line, with the focus on more decent trading updates from the retail sector, although to look at the share price reaction, you’d have been forgiven for thinking they weren’t that great, although they could always have been better.

“It has in fact been a day of decent quarterly numbers for UK retail, not that you’d know it, with both Tesco and Marks and Spencer share prices slipping back, although this could simply be a case that expectations were perhaps a little bit too high leading into the numbers, and there are concerns as we head into the final quarter, for both, that cost-of-living pressures might impact their final Q4 numbers, heading into the spring.”

04:56 PM

Sotheby’s seeks $5bn valuation in Wall Street listing

Sotheby's auction house - Sotheby

Sotheby’s auction house – Sotheby

Sotheby’s, the auction house owned by French telecom billionaire Patrick Drahi, has selected Goldman Sachs and Morgan Stanley to work on a potential US listing, according to Bloomberg.

An initial public offering could take place later this year and the company may seek a value of about $5bn (£3.6bn) excluding debt.

Deliberations are ongoing and the eventual timing and valuation of any listing will depend on investor appetite and market conditions.

Sotheby’s competes with Christie’s, owned by French billionaire Francois Pinault, as one of the world’s biggest auction houses dealing in fine art, collectibles and real estate. Drahi’s decision to explore a flotation follows a record year for Sotheby’s in which sales topped $7bn.

04:25 PM

Housebuilder Countryside boss steps down after disappointing performance

The boss of housebuilder Countryside has stepped down after it failed to capitalise on the pandemic property boom.

Shares in the company plunged by around a quarter in early trading after the FTSE 250 company told shareholders that profits for the past three months were less than half their levels from a year earlier.

The group said chief executive Iain McPherson will now stand down from his post as it blamed operational issues for the recent poor performance. It reported that revenues dropped to £249.8m for the quarter from £363.8m in the same period last year.

Chairman John Martin will stand in as an interim chief until Mr McPherson’s replacement is found.

03:45 PM

Faux burgers maker Beyond Meat targeted by short sellers as shares struggle to gain momentum

Faux burgers maker Beyond Meat is the most shorted company in the Russell 1000 Index, as the shares struggle to gain momentum amid growing competition for plant-based meat alternatives.

Short interest stands at 37pc of the company’s freely traded shares, the highest among stocks in theindex, according to the latest data from financial analytics firm S3 Partners.

That’s risen from 26pc at the start of October as short sellers pile in.

When Beyond Meat went public in May 2019, it held one of the most sought after initial public offerings, and jumped 163pc on its debut.

However, it is struggling to turn the initial buzz into durable investor support, with shares dropping 46pc over the past 12 months, compared with a 21pc gain for the Russell 1000 Index.

03:12 PM

Handing over

That’s all from me today – thanks for following! Giulia Bottaro will take over from here.

03:11 PM

Renault targets 100pc electric car sales in Europe

Renault electric car sales Europe 2030

Renault electric car sales Europe 2030

Renault is aiming to achieve 100pc electric car sales in Europe by 2030 – ramping up a previous commitment of 90pc.

Chief executive Luca de Meo said: “We have decided to prepare the conditions to make Renault a 100pc electric brand by 2030.

“We imagine a Renault brand that shows off with the newcomers on this market, on European soil.”

Renault will launch its Megane electric car and a modern version of its small Renault 5 this year as manufacturers pivot towards climate-friendly energy sources and away from polluting fossil fuels.

The UK will ban sale of all new petrol and diesel cars from 2030.

02:55 PM

Wall Street opens higher as inflation fears ease

Wall Street’s main indices opened higher this afternoon after weaker-than-expected producer prices data eased concerns about a faster pace of interest rate hikes from the Federal Reserve.

The S&P 500 gained 0.2pc, while the tech-heavy Nasdaq rose 0.4pc. The Dow Jones was little changed.

Delta Air rose 2.5pc after reporting strong trading over the Christmas period, though it warned of a loss in the current quarter due to the omicron variant.

02:51 PM

Short sellers tuck into Beyond Meat

Beyond Meat short sellers IPO - SASCHA STEINBACH/EPA-EFE/Shutterstock

Beyond Meat short sellers IPO – SASCHA STEINBACH/EPA-EFE/Shutterstock

Short sellers are piling into Beyond Meat, making it the most shorted company in the Russell 1000 Index, as the shares struggle to gain momentum amid growing competition for plant-based meat.

Short interest stands at 37pc of the company’s freely traded shares, the highest among stocks in the Russell 1000 Index, according to data compiled by Bloomberg.

That’s up from 26pc at the start of October, while short interest has risen by 3pc in the last week alone.

Beyond Meat enjoyed a bumper start to trading after it went public in July 2019. But with more and more rivals entering the market, the company is struggling to hold its ground.

02:26 PM

US jobless claims rise while inflation cools

Fresh data published this afternoon is giving a mixed view of the US economy’s recovery.

The number of Americans applying for unemployment benefits rose last week to 230,000 – the highest since mid-November.

The weekly applications, a proxy for layoffs, have now risen four of the last five weeks, possibly a sign that the omicron variant is having an impact on the job market, which has bounced strongly from last year’s Covid recession.

However, there were some signs that inflation was cooling in December.

While the producer price index jumped 9.7pc over 2021 as a whole – the second-largest in figures back to 2010 – the growth decelerated last month.

It came as two key drivers of inflation in 2021 – food and energy – declined from a month earlier, suggesting cost pressures may be starting to ease.

02:14 PM

Cashflow crunch threatens thousands of businesses

Banks are braced for a wave of defaults as the energy crisis and omicron deliver a cashflow “crunch” on businesses, writes Russell Lynch.

The Bank of England’s latest credit conditions survey revealed pressure on small and medium sized businesses as Rishi Sunak, the Chancellor, prepares to withdraw more Covid support schemes at the end of March before raising taxes.

Concerns among lenders have doubled in the past three months, the Bank’s survey said.

The share of banks fearing a rise in defaults was 35 percentage points higher than those expecting a fall.

One in 10 firms hold no cash reserves at all, according to separate Office for National Statistics figures, with 7pc of companies having “no or low” confidence of surviving the next three months.

It follows warnings from the Federation of Small Businesses that some companies with failed suppliers were facing an eight-fold rise in energy costs during negotiations with new providers.

Craig Beaumont from the FSB warned: “We have got a crunch quarter coming up as energy bills are starting to rise and people are renegotiating their fixed costs. “We have got energy, late payments are rising – which always happens when the economy is more fragile – and tax rises in April. We have got all those pressures at the same time and businesses are in way more debt than they were [before Covid]. It is a crunch quarter for cashflow.”

01:30 PM

Omicron sparks paracetamol and ibuprofen shortage

Brits have been emptying the shelves of painkillers in recent weeks as the omicron variant runs riot.

Tom Rees has delved into the ONS stats:

Paracetamol is the scarcest item on shop shelves with three in 10 stores having no or low stocks of the painkiller during the huge Covid wave.

A fifth of shops are suffering shortages of ibuprofen while there are also low supplies of toilet roll and fresh fish.

The data suggests shortages of the painkillers have worsened considerably since omicron sent cases rocketing, with 15pc of stores suffering a lack of paracetamol in early November.

Pharmaceutical supply experts said supply of the drugs has been unable to cope with rocketing demand as omicron rips through the country.

One in 15 in England, or 3.7m people, have Covid, the ONS estimates, while virus restrictions have caused chaos across supply chains.

Read Tom’s full story here

01:16 PM

Pubs and restaurants suffer ‘lost Christmas’

Pubs restaurants hospitality omicron Christmas - VICKIE FLORES/EPA-EFE/Shutterstock

Pubs restaurants hospitality omicron Christmas – VICKIE FLORES/EPA-EFE/Shutterstock

Pubs and restaurants suffered a 60pc plunge in Christmas Day trading as omicron caution cost hospitality firms £3bn in lost sales.

Industry bosses said the sector suffered a “lost Christmas” after figures revealed that revenues dropped sharply across the key trading week as customers opted to stay at home

Data from industry body UKHospitality and research firm CGA showed that sales on Christmas Day fell by 60pc compared to 2019, while revenues dropped by 31pc on Boxing Day and 27pc on New Year’s Eve.

Figures also showed that sales across December were 40pc lower than during the same month before the pandemic as the rapid spread of omicron kept punters away.

Venues in Scotland and Wales were hit worse in the week leading up to New Year, where more stringent restrictions were in place.

Kate Nicholls, chief executive of UKHospitality, said:

These sales drops versus 2019, and also against our members’ projections before the onset of the new omicron variant, will have taken most businesses from healthy trading for the month to painful losses, delaying the sector’s recovery and extending hospitality’s long Covid.

Cash reserves are severely depleted, and some businesses will struggle to survive the first quarter of 2022.

12:45 PM

BoE’s Mann warns on ‘spillover’ risk from inflation response

Bank of England Catherine Mann - Xinhua/Wang Ying

Bank of England Catherine Mann – Xinhua/Wang Ying

Central banks will diverge on the way they respond to inflation this year, creating risks for economies across the globe, the Bank of England’s Catherine Mann has said.

The policymaker said inflation was clearly above target in the US and UK, though not yet in the euro area. She said that central banks were facing different requirements with regard to responding to that surge.

“Those differences in strategies responding to the inflationary surge is going to generate its own global spillovers,” she said. “And this is going to be particularly important feature of the 2022 economic experience.”

The Bank expects inflation to surpass 6pc this year, triple its target, while it hit a 39-year high of 7pc in the US last year.

12:34 PM

Commodities trader thinks oil could hit $200

The bullish predictions on oil just keep coming, with commodities trader Doug King predicting prices could hit $200 a barrel.

Mr King said it could soon hit $100 and even rise to $200 over the next five years due to a lack of exploration and investment to maintain existing supplies.

It follows a record year for Mr King’s hedge fund, which cashed in on soaring energy, food, power and freight prices.

His $244m (£178m) Merchant Commodity Fund gained 74pc, beating its previous best of 59pc in 2014, according to an investor letter seen by Bloomberg.

12:19 PM

Wall Street unmoved as dollar slides

US futures are largely unchanged today as traders digest the latest US inflation figures and their potential impact of Federal Reserve interest rate increases.

Futures tracking the S&P 500 and Nasdaq held steady, while the Dow Jones ticked up 0.1pc.

The dollar has slumped in recent days as more investors bet the currency has reached its peak, with expectations of a rate rise largely priced in.

Meanwhile, the pound has hit its highest level since October despite calls for Boris Johnson to resign over a lockdown party in Downing Street.

12:10 PM

Expert reaction: Gas market set for another unsettling year

Kateryna Filippenko, analyst at Wood Mackenzie, says that while prices will eventually come down as spring approaches, the next few months could be tough.

Without additional Russian imports, the ability to refill depleted storage and to avoid a repeat of last year’s crisis will be limited.

But Gazprom has so far been reluctant to make more gas available on the existing routes. And the start-up of Nord Stream 2 remains the big unknown as Gazprom navigates regulatory approvals. Political relations remain fragile as Russian troops amass along the Ukrainian border.

Cold weather in Europe could exacerbate the situation further, adding up to 10bn cubic metres to gas demand through the rest of the winter, pushing storage levels to zero unless more Russian gas is supplied, and Europe may have to tap into cushion gas to balance the market.

Normal winter weather, including in Asia, and visibility on Nord Stream 2 commissioning would push prices down, although demand for storage (and high carbon costs) will maintain prices above US$15 per metric million British thermal units.

11:45 AM

Next cuts sick pay for unvaccinated staff

Next retail staff unvaccinated - REUTERS/May James

Next retail staff unvaccinated – REUTERS/May James

Next has confirmed it’s cut sick pay for unvaccinated staff who are self-isolating due to exposure to Covid.

The high street retailer said all staff who test positive will be paid in full – regardless of whether or not they’ve had the jab.

But unvaccinated staff who are required to isolate because they have been identified as a close contact of someone with the virus will only receive statutory sick pay, unless there are mitigating circumstances.

It comes after a number of other retailers, including Morrisons and Ikea, introduced similar policies for unvaccinated workers.

Next is the biggest FTSE 100 faller this morning, falling 3.5pc amid wider inflation fears hitting the high street.

11:32 AM

Goldman Sachs: UK to spend £3.4bn to tackle energy crisis

Britain will stump up almost £3.4bn to help households weather the energy crisis, according to forecasts from Goldman Sachs.

Consumers are expected to face an £18bn spike in energy bills from April, when the new price cap comes into force. Some household bills will soar 50pc, fuelling a cost of living crisis.

Goldman Sachs said it expected the Government to intervene by slashing VAT on energy bills to zero until April 2023, increase the Warm Home Discount by £100 and introduce a small loan relief scheme for energy suppliers.

Economists at the bank expect the announcement to come before the energy regulator sets the new price cap on Feb. 7. The total cost of the policy package would add £3.35bn pounds to government borrowing.

11:08 AM

Oil steadies near two-month high

Oil has steadied near a two-month high as demand remains robust despite the omicron variant and supplies come under pressure.

West Texas Intermediate held above $82 a barrel, while Brent crude gained 0.1pc to just under $85.

Consumption has remained resilient as the new strain of the virus has only a limited impact, while US stockpiles dropped, adding to tight supplies elsewhere around the globe.

Oil’s gains in the year so far will add to inflationary pressures as central banks gear up for a tightening of monetary policy.

10:53 AM

Ovo Energy set to slash 1,700 jobs as crisis escalates

ICYMI – Ovo is expected to cut a quarter of its workforce as part of cost-saving measures to cope with the energy crisis.

Giulia Bottaro has the details:

Ovo Energy will slash 1,700 out of 6,200 roles, Sky News reported, as well as closing sites to focus on three locations in London, Bristol and Glasgow. It will also open a new academy in the Scottish city.

The new strategy involves a commitment to raise minimum pay to £12 an hour and moving all customer-facing jobs to the UK.

Domestic providers have been squeezed by the Government’s price cap while global wholesale power costs have soared.

About 26 have gone bust over the past five months including Bulb, the seventh-biggest supplier with 1.7m customers. They all stopped trading except for Bulb, which was bailed out with £1.7bn of taxpayer money.

Read Giulia’s full story here

10:41 AM

NatWest launches new digital team in blockchain push

NatWest is launching a new digital capital markets team as it looks to boost its use of blockchain technology to cut costs for clients.

The lender has tapped Chris Agathangelou, its head of credit flow, to lead the new division. It’s part of a wider overhaul that will see James Tayler, previously head of US capital markets, return to the UK in an expanded role.

NatWest is looking to formalise its growth strategy in blockchain, which it said would lead to faster execution and increase capital efficiency for clients.

10:17 AM

Hays lifts profit forecasts amid hiring boom

While it’s a sombre picture for retailers at the moment, things are much better for recruiters.

Staffing company Hays has said its full-year profit will top estimates as widespread shortages fuel a boom in hiring.

Hays said net fees in the second quarter rose 37pc to a record high and lifted its operating profit forecast to around £200m. Shares rose as much as 3.2pc.

Alistair Cox, chief executive of Hays, said:

It is too early to quantify how the omicron variant will impact our New Year ‘return to work’ trends, which as usual will be a key driver of second half performance.

However, client and candidate confidence remain high, with clear signs of skill shortages and wage inflation

09:57 AM

‘Britcoin’ project mocked by Lords as a ‘solution in search of a problem’

A Treasury and Bank of England plan to create a central bank digital currency is “a solution in search of a problem” and poses serious risks to financial stability, a Lords committee has warned.

Tim Wallace has more:

Peers, including the former Bank governor Lord King, fear that officials have overstated the potential benefits of a “digital pound”, or CBDC.

The Bank of England and Treasury have set out potential benefits of a digital currency, including lower transaction costs, ahead of a consultation later this year on the idea of digital banknotes. They would be an alternative to commercial bank money usually held in deposit accounts.

Lord Forsyth, the committee’s chairman, said many potential benefits were “overstated, or they could be achieved via alternative means with fewer risks. In the UK, a central bank digital currency is a bit of a solution in search of a problem.”

While the peers struggled to see significant benefits from a CBDC, or “Britcoin”, they found a series of major hazards that would need to be addressed.

Read Tim’s full story here

09:50 AM

Britain running out of paracetamol

Britain is running out of paracetamol as more and more people are struck down with the omicron variant.

New figures from the ONS show almost a third of shelves across the country had low or no availability of the drug between 7 and 10 January.

Meanwhile, in late December, around 3pc of the UK workforce was estimated to be on sick leave or not working because of Covid symptoms, self-isolation or quarantine – the highest level since at least June 2020.

Incidentally, shelf availability over the period was highest for beer. It’s not clear whether this contributed to the paracetamol shortage.

09:42 AM

Uniqlo to increase prices as material costs rise

Uniqlo Fast Retailing inflation prices - KAZUHIRO NOGI/AFP via Getty Images

Uniqlo Fast Retailing inflation prices – KAZUHIRO NOGI/AFP via Getty Images

The company behind Japanese fashion giant Uniqlo has warned it will probably need to increase prices as the cost of materials continues to rise.

Takeshi Okazaki, chief financial officer of Fast Retailing, said: “It’s time to review and increase prices of some items as we face higher costs of materials, logistics and weaker yen.

“Our baseline is trying not to raise prices as much as possible. It will be extremely limited.”

Although core inflation remains well below 1pc in Japan, consumer expectations for higher prices have climbed to their highest since 2008, according to a recent quarterly survey by the Bank of Japan.

It came after Fast Retailing reported that operating profit rose to 119bn yen (76bn) in the three months to November, despite weaker sales at its Uniqlo stores in Japan and slower foot traffic.

09:31 AM

Card Factory slumps as inflation bites

Shares in Card Factory dropped as much as 14pc this morning as the retailer warned inflation would dent its profits.

While the company said it was taking measures to mitigate inflation – include price rises – it said this wouldn’t be enough to prevent lower profits than previously anticipated.

It marks the biggest daily fall for the London-listed firm since May.

09:27 AM

Pound hits highest level since October

Sterling has risen to a two-and-a-half-month high against a weakening dollar, while traders are still weighing up a potential resignation for Boris Johnson.

The pound gained as much as 0.3pc to hit $1.3747 – its highest since October 29. Against the euro, it’s steady at 83.48p.

Neil Jones at Mizuho told Bloomberg: “Pound strength is in part a function of general dollar weakness and relative inflation expectations running parallel with potential investment money from overseas.”

Traders are also weighing up the impact of the furore around the Prime Minister and calls for his resignation over a party at Downing Street during lockdown.

Analysts said the impact on sterling would depend on whether Rishi Sunak or Liz Truss would replace him, with the Chancellor seen as more fiscally conservative and therefore bad for the pound.

09:15 AM

UK and India aim for trade deal by end of the year

The UK and India formally launched free trade agreement talks in New Delhi today with the aim of wrapping up a deal by the end of the year that could boost annual bilateral trade by billions of pounds.

Reuters has the details:

Britain has made a deal with India one of its post-Brexit priorities as, free from the EU’s common trade policy, ministers look to gear trade policy towards faster-growing economies around the Indo-Pacific region.

Meeting in New Delhi on Thursday, Indian trade minister Piyush Goyal and counterpart Anne-Marie Trevelyan said they would also launch an “early harvest” or a limited-scope interim trade agreement in the next few months, before finalising the free trade agreement.

“This is an opportunity that we must seize to steer our partnership along the track of mutual prosperity for the decades to come,” Trevelyan said.

The UK said the deal could almost double British exports to India, and by 2035 boost total trade by £28bn per year.

09:09 AM

Sales dry up for All Bar One owner as punters stay away

All Bar One Mitchells & Butlers - Yui Mok/PA Wire

All Bar One Mitchells & Butlers – Yui Mok/PA Wire

The owner of All Bar One has reported a fall in sales over Christmas as the spread of omicron kept drinkers away.

Mitchells & Butlers, which also owns Toby Carvery and Harvester, said the group suffered lower customer numbers and “disruption caused by the inevitable isolation of team members” due to rising Covid cases.

The company told shareholders it had seen an “encouraging” performance for most of the latest quarter, but lost its strong momentum over the festive period.

M&B said it is also facing a surge in costs of between £60m and £65m due to higher wages and soaring energy costs.

Phil Urban, chief executive of Mitchells & Butlers, said:

This first quarter performance represents a robust performance given the challenges the industry faces from the rapid spread of the new variant both in terms of reduced consumer activity and disruption caused by the inevitable isolation of team members.

Experience shows that as restrictions ease, and confidence returns, our business is able to swiftly recover.

09:00 AM

FTSE 250 risers and fallers

Much of the market movement this morning is coming from the mid-cap FTSE 250.

At the top end of the index is engineer Wood Group, which gained as much as 12.8pc after announcing plans to sell its business division that helps governments and companies assess environmental risks.

It also reported total 2021 revenue of around $6.4bn (£4.7bn) – down 14pc but in line with expectations. Bet debt of around $1.4bn was higher than expected.

Things were less rosy for Countryside Properties, which slumped as much as 20pc – its biggest fall since May 2020.

It came after the developer warned trading in the first quarter was below expectations.

The company, which is facing pressure from activist investor Browning West, also said chief executive Iain McPherson was stepping down.

08:54 AM

Asos jumps on move to London’s main market

On a busy morning of retail results, the overall mood is negative, as investors look past strong Christmas trading to focus on inflationary pressures in the year ahead.

Asos is one bright spot, however. Despite its disappointing festive sales – which were hit by omicron and supply chain woes – shares rose as much as 7.8pc this morning.

It comes after the company said it plans to move to London’s main market next month following two decades on the junior Aim market.

RBC analysts described the decision as “another positive step for the share price”. Shore Capital said it was a way for Asos to improve its profile after last year’s profit warning.

08:50 AM

Halfords sales slow as omicron keeps shoppers away

Halfords sales omicron

Halfords sales omicron

Halfords has revealed strong sales in the lead-up to Christmas eased off in December as the omicron variant took its toll.

A series of store closures also dented sales of both motoring and cycling products, which fell 1.5pc and 2.1pc respectively. Total retail sales dropped 1.8pc, although on a like-for-like basis they were up 5.6pc.

The company said there was “a strong performance during October and November but a drop-off in performance in the latter part of the period as the omicron variant grew in prominence.”

Bosses said retail motoring sales would probably ease off during the year with fewer staycations expected. Shares fell 2.9pc.

08:36 AM

FTSE risers and fallers

The FTSE 100 has started the day on the back foot, falling 0.2pc after climbing to a two-year high on Wednesday.

Large international companies Diageo and Unilever were among the biggest drags on the index, losing ground as the pound hit fresh highs against the dollar.

Tesco and Marks & Spencer were down 1.9pc and 4.4pc respectively even after posting strong Christmas trading, with inflation worries clouding the outlook.

Persimmon also dropped 2.9pc as its upbeat update failed to impress investors.

The domestically-focused FTSE 250 also fell 0.2pc, dragged down by a 19pc plunge for Countryside Properties, which issued a disappointing trading update and said its chief executive was stepping down.

08:28 AM

Persimmon slides despite margins upgrade

Persimmon margins supply chain - REUTERS/Lee Smith/File Photo

Persimmon margins supply chain – REUTERS/Lee Smith/File Photo

Meanwhile, housebuilder Persimmon has seen its shares slide in early trading even after it forecast a higher operating margin for the full year.

The FTSE 100 firm has been buoyed by a red-hot housing market, with rising prices helping to offset higher costs from labour shortages and supply chain disruptions.

Persimmon said it is expecting 2021 underlying operating margin to be about 28pc, 0.4 percentage points above last year.

Revenue rose 8.4pc to £3.6bn, as the company constructed 14,551 new homes. Forward sales stood at £1.6bn at the end of the year – 20pc ahead of pre-pandemic levels.

Persimmon also named Aviva’s finance chief Jason Windsor as its new chief financial officer.

But this failed to impress investors, with shares dropping 3.3pc amid doubts over the outlook for housebuilders.

08:07 AM

Asos plots stock market upgrade

Separately, Asos also announced plans to move from London’s junior Aim index to the main market as it pursues further growth.

The move, expected to take place by the end of February, marks a turnaround in fortunes since the company’s shock profit warning last year and the departure of chief executive Nick Beighton.

Asos also said it’s appointed former Paddy Power boss Patrick Kennedy to its board.

08:05 AM

Asos flies in clothes as omicron hits sales

Asos omicron sales - JUSTIN TALLIS / AFP

Asos omicron sales – JUSTIN TALLIS / AFP

Asos said it was forced to fly in clothes to avoid supply chain disruption, while the omicron variant hit sales as revellers stayed at home.

The online fashion retailer said sales in the last four months of the year rose just 2pc to £1.4bn, while profits were dented as it discounted heavily and spent more on shipping.

Asos said sales in Europe were particularly hard hit, falling 3pc to £390m, with several countries across the continent imposing strict lockdowns. This hit sales of dresses and outfits for going out.

However, the UK put in a stronger performance as fewer restrictions were imposed.

Looking ahead, the company said omicron continued to cause uncertainty, but underlying pre-tax profits are still expected to be up around 10pc to 15pc at between £110m and £140m.

08:01 AM

FTSE 100 falls

The FTSE 100 has lost ground at the open, pausing after strong gains in the week so far.

The blue-chip index fell 0.2pc to 7,537 points.

07:56 AM

…but price war looms

Despite the optimistic forecasts, there are clouds on the horizon for retailers.

Suring inflation – driven by rising energy bills – as well as planned tax rises in April, mean Brits are facing a cost of living crisis. What’s more, supermarket chains are facing increased pressure from German discount rivals Aldi and Lidl.

Value will be a key area of focus for Tesco in particular, which has pushed discounts through its Clubcard scheme and launched a price match with Aldi.

Richard Lim, chief executive of Retail Economics, says:

The retailer’s single-minded focus on competitive pricing and driving loyalty through its Clubcard-only discounts has won over customers this Christmas. The use of Clubcard has been a masterstroke from the retailer, enhancing the perception of value and playing on the hugely powerful customer instinct of FOMO – the fear of missing out.

Looking forward, the imminent squeeze on incomes will force many households into recessionary behaviours, trading down to own-brand and shopping around as they look to make budgets stretch that little bit further.

Tesco is well placed to win new customers with their laser-like focus on value as they double-down on their Clubcard success.

07:49 AM

Tesco joins Christmas retail boom

There was also good news for Britain’s biggest supermarket chain Tesco, which joined its rivals in cheering strong Christmas sales.

Alongside its retail success, Tesco also reported robust trading in its banking division after an improved outlook for credit losses. Tesco Bank is expected to post operating profit of between £160m and £200m.

It comes after Sainsbury’s also lifted its profit forecast, helped by a 0.1pc sales rise over the six weeks to January 8.

Ken Murphy, chief executive of Tesco, said:

Despite growing cost pressures and supply chain challenges in the industry, we continued to invest to protect availability, doubled down on our commitment to deliver great value and offered our strongest ever festive range.

This put us in a strong position to meet customers’ needs as, once again, Covid-19 led to a greater focus on celebrating at home.

As a result, we outperformed the market, growing market share and strengthening our value position.

07:43 AM

M&S turnaround gathers pace

M&S’s positive Christmas figures mark another step forward in the turnaround of the British high street stalwart.

It’s the third time the retailer has reiterated its outlook as a long-awaited revamp finally appears to be paying off.

Alongside strong food sales, M&S welcomed a second consecutive quarter of growth for its clothing and home division, which has often been dismissed as old-fashioned and been a headache for the group.

Steve Rowe, chief executive of M&S, said:

Trading over the Christmas period has been strong, demonstrating the continued improvements we’ve made to product and value.

Clothing & Home has delivered growth for the second successive quarter, supported by robust online and full price sales growth. Food has maintained its momentum, outperforming the market over both 12 and 24 months.

The market continues to be impacted by the headwinds and tailwinds that we reported in the first half, but I remain encouraged that our transformation plan is now driving improved performance.

07:38 AM

Retailers toast festive success

Good morning.

There are bullish trading statements out from Marks & Spencer and Tesco this morning, with both companies hailing bumper sales over Christmas.

M&S said food sales increased 12.4pc against pre-Covid levels in the 13 weeks to Jan. 1, beating market forecasts of 10pc growth. Clothing and home sales also exceeded expectations.

Tesco reported an 8.8pc rise in festive sales compared to two years ago, reaching its biggest market share in four years.

Both firms said full-year profits would meet or exceed previous expectations.

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1) Peers cast doubt on ‘Britcoin’ project Lords committee warns that Bank of England officials have overstated the potential benefits of a central bank digital currency

2) HSBC accused of hypocrisy over charity bank account charges A Leeds treasurer said he was “shocked” that the lender would “pick on small charities to try and elevate its profits”

3) Ovo to cut quarter of workforce amid energy crisis Supplier to announce restructuring programme as part of cost-saving measures

4) Hinkley Point developer hit by new setback with French nuclear reactor EDF downplays risk of similar problems at Hinkley Point C and Sizewell C

5) Investors lose patience with Unilever’s ethical dilemma Marmite maker’s sustainability drive is proving as divisive as the spread among shareholders

What happened overnight

Asian markets were mixed on Thursday as traders fought to maintain the previous day’s upward momentum. Hong Kong, Sydney, Taipei and Manila rose, while Singapore and Wellington were flat.Tokyo ended the morning lower as a stronger yen weighed on exporters, with Shanghai, Seoul and Jakarta slightly off.

Coming up today

  • Corporate: Asos, Dunelm, Halfords, Hilton Food Group, John Wood Group, Marks & Spencer, Persimmon, Safestore Holdings, Taylor Wimpey, Tesco (Trading update)

  • Economics: RICS house price balance (UK), Bank of England credit conditions survey (UK), trade balance (China), producer price index (UK), jobless claims (UK)