Oil prices spike as Saudi Arabia threatens deeper supply cuts

Jun 07, 2024

Chosen by us to get you up to speed at a glance

Saudi Arabia’s threat to deepen cuts to oil production has driven up prices as the country seeks to squeeze global supply.

The warning was made after Saudi Arabia announced it will curb production by one millions barrels per day in September, extending the voluntary cut it made in August by another month.

Analysts said Crown Prince Mohammad bin Salman is trying to push up oil prices to compensate for record-high borrowing costs in the Gulf State, which are creating funding strains for projects such as his $500bn development of the Neom region.

Russia followed suit with its own supply cuts on Thursday, as deputy prime minister Alexander Novak announced Russia would curb oil exports by 300,000 barrels per day in September.

This followed a reduction of 500,000 barrels per day in August – equivalent to around 5pc of Russian oil production.

The price of brent crude rose from $82.46 per barrel to $83.63 as traders factored in the drop in supply.

Caroline Bain, chief commodities economist at Capital Economics, said: “Saudi is very keen for prices at $80 or above just for fiscal reasons, for financing these big projects like Neom.”

Although Russia extended its export cuts, it has done so on a smaller scale than earlier this year in a sign the war in Ukraine is taking an economic toll at home.

Ms Bain said: “I think Russia is trying to keep Saudi Arabia happy by showing solidarity with them, but ultimately they are very keen from their side to sell as much oil as they can.”

Capital Economics has forecast that oil prices will hit $85 by the end of the year.

Demand will significantly outweigh supply through the second half of the year, primarily because of the Saudi-led output cuts, which will outweigh a slowdown in global economic growth, Ms Bain said.

Data released on Wednesday showed the US made a record drawdown of 17 million barrels per day from its crude stocks in the last week.

“That suggests demand is holding up. It does look like higher prices ahead,” Ms Bain said.

In another geopolitical move against the West, Mikhail Mishustin, Russia’s prime minister, said on Thursday that Russia may offer cheaper grain exports to countries that have not imposed sanctions.

Mr Mishustin said the Russian government could get power to lower duties on exports including grain and fertilisers to “friendly” countries.

Russian attacks on Ukrainian grain have triggered a jump in global wheat prices.

That’s all from me today.

I’ll leave you with this tweet from Jeremy Hunt, the Chancellor, who has requested that the Financial Conduct Authority “urgently investigate” whether individuals are losing their bank accounts over their political views, following the Farage scandal.

Having your bank account removed because of your political views is very clearly against the law - it shouldn’t be happening. I’ve written to the financial regulator today. They're going to urgently investigate how widespread this practice is, and put a stop to it. pic.twitter.com/TFcCJoocn9

Andrew Bailey has responded to commentators who are against raising interest rates, noting that it wasn’t long ago that they were calling for borrowing costs to rise.

The Bank of England governer told ITV:

Some of the commentators, including some of my former colleagues, only a month or two ago were saying you’ve got to take them all the way up to 6pc and do it quickly. Now, I don’t think that is the right thing to do, we haven’t done it. But you have the luxury of changing your mind when you’re in that world.

'The former chief economist here says raising rates runs the risk of propelling a brick towards to financially vulnerable - is that a risk you're willing to take?'Bank Governor Andrew Bailey explains to @ITVJoel why he's raised interest rates again https://t.co/U7owKr5top pic.twitter.com/pPuyBpT0Yw

Elon Musk’s Tesla is facing a legal battle with drivers over claims the company falsely advertised how many miles its electric cars can travel on a full battery.

Reporters James Warrington and Gareth Corfield have the details:

Three Tesla owners have proposed a class action lawsuit in the US alleging that their cars failed to achieve their advertised ranges and that the company had failed to address complaints.

James Porter, one of the plaintiffs who owns a Model Y, said that on one trip he “lost approximately 182 miles of range – despite only driving 92 miles”.

The lawsuit alleges that Tesla breached vehicle warranties and engaged in fraud and unfair competition.

It states: “Had Tesla honestly advertised its electric vehicle ranges, consumers either would not have purchased Tesla model vehicles, or else would have paid substantially less for them.”

The complaints highlight the growing phenomenon of range anxiety, where electric vehicle owners fear their battery will not have enough charge to make it to their destination, leaving them stranded.

It is not the only legal claim Tesla’s owner Musk is facing...

Oil prices have surged following Russia’s announcement that it will further cut oil exports next month.

Brent crude, the benchmark price for purchases of oil worldwide, has climbed nearly 1.8pc today to over $84 per barrel.

US benchmark West Texas Intermediate is up 2.2pc to $81.25.

Deputy Prime Minister Alexander Novak revealed earlier this afternoon that Russia will cut oil exports by 300,000 barrels per day in September.

Russia, the world’s second-largest oil exporter after Saudi Arabia, has already pledged to reduce its oil output by around 500,000 barrels per day, or some 5pc of its oil production, from March until year-end.

The announcement followed reports that Saudi Arabia will continue cutting oil output throughout September.

The FTSE 100 has closed in the red, although reversed losses recorded earlier in the trading day.

The blue-chip index finished down 0.43pc at 7,529.16, while the FTSE 250 midcap index climbed inched up 0.11pc to end at 18,833.65.

It comes after the FTSE 100 has dropped to a two-week low earlier today amid nervousness in global markets ahead of the Bank of England’s rate decision.

The Legend of Zelda release pushed profits at Nintendo to a record high after the video game was blamed for fuelling inflation in the UK.

Technology reporter Matthew Field has more:

The Japanese games maker, which develops the Nintendo Switch console, said its latest Zelda game had sold more than 18 million copies since it was released in May, bringing in profits of $1.3bn.

The rise in sales was last month blamed for fuelling the UK’s inflation figures, after economists pointed out the release of Zelda game Tears of the Kingdom added to core inflation.

Economists at HSBC said the game may have contributed to a 0.06 percentage point increase after core inflation spiked to 7.2pc in June, the highest level in 31 years.

Chris Hare, a senior economist at the bank, said: “It’s possible that strength in computer games prices might have been aptly due to the release of the – rather aptly titled – ‘Legend of Zelda: Tears of the Kingdom’ on May 12.”

Read the full story here...

Andrew Bailey, the governor of the Bank of England, has repeated calls for wage levels to come down.

He told Sky News: “Current levels are not consistent with the 2pc target because we’re not at the 2pc target - it is going to need to come down.”

Mr Bailey said he is “very aware” that the late rate hike will be difficult for households, but noted that economy is “much more resilient that we feared it would be”.

He noted that the central bank today has set out two paths of reaching the 2pc inflation goal: either interest rates rise and then fall, or the rates remain at 5.25pc for the next two or three years.

Mr Bailey said that both options will build confidence that inflation is falling, which will impact wage and price setting.

Jeremy Hunt has said that the Bank of England’s plan to bring down inflation “solidly, robustly and consistently” is on track.

The Chancellor recognised that the central bank’s latest interest rate rise would cause concern for businesses with loans and households with mortgages.

However, he noted that “underneath that decision is a forecast that says that this time next year, inflation will be 2.8pc and we will have avoided recession”.

He told GB News:

The plan is working, but what we have to do as a Government is we stick to that plan - we don’t veer around like a shopping trolley - we stick to that plan so that families and businesses can start to feel the benefits of that plan actually working.

It’s been an eventful day and my colleague Adam Mawardi will keep you informed from here as you head into the evening.

He will keep you up to speed with Apple and Amazon’s results after markets close on Wall Street tonight.

We will also have the latest on the impact of the Bank of England’s decision to increase interest rates to 5.25pc.

Apple and Amazon report their latest results after markets close this evening, just as markets struggle with the US credit downgrade and an ever-resilient jobs market.

Both stocks have been critical to the S&P 500’s advance this year, attracting investors with their relatively durable revenue streams and market dominance.

However, a question hangs over whether they can fuel further gains, given they trade at lofty prices, face headwinds in their core businesses, and have limited direct exposure to artificial intelligence — a key driver behind this year’s jump.

Irene Tunkel, chief US equity strategist at BCA Research, said:

At these valuations, multiples either need to come down, or earnings need to rebound in a very robust way, which might be difficult since a lot of AI excitement has been priced in.

But that remains a buzzword more than something that is moving the needle in terms of growth.

Apple shares fell 0.5pc in early trading, while Amazon dropped 0.9pc before climbing back to a 0.1pc gain.

The US service sector expanded at a more moderate pace in July as it was restrained by a softening of employment growth, according to a closely watched survey.

The Institute for Supply Management’s services index decreased 1.2 points to 52.7 last month.

Readings above 50 indicate expansion, though the latest figure came in just below expectations.

ISM’s measure of employment at service providers indicated scant hiring during the month.

It comes after separate data showed US applications for unemployment benefits held near the lowest levels of the year, underscoring resilient demand for workers.

Initial claims for unemployment benefits ticked up by 6,000 to 227,000 in the week ending July 29, according to the Labor Department. Economists had predicted 225,000 applications.

Continuing claims, which include those who have received benefits for longer than one week, edged higher to 1.7m in the week through July 22.

The data precede Friday’s employment report, which is forecast to show the US added 200,000 jobs in July. While that would be the weakest figure since the end of 2020, it is still a strong advance historically.

The ISM Services Employment in the United States decreased to 50.7 points in July 2023 from a four-month high of 53.1 points in June, missing forecasts of 51.1.https://t.co/UQnYG0Daqq pic.twitter.com/YArGtrUXDK

Russia will cut oil exports by 300,000 barrels per day in September, Deputy Prime Minister Alexander Novak has said, following an announcement that Saudi Arabia will continue its own unilateral production cuts.

Russia has already pledged to reduce its oil output by around 500,000 barrels per day, or some 5pc of its oil production, from March until year-end.

Russia is the world’s second-largest oil exporter after Saudi Arabia, which said today it would extend a voluntary cut in oil output of one million barrels per day for another month to include September.

Mr Novak said: “Within the efforts to ensure the oil market remains balanced Russia will continue to voluntarily reduce its oil supply in the month of September, now by 300,000 barrels per day, by cutting its exports by that quantity to global markets.”

Oil prices have risen significantly since Russia and Saudi Arabia announced supply cuts in early July, with Brent crude oil, the global benchmark for their main export, climbing from around $76 a barrel to above $83 currently.

Warner Bros Discovery reported a smaller-than-expected quarterly loss from streaming, suggesting the media giant is making progress in its path toward profitability in the burgeoning business.

The parent of HBO and CNN, which relaunched its streaming service as Max in May, posted a second-quarter loss of $3m in its direct-to-consumer business, which encompasses its streaming services. Analysts had forecast a loss of $285.6m, on average.

Subscribers to its streaming services, which include Max and Discovery+, decreased by 1.8m. In May, the company reported a surprise first-quarter profit in its streaming video business.

Warner Bros Discovery faced a challenging second quarter, including a tough TV advertising climate. The company said TV ad sales fell 13pc, driven by audience declines and a soft ad market.

Shares were down 0.4pc in early trading.

US markets slumped at the opening bell after the number of Americans filing new claims for unemployment benefits rose slightly last week, while layoffs dropped to an 11-month low in July.

The Dow Jones Industrial Average fell 0.2pc to 35,203.63 while the broad-based S&P 500 dropped 0.4pc to 4,493.96.

The tech-heavy Nasdaq Composite has dropped 0.5pc to 13,900.34.

Saudi Arabia has announced that it is extending a voluntary oil production cut of one million barrels per day for another month, keeping up its campaign to prop up prices.

The country’s energy ministry said: “Saudi Arabia will extend the voluntary cut of one million barrels per day... for another month to include the month of September.”

In April, oil prices had slumped 15pc since the start of the year, but prices have recovered to be down about 2pc after Saudi Arabia and Russia announced output cuts.

Oil prices have jumped higher after the news, with Brent crude jumping 1.1pc to more than $84 a barrel.

Serco, one of Britain’s biggest outsourcers, expects another £280m in revenue as demand for immigration services soars amid a mounting asylum backlog.

Our industry editor Howard Mustoe has the latest:

Serco said it anticipates more work for its immigration services business, which includes detention centres and accommodation for those seeking asylum in the UK.The company is also enjoying a boom in work it does in defence, particularly in the US where Serco’s diverse interests include ship design and managing computer systems.The UK Government faces a record backlog in asylum cases.Chief executive Mark Irwin said: “Our international immigration services capability has allowed us to respond to high demand from national and local governments to provide accommodation and support services.”Serco said profit before tax for the first six months of the year rose to £137m from £120m a year earlier.

Mortgage holders on tracker deals face nearly £24 per month being added to their payments, on average, following the latest Bank of England base rate rise.

Based on the mortgages outstanding, the new 0.25 percentage point rise, which takes the base rate to 5.25pc, will add on £23.71 typically to monthly tracker payments, according to figures from trade association UK Finance, adding up to nearly £285 per year.

For homeowners on a standard variable rate (SVR) mortgage, the average payment could increase by £15.14 per month or nearly £182 per year.

SVRs are set by individual lenders and often follow movements in the base rate.

The latest base rate increase is the 14th in a row.

Taking all 14 base rate rises into account, average monthly payments will have increased by £488.50 for tracker deals and, assuming base rate rises have been fully passed on, £311.90 for SVRs.

As interest rates increased to 5.25pc, many homeowners will be keeping a watchful eye as to whether mortgage lenders pass on this rate rise.

Katie Binns and Alex Clark reveal whether it is better to save or pay off home loans:

The average two-year fixed-rate is 6.85pc, according to analyst Moneyfacts – but several big name lenders have recently announced rate cuts.

High mortgage rates can spur homeowners to overpay their mortgage as a way to fight back.

Paying off larger chunks of your mortgage means you can speed up becoming mortgage-free, while drastically reducing the interest being clawed back by your lender.

But it’s not always the best course of action. By weighing up the interest being charged by your mortgage lender, versus interest you’re paid on your savings, you could be better off squirrelling your cash into a savings account instead.

Use our calculator on whether it is worth overpaying on your mortgage.

The Governor of the Bank of England has said banks boosted savings rates “pretty fully” after its last interest rate rise as policymakers raised borrowing costs for the 14th straight meeting.

Andrew Bailey said there is evidence that savers benefited much quicker from the interest rate rise made in June, when policymakers raised rates by half a percentage point.

It comes as the Bank increased interest rates today by a quarter of a point to 5.25pc, its highest level since February 2008.

Mr Bailey said: “The latest numbers we have in June suggest that the pass-through of our June interest rate rise of 50 basis points has been pretty full actually.

“So that’s a change because it certainly was not full as has been well covered. That was not the case previously.”

Analysis of today’s savings deals and those in 2008, when interest rates were last at 5.25pc, has revealed that banks are short changing savers.

Rachel Reeves has explained what Labour would do “differently from the Government” in terms of economic policies.

The shadow chancellor was told on the BBC Radio 4’s World At One programme that “a lot of people struggle to see much difference between your plans and the Conservatives”.

Ms Reeves said:

First of all, the Government have got a voluntary scheme with banks and lenders to help people with mortgages who are in financial difficulty. That should not be a voluntary scheme. Banks and lenders should be forced to take part in that, otherwise hundreds of thousands of people getting into financial difficulty with their mortgages risk falling through the gaps.

Second, obviously we are talking about mortgages and rents today, but the truth is that energy prices are still much higher than they were before Russia’s invasion of Ukraine, and the energy companies continue to make large profits.

We would tax those properly by closing some of the loopholes in the Government’s windfall tax on the energy giants and use that money to help people with their bills.

Those are two practical things that we would do differently from the Government right now. But the truth is we are in these problems today because of a decade or more of economic mismanagement, and we need to do more to get our economy back on the right path.

The Bank of England’s modelling “is not built” to see how the economy would react to twin shocks like the Covid pandemic and the war in Ukraine, Andrew Bailey has said.

The Governor defended the Bank’s modelling system which failed to predict the scale of the inflation challenge facing Britain, allowing prices to rise in the double digits for more than six months.

Former US Federal Reserve chairman Ben Bernanke has been appointed to lead a review into the Bank’s forecasting. Mr Bailey said:

We don’t have a run of history that has those sorts of shocks. It doesn’t have a global pandemic, it doesn’t have a war in Europe in the historical data to draw upon.

It is not, in a way surprising, that these models have been put under such strain.

It is not the fault of the modelling process.

He added that there are “a lot of lessons that we hopefully can draw about how you approach policymaking when you have such big shocks in the economy”.

The Governor of the Bank of England has emphasised that inflation hurts lower-income households the most, which is why the Bank has opted for “restrictive” monetary policy.

Andrew Bailey said: “We do recognise, and I think it’s very important to say, that inflation has a very serious effect particularly on those least well off.”

The main components of inflation, energy and food, make up a bigger portion of spending for lower income families, he said.

But I will emphasise that the economy is more resilient. Yes unemployment has gone up a bit, but it is still at historically low levels.

We haven’t experienced a recession and we’re not forecasting one.

He added that the Bank’s use of the word “restrictive” to describe the path for interest rates applies in that context.

Bank of England Governor Andrew Bailey has said that it is not “time to declare it’s all over” after the Bank hiked interest rates for the 14th time in a row. He said:

We’ve had quite contrasting evidence in the last couple of months or so.

The evidence has gone one way then gone a bit the other way.

So I don’t think it is time to declare it’s all over and we’re sort of sticking where we are for the moment, because I think that really does sit at odds with the fact that we’ve had some very big pieces of news and they are not going the same direction.

So I think we have to remain evidence driven. We’ve continued to use language which we’ve used before, which is to say, if we get more evidence of more persistent inflation then we will have to react to that.

Asked if there is a “neutral” level for interest rates, Bank of England deputy governor Ben Broadbent said that rates in the UK are now above such a rate.

He said interest rates are restrictive but said it was virtually impossible to determine what a neutral rate for the economy would be without the benefit of hindsight.

Government borrowing costs have fallen after the Bank of England raised interest rates by 25 basis points.

Market expectations prior to the meeting were almost evenly split between a quarter point and half point increase.

The rate-sensitive two year yield was down 12 basis points at 4.87pc, which would be its biggest daily fall in two weeks.

The benchmark 10-year yield, which had been higher ahead of the decision, was flat at 4.4pc.

On stock markets, shares in homebuilders and real estate companies rallied after the policy announcement, helping the main benchmark indices pare some earlier losses.

The FTSE 100 inched higher but remained down 0.8pc on the day and the mid-cap FTSE 250 has turned positive, up 0.1pc.

Bank of England deputy governor Ben Broadbent has said that policymakers will need to ensure that interest rates are “sufficiently restrictive”, over the medium term.

He told reporters:

Our focus is very much on the medium term.

We have to show that interest rates over that period are sufficiently restrictive.

I don’t think we’re saying any more than that. We didn’t have in mind somehow that households in particular were underestimating the risks.

After the Bank of England forecast inflation to fall to around 4.9pc this year, Barret Kupelian, senior economist at PwC, said:

The Bank’s decision today to raise its policy rate by 25 basis points reflects the good, the bad and the ugly of tightening monetary policy.

The more positive news is that the inflation, which is currently running at 7.9pc, is expected to fall further. The Bank’s conditional forecasts show that they are due to fall to 5pc by the end of the year and that it will hit the Bank’s target by the beginning of 2025. Monetary policy is working.

The bad news is that even though food inflation is expected to moderate, food prices will remain high and not decrease. This means that the era of cheap food has probably come to an end in the UK. It also highlights the need to build resilience in the UK economy by doing more to bolster the domestic food growing industry.

The ugly news is that financial conditions are tightening for both homeowners with mortgages and those who are renting. The Bank estimates that four million additional households will face higher mortgage payments by the end of 2025.

Rental prices for new lets are increasing at double digits rates. The cooling in the housing market means that housing investment is expected to decrease, which is likely to lead to fewer houses being built in the future.

Bank of England Governor Andrew Bailey has said that pay has increased a lot more than the Bank expected just three months ago. He said:

Annual private sector regular pay growth increased further, to 7.7pc in the three months to May.

This is materially above expectations in May’s Monetary Policy Report, and it is notably stronger than standard models of wage growth based on labour market productivity, short-term inflation expectations and tightness in the labour market would have predicted.

He added that unemployment remains historically low in the UK and that the economy has been more resilient than expected.

Answering a question from our economics editor Szu Ping Chan, Bank of England governor Andrew Bailey said the evidence in the last few months is that the jobs market has not softened as much as other parts of the economy.

Mr Bailey said wage growth is “an important point in judging the future path” of inflation - and by extension the Bank of England’s response.

Deputy governor Sir Dave Ramsden said that its latest Monetary Policy Report was the first to describe wage inflation to have “crystalised,” pointing to the factor’s importance in its future interest rate decisions.

Andrew Bailey said further interest rate rises will be needed if inflation persists.

The Governor said he will act based on how data turns out and will not prejudge what rates should be.

He conceded that wage growth could ease more slowly, having been “materially” stronger in May.

He said Britain’s jobs market remains strong.

Bank Governor Andrew Bailey told the press conference:

Core goods price inflation continues to be broad-based.

It is taking time for the fall in energy prices to work through the supply chain, and the prices of imported goods have continued to rise despite a fall in world export prices.

That is why, in our central projection, we expect core goods price inflation to come down only gradually.

But let me be clear, we do expect goods price inflation to ease over the rest of the year, and there are indicators that suggest it could happen faster than in our projection.

He earlier began his press conference by saying:

Inflation is falling and that’s good news.

We know that inflation hits the least well off the hardest and we need to make absolutely sure that it falls all the way back to the 2pc target.

That’s why we’ve raised rates to 5.25pc today.

Money markets expect interest rates to peak at 5.75pc after the Bank of England’s latest interest rate decision.

Traders have cut bets on the top level of rates, having expected them to hit as high as 6.5pc as recently as July 11.

Neil Birrell, chief investment officer at Premier Miton Investors, said:

Even though the Bank of England has had positive news on inflation, it isn’t surprising that it stuck with a 0.25pc increase in the base rate.

Inflation may be falling, but the core rate is still clipping along at a level that needs addressing.

We are probably now at a stage where we can be thinking about the peak in rates, but the Bank is retaining flexibility to go higher if necessary.

Nonetheless, the length of time that rates stay at their peak is more important than the actual level itself.

Andrew Bailey, the Governor of the Bank of England, has begun his press conference after raising interest rates to 5.25pc.

He said food inflation will fall this year and goods price inflation could fall faster.

Mr Bailey said service price rises are likely to be more persistent.

Economic activity in Britain has shown unexpected resilience, he said.

The pound, which was already trading lower, weakened further after the interest rate rise, down 0.5pc at $1.26 and 0.4pc lower at €1.16.

The FTSE 100 has pared back losses seen earlier in the session, to stand 0.6pc down at 7,517.96.

Shadow chancellor Rachel Reeves said:

This latest rise in interest rates will be incredibly worrying for households across Britain already struggling to make ends meet.

The Tory mortgage bombshell is hitting families hard, with a typical mortgage holder now paying an extra £220 a month when they go to re-mortgage.

Responsibility for this crisis lies at the door of the Conservatives that crashed the economy and left working people worse off, with higher mortgages, higher food bills and higher taxes.

As interest rates increased, Chancellor Jeremy Hunt said:

If we stick to the plan, the Bank forecasts inflation will be below 3pc in a year’s time without the economy falling into a recession.

But that doesn’t mean it’s easy for families facing higher mortgage bills so we will continue to do what we can to help households.

The Bank of England has forecast that Rishi Sunak will meet his promise to halve inflation by the end of this year as it raised interest rates to their highest level in 15 years.

Policymakers said that due to drops in international energy prices, inflation is set to fall to around 4.9pc averaged over the final three months of 2023.

Inflation was running at 10.5pc in December when the Prime Minister announced in January his intention to halve inflation, which would have needed the consumer prices index to fall below 5.3pc.

The Bank said that it is largely energy prices, set by global markets, that ministers have to thank for reduced inflation.

The average gas and electricity bill is expected to drop below £2,000 from October when Ofgem next changes the energy price cap, the Bank said.

Inflation fell to 7.9pc in June - its lowest level since March 2022 and down from 8.7pc in May.

The Monetary Policy Committee voted by a majority of six to three to push interest rates 0.25 percentage points higher to 5.25pc, their highest level since February 2008.

The pound, which was already trading lower, weakened further after the interest rate rise, down 0.5pc at $1.26 and 0.4pc lower at €1.16.

The Bank of England has said that some of the “more persistent” pressures on inflation have begun to “crystallise” in the economy.

It noted wage growth as one of the key factors behind its decision to raise rates to 5.25pc.

The Bank of England’s policymakers were split three ways on the decision to raise interest rates to 5.25pc.

Six members of the nine-strong Monetary Policy Committee (MPC) opted to increase the base rate by 0.25 percentage points.

But two others, Jonathan Haskel and Catherine Mann, voted for a bigger half-point increase, while one member, Swati Dhingra, preferred to keep the rate at 5pc.

The MPC said that some of the risks from more persistent inflation, notably wage growth, had “begun to crystallise”, prompting it to push borrowing costs higher.

The policymakers also indicated that interest rates would need to stay higher for longer in order to bring inflation back down to its 2pc target.

The Bank of England has raised interest rates by a quarter of a percentage point to 5.25pc.

Just a few minutes until the Bank of England announces its next interest rate decision.

Rates are currently at 5pc after a half a point increase in June.

Wilko is on the brink of collapse putting 12,000 jobs at risk after it said it was preparing to appoint administrators.

Our retail editor Hannah Boland has the details:

The discount retailer said it was in talks over a rescue deal, but had yet to receive an offer which would provide it with enough liquidity in the time it has available as it battles “mounting cash pressures”.

It said it was still racing to secure a rescue deal, but had been left with no choice but to take a step closer to administration. It filed a notice to appoint administrators on Thursday. This gives Wilko management a two-week deadline to find a buyer for all or parts of the business.

The court notice also provides Wilko with protection from action by creditors as it attempts to strike a rescue deal.

Wilko chief executive Mark Jackson said there had been a “significant level of interest” for the business, including indicative offers which would meet all its criteria to recapitalise the business.

Tesco has rolled out changes allowing all its staff to request flexible working from their first day at the chain, nearly a year ahead of an incoming change in the law.

The supermarket brought in its new flexible working policy this week, which gives its more than 300,000-strong workforce the right to ask for part-time or flexible working hours from day one.

Under current rules, employees must wait six months before being allowed to make the request.

It sees Tesco make the move ahead of new laws expected to come in next spring which will give all employees the right to a flexible working request from day one.

The new law will require employers to consider and discuss any requests made by workers, who will have the right to two requests a year, with waiting times for a decision brought down from three months to two.

US stock markets are expected to fall at the opening bell later amid a jump in bonds yields spurred partly by Fitch’s downgrade of the country’s credit rating.

Fitch’s move hit the appetite for risky assets on Wednesday, dragging Wall Street sharply lower as investors took profits on five months of gains.

Megacap stocks including Apple, Alphabet and Microsoft slipped between 0.3pc and 0.5pc in premarket trading, with the yield on the benchmark 10-year note hovering around its highest since November.

Karen Reichgott Fishman, senior strategist at Goldman Sachs, said: “US equities, especially cyclicals, look vulnerable to further downside after a strong run - either on disappointment in the data relative to lofty expectations or on renewed hawkishness from the Fed.”

In premarket trading, the Dow Jones Industrial Average and S&P 500 were down 0.3pc, while the tech-heavy Nasdaq 100 had fallen 0.4pc.

Oil slipped lower after posting the biggest loss in five weeks as traders took stock of a broad shift away from riskier assets in the wake of the US credit rating downgrade.

Brent crude, the international benchmark, has dropped 0.4pc to below $83 a barrel, while US-produced has fallen 0.4pc toward $79.

Oil tumbled 2.3pc on Wednesday as a spike in Treasury yields and the US dollar hurt equities and commodities.

Crude’s sell-off came even as data showed a drop of more than 17m barrels in US crude stockpiles, the biggest-ever draw in volume terms. Storage levels at the key Cushing hub in Oklahoma shrank for a fifth week.

On Friday, the Opec+ Joint Ministerial Monitoring Committee is due to hold an online review of the market to gauge the impact of the supply reductions that have been led by leading member Saudi Arabia and its ally Russia.

Elon Musk’s X is being sued by a major French news agency for allegedly refusing to pay for featuring news content on the social media platform.

Senior technology reporter Gareth Corfield has the latest:

Agence France Press (AFP) claims in the Paris lawsuit filed on Wednesday that X, Musk’s new name for Twitter, failed to negotiate with the newswire as required under French law.

Since 2019 France has had a news bargaining code forcing big tech companies to pay news publishers in return for using their content.

AFP said: “This move is aimed at compelling Twitter, in accordance with the law, to provide all the necessary elements required for assessing the remuneration owed to AFP under the neighbouring rights legislation.”

Mr Musk said the claim is “bizarre” as he responded to a tweet about the lawsuit.

Read on for details.

European natural gas prices have advanced for a second day amid reduced fuel flows from the continent’s top supplier Norway.

Benchmark futures have risen as much as 5.7pc, supported by dwindling imports of liquefied natural gas and deeper-than- expected capacity cuts in Norway amid maintenance this week.

Yet prices remain in a relatively narrow range as high storage levels offset supply risks.

Goldman Sachs analyst Samantha Dart said industrial demand for gas remains depressed, and it may take until well into 2024 before it normalises.

Dutch front-month futures, Europe’s gas benchmark, was trading back above €30 per megawatt hour.

The pound has fallen to its lowest level since June while the FTSE 100 has dropped to a two-week low amid nervousness in global markets ahead of a finely balanced Bank of England rate decision.

Policymakers are expected to raise interest rates to a 15-year high of 5.25pc from 5pc on Thursday, although market pricing indicates a roughly 40pc chance of a repeat of June’s surprise half-point increase as British inflation remains the highest of the world’s major economies.

Sterling was down 0.3pc today having fallen below $1.27 on Wednesday. It is at its lowest point since June 30.

This was a turnaround from being the best performing major currency against the dollar in the first half of the year because of expectations the Bank would have to raise rates further than global peers.

Markets expected interest rates to peak at 6.5pc as recently as July 11 after data showed record wage growth but predictions have since fallen to a pinnacle of 5.75pc after a sharp decline in inflation.

Britain’s economy will “flatline at best” in the coming months after a closely-watched survey indicated a marked slowdown in the nation’s dominant services sector.

The industry delivered its weakest performance in six months in July as new business expanded at a much slower rate than in previous months.

The S&P Global/CIPS UK Services purchasing managers’ index fell to 51.5 in July, down from 53.7 in June and the lowest in the current phase of expansion that began in February.

Although still in growth territory above 50, the index has signalled a loss of momentum for business activity growth in each of the past three months.

Tim Moore, economics director at S&P Global Market Intelligence, said:

The loss of momentum signalled by service providers in July suggests that the UK economy is set to flatline at best in the coming months as higher borrowing costs take a bigger toll on consumer spending and business confidence.

Service sector companies saw the weakest rise in new work for six months, while job creation slipped as some firms responded to softer market conditions by putting the brakes on hiring.

UK service sector saw the weakest performance in six months with the #PMI posting 51.5 (Jun: 53.7). Input cost inflation picked up from June's 25-month low. Read more: https://t.co/tysJwlwbVJ pic.twitter.com/2tM5HaZoya

The downturn in eurozone business activity worsened more than initially thought in July as the slump in manufacturing was accompanied by a further slowing of growth in the bloc’s dominant services industry, a survey showed.

HCOB’s final Composite Purchasing Managers’ Index (PMI), compiled by S&P Global and seen as a good gauge of overall economic health, dropped to an eight-month low of 48.6 in July from June’s 49.9.

That was below the 50 mark separating growth from contraction for a second straight month and shy of a preliminary estimate for 48.9.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said:

The eurozone is off to a bad start in the second half of the year

The slump in activity is driven by manufacturing, but services activity growth has cooled off too, scaling back the support to the economy as a whole.

Monday’s manufacturing PMI showed factory activity across the euro zone contracted in July at the fastest pace since the pandemic and Wednesday’s services PMI showed slowing growth in the industry.

The headline services index fell to 50.9 from 52, coming in under the preliminary 51.1 reading.

Eurozone services activity growth eased for a third month running with the HCOB #Eurozone Services #PMI posting 50.9 (Jun: 52.0) amid a renewed reduction in new business intakes. @HCOB_Economics Read more: https://t.co/VvM11TvVeZ pic.twitter.com/dekrUVAuJU

London Stock Exchange Group has revealed a jump in income from rising interest rates and growth in its data operation.

The stock market and financial data company told investors that total income grew by 11.9pc to £4.2bn over the six months to June 30, against the same period last year.

As a result, it said revenue growth is on track to be at the upper end of its 6-8pc range for 2023 as a whole.

LSEG said it benefited from 7.6pc growth in its data and analytics business as it continues to benefit from the integration of Refinitiv, the data firm it bought in a $27bn (£21bn) deal in 2021.

The group has also expended its data operation since agreeing a deal last year for Microsoft to buy a $2bn (£1.6bn) stake in the firm last year.

David Schwimmer, chief executive officer of the group, said: “LSEG delivered strong, broad-based growth in the first half.”

The company also revealed that operating profits were down 18.7pc to £729m for the past half-year.

Shares in the company were 3pc lower in early trading.

As global markets tumble, Interactive Investor’s head of investment Victoria Scholar said:

After the FTSE 100 fell over 1pc yesterday caught up in the global market sell-off following Fitch’s US downgrade, European markets have opened in the red for the third straight day.

Last night on Wall Street, the Nasdaq tumbled more than 2pc while the S&P 500 shed over 1.3pc. Focus turns to the Bank of England’s anticipated rate hike at lunchtime.

The Dax in Frankfurt has fallen 1.3pc in early trading while the CAC 40 in Paris has dropped 1.3pc.

Beer maker Anheuser-Busch InBev has revealed a steep drop in sales of its Bud Light brand after a collaboration with a transgender TikTok personality sparked a backlash in the US.

The world’s biggest brewer revealed that US revenues dropped by 10.5pc in the second quarter of the year.

It said that an increase in global revenues of 7.2pc to $14.8bn (£11.7bn) had been “partially offset by the revenue decline of Bud Light in the US”.

AB InBev infuriated some of its most loyal, more conservative customers with its decision to partner transgender TikTok personality Dylan Mulvaney to attract younger drinkers.

The decision was slammed as tone deaf by everyone from Tucker Carlson to Kid Rock.

Mulvaney, a 26-year-old influencer who describes herself as one of “the most privileged trans women in America”, posted images of the customised Bud Light cans with her face on to mark “365 Days of Girlhood”.

The US decline masked what was a generally solid set of results, which included an 18.4pc increase in combined revenues of our global brands Budweiser, Stella Artois and Corona, outside of their respective home markets in the second quarter.

A post shared by Dylan Mulvaney (@dylanmulvaney)

The FTSE 100 opened lower as investors awaited the Bank of England’s verdict on interest rates.

The blue-chip index has fallen 1.1pc and is hovering near a two-week low hit, while the more domestically-focussed FTSE 250 midcap index lost 0.4pc.

London Stock Exchange Group lost 3.9pc after its first-half profit before tax fell 17.6pc.

Smith+Nephew slipped 3.2pc after the medical products maker reported a 5pc fall in trading profit for the six months to July 1, missing market expectations.

Also weighing was BT Group, which fell 5.2pc as shares of the telecom firm traded ex-dividend.

The Bank of England is expected to raise interest rates to a 15-year high of 5.25pc from 5pc, though there is a risk of a repeat of June’s surprise half-point increase as inflation remains the highest of the world’s major economies.

Adidas sales should fall only slightly in 2023 in a boost for the sportswear giant after it confirmed strong demand for its remaining Yeezy shoe stocks following the controversy surrounding its partnership with the rapper Ye, formerly known as Kanye West.

The upgraded guidance follows a 40pc jump in Adidas shares since the start of the year as investors bet on chief executive Bjorn Gulden’s ability to turn the company around after the chaotic break-up with Yeezy designer Ye over his anti-Semitic comments.

Sales of surplus Yeezy shoes generated around €400m (£344m) in the second quarter, helping Adidas reduce its predicted loss for the year to €450m, down from the €700m loss previously expected.

In currency-neutral terms, overall sales were flat compared to the second quarter of 2022, while they were down 5pc in euro terms, to €5.3bn.

Adidas said it now expected currency-neutral revenues to decline at a mid-single-digit rate in 2023, from the high-single-digit rate previously estimated.

Gross margins increased by 0.6 percentage points to 50.9pc in the quarter thanks to less discounting.

Rolls-Royce has revealed “significantly improved first half results” as its turnaround programme gathers pace and amid a bounce-back in international travel.

The aircraft engine manufacturer posted underlying operating profits of £673m for the six months to June 30 - more than five times the £125m it reported a year earlier.

Revenues increased by 31pc to £6.9bn in a sharp uplift after new chief executive Tufan Erginbilgic described the company as a “burning platform” when he took over in January.

On a statutory basis, it swung to a pre-tax profit of £1.4bn from losses of £1.8bn a year ago.

The results come a week after Rolls hiked its earnings outlook for the full-year to between £1.2bn and £1.4bn this year, up from the previously guided range of £800m to £1bn.

The profit cheer sent its shares surging higher on the day, to levels not seen since the start of the pandemic.

Markets have slumped ahead of the Bank of England’s interest rate decision today, as the hangover from the downgrade of the US credit rating continues.

The FTSE 100 has fallen 0.7pc to 7,508.49 while the midcap FTSE 250 has dropped 0.3pc to 18,756.82.

Wizz Air carried a record number of passengers as travellers seek out cheaper ways to go on holiday.

The low cost carrier revealed it served 15.3m passengers in the three months to June, an increase of 25pc on the previous year.

It delivered a 53pc boost to revenues to £1.2bn.

Chief executive József Váradi said:

Summer is going well operationally and from a revenue perspective.

We have made significant progress against our main objectives of reinstating best in class profitability at the back of delivering high-capacity growth and improving operational metrics during the quarter.

It comes after Ryanair revealed it carried a record 18.7m passengers in a single month for the first time in July.

A housebuilding company has said there has been “some pause” on prospective homeowners buying properties amid an increase in mortgage rates.

Peter Truscott, the chief executive of Crest Nicholson, was asked on Radio 4’s Today programme if demand for housing is falling as interest rates rise. He said:

Demand still remains very strong in terms of clicks onto the website, people that are interested in buying homes, but not surprisingly, there has been some pause in terms of people actually coming in and reserving homes.

I think a lot of people are standing on the sidelines. The market is broadly as we expected it to be following the the dislocation at the back end of last year and it’s tending to be volumes which are taking the strain rather than price.

There is a little bit of gentle downward pressure on price, but it’s really volumes that are taking the strain.

Next has boosted its profit outlook after good weather delivered a boost before its summer sale.

The high street bellwether has increased its earnings forecast by £10m to £845m after increasing sales by 6.9pc in the three months to June driven by 10pc growth in its online business.

It said full price sales were up 3.7pc on the same period last year ahead of an end-of-season sale that “has gone well”.

Nevertheless, this included a slowdown over the last six weeks of the period after it had been boosted by warm weather in May and June.

The UK’s biggest banks stand to gain billions this year from safety investments designed to protect them against rising rates.

Structural hedges, the balance sheet exercise which reduces banks’ sensitivity to interest rate moves, were worth well over £1bn at each of Britain’s top lenders in the first half of the year.

At Barclays, hedging income for 2023 is expected to surge more than 60pc to £3.6bn.

Hedging is a strategy that seeks to limit risk for financial assets - in this case investments designed to counteract the impact of the Bank of England raising interest rates.

Finance chiefs this quarter confirmed that the hedge, which could also be described as a bank’s fixed-income portfolio, will be a major contributor to earnings as swap contracts reprice at higher interest rates.

This trend is widely expected to help lenders offset income hits from tougher mortgage competition and pressure to pass on a greater share of rate hikes to customers.

NatWest chief financial officer Katie Murray said that as swap contracts mature, “we do expect through to 2025 that the uplift from the hedge activity remains sizable”.

This year’s collapse of US regional lenders including Silicon Valley Bank has underscored the importance of lenders’ asset and liability management, which can come under particular pressure when depositors withdraw huge sums or switch to higher-yielding savings accounts.

Shoppers cut back on spending last month amid rising interest rates, rain and rail strikes as the Bank of England prepares to raise borrowing costs for a 14th consecutive meeting today.

Retail footfall dropped between June and July for the first time since 2009, when MRI Springboard first started compiling the figures.

Shopper numbers typically rise by more than 3pc between the two months, as the start of the school summer holidays leads to an uptick in people spending time in city centres.

However, the figure dropped by 1.7pc as rain and rail strikes held back consumers already tightening their belts as interest rates impact household finances.

MRI Springboard said there was a risk that high streets could face further pain in the coming weeks, despite another bank holiday at the end of the month.

Founding director Diane Wehrle said the August bank holiday was a “less significant public holiday than Easter, which is what drove additional footfall in April, and the impact of the increase in interest rates, with the Bank of England set to announce on Thursday further increases, is clearly now starting to be felt”.

She added: “The greater impact on footfall in high streets is in part likely to be due to the rain, as shoppers tend to gravitate towards either the covered environments of shopping centres or retail parks as they are easier to access by car.

“There was also likely to be an additional impact on high streets, caused by some employees opting to work from home on the days when rail overtime bans occurred.”

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Asian stock markets followed Wall Street lower on Thursday after Fitch Ratings cut the United States government’s credit rating.

Tokyo’s market benchmark fell almost 1.5%. Shanghai, Hong Kong and Seoul declined. Oil prices edged higher.

Wall Street turned in its biggest one-day decline in months after Fitch Ratings downgraded the top-level US government credit rating on Tuesday.

The S&P 500 closed down 1.4pc to 4,513.39 for its sharpest tumble since April, marking its second straight loss after reaching a 16-month high on Monday.

The Dow Jones Industrial Average ended 1pc lower, while the Nasdaq Composite finished down 2.2pc.

In the bond market, the benchmark yield on the 10-year Treasury rose to 4.07pc from 4.04pc late Tuesday. The policy sensitive two-year Treasury yield slipped to 4.89pc from 4.91pc as its price rose.

The Nikkei 225 in Tokyo tumbled 1.4pc to 32,244.08 and the Shanghai Composite Index lost 0.2pc to 3,254.37. The Hang Seng in Hong Kong retreated 0.5pc to 19,429.17.

The Kospi in Seoul gave up 0.8pc to 2,597.36 and Sydney’s S&P-ASX 200 declined 0.5pc to 7,318.20. Jakarta gained while New Zealand and other Southeast Asian markets declined.