Shell to invest up to £25bn in UK energy after cutting ties with Russia

Shell energy UK Russia FTSE 100 renewables sanctions oil gas – Daniel Harvey Gonzalez

Shell has said it will invest up to £25bn in the UK energy system over the next decade after cutting ties with the Kremlin over Russia’s invasion of Ukraine.

David Bunch, Shell’s UK country chair, said the company will spend between £20bn and £25bn, with 75pc of that on low-carbon products and services such as offshore wind, hydrogen and electric mobility.

It comes after Shell pledged to sell its stake in Rosneft, end its joint venture with Gazprom and stop work on the Nord Stream 2 pipeline.

The FTSE 100 company also said it will stop buying Russian oil and gas following a backlash over its decision to snap up a cargo of crude at a discount earlier this month.

10:52 AM

Alfa-Bank says new sanctions don’t affect regular operations

Russian lender Alfa-Bank has insisted new UK sanctions won’t affect its regular operations.

The bank was one of 65 entities to be targeted in a fresh wave of economic measures aimed at hitting the country’s “strategic industries”.

Alfa-Bank said Visa, Mastercard and Mir card transactions within Russia were working normally. It said it will suspend all transactions with UK counterparties as a result of the sanctions.

10:35 AM

Bank of England delays stress tests amid Ukraine conflict

The Bank of England has delayed the launch of its 2022 stress tests for British lenders as it warned Russia’s invasion of Ukraine had increased uncertainty and sparked market volatility.

The central bank said that while the UK’s direct exposure to Russia was limited, the war could pose further risks to the financial system and was likely to pile further pressure on real incomes for households and businesses.

While markets have remained functional, the Bank said it had noted heightened levels of market calls on energy and other commodity derivatives, and also said market liquidity has been impacted by the war in some bond markets.

The Bank halted stress tests, due to start today, and changed its guidance on the outlook for its countercyclical capital buffer, indicating a signalled increase next quarter was now less likely.

10:05 AM

Seven in eight workers to pay more tax

Seven in eight workers will see their taxes rise before the next election despite commitments by the Chancellor to reduce the burden on households as families face a £1,100 plunge in their real incomes over the next 12 months.

Tom Rees has more details:

A lack of support from the Chancellor at the Spring Statement will push 1.3m into absolute poverty as his Spring Statement support falls short, analysis by the Resolution Foundation also revealed.

Around 27m out of the 31m people in work will pay more in income tax and national insurance despite Rishi Sunak’s attempt to bolster his low tax credentials yesterday.

The think tank found that the typical working-age household will suffer a 4pc drop in their incomes in real terms in 2022-23, a £1,100 hit, while the poorest quarter of families face an even bigger 6pc fall.

Torsten Bell, chief executive of the Resolution Foundation, said: “The big picture is that Rishi Sunak has prioritised rebuilding his tax-cutting credentials over supporting the low-to-middle income households who will be hardest hit from the surging cost of living, while also leaving himself fiscal flexibility in the years ahead.

“Whether that will be sustainable in the face of huge income falls to come remains to be seen.”

​Read Tom’s full story here

09:53 AM

UK hits Alfa-Bank in fresh wave of sanctions

The UK has unveiled fresh sanctions against 65 more Russian entities, including Alfa-Bank, as it targets “strategic industries” and top business figures in the country.

The new measures target industries supporting Russia’s invasion of Ukraine, including Russian Railways and defence company Kronshtadt, the main producer of Russian drones.

The Wagner Group – the organisation Russian mercenaries reportedly tasked with assassinating President Zelenskyy – has also been sanctioned.

Six more banks are targeted, including Alfa-Bank, whose cofounders include previously sanctioned oligarchs Mikhail Fridman, Petr Aven and German Khan. The world’s largest diamond producer Alrosa is also sanctioned.

Individuals sanctioned include the billionaire oil tycoon Eugene Shvidler, founder of Tinkoff bank Oleg Tinkov, Herman Gref, the chief executive of Russia’s largest bank Sberbank, and Polina Kovaleva, step-daughter of foreign minister Lavrov.

Foreign Secretary Liz Truss said:

These oligarchs, businesses and hired thugs are complicit in the murder of innocent civilians and it is right that they pay the price. Putin should be under no illusions – we are united with our allies and will keep tightening the screw on the Russian economy to help ensure he fails in Ukraine. There will be no let-up.

09:46 AM

Expert reaction: Ukraine war sparking uncertainty

Rhys Herbert at Lloyds Bank says the Ukraine war will fuel inflation, prolong uncertainty and could drag on the economy.

The economic outlook continues to be uncertain and mixed. While the reduction in pandemic-related restrictions is bolstering many sectors, inflationary pressures, exacerbated by the war in Ukraine, are causing a drag on the economy.

The price of commodities such as oil, nickel, zinc, and wheat have soared since the beginning of the conflict and are now impacting some businesses’ balance sheets.

This seems bound to push inflation higher, which will reduce the spending power of companies and consumers alike, potentially causing orders and output to falter in the near term.

The ongoing crisis in Ukraine and apparent lack of progress in reaching a peaceful settlement will prolong the period of uncertainty that firms have to contend with.

09:40 AM

Manufacturing stalls as Ukraine war drives up costs

UK manufacturers grew at their slowest pace in 13 months in the aftermath of Russia’s invasion of Ukraine as the war disrupted supply chains and drove up costs.

S&P Global’s manufacturing PMI dropped to 55.5 in March from 58 last month – well below expectations. Meanwhile, business optimism fell to its lowest since October 2020, with bosses concerned about surging energy and raw material prices.

Chris Williamson, chief business economist at S&P Global, said: “The outlook darkened as concerns over Russia’s invasion exacerbated existing worries over soaring prices, supply chains and slowing economic growth.

“The survey indicators point to potentially sharply slower growth in the coming months, accompanied by a further acceleration of inflation and a worsening cost of living crisis, which paints an unwelcome picture of ‘stagflation’ for the economy in the months ahead.”

Output across the economy as a whole held up in March, with the PMI slipping to 59.7 from 59.9 in February – that’s ahead of forecasts of a fall to 57.5.

The services sector was unexpectedly strong, with the PMI accelerating to a nine-month high of 61 from 60.5.

PMI - S&P Global, CIPS, ONS

PMI – S&P Global, CIPS, ONS

09:29 AM

Morrisons takeover could push up fuel prices, says watchdog

Morrisons CD&R fuel prices petrol stations - REUTERS/Phil Noble/File Photo

Morrisons CD&R fuel prices petrol stations – REUTERS/Phil Noble/File Photo

The competition watchdog has warned that the £7.1bn private equity takeover of Morrisons could lead to higher fuel prices.

In January the Competition and Markets Authority (CMA) launched an investigation into Clayton, Dubilier & Rice’s (CD&R) deal to snap up the supermarket chain.

It now says it has concerns about fuel prices in 121 locations across the UK.

Morrisons has 339 petrol stations at its supermarkets, while CD&R also owns Motor Fuel Group, which runs more than 900 forecourts under various brands.

The two sides have five days to offer proposals to ease the concerns, after which the CMA has five days to decide whether to accept them or launch an in-depth investigation.

Colin Raftery at the CMA said:

Prices for petrol and diesel have recently hit record highs, which makes it even more important that we don’t allow a lack of competition at the pump to make the situation worse.

We’re concerned that this deal could lead to higher prices for motorists in some parts of the country. But if CD&R and Morrisons are able to address these concerns, then we won’t need to move on to an in-depth investigation of the merger.

09:20 AM

Pound falls again after Sunak’s cuts

Sterling has weakened against the dollar for a second day amid concerns Chancellor Rishi Sunak didn’t do enough to tackle the cost-of-living crisis.

The pound fell 0.3pc to $1.3164, with the dollar also gaining ground following the Federal Reserve’s increasingly hawkish tone. Against the euro, it fell 0.2pc to 83.48p.

09:13 AM

Renault shares fall after Moscow factory closure

Renault Moscow sanctions factory - Andrey Rudakov/Bloomberg

Renault Moscow sanctions factory – Andrey Rudakov/Bloomberg

Shares in Renault fell in early trading after the company said it was suspending operations at a factory in Moscow.

The French car maker also said it would assess options on its majority stake in Avtovaz, Russia’s biggest car manufacturer.

Shares slid as much as 2pc before paring losses to trade flat.

The move came after Ukrainian President Volodymyr Zelenskyy accused Renault of financing Russia’s war. The foreign ministry has since welcomed the company’s decision.

09:05 AM

Rouble extends rally as trading resumes

The rouble has extended its recovery this morning as the Moscow Exchange partially resumed trading after a month-long shutdown.

The Russian currency gained 2pc to just under 96 against the dollar, extending overnight gains after Vladimir Putin said the country would start selling gas to “unfriendly nations” in roubles.

Against the euro, the rouble was 3pc higher at 105. This is well above the all-time low of 132 hit earlier this month, but far from levels of around 90 seen before Russia invaded Ukraine.

09:04 AM

Next takes £85m sales hit over Ukraine crisis

Next retail inflation cost-of-living crisis - Ian West/PA Wire

Next retail inflation cost-of-living crisis – Ian West/PA Wire

Next has warned of an £85m hit to sales in the current financial year after it was forced to shut down its operations in Russia and Ukraine.

The retailer said the closure of its websites in both countries would also pull down profits by £18m for the year, although this will be partially offset by “better-than-expected” sales in the UK. It downgraded profit targets by £10m as a result.

Overall, the company still expects a 5pc increase in sales for the year, while profits are set to rise by 3.3pc to £850m.

Lord Simon Wolfson, chief executive of Next, told PA the company was expecting to increase prices by an average of 3.7pc over the half-year to July as inflation bites.

He said pricing is expected to rise by an average of 8pc in the following six-month period, with fashion set for a 6.5pc rise.

Lord Wolfson warned Next had factored in potential for “subdued” trading as the cost-of-living crisis bites over the rest of the year. Shares fell 3.4pc following the update.

09:02 AM

FTSE risers and fallers

The FTSE 100 has posted cautious gains this morning as traders weigh up the economic fallout from the Ukraine crisis and Rishi Sunak’s new measures to tackle the cost-of-living crisis.

The blue-chip index rose 0.3pc in early trading, with BP and Shell gaining as oil prices continued to rise.

Miner Glencore fell 3.2pc after it priced its share offering at a discount, while retailer Next lost 2.9pc after lowering its sales and profit forecasts for the year ahead.

The domestically-focused FTSE 250 was down 0.2pc, with Bridgepoint jumping as much as 16pc on upbeat results.

08:28 AM

Ukraine war will be ‘major claim’, warns Lloyd’s of London

Insurance market Lloyd’s of London has warned Russia’s war against Ukraine will be a “major claim” this year.

The insurance group said it was in “close dialogue” with market partners to gauge their exposure to Ukraine and the impact of Russia’s invasion.

While it did not give a figure, it stressed that direct and indirect claims were “expected to fall within manageable tolerances and will not create solvency challenges”.

It came as Lloyd’s revealed it swung out of the red last year, with pre-tax profits of £2.3bn against losses of £900m in 2020.

08:21 AM

1.3m Brits to be pushed into poverty, warns think tank

1.3m people will be pushed into absolute poverty next year after Rishi Sunak failed to ease the cost-of-living crisis for British families, the Resolution Foundation has warned.

The think tank took aim at the Chancellor’s “big but poorly targeted policy package”, saying it focused on offsetting previously announced tax rises rather than providing more support.

Torsten Bell, chief executive of the Resolution Foundation, said typical family incomes would drop by £1,100 next year, while 1.3 million people – including half a million children – would fall below the poverty line.

He added that despite the “eye-catching” cut to income tax, seven in eight workers will see their tax bills rise.

08:19 AM

Reaction: Not much to celebrate for locals

Emre Akcakmak at Greenwest Consultancy says there’s “not much to celebrate” for Russian investors as markets reopen.

While Putin has averted a market crash, Russia is still grappling with a slump in the rouble and surging inflation.

08:12 AM

UK puts Putin’s gold reserves in its sights

Vladimir Putin Russia gold sanctions - REUTERS/Alexander Manzyuk/File Photo

Vladimir Putin Russia gold sanctions – REUTERS/Alexander Manzyuk/File Photo

Britain and other western allies are looking at whether more can to done to prevent Vladimir Putin from accessing gold reserves as they ramp up the economic pressure on Russia.

A wave of sanctions have already frozen much of Russia’s central bank’s $640bn (£486bn) in assets, barred several banks from the Swift global payments system and hammered the rouble.

But Boris Johnson said : “We need to do more, and so we need to do more economically. Can we do more to stop him using his gold reserves for instance, in addition to his cash reserves?

“The more pressure we apply now, particularly on things like gold, that I believe the more we can shorten the war.”

Speaking to LBC radio, the Prime Minister said US President Joe Biden was right to say Russia was guilty of war crimes, adding that Putin should appear before the International Criminal Court.

08:03 AM

FTSE 100 inches higher

Closer to home, it’s a cautiously positive start to trading for the FTSE 100, as traders digest the latest inflation figures and Rishi Sunak’s efforts to ease the cost-of-living crisis.

The blue-chip index ticked up marginally to 7,466 points.

08:01 AM

White House slams ‘Potemkin market opening’

The White House has slammed the partial resumption of trading on the Moscow Exchange, branding it a “Potemkin market opening”.

Russia has made clear they are going to pour government resources into artificially propping up the shares of companies that are trading.

This is not a real market and not a sustainable model—which only underscores Russia’s isolation from the global financial system.

Only stocks that have primary listings in Russia are active today, meaning tech firms such as Yandex and Ozon haven’t resumed trading. A range of other restrictions on trading have also limited the damage.

On the day of Russia’s invasion of Ukraine, the benchmark index crashed as much as 45pc in the fifth-worst plunge in equity market history.

07:56 AM

Energy stocks rise as Aeroflot slumps

Lukoil Gapzrom Moscow Exchange stocks - Gabby Jones/Bloomberg

Lukoil Gapzrom Moscow Exchange stocks – Gabby Jones/Bloomberg

Energy stocks are providing the biggest momentum to the Moscow Exchange this morning. They’ve managed to avoid western sanctions, while Putin’s demand for gas payments in roubles has also helped sentiment.

Lukoil jumped 16pc, while Gazprom was up more than 18pc. State-owned pipeline transport company Transneft bucked the trend, falling 5.9pc.

Rostelecom, the country’s largest telecoms group, also jumped 13pc, outstripping wider gains.

But Putin hasn’t been able to prevent a slump in all stocks. Heavily-sanctioned bank VTB shed 6pc, while flag carrier Aeroflot dropped as much as 18pc.

07:49 AM

Putin staves off market crash

Traders’ fears of a market crash as the Moscow Exchange reopened haven’t materialised – but that’s largely due to Russia’s efforts to block a sell-off.

Analyst Hasnain Malik said: “With restrictions on foreign selling and repatriation this is not a functional market in terms of efficient price discovery, given foreigners dominate the market’s free float.

“The one fundamental factor that has improved during the stock market’s suspension is the partial recovery in the currency as Russia tries to shift oil and gas trade to roubles.”

Vladimir Putin yesterday moved to prop up the sinking rouble by demanding payments in the currency for natural gas purchases from so-called “unfriendly” nations.

07:32 AM

Russian stocks rise as Moscow reopens

Good morning.

Russian stocks have pushed higher as trading reopened following an historic shutdown of the Moscow Exchange.

The benchmark index rose 11pc in early trading, driven by gains for energy stocks such as Lukoil and Gazprom.

The market is open for a shortened session, with only 33 stocks trading. Moscow has also rolled out a string of measures to try and limit a sell-off, including a ban on short selling and foreigners withdrawing their investments, as well as a cash injection from Russia’s wealth fund.

The Moscow Exchange has been shuttered since February 26. It crashed as much as 45pc following Russia’s invasion of Ukraine – its biggest drop ever.

5 things to start your day

1) Commuters brace for record rise in rail fares Ticket prices expected to increase by about 10pc if ministers keep them pegged to the Retail Prices Index (RPI)

2) Sunak holds back £32bn war chest amid economic uncertainty The Ukraine crisis poses a threat to Britain’s recovery as actions to hobble Putin’s regime ‘are not cost free’

3) £33bn student loan ‘stealth tax’ funds Sunak’s giveaways Repayment level freeze will be the biggest earner of the Chancellor’s fiscal tweaks

4) P&O Ferries faces huge fine if it broke the law, warns Boris Johnson Prime Minister condemns “callous” nature of the mass redundancies and vows that employees working in the UK will be paid the minimum wage

5) Putin demands payment for Russian gas in roubles Tactic ramps up pressure on EU leaders and sends prices soaring by a third

What happened overnight

In early trade, Tokyo, Hong Kong, Shanghai, Seoul, Wellington, Taipei and Bangkok were all down, though Sydney and Singapore eked out gains.

Coming up today

  • Corporate: Bridgepoint, Energean, Next, International Public Partnerships (full-year); CVS (interims)

  • Economics: ‘Flash’ PMI surveys (UK, eurozone, Japan, US), jobless claims, durable goods orders (US)

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