Closing summary
Ofgem has announced it will reveal the full scale of the energy price cap hike earlier than expected, as it emerged that the government may introduce a measure to slash £200 from household energy bills in order to soften the blow.
The energy regulator will announce at 11am on Thursday what is expected to be the steepest ever increase in household bills, amid growing speculation that the Treasury is considering a multibillion-pound move to protect households from the full brunt of the increase. Energy debt advice and crisis support have already surged to record levels, according to the charity Citizens Advice.
The UK government has announced its plan for levelling up, with a focus on devolution, transport, education and raising the pay and productivity of towns and cities outside London and the south east. However, critics seized on the lack of new funding.
Inflation in the eurozone unexpectedly ticked up to 5.1% in January, instead of slowing to 4.4% as forecast –- a new record high. This is more than twice the European Central Bank’s target, but the bank –– which holds a policy meeting tomorrow -- has so far shrugged off rising inflation, saying that it is temporary.
In the US, companies cut 301,000 jobs between December and January, according to the payrolls processing firm ADP, while economists had expected them to take on 200,000 people. It is the first time the private sector has cut jobs since December 2020, ADP said.
Stock markets have climbed between 0.1% and 1% in Europe, while Wall Street is also ahead, although gains over here have been limited ahead of central banks’ policy meetings tomorrow (European Central Bank, Bank of England).
Our other main stories today:
Thank you for reading and commenting. We’ll be back tomorrow. Bye! - JK
The landlord run by the billionaire Guy Hands’ private equity firm has issued the government a two-week ultimatum to drop legal action to take over 38,000 homes for military families and instead accept a one-off refurbishment payment of £105m, reports my colleague Jasper Jolly.
The Ministry of Defence revealed last week it planned to bring the properties back under government control, 25 years after a privatisation deal that has been criticised by the National Audit Office, the government’s spending watchdog, as a waste of taxpayers’ money.
The landlord Annington’s offer would represent less than £2,800 per property, a figure that is thought to be unlikely to cover the costs of extensive repairs in some of the more dilapidated homes – and is lower than the MoD’s £140m spending on maintenance for a single year. It would also represent just over an eighth of what Annington paid out in a dividend to its parent company last year.
As energy bills are set to rise further, with the new energy price cap to be unveiled by the regulator Ofgem tomorrow morning, our Money editor Hilary Osborne and Miles Brignall have looked at the warm homes discount and done this explainer.
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Wall Street has mostly opened higher, with the Nasdaq jumping 1% to 14,494, after bumper earnings from Google parent Alphabet and the chipmaker Advanced Micro Devices triggered a jump in their stocks.
The Dow Jones fell slightly to 35,378 at the open while the S&P 500 rose 20 points, or 0.4%, to 4,566.
Government unveils levelling up plan; critics seize on lack of new funding
The government has announced its plan for levelling up, with a focus on devolution, transport, education and raising the pay and productivity of towns and cities outside London and the south east, writes our economics correspondent Richard Partington.
However, it follows decades of attempts by successive governments to spread prosperity across the country, including most recent attempts with George Osborne’s northern powerhouse plan and Theresa May’s industrial strategy.
While experts welcomed the focus on living standards, they warned it comes after a decade of austerity that has made the task harder, and said much more needed to be done.
Katie Schmuecker, deputy director of policy & partnerships at the Joseph Rowntree Foundation poverty charity, said:
The lack of new funding announced today, and an approach to devolution that appears to be quite centrally controlled, suggest more needs to be done before the reality of these plans meets the rhetoric.
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The north of England risks being left with “second-best” trains for 200 years under the government’s £96bn rail plan, the mayor of Greater Manchester has told MPs, reports our transport correspondent Gwyn Topham.
Andy Burnham said that while his city would do better than most in the north, the plan would not “maximise the levelling-up benefits” that ministers claimed it would bring.
The integrated rail plan, published in November, axed the north-eastern leg of HS2 and angered leaders in the region by failing to include a new promised high-speed line linking cities across the north of England.
Appearing before the transport select committee, Burnham said that while the investment would bring benefits, the north was being asked to settle for second best again.
The UK’s levelling up secretary, Michael Gove, has said it is a “bogus argument” to suggest there is no new money going into his flagship levelling-up agenda, reports the Guardian’s senior news reporter Jamie Grierson.
Gove defended long-awaited plans to close the gap between rich and poor parts of England in the face of accusations they contain no new money and little fresh thinking.
Responding to claims there is no new money for the wide-ranging plans, Gove told Sky News: “I think that’s a bogus argument because the chancellor gave us a huge cheque in the spending review and now we are spending it.
Levelling-up: some wealthy areas of England to see 10 times more funding than poorestRead more
“We’re making sure in Wolverhampton, in Sheffield and in other areas that we put our money where our mouth is. And that we make sure that money which in the past was spent too much in London and the south-east is now spent in the north and the Midlands where it’s needed.”
Here is our full story on Vodafone:
Vodafone’s chief executive has confirmed he is in talks with rivals in its biggest markets to strike deals with “speed and resolve”, as the telecoms company seeks to respond to calls for a business shake-up from the new activist investor Cevian, writes our media business correspondent Mark Sweney.
Nick Read, who has argued that the European telecoms industry must consolidate to create more profitable businesses that are more attractive to investors, confirmed the mobile operator was speaking to rivals in the UK, Germany, Italy and Spain.
The chief executive has struck 19 deals since being appointed chief executive three years ago, a tempo that he said he intended to keep up, in his first comments since Europe’s largest activist shareholder was revealed to have taken a stake in Vodafone.
ADP chief economist Nela Richardson said:
The labor market recovery took a step back at the start of 2022 due to the effect of the Omicron variant and its significant, though likely temporary, impact to job growth.
The majority of industry sectors experienced job loss, marking the most recent decline since December 2020. Leisure and hospitality saw the largest setback after substantial gains in fourth quarter 2021, while small businesses were hit hardest by losses, erasing most of the job gains made in December 2021
US firms cut 301,000 jobs in January – ADP
The ADP jobs report is out in the United States. It shows an unexpected drop in jobs in January, as the Omicron variant hit the labour market.
Companies cut 301,000 jobs between December and January, according to the payrolls processing firm ADP, while economists had expected them to take on 200,000 people. This compares with a downwardly revised 776,000 gain in jobs in December.
It suggests employers cut jobs for the first time since December 2020. Unsurprisingly, the leisure and hospitality industry was the hardest hit, losing 154,000 jobs. Trade, transportation and utilities cut 62,000 roles while the other services category declined by 23,000.
The goods-production sector, including natural resources/mining, construction and manufacturing, cut 27,000 jobs.
Companies unexpectedly cut 301,000 jobs in January as omicron slams jobs market, ADP sayshttps://t.co/DJ5R9uOM5o
— Shehzad Younis (@shehzadyounis) February 2, 2022
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While the European Central Bank has argued that the rise in inflation is caused by temporary factors, and is expected to sit on its hands tomorrow, it’s a different story over here.
The Bank of England was one of the first central banks to raise interest rates (from zero to 0.25% in December) to counter rising inflation, and money markets have priced in a series of rate hikes this year, to 1.25% by the end of 2022.
29 out of 45 economists polled by Reuters expect to see a quarter-point rate hike tomorrow to 0.5%, while the rest are forecasting no change. The decision is due to be announced at noon. The Bank will also release its latest inflation and growth forecasts, which are likely to show eye-watering inflation this spring.
Some analysts see another quarter point rise in March as more likely than a bigger, half-point rise in February because that could spook people. Most economists also believe that the central bank will indicate that it will start unwinding its £895bn quantitative easing programme.
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US stock futures are pointing to a higher open on Wall Street later, especially on the tech-heavy Nasdaq. It is set to to open 1.7% higher after bumper results from Google parent Alphabet and the chipmaker Advanced Micro Devices.
Alphabet shares rose more than 10% in pre-market trading after the company posted record quarterly sales and a profit of more than $20bn on Tuesday night and unveiled plans for a 20-to-one stock split.
The stock split should make it more appealing to smaller investors, said Neil Wilson, chief market analyst for Markets.com, and argued that the results should lead to a return in confidence in beaten-down technology names.
After all the tumult of January, solid earnings can be a catalyst for gains.
Updated
Katharine Neiss, chief European economist at PGIM Fixed Income, notes that inflation in the euro area is running at a rate not seen since the early 1990s, and the European Central Bank expects it to remain high until at least the middle of this year -- but explains why the central bank can look through higher-than-expected inflation.
If energy prices continue to rise — which is entirely possible given the fragile relationship between Russia and the West and limited reserves in Europe— inflation could rise even more than expected.
For example, a further €25 per megawatt hour rise in wholesale gas prices and a further €10 per barrel rise in oil prices could add around 0.5 percentage points to inflation within a quarter. So, do the critics have a case, and should the ECB tighten policy?
Many investors overlook the point that most of the euro area’s inflation surprise isn’t the result of unexpectedly stronger economic activity. Instead, it is caused by an unanticipated rise in energy costs, and by unexpectedly higher prices for products that experienced global supply chain disruptions due to the pandemic, such as cars and household electronics.
She concludes that energy and supply chain disruptions account for most, if not all, of the past year’s inflation surprise.
By contrast, other economic data paint a benign picture of underlying inflation. Euro area gross domestic product, for example, has only just recovered to its pre-pandemic level. In contrast to the US, euro area negotiated wage growth is at a multi-decade low.
The average contribution of services inflation, an indicator of domestically-generated inflation, was lower in 2021 than in the three years before the pandemic. Finally, a broad range of survey and market-based measures of inflation expectations remain below the ECB’s inflation target.
The bottom line is that, once unexpectedly higher energy prices and supply chain disruptions are accounted for, there is no indication that underlying inflation is drifting meaningfully above the ECB’s 2% target.
Updated
Riccardo Marcelli Fabiani, economist at the consultancy Oxford Economics, has looked at the figures and what they mean for European Central Bank policy.
- The rise [in inflation to 5.1%] was mainly driven by a surge in energy inflation, although stronger-than-expected core inflation points to a more robust pass-through of energy prices.
- The current geopolitical tensions in Ukraine will maintain elevated energy prices. We now see inflation remaining higher for longer and then gradually falling. We expect a slower moderation on the back of higher energy prices and the related pass-through. Near-term risks are tilted to the upside, although the likelihood of runaway inflation remains low.
- We continue to think that ECB President Lagarde will push back against market pricing of a rate hike this year. But we would not be surprised if a gradual hawkish shift of the council will see her also flag that there could be faster tightening.
The uptick in eurozone inflation came despite a fall in German inflation, to 5.1% from 5.7% in December, France, where inflation edged lower to 3.3% from 3.4%, and Spain, where inflation slowed to 6.1% from 6.6%.
However, inflation picked up in Italy, Belgium, Portugal, the Netherlands and many east European countries.
According to a separate release from Istat, Italy’s statistics agency, January headline inflation in Italy came in at 4.8% year-on-year, the highest level since 1996, driven by a 38.6% surge in energy prices.
Back to our other main story today: inflation in the 19 countries sharing the euro rose to an annual rate of 5.1% in January, defying expectations of a drop to 4.4%, according to a flash estimate from Eurostat.
The main culprit were energy costs, which soared by 28.6% year-on-year, followed by food, alcohol & tobacco prices (up 3.6%), services (2.4%) and non-energy industrial goods (2.3%).
Updated
Here is our full story on Ofgem’s energy price cap announcement tomorrow, which has been brought forward from next Monday.
‘Why is no one up in arms?’ Six householders on the menace of fuel poverty –- my colleague Rachel Obordo and Clea Skopeliti have talked to six people struggling with living costs about their fears.
So, to recap: The energy regulator will reveal the full scale of energy price hike earlier than expected after it emerged that the government may slash £200 from household energy bills to soften the blow of a looming tariff increasing by underwriting loans to suppliers, our energy correspondent Jillian Ambrose reports.
Ofgem will on Thursday announce what is expected to be the steepest ever increase in home energy bills, amid growing speculation that the Treasury is considering a multi-billion pound move to protect households from the full brunt of the hike.
The regulator is understood to have brought forward its planned announcement on rising energy bills, originally set for Monday, to help ease growing concern and speculation over the maximum level for energy prices which is expected to climb by more than 50% to reach almost £2,000 a year.
The unexpected, eleventh hour decision comes as new government measures to protect households from rocketing energy prices has emerged.
The Guardian understands the Treasury is looking at the “broad-brush financial support” as well as extra payments for vulnerable customers who will be hardest hit by the energy price cap increase due to be announced on Monday.
The multibillion-pound plan to “top slice” energy bills would allow suppliers to borrow government money and soften the financial impact on their customers by paying the loans back through higher tariffs over the coming years, according to senior industry sources.
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Citizens Advice: energy debt advice, crisis support hit record levels
Ahead of the Ofgem announcement tomorrow on how much energy bills can rise from April under its energy price cap, Citizens Advice said energy debt advice and crisis support had reached record levels, and urged the government to bring forward a support package for households on the lowest incomes.
More people are seeking one-to-one support from Citizens Advice than at any point during the pandemic. The charity warns that crisis support - including referrals to food banks and advice on emergency one-off grants - is at the highest level on record. Similarly, advice on managing energy debts has reached unprecedented heights.
Dame Clare Moriarty, chief executive of Citizens Advice, said:
Cost-of-living pressures are at boiling point. April’s price hikes haven’t yet hit and already people are turning to our services in record numbers.
Frontline advisers are hearing desperate stories of families living in just one room to keep warm, people turning off their fridges to save money and others relying on hot water bottles instead of heating due to fears about mounting bills.
Our data has reached red alert levels. If the government doesn’t act soon and bring forward a package of support for those on the lowest incomes, many more households will be pushed beyond breaking point.
Julian Jessop, Economics Fellow at free market think tank the Institute of Economic Affairs, has sent us his thoughts on the Times story that officials are finalising plans for a new system of temporary rebates on energy bills, financed by government loans to suppliers.
This proposal is better than some alternatives, but still deserves only a lukewarm response.
This plan is a form of ‘price stabilisation mechanism’. The government would lend money to energy suppliers when wholesale prices are above a certain level, allowing companies to cut bills. However, when prices fall below this level, suppliers would be expected to pay these loans back, rather than pass any savings on to customers.
This should be a better deal for the taxpayer than simply giving money to suppliers to lower bills. It is also right that consumers ultimately pay the going rate for the energy that they use, to give market forces and price signals a better chance of working properly.
But there are four dangers in going down this route, Jessop said.
First, the scheme would mean that customers pay less when wholesale prices are high, but more than they would otherwise have done in future when prices fall. This smoothing of bills over time will still be helpful, but is it important that people understand that any savings now will be offset later.
Second, it would still be better (and potentially less expensive) to target more support at those that really need it. The savings being suggested (perhaps £200 per household) would still leave many poorer families struggling with their bills. This scheme would therefore need to be part of a bigger package that includes extra help for low-income households, such as a further top-up to the Warm Homes Discount (though this seems likely to be part of the final announcement too).
Third, the taxpayer will bear the risks of fluctuations in wholesale energy prices, and the risks of loans not being repaid. This might be justified in an emergency. But in general, businesses should be expected to manage and hedge their own exposure to changes in their costs, and it is not the government’s job to do this for them.
Fourth, the proposed scheme is described as ‘temporary’ and ‘self-funding’, but it cannot really be both. The scheme would need to be in place for an uncertain but probably long time if taxpayers are ever going to get their money back.
He concludes:
During this period, the government would effectively be setting prices, which should not be its job either. It is essential that the government uses this time for a fundamental rethink of its energy policies, many of which have actually contributed to the crisis. The proposed price stabilisation mechanism is another heavy state intervention that could easily backfire.
Experts at Hargreaves Lansdown have looked at cold weather payments, as the government issued estimates for recipients from November to January.
- Just under 4 million people qualify for Cold Weather Payments. Just over 1.3m of these are on Pension Credit.
- Between 1 November and 28 January there were an estimated 13,000 Cold Weather Payments issued. These were all in Scotland which had six cold weather triggers over the Christmas period.
- Cold Weather Payments are issued to people on benefits such as Pension Credit and Universal Credit.
- You’ll get a payment if the average temperature in your area is recorded as, or forecast to be, zero degrees celsius or below over seven consecutive days.
- You’ll get £25 for each seven-day period of very cold weather between 1 November and 31 March.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said:
Winter has yet to truly bite with only six Cold Weather Payment triggers so far this year, but this will come as little comfort to those worried about meeting surging energy costs. Energy prices have been on the rise and look to go up still further when the new energy price cap increase is announced.
Many people will have been banking on these payments to help them heat their homes over the coming months and could struggle to make ends meet without them. While we should be grateful that the weather has not been colder, we could still see people fall ill because they haven’t been able to adequately heat their homes as they are forced to make difficult decisions to deal with the rising cost of living.
Updated
Even households on green energy tariffs are affected by the energy crisis. Those who assumed they would be unaffected by soaring gas prices have been shocked to be told their electricity bills are rising, despite them being signed up to a renewable supply, my colleagues on the Money desk Anna Tims and Miles Brignall reported recently.
The Times reported this morning that Boris Johnson is poised to announce billions of pounds in state-backed loans to reduce the impact of soaring energy prices on household bills.
The prime minister and Rishi Sunak, the chancellor, have agreed to a “rebate and clawback” scheme, in which taxpayers will underwrite loans to energy firms, the paper said.
Ofgem will announce price cap revisions tomorrow at 11am. Reports this morning that Government to offer industry £6bn loan to offset bills by £200 on average. Ultimately, this means the Treasury won’t have to dip into its pockets to bring down energy bills.
— Simon Neville (@SimonNeville) February 2, 2022
Updated
Ofgem to announce energy price cap tomorrow
The energy regulator Ofgem will tomorrow announce how much bills for around 22 million households can rise from the beginning of April.
It said in a brief statement that it would reveal the new energy price cap at 11am.
Millions currently have their energy bills capped at £1,277 a year for an average household. Experts believe that this could rise to around £1,900 from April 1 when the new price cap comes into force. Calls have intensified in recent weeks for the government to step in to help struggling households.
Updated
Eurozone inflation hits record high of 5.1%
Inflation in the eurozone has unexpectedly ticked up to 5.1%, instead of slowing to 4.4% as forecast –- a new record high.
The consumer prices index rose at an annual rate of 5.1% in January, compared with 5% in December, according to Eurostat, the European Union’s statistics office.
This is more than twice the European Central Bank’s target, but the bank –– which holds a policy meeting tomorrow -- has so far shrugged off rising inflation, saying that it is temporary.
Market summary
Shares are continuing to climb in Europe as investor sentiment steadies after last month’s sell-off. However, gains are limited ahead of central bank meetings, with concerns over how fast central bankers will raise interest rates to counter soaring inflation.
Markets have priced in a series of rate hikes from the US Federal Reserve and the Bank of England this year. The Bank meets tomorrow, as does the European Central Bank, which has so far brushed off talk of rate increases. Fed officials have played down the chance of a half-point rate rise in March.
According to Deutsche Bank research, global stock markets in January had their worst month since March 2020, at the time of the Covid-19 outbreak and first lockdowns.
We’ll be getting the latest inflation data for the eurozone in just a few minutes. They are expected to show a temporary drop in the annual rate to 4.4% in January from 5% in December.
The pound has hit a 1 1/2 week high before the Bank of England meeting where policymakers are widely expected to raise borrowing costs again, following December’s surprise rate hike. Sterling rose to $1.3549, its highest level since 24 January, and was steady against the euro at 83.37p.
Oil prices are heading higher again, with Brent crude up 0.3% at $89.44 a barrel while US light crude is 0.35% higher at $88.51 a barrel. The Opec+ oil cartel with its allies including Russia is expected to stick to a modest output increase at its meeting today.
Updated
The Florida teenager demanding Elon Musk hand over $50,000 to stop him tweeting the location of the billionaire’s private jet has said he is creating dozens more accounts tracking the movements of other rich and famous people.
Rupert Neate, our wealth correspondent, has interviewed Jack Sweeney, a 19-year-old college student and aviation enthusiast. He said he had created 16 automated Twitter accounts, or bots, similar to @ElonJet to follow jets owned by Microsoft co-founder Bill Gates (@GatesJet), Amazon’s Jeff Bezos, the billionaire entrepreneur Mark Cuban and the rapper Drake.
Sweeney said he had also created a website, Ground Control, to “monetise” the service by offering bespoke tracking services to celebrities’ superfans and to host web versions of the Twitter bots if the microblogging site closes his accounts because of privacy concerns raised by the subjects.
European stock markets are rising, while oil prices have edged lower ahead of the Opec+ meeting, giving up earlier gains.
- UK’s FTSE 100 up 37 points, or 0.5%, at 7,574
- Germany’s Dax up 82 points, or 0.5%, at 15,701
- France’s CAC up 27 points, or 0.4%, at 7,128
- Italy’s FTSE MiB up 0.5% at 27,269
- Spain’s Ibex up 11 points, or 0.15%, at 8,739
Amazon intends to create 1,500 new apprenticeships in the UK this year.
The internet giant said it was offering 40 entry-to-degree-level schemes, including in publishing, retail, marketing and a programme focused on environmental, social and corporate governance.
The company said it hired 25,000 more people at its warehouses and delivery stations last year, taking its UK workforce to 70,000 –- more than previously planned. Amazon also opened its first 17 physical stores in the UK –- 15 Amazon Fresh food stores in London and two Amazon 4-star retail stores in London and Kent, which sell products from Amazon and small businesses.
The water company Severn Trent said this morning it’s on course to invest more than £500m in a programme to improve river quality, after it got fined £1.5m for illegal sewage discharges into watercourses in December. About 360,000 litres of raw sewage were illegally discharged as a result of the breaches at four water treatment plants in Worcestershire.
The FTSE 100 listed company also said its full-year outlook remained unchanged.
Turning to today’s corporate results... Vodafone said it’s on track to meet its full-year guidance after reporting a 2.7% rise in group service revenue in the third quarter, underpinned by growth in both Europe and Africa.
Chief executive Nick Read said the company had delivered a “solid quarter” with service revenue growth of 1.1% in Germany, its biggest market. News that the activist investor Cevian Capital has taken a stake in Vodafone drove up its shares by 4% on Monday, with hopes for more deals.
Read, who has already pulled off 19 deals, has called for more consolidation in Europe and said Vodafone was willing to pursue merger opportunities for its Vantage Towers infrastructure spin-out. The Financial Times reported that Cevian, Europe’s largest activist fund, wanted Vodafone to be more aggressive in driving consolidation in markets such as Spain, Italy and the UK.
In further evidence of the cost of living squeeze, UK shop price inflation almost doubled in January to the highest level for nearly a decade as the cost of furniture and flooring shot up, reports our retail correspondent Sarah Butler.
Annual inflation of goods bought from retailers rose to 1.5% last month from 0.8% in December, according to the latest data from the British Retail Consortium (BRC) trade body and the market research company NielsenIQ, the highest level since December 2012.
The price of food rose by 2.7% in January, up from 2.4% in the previous month and the highest rate since October 2013. However, the biggest change in inflation was in non-food items, with prices rising by 0.9% compared with 0.2% a month before.
Helen Dickinson, the chief executive of the BRC, said:
January saw shop price inflation nearly double, driven by a sharp rise in non-food inflation. In particular, furniture and flooring saw exceptionally high demand leading to increased prices as the rising oil costs made shipping more expensive.
Food prices continue to rise, especially domestic produce which have been impacted by poor harvests, labour shortages, and rising global food prices.
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Introduction: Oil prices climb towards seven-year highs ahead of Opec+ meeting
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Oil prices have climbed towards the seven-year highs reached last week, after a drawdown on US crude stocks suggested strong demand and amid a lack of supply, but investors remained cautious ahead of a meeting by the Opec oil cartel and its allies (known as Opec+) later today.
US crude stocks fell by 1.6m barrels in the week to 28 January, more than expected, Reuters reported, citing market sources who had seen American Petroleum Institute figures.
Brent crude is up 20 cents at $89.36 a barrel while US light crude has gained 21 cents to $88.41 a barrel. The Organisation of the Petroleum Exporting Countries and its allies including Russia are expected to stick to the group’s policy of moderate boosts to output at today’s meeting, i.e. pumping 40,000 more barrels a day from March.
Tight global supplies and geopolitical tensions in Eastern Europe and the Middle East, in particular the standoff between Russia and Ukraine, have driven up oil prices by about 15% so far this year. Last Friday, crude benchmarks hit their highest prices since October 2014, with Brent touching $91.70 and US crude hitting $88.84 a barrel.
Tensions are rising between Russia, the world’s second-biggest oil producer, and the West over Ukraine, stoking fears that energy supplies to Europe could be disrupted. Vladimir Putin has accused the US of ignoring Russia’s security proposals in his first public comments on the growing crisis over Ukraine since December last night.
Markets will also be closely watching inflation data for the eurozone for January. Economists are forecasting a drop to to 4.4% from 5% in the annual rate, due to events a year ago which saw a big jump in the January 2021 inflation numbers (the reintroduction of regular VAT rates and additional climate measures which boosted German inflation).
Michael Hewson, chief market analyst at CMC Markets UK, says:
While it will be convenient for the European Central Bank to paint this as evidence of their argument that inflationary pressure is transitory and now falling, we already know from the experience of the US it is nothing of the sort.
There is also the added complication that factory gate price in inflation is even higher, and well above 20% in Germany, Italy and Spain. With markets already pricing in the prospect of two ECB rate rises this year, tomorrow’s ECB press conference will be an exercise in trying to spin a narrative that the market simply doesn’t buy.
Just before the US open, we get to see the latest ADP payrolls report, which in December saw the US economy add 807,000 jobs, which was a bit of an outlier to the equivalent non-farm payrolls report a couple of days later. Today’s January report could well come in much weaker due to the disruption caused by Omicron over the Christmas and New Year period, which has seen weekly jobless claims rise sharply.
The Agenda
- 10am GMT: Eurozone inflation for January (forecast: 4.4%)
- 10am GMT: Italy inflation for January (forecast: 3.8%)
- 1.15pm GMT: US ADP jobs report for January (forecast: 207,000)
