Live news updates from June 22: Powell warns US recession is ‘certainly a possibility’, Scholz rules out return to normal relations with Russia

The head of the US PGA Tour has blasted a rival Saudi Arabia-funded golf series for attempting to “buy the game of golf”, as an increasing number of circuit members defect to the new project fronted by former star player Greg Norman, escalating the battle for the future of the sport.

Jay Monahan, commissioner of the PGA Tour, said that LIV Golf, which is majority-owned by Saudi’s $620bn sovereign wealth fund, was “not concerned with the return on investment or true growth of the game”.

“I am not naive,” said Monahan. “If this is an arms race and if the only weapons are dollar bills, the PGA Tour can’t compete with a foreign monarchy spending billions of dollars trying to buy the game of golf.”

Saudi’s Public Investment Fund has earmarked at least $2bn to invest in LIV, threatening the PGA Tour’s position as one of the dominant forces in the sport by paying lucrative fees to draw away some of the game’s biggest stars, including Phil Mickelson, Dustin Johnson and Bryson DeChambeau.

The PGA Tour is increasing its own prize money and rewards for golfers. It has already suspended more than 17 of its members who took part in the inaugural LIV tournament in London two weeks ago. Two of the future LIV gatherings will happen at golf clubs operated by former US president Donald Trump.

The London event was the first of eight so-called invitational tournaments which will offer a total prize purse of $250mn.

Read more on this story here

A nascent rally in US stocks faded late on Wednesday, with a slide in oil prices weighing on energy shares that dragged down equity indices.

The S&P 500 index gave up early gains to turn negative in the final 30 minutes of trading in New York, ending 0.1 per cent lower for the day. Oil companies including Marathon Oil and ConocoPhillips moved sharply lower as Brent crude dropped 2.5 per cent to settle at $111.74 a barrel.

The technology-heavy Nasdaq Composite share index also fell 0.1 per cent and remains nearly 30 per cent lower for the year.

The declines ended a two-day rally for the S&P 500, which has dropped into a bear market this year on concerns that the Federal Reserve’s push to raise interest rates will cause an economic slowdown.

Jay Powell, the Fed chair, on Wednesday told the US Senate banking committee that “the American economy is very strong and well positioned to handle tighter monetary policy”. But he also warned of further surprises from inflationary trends. He said a recession was “certainly a possibility”.

The Fed last week raised its main interest rate by 0.75 percentage points, the most since 1994, after US consumer price inflation hit a 40-year high in May.

Money markets imply that the Fed will lift its main funds rate to about 3.5 per cent this year, with investors worrying that the combination of rising inflation and higher borrowing costs will threaten corporate profits and economic growth.

Read more on the day’s market moves here

The UK has declared a national incident after detecting poliovirus in sewage samples, as health authorities said the disease may be spreading between “closely linked” individuals.

The UK Health Security Agency on Wednesday said it was investigating whether community transmission, or transmission between individuals without known links, was under way.

No polio cases have been identified and the HSA noted that the risk to public overall remained “extremely low”. If an outbreak is confirmed, the UK would lose the polio-free status it has held since 2003.

Polio, short for poliomyelitis, mostly affects children under the age of five, according to the World Health Organization. It can cause severe disease and paralysis in a small, but significant, subset of patients.

Health secretary Sajid Javid said on Wednesday that he was “not particularly worried” about polio after the virus was detected.

He told the BBC: “That’s because the UK Health Security Agency, what they have explained to me is that through routine testing of wastewater in north-east London, they have detected vaccine-derived polio virus.”

“And they are tentatively having an investigation to learn more about that,” he added.

Public health authorities on Wednesday urged parents to check their children’s vaccinations were up-to-date to ensure optimal protection.

The last UK case of wild polio, or polio not linked to vaccination, was recorded in 1984, the HSA said.

Read more on the UK polio case here

Wall Street stocks eked out small gains on Wednesday after Federal Reserve chair Jay Powell pointed to the “possibility” of a recession, but said the US economy could withstand tighter monetary policy.

The S&P 500 was 0.2 per cent higher by lunchtime in New York, trimming an earlier rise, after Powell began a two-day testimony to lawmakers. The moves extended gains from the previous session, when the S&P climbed 2.5 per cent as traders hunted for bargains following a steep weekly drop.

The technology-heavy Nasdaq Composite share index rose 0.3 per cent, but remained almost 30 per cent lower for the year.

Powell told the US Senate banking committee on Wednesday that “the American economy is very strong and well positioned to handle tighter monetary policy”. But he also warned of further surprises from inflationary trends. He said a recession was “certainly a possibility”.

The Fed last week raised its main interest rate by 0.75 percentage points, the most since 1994, after US consumer price inflation hit a 40-year high in May.

Money markets imply that the Fed will lift its main funds rate to about 3.6 per cent this year, with investors worrying that the combination of rising inflation and higher borrowing costs will threaten corporate profits and economic growth. The annual pace of US consumer price inflation rose to 8.6 per cent last month, after Russia’s invasion of Ukraine drove up energy and food prices.

For more markets news, click here

Olaf Scholz, Germany’s chancellor, has ruled out a return to any kind of normal relationship with Russia in the wake of its war of aggression against Ukraine, as he used a statement to the Bundestag to reiterate Berlin’s support for Kyiv.

“Partnership . . . with Putin’s aggressive, imperialist Russia is inconceivable for the foreseeable future,” he told MPs.

He was speaking days after one of his closest advisers, Jens Plötner, controversially suggested that the media should focus more on Germany’s future relationship with Russia than on supplying Ukraine with heavy weapons.

Scholz did not comment on Plötner’s remarks, but he played down the prospects of returning to the kind of relationship Germany had with Russia before President Vladimir Putin sent his troops into Ukraine in February.

However, he said Nato should not revoke the Nato-Russia Founding Act of 1997, which governs relations between Moscow and the western military alliance, saying such a move would “play into the hands of Putin and his propaganda”.

Scholz said the Founding Act enshrined principles, such as respect for borders, the sovereignty of independent states and the renunciation of violence, that Putin had violated.

In the statement made ahead of this week’s EU summit in Brussels, the weekend G7 summit in Bavaria and a Nato summit in Madrid next week, Scholz called for a new “Marshall Plan” for Ukraine to help with its postwar reconstruction.

Scholz said the images he saw during his trip to Kyiv earlier this month reminded him of the pictures of German cities destroyed during the second world war. “Just like war-torn Europe then, so Ukraine now needs a Marshall Plan for its reconstruction,” he said.

Jay Powell has said a US recession is “certainly a possibility” and warned that avoiding a downturn now largely depends on factors outside the Federal Reserve’s control.

In testimony to the Senate banking committee on Wednesday, the Fed chair acknowledged that it was now more challenging for the central bank to root out soaring inflation while maintaining a strong job market.

He argued that the US was sufficiently resilient to withstand tougher monetary policy without sliding into a downturn, but acknowledged that outside factors, such as the Ukraine war and China’s Covid-19 policy, could further complicate the outlook.

“It’s not our intended outcome at all, but it’s certainly a possibility,” said Powell, responding to a question about the risk that the Fed’s plans to raise rates this year could lead to a recession.

He added that because of the “events of the last few months around the world” it was “now more difficult” for the central bank to achieve its goals of 2 per cent inflation and a strong labour market.

“The question of whether we are able to accomplish that is going to depend to some extent on factors that we don’t control,” he said, in a reference to soaring commodity prices stemming from Russia’s invasion of Ukraine and clogged-up supply chains due to China’s lockdowns.

Powell was pressed several times by lawmakers about the burden imposed by the Fed’s recent moves to combat inflation, which is now at 8.6 per cent, the highest level in four decades.

Read more on Powell’s testimony here

US liquefied natural gas exporters announced a spate of deals on Wednesday to beef up supplies to Europe as it suffers a mounting energy crisis.

Cheniere, the biggest American exporter, said it had reached a final investment decision to push ahead with a project that will boost its capacity by more than 20 per cent over the coming years, while a string of long-term supply deals locked in purchases of US gas over the coming decades.

The expansion of Cheniere’s facility on the Texas Coast will add 10mn tonnes a year of liquefaction capacity on top of its current 45mn tonnes. Total US capacity stands at roughly 99mn tonnes.

The announcements came amid a rash of US LNG deals unveiled on Wednesday, as American exporters look to increase production and position themselves to fill the gap as Europe turns away from Russian imports.

Chemicals group Ineos, meanwhile, announced plans to start trading liquefied natural gas. Under the agreement, Britain’s largest privately owned company would buy 1.4mn tonnes per year for 20 years of the fuel from projects proposed by US company Sempra Infrastructure.

Meanwhile, Venture Global, another big Gulf Coast developer, said on Wednesday that it had struck a deal to sell 2mn tonnes per year to oil major Chevron over a 20-year period.

Cheniere also inked a separate deal on Wednesday to sell 2mn tonnes a year to Chevron over a 15-year period.

Read more on LNG exporters here

The second of three one-day rail strikes across Britain will go ahead on Thursday, the union at the heart of the dispute said, after talks to resolve the dispute broke down.

Mick Lynch, head of the RMT union, criticised transport secretary Grant Shapps for the impasse in the negotiations between the RMT, the train operators and Network Rail, which owns the infrastructure.

State-owned Network Rail wrote to the RMT on Monday saying that it was going ahead with 1,800 job cuts, “the vast majority” of which would be voluntary.

“Grant Shapps has wrecked these negotiations by not allowing Network Rail to withdraw their letter threatening redundancy for . . . our members,” said Lynch.

“We will continue with our industrial campaign until we get a negotiated settlement that delivers job security and a pay rise for our members that deals with the escalating cost of living crisis.”

Some 40,000 RMT members at Network Rail and the 13 train operators will not work on Thursday, following a stoppage on Tuesday during which only about 20 per cent of services ran. They are also due to strike on Saturday.

Andrew Haines, Network Rail’s chief executive, said “it was a complete fabrication” that the government was involved in the decision not to withdraw the letter.

“There is nothing remotely to justify why they have chosen to walk out . . . it is just absurd.”

Haines said there was a “really credible way to get out of this” if the RMT accepted sweeping modernisations, particularly to maintenance roles. “But they wouldn’t even talk about it,” he said.

For more news on the strike, click here

Consumer confidence in the eurozone has fallen to its lowest level since the start of the coronavirus pandemic, as households face soaring energy and food prices and economists warn about the heightened risk of a recession.

The European Commission said on Wednesday that its flash consumer confidence indicator for the eurozone had fallen 2.4 points to -23.6 this month. That is its weakest reading since a record low of -24.5 was registered in April 2020 as the Covid-19 crisis took hold.

The results were worse than expected by economists polled by Reuters, who had predicted consumer confidence in the 19-country bloc would rise to -20.5.

The cost of living is increasing at the fastest rate in the history of the single currency zone, after soaring energy and food prices pushed inflation to 8.1 per cent in the year to May. Wages are lagging inflation, leaving most European households worse off.

Economists predict that the combined impact of higher inflation and increased financing costs — as central banks raise interest rates — will dent growth in the eurozone.

“The odds are that the eurozone will suffer a recession — at least two quarters of negative growth,” said Erik Nielsen, chief economics adviser to UniCredit.

“In early 2023, when the full force of the monetary tightening hits and if excess savings have been reduced, we could certainly dip below early-2022 levels” of eurozone gross domestic product, he added.

Wall Street stocks rose on Wednesday as investors weighed comments from the Federal Reserve chair that signalled the US economy may be strong enough to withstand more interest rate rises.

The S&P 500 added 0.5 per cent after Fed chair Jay Powell began a two-day testimony to lawmakers. The moves extended gains from the previous session, when the S&P rose 2.5 per cent as traders hunted for bargains following a steep weekly drop.

The technology-heavy Nasdaq Composite share index rose 0.8 per cent on Wednesday, but remained almost 30 per cent lower for the year.

Powell on Wednesday told the US Senate banking committee that “the American economy is very strong and well positioned to handle tighter monetary policy”. But he also warned of “further surprises” from inflationary trends.

The Fed last week raised its main interest rate by 0.75 percentage points, the most since 1994, after US consumer price inflation hit a 40-year high in May.

But, so far, Powell’s testimony had broken “no new ground after last week’s policy action”, said Pantheon Macroeconomics chief economist Ian Shepherdson. He also noted that Powell may have brought some relief to markets with “no specific mention” of plans for another extra large rate rise in July.

In Europe, the Stoxx 600 share index fell 0.5 per cent, recovering from steeper losses earlier in the day ahead of Powell’s testimony. A FTSE index of Asia-Pacific stocks outside Japan dropped nearly 2 per cent, with Tokyo’s Topix closing 0.2 per cent lower.

Read more markets news here

Jay Powell sought to alleviate fears about an impending recession, even as he warned that further surprises on inflation could be in store.

In testimony to the Senate banking committee on Wednesday, the US Federal Reserve chair said the economy could handle significantly tighter monetary policy, as he stressed the central bank’s commitment to root out the highest inflation in four decades.

But concerns about a possible recession have grown more pronounced in recent weeks as US inflation data have come in worse than expected.

“The American economy is very strong and well positioned to handle tighter monetary policy,” Powell said in prepared remarks that highlighted the resilience of the US consumer and the labour market, where employment has grown on average by roughly 400,000 jobs a month.

But he underscored uncertainty affecting the outlook, moving beyond past comments acknowledging the path to achieving a “soft landing” has become more challenging.

“Inflation has obviously surprised to the upside over the past year and further surprises could be in store,” he warned.

“We therefore will need to be nimble in responding to incoming data and the evolving outlook and we will strive to avoid adding uncertainty in what is already an extraordinarily challenging and uncertain time.”

Read more on Powell’s testimony here

Inflation in Canada has increased to its highest level in 39 years, with prices rising by 7.7 per cent year on year in May.

The consumer price index was pushed up by a broad range of categories, but energy prices stood out with a 34.8 per cent year-on-year rise. Petrol prices were up 48 per cent, increasing pressure on the pockets of Canadian motorists. The CPI numbers topped consensus estimates that it would come in at 7.4 per cent.

Excluding energy, CPI rose 6.3 per cent in the past year. While a tight labour market has helped to push up hourly wages by 3.9 per cent, higher pay has been outpaced by rising grocery costs, which are up 9.7 per cent year on year. The cost of edible oils and fats has ballooned 30 per cent.

Accommodation costs rose 7.4 per cent year on year, maintaining the April pace. While home prices have recently cooled in most markets, sharply higher mortgage rates have increased the overall costs of owning a home.

The CPI figure is Canada’s highest since January 1983. The increase in inflation makes it more likely that the Bank of Canada will follow the US Federal Reserve and raise the benchmark interest rate by 0.75 percentage points at its next meeting.

Shopify has set its sights on a “huge untapped market” for business-to-business commerce, as it introduces new tools in an attempt to fend off competition from Amazon and revive its fortunes after a bruising stock sell-off.

Shopify said its push into business-to-business sales, announced on Wednesday, would unlock opportunities “multiple times” bigger than its existing model. The tools are meant to make it easier for merchants to sell in bulk and integrate with enterprise resource planning software used by companies to handle procurement.

“It is an opportunity for us to expand our [total addressable market],” Harley Finkelstein, Shopify’s president, told the Financial Times. “Not just go after direct-to-consumer businesses, big and small, but to now go after wholesale business, which is a huge untapped market.”

Ottawa-based Shopify, which provides software and services for independent retailers, has been keen to herald growth opportunities after a year in which its shares have plummeted 75 per cent, wiping off more than $130bn in market value and erasing the gains it made as one of the coronavirus pandemic’s biggest winners.

Its decline has been sharper than ecommerce rivals, such as Amazon. Inflation, supply chain uncertainty and the effect of Apple’s privacy changes on targeted advertising have hit the direct-to-consumer brands that use Shopify, according to ecommerce data analyst PipeCandy, which showed traffic growth for DTC down 18 per cent in the past six months.

Read more on Shopify’s business-to-business push here

US delivery company DoorDash has signed an exclusive deal to build warehouses for Canada’s largest grocery chain, intensifying its competition with rival Instacart.

The warehouses will handle delivery within 30 minutes of 5,000 to 8,000 products sold under Loblaw’s “President’s Choice” brand, licensed to a newly-created DoorDash subsidiary. The companies did not disclose the financial terms of the partnership.

The agreement is the first of its kind for DoorDash, the US market leader in restaurant delivery, as it seeks to build out its capabilities for rapidly delivering groceries and convenience items. It hopes it can establish similar arrangements with grocery chains in other markets, such as the US where total online grocery sales topped more than $7bn in May, according to advisory company Brick Meets Click.

“Our ambition has always been to meet merchants where they are and to help them lean into . . . the digital convenience economy,” said Fuad Hannon, DoorDash’s head of new verticals.

The deal escalates the company’s rivalry with Instacart, which had previously been an exclusive partner to Loblaw and hopes to establish its own warehousing partnerships for some of its 750 retail partners in North America. Instacart will still carry Loblaw on its marketplace, but customers will not have access to the selection offered for delivery in under 30 minutes.

Setting up dedicated warehouses is considered the next frontier for online grocery providers. The format allows the companies to fulfil more orders per driver per hour, compared with having workers go into stores to pick items and take them to customers.

Read more here

A second big shareholder in Capricorn Energy has balked at its proposed merger with rival oil and gas producer Tullow Oil, slamming the deal as a “rights issue in disguise”.

Hedge fund Kite Lake said the planned $1.4bn tie-up was a solution to a problem that only existed for investors in debt-laden Tullow.

“It is nothing more than a rights issue in disguise for Tullow and we believe the only benefit of this deal is that it has reminded the market that the underlying value of Capricorn far exceeds any value offered in the proposed Tullow combination,” said Jamie Sherman, co-chief investment officer at Kite Lake.

The hedge fund, which has a 4.6 per cent interest in Capricorn, joins Legal and General Investment Management (LGIM) in criticising the deal.

Under the terms of the transaction, Capricorn investors would receive 3.8 new Tullow shares for each of their existing shares. Tullow investors would own 53 per cent of the combined company, with Capricorn’s shareholders taking the remainder.

LGIM, the UK’s biggest asset manager, told the Financial Times earlier this month that there was no “clear strategic rationale for the deal”. It also said the takeover would increase “financial leverage and the probability of the combined entity growing oil production over time, potentially in higher cost basins”.

Capricorn claims the deal will create a leading London-listed energy group focused on Africa, with assets in countries such as Egypt, Ghana, Gabon, Ivory Coast and Kenya and combined production of 100,000 barrels per day.

But the tie-up will also allow Tullow, whose net debt was $2.1bn at the end of 2021, access to Capricorn’s cash.

Sir Keir Starmer, leader of the UK opposition Labour party, on Wednesday called on the prime minister to “get round the table and get the trains running”.

Forty thousand UK rail staff went on strike on Tuesday causing disruption across the network. More strikes are scheduled for later in the week, although talks are under way between the unions and rail networks.

Speaking during prime minister’s questions in parliament, Starmer argued that neither Boris Johnson nor transport secretary Grant Shapps had held a “single meeting, held a conversation or lifted a finger” to prevent the strikes.

“If he is genuine about preventing strikes will the prime minister tell this house how many meetings he or his transport secretary have had with rail workers this week to actually stop the strikes,” said Starmer.

In response, Johnson accused Starmer of siding with the strikers, noting that around 25 Labour MPs were on the picket line during Tuesday’s strike.

“The leader of the Labour party hasn’t even got the gumption to speak out against the rail strikes that are doing so much damage to the people up and down this country,” the prime minister told the House of Commons.

Johnson added: “We are making sure that we do everything we can to prevent these strikes. He knows it is up to the railway companies to negotiate, that is their job. We’ve spent £16bn looking after the railways throughout the pandemic. That’s cost every household £600.”

Moderna is urging regulators to authorise its new two-strain Covid-19 vaccine booster, after releasing data that shows it increases immunity against the fast-spreading Omicron subvariants.

The US biotech group said the vaccine, which contains the genetic code for the original strain and Omicron, demonstrated a “potent neutralising antibody response” to the subvariants BA.4 and BA.5.

Stephen Hoge, Moderna’s president, said the higher level of protection compared with the company’s existing vaccine justified switching to the new booster, which could help prevent “a large rise in cases” in early autumn.    

“We’ve been producing millions of doses over the last couple of months,” he added. “And we would hope to have tens of millions to hundreds of millions of doses available in August, September and October to support boosting prior to the fall respiratory virus season.”

However, the vaccine does not elicit as many antibodies to the new subvariants as it did to the original Omicron variant, suggesting its efficacy may already be declining. The new data backs up studies that have shown that previous infections from the original Omicron strain, known as BA.1, do not provide a strong antibody response against newer versions.

While global regulators prepare to discuss whether to co-ordinate a switch to the vaccines designed to target Omicron, the virus has already raced ahead. The trials of the vaccines adapted to Omicron took several months, leading some to question whether the vaccine makers should be allowed to adapt the jabs without first providing new clinical data for each tweaked version.

Read more here

Ford has selected its Valencia plant in Spain to make battery-powered cars, a decision that will lead to the end of vehicle production at rival site Saarlouis in Germany, as the carmaker reshuffles its European factories ahead of going all-electric in the region.

The US carmaker also plans “significant” staff cuts even at Valencia because electric cars require fewer employees to build them, it said on Wednesday.

Carmakers in Europe are shifting some factories to make electric vehicles as the region prepares to switch to selling only electric or hydrogen models, with plants that fail to secure electric car production facing the risk of closure once the region transitions.

Europe is poised to phase out sales of petrol or diesel models by 2035 following an European parliament vote, though some countries such as Norway are making the move earlier.

The US carmaker wants to switch all of its cars to electric in the region by 2030 and vans by 2035.

Ford was choosing between Valencia and Saarlouis for the investment in its in-house electric car technology.

The group has already announced that it will make electric cars in Cologne, Germany using Volkswagen’s technology and in Romania through a joint venture, as well as making battery-powered vans in Turkey.

Wednesday’s decision means Saarlouis, which has 4,600 staff, is the only Ford vehicle plant in the region that has not been allocated electric vehicles for the future.

Ford’s new in-house system will be used in factories globally, but the company expects to have only one European production centre for the vehicles that use the technology.

Turkey and Russia have agreed to hold UN-brokered talks with Ukraine aimed at averting a global food crisis by securing the safe passage of millions of tonnes of grain out of the war-torn country, the Turkish state news agency has said.

Anadolu Agency said that talks between a Turkish and Russian delegation in Moscow this week had been “constructive and very positive”.

It said that an “understanding was reached” that a four-way meeting with officials from Ukraine, Russia, Turkey and the UN would take place in the coming weeks.

The UN has warned that hundreds of millions of people are at risk of “hunger and destitution” because of food shortages caused by the war in Ukraine and Russia’s blockade of Black Sea grain shipments.

However, negotiations have struggled to progress, with talks foundering over Moscow’s refusal to allow ships to leave Ukraine’s main port of Odesa and Kyiv’s fear of opening itself up to more attacks.

Hopes have risen of a breakthrough in the stalled process of EU enlargement in the western Balkans after Bulgaria’s opposition agreed to support lifting the country’s veto on the start of accession talks with North Macedonia.

Boyko Borisov, a former Bulgarian prime minister, said his centre-right GERB party would vote in favour of beginning the EU negotiations. If adopted by Bulgaria’s parliament, that would also unlock membership talks with Albania ahead of a summit of EU leaders on Thursday and Friday.

“This is the most correct decision for the future of the Balkans, the EU and Bulgaria,” said Borisov. “We will not remain on the dark side of Eurasia, we will not allow Putinisation.”

The move marks a U-turn for Borisov, who blocked the talks with North Macedonia in 2019 in a dispute about the former Yugoslav country’s interpretation of Balkan history.

Kiril Petkov, Bulgaria’s reformist prime minister, had been poised to strike a deal with Skopje unlocking the talks when one of the parties in his coalition pulled out in protest over the issue earlier this month, leaving him clinging on to power.

A vote on enlargement talks could be held in parliament on Thursday, with GERB’s support being enough to lift Sofia’s veto.

European officials fear blocking EU enlargement would create political instability in the western Balkans and disillusionment about the region’s western orientation, which could be exploited by Russia.

In a further sign of possible movement, North Macedonia, Serbia and Albania on Wednesday confirmed they would take part in a summit in Brussels tomorrow with EU leaders, a day after threatening to not attend the meeting over Bulgaria’s opposition to North Macedonia’s candidacy.

“We’ll attend the EU Council meeting,” Albania’s prime minister Edi Rama said, adding that Bulgaria’s stance was akin to “kidnapping” and “destroys” the “spirit of Europe”.

A shortlived rally for beaten-down global shares fizzled out on Wednesday and government bond prices firmed, as investors expected the US Federal Reserve to indicate further aggressive rate rises to combat inflation.

Europe’s Stoxx 600 share index lost 1.7 per cent in morning trading, handing back the gains it had made over the previous two sessions. The benchmark has lost more than 17 per cent this year. Germany’s Dax led fallers, shedding 2 per cent.

Futures trading also implied that Wall Street’s S&P 500 would start 1.7 per cent lower after the index posted a 2.5 per cent rise on Tuesday, in a session characterised by bargain hunting following a steep decline in the previous week.

The S&P 500 is more than a fifth below its January all-time peak, although the grind lower has featured some sharp rallies. Tuesday was the sixth session since early April where the Wall Street benchmark had gained more than 2 per cent, according to JPMorgan.

“Each of the five previous times we have seen the index fall the next day by an average of 2.5 per cent,” the bank’s head of US market intelligence Andrew Tyler said. “Client activity is muted with everyone universally bearish and a sell-all rallies mentality.”

Investors are fretting about the effects of inflation and rising debt costs on companies’ profits. Business activity surveys have signalled a manufacturing downturn caused by high commodity prices and coronavirus-related lockdowns in China.

Read more on today’s markets here

Jay Powell: The Federal Reserve chair will face US lawmakers for a congressional hearing on the state of the economy one week after the central bank raised the benchmark interest rate by 0.75 percentage points, the biggest increase since 1994.

Fedspeak: Chicago Fed president Charles Evans will speak about economic conditions before the Corridor Business Journal Mid-Year Economic Review in Iowa. Philadelphia Fed president Patrick Harker and Richmond Fed president Thomas Barkin will participate in a macroeconomic outlook discussion about equality, hosted by the Philadelphia Fed.

Corporate earnings: Canadian grocer Empire and US homebuilder KB Home will report earnings. Empire is expected to report a profit of 69 Canadian cents per share on C$8bn ($6.2bn) in revenues. KB is expected to report earnings of $2.03 a share on $1.64bn in revenues. On Tuesday, rival US homebuilder Lennar surpassed consensus estimates despite rising mortgage rates.

A UK rail union has said its members have accepted a pay deal, as travellers experienced more disruption a day after the biggest transport strike in a generation ground the network to a halt.

The TSSA union, which represents clerical, supervisory and station staff, said on Wednesday its members at Merseyrail had voted to accept a 7.1 per cent pay deal, calling it “a sensible outcome to a reasonable offer”.

Manuel Cortes, TSSA general secretary, said the deal showed unions were “in no way a block on finding the solutions needed to avoid a summer of discontent on the railways”.

The deal, which is more than double that offered by Network Rail and train operators locked in talks with the RMT union, is the same for general and management grades. It was linked to November’s rate of retail price inflation and consistent with an offer made to other grades whose pay had been renegotiated at that date, the TSSA said.

Merseyrail is controlled by the Labour-led Liverpool City Region combined authority and is not part of the national franchise system.

About 60 per cent of services are expected to run on Wednesday as the industry resets after 24 hours of industrial action.

RMT negotiators were set to resume talks with Network Rail, the infrastructure owner, and 13 train operating companies on Wednesday in efforts to avoid further strikes scheduled for Thursday and Saturday.

The former chief executive of UK grocer Sainsbury’s said rising wages will hit other pay packets, as talks between rail bosses and unions over remuneration and work conditions persist.

“All wage awards impact on other wage awards, because we have a labour shortage in the UK today,” Justin King told BBC Radio 4’s Today programme on Wednesday. “There are perhaps 1mn people fewer in the workforce than there were before Covid for a multitude of reasons.

“If one company puts up their wages, others tend to follow,” he added. “It doesn’t really matter whether it’s [in the] public or private [sector], albeit we tend to notice the public ones more.”

King said UK supermarkets had pushed their base rate of pay above £10 and made “big announcements of it, because there’s a competition for labour”.

King was speaking a day after the UK’s transport network ground to a halt following a dispute between rail bosses and unions over pay, proposed redundancies and work conditions.

The RMT rail union is seeking pay rises of 7 to 8 per cent to compensate for record inflation, which hit a four-decade high of 9.1 per cent in May. More strikes are expected on Thursday and Saturday.

“I’ve always been somewhat downbeat about the prospect of inflation being short-lived, so I think it’s going to last for quite some time,” said King.

The former boss of the UK’s second-largest supermarket group Sainsbury’s said retailers “can make a difference, but not too much”.

He added: “[Supermarkets] make about 3 to 4 per cent . . . even if they halve their profits it would only really take a little off the headline figures.”

UK house price growth accelerated in April, pushing the average property price above £280,000 for the first time, according to official figures that show the pandemic-induced real estate boom continued despite rising borrowing costs.

UK average house prices increased 12.4 per cent during the year to April, up from 9.7 per cent in March 2022, data released by the Office for National Statistics showed on Wednesday.

The average UK house price was £281,000 in April 2022 — £31,000 higher than the same time last year. It was also £50,000 higher than in February 2020 before the pandemic took hold, reflecting high demand in the property market during the health crisis.

ONS house prices statistician Chris Jenkins noted that the acceleration was “mainly due to falls seen at this time last year from changes in the previous stamp duty holiday”.

As a result, official data were “not yet showing the softening in demand picked up by other reports over the past few weeks”, said Jeremy Leaf, north London estate agent and a former RICS residential chair.

However, many experts expect prices to cool as interest rates rise.

Andrew Montlake, managing director of the UK-wide mortgage broker Coreco, said that “increased borrowing costs and the immense pressure on household finances will almost certainly start to temper demand in the months ahead, which will see the rate of price growth slow”.

ONS data showed that London continued to be the region with the lowest annual growth at 7.9 per cent. In contrast, Wales and Scotland reported house price increases of more than 16 per cent.

The average office occupancy in London dropped sharply to less than a tenth on the first day of nationwide rail and Tube strikes as many redeployed their pandemic working practices and stayed at home.

Occupancy in the UK capital fell to 9 per cent on Tuesday, according to Freespace, the office services provider, compared with 42 per cent last week. The earlier figure reflects a gradual return of staff to their workplaces since pandemic lockdowns were eased at the start of the year.

Freespace, which has deployed more than 140,000 sensors that measure building occupancy and environmental conditions, said that the average UK office occupancy in June was higher at 22 per cent.

Many offices outside London, and especially on office estates around areas such as Reading, have better access to parking for cars which means that they are less affected by train strikes.

But even this was half the level of the week before, when the average across the UK was 40 per cent.

Rail bosses are calling on unions to accept almost 2,000 job losses, as the two sides seek to overcome their differences in talks after the biggest transport strike in a generation brought much of Britain to a halt.

Services are expected to be disrupted on Wednesday. Further strikes are planned for Thursday and Saturday.

A shortlived rally for beaten-down global shares fizzled on Wednesday, as investors awaited a congressional appearance by Federal Reserve chair Jay Powell and business data that may signal a global slowdown.

Europe’s Stoxx 600 share index, which had gained 1.3 per cent over the previous two sessions, lost 1.5 per cent in early London dealings. The regional gauge remains more than 17 per cent lower for the year.

A FTSE index of Asia-Pacific stocks outside Japan, which also rose on Tuesday, gave up most of that gain with a 2.1 per cent drop. Tokyo’s Topix slipped 0.2 per cent lower.

Futures trading implied that Wall Street’s S&P 500 would lose 1.7 per cent, after the benchmark US share gauge rose 2.5 per cent on Tuesday in a session characterised by bargain hunting following a steep decline in the previous week.

The FTSE All-World index of developed and emerging market shares has fallen for 10 of the past 11 weeks as global central banks followed the US Fed into tightening monetary policy in a bid to stamp out red-hot global inflation.

Investors are fretting about the effects of higher prices and debt costs on consumer spending and companies’ profits, while business activity surveys have signalled a manufacturing downturn caused by high commodity prices and coronavirus-related lockdowns in China.

The S&P 500 is more than a fifth below its January all-time peak, although the grind lower has featured some rallies driven by bargain hunting or hedge funds closing out short-selling positions.

Read more about markets here.

The UK’s deputy prime minister has called for “restraint” in public sector pay, as the inflation rate hit a fresh 40-year high.

“We do need to have the kind of pay restraint in the public sector that we’ve been talking about, which is at the heart of the challenge with the unions,” Dominic Raab told Sky News on Wednesday. “Otherwise we’ll just have the vicious cycle of inflation staying higher for longer.”

UK inflation accelerated to 9.1 per cent in May, its highest level since 1982.

Meanwhile, industry executives said rail infrastructure owner Network Rail is set to offer workers a 3 per cent pay increase, one day after the UK was hit by the biggest transport strike in a generation. Rail workers are due to walk out again on Thursday and Saturday.

The RMT rail union is pushing for pay rises of 7 to 8 per cent to compensate for inflation that is expected to hit 11 per cent this year.

Raab said higher wages would merely prolong the issue of rising prices: “We know if public sector pay keeps going up then it will only keep inflation high for longer.”

He added: “We’re taking a firm line with, for example, the RMT unions precisely because we want to [prevent] this erosion of pay packets by inflation.”

Frasers Group has raised its stake in Hugo Boss to be worth about €900mn in the latest move by the UK retailer to boost its exposure to the German fashion brand.

The UK-listed retail company, known for its Sports Direct and House of Fraser brands, said on Wednesday that it had bought stock representing 4.9 per cent of Hugo Boss’s total share capital.

The company, founded by Mike Ashley, has also upped its stake through the sale of put options, amounting to 26 per cent of the German company.

The latest investment increases Fraser’s maximum exposure to approximately €900mn.

Frasers said the “strategic” move reflected its “belief in the Hugo Boss brand, strategy and management team”.

It comes after the retailer initiated a £35mn share buyback on Monday, under chief executive Michael Murray who succeeded Ashley last month.

Frasers last increased its stake in Hugo Boss in April, when it bought shares worth 2.1 per cent of Hugo Boss and sold put options representing 23.2 per cent of the German company’s total share capital.

Athleisure retailer JD Sports is to overhaul all aspects of its corporate governance and internal controls following the departure of its longtime executive chair Peter Cowgill.

Alongside its much-delayed full-year results, the FTSE 100 company said that “a number of regulatory issues” have highlighted a need for more board-level experience and greater internal scrutiny and control.

In recent months the group has had several run-ins with the UK’s competition regulator and been fined on two occasions.

It said that following a review, it will now implement “a more formalised approach to governance, risk management and the documentation and appraisal of internal controls”.

Despite the disputes, the company reported its best-ever financial results, with sales in the year to January 2022 rising more than a third to £8.56bn and pre-tax profit before exceptional items more than doubling to £947mn. The group finished the year with net cash of £1.18bn.

JD said it expected a similar level of profit in the current year. Talks continue regarding the sale of Footasylum, while processes to recruit a new permanent chief executive and chair following Cowgill’s departure have begun.

House prices in London are unlikely to fall despite rising interest rates and inflation because the city has such a chronic undersupply of housing, according to the biggest developer of new homes in the capital.

FTSE 100 developer Berkeley Group said on Wednesday that demand for London housing was solid despite growing fears about the economy.

“The economic and operating environment remains volatile with inflation, labour and materials shortages, interest rates and regulatory costs of development all having the potential to impact supply and demand,” said Berkeley.

But “the ongoing undersupply of housing” meant that, even in such a challenging environment, demand was outstripping supply, added the builder.

Berkeley posted pre-tax profits of £552mn for the 12 months to the end of April, a 6.4 per cent increase on the previous year, even as operating expenses rose 18 per cent to £157mn.

The company, which claims to be responsible for one in 10 new homes built in London, said cost inflation caused by Russia’s invasion of Ukraine and supply chain disruption was being offset by rising house prices.

The UK’s inflation rate hit another 40-year high in May, reaching 9.1 per cent, its highest level since 1982.

Fuelled by higher food prices last month, the rise was in line with economists’ expectations that suggest inflation will march higher in the coming months to move into double digits by the autumn.

The Bank of England expects the inflation rate to exceed 11 per cent in October, significantly higher than other similar countries in the G7.

The rise in inflation will add to cost of living pressure on households, intensify demands for wage rises to offset higher prices and make it more difficult to resolve industrial disputes such as those on the railways.

Prices rises have been broad-based across goods and services. Food prices rose 1.5 per cent in the month alone with bread, cereals and meat rising fastest in price.

In May, the Office for National Statistics said road fuel prices were 32.8 per cent higher than a year earlier, the largest annual jump in prices seen in this category since detailed indices were first compiled in 1989.

Grant Fitzner, ONS chief economist, said there was still more inflation in the pipeline across factories in the UK in a sign that price pressures were still strengthening. “The price of goods leaving factories rose at their fastest rate in 45 years, driven by widespread food price rises, while the cost of raw materials leapt at their fastest rate on record,” he said.

UK: The country releases consumer price index data for May, as well as its latest producer price index. Official figures show that CPI inflation rose to a 40-year high of 9 per cent in April, with the Bank of England predicting it could hit 11 per cent in the autumn. Meanwhile, the government will introduce a new “Bill of Rights” to the House of Commons, which will allow UK courts to diverge from rulings from the European Court of Human Rights. 

EU: The bloc publishes flash consumer confidence figures and the governing council of the European Central Bank holds a non-monetary policy meeting in Frankfurt.

Berkeley Group: The UK-based housebuilder will publish full-year results. Earlier this month, Berkeley said Michael Dobson would join the group as chair in his first major role since stepping down from his position at Schroders.

Markets: Futures for the Euro Stoxx 50 and the FTSE 100 were down 1.3 per cent and 0.9 per cent, respectively. Oil prices and Asian equities declined, as fears over a recession in the US and China’s economic outlook dampened sentiment.

Oil prices dropped on Wednesday following news reports that Washington was preparing steps to bring down fuel costs, while Asia-Pacific equities defied a jump on Wall Street to edge lower.

Brent crude, the international benchmark, declined 3.5 per cent to trade at $110.69 a barrel, while West Texas Intermediate, the US marker, fell 3.7 per cent to $105.48.

US president Joe Biden on Monday said he was considering whether to pause a tax on a federal gasoline tax; Bloomberg and Reuters reported that he would call for the suspension on Wednesday. Energy secretary Jennifer Granholm is set to meet refiners on Thursday. 

Asia-Pacific equities fell on Wednesday despite gains for US equities on Tuesday, as Wall Street markets played catch-up following the Juneteenth holiday on Monday.

Hong Kong’s Hang Seng index shed as much as 1.3 per cent, China’s CSI 300 dropped 0.7 per cent and South Korea’s Kospi dropped 2.1 per cent. Japan’s Topix was broadly flat after earlier gains of as much as 0.8 per cent.

On Wall Street on Tuesday,  the S&P 500 added 2.4 per cent and the Nasdaq Composite rose 2.5 per cent. 

The yen tumbled to a new 24-year low against the dollar on Wednesday, as major importers continued to buy the US currency and hedge funds unwound more of their bets that the Bank of Japan was poised to “blink” on its ultra-loose monetary policy. 

In early trading in Tokyo, the yen sank to ¥136.71 against the dollar, building on an overnight slump of just over 1 per cent after successive weeks on the slide.

Traders said the move past the ¥136 line marked a significant test of both the BoJ and the Japanese authorities more broadly, amid speculation that a sharp move from current levels to ¥140 might force some form of practical intervention.

Ahead of last week’s BoJ monetary policy meeting, some speculators had amassed bets that governor Haruhiko Kuroda might tweak the Japanese central bank’s stance, its policy having made it increasingly globally isolated. However, the BoJ commented only that it would “pay due attention” to developments in forex markets. 

Forex strategists concluded that the BoJ had made it plausible that the market would send the yen lower, with analysts at JPMorgan among those commenting that it would fall below ¥140 to the dollar.  

Analysts said there were now two main forces driving short-term movements in the yen: Japanese companies that need a continuous source of dollars to meet the demands of rising import costs for energy and raw materials, and, according to Yujiro Goto, FX strategist at Nomura, speculators who are unwinding positions that were built ahead of last week’s BoJ meeting on the expectation of a small shift in policy but who have now concluded that such a risk has receded.

Janus Henderson announced on Wednesday that Ali Dibadj, former finance chief at New York-listed fund manager AllianceBernstein, has been appointed as its new chief executive, months after its previous head retired amid activist pressure on the group.

Dibadj will replace Roger Thompson, who has acted as interim chief executive since April, and will also take a place on the $361bn global asset manager’s board, the company said. Thompson will continue to serve as the group’s finance chief.

Dibadj, 47, also previously served as a portfolio manager at AB Equities and as a research analyst at Bernstein Research Services.

Former Janus Henderson chief executive Dick Weil, who helped create the group via an all-share merger between Janus Capital and Henderson, retired in November last year.

His decision came after Trian, the hedge fund run by Nelson Peltz, increased its holding in Janus Henderson to 15 per cent and called for independent new directors to be appointed to the board, according to a US regulatory filing.

Richard Gillingwater, Janus Henderson chair, said Dibadj would bring his “experience, accomplishments and vision” to the role. “We look forward to his contributions and leadership as Janus Henderson pursues its next stage of growth in a rapidly evolving marketplace,” he added.   

Singapore has seen a 23 per cent week-on-week upswing in Covid-19 community infections, according to the city-state’s health authority, with the jump partly blamed on new Omicron sub-variants.

The Ministry of Health of Singapore said the BA.4 and BA.5 sub-variants had accounted for about 30 per cent of new Covid cases in the past week, with growth in such cases likely to continue.

While infections linked to the two sub-variants are similar in severity to earlier Omicron strains, they have higher transmissibility.

“Although the BA.2 sub-variant still accounts for the bulk of our Covid-19 infections, the proportion of BA.4 and BA.5 infections is rising,” the ministry said in a statement released on Tuesday.

In expectation of a new wave of infections in the months ahead, health minister Ong Ye Kung on Monday urged Singapore’s elderly to receive vaccine booster shots. About 80,000 local people aged 60 or over had not yet received boosters, Ong said.

Japan: The country’s political parties begin campaigning for next month’s upper house elections.

Markets: US stocks gained on Tuesday, leading the S&P 500 index to its best day since late May, as traders hunted for bargains following a steep weekly decline for global shares fuelled by central banks raising interest rates. The S&P 500 closed 2.4 per cent higher in the New York session, while the technology-focused Nasdaq Composite rose 2.5 per cent. In Asia-Pacific on Wednesday morning, Australian and Japanese equities rose, while the yen fell. Futures in Hong Kong were flat.

Donald Trump and his lawyers bombarded Republican state officials with telephone calls as they put pressure on them to overturn the 2020 election, a congressional committee has heard.

Several senior Republicans in swing states told members of the bipartisan panel investigating last year’s attack on the US Capitol that they had been called multiple times by the then-president himself or by his senior lawyers in the aftermath of the vote.

Some described how lawyers including Rudy Giuliani, the former New York mayor, called on them to decertify their states’ results or to send false slates of electors to Washington DC in an attempt to announce Trump the winner.

Rusty Bowers, the Republican Speaker of the Arizona House of Representatives, said he told Trump: “You’re asking me to do something that is counter to my oath, which I swore to the constitution to uphold, and also to the constitution and the laws of the state of Arizona. This is totally foreign.”

Brad Raffensperger, the Georgia secretary of state, went into detail about a now-famous 67-minute telephone call with Trump in which the then-president urged him to “find 11,780 votes”.

Raffensperger described how he had repeatedly told Trump his claims of electoral fraud were wrong, but said that the president did not listen and even refused to look at evidence that Raffensperger said helped prove his case.

Trump and his lawyers pushed officials to reject election results as part of a scheme to have him falsely declared the winner of the 2020 election. The pressure campaign formed part of what committee members have previously said was an attempted coup by the former president.

Read more on the January 6 hearing here

US stocks gained on Tuesday, leading the S&P 500 index to its biggest one-day rise since late May, as traders hunted for bargains following a steep weekly decline for global shares fuelled by central banks raising interest rates.

The S&P 500 closed 2.4 per cent higher in the New York session as trading resumed after a holiday on Monday, while the technology-focused Nasdaq Composite rose 2.5 per cent. The energy and consumer sectors were among the biggest risers on the S&P 500.

The moves reversed a portion of the losses inflicted on equities markets in recent weeks. The blue-chip S&P 500 remains down by more than a fifth from its January peak, leaving it in a bear market.

Some analysts also suggested the bounce on Tuesday may be related to hedge funds covering short positions, after short selling last week reached its highest level since 2008, Bloomberg reported.

Global stocks sank last week after the Federal Reserve raised its main interest rate by 0.75 percentage points, in its first such move since 1994. Fed governor Christopher Waller then expressed support for another 0.75 percentage points rise in July, describing the central bank as “all in on re-establishing price stability” after US inflation hit a 40-year high in May.

In government debt markets, the yield on the benchmark 10-year Treasury note, which underpins loan pricing worldwide, added 0.08 percentage points to rise to 3.3 per cent. The policy-sensitive two-year Treasury yield rose 0.02 percentage points to 3.2 per cent.

Read more on the day’s market moves here

Sales of previously owned homes in the US dropped for the fourth straight month, against a backdrop of record prices and rising mortgage rates that are hampering potential buyers.

Existing home sales declined in May to a seasonally adjusted annualised rate of 5.4mn units, according to the National Association of Realtors.

The figure aligned with consensus expectations of 5.4mn units, according to economists polled by Reuters. Secondary market sales dropped 3.4 per cent compared with April and have fallen 16.9 per cent since January.

The median US home price rose to $407,600, reaching north of $400,000 for the first time and representing a 14.8 per cent increase from a year ago. Home prices have continued to rise in some markets despite an increase in US mortgage rates, which hit a 35-year high last week.

Year-on-year price growth was the highest in warm weather cities such as Miami, Nashville and Orlando.

NAR chief economist Lawrence Yun said home sales had slowed to pre-pandemic levels. “Further sales declines should be expected in the upcoming months given housing affordability challenges from the sharp rise in mortgage rates this year,” he said.

“Nonetheless, homes priced appropriately are selling quickly and inventory levels still need to rise substantially — almost doubling — to cool home price appreciation and provide more options for home buyers.”

Yun’s comments echo those of Lennar executive chair Stuart Miller, who said on Tuesday that the housebuilder’s strong quarterly results were aided by a shortage of housing supply.

First-time buyers made up 27 per cent of sales in May, down from 31 per cent last year.