Surging gas prices drive energy prices higher

This week the soaring costs of energy dominated the headlines again.

The confirmation of the price cap increase in the UK means people are likely to pay almost three times as much on their energy bills this winter, while the market rate of electricity in Germany and France continued to skyrocket. Much focus is on Russia’s actions. It is planning to shut down the main gas pipeline into Europe later this month, supposedly for temporary maintenance. The huge surge in gas prices signals people aren’t convinced they’ll restart it.

Elsewhere there is more bad news on the horizon. Leading indicators are showing a big decrease in economic activity as rising rates and costs squeeze businesses and consumers. While data released this week showed economic growth and earnings in the US holding up, these figures are somewhat lagging. Housing and manufacturing data show a collapse in new home sales and orders and are more reliable canaries, typically leading a recession by six to 12 months. The next domino to fall would be earning and profitability, a sure sign that recession was indeed imminent.

For the following stories, please click on this link*

• Global – Falling economic output raises stakes for Central Banks
• Commodities – Surging prices paint a bleak picture for UK inflation
• China: New attempt to boost economy and revive property market

(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)

UK inflation squeezing consumers and businesses

This week the inexplicably drawn-out conservative party leadership election carried on with yet more hustings generating yet more policy ideas that the market at least has to consider taking seriously.

The civil service and now the financial regulators are the latest departments slated for surgery under the new regime, although why that’s seen as a high priority issue to campaign on remains a mystery. It is unlikely to happen, but also unnecessary. Taking back control means a large amount of regulating that was previously outsourced to the EU will need to be done here, necessitating a larger civil service rather than a smaller one. Something I suspect is well known by the politicians suggesting otherwise.

Elsewhere the US has decided to tackle inflation through policy. The Inflation Reduction Act signed this week is primarily a climate policy rejigged to focus on energy costs. Subsidising the rapid build out of renewable energy, energy efficiency measures such as heat pumps and the transition to electric vehicles, as well as boosting oil and gas short term, looks to solve the problem by reducing energy needs while boosting supply.

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• UK – Inflation surpassing expectations sets tone for future rates
• Electrical Retailers – Pandemic retailers feeling the slowdown
• Semiconductors: Ever important despite falling prices

(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)