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Fed lifts rates to post-crisis high as Powell warns of more pain to come

·41-min read
Federal Reserve Board Chairman Jerome Powell - Drew Angerer/Getty Images
Federal Reserve Board Chairman Jerome Powell - Drew Angerer/Getty Images

The Federal Reserve lifted interest rates to a post-financial crisis high on Wednesday night as chairman Jerome Powell warned the overpriced US housing market is heading for a painful correction.

Mr Powell said central banks have some “way to go” in their fight against inflation and indicated that interest rates have only just reached levels in the US where they are starting to have the necessary restrictive effect on prices.

The 0.75 percentage point increase by the Fed will pile pressure on the Bank of England to follow suit on Thursday as the pound and euro plunged to fresh multi-decade lows against the dollar.

The Fed's increase is its third consecutive 0.75-point rise, taking the target range of interest rates to 3pc-3.25pc. Its policymakers predicted more hefty increases will push the body's key federal funds rates to 4.4pc by the end of the year.

Mr Powell said he is “strongly committed” to keep raising interest rates until “the job is done” in another hawkish signal to markets as the Fed slashed its economic forecasts.

The central bank chairman also warned property prices in the US were set to fall after rising at "an unsustainably fast level."

"For the longer term what we need is supply and demand to get better aligned so housing prices go up at a reasonable level, at a reasonable pace and people can afford houses again," he said. "We probably, in the housing market, have to go through a correction to get back to that place."

Mr Powell said the US rate-setters are “strongly resolved to bring inflation down to 2pc” and there is still a “way to go” before they can remove monetary policy from restrictive settings.

“We will keep at it until we’re confident the job is done,” he said. “Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.”

The Fed and other central banks have embarked on the most aggressive rate rises since the 1980s with inflation in the US hitting a 40-year high above 8pc. Price pressures have worsened considerably since the war erupted in Ukraine, stoking fears that rate rises will tip economies in recession.

Stocks and bonds tumbled in the wake of the decision as the rampant dollar extended its gains on currency markets. The pound slipped below $1.13 against the dollar to a new 37-year low while the euro extended its fall below parity to hit a new 20-year nadir versus the greenback.

The Fed’s decision will be felt around the world as it has a direct impact on borrowing costs outside of the US and will ramp up the pressure on other central banks to follow suit.

The Bank of England will decide on Thursday whether to also take a hawkish stance against inflation and boost rates by 0.75 percentage points to 2.5pc. With the pound plunging against the dollar in recent months, the Bank could opt for its biggest rate increase since Black Wednesday in 1992.

The Fed’s policymakers downgraded their growth forecasts as inflation eats into households’ disposable income. Tighter monetary policy will cap growth to 1.2pc in 2023 and 1.7pc in 2024, down from its previous forecasts of 1.7pc and 1.9pc respectively.

Anna Stupnytska, an economist at Fidelity International, said: “Without delivering the full 100bp, the Fed still managed to outhawk the markets.

“As more clarity on the Fed's current policy reaction function emerges, we believe the bar for major central banks in general and for the Fed itself in particular to turn less hawkish going into year-end is very high.”

Michael Pearce, US economist at Capital Economics, said: “The Fed believes it will need to raise rates a little further and see economic growth weaken by more than it previously thought to bring core inflation back close to the 2.0pc target over the next two to three years.”

07:40 PM

Wrapping up

That's all from us today, thank you for following! Before you go, check out the latest stories from our reporters:

07:29 PM

Gold also in decline

Gold prices have dropped, crimping demand for the precious metal that doesn’t pay interest or offer returns like assets such as equities.

Spot gold declined 0.2pc to $1,662.40 per ounce shortly after the Fed's announcement.

Gold is down more than 8pc this year as the highest inflation in decades motivated central banks from Europe to the US to hike interest rates at the strongest pace in recent memory. Higher rates reduce the appeal of gold, which isn’t an interest-bearing asset.

07:21 PM

S&P 500 dips

Stocks erased gains and bond yields climbed after the interest rates rise, with the “dot plot” projections suggesting a fourth straight hike of that magnitude in November is possible.

The S&P 500 pushed lower, while the two-year US yield topped 4pc. The dollar remained higher.

The Fed decision, which was unanimous, takes the target range to the highest level since before the 2008 financial crisis, and up from near zero at the start of this year.

07:08 PM

Officials anticipate another rise this year

Officials expect the benchmark rate to rise to 4.4pc by year end and 4.6pc during 2023, according to the median estimate in updated quarterly projections published alongside the statement. That indicates a fourth-straight 75 basis-point hike could be on the table for the next gathering in November, about a week before the midterm elections.

Further ahead, rates were seen stepping down to 3.9pc in 2024 and 2.9pc in 2025.

The projections, which showed a steeper rate path than officials laid out in June, underscore the Fed’s resolve to cool inflation despite the risk that surging borrowing costs could tip the US into recession.

07:02 PM

Fed announces interest rates rise

The Federal Reserve has increased US interest rates to the target range of 3.00-3.25pc, as expected.

The Committee said it anticipates further increases in continued attempts to tame inflation.

06:53 PM

Marathon Petroleum opens UK office ahead of EU’s Russia sanctions

Marathon Petroleum, the largest fuelmaker in the US, is opening a small office in London, Bloomberg reported.

The office’s focus will be on trading diesel-type fuel, possibly including jet fuel. There is currently no plan for crude oil.

Marathon’s decision was likely driven, at least in part, by upcoming European Union sanctions on Russia that will all but cut the continent off from its single biggest external diesel supplier.

The US refiner regularly sells oil products for export, including from its Garyville and Galveston Bay refineries on the Gulf Coast, according to its 2021 annual report. It may be looking to ramp up fuel sales into Europe, helping to fill the void left by Russian barrels.

06:32 PM

Bank stocks drop as Truss considers change to Bank of England rules

UK bank stocks fell on Wednesday after it was reported that the Government could scrap rules that currently hand lenders interest on deposits held at the Bank of England. Patrick Mulholland reports:

Prime Minister Liz Truss may consider suspending interest rate payments on quantitative easing deposits held by high street banks at the Bank of England to save taxpayers billions of pounds, Bloomberg reported.

The deposits, totalling £450bn, are held by the BoE as part of its quantitative easing program. Under the scheme, the central bank pays interest on those deposits out of the income it earns from government bonds.

This is usually straightforward, but rising interest rates mean bond payments will no longer cover the interest on the accounts. That will force the Treasury to make up the difference. Scrapping this obligation could save the taxpayer billions.

06:08 PM

Paris and New York join climate litigation against TotalEnergies

The cities of Paris and New York have joined a coalition of associations and local authorities that are suing oil major TotalEnergies for failing to adequately fight climate change.

"All the signals are in the red. To get out of this and keep the increase in global temperature below 2°C, the Paris Agreement must absolutely be respected...With this lawsuit, we want to force a major energy player to respect the Paris Agreement," Paris Mayor Anne Hidalgo was quoted as saying.

TotalEnergies said in a statement it regretted the litigation, adding that it viewed its commitment to renewable energy and electricity as "a much more efficient response to the climate challenge than litigation".

The legal action that started in January 2020 uses a 2017 French law requiring major French companies to draft vigilance plans to prevent environmental damage. The coalition wants a judge to order TotalEnergies to "take the necessary measures to drastically reduce its greenhouse gas emissions and align itself with the objectives of the Paris Agreement", in a move that it said would be "similar to the Shell decision in the Netherlands".

05:45 PM

Citi proposes revamp of UK retail banking

Citigroup - Dan Kitwood/Getty Images
Citigroup - Dan Kitwood/Getty Images

Citigroup wants to focus its UK retail-banking operation on its wealthiest customers as the Wall Street giant revamps its overseas presence.

The company will invite UK customers that meet the profile of its private bank to make use of those services as it winds down the operation. The majority of clients wouldn’t be affected until next year, said the New York-based company.

“Citi has begun the process of collectively consulting with employees of its UK retail bank in more detail about the proposal,” the lender said. “No final decision can be taken until that process concludes.”

05:20 PM

FTSE 100 on the rise

Defence and energy stocks led a recovery in the FTSE 100 from near three-week lows today, while investors also braced for likely interest hikes from the US Federal Reserve and the Bank of England. The index rose 0.6pc.

Oil majors BP and Shell climbed after Russian President Vladimir Putin announced a partial military mobilisation, raising the prospect of higher crude prices for longer on tighter supply concerns. Oil prices jumped before giving up gains on dollar strength.

"Investors will be looking at defence stocks and thinking about the potential that governments will look to increase their spend on weapons and on military hardware," said Danni Hewson, financial analyst at AJ Bell.

04:55 PM

First Chinese car brand to be sold in Britain

The first Chinese car brand will be sold in Britain within months after a leading UK dealer revealed it is in the final stages of a deal with the country's biggest electric vehicle maker. Howard Mustoe reports:

Pendragon said it expects to begin selling cars from BYD, which is based in Guangdong Province, before the end of the year.

BYD, which only started making cars in 2003, already has a small presence in the UK, where it works with Alexander Dennis to make electric buses, but it is a top player in its home country, the world’s largest producer of cars. Of the 56m cars made globally last year, more than 21m rolled off production lines in China.

Read the full story here

04:30 PM

Barbados issues world's first pandemic-protected bond

Barbados - vale_t /iStock Editorial 
Barbados - vale_t /iStock Editorial

Barbados has issued the world's first government bond with a clause allowing payments to be suspended in the event of another global pandemic, a move expected to attract interest from dozens of other countries savaged by the Covid crisis.

The Caribbean has become something of a test region for sovereign debt innovation in recent years. In 2015, Grenada became the first to put a "hurricane clause" in one of its bonds, sparking a flurry of copy-cat natural disaster deals.

Barbados' new bond - finalised in a deal with bankers on Wednesday - is likely to leave an even bigger imprint, especially with smaller, tourism-dependent countries that were pushed to the brink of economic collapse during the Covid pandemic.

The bond, to be repaid over the next 15 years, will be the first to allow a government to suspend its payments if another outbreak similar to Covid happens. Payments can be suspended for up to two years at a time and twice if necessary but cannot be cancelled altogether.

04:04 PM

Handing over

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

03:58 PM

Government pulls in record stamp duty haul

The Government raked in £7.75bn in stamp duty in the first five months of this financial year, a record sum as the tax on property sales soars on the back of the booming housing market.

Tim Wallace has more:

The tax, which is paid on the sale of homes, brought in £1.7bn in August alone, according to the Office for National Statistics, the second-highest for any single month on record.

Over the past 12 months the tax has brought in £17.5bn, also a record high.

Liz Truss is believed to be looking at cutting the tax in Friday’s fiscal statement, in a move which economists hope would free up the market by reducing the cost of moving house.

Tom Clougherty, head of tax at the Centre for Policy Studies, said stamp duty is “the worst tax we have on the statute books in the UK” because it reduces the number of people moving house, making it harder to move either for work or for a house which is more suitable for a family’s needs.

Cutting the tax would bring “all kinds of positives,” he said, allowing more people to move home, boosting economic activity from those extra transactions and encouraging builders to construct more homes into a livelier market.

“I would expect the threshold to be permanently put at a higher level, maybe that is £500,000 maybe it is higher, maybe even £1m, and for the marginal tax rates above that level to be brought down lower,” he said.

03:47 PM

TikTok bans political fundraising as Chinese-owned app seeks to avoid US firestorms

TikTok has banned political fundraising worldwide ahead of the US midterm elections, amid fears the Chinese-owned app could be caught up in allegations of foreign interference.

Gareth Corfield has more:

Accounts owned by politicians and political parties have been blocked from accessing advertising features on the video-sharing app. TikTok is also trialling compulsory verification for accounts belonging to governments, politicians and parties, it said.

The moves highlight TikTok’s nerves over potential political controversies after Donald Trump’s 2020 suggestion of banning it from operating in the US.

Mr Trump viewed TikTok as a national security threat owing to its ownership by Chinese company ByteDance. Concerns over TikTok’s massive reach and access to personal data have since spread across the political spectrum in the US, however.

​Read Gareth's full story here

03:28 PM

Deutsche Bank's new London headquarters sold at a discount

The building that will house Deutsche Bank's new London headquarters has been sold at a sharp discount to its valuation.

Land Securities has agreed to sell the development to Lendlease for £809m. That's 9pc less than the March valuation, but promises to yield £145m of development profit.

Deutsche Bank has signed a 25-year lease for the 586,500 square foot property and will pay rent of £38m a year.

Landsec still has to finish the project, which is scheduled to complete in the first three months of 2023.

Neil Martin, chief executive for Europe at Lendlease, said:

The scale of this joint investment in the City of London reflects the global appetite for premium and sustainable office assets in the world's key gateway cities.

03:14 PM

City watchdog to give staff £1,000 cost-of-living payment after strikes

The City watchdog is to hand staff a £1,000 cost-of-living payment in an olive branch after strikes over pay reforms earlier this year.

Simon Foy and Tony Diver report:

The Financial Conduct Authority (FCA) told employees on Wednesday that those earning under £60,000 will receive a one-off payment of £1,000 next month to help them weather the cost-of-living crisis, The Telegraph understands.

Those earning between £60,000 and £60,500 will also receive an extra £500. The move is the latest example of organisations boosting pay to help staff cope with spiralling food and energy bills.

Banks including Lloyds and NatWest and other City firms such as Aviva and abrdn have put in place similar measures in recent months.

It comes after a major fall out earlier this year between staff at the FCA and management over controversial pay reforms, which were championed by the organisation's chief executive Nikhil Rathi.

The idea of a one-off cost-of-living payment has been pushed by the FCA’s “staff consultative committee” in recent weeks, according to a source, suggesting bosses at the regulator are seeking to mend relations with employees.

​Read the full story here

02:52 PM

United Airlines workers at Heathrow to vote on strike

United Airlines Heathrow strike - REUTERS/Louis Nastro/File Photo
United Airlines Heathrow strike - REUTERS/Louis Nastro/File Photo

There could be more disruption coming next month as United Airlines workers at Heathrow begin voting in a strike ballot.

Around 300 employees at the London airport employed in operations, customers services and baggage handling will vote in the ballot, which runs until October 11.

United's UK staff are embroiled in a dispute with the US airline over what the Unite union had branded a real-terms pay cut. Bosses have offered a raise of 5pc this year plus an additional payment, followed by 4pc in 2023.

Unite said a strike would threaten as many as 18 flights a day into Heathrow.

Sharon Graham, Unite general secretary, said:

To make matters worse, bosses want to tear up a long-standing agreement barring the use of outsourced workers. These are red lines the workers won't cross.

02:40 PM

Wall Street rises ahead of Fed interest rate decision

Wall Street's main indices have opened in positive territory ahead of a widely expected interest rate rise by the Federal Reserve.

The US central bank is poised to raise rates by 75 basis points for a third consecutive meeting this evening as it grapples with surging inflation.

The S&P 500, Dow Jones and Nasdaq all rose 0.4pc at the opening bell.

02:17 PM

KPMG's Frankfurt offices raises in cum-ex probe

KPMG's Frankfurt offices are being raided as part of Germany's investigation into the cum-ex scandal.

Prosecutors in Cologne said the raids were part of a probe against lawyers and tax advisers who previously worked for the consulting firm. KPMG said it was cooperating fully with authorities.

A flurry of raids in Frankfurt began earlier this year, first targeting mainly international investment banks, including Morgan Stanley, JP Morgan and Barclays.

Investigators are now specifically targeting the advisory work done on cum-ex transactions.

02:03 PM

Supermarkets not passing on lower fuel prices, says RAC

RAC supermarket fuel price - Chris Ratcliffe/Bloomberg
RAC supermarket fuel price - Chris Ratcliffe/Bloomberg

Supermarkets are failing to pass on lower wholesale fuel costs to motorists at the pump, the RAC has said.

New figures published by the Government showed fuel prices have fallen to their lowest level since mid-May, offering some relief to drivers after months of escalating costs.

A litre of petrol cost an average of 165.5p on Monday, while diesel was 181.1p per litre. That's down from July's highs of 191.6p and 199.2p respectively.

But the RAC said prices should have fallen further as it accused supermarkets of boosting their margins instead of passing savings onto consumers.

Simon Williams, RAC fuel spokesman, said:

While this is clearly good news, prices should have fallen much further than they have due to the big reduction in the cost of wholesale fuel this summer.

And the main reason this hasn’t happened is that the big four supermarkets, which dominate UK fuel sales, have refused to pass on savings they are benefitting from buying cheaper wholesale petrol and diesel.

means average margins are now 19p a litre – 12p more than the long-term average. Petrol should really be on sale for 153p a litre and diesel 175p.

We also have a strange situation where independent retailers that have traditionally been far more expensive than their supermarket rivals are often selling at far lower prices.

We hope the Competition and Markets Authority is watching what’s happening closely.

01:51 PM

Bank stocks slide on reports of QE change

Banking stocks have gone into decline following reports that Liz Truss is exploring a change to the Bank of England's quantitative easing programme.

Under the potential plan, interest paid on some deposits held by commercial lenders at the BoE would be scrapped, potentially saving more than £10bn a year, Bloomberg reports.

Gerard Lyons, the Prime Minister's external economic adviser, said she was aware of the potential financial benefit and the Government has looked at the option.

But banks say the change would amount to a stealth tax.

HSBC, LloydsBarclays and NatWest all dropped between 1pc and 3pc.

01:29 PM

Pound falls to fresh 37-year low as Government borrowing doubles

Kwasi Kwarteng Business Secretary pound - Wiktor Szymanowicz/Anadolu Agency
Kwasi Kwarteng Business Secretary pound - Wiktor Szymanowicz/Anadolu Agency

The pound fell to a fresh 37-year low against the dollar after official figures showed the Government borrowed double the amount expected last month amid a record jump in debt interest costs.

Szu Ping Chan has more:

In what economists described as a "worrying" trend before the chancellor unveils billions of pounds in extra tax cuts on Friday, the Office for National Statistics (ONS) said borrowing to plug the gap between taxes and spending stood at £11.8 billion in August.

This is £2.6bn less than the previous year, but £5.8bn more than the £6bn forecast by the Office for Budget Responsibility (OBR), the Government's official watchdog.

Sterling slumped to as low as $1.1305 against the dollar amid fears that a renewed borrowing binge will worsen the public finances.

​Read Szu's full story here

12:46 PM

BP shuts down US oil refinery after huge fire

BP has shut down operations at an oil refinery in Ohio after it was engulfed in a huge fire.

The British energy giant said it halted the Husky Toledo site in Oregon following the blaze, videos of which were posted on social media.

At least two people were injured in the fire, which was extinguished by firefighters last night.

12:28 PM

Rees-Mogg: Energy support will cost tens of billions

Jacob Rees-Mogg has said the cost of the Government's energy support package will be in the tens of billions of pounds, but added that the exact amount was hard to quantify.

The Business Secretary told reporters:

The difficulty with giving cost figure is that this will depend on where the price of energy goes over the winter, and that's very difficult to forecast so I can't give you an absolute cost.

It will be in the tens of billions of pounds unquestionably.

12:19 PM

M&S launches £15m cost-of-living package for staff

M&S £15m cost of living - Hollie Adams/Bloomberg
M&S £15m cost of living - Hollie Adams/Bloomberg

Marks & Spencer will spend £15m to support its staff struggling with the soaring cost of living.

The retail said it plans to boost hourly wages from £10 to at least £10.20 – its second pay rise this year. It will also hand one-off £250 M&S vouchers to 4,500 workers.

Other measures include free meals every shift for employees at the company’s Castle Donington distribution centre.

Starting in September, staff will have access to free sanitary products, while M&S is also offering free financial planning workshops and online planning tools.

Rivals including Sainsbury's and John Lewis have announced their own schemes to help employees as prices continue to soar.

12:04 PM

US futures flat as investors brace for interest rate rise

US futures are treading water as investors brace for a hefty interest rate hike from the Federal Reserve for a third straight meeting.

The central bank is expected to raise rates by 75 basis points this evening, and traders will have a close eye on a press conference from Fed Chair Jerome Powell.

Futures tracking the S&P 500 and Dow Jones were flat, while the Nasdaq slipped 0.1pc.

11:39 AM

London to lend TfL up to £500m

TfL City Hall Mayor Sadiq Khan - Chris J Ratcliffe/Getty Images
TfL City Hall Mayor Sadiq Khan - Chris J Ratcliffe/Getty Images

City Hall will lend Transport for London up to £500m to help shore up its budget and avoid service cuts.

Mayor Sadiq Khan has established a finance facility to ensure the transport group's budget will be balanced until 2024.

City Hall said the funding gave TfL time for its revenue to recover, adding that a recent Government agreement left the organisation with a £230m funding gap that may not be able to met with efficiency savings.

In a statement Sadiq Khan said:

The recent funding agreement for TfL came after some extremely tough and protracted negotiations. Although TfL and I were able to secure a number of key concessions, the Government still left TfL with a significant funding gap.

City Hall’s innovative yet prudent approach to ensuring TfL can balance its books, will help TfL to adapt to the negative impacts of the pandemic without the need for significant service cuts, protecting London’s transport network for the millions of Londoners and visitors who rely on it every day.

11:23 AM

Losses surge at Martin Sorrell's S4 Capital

Martin Sorrell S4 Capital - REUTERS/Eric Gaillard
Martin Sorrell S4 Capital - REUTERS/Eric Gaillard

Sir Martin Sorrell's S4 Capital has reported ballooning operating losses as it spends more on hiring to fuel its rapid growth.

The digital advertising firm's losses more than quadrupled in the first half to £75.4m.

Sir Martin vowed to cut spending and said the company would focus on growing its existing businesses rather than pursuing more acquisitions.

He said: "Combinations remain a key part of our growth strategy, however, for the time being we are focused on organic growth and maximising value from our existing businesses, where momentum remains strong."

S4's revenue jumped 60pc to £446.4m and it reaffirmed its full-year net revenue growth target of 25pc. Shares jumped 10pc.

11:12 AM

Former EDF executive to head No 10 business relations

Liz Truss is said to have tapped a former EDF executive to lead Downing Street's business relations strategy as she looks to win over the City.

Michael Stott, who has also worked as a Conservative Party press officer, has been recruited by the new Prime Minister as the head of business liaison in No 10, Sky News reports.

Mr Stott will replace Alex Hickman, who held the role under Boris Johnson.

The appointment highlights Ms Truss's efforts to position her administration as pro-business as she paves the way for tax cuts at the mini Budget later this week.

10:55 AM

Russian stocks fall sharply as Putin threatens West with nuclear war

The Russian stock market tumbled on Wednesday after Vladimir Putin ordered his country’s first mobilisation since the Second World War and warned the West he was prepared to use nuclear weapons.

Matt Oliver has more on the market reaction:

Mr Putin’s bellicose warning sent the Moscow Stock Exchange’s MOEX index plunging by as much as 10pc, marking the second day in a row of big losses.

The MOEX had already fallen by 9pc on Tuesday following the president’s threat to annex parts of Ukrainian territory currently held by his country’s troops, using what have been denounced as “sham” referendums.

The escalation sent shockwaves through gas markets as well, with the European benchmark price jumping 8pc higher to about €210 per megawatt hour.

Sterling and the euro weakened as investors took flight to the dollar. The US currency hit a 20-year high against a basket of six other major currencies on Wednesday morning.

​Read Matt's full story here

10:38 AM

More than 2,000 London bus drivers to strike

London bus strike Arriva Unite - REUTERS/Henry Nicholls
London bus strike Arriva Unite - REUTERS/Henry Nicholls

More than 2,000 bus drivers in London are plotting an all-out strike next month, threatening widespread disruption across the capital.

Members of the Unite union working at Arriva's north London division will begin the walk-out on October 4. The strike will run continuously until the dispute is resolved.

The dispute affects drivers operating from a total of eight depots: Ash Grove, Barking, Clapton, Edmonton, Enfield, Palmers Green, Tottenham and Wood Green. The strike will affect routes throughout north London.

Sharon Graham, Unite general secretary, said:

Our members at Arriva have generated huge profits for the company for decades. Arriva can afford to offer a pay increase that meets the real rate of inflation, but it has put profits before people and declined to do so.

Unite will leave no stone unturned in the support given to our members during this dispute.

10:24 AM

IoD: Energy support provides short-term reassurance

Jonathan Geldart, director general of the Institute of Directors, says the Government's intervention provides "much needed short-term reassurance" for companies.

We particularly welcome the decision to include all contracts signed since April 1 2022 within the scope of the new arrangements, and also the commitment to work with suppliers to ensure all businesses currently on variable contracts have the option of a fixing rate deal that benefits from the government support price.

Currently around one in 4 firms are on variable arrangements so it is important they are now given maximum certainty to help them plan.

We look forward to working with the government in the coming months to ensure that any further relief is carefully targeted at those industries and sectors whose survival is most threatened by current economic conditions.

Ultimately, however, business and government will need to work hand in hand to develop domestic energy sources and reduce consumption and dependency on expensive fossil fuels.

10:16 AM

Rees-Mogg: Energy support will boost growth and protect jobs

Business Secretary Jacob Rees-Mogg was spotted filming on the streets of Westminster this morning.

He's just posted the video, which details the new energy bills support for businesses.

10:07 AM

Neil Woodford fund administrator facing extra £50m fine

Neil Woodford Link FCA - Geoff Pugh
Neil Woodford Link FCA - Geoff Pugh

Neil Woodford's fund administrator is facing an additional £50m fine over the collapse of the star stockpicker's flagship fund.

The Financial Conduct Authority has issued a draft notice to Link Fund Solutions warning of the penalty. It comes two days after the City watchdog said Link could face a redress payment of up to £306m.

Link was the fund administrator on the LF Woodford Equity Income fund, which started to be liquidated nearly three years ago.

Mr Woodford froze the vehicle in mid-2019 because he couldn’t meet clients’ withdrawal requests, trapping £3.7bn of investor funds.

Link said in a statement: “Link Group has not made any commitment to fund or financially support LFSL. Link Group considers that any liabilities relating to the Woodford matters will be confined to LFSL.”

09:59 AM

Sainsbury's in talks over £500m store sale and leaseback deal

Sainsbury's sale leaseback stores - REUTERS/Andrew Boyers/File Photo
Sainsbury's sale leaseback stores - REUTERS/Andrew Boyers/File Photo

Sainsbury's is in discussions with a real estate investment trust over a sale and leaseback deal for its supermarkets worth around £500m.

The agreement, which includes 18 stores in the south of England, would see LXi REIT purchase the sites and rent them back to the company.

The move would help Sainsbury's to bolster its balance sheet as surging inflation threatens grocers' profit margins. The chain is already investing more than £500m over two years to keep prices lower.

09:48 AM

Russian stocks tumble to lowest since invasion

Russian stocks have crashed to their lowest since the start of the invasion of Ukraine after Putin declared a partial mobilisation and said he wasn't bluffing over the use of nuclear weapons.

The benchmark Moex index tumbled as much as 9.6pc to the lowest since February 24, before paring losses to 4.2pc.

Oil giants Gazprom and Lukoil and lender Sberbank led the losses.

Investors are fleeing Russian stocks after Putin's televised address stoked concerns about an escalation in the conflict.

The rouble was also 2.6pc weaker against the dollar at 62.18 to the dollar, having dipped to its lowest since early July.

09:35 AM

FTSE 100 extends gains after energy support

The FTSE 100 has extended its gains after the Government confirmed it will slash businesses' energy bills in half.

Business Secretary Jacob Rees-Mogg unveiled details of the six-month scheme, which will be applied directly to companies' bills and come into effect in October.

The blue-chip index pushed 0.6pc higher.

09:26 AM

Manufacturers welcome energy support

Stephen Phipson, chief executive of Make UK, says the support package will give businesses reassurance.

Industry will warmly welcome the timely announcement of an energy price cap for an initial six months for all business users.

Government has delivered a scheme which is simple to understand, giving reassurance to the business sector and making immediately available the much needed help companies have been calling for across the board at a time energy costs were spiralling out of control.

It does appear likely that prices will remain high for many months to come and industry is likely to need support for a longer period if we are to protect jobs and remain competitive, so the further announcement of a review on future support at the three month stage is reassuring.

We will monitor the impact of the cap closely, and will engage with the review mechanism later in the year to ensure that these priorities are recognised and understood.

We recognise that all parties have moved at pace and a long way. However, manufacturing businesses are under huge pressure already many are struggling to stay afloat. We hope that this support can be made tangible as quickly as possible and not applied retrospectively at the end of the next quarter.

09:24 AM

Pubs and brewers call for more support from Chancellor

Emma McClarkin, chief executive of the British Beer and Pub Association, says further help is needed from the Chancellor in Friday's mini Budget.

We welcome this very significant and critical intervention by the Government. It will be a lifeline for many pubs and brewers this winter.

It is crucial that business owners can easily understand what discount they will be receiving so they can effectively plan ahead, and the requirement for security deposits to enter new contracts must be removed as a barrier to fair supply.

Whilst this announcement has helped businesses to breathe an initial sigh of relief as they head into this critical period, more support is needed to tackle the cost of doing business and we need a plan beyond the next six months.

Our industry is one of only a few that supports jobs and livelihoods in every single part of the UK, and we have the potential to deliver growth in every single community we serve.

On Friday, the Chancellor must take steps to address the cost of doing business, by reducing the tax burden on our sector, allowing pubs and brewers the chance to not only survive this winter, but remain at the heart of local economies and their communities for many years to come.

09:19 AM

Hospitality firms welcome 'unprecedented' support

Kate Nicholls, chief executive of UKHospitality, welcomes the energy support for businesses.

This intervention is unprecedented and it is extremely welcome that Government has listened to hospitality businesses facing an uncertain winter.

We particularly welcome its inclusiveness – from the smallest companies to the largest - all of which combine to provide a huge number of jobs, which are now much more secure.

The Government has recognised the vulnerability of hospitality as a sector, and we will continue to work with the Government, to ensure that there is no cliff edge when these measures fall away.

09:18 AM

Liz Truss: New scheme will keep energy bills down

Prime Minister Liz Truss says:

I understand the huge pressure businesses, charities and public sector organisations are facing with their energy bills, which is why we are taking immediate action to support them over the winter and protect jobs and livelihoods.

As we are doing for consumers, our new scheme will keep their energy bills down from October, providing certainty and peace of mind.

At the same time, we are boosting Britain’s homegrown energy supply so we fix the root cause of the issues we are facing and ensure greater energy security for us all.

08:57 AM

Pound hits fresh 37-year low

Sterling dropped to a fresh 37-year low this morning as the currency continues to take a battering.

Russia's announcement of a partial mobilisation of troops in Ukraine fuelled demand for the safe-haven dollar, while data showing a rise in UK Government borrowing also weighed on the pound.

Investors are also piling into the dollar ahead of an expected rise in interest rates by the Federal Reserve this evening.

The pound fell as much as 0.7pc against the dollar to $1.1305, its lowest since 1985, before paring losses slightly. Against the euro it was up 0.3pc to 87.32p.

08:54 AM

West Ham betting sponsor fined for advertising on children's websites

Betway West Ham -  Rob Newell - CameraSport
Betway West Ham - Rob Newell - CameraSport

West Ham United’s main sponsor Betway has been fined more than £400,000 for advertising on children’s pages of the Premier League football team’s websites, the Gambling Commission has announced.

Oliver Gill has more:

The regulator said that for nearly a year and a half from April 2020, the Betway logo appeared on a web page offering users the opportunity to print out a teddy bear for children to colour in.

And for more than a year from October 2020, the Betway logo also featured on the “Young Hammers at Home” website.

Betway has a slew of sponsorship deals with sports clubs around the world as varied as the Chicago Bulls basketball team, South African rugby and West Indies’ cricket side.

The London-headquartered company’s website lays claim to have “operations [that] meet or exceed the highest industry standards”.

A spokesman for Betway said: "On this occasion, the Betway logo – owing to a technical error – appeared on a restricted section of the West Ham United website. As soon as we were made aware of this error, we took immediate action to get it removed.

"Nonetheless, we accept the fine and will continue to work closely with the club to ensure this does not happen again."

08:50 AM

Oil prices jump as Putin mobilises troops

It’s not just gas prices that are on the rise this morning – oil has pushed higher too.

Benchmark Brent crude gained 2.6pc to just under $93 a barrel, while West Texas Intermediate was trading above $86.

It comes after Putin confirmed he ordered a partial mobilisation of troops in Ukraine and vowed to annex occupied territories.

The escalation has fuelled concerns of further disruption to energy supplies.

08:48 AM

Software group Aveva snapped up in £9.5bn deal

Here's some more on that Aveva takeover deal...

The software group has been snapped up by Schneider Electric in a deal that values it at just under £9.5bn.

Schneider will buy out minority shareholders for £31 per share. The French company, which already holds 59pc of Aveva, will pay about £3.9bn for the remaining equity.

The deal for Cambridge-based Aveva, which has more than 6,400 employees, is expected to complete in the first three months of 2023.

The acquisition will help to strengthen Schneider’s foothold in the UK, where it already has around 4,000 staff.

08:47 AM

FTSE risers and fallers

The FTSE 100 has turned positive in early trading as investors look ahead to more details about energy bills support for businesses.

The blue-chip index rose 0.3pc, reversing its early losses.

Markets are waiting for details of how the Government will help companies cope with surging energy bills.

Housebuilders including Persimmon, Barratt and Taylor Wimpey were among the biggest risers following a report that Liz Truss will cut stamp duty in this week’s budget.

Aveva was up 2.2pc after Schneider Electric confirmed a £9.5bn takeover deal, while BAE Systems jumped 4.7pc as Putin’s escalation of Russia’s investigation of Ukraine bolstered defence stocks.

The domestically-focused FTSE 250 rose 0.2pc, with housebuilders Bellway and Redrow the top gainers. Games Workshop slumped 8.6pc following a downbeat trading update.

08:20 AM

JD Sports to pay former boss Peter Cowgill £5.5m

JD Sports Peter Cowgill - Nicholas.T.Ansell/PA Wire
JD Sports Peter Cowgill - Nicholas.T.Ansell/PA Wire

JD Sports will hand at least £5.5m to former boss Peter Cowgill as part of an exit deal after he was ousted amid concerns about his corporate governance.

Mr Cowgill was pushed out in May following a series of issues, including a clandestine meeting in a car park with the boss of rival Footasylum.

He will be paid £3.5m over two years in the first part of the deal and £2m over three years for the second. He is also receiving his salary, benefit and bonus up to his departure in May.

The company said it would honour his contractual notice period of 12 months.

The agreement also means Mr Cowgill cannot work or advise any competitors to the high street sports chain and cannot solicit any of its employees.

He will also be kept on as a consultant to support chairman Andy Higginson and chief executive Regis Schultz.

08:13 AM

French tycoon takes 2.5pc stake in Vodafone

Xavier Niel Vodafone - REUTERS/Sarah Meyssonnier/File Photo
Xavier Niel Vodafone - REUTERS/Sarah Meyssonnier/File Photo

Billionaire tycoon Xavier Niel has taken a 2.5pc stake in Vodafone, becoming the second French mogul to swoop on a British telecoms firm.

The entrepreneur bought the stake through his Atlas Investissement vehice, saying it saw “opportunities to accelerate both the streamlining of Vodafone’s footprint and the separation of its infrastructure assets”.

It added that it supported Vodafone's intention to merge with rivals such as those in the UK and Italy and separate out its infrastructure assets like towers and fibre.

Shares in the FTSE 100 company rose 1.4pc.

It comes after fellow French tycoon Patrick Drahi took an 18pc stake in BT last year, fuelling speculation of a possible takeover bid.

08:06 AM

Gas prices jump as Putin escalates Ukraine war

Putin Russia war Ukraine gas -  Russian Presidential Press Service
Putin Russia war Ukraine gas - Russian Presidential Press Service

Natural gas prices jumped in early trading as Putin stepped up his war in Ukraine.

The Russian leader warned the West he is "not bluffing" over nuclear weapons as he announced a partial military mobilisation, which will see 300,000 reservists called up to the army.

Russia will also move to annex the territories its forces have already occupied.

Benchmark European gas jumped as much as 6.6pc as Putin raised the stakes in the war, stoking fears to further disruption to supplies.

The escalation offset Germany's move to nationalise ailing energy giant Uniper in a move designed to protect its energy system from collapse.

08:01 AM

FTSE 100 opens lower

The FTSE 100 has lost ground at the opening bell as markets await more details about energy support for businesses.

The blue-chip index fell 0.3pc to 7,173 points.

07:54 AM

Government borrowing swells ahead of Truss tax cuts

Government borrowing climbed to £58.2bn in the first five months of the financial year – a sum that's set to surge further as Liz Truss prepares to unveil tax cuts and energy bills support.

Inflation is already taking its toll on the public finances, with debt costs surging to £8.2bn. That's the highest for any August on record.

Borrowing for the month was £11.8bn. This was ahead of forecasts but downward revisions to previous months meant the deficit for the year so far was in line with OBR forecasts.

The numbers will fuel criticism that Ms Truss is putting the public finances at risk and stoking inflation.

The Prime Minister has promised more than £30bn of tax giveaways in a bid to boost growth, and earlier this month pledged further support for household energy bills. More support for businesses is coming this morning.

07:49 AM

Former BoE official: Short the pound

Liz Truss's economic plan has been given short shrift by one former Bank of England policy maker.

Danny Blanchflower, now a Dartmouth College economic professor, has taken aim at the Prime Minister's "disastrous" economic policies, which he said were in "total disarray".

He also expanded on his concerns about the outlook for the UK economy, which is expected to tip into recession later this year. He suggested investors should short the pound.

07:44 AM

Liz Truss to cut stamp duty

Liz Truss will cut stamp duty on home purchases in an effort to stimulate economic growth, the Times reports this morning.

The Prime Minister and Chancellor Kwasi Kwarteng will announce the measure on Friday as part of the emergency Budget.

Ms Truss reportedly believed that the tax cut will encourage growth by allowing more people to move and enabling first-time buyers to get on the property ladder.

Whitehall sources told the newspaper that the policy was the "rabbit" in the mini Budget.

07:37 AM

Rees-Mogg to unveil business energy support

Good morning. 

All eyes are on the Business Secretary this morning for more details about a multi-billion-pound support package to help companies cope with soaring energy bills.

Jacob Rees-Mogg is expected to unveil a package that will slash businesses's energy costs in half amid concerns the crisis could spark a wave of collapses.

Electricity bills are expected to be slashed in half, while gas bills will be cut by a quarter. The measures will last for six months.

It comes after ministers intervened to cap households energy bills at £2,500 per year for two years from October.

5 things to start your day

1) Sir Richard Branson-backed bid to launch rocket from Cornwall pushed back again  Virgin Orbit is planning over a dozen rocket launches from Cornwall in the next decade

2) Chocolate scratch-n-sniff cards on the menu at National Lottery  Czech-owned gambling business aims to dramatically increase number of scratch card purchases

3) British millionaire numbers surge above France and Germany  Recovery in UK markets boosts ranks of the wealthy, finds Credit Suisse

4) Jacob Rees-Mogg faces High Court showdown with 11 striking unions  Trade unions launch judicial review over plans to replace striking workers

5) New Transport Secretary to meet union bosses in olive branch after months of rail strikes  Dialogue with unions comes after a new wave of strikes announced for October

What happened overnight

Hong Kong stocks dropped at the start of trade this morning, reversing the previous day's gains as investors geared up for an expected Federal Reserve interest rate hike.

The Hang Seng Index fell 0.768pc. The Shanghai Composite Index shed 0.5pc, while the Shenzhen Composite Index on China's second exchange lost 0.7pc.

Tokyo stocks opened lower, with the benchmark Nikkei 225 index down 1pc, while the broader Topix index plummeted 0.8pc.

Coming up today

  • Economics: Federal Reserve interest rate decision (US), public sector net borrowing (UK)

  • Corporate: Supermarket Income REIT (full-year results); Petershill Partners, Keywords (interims)