Closing summary
Germany moved closer to gas rationing on Wednesday, after activating an emergency plan designed to help it cope with any disruption in supplies from Russia, ahead of Moscow’s Thursday deadline for gas payments in roubles.
Vladimir Putin has demanded that “unfriendly” countries i.e. Europe and the US pay for their gas shipments in roubles, rather than euros or dollars, but western nations have rejected this demand and accused Russia of breaching contracts. Germany, Europe’s largest economy, is particularly reliant on Russia for natural gas.
Amid fears of a looming showdown with Putin over gas flows, Germany’s economy minister, Robert Habeck, convened a crisis team and warned consumers and businesses to reduce consumption, telling them “every kilowatt hour counts”.
Russia’s top lawmaker suggested that Russia should also switch to rouble payments for other commodities. Vyacheslav Volodin, the speaker of Russia’s lower house of parliament, said in a post on Telegram: “If you want gas, find roubles,” before suggesting that rouble payments should be extended to oil, grains, metals, fertiliser, coal and timber for roubles on global markets where it is profitable to do so.
European stock markets are mostly in the red, down between 0.3% (Italy) and 1.4% (Germany), while the UK’s FTSE 100 index has edged 0.26% higher to 7,557. Wall Street has also opened lower, as yesterday’s optimism about the peace talks between Ukraine and Russia evaporated.
Oil prices have risen by more than $4 with Brent crude at $114.41 a barrel, while British and Dutch gas prices jumped amid supply fears.
Glencore, the mining and commodities group, said it had stopped seeking new business in Russia, but will honour its legal obligations under pre-existing contracts. It said there was “no “realistic way” to exit its 10.6% stake in the Russian metals group EN+ and its 0.6% holding in Rosneft “in the current environment”.
Our other main stories today:
Thank you for reading. We’ll be back tomorrow. Bye! – JK
Updated
Starbucks paid just £5.4m in UK corporation tax last year despite making a gross profit of £95m, reports our wealth correspondent Rupert Neate.
The company, which has faced years of heated criticism for paying very little tax in the UK, paid out £26.5m in royalty payments to its parent company - almost five times as much the UK tax it paid, according to accounts filed at Companies House.
The royalty payment helped Starbucks, which is run by the billionaire Howard Schultz, make a global profit of $4.9bn in the same period.
UK division collected sales of £328m from its 1,000 UK stores in the year to 3 October 2021, up from £243m in the previous year when shops were temporarily closed during the pandemic lockdown.
Updated
BioNTech sales and profits surge on Covid jab
Germany’s BioNTech, which developed a Covid-19 vaccine with Pfizer – the first to be approved in late 2020 – has made bumper revenues and profits from the jab. The Mainz-based firm made fourth-quarter revenues of €5.5bn and 2021 revenues of $19bn (versus €482m in 2020), as the firm’s fortunes were transformed by the product.
Previously a little-known German biotech, it has grown into a $42bn company (listed on Nasdaq). It said 2.6bn doses of the Comirnaty jab were delivered to more than 165 countries last year, including more than 1bn doses to low-and middle-income countries.
A further 2.4bn doses have been ordered this year, and BioNTech expects to make annual revenues of €13bn to €17bn from the vaccine.
BioNTech made a net profit of €10.3bn last year, compared with €15.2m in 2020. The company is paying a special cash dividend of €2 per share and will buy back up to $1.5bn of shares over the next two years.
The company said it would reinvest its profits to ramp up its oncology and infectious disease programmes, broaden its pipeline and scale up the business.
Ugur Sahin, chief executive and co-founder of BioNTech, said:
To continue our industry leadership, we intend to build on our 2021 success and rapidly advance multiple programs, including our mRNA-based immunotherapies, cell therapies, and bi-specific antibodies.
At the same time, we are investing in our second growth pillar, infectious diseases, and intend to advance our influenza and shingles vaccine candidates together with our partner Pfizer. In parallel, we also intend to invest heavily in regenerative medicine and autoimmune diseases with the aim to develop further therapeutic innovations addressing high unmet medical need.
Updated
US GDP growth in the fourth quarter has come in lower than forecast. The annualised growth rate was revised slightly lower to 6.9% from 7%.
Tom Hopkins, portfolio manager at BRI Wealth Management, said:
US GDP came in at 6.9% in Q4 2021, slightly below the forecasts of 7%. It remains the strongest expansion since a record growth of 33.8% in the third quarter of 2020.
The figures show the economy performed strongly in the final quarter as lockdown restrictions continued to subside and the economy returned to near normal conditions, helped by positive consumer spending figures in October and November.
What’s encouraging is that the Omicron surge in December posed little disruption given that over 70% of the US population has now had at least one covid vaccination. Looking forward, the Fed will continue to face pressure to raise interest rates as inflation and related problems, such as tangled supply chains, may continue to challenge business leaders and policymakers.
The Russian invasion of Ukraine is not likely to derail the US recovery, but it will push up inflation in the short run. That said, the labor force participation rate has started to pick up and corporate profits are more than satisfactory.
German chemical industry warns of shutdowns for months without gas
Germany’s chemical industry association VCI has warned that if gas is rationed, production facilities would have to shut down, possibly for months, causing knock-on effects for other industries such as carmakers. VCI head Christian Kullmann told Reuters:
These are large complexes that are inter-related in their material flows. You don’t just switch them off and on again like a microwave. Once chemical plants are shut down, they stand still for weeks and months.
If our plants stand still, a little later the assembly lines in the automotive industry, in mechanical engineering and in many other industries also stand still. There would be a huge domino effect throughout almost all industries – one after the other would topple.
German inflation jumps to 41-year high of 7.3%
In Germany, inflation surged to the highest level since 1981, because of higher energy, commodity and food prices. The headline annual rate rose to 7.3% in March from 5.1% in February, according to a preliminary estimate from the country’s statistics office Destatis.
It said:
Since Russia’s attack on Ukraine, the prices of natural gas and mineral oil products have markedly increased again and have had a considerable impact on the high rate of inflation.
A similarly high inflation rate in Germany was last recorded in autumn 1981 when mineral oil prices had sharply increased, too, as a consequence of the first Gulf war. Additional factors in the current reference month are delivery bottlenecks due to interruptions in supply chains caused by the Covid-19 pandemic and the marked increases in energy product prices at upstream stages in the economic process.
“The bad news is that this will not be the end of accelerating inflation. For inflation, the only way is up and double-digit numbers can no longer be excluded,” said Carsten Brzeski, global head of macro at ING.
He explained:
Looking ahead, with the war in Ukraine and continued tension and upward pressure on energy, commodity and food prices, headline inflation in Germany will accelerate further in the coming months.
The pass-through to all kinds of sectors is in full swing. Add to this the additional price mark-ups in the hospitality, culture and leisure sectors once the current round of restrictions is over and it is hard to see inflation coming down significantly any time soon.
Against the backdrop of recent geopolitical events, we now expect German inflation to average at more than 8% this year with a chance that monthly inflation rates will enter double-digit territory in the summer.
Just to put things into perspective: The last time #inflation was 7.3% in Germany – in Nov 1981 – the Bundesbank key interest rate was 11.4%. Today, #ECB's main rate remains pegged at 0%. pic.twitter.com/s1zQMxtmov
— Holger Zschaepitz (@Schuldensuehner) March 30, 2022
Executives at the British aviation services company John Menzies have accepted a £571m takeover deal from a Kuwaiti rival, after rebuffing three previous offers, reports Joanna Partridge.
A subsidiary of Agility Public Warehousing had made the bid more than a month ago, which was conditional at the time, although the John Menzies board said it would accept the offer.
The Edinburgh-based company, which offers services ranging from cargo and baggage-handling to passenger check-in and plane de-icing and refuelling, told the stock market on Wednesday that it had agreed the terms of the deal.
Here is our full story on Germany’s emergency fuel plan:
...and the story on the crisis meeting about rocketing fertiliser prices and the rising cost of food production:
Consumers have begun cutting back on food spending and reduced their use of gas and electricity at home, as more people report rising living costs and concern grows about the impact of soaring prices on the poorest households in Britain, reports our economics correspondent Richard Partington.
According to an extensive survey of more than 13,000 adults in Great Britain, the Office for National Statistics (ONS) said as many as 83% saw an increase in their cost of living this month, up from 62% in November.
As utility bills and the weekly shop became more expensive, the ONS said 34% of those reporting rising living costs said they were using less gas and electricity at home, while 31% said they were spending less on food. Half have cut back on non-essentials.
The ONS figures raise concerns that some of the poorest in Britain are being forced to make tough choices between heating and eating.
German government economic adviser Volker Wieland sees a “substantial risk” of a recession in Germany because of the war in Ukraine.
He told Reuters that the council of economic advisers of which he is part had not yet calculated the probability of recession.
But an energy embargo [against Moscow] is a possibility. So, this is a substantial risk.
He said the blow had come at a time when Germany has yet to fully recover from the Covid-19 pandemic.
Look at the USA. They have already grown well above the pre-crisis level. We’re still below that and would be set back once again.
Updated
There is lots of anger on Twitter after part of the British Gas website and its app both apparently crashed earlier today - possibly due to large numbers of people trying to submit a meter reading ahead of Friday’s energy price hikes, reports my colleague Rupert Jones, deputy Money editor.
With energy bills due to rise by an average of 54% on Friday, millions of households have been urged to take gas and electricity meter readings the day before, to ensure they get the current, cheaper rates for all the energy they use right up until close of play on Thursday.
But, ominously, many people logging on to the “Submit a meter reading” section of the British Gas website were met with a message saying: “Service temporarily unavailable. We’re really sorry if you can’t access your online account – there are some technical issues we’re trying to resolve as quickly as possible. Please try again later.” At the time of writing (12.25pm), this part of the site now appears to be working again. Meanwhile, there were reports that the app was also down.
The organisation Energy Action Scotland tweeted a screengrab and said: “Really concerned that the @BritishGas app is down just as households prepare to respond to the submission of meter readings ahead of the increase in costs on 1 April 2022. #BigMeterRead.”
The Guardian has approached British Gas for comment.
Updated
Market summary
Sadly, Russia sees no signs of a breakthrough in talks with Ukraine, according to the Kremlin.
Kremlin spokesperson Dmitry Peskov, speaking with reporters today, said Russia had not noticed anything really promising or that looked like a breakthrough yet in peace talks with Ukraine, Reuters is reporting.
This has sent stock markets falling across Europe, with the German Dax down 1.4%, the French CAC down 0.9% and the Italian borsa losing 0.3%, after yesterday’s rally. The FTSE 100 index in London is clinging on to a 0.1% gain, up 8 points at 7,545.
Russian shares rose in Moscow, where stocks and bonds resumed full trading this week after weeks of shutdown. The rouble-based Moex Russia index gained 4.3% while the dollar-denominated RTS index rose 7.7% in a shortened trading session. The rouble jumped more than 7% to 82.95 per dollar, a one-month high, and is now trading at 83.5 per dollar. Against the euro, it is up 2.15% at 92 per euro.
Oil prices are rising again after selling off in the past couple of days. Brent crude, the global benchmark, has gained 2.4% to $112.84 a barrel while US light crude is 2.6% ahead at $107 a barrel.
Ikea is planning to close one of its six London stores with the potential loss of 450 jobs as the furniture retailer shifts towards online and high street locations, reports our retail correspondent Sarah Butler.
The Swedish retailer is to close the store in Tottenham, north London, later this year, just a decade after its opening caused a riot with a 1,000 cars reported to have queued up on opening day and six shoppers taken to hospital amid the chaos.
News of the planned closure comes just weeks after Ikea opened a new kind of high street outlet in Hammersmith, west London, in February and ahead of the opening of a warehouse in Dartford, Kent, that will enable home deliveries within 24 hours across the capital.
Ikea closes all stores and factories in Russia amid exodus of western firmsRead moreAdvertisement
It is also preparing to open a store in Topshop’s former flagship on Oxford Circus in central London in autumn 2023 as part of £1bn investment in the capital over the next three years.
British and Dutch gas prices jump on supply fears
Amid fears the Russia could turn off the gas taps if Europe doesn’t pay for shipments in roubles, with a deadline looming tomorrow, gas prices have jumped today.
British gas for next-day delivery rose more than 15% to 294p per therm, while the Dutch wholesale gas contract for May rose 14% to €120.75 per megawatt hour.
Updated
One of the economic advisers to the German government, Volker Wieland, said he was in favour of keeping the country’s nuclear power stations running for longer.
He told Reuters:
We have to change course and use all levers to become less dependent on Russian raw material supplies.
Germany still doesn’t have the storage technologies to make renewable electricity available when the sun doesn’t shine and the wind isn’t blowing, he said.
This means we have to continue using coal and nuclear power, at least until we have a secure energy supply.
Germany’s three remaining nuclear plants are due to be shut down by the end of the year.
Wieland added:
We will remain an energy importer in the long run. In the future, that may include green hydrogen produced in Arica, for example.
Updated
Germany moves closer to gas rationing ahead of Thursday's rouble payment deadline
More on our top story: Germany has declared an “early emergency” for gas supplies, convened a crisis group to monitor the situation, and is moving closer to gas rationing, ahead of Moscow’s Thursday deadline for gas payments in roubles.
Germany, Europe’s largest economy, is particularly reliant on Russia for natural gas. The German economy minister Robert Habeck called on consumers and businesses to reduce consumption, telling them “every kilowatt hour counts”. While supplies were safe for now, “we must increase precautionary measures to be prepared for an escalation on the part of Russia”.
Vladimir Putin said on 23 March that Russia would seek payment in roubles for gas sold to “unfriendly” countries, i.e. European nations and the United States, which have imposed sanctions on Moscow over its invasion of Ukraine. Putin’s message was: If you want our gas, buy our currency.
The Russian president has set 31 March as the deadline for the rouble payments, as Moscow is working out the practical arrangements. However, European countries, which pay mostly in euros, have so far rejected the demand, with Germany and Poland calling it a breach of contract. The stand-off has stoked fears of disruption to gas flows as the deadline approaches.
Russia’s switch to rouble payments appears to be mainly politically motivated, although it could also help prop up the Russian currency, which slumped to record lows when western sanctions were imposed. The rouble has since staged a (partial) recovery to trade at 83.73 per dollar this morning, up 2%, and at 92.6 per euro, up 1.5%.
Kremlin spokesperson Dmitry Peskov told reporters on Tuesday:
No one will supply gas for free, it is simply impossible, and you can pay for it only in roubles.
Referring to the new rouble payment mechanism, Peskov said “all modalities are being developed so that this system is simple, understandable and feasible for respected European and international buyers”.
Today, Russia’s top lawmaker suggested that Russia should switch to rouble payments for other commodities. Vyacheslav Volodin, the speaker of Russia’s lower house of parliament, said in a post on Telegram: “If you want gas, find roubles,” before suggesting that rouble payments should be extended to oil, grains, metals, fertiliser, coal and timber for roubles on global markets where it is profitable to do so.
Asked about this, Peskov said:
This is an idea that should definitely be worked on.
Updated
BOE's Broadbent: UK experiences biggest-ever external hit from commodity price surge
Bank of England deputy governor Ben Broadbent has spoken about the surge in UK inflation, which might reach almost 9% – more than four times the central bank’s 2% target – because of rocketing energy prices.
Speaking at a conference at Gresham College in London, hosted by the National Institute of Economic and Social Research and the The Money Macro and Finance Society, Broadbent said:
From an economic perspective, coming on top of what was already a very steep rise in the cost of globally traded goods, in the wake of the pandemic, the invasion has led to substantial rises in the cost of energy and other commodities.
As a big net importer of manufacturers and commodities, it’s doubtful that the UK has ever experienced an external hit to real national income on this scale.
From the narrow perspective of monetary policy, it will result in the near term in the difficult combination of even higher inflation but weaker domestic demand and output growth.
His comments come after the Bank’s governor Andrew Bailey said the UK is facing an energy price shock on the scale of the 1970s.
The Commons Treasury committee will quiz leading economists on the spring statement (a mini budget presented by Rishi Sunak a week ago) at 1.45pm BST today.
- Dr Gemma Tetlow, chief economist at Institute for Government
- Torsten Bell, chief executive at Resolution Foundation
- Paul Johnson CBE, director at Institute for Fiscal Studies
Cathay Pacific is planning the world’s longest passenger flight by rerouting its New York to Hong Kong service over the Atlantic instead of the Pacific, the airline has said, in a new path that steers clear of Russia.
The flight path will cover “just under 9,000 nautical miles” (16,668km, or 10,357 miles) in 16 to 17 hours, Cathay said in a statement to Agence France-Presse.
On Tuesday evening, Cathay listed on its website a New York-to-Hong Kong flight for 3 April – a non-stop journey it said would stay in the air for 17 hours and 50 minutes.
The business secretary has effectively ruled out a windfall tax on North Sea oil firms to fund discounted energy bills but promised much greater investment in solar panels, wind and nuclear to reduce reliance on Russian oil and gas, report Rob Davies and Mark Sweney.
Speaking amid reports of a cabinet split over landmark energy security plans due to be published within days, Kwasi Kwarteng offered up a tax on oil companies, backed by Labour, as the one policy that definitely will not find favour with ministers.
“We believe a windfall tax would be a tax on jobs, would destroy investment and would add to the uncertainty in oil markets,” he said. “It would be completely the wrong message to send investors.”
The UK’s poorest families will see the amount of spare cash at their disposal drop by a fifth this year with £850 less to spend on non-essentials as shop prices hit a decade high, writes our retail correspondent Sarah Butler.
Pressure on family budgets is tightening as grocery price inflation reached 5.2% in March, the highest level since April 2012, according to the latest figures from market analysts Kantar.
The company said prices were rising fastest for pet food and savoury snacks, such as crisps, but were still falling for some products such as fresh bacon.
Spare cash is also under pressure from rises in the price of clothing and furnishings with non-food retail price inflation accelerating to 1.5% in March, from 1.3% in February, according to the latest report from the British Retail Consortium (BRC). This is the highest rate of non-food inflation since February 2011.
Competition investigators raided the offices of outsourcer Mitie and are examining the emails of senior staff, after the Home Office raised concerns about suspected anti-competitive behaviour, the Guardian understands.
The Competition and Markets Authority (CMA) is examining the relationship between Mitie and US firm PAE, who operate a joint venture for the Ministry of Defence but were also competing to run Home Office immigration removal centres, at Derwentside, in Coutry Durham, and Heathrow, reports my colleague Rob Davies.
Let’s have a look at today’s other news.
P&O Ferries is not the first in UK waters to hire low-cost workers. The government has long turned a blind eye to widespread pay abuses by operators working out of UK ports, writes our transport correspondent Gwyn Topham.
If Grant Shapps hoped P&O Ferries would fold before his ultimatum this week and reinstate 800 sacked workers, a letter by return quickly disabused him.
Such a move, P&O Ferries’ chief executive Peter Hebblethwaite said, would lead to the company collapsing, adding the transport secretary was “ignoring the situation’s fundamental and factual realities”.
It would not be the first time a minister had done so, when it comes to the sea. While Shapps has now promised measures to tackle the actions of P&O Ferries, which dismissed all crew around the UK employed on its “British”, (but Jersey-issued) contracts, and enforce minimum wages, the government has long turned a blind eye to pay abuses.
European shares decline, FTSE 100 edges higher
After yesterday’s rally, European stock indices are trading lower today, with the exception of the FTSE 100 index in London, which edged up 14 points, or 0.2%, to 7,551. Optimism about a ceasefire in Ukrain evaporated as fighting continued on the ground.
The governor of Ukraine’s northern Chernihiv region said he saw no let-up in Russian attacks despite a promise by Moscow to scale down military operations there. More on our Ukraine live blog:
The Dax in Frankfurt has lost 146 points, or 1%, to 14,672, while the CAC 40 in Paris is trading 46 points lower at 6,473, a 0.7% drop. The FTSE MiB in Milan has fallen 127 points, or 0.5%, to 25,180.
The inflation figure is the flash estimate published by the Spanish statistics institute (INE) today, and is up from an annual rate of 7.6% in February. Prices went up 3% in March compared with February.
Prices for electricity, fuel, food and drink surged compared with March 2021. Core inflation, which excludes volatile items such as non-processed food and energy costs, rose to 3.4%, the highest since September 2008.
Spain inflation rises to 9.8%, highest since 1985
In Spain, inflation has risen to 9.8% in March, the highest annual rate since 1985, because of rocketing energy prices. This has raised expectations of more government support measures, as Angel Talaveria, head of European economics at the consultancy Oxford Economics, tweeted.
Spain inflation is now effectively at double digits, with energy prices absolutely out of control. This is now panic territory of the sort that can get governments ousted, so I expect more policy support to be announced sooner than later. pic.twitter.com/2yIDrrRpmM
— Ángel Talavera (@atalaveraEcon) March 30, 2022
CPI inflation in Spain reaches 9.8 percent in March, the highest annual rate since 1985 pic.twitter.com/GXL07bdv6R
— Erik Meyersson (@emeyersson) March 30, 2022
Updated
UK government to host roundtable about rocketing fertiliser prices
The UK government is to host a crisis meeting with farmers about rocketing fertiliser prices, as part of several moves designed to help them with soaring costs which could impact food production, my colleague Joanna Partridge reports.
Quotes for ammonium nitrate fertiliser prices have risen as high as £1,000 per tonne in recent weeks, compared with £280 per tonne a year ago. The cost of fertiliser had already been climbing in recent months, as a result of the increase in wholesale gas prices, which is necessary for production.
However, the conflict in Ukraine only exacerbated the situation, disrupting exports from Russia and further increasing production costs, leading to a recent price surge. This sparked panic-buying from some farmers who feared the price would only keep on rising.
The Department for the Environment, Food, and Rural Affairs (Defra) will host a roundtable this week with industry bodies, chaired by the farming minister, Victoria Prentis, to discuss current pressures on farmers and to come up with possible solutions to soaring fertiliser prices.
The meeting will also look at alternatives to ammonium nitrate fertiliser, including those produced from organic material, as well as the use of some traditional farming practices, where crops are grown without fertiliser.
Defra said the government would pay farmers to help them with the cost of sowing nitrogen-fixing plants, such as legumes and clovers, to reduce some of their dependence on manufactured fertilisers.
Updated
Here’s more on Germany declaring an “early warning” that it could be heading for a gas supply emergency. It is the first of three stages and does not yet imply state intervention, although a crisis team has convened to monitor the situation closely.
The move comes ahead of Moscow’s plan to present a new mechanism under which gas payments will be switched to roubles, which has been resisted by the G-7 nations, including Germany, and has stoked fears of supply disruption.
Germany’s economy minister Robert Habeck said gas supplies were safe for now.
Nevertheless, we must increase precautionary measures to be prepared for an escalation on the part of Russia. With the declaration of the early warning level, a crisis team has convened.
He said that the crisis team, which includes members of his ministry, the German network regulator and network operators, would closely monitor the situation “so that – if necessary – further measures can be taken to increase supply security”.
Klaus Müller, president of the German network regulator, Bundesnetzagentur, said in a tweet: “It is right that the economy minister declared an ‘early warning’. The aim is to avoid a deterioration of gas supplies for Germany and the EU via energy savings and additional purchases. The regulator is urging consumers and industry to do their bit and is preparing for all scenarios.”
Es ist richtig, dass das @BMWK die #Frühwarnstufe ausgerufen hat. Ziel ist & bleibt es, eine Verschlechterung der #Gasversorgung für 🇩🇪 & 🇪🇺 durch #Einsparungen & Zukäufe zu vermeiden. Die @BNetzA bittet Verbraucher & Industrie beizutragen & bereitet sich auf alle Szenarien vor.
— Klaus Müller (@Klaus_Mueller) March 30, 2022
Updated
Introduction: Germany declares 'early warning' for gas emergency
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Germany has declared an “early warning” that it could be heading for a gas supply emergency and said the measure was aimed at preparing for a possible disruption of natural gas flows from Russia.
Economy minister Robert Habeck said supplies had been safeguarded for the time being and that Germany was closely monitoring supply flows with market operations.
This came as Russia’s top lawmaker said Russia should sell its oil, grain, metals, fertiliser, coal and timber for roubles on global markets where it is profitable to do so. President Vladimir Putin has ordered that natural gas exported to Europe or the United States be paid for in roubles. Energy ministers from the G-7 group of industrialised nations have rejected this demand.
The speaker of Russia’s lower house of parliament, Vyacheslav Volodin, said today:
If you want gas, find roubles.
Moreover, it would be right, where it is beneficial for our country, to widen the list of export products priced in roubles to include fertiliser, grain, food, oil, coal, metals timber etc.
A growing number of German companies are planning to raise their prices over the next three months, pointing to a further rise in Germany’s inflation rate, according to the Munich-based Ifo institute.
Its price expectations measure recorded a new record high of 54.6 points, up from 47.6 points in February. Consumers have to brace for sharp price increases from food retailers in particular (price expectations rose to 94.0 points and to 68.2 points among other retailers).
Timo Wollmershäuser, head of forecasts at Ifo, said:
Russia’s attack on Ukraine is driving up not only energy costs, but also the price of many agricultural raw materials.
This makes it likely that the rate of inflation will rise to well beyond 5% this year. Germany hasn’t experienced such a spike in over 40 years, not since the rate of inflation climbed to 6.3% following the second oil crisis in 1981.
German inflation hit 5.1% last month and is forecast to have risen to 6.3% in March, with data due at 10am BST.
Ifo said price pressures climbed across all sectors. In wholesale, price expectations rose to 78.1 points, in manufacturing to 66.3 points, in construction to 48.9 points, and in the service sector to 42.7 points.
The German Dax rallied 2.8% yesterday and France’s CAC rose 3% while the FTSE 100 index in London lagged with a 0.86% gain and the Dow Jones on Wall Street rose nearly 1%.
Asian shares joined the global rally as hopes increased for a negotiated end to the Ukraine conflict, with new talks between Ukraine and Russia kicking off in Istanbul yesterday and some signs of progress. However, on the ground attacks continued and Ukraine reacted with scepticism to Russia’s pledge to drastically scale back military operations around Kyiv.
Hong Kong’s Hang Seng climbed 1.5%, the Shanghai Composite added 1.8% and Australia was up 0.7%. Japan’s Nikkei was the odd one out, down 1%, as traders took profits heading into the end of the fiscal year.
However, commodities such as oil, wheat and aluminium are rising again after declining on Tuesday, as optimism about a ceasefire started to fade somewhat.
Brent crude is trading at $111.50 a barrel, up 1.15% while the most-active wheat contract on the Chicago Board of Trade rose 0.3%. Three-month aluminium on the London Metal Exchange rose 1.6% to $3,490 a tonne, falling a 4.9% drop on Tuesday.
The Agenda
- 8am BST: Spain inflation for March (preliminary)
- 9am BST: Bank of England deputy governor Ben Broadbent speaks at NIESR conference
- 10am BST: Eurozone consumer confidence final for March
- 10am BST: European Central Bank president Christine Lagarde speaks
- 1pm BST: Germany inflation for March (preliminary) (forecast: 6.3%)
- 1.30pm BST: US GDP for fourth quarter final (forecast: 7.1%)
Updated
