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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Spanish inflation almost halves and German CPI falls as energy prices cool – as it happened

United Kingdom Inflation Vodafone United States Economy Catherine Mann CBI SMMT Victoria Scholar Bank of England
Seafood and fish in `Mercado de la Plaza de San Agustin´, Coruna city, Galicia, Spain.
Seafood and fish in `Mercado de la Plaza de San Agustin´, Coruna city, Galicia, Spain. Photograph: Lucas Vallecillos/Alamy

Closing summary

Time to wrap up… here’s a quick recap.

Europe’s inflation squeeze has eased a little this month, with a slowdown in price rises in Spain and Germany.

Spain’s annual inflation rate almost halved this month, to 3.3% from 6% in February, as electricity and fuel prices fell back. However, core inflation remained sticky, at 7.5%.

Analysts predicted that Spain’s headline inflation rate would continued to fall.

In Germany, inflation also fell – but was higher than expected. On an EU-harmonised basis, the consumer prices index rose by 7.8% year-on-year, down from 9.3% earlier this year.

Food price inflation climbed in Germany, though, hitting 22.3%, as households were hit by soaring costs of essentials.

Global shipping costs have dropped again this week, which should help ease price pressures in the world economy.

There are signs of green shoots in the UK economy, with companies predicting that activity will return to growth in the next quarter.

But economists at Allianz predict that the UK, Germany and Italy will fall into recession this year.

They also predict the US could fall into “a sizeable recession”, after its banking sector saw a “near-death” experience this month.

Allianz say:

Negative confidence effects from the near-death experience in the US banking sector and the unresolved energy situation in Europe will shape the rest of the year.

We maintain our call for a sizable recession in the US at the end of the year due to a slowdown in housing, manufacturing and construction, while economic momentum stalls in the Eurozone as fiscal stimulus is gradually pared back.

The outlook for the Chinese economy has improved, but global spillovers from the reopening are limited.

European stock markets have closed higher, while the pound touched a two-month high today.

In other news…

Green business groups and academics have dismissed the UK’s new energy plan unveiled today as a missed opportunity full of “half-baked, half-hearted” policies that do not go far enough to power Britain’s climate goals.

Energy firms will no longer force people in a village in Cheshire to stop heating and cooking with natural gas and swap to lower-carbon hydrogen after a local backlash to a planned government-backed pilot.

A decision on whether to bring forward the date when the state pension age rises to 68 has been postponed until after the next general election.

Facebook and Instagram’s parent company, Meta, is reportedly considering a company-wide ban on political advertising in Europe amid fears it could struggle to abide by new EU campaigning laws.

The former chief executive of LV= has been awarded a £318,000 bonus despite widening losses and lingering controversy over his role in a failed sale to an US private equity firm that would have resulted in the demutualisation of the insurer.

The outgoing head of the World Bank has called for a dramatic increase in financial help is needed to help poor countries meet the $2.4tn (£1.9tn) annual cost of coping with the combined impact of wars, pandemics and the climate crisis.

World Bank chief calls for dramatic hike in funding to help developing world

A dramatic increase in financial help is needed to help poor countries meet the $2.4tn (£1.9tn) annual cost of coping with the combined impact of wars, pandemics and the climate crisis, the outgoing head of the World Bank has said.

Speaking in Niger, David Malpass defended his record for funding support for developing countries since becoming president of the Washington-based organisation and said further increases would probably be announced at the Bank’s spring meeting next month.

“During the last four years, we have shown that financing for development can be quickly ramped up,” Malpass said.

He added:

“Development needs have increased dramatically and so should development finance, to help countries such as Niger implement good development policies that support their citizens, boost economic growth, alleviate poverty, maintain peace and respond to complex global problems.”

More here:

Britain’s FTSE 100 index has posted its fourth daily gain in a row, as fears of a banking crisis continue to recede.

The blue-chip share index has closed 56 points higher at 7620 points, up 0.75% today.

Online grocery business Ocado led the risers, jumping 10%, as technology stocks rallied, followed by commercial property group Land Securities (+4.5%) and retailer JD Sports (+4.2%).

European markets also held their gains, with Spain’s IBEX jumping 1.6% and Germany’s DAX up 1.3%.

Michael Hewson of CMC Markets explains:

Ocado has continued to make gains and has risen sharply for the 2nd day in a row. The gains of the last two days have come despite the shares finishing lower on the day that they published their Q1 numbers. At the time there was a sense that the fall seemed overdone given the weakness we’d already seen since January, begging the question as to whether a lot of the bad news was already in the price. The reaction of the last two days would appear to suggest that there is a degree of that, hence the gains seen in the last couple of days.

The commercial real estate sector has continued its rebound from yesterday, led by British Land and Land Securities in London and Vonovia in Germany.

Swedish retailer H&M is seeing some strong gains today after surprising the markets with a return to profit in Q1. Operating profits came in at SKr725m on sales of Skr54.87bn. Gross margins also came in better than expected at 47.2%.This appears to be giving a lift to the likes of JD Sports, Frasers Group and Next.

Inflation has prompted South Africa’s central bank to raise interest rates by more than expected today.

The South African Reserve Bank announced its ninth interest rate rise in a row, lifting its key lending rate to 7.75% from 7.25%.

Economists had expected a smaller, quarter-point rise.

The move comes after South Africa’s inflation rate rose to 7.0% in the year to February, up from 6.9% in January.

The rolling power cuts that hit South Africa this year have hit its economy, forcing offices, hospitals, factories and tens of thousands of small businesses to close, hitting food supply chains.

Shares in power company Drax have shaken off their earlier losses, after the company told the City it had been invited to enter formal bilateral discussions with the government about its bioenergy with carbon capture and storage project (BECCS).

Drax’s shares are now up 6.5% in late trading, having been down up to 10% this morning, after the company missed out on fast-track financing as part of the UK’s net-zero energy drive.

But Drax says this isn’t the end of the story, and that its Power Station BECCS project has passed the deliverability assessment for the Power BECCS project submission process.

Drax explains:

Drax has been invited to enter formal bilateral discussions with the Government immediately, to move the project forward and ensure the Government is able to fulfil its restated commitment to achieving 5Mtpa of engineered Greenhouse Gas Removals (GGRs) by 2030.

Drax believes that BECCS at Drax Power Station is the only project that can enable the Government to achieve this goal.

The Government has also committed to publish its biomass strategy by the end of June 2023 which will set out how the technology could be deployed.

Updated

Reader Ruth Schewietzek has got in touch from Germany about the cost of living squeeze there, following today’s inflation report:

My electricity bill will go down, here in Germany, I already received a letter about that, yet I don’t know how much.

I am now paying 58 euros per month for electricity. Last year I paid 43 euros per month. The bill went up last winter. My suppliers are the municipal suppliers, not a private company.

But in the UK, people face rising costs from the start of April, even though Jeremy Hunt has frozen the Energy Price Guarantee until the end of June.

As John Kerswill points out, the £400 discount paid to households over the last six months will end.

John explains:

For me, loss of the £67 government support grant will see my monthly bill rise by 43%, based on winter use (higher % Inc on summer use).

[ending the EPG shouldn’t directly affect the UK inflation rate, though, as the money was classed as income rather than a cut to prices. But it will leave consumers with less to spend]

Just to clarify one point raised by Tim V, most of the inflation numbers we’ve been quoting today have been another annual price changes, rather than monthly (although i’ve tried to quote both).

Another reader has responded to my point about Spain’s government cutting food prices by lowering the VAT rate – reporting that prices have still risen.

In Spain the government tried to cushion raising prices but supermarkets raised them, prices on essential items are sky high.

Pound at two-month high

Back in the financial markets, sterling has hit its highest level against the US dollar since the start of February.

The pound has gained over half a cent today to $1.2384, a near two-month high.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, reported yesterday that sterling bulls had their eyes set on the $1.25 target, as the hawks on the Bank of England look to cool inflation.

The pound vs the US dollar over the last two years
The pound vs the US dollar over the last two years Photograph: Refinitiv

The exterior of the New York Stock Exchange.
The exterior of the New York Stock Exchange. Photograph: Michael M Santiago/Getty Images

Stocks have opened higher on Wall Street, as markets are cheered by signs that inflation is easing and that the banking crisis has calmed down.

The Dow Jones industrial average has risen by 151 points, or 0.46%, to 32,869 points in early trading, with the broader S&P 500 index up 0.65%.

The tech-focused Nasdaq 100 index has gained 0.7%, a day after entering a bull market.

Yesterday it finished trading up more than 20% from its December 28 closing low, helped by rallies in major US teck stocks.

Facebook-owner Meta, for example, has rallied by 70% so far this year, with Apple up 29% in 2023 and Amazon up 18%.

Today’s US economic data shows that inflation still needs to be tamed, says Ryan Brandham, head of global capital markets for North America at Validus Risk Management.

These numbers are fairly in line with expectations, and the Fed will likely breathe a small sigh of relief on the uptick in jobless claims from the last few weeks.

At the margin, this will take some pressure off, but the strong GDP growth means inflation still needs to be tamed”.

Updated

US Q4 growth rate trimmed

The US economy grew slightly less quickly than previously thought at the end of last year.

US GDP rose at an annualised rate of 2.6% in the October-December quarter, updated data shows. That’s down from 2.7% estimated previously

It’s the equivalent of quarterly growth of 0.65%.

Today’s data includes more information than earlier estimates, which shows that exports fell by more thann thought while consumer spending was rose by less – just 1%, down from 1.4%.

US jobless claims rise

Over in the US, the number of people filing new jobless claims has risen.

About 198,000 ‘initial claims’ were filed last week, an increase of 7,000 on the previous week when 191,000 people filed unemployment insurance claims.

That may signal that the US jobs markets cooled a little last week, following the increase in interest rates.

Applications for unemployment benefits broadly indicate the number of layoffs in the US. Current levels are low in historic terms.

Updated

On a monthly basis, the German consumer price index rose by 0.8% in March alone.

On an EU-harmonised basis (to make comparisons across the Europe earlier) prices jumped by 1.1% this month.

German inflation also dropped this month on an EU-harmonised basis, but again by less than forecast.

Annualised harmonised inflation dropped to 7.8% in March, from 9.3%, but ahead of forecasts of a larger fall to 7.5%, as falling energy prices helped the cost of living squeeze to ease.

Updated

German inflation rate drops

Inflation has slowed across Germany, but not by quite as much as expected.

The inflation rate in Germany is expected to be +7.4% in March 2023, statistics body Destatis reports, down from 8.7% in both January and February 2023.

Economists had forecast a slightly larger fall, to 7.3%.

Energy inflation slowed to 3.5%, down from 19.1% in the year to February (as we’ve now caught up with the surge in energy prices after the Ukraine war began).

Food inflation accelerated, though, from 21.8% in February to 22.3% per year in March.

That left goods inflation at 9.8%, down from 12.4% per year in February.

But… service sector inflation rose from 4.7% to 4.8%.

This morning’s hopes of green shoots in the UK economy may have suffered a nasty frost.

Allianz Research has predicted that the UK economy will suffer a recession this year, with growth of -0.3% over the whole of 2023.

The US, Germany and Italy are also seen falling into recession this year, with Allianz sticking with its call for “a sizeable recession in the US at the end of the year” due to a slowdown in housing, manufacturing and construction.

The eurozone should avoid a recession in 2023, though, with growth of 0.3% expected.

UK inflation is forecast to average 6.5% this year, and 3.4% in 2024.

That’s higher than in the eurozone, where prices are seen as rising by 5.6% this year, and 2.6% in 2024.

High inflation means central banks remain “ever more caught between a rock and a hard place”, Allianz warns in its latest economic outlook.

It adds:

Financial stability concerns could complicate the already difficult tradeoff between managing sticky core inflation and maintaining growth in setting policy rates over the next few months.

Updated

Global shipping costs drop again

The cost of shipping goods around the world continues to fall, which should help push down inflation.

Drewry’s composite World Container Index shows that prices dropped by 2% this week, to $1,716.85 per 40ft container – which is 79% less than a year ago.

That means the cost of shipping a 40ft container is now 83% below the peak of $10,377 reached in September 2021.

Drewry’s composite World Container Index
Drewry’s composite World Container Index Photograph: Drewry

It is 36% lower than the 10-year average of $2,690, which Drewry says indicates “a return to more normal prices”. However, they’re still 21% higher than average pre-pandemic rates, of $1,420 in 2019.

Shipping prices surged during the pandemic, with prices pushed up by increased demand for consumer goods and disruption at ports. China’s reopening at the start of this year is helping to ease supply chain problems.

Drewry’s composite World Container Index
Drewry’s composite World Container Index Photograph: Drewry

Updated

Primark lifts pay for 26,000 shop workers

A woman walks past a window display at a Primark store in Liverpool, Britain.

Back in the UK, Primark workers are getting a pay rise that should help with the cost of living crisis.

Primark is to hand its roughly 26,000 retail assistants a pay rise from next week.

The high street giant is to increase the rates of pay for all its hourly paid store staff across England, Scotland and Wales to £11 an hour, with this rising to £11.51 in London.

The pay rise will represent a 12% increase against the same time last year, it said.

The increase will come into force on 1 April, when the new national living wage of £10.42 an hour – which applies for all workers aged 23 – comes into effect.

Other UK retailers, including Aldi and Pret a Manger, have also been lifting wages in recent months.

Updated

Ireland's inflation rate drops

Inflation across the Republic of Ireland has slowed this month too.

Ireland’s consumer price index is estimated to have increased by 7.0% in the 12 months to March 2023, on an EU-harmonised basis, the Central Statistics Office says, down from 8.1% in February.

Prices rose by 0.9% in March alone, the CSO says, with energy prices estimated to have decreased by 0.9% during the month.

Food prices, though, are estimated to have increased by 1.1% in the last month and jumped by 13.5% in the last 12 months.

The HICP excluding energy is estimated to have increased by 6.3% in the year to March.

Inflation has also dropped in parts of Germany this month, new official data shows.

In North Rhine-Westphalia, Germany’s most populous state, annual inflation eased to 6.9% in March from 8.5% a month earlier.

But the cost of living rose faster in Saxony, which includes Leipzig and Dresden. Saxony’s inflation rate dipped to 8.3% this month, down from 9.2% year-on-year in February.

We get overall German inflation data at 1pm UK time. It’s expected to drop to 7.3%, from 8.7% in February.

Updated

Message us your views

We’re testing a new feature in the blog again today, which lets readers send through messages to us here at the Guardian.

They’re not public comments – we are the only ones who will see your message, but I will monitor them and try to respond in the liveblog, or by email.

So you can let us know your views on inflation, the cost of living crisis, the state of the UK economy, the recent turmoil in the banking sector, or other business events in the news…

To try it, click the ‘Send us a message’ under my byline near the top of this blog. Thanks!

Spain’s stock market is rallying pretty strongly today, as traders cheer the drop in Spanish inflation this month.

The Spanish IBEX index has jumped by 1.6% this. morning, outperforming the rest of Europe (which continues to rally this morning).

Across Europe, Germany’s DAX and France’s CAC 40 have both gained around 1%, while the UK’s FTSE 100 is still at a two-week high (up 0.65% at 7,612).

Chris Beauchamp, chief market analyst at IG, says:

“Spain’s CPI is a welcome bit of news really, and seems to have provided markets with another reason for a rally.”

Back in the UK, British Airways has warned customers there could be delays over the next 10 days, due to strike action.

BA say they expect “some delays”, due to industrial action being taken by Heathrow Airport staff from 31 March to 9 April.

The Unite union said this week that two groups of Heathrow security officers will strike from 31 March – 9 April. The airport will remain open and operational, though.

Updated

Falling inflation does not mean that prices are falling, of course, simply that they are rising less quickly.

As it’s now over a year since Russia’s invasion of Ukraine, we are starting to catch up with the surge in energy and food prices last year.

Alfonso Peccatiello, author and former head of fixed-income portfolio management at ING Deutschland, points out that these ‘base effects’ mean inflation will appear to be ‘falling off a cliff’ – even if prices are actually settling at a higher plateau.

But core inflation may remain sticky, as BoE policymaker Catherine Mann warned last night (see opening post).

Updated

Spanish inflation falls: what the experts say

Neil Wilson of Markets.com warns that inflation has not been slain, despite Spain’s headline CPI index dropping to 3.3% from 6%.

He writes:

Is the dragon slayed? Well, not quite....we can see the headline rate collapsing due to the base effects of energy prices.

It’s less optimistic when you look at the stickiness of core inflation – underlying inflation fell marginally to 7.5%. And the yellow line here shows a clear upward trend.

Wouter Thierie, economist at ING, predicts headline inflation will cool further in the coming months, as energy prices drop. The significant decrease in agricultural commodity prices should feed through to food prices in the shops, too.

Thierie writes:

Spanish inflation cooled in March, according to Spain’s statistics office INE. Headline inflation stood at 3.3% year-on-year, down from 6% in February. The HICP came in at 3.1% year-on-year, down from 6% in February.

The decline in headline inflation was mainly due to the fall in gas and electricity prices this month, after the sharp rise in the same month last year.

Also encouraging is that core inflation fell slightly to 7.5% from 7.6% in February, the first drop in 23 months. This shows that despite the sharp fall in headline inflation, inflationary pressures in the economy remain very high, but it is also a sign that the pass-through of higher energy prices into higher consumer prices is starting to lose strength. Moreover, pressures on global supply chains have further eased in recent months to pre-pandemic levels, which is also dampening inflation.

Updated

Four bankers who helped Putin's friend set up Swiss bank account convicted

Four bankers who helped a close friend of Vladimir Putin move millions of francs through Swiss bank accounts have been convicted of lacking diligence in financial transactions.

Reuters has the details, from Zurich:

The four were found guilty on Thursday of helping Sergey Roldugin, a concert cellist who has been dubbed “Putin’s wallet” by the Swiss government.

The executives - three Russians and one Swiss - helped Roldugin, who is godfather to Putin’s eldest daughter Maria, deposit millions of francs in Swiss bank accounts between 2014 and 2016.

The men, who cannot be identified under Swiss reporting restrictions, were found guilty at a hearing at Zurich District Court and were given suspended fines (updated).

The case highlights how people like Roldugin were used as “strawmen”, the indictment seen by Reuters said, a way to hide the true owners of money.

In Switzerland, banks are obliged to reject or terminate business relationships if there are doubts about the identity of the contracting party.

Updated

Spanish inflation plummets

Inflation in Spain has tumbled, as energy prices slide.

Consumer price inflation across Spain dropped to 3.3% in March, the lowest level since August 2021, down from 6.0% in February.

On a EU-harmonised basis, Spanish inflation dropped to 3.1%.

In contrast, inflation in the UK was recorded at 10.4% in February

Spain’s government had helped to cushion the rising cost of living by cutting the VAT rate on energy, and scrapping VAT on basic food items, such as bread, cheese and vegetables, and halving it to 5% on oil and pasta.

Spain’s National Statistics Institute said the drop was mainly because electricity and fuel prices decreased this month, having increased in March 2022.

But core inflation, which strips out volatile fresh food and energy prices, only fell slightly to 7.5% year-on-year, down from 7.6% in February.

Updated

British music brand Marshall bought by Zound Industries

Jimi Hendrix, at the Summer Of Love Festival, Monterey Pop Festival
Jimi Hendrix, at the Summer Of Love Festival, Monterey Pop Festival Photograph: Education Images/Universal Images Group/Getty Images

The British family-owned company behind Marshall amplifiers is being bought by a Swedish maker of Bluetooth speakers.

Marshall, founded by Jim Marshall in London in the 1960s, is being acquired by Zound Industries to create a new business, called Marshall Group.

Zound, which has been selling Marshall-branded speakers and headphones since 2010, says the deal will create “the most exciting audio tech powerhouse”.

Henri de Bodinat, Chairman of Zound Industries, says:

With this game-changing deal, Marshall Group will become the main challenger in our industry and the most exciting alternative to traditional players, bringing even greater innovation and value to clients, employees, and investors alike.”

De Bodinat will chair the new Marshall Group, while the Marshall Family will be the largest shareholders, owning 24% of the new business.

Jim Marshall, who died in 2012, posing with one of his products at the 'Musikmesse' in Frankfurt March 13, 2002.
Jim Marshall, who died in 2012, posing with one of his products at the 'Musikmesse' in Frankfurt March 13, 2002. Photograph: Ralph Orlowski/REUTERS

The Marshall shop in London sold musical equipment to young rock musicians such as Pete Townshend and John Entwistle of the Who. Jim Marshall – known as the “Father of Loud” – then moved into building amplifiers with his son Terry.

Marshall went to build large speaker cabinets, such as the 4x12” cabinets, after Townshend demanded a louder sound. They then went international in 1966, when Jimi Hendrix used them at a gig.

Swedish tech entrepreneur Konrad Bergström, who helped arrange the deal, says:

Spinal Tap features one of cinema’s most iconic scenes when Nigel shows off how his Marshall guitar amplifier can turn ‘up to eleven’, but what we are announcing today is no parody: Marshall Group is going to go beyond established rules and limits and define a new sonic lifestyle category. We are going to Live Loud!”

Drax shares slump after carbon-capture project rejected

Shares of British power generator Drax have tumbled almost 10% after its carbon-capture project failed to be selected by the UK government.

Drax’s carbon-capture scheme was not selected for the country’s Track-1 programme, the Department for Energy Security & Net Zero said. Instead, the government will continue to engage over the project.

Drax runs a biomass and coal fuelled power station, near Selby in North Yorkshire. Last week it paused a planned £2bn investment in “bioenergy with carbon capture and storage” (BECCS) technology at the site, saying it needed a “firm commitment” from the government first.

Analysts at RBC Europe say today’s decision not to put Drax into Track 1 is a surprise, given the company’s importance to security of supply in the UK.

RBS add:

The UK government has announced the Track 1 project negotiation list this morning, with Drax not selected as a Track 1 project in the government’s decision. Within the East Coast Cluster, Track 1 projects selected were Net Zero Teesside Power, bpH2Teesside and Teesside Hydrogen CO2 Capture. The government noted the following:

“We are also announcing the conclusion of the power BECCS project assessment process. Both projects which made submissions, Drax Power Ltd and Lynemouth Power Ltd, met the minimum criteria for deliverability by 2027. These projects have not been selected for deployment in Track 1 but the department will engage further with these projects following the assessment outcome. Track 1 is not the extent of our ambition and the government remains committed to achieving 5Mtpa of engineered greenhouse gas removals by 2030.”

Shares in Drax have dropped to 527p, down 8%, the lowest since last November.

Updated

European stock markets highest since SVB crisis began

European stock markets have hit their highest level since the collapse of Silicon Valley Bank, as fears over the banking sector ebb.

The Stoxx 600 index of European companies has risen 0.7% this morning to 453.69 points, the highest since March 10th – the day when SVB failed.

In London, the FTSE 100 index of blue-chip stocks has climbed to a two-week high – up 40 points or 0.5% at 7,604 points. Real estate, utilities and mining stocks are leading the risers.

The markets suffered several days of heavy falls after SVB failed, but a degree of calm has now returned – helped by the rescue of Credit Suisse by UBS.

Another day without any unwelcome banking surprises has cheered investors, says Richard Hunter, head of markets at interactive investor:

Technology shares were a particular area of buying interest and have seen gains in anticipation of hopes that the interest rate hiking cycle may be nearing its end. In addition, chipmaker Micron saw its shares rise by over 7% after stating that inventory issues were now improving. The rosy outlook statement added fuel to the fire of optimists, who read the news as being indicative that the overall economy was holding up, given that the company’s chips are used in a wide variety of industries. In terms of the main indices, the Nasdaq has been the stand-out performer and currently stands ahead by 14% in the year to date.

Elsewhere, remarks to Congress by the US bank regulator appeared to lay the blame for the Silicon Valley Bank collapse at the door of the banking supervisors and their failure to spot the stresses, as opposed to a more systemic weakness within the system. While sentiment currently remains on something of a knife-edge, no news will continue to be good news in terms of any further banking shocks. The so-called fear gauge, or volatility index, also returned to early March levels as a further indication of investor relief that the worst may have passed.

Electricity generator SSE has hiked its profit forecasts, again.

SSE now expcts to make 160 pence per share in the 2022-23 financial year, up from previous guidance of more than 150 pence/share.

It credits the upgrade to a “continued strong performance” from its flexible generation plant as it supported the security of UK energy supplies.

Finance director Gregor Alexander said:

As we progress our ambitious net zero acceleration programme, we are investing more than we make in profits into the infrastructure society needs for a more secure, affordable and clean energy system. Our balanced business model has performed well in a volatile year, helping to ensure security of supply.

At the same time, we are progressing multiple projects and adding to our pipeline as we deliver on our net zero-focused electricity infrastructure strategy. This strong performance leaves us well positioned to continue our significant investment programme and we will update the market with more detail in May.”

Shares in SSE are among the top rises in early trading, up by 2.3%. It had already raised its profit forecasts in January, helped by higher energy prices.

Updated

Mobile network giant Vodafone is planning to cut about 1,300 full-time jobs in Germany, its regional boss Philippe Rogge has told the Handelsblatt newsaper.

In his first public comments since becoming Vodafone Germany CEO in July, Rogge indicated that administrative and management positions will predominantly be affected by the cutbacks.

This would be about 6.3% of Vodadfone’s 14,230 workforce in Europe’s largest economy.

Victoria Scholar, head of investment at interactive investor, points out that other jobs are being cut across Vodafone, too:

Earlier in March Vodafone said it was planning to slash 1,000 roles in Italy and in January the Financial Times reported that several hundred positions would be let go mostly in London.

In February, Vodafone reported weakness in Germany, its biggest market with service revenue in Europe down 1.1% in the third quarter. Interim CEO Margherita Della Valle said it is ‘simply not good enough’.

In November Vodafone cut its annual profit forecast and announced a €1bn cost-cutting strategy. At the end of 2022, Nick Read stepped down as CEO following a sharp slide in Vodafone’s shares under his four-year period as leader.

Vodafone has been in talks with Three UK over a potential merger to combine networks in Britain, Scholar adds:

The CFO of Hutchinson’s Three UK Darren Purkis said discussions ‘are moving in the right direction.’

Vodafone has been grappling with pressure on its share price, which is hovering near 2002 lows, a weakening economic backdrop with rampant inflation and rising energy bills as well as uncertainty in the C-suite following the CEO’s departure last year. Plus talks over its merger with Three UK are dragging on, adding to the sense of unease.

However, its share price fall has caught the attention of some opportunistic investors with John Malone from Liberty Global, an investor in ITV and Virgin Media O2, snapping up a 4.92% stake in Vodafone amid the belief that the stock is undervalued. French billionaire Xavier Niel also bought a 2.5% stake last September.”

Updated

Blackstone's Schwarzman: banks not in crisis

The head of asset manager giant Blackstone has played down concerns over the banking sector, blaming new technology for the speed of the bank runs we’ve seen this month.

Speaking to Bloomberg, Schwarzman said he expects most US banks to withstand the current industry turmoil, which he blames on the after-effects of the pandemic and technology rather than a wave of bad loans.

Schwarzman explained:

“The banking system is not in any type of conventional crisis. We have just an interim issue with interest rates being up and we have a deposit issue caused by technology. And these are both solvable problems for the vast number of banks.”

He also pointed to the use of mobile phone apps, which let people communicate their concerns and also to withdraw money electronically, rather than having to queue at a branch.

This was a factor in the rapid collapse of Silicon Valley Bank, which the Bank of England governor compared to the high-speed failure of Barings Bank 30 years ago.

Schwarzman says:

“This crisis was caused by people on iPhones and other devices, hearing on social media that some bank might be in trouble.

They responded with huge withdrawals in a very short period of time, collapsing the bank.”

Updated

UK car production rises, helped by exports to EU

UK car production rose by over 13% last month, in a signal that the auto industry is recovering from supply chain shortages.

The number of cars built in UK factories rose to 69,707 last month, about 8,050 more than the same month a year ago, the Society of Motor Manufacturers and Traders (SMMT) reports this morning.

Problems sourcing semiconductors had been hurting car production since early in 2021, but those problem seem to now be easing.

Production for both home markets rose by over 20%, while output for overseas markets rose by 11.5%.

Shipments to the EU rose by 6.5%, offsetting a 19.9% drop in car production for the US and 21.6% fall for China, which the SMMT says provides “further evidence of the need for continued free trade across the Channel”.

February’s growth in UK car production signposts an industry on the road to recovery, says Mike Hawes, SMMT chief executive, adding:

The fundamentals of the sector are strong; a highly skilled workforce, engineering excellence, a sector that is embracing new electrified vehicle manufacturing and wide ranging capabilities in the EV supply chain.

To take advantage of global opportunities, however, we must scale up at pace and make the UK the most attractive destination for automotive investment by addressing trading and fiscal costs and delivering low carbon, affordable energy.”

Updated

Introduction: UK firms see signs of 'green shoots'

Good morning and welcome to our rolling coverage of business, the financial markets and the world economy.

There are signs of ‘green shoots’ in the UK economy, with firms more confident about the country’s economic prospects after a tough winter.

British businesses expect a return to growth in the next three months for the first time since shortly after Russia’s invasion of Ukraine, according to the latest poll from the CBI released today.

The monthly business survey found a net majority of +5% of firms expect growth in private sector activity in April-to-June. This is the first time there have been positive expectations for growth since April 2022.

The CBI also reports that activity fell slightly in the three months to March, the eighth ‘rolling quarter’ in a row in which the private sector has shrunk.

Manufacturers are most optimistic, with a balance of +12% predicting a recovery in output, while service sector firms see a small uptick.

Alpesh Paleja, CBI Lead Economist, warns that the UK is ‘skirting stagnation’ rather than growing strongly:

“It’s encouraging that the private sector is expected to return to growth in the months ahead, chiming with a range of other data indicating some resilience in economic activity. But let’s be clear – at best, this illustrates an economy skirting stagnation-like conditions rather than delivering the strong, sustainable growth we need.

“While the chancellor has set out an ambitious plan to deliver growth in his spring budget, there’s broad recognition that the UK still faces considerable economic headwinds.

Paleja cautions, though, that ”Inflation remains stubbornly high”, and will continue to pressure household budgets.

Last week, Bank of England governor Andrew Bailey warned firms to that continuing to lift prices would drive up inflation and lead to higher interest rates.

The annual rate of UK inflation rose to 10.4% last month, but is expected to drop sharply through this year (as we catch up with price hikes in 2022).

But, BoE policymaker Catherine Mann is concerned that core inflation will remain too high, making it harder to bring CPI inflation down to the 2% target.

Last night, Mann told the National Association for Business Economics that persistent underlying inflation will make it hard to set monetary policy this year.

Mann said:

“Gas prices in particular are on the down slope, and that type of dynamic is going to be very important in driving headline inflation down.

But, she added:

“Core goods and services are trending up ... It is going to make it very difficult to do our job.”

The financial markets currently indicate there is a 58% chance that the Bank raises rates at its next meeting, in early May. It has already raised them to 4.25% this month, a 14-year high.

Also coming up today

The government is announcing an updated net zero and energy security strategy today, on what was originally going to be billed ‘Green Day’. Instead, we’re getting a new net zero strategy, with a focus on oil and gas development, alongside renewable energy.

The UK government will defy scientific doubts to place a massive bet on technology to capture and store carbon dioxide in undersea caverns, to help expand oil and gas in the North Sea.

Grant Shapps, the energy and net zero secretary, will on Thursday unveil the ‘powering up Britain’ strategy, with carbon capture and storage (CCS) at its heart, during a visit to a nuclear fusion development facility in Oxford.

Hundreds of the UK’s leading scientists are urging Rishi Sunak to halt the licensing of new oil and gas developments in the UK, ahead of the announcement.

On the economic front, we get Germany’s inflation report for March, an economic bulletin from the European Central Bank, and updated US GDP data for the last quarter of 2022.

European stock markets are set to open a little higher:

The agenda

  • 9am BST: ECB’s economic bulletin published

  • 9.30am BST: Realtime UK economic and business activity data

  • 10am BST: Eurozone consumer and business confidence

  • 1pm BST: German inflation rate for March

  • 1.30pm BST: US Q4 2022 GDP report (final estimate)

  • 1.30pm BST: US weekly jobless claims

Updated

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