Time to wrap up.

UK gas prices have surged to fresh record highs today, as the energy price crunch threatens to drive inflation sharply higher, hitting growth and hampering the recovery.

Bur prices tumbled back in a roller-coaster ride, after Russia’s president indicated Moscow could stabilise soaring global energy prices. Vladimir Putin hinted that Russia’s state-backed monopoly pipeline exporter, Gazprom, may increase supplies to help Europe.

The price of gas for delivery in November initially surged by almost 40% to 400p per therm this morning, but reversed course after Putin’s comments, to finish 9% lower at 266p.

Gas for next-day delivery also fell back from record levels. After hitting 355p per therm this morning, it is now 231p, down 17% today.

But unless the energy crisis eases, UK industry could face shutdowns this winter:

Energy worries weighed on markets, with European equities and Wall Street both falling. Oil hit new multi-year highs, before subsiding, amid worries that petrol prices could surge higher before Christmas.

UK borrowing costs hit their highest since May 2019, before easing back this afternoon.

Inflation worries prompted New Zealand and Poland to both raise interest rates.

German industrial orders tumbled, as supply chain bottlenecks hit industry.

The supply chain crisis has also hit UK builders, where growth hit an eight-month low last month.

New data has shown that UK car traffic hit its lowest since May during the fuel crisis.

In other news:

Goodnight. GW

Stocks in London have ended the day at their lowest close in a fortnight, although they did recover from their lowest point.

The FTSE 100 index of blue-chip shares has closed 81 points lower at 6996 points, a drop of 1.15% today.

Worries about growth and inflation weighed on stocks.

Copper producer Antofagasta was the top faller, sliding by 5.5%, followed by retail group Next (-4.8%), hotel operator Whitbread (-4.5%), and engineering group Melrose (-4.5%).

But Tesco (+5.9%) led the risers after doubling its profits, announcing a £500m share buyback, and said its supply chain was holding up well.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, says Russia’s president calmed markets today.

“When Putin’s promises help calm the storm of rising prices which was pummelling financial markets, it’s clear investors are desperate for any gust of good news blowing in.

Surging gas prices which accelerated the sell off on the FTSE 100 were reined in a little after Russia’s president said the country would increase the amount of gas it will send to Ukraine via Europe, over the level it’s currently contracted to do. It underlines the volatility in the market and the nervousness amongst investors about low stockpiles of gas across Europe.

Although the government says there is no magic solution to surging prices, one UK industry organisation, the Energy Intensive Users Group, which represents steel, chemical and fertiliser firms, clearly believes the energy situation is so desperate that emergency measures are needed to avoid shut downs.

European markets also ended lower, with the Stoxx 600 down 1%.

UK gas prices have fallen back from their earlier highs, after comments from Russia’s president calmed the market.

Reuters reported that Vladimir Putin said Russia is boosting gas supplies to Europe, including via Ukraine, in response to the energy crunch and stands ready to stabilise the market amid surging prices.

Russian gas sales to Europe may hit a new record this year as a result, he said, and transit via Ukraine is set exceed volumes agreed under Gazprom’s contract with Kyiv.

This has pulled the price of UK natural gas for delivery in November back down to 267p per therm.

That’s a drop of almost 9% today, after it briefly surged 39% to around 400p this morning.

Last month, the world’s energy watchdog called on Russia to send more gas to Europe to help with the supply crunch.

EU politicians have accused the Kremlin of deliberately withholding gas supplies while it awaits regulatory approval for a controversial pipeline project, Nord Stream 2, which would double Russia’s capacity to export gas to Germany.

But Putin today said that Europe was to blame for the current energy crisis.

The AFP newswire has the details:

“They’ve made mistakes,” Putin said in a televised meeting with Russian energy officials.

He said that one of the factors influencing the prices was the termination of “long-term contracts” in favour of the spot market.

“It turned out, and today this is absolutely obvious, that this policy is wrong,” Putin said.

Road traffic fell to its lowest level since May as the fuel crisis gripped the country.

Department for Transport figures show car traffic across Britain on Tuesday 28th September was just 86% of pre-pandemic levels after several days of shortages at the pumps. That’s its lowest in four months.

Car traffic had been 100% of pre-pandemic levels on the previous Friday, the first day of long queues at forecourts. But it fell to 91% on Monday 27th (down from 97% a week earlier), after a weekend of panic buying left many petrol stations dry.

Car traffic then remained below 90% between Tuesday 28th and Thursday 30th September, suggesting motorists cut back on journeys for fear of running out of fuel.

By this Monday, car traffic was still only 91% of pre-pandemic levels, with around a fifth of forecourts in London and south-east London still dry.

AA’s head of roads policy Jack Cousens says:

“Not only did the fuel shortages, which had been managed successfully up until details of a Government meeting with the fuel industry and hauliers were leaked, leave millions of cars having to queue but they had a direct impact on commerce.

“This has been a woeful chapter in a long history of UK drivers being let down or exploited.

UK building firms were hit by widespread supply shortages last month, which drove up cost inflation and hit growth.

The latest survey of the construction sector found that shortages of materials and staff hold back the construction recovery in September.

Growth hit an eight-month low, as builders reported softer demand, unavailable transport, a severe lack of materials and continued staff shortages. It was also harder to find sub-contractors, who hiked their prices at the fastest rate on record.

Some firms said the unpredictable pricing environment had slowed clients’ decision-making on new orders and led to delays with contract awards.

This dragged the IHS Markit/CIPS UK Construction PMI down to 52.6 in September, from 55.2 in August. That only shows a moderate expansion, and the weakest in eight months.

Purchase prices increased rapidly in September, although the rate of inflation eased further from June’s all-time peak.

Around 78% of the survey panel reported a rise in their cost burdens, which was mostly linked to supply shortages and transport surcharges.

Staffing levels rose, but at the weakest rate since April, which partly reflected long wait times to fill vacancies.

Tim Moore, Director at IHS Markit, says labour shortages and the supply chain crisis led to a severe loss of momentum:

“The volatile price and supply environment has started to hinder new business intakes as construction companies revised cost projections and some clients delayed decisions on contract awards. As a result, the latest survey data pointed to the worst month for order books since January’s lockdown.

Shortages of building materials and a lack of transport capacity led to another rapid increase in purchase prices during September. There was also a considerable decline in the availability of sub-contractors, with survey respondents citing shortages of bricklayers, drivers, groundworkers, joiners, plumbers and many other skilled trades.

Measured overall, prices charged by sub-contractors increased at the fastest rate since the survey began in April 1997.

The energy crisis is also dragging down government bond prices, pushing up the cost of borrowing.

The yield, or interest rate, on 10-year UK gilts has risen to 1.118% this morning, it highest since May 2019.

This suggests the markets are anticipating that UK inflation will push higher, intensifying pressure on the Bank of England to raise interest rates.

Other government bond yields are also rising (including US Treasuries), as investors worry fret about rising prices hitting growth.

Neil Wilson of Markets.com says:

Inflation/stagflation, supply chain problems, the US debt ceiling, an energy crisis as natural gas prices soar to new records in Europe and the UK, tighter monetary policy from central banks, worries about the Chinese property sector – all swirling around equity markets this week and not going away any time soon.

Chiefly this morning we might say that rising Treasury yields and soaring energy prices are conspiring to knock risk appetite.

European stock markets have sunk deeper into the red, as rising energy prices threaten economic growth and drive up inflation.

The FTSE 100 index has now fallen by 120 points, or 1.7%, to 6956 points, a two-week low.

Every sector is down, led by consumer cyclicals, technology and industrial stocks, with mining stocks, travel companies and UK housebuilders among the fallers.

“A continuing surge in energy prices means the sceptre of inflation is looming large over the markets again, says AJ Bell investment director Russ Mould.

“Oil prices are camped above $80 per barrel after producers’ cartel OPEC failed to increase output and natural gas continues to touch record highs. The concern will be that rising prices will prove much stickier than hoped.

“This is undermining the markets’ efforts to pick themselves off the canvas after a bruising autumn so far. The next big announcement on the radar is the US jobs report on Friday – a weak number could prompt concern that we are heading for the dreaded stagflation scenario.”

Germany’s DAX has slumped by 2.4%, with European markets all a sea of red:

UK gas prices have surged to new all-time highs today, piling more pressure on energy users and providers.

British wholesale gas for day-ahead delivery breached the £3 per therm mark for the first time on Wednesday morning.

The British day-ahead contract jumped by 25%, extending its run of very sharp moves higher, to hit 350p per therm, Refinitiv data shows.

This takes wholesale gas prices further above the spike seen in 2018, when the “Beast from the East” weather system created a scramble for gas.

A series of factors have driven up gas and energy prices across Europe -- from lower production levels and higher global demand, to a lack of wind to power the renewables turbines, and forecasts of a cold winter.

Bloomberg’s Will Hares points out that the UK’s natural gas benchmark has more than doubled in the last month, as the crisis intensified.

Yesterday, a UK industry body representing energy intensive sectors including steel, chemicals and fertilisers called for more help from the government to ensure they could continue to operate this winter.

Without emergency measures, there could be shutdown at essential industries, they warned.

Richard Leese, chairman of the Energy Intensive Users Group, said:

“We have already seen the impact of the truly astronomical increases in energy costs on production in the fertiliser and steel sectors.

“Nobody wants to see a repeat in other industries this winter given that UK energy intensive industries produce so many essential domestic and industrial products and are intrinsically linked with many supply chains.

“Now is the moment for government and Ofgem to take preventative action.”

Nearly two-thirds of UK manufacturers expect to raise their prices in the run-up to Christmas after being hit by mounting cost pressures.

The British Chambers of Commerce said inflation expectations had risen to their highest since its records began at the end of the 1980s, with 62% of industrial firms planning price hikes over the next three months.

It’s another sign that inflationary pressures are on the rise, intensifying the cost of living squeeze on households. More here.

Tesco is bucking the selloff this morning, after doubling its profits in the first half of the year.

The UK’s largest supermarket cut costs related to the coronavirus pandemic and said its strong supply chain had kept shelves stocked despite widespread delivery problems across the industry.

Sales rose 3% to £27.3bn in the six months to 28 August and profits soared by 107% to £1.1bn.

It said its shoppers had sought out clothing and other household goods while it got a boost from the Euro 2020 football tournament, which was postponed to the summer of 2021, and more families holidaying in the UK because of travel restrictions.

Tesco said:

“As industry supply chains came under increasing pressure, we were able to leverage our strong supplier relationships and distribution capability to maintain good levels of availability for customers, contributing to our market outperformance.

Here’s the full story:

Tesco also announced a £500m share buyback, which is helping to push its share up by 4.1% this morning.

Victoria Scholar, Head of Investment at interactive investor, tweets:

European stock markets have dropped smartly in early trading, as worries about growth and inflation swirl.

The FTSE 100 has fallen back the 7,000 points mark -- dropping by 91 points or 1.28% to 6985 points.

Retailers, hospitality firms, travel companies and housebuilders are all among the fallers, with most stocks down.

JD Sports (-3.5%), hotel operator Whitbread (-3.1%) and gambling group Flutter (-3.1%) are the top fallers.

The Europe-wide Stoxx 600 has dropped by 1.1%, following losses in Asia-Pacific markets.

Kyle Rodda of IG explains:

Stocks have rolled over in Asia trade, as market participants fall back down that proverbial wall of worry. The priority remains inflation, policy and by extension future economic growth, as fears about rising global costs and the knock on effects that’ll have on asset valuations keeps investors in price discovery mode.

Somewhat unexpectedly, the RBNZ – normally a central bank that can say plenty without moving the markets a lot – seems to have catalysed this bout of risk aversion today. As expected, the [New Zealand] central bank hiked rates to 0.5% today, but put quite a strong emphasis on the persistent cost pressures motivating their decision in its statement, dispensing slightly with the general rhetoric from other global central banks that inflation is transitory.

European natural gas prices have surged to new highs in early trading:

As Bloomberg’s Javier Blas explains, the gas crisis risks morphing into a real political crisis:

German industrial orders tumbled in August, as supply bottlenecks and shortages hit factories in Europe’s largest economy.

Factory orders fell by 7.7% during the month, after two months of strong gains, much worse than the 2.1% fall which analysts expected.

Car orders were particularly weak. The Federal Statistics Office said that orders for motor vehicles and motor vehicle parts fell by 12.0% in August -- a sign that the global shortage of semiconductors is hitting German carmakers.

Orders for metal production and processing dropped 9.6%, with manufacturers also blaming delivery bottlenecks for preliminary products.

The drop was driven by a drop in demand from countries outside the eurozone:

Domestic orders fell 5.2% in August 2021 compared to the previous month. Foreign orders fell by 9.5%.

Incoming orders from the euro zone increased by 1.6%, while incoming orders from the rest of the world fell by 15.2%.

The steep drop on the month was partly caused by a rise in orders for planes, ships and other large vehicles in June and July. Without this distorting effect, industrial orders were down by 5.1% in August.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the UK’s supply chain crisis, and business.

The energy crunch is intensifying, driving up costs for households and businesses, and sending inflation fears rippling through the markets.

US crude has hit its highest level since 2014 this morning, extending its recent rally, amid tight supplies, rising demand, and the rocketing gas price.

A barrel of US crude touched $79.40, a new seven-year high, while Brent crude has hit a three-year high of $83 per barrel.

The recent surge in the oil price is making investors jittery, especially after the Opec+ group is resisting pressure to ramp up its production.

Naeem Aslam of Think Markets explains:

Oil prices in the United States have climbed to their highest level since 2014, rising for the last 5 sessions. Crude oil has gained support from uncertainty regarding energy supplies as supplies of coal, natural gas, and crude appear to be tighter.

Monday’s OPEC meeting only exacerbated the issue as the group conveyed no significant rise in oil production and decided to go on with its already existing timeline to avoid any major repercussions caused by another wave of coronavirus.

However, the cartel may be pushed into a corner if demand continues to rise, leaving no option but to ramp up production.

The jump in the oil price will drive up petrol prices, with the RAC warning that they could hit all-time highs before Christmas -- bringing “misery” for motorists still reeling from the fuel shortage crisis.

Amid signs that the number of petrol forecourts running dry was easing, the drivers’ organisation warned that anxiety about whether motorists could fill up their tanks was likely to be replaced by concern about how much it would cost.

The RAC’s fuel spokesperson, Simon Williams, said that oil demand was outpacing supply as economies begin to pick up pace amid eased Covid restrictions, with the increase exacerbated by Opec opting not to increase oil flows significantly this week.

He said:

“[The trend] looks likely to spell further misery for drivers at the pumps as we head towards Christmas … If this were to happen we could see the average price of unleaded hit a new record of around 143p per litre.

Diesel would shoot up to 145p, which is only 3p off the record high of 147.93 in April 2021.”

The frenzy in the gas markets, where prices are surging by the day, is also pushing up crude, as countries may be forced to burn more oil instead.

Kim Kwangrae, senior commodities analyst at Samsung Futures Inc, explains (via Bloomberg)

“The tight supply outlook and the extra oil demand coming from countries in Europe and Asia in search of alternative fuels due to the global energy crunch have pumped up prices,” said

“Oil at $80 will become a psychological burden for some investors, potentially driving a sell-off if the American government data shows crude inventories have climbed as per expectations.”

These worries are hitting equities too; European stock markets are expected to open around 0.7% lower.

Investors are await the latest healthcheck on UK and eurozone builders, and a survey of private sector job creation in the US ahead of Friday’s non-farm payroll report.

The agenda

• 8.30am BST: Eurozone construction PMI for September
• 9.30am BST: UK construction PMI for September
• Noon BST: US weekly mortgage applications
• 1.15pm BST: US ADP survey of private sector payrolls in September
• 3.30pm BST: EIA weekly oil inventory figures