Markets slide as soaring oil and gas prices stoke stagflation worries – business live

• 12.54pm GMT 12:54 Market update: off the lows
• 11.02am GMT 11:02 EY, KPMG and PwC cut ties with Russia operations
• 9.53am GMT 09:53 UK and European gas prices hit fresh record highs
• 9.06am GMT 09:06 FTSE 250 index tumbles 3.75%
• 8.43am GMT 08:43 Germany's DAX falls into bear market territory
• 8.23am GMT 08:23 London open: FTSE 100 drops 2% to five-month low
• 8.10am GMT 08:10 Cleverly: UK will consider Russia oil ban

09:53

Updated at 9.58am GMT

UK gas prices are continuing to climb, with the day-ahead wholesale contract now up 37.5% today - to 643p per them.

After a fraught morning, European stock markets are recovering from their lowest levels this session.

In the City, the blue-chip FTSE 100 is now down 0.4% or 30 points at 6966 points, having hit a seven-month low of 6,788 points in morning trading.

Mining stocks and oil companies continue to rally, after oil hit its highest since 2008 and nickel prices soared as much as 30% to a 15-year high.

Banks, travel companies, technology companies, retailers and consumer-goods makers are all still weaker, with grocery tech firm Ocado down 5.4%, drinks group Diageo down 4.4%, Next down 4.3% and Lloyds Banking Group 4.2% lower.

Across Europe, Germany’s DAX is off 1% and France’s CAC is 0.8% lower, having both been down 4.5% at one point.

Russia’s rouble has tumbled to a fresh record low today.

Russia’s currency is down around 8% at 131 to the dollar, according to Refinitiv data. On the EBS trading platform, the rouble weakened as far as 141.00 to the dollar.

The rouble started the year at around 75 to the US dollar, before plunging to record lows as the invasion of Ukraine began last month.

Bid/offer spreads were between 10 and 15 cents, pointing to an increasingly illiquid market in thin trading, Reuters points out.

Trading on the MOEX Moscow exchange is scheduled to be closed until Wednesday for a bank holiday.

The possibility of a US ban on Russian crude imports adds to the heavy pressure on the rouble, with Russia’s economy facing a severe recession.

Marc Ostwald, chief economist & global strategist at ADM Investor Services, says:

Leaving aside the official imposition of energy sanctions on Russia, there are already a large number of companies in the energy and many other sectors that are now ‘self-sanctioning’, i.e. halting all business with Russia, which will have a) devastating effects on the Russian economy; b) leaves many questions about whether there is capacity elsewhere to compensate for this loss of supply (oil, gas, fertiliser, grains, oilseeds, copper and palladium are just a few of these); c) may already lead start to result in involuntary inventory accumulation in some finished goods, but above all even more acute problems for the semiconductor sector, and per se auto and mobile phone makers.

Investor morale across the eurozone has plunged, following the Russian invasion of Ukraine.

Research group Sentix’s index of eurozone investor confidence fell to -7.0 in March from 16.6 the previous month, hitting its lowest level since November 2020.

An expectations sub-index fell to -20.8 in March from 14.0 in February, the lowest reading in nearly a decade and the biggest drop in the Sentix index’s 20-year history.

Sentix said the eurozone economy was being dramatically hit by the Ukraine crisis, adding that the eastern European region was particularly suffering. More here.

Last weekend, the president of the World Bank told the BBC the war in Ukraine is “a catastrophe” for the world which will cut global economic growth.

“The war in Ukraine comes at a bad time for the world because inflation was already rising,” said David Malpass, pointing out that rising energy and food prices hit the poorest hardest.

Malpass stressed his biggest concern is “about the pure human loss of lives” that is occurring.

Average petrol prices in the UK have exceeded 155p per litre for the first time as oil prices continue to soar due to Russia’s invasion of Ukraine.

Figures from data firm Experian Catalist show the average cost of a litre of petrol at UK forecourts on Sunday was 155.62p, while the price of diesel reached a record high of 161.28p.

A year ago the price per litre of petrol and diesel was 124.32p and 127.25p respectively.

Today’s rise in the oil price, with Brent crude hitting $139 per barrel before dropping back to $125/barrel now, could push prices even higher.

RAC fuel spokesman Simon Williams said (via PA Media) that:

“These hikes are unprecedented and will sadly be hitting both homes and businesses hard.

“It’s therefore vital the Chancellor acts quickly to limit the damage by cutting VAT to at least 15% which would save drivers 6.5p a litre and take the average price of unleaded back under £1.50.

“Importantly, this could also limit the impact of inevitable fuel price rises in the coming days and weeks.”

AA spokesman Luke Bosdet said the average petrol price rising above £7 a gallon was a “watershed moment” which means “it’s time to ditch petrol and diesel, and switch to electric” for drivers who can make the transition.

“Although electricity is still susceptible to rising costs and market pressures, removing all those well-to-pump actors that can make a driver’s life a misery in a matter of weeks, will ensure a smoother ride with the cost of motoring - and a big saving initially.”

Jasper Jolly

EY has followed its rivals and fellow big four global accountancy firms, KPMG and PwC, by cutting off businesses in Russia and Belarus, piling pressure on Deloitte, which has yet to pull out.

The businesses will not necessarily close down but they will be legally separated, in the latest example of multinational firms responding to the invasion of Ukraine by pulling out of Russia. KPMG has more than 4,500 workers and partners in Russia and Belarus, while PwC has 3,700 and EY has 4,700.

KPMG and PwC confirmed the businesses will no longer be able to use their brands or name once separated.

Companies across the world have been scrambling to work out their exposure to Russia after the US, EU and UK sought to isolate it economically with sanctions. None of those have imposed blanket bans on Russia or Belarus, which supported the invasion by its bigger ally, but many have judged that reputational or financial risks were too great.

More here:

This latest surge in energy prices will have an immediate impact on companies, driving up costs and creating the risk of demand destruction at energy-intensive companies.

Peter Garnry, head of equity strategy at Saxo Bank, says:

The galloping commodity prices will naturally put downward pressure on the economy and increase operational volatility for many companies already struggling with inflationary pressures.

An import ban on Russian oil and gas would immediately put Europe into a rationing mode to preserve and allocate oil and gas to the most important sectors of the economy first.

If prices don’t come down, UK consumers would face another jump in energy bills this autumn.

The price cap on UK bills will rise by 54% next month, taking the average bill up to £2,000. Experts have already predicted bills could rise again to as much as £3,000 in October when Ofgem next sets the price cap.

Jasper Jolly

The Conservative peer Greg Barker has resigned as chairman of EN+, the mining company part-owned by the sanctioned Russian oligarch Oleg Deripaska.

Lord Barker, an energy minister in David Cameron’s government, oversaw a plan to help the firm respond to US government sanctions levelled against the company and Deripaska in 2018, when it sanctioned the oligarch over his alleged links to the Russian government. Deripaska has previously said the US allegations were based on “false rumour and innuendo”.

Barker’s resignation comes amid intense scrutiny of companies linked to sanctioned Russian oligarchs, alleged by authorities in the US, EU and UK to be part of the system through which Vladimir Putin controls the Russian economy.

Here’s the full story:

Wholesale gas prices in the UK and in Europe have jumped to fresh record highs this morning, as the inflationary squeeze intensifies.

The price of gas for delivery in the UK in April is up over 30% at 650p per therm,driven by concerns of supply disruption and sanctions on Russia.

The contract surged as high as 800p in early trading, up from 460p on Friday.

A year ago, gas was trading at around 40p per therm, before last autumn’s energy price crunch.

Gas for next-day delivery in the UK has also hit a record high, up almost 30% at 605p per therm.

European energy prices also hit fresh records after the U.S. said it was considering curbs on imports of Russian oil, a move that would add to supply fears across commodity markets.

Benchmark gas prices jumped 79% to as high as €345 per megawatt-hour, as Bloomberg reports::

Dutch front-month gas, the European benchmark, soared to a high of 345 euros a megawatt hour, and was 74% higher at 335.04 euros as of 9:32 a.m. in Amsterdam. The U.K. equivalent contract rose 74% to an unprecedented 800 pence a therm. German month-ahead power surged 60% to 675 euros a megawatt-hour, also a record high

“I’m lost for words,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S. “By now only very few traders besides those who have a commercial interest is likely to be trading this market.”

As oil and gas rockets in price and worries about the effect on global growth rise, the spectre of stagflation is hovering over financial markets, says Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown:

Russia looks increasingly embedded in the conflict, and with relentless bombardments of Ukrainian cities and human tragedy continuing, speculation is that the US and Europe will retaliate by banning Russian energy exports. That would would have a richochet effect on their economies, with a supply squeeze on global markets, pushing up prices for industries across the board and making the cost of living crisis even more painful. This piles pressure on central bank policymakers, who are faced with the increasingly difficult tightrope to tread of trying to bring down inflation by raising rates, which will make overall costs more unbearable, potentially tipping economies back into a downturn.

A barrel of Brent crude jumped 15% earlier to its highest point since 2008, spiking at $139, before settling back at just over $126. This is still a very uncomfortable level for companies and consumers who are set to pay the price in terms of yet higher higher transport costs.

European natural gas prices have exploded since the start of the year and soared to fresh all time highs above €240 per megawatt-hour earlier today. If Russian exports are turned off, it will leave a huge gap in European energy needs, given the country accounts for more than 30% of the region’s natural gas imports.