Wall Street makes $4bn from inflation bets as US teeters on brink of recession

Wall Street’s biggest banks made almost $4bn (£3.2bn) from making bets on inflation last year, according to new reports, which come as forecasters warn efforts to tackle soaring prices risk a US recession this year. 

© AP
Wall Street traders – AP

According to Bloomberg, companies including Goldman Sachs and JPMorgan made $3.9bn on inflation trading, almost double what they had made a year earlier. Inflation trading is an investing practice which sees banks take profit from rising prices, by trading using commodities or currency derivatives. 

It comes after a year which has seen many major economies attempt to tackle inflation. Last month, the US Federal Reserve vowed to push on with interest rate rises, even though indications suggested that inflation was peaking. 

Forecasters this week warned that the US economy could be braced for recession later this year, with economic activity in the country on course to contract over two consecutive quarters in the middle of this year.

A Bloomberg survey of 73 economists, conducted last week, suggested that they saw gross domestic product falling at a 0.6pc annualised rate in the second quarter and a 0.3pc rate in the third quarter. 

James Knightley, chief international economist at ING, said: “Recession worries are mounting in the US as the Federal Reserve continues hiking interest rates. With more companies adopting a defensive posture we expect to see hiring and investment plans cut back aggressively.”

Last month, the Fed raised rates by half a percentage point, although chair Jay Powell said: “We’ve covered a lot of ground and the full effects of our rapid tightening so far are yet to be felt. We have more work to do.”

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06:00 PM

Wrapping up

That’s all for today and this week. Thanks for tuning in and hope to see you again on Monday. Before you go, why not take a look at some of our top stories from today:

05:54 PM

Nadhim Zahawi ‘paid penalty to settle tax bill worth millions’

Over on our Politics liveblog today is the news that Nadhim Zahawi is facing fresh questions over his tax affairs.

It comes after he was accused of paying a penalty as part of a multi-million pound settlement with HMRC.

The former chancellor who is now the chairman of the Conservative Party has been under pressure in recent days after it was reported he paid a seven-figure sum to end a dispute.

The Guardian has now reported today that Mr Zahawi paid a 30pc penalty, taking the estimated total to more than £4.8 million.

The Telegraph has contacted Mr Zahawi’s team for comment.

Read more on the story here.

05:34 PM

Maternity brand worn by Princess of Wales to be taken private for tenth of float value

© Getty Images
Princess of Wales wearing Seraphine – Getty Images

A maternity brand known to be a favourite of the Princess of Wales is to quit the London markets, in a deal which sees it valued at just a tenth of what it was worth eighteen months ago. 

Independent directors of Seraphine and its majority shareholder Mayfair Equity Partners said they had struck a deal to take the company private, after a year in which its shares have plunged. 

Seraphine, which floated in the summer of 2021 with a valuation of more than £150m, was worth just £4.8m at the end of Thursday. The take-private deal values Seraphine at £15.3m.

It comes after a major downturn for the brand, which shot to fame in 2013, when Kate Middleton wore its £49 Jolene Knot Front Dress for her first official family portrait on the birth of Prince George.

The dress sold out within two hours of the photo’s publication and it had a waiting list of four-weeks. Ms Middleton later wore Seraphine clothes for her other two pregnancies. 

05:12 PM

Apple appeals competition investigation into dominance over mobile market

Apple is appealing an investigation by UK competition regulators which is set to look into claims it has a “stranglehold” over the mobile ecosystem. 

Apple has asked the specialist court  to review a decision to start an in-depth probe into its dominance of the mobile browser market. The probe is also due to include Google, although owner Alphabet is not involved in the latest challenge.

It follows a report that the pair are able to “exercise a stranglehold” over everything including app stores and web browsers on mobiles. 

Apple said rules on timings meant that the probe was “invalid” and had “no legal effect”, according to court documents. 

“We will defend our position and continue to progress our work in line with the statutory timetable,” a CMA spokesman said.  

04:49 PM

Activist investor takes stake in Wagamama owner The Restaurant Group

© Matthew Horwood/Getty Images Europe
Wagamama – Matthew Horwood/Getty Images Europe

Activist investment fund Oasis has bought a stake in Wagamama and Frankie & Benny’s owner The Restaurant Group. 

As Daniel Woolfson writes:

The Hong Kong based hedge fund Oasis is best known in the UK for buying nearly a fifth of the shares of Mr Kipling and Oxo owner Premier Foods and attempting to oust its then-chief executive Gavin Darby.

Company filings from late November reveal Oasis has bought 5pc of the shares of The Restaurant Group, which also owns chains Chiquito, Firejack and pub group Brunning & Price.

The Restaurant Group was founded in 1987 and operates more than 400 restaurants in the UK. It bought Wagamama in 2018 in a deal worth £559m.

It was hit badly by the pandemic and forced to close more than 100 sites in 2020. However its sales recovered quickly as diners returned to its venues.

04:27 PM

Jus-Rol must be sold to ward off pricier pastries, competition regulator rules

The UK’s largest manufacturer of bake-at-home dough items has been told it must sell Jus-Rol, amid fears that a deal between the pair could force the price of cook-at-home pastries and pizzas higher. 

The Competition & Markets Authority has orderded Cérélia to sell Jus-Rol, after an investigation which found that the pair account for almost two-thirds of ready-to-bake dough products sold to UK supermarkets. Jus-Rol had been bought by Cérélia in January 2022. 

Margot Daly, who chaired the independent panel of experts conducting the in-depth investigation, said: 

“As living costs continue to rise, it’s our responsibility to make sure that competition can play its part in delivering the best possible deals for customers.

“Cérélia and Jus-Rol are the biggest players in this market by far and losing the competition that takes place between them could result in customers facing higher prices and worse quality products. Today’s decision will ensure that doesn’t happen.”

04:02 PM

Handing over

That’s your lot from me today. Hannah Boland will guide you through this evening.

03:52 PM

Asos leads FTSE 350 as US analysts snap up online retailers

Asos shares have surged by 11.2pc after Bank of America told investors it is buying European retail stocks.

While the online retailer led the way on the FTSE 250, JD Sports Fashion has been the top performer on the FTSE 100 today, up 3pc, with Burberry not far behind, up 2.9pc.

After being cautious about shopping companies over the last 18 months, Bank of America analysts Geoffroy de Mendez and Ashley Wallace said: “Risk/reward has reversed: we’re buyers of all stocks.”

The bank upgraded Asos, Boohoo and Zalando to buy.

The FTSE 100 has risen 0.3pc to 7,767 today, while the FTSE 250 has climbed 0.7pc to 19,708. 

03:39 PM

Vox Media to axe 7pc of staff

Vox Media, the publisher of New York and Now This, will lay off 7pc of its staff, its chief executive has revealed in an email.

The email to all staff said those affected by the job cuts would be informed within 15 minutes of receiving the note from Jim Bankoff.

Mr Bankoff blamed the decision on “more of the same economic and financial pressures that others in the media and tech industries have encountered”.

The company is thought to employ more than 1,200 people.

CNN broke the news:

03:29 PM

Bitcoin sustains rally despite Genesis collapse

Bitcoin has continued its rally despite the announcement of crypto lender Genesis filing for bankruptcy.

The digital token has risen 0.5pc today to be worth £17,095 and remains up 23pc over the last month.

Today Genesis filed for bankruptcy but the crypto lender is aiming for a relatively quick exit from bankruptcy court by either selling itself or turning its customers into owners.

The company, backed by Digital Currency Group, plans to emerge from Chapter 11 protection no later than May 19, according to bankruptcy court papers. 

Genesis is seeking bids for all of its assets no later than April 14, the court papers show. 

If the company does not sell itself to repay customers, they will be given stock in the post-bankruptcy company.

Read how Genesis’s collapse is the biggest industry failure since FTX.

03:14 PM

Netflix and Alphabet lead boost for tech shares

Strong Netflix subscription figures helped lift the Nasdaq in early US trading as Wall Street sought to shrug off losses this week amid recession worries.

The streaming giant reported lower quarterly profits, but Netflix shares surged as much as 8.1pc after it reported more than 230m global subscribers, topping analyst estimates, as hits such as “Wednesday” and “Harry & Meghan” enticed new viewers.

Google parent Alphabet also rose, advancing 4.7pc after announcing it will cut about 12,000 jobs globally in the latest downsizing by a tech giant.

The tech-heavy Nasdaq Composite was up 1pc to 10,967.

The Dow Jones Industrial Average was barely up 0.1 pc at 33,056 while the broad-based S&P 500 climbed 0.5pc to 3,918.

Stocks have been under pressure this week as investors have digested weak retail sales and other indicators of declining economic performance while top Federal Reserve officials have continued to vow a tough line against inflation.

02:46 PM

Lagarde says ECB ‘will do what is necessary’ to tackle inflation

If there was any doubt about whether the ECB might ease off on the pace of interest rate rises this year, Christine Lagarde has done her best to put those thoughts to bed at the World Economic Forum this week:

02:35 PM

Wall Street up at the open

US stock markets got off to a generally positive start today as Google laid off 12,000 staff but Netflix reporting better than expected results.

The Dow Jones Industrial Average fell 0.2pc at the open to 32,974 but the broad-based S&P 500 was up 0.1pc to 3,903.

The tech-heavy Nasdaq Composite was up 0.4pc to 10,894.

02:20 PM

King’s ‘grrrrreat’ gag on visit to Kellogg’s factory

The King has visited the biggest Corn Flakes factory in the world, where he joked that he was a year late for the 100th anniversary of Kellogg’s in the UK.

Charles was at the Manchester site of Kellogg’s – the largest cereal factory in Europe – which produces breakfast favourites such as Corn Flakes, Frosties, Rice Krispies, Crunchy Nut and Coco Pops.

Kellogg’s celebrated a century in the UK last year, with Corn Flakes and All-Bran first introduced to the British public in 1922.

Charles, who unveiled a plaque marking his visit and celebrating 100 years of “bringing breakfast to Britain”, sparked laughter when he said: “Sorry I’m a year late.”

During his visit to the plant, which has just under 400 workers, Charles toured the culinary centre – a new research and development hub – where he viewed cooking demonstrations and saw the various cereals on offer.

© Paul Ellis/PA Wire
The King visited the Kellogg’s factory in Trafford Park, Stretford, to mark 100 years of Kellogg’s in the UK – Paul Ellis/PA Wire

02:06 PM

British Steel ‘close to securing £300m aid package’

British Steel looks likely to receive a taxpayer bailout with the Treasury reportedly close to agreeing a £300m aid package to rescue the UK’s second-largest steel producer.

Jeremy Hunt has been advised by officials to approve a request for public money from the Chinese-owned business, according to Sky News.

The company, bought for £70m by Jingye Group in March 2020, has its main steel production site is Scunthorpe Steelworks, with rolling facilities at Skinningrove Steelworks in Teesside.

The package follows an intervention by Grant Shapps, the business secretary, and Michael Gove, the levelling-up secretary, and would aim to reduce its carbon footprint and save thousands of jobs across northern England.

Jingye Group would also be obliged to invest at least £1bn in the business by 2030 and make commitments relating to job retention, sources added.

© Steve Morgan/British Steel
British Steel could receive a £300m aid package – Steve Morgan/British Steel

01:50 PM

Oil pushes toward second weekly gain

Oil is headed for a second weekly gain as optimism over stronger Chinese demand overshadowed a weaker outlook in other major economies.

Brent crude, the international benchmark, has risen 0.6pc today towards $87, having gained 9.6pc over the last fortnight.

West Texas Intermediate has risen 0.7pc close to $81 a barrel, putting the US benchmark on course for a gain of almost 1pc this week and 8.9pc over the last two weeks. 

Chinese consumption has been picking up after the world’s top crude importer abandoned harsh Covid restrictions, with signs of increased buying by refiners in the physical market.

Still, weakness elsewhere has limited the rally. European Central Bank President Christine Lagarde vowed monetary policy would remain tight as inflation is still too high. 

In the US, Federal Reserve Vice Chair Lael Brainard said rates will need to stay elevated for “some time”.

01:21 PM

Harry and Meghan becomes second most successful Netflix documentary ever

Netflix has announced the Duke and Duchess of Sussex’s recent series, Harry & Meghan, which revealed behind the scenes details of royal life as its second-highest ranked documentary ever.

The series began its release on Dec 8, in the lead-up to the publication of the duke’s memoir, Spare, and saw damaging claims levelled at the royal family throughout six episodes.

Netflix reported its fourth quarter earnings on Thursday and disclosed a gain of 7.7 million subscribers during the October-December period, a stretch that included the debut of an ad-supported option for seven dollars (£5.65) per month.

Read what other series and films were successful.

01:04 PM

Gas prices surge as SSE reveals surging profits

European natural gas prices surged as much as 5.7pc today as it emerged the amount of electricity that SSE produced in the last nine months of 2022 spiked despite a massive global gas crisis.

Benchmark Dutch futures traded above $64 per megawatt hour after the Perth-based energy supplier revealed output from its gas power plants was 27pc higher over the period when compared to the year before.

SSE managed a 60pc boost to its profits this year as energy market volatility drives demand for its flexible power stations and gas storage sites and pushes up prices. 

Meanwhile, Abu Dhabi National Oil, known as Adnoc, has reportedly added banks including HSBC and EFG Hermes to help arrange the planned initial public offering of its natural gas business.

Gas prices had looked like they were heading for a sixth consecutive weekly decline, the longest since February 2020, but that looks like it may be avoided.

However, the cold front moving through Britain and Europe is expected to ease by the end of the month, according to forecaster Maxar Technologies. 

12:36 PM

Wall Street outlook unclear for opening bell

US markets may struggle for direction later as traders remained concerned over hawkish central banks, worsening economic data and earnings hiccups in the world’s largest economy.

Futures contracts on the S&P 500 and Nasdaq 100 were little changed. 

Treasuries fell as investors weighed comments by US and European central bankers favoyring higher interest rates. The dollar edged higher. 

In premarket New York trading, Eli Lilly fell as its bid for accelerated approval of its Alzheimer’s therapy was rejected by regulators. 

Netflix jumped after reporting stronger-than-expected subscriber numbers for the fourth quarter.

12:23 PM

FTX token surges as boss hints at restarting trading platform

FTX’s controversial FTT token surged by more than 40pc after the bankrupt company’s new chief executive, John J Ray III, said that he is exploring the possibility of restarting the crypto exchange.

A relaunch is one option under consideration as Mr Ray works to return money to FTX’s customers and creditors, he said in an interview with the Wall Street Journal

A task force has been set up to explore restarting FTX.com, he said. 

Besides being reopened briefly to allow US investors to repatriate their funds, FTX would likely face a backlash if there was an attempt to relaunch, according to Campbell Harvey, a finance professor at Duke University. 

He said: “The brand is toxic. It is a classic situation where you fooled me once, shame on FTX but if you fool me twice, it’s all on me.”

FTX is currently in Chapter 11 bankruptcy, a legal process that gives companies protection from creditors while hashing out a restructuring plan. Companies in Chapter 11 typically explore any and all turnaround plans that would maximize recoveries for creditors.


12:04 PM

Trade war could wipe $7trn off world economy, warns IMF boss

The International Monetary Fund’s (IMF) managing director has warned that trade wars could wipe $7trn (£5.6trn) off the global economy.

Kristalina Georgieva referring to the possibility of cutting ties with China, she warned told a panel at the World Economic Forum annual meeting: “If we are like an Elephant in a China shop, and we trash trade, which has been an engine for growth for so many decades, the cost can go up to 7pc loss of GDP. That’s $7trn.”

Ms Georgieva also said that the economic outlook was less bad than feared a couple of months ago.

She said that what had improved was the potential for China to boost growth and that the IMF now forecast Chinese growth of 4.4pc for 2023.

She said, however, she saw no “dramatic improvement” in the current IMF 2023 global growth forecast of 2.7pc.

Ms Georgieva said that the war in Ukraine remained a “tremendous risk” for confidence, particularly in Europe.

© Stefan Wermuth/Bloomberg
International Monetary Fund managing director Kristalina Georgieva – Stefan Wermuth/Bloomberg

11:50 AM

The Works shares plummet after ‘disappointing’ online sales

The Works reported higher sales over the festive period but saw shares tumble after “disappointing” online trade.

The stationery and books retailer saw shares slide as much as 20pc in early trading after it said “online sales softened in the run up to Christmas”.

It told shareholders it believes the online drop over the 11 weeks to January 15 was “due to consumers losing confidence in retailers’ delivery promises in light of the widely reported postal strikes, and the potential for knock-on effects on other carriers”.

The Works did hail a broadly “strong” showing over the festive period as it was buoyed by increased high street footfall.

Total like-for-like sales increased by 5.7pc over the 11-week period compared with a year earlier it said.

It added that 9.7pc sales growth in shops offset a 14pc decline in the group’s online operation.

The update on latest trading came as the company said that total sales increased by 2.4pc to £118.9m over the half-year to October 30.

11:37 AM

SSE gas production makes up for renewables shortfall

The amount of electricity that SSE produced in the last nine months of 2022 spiked despite a massive global gas crisis, the business has revealed.

SSE, which no longer supplies energy directly to households, said output from its gas power plants was 27pc higher over the period when compared to the year before.

It came in a year when weather conditions were unusually poor for renewable generation across Britain.

Even though the UK broke its previous wind power record in December, there were many days across the year when wind speeds dropped. 

Over the past year, 36pc of Britain’s power has come from renewables, and 41pc from gas.

SSE said that it had produced 10pc less electricity than planned from its renewable sources in the nine months to the end of December. But production was considerably higher than the year before when weather conditions were even less favourable.

© Asadour Guzelian
The view from SSE Thermal’s Keadby 2 power station in north Lincolnshire – Asadour Guzelian

11:14 AM

Lagarde hails solidarity ‘when we had Brexit’

European Central Bank president Christine Lagarde put her cards on the table as she responded to comments on the Ukraine war by French minister Bruno Le Maire.

Mr Le Maire told the audience at the World Economic Forum in Davos that the war in Ukraine is not a regional conflict but a global war because of its direct impact on commodity and energy prices and “because core common values are at stake”.

He said: “The principle of sovereignty, of national sovereignty, must never be jeopardised or weakened by any kind of conflict.”

After Mr Le Maire received applause, Ms Lagarde stepped in and hailed the past “solidarity between the US, Europeans and quite a few other countries including Japan”. She said:

We have to make sure that solidarity front holds.

When we had Brexit we were all together.

We have to make sure it sticks.

11:04 AM

‘Stay the course’ is my mantra, says Lagarde

Christine Lagarde has said policymakers must not let up in their battle with inflation — even as the spike in prices appears to have peaked.

The European Central Bank president told an audience at the World Economic Forum in Davos: 

We have to also stay that course of resilience that we observed in 2022. 

‘Stay the course’ is my mantra for monetary-policy purposes.

Ms Lagarde and some of her ECB colleagues have been pushing back against suggestions that the pace of rate increases should be slowed following an expected half-point move next month. 

While headline inflation has dipped back into single digits, underlying price gains reached a record in December. The economy, meanwhile, is proving robust — despite rising interest rates.

© Stefan Wermuth/Bloomberg
Christine Lagarde, president of the European Central Bank, during a panel session on the closing day of the World Economic Forum in Davos – Stefan Wermuth/Bloomberg

10:54 AM

Alphabet hit by slip in demand for digital goods since pandemic

Alphabet has resorted to the mass layoffs amid an economic slowdown and a sharp decline in share prices as technology giants.

Senior technology reporter Matthew Field has this analysis:

During the pandemic, Google, like its rivals, hired rapidly, betting on a permanent transformation to digital communication and working from home.

However, as the world reopened, demand for digital goods has slipped. 

Google’s core search engine advertising business has also been hit by the economic slowdown as companies pare back their marketing spending. 

Investors have called on technology companies to moderate their spending after years of investment. 

In November, Sir Christopher Hohn, the billionaire behind The Children’s Investment Fund, called on Mr Pichai to take “aggressive action” on employee costs.

10:38 AM

Alphabet job losses to come across the company

The Alphabet job losses affect teams across the company including recruiting and some corporate functions, as well as some engineering and products teams.

The layoffs are global and impact US staff immediately, Google said.

The news, first reported by Reuters, comes during a period of economic uncertainty as well as technological promise, in which Google and Microsoft have been investing in a fledgling area of software known as generative artificial intelligence.

Sundar Pichai, Alphabet’s chief executive, said in the note: “I am confident about the huge opportunity in front of us thanks to the strength of our mission, the value of our products and services, and our early investments in AI.”

10:27 AM

Google parent company to cut 12,000 jobs

Google’s parent company Alphabet has announced it will cut about 12,000 jobs, becoming the latest tech giant to slash its workforce after years of growth.

The cuts represent more than 6pc of the company’s global workforce.

10:21 AM

Crypto lender Nexo fined $45m

Nexo Capital has been fined $45m (£36.4m) by US regulators over allegations that it broke securities rules by offering a crypto lending product. 

The Securities and Exchange Commission said that Nexo’s Earn Interest Product amounted to a security that should have been registered with the agency. 

It is the latest in a series of cases that Wall Street’s main regulator has brought over similar products. Gurbir Grewal, the SEC enforcement director, said: 

We are not concerned with the labels put on offerings, but on their economic realities. 

And part of that reality is that crypto assets are not exempt from the federal securities laws.

Nexo will pay $22.5m to the SEC, and $22.5m to settle allegations from state regulators, the SEC said. 

Nexo did not admit or deny the agency’s findings in the settlement. 

09:58 AM

Train companies ordered to stop using cancellation loophole

Train operators have been ordered by a regulator to stop misusing a process which removes services from schedules without them being classed as cancelled.

The Office of Rail and Road (ORR) said cancellations are at record levels, and there is “a further gap” between the passenger experience and performance statistics.

It found that operators are increasingly using a process known as p-coding, through which services can be axed as late as 10pm on the previous evening and not included in the timetables that reliability is measured against.

For passengers, it means a train they expected to catch when they went to bed can disappear from the timetable by the time they leave for the station the following morning.

The ORR said it has written to all train companies telling them to “stop using this inappropriate approach”.

TransPennine Express is among the operators that have used p-coding.

© REUTERS/Toby Melville
Waterloo station – REUTERS/Toby Melville

09:49 AM

Bernie Ecclestone arrives in court

Former Formula One boss Bernie Ecclestone has arrived at Southwark Court Court where he faces fraud charges.

It is alleged that he failed to declare some £400m of assets owned overseas. 

He faces trial on October 9 but has not yet entered a plea.

© NEIL HALL/EPA-EFE/Shutterstock
Bernie Ecclestone arrives at Southwark Court Court – NEIL HALL/EPA-EFE/Shutterstock

09:27 AM

Lloyds and Halifax announce branch closures

Lloyds and Halifax have become the latest to announce a series of bank branch closures across England and Wales.

Lloyds Banking Group, which owns both high street banks, is to close 18 Halifax sites and 22 Lloyds branches between April and June this year.

It adds to 64 closures that have been announced since the beginning of the year, with Barclays and TSB saying they will shut 24 sites between them.

© Stefan Rousseau/PA Wire
Lloyds – Stefan Rousseau/PA Wire

09:01 AM

Britons ‘tried to have the best possible Christmas they could’, says Tesco chairman

John Allan, chairman of Tesco and Barratt Developments, said the fall in retail sales in December was “unsurprising”. 

He told BBC Radio 4’s Today programme:

The reality is many people in this country are suffering through this cost of living crisis, some much more than others.

My hunch would be that people tried to have the best possible Christmas they could, which was why food sales were reasonably sound over Christmas, but they have had to economise on many other things.

© Jeff OVERS / BBC / AFP
Tesco chairman John Allan – Jeff OVERS / BBC / AFP

08:43 AM

Markets bounce back after boost from energy and metals companies

The commodity-heavy FTSE 100 has bounced back after ending lower in the previous session, supported by miners and energy firms, while marketing firm 4imprint jumped on an upbeat profit forecast.

The export-oriented index has now risen 0.4pc but looks set to end the week in the red, while the FTSE 250 has added 0.3pc.

Industrial metals and energy firms were the biggest boost on the benchmark index gaining 1pc and 1.3pc, respectively, as crude oil and copper prices climbed on a brighter economic outlook from top-consumer China.

Meanwhile, data showed that monthly retail sales in December unexpectedly narrowed further as higher food prices squeezed consumers. However, the retail sector added 0.2pc.

Among stocks, Standard Chartered advanced 1.2pc after it won an approval to set up a new securities brokerage unit in China. The broader banking sector added 0.4pc.

4Imprint Group rose 3.8pc, after it said it expected full-year profit before tax to be above the upper end of range of analysts’ forecasts.

08:30 AM

Russia faces ‘incredible poverty’, warns ex-IMF chief

Russia’s people face “incredible poverty” following Western sanctions in response to Vladimir Putin’s war in Ukraine according to the former chief economist of the International Monetary Fund.

Harvard professor Kenneth Rogoff said the country is headed towards being a new Cuba, Venezuela or “a giant Iran”.

Mr Rogoff also said the West needs to think about imposing secondary sanctions on the Kremlin.

He said: “If Russia escalates, what are we doing? We need to be ready. They need to know that is coming.”

In all 39 countries are imposing sanctions on Russia, with the country also facing a cap on the price of its oil from the G7 nations and the EU.

Mr Rogoff said sanctions alone are not enough to win the war but said “you have to stay the course”.

He acknowledged that “getting regime change is hard”, citing the examples of Cuba, Venezuela and Iran, but said “that is where Russia is headed”. 

He added: “Will there be regime change? I hope so.”

At the same event, Valdis Dombrovskis, European commissioner for trade, said: “We need to stay the course [on sanctions]. 

“Sanctions are working. Russia’s economy was in recession last year and is going to be in an even deeper recession this year.”

Read on for more.

© Jason Alden/Bloomberg
Former IMF chief economist Kenneth Rogoff – Jason Alden/Bloomberg

08:05 AM

Crypto lender Genesis files for bankruptcy

Cryptocurrency lender Genesis has filed for bankruptcy, becoming the latest company to collapse in the aftermath of the FTX exchange’s swift downfall.

The company, plus subsidiaries Genesis Global Capital and Genesis Asia Pacific, filed for Chapter 11 protection on Thursday in the Southern District of New York, court documents show.

Genesis Global Capital listed the same range, $1bn to $10bn (£810m to £8.1bn), for both assets and liabilities as well as over 100,000 creditors — the top 50 unsecured claims amount to about $3.4bn (£2.8bn).

Its parent company Digital Currency Group (DCG) had been in confidential negotiations with various creditor groups amid a liquidity crunch. Genesis had warned that bankruptcy was possible if it failed to raise cash.

Financial pressure at DCG began to emerge following the collapse of hedge fund Three Arrows Capital last year.

Genesis’s lending unit suspended withdrawals in November, soon after FTX filed for bankruptcy.

Its chief executive Barry Silbert is locked in an escalating battle with Gemini crypto exchange co-founder Cameron Winklevoss, whose customers have lost access to $900m of funds that were placed with Genesis.

© REUTERS/Lucas Jackson
Gemini crypto exchange co-founder Cameron Winklevoss is locked in a legal dispute with Barry Silbert – REUTERS/Lucas Jackson

08:04 AM

Markets fall at the open after retail figures

The FTSE 100 has tumbled tumble after data showing an unexpected fall in retail sales before Christmas, as well as retailers suffering the worst annual decline on record last year.

The blue chip index fell by 0.6pc at the open to 7,782.

However, the domestically-focused FTSE 250 has risen by 0.2pc to 19,615.

07:42 AM

Real test for retailers ‘will come in 2023’

Charlie Huggins, head of equities at Wealth Club said:

The decline in retail sales volumes accelerated in December, with consumers starting to cut back on spending because of increased prices and affordability concerns.

Online sales were particularly weak as the absence of lockdown restrictions, and the Royal Mail strikes encouraged more last minute shoppers into stores.

However, the real test for retailers will be what happens in 2023.

Pressure on UK consumers is mounting and is likely to build in the coming months. With many people on fixed rate mortgages, the impact of interest rate rises has yet to be really felt. 

It’s times like these that tend to sort the wheat from the chaff. Retailers must be able to generate profit and cash, while offering customers value for money. If not, they risk following the same path as Joules and Made.com.

07:41 AM

Pound fall after retail sales slump

The pound has fallen sharply after data showing shoppers unexpectedly spent less in December in the UK.

Sterling dropped 0.3pc against the dollar towards $1.23.

07:29 AM

World Cup not ‘strong enough incentive to loosen the purse strings’

Aled Patchett, head of retail and consumer goods at Lloyds Bank, said:

December’s fall in sales suggest consumers didn’t see Christmas or the World Cup as strong enough incentives to loosen the purse strings. 

That will worry retailers, with inflation also pushing up salaries and input costs, and leaving boardrooms with a basketful of concerns to deal with.

Despite a slight easing of inflation in December, it still remains uncomfortably high for many retailers. 

With food prices increasing well above the overall rate in 2022, the worry now is that consumers become more conscious spenders as we move into 2023, reducing non-essential purchases until confidence in personal finances improves.

07:26 AM

Postal strikes led more people to buy goods instore, says ONS

ONS deputy director for surveys and economic indicators Heather Bovill said:

Retail sales dropped again in December with feedback suggesting consumers cut back on their Christmas shopping due to affordability concerns.

After last month’s boost as shoppers stocked up early, food sales fell back again in December, with supermarkets reporting this was due to increased food prices and the rising cost of living.

Online sales dipped with feedback indicating postal strikes were leading people towards purchasing more goods instore.

Looking at the broader picture, retail sales decreased in 2022 compared with 2021 largely reflecting declines in online retailing and food stores.

In recent months retail has been especially squeezed by widespread price rises and the higher cost of living, with consumers reducing their spending in response.

07:17 AM

Worst year on record for retail sales

Shoppers failed to deliver the usual boost to the high street over Christmas as the cost of living crisis impacted spending. 

Sales fell 1pc in December from a month earlier and were down 5.8pc on the same time a year earlier, according to the Office for National Statistics (ONS).

The annual decline is the sharpest fall in sales since records began in 1997.

Today’s December retail sales numbers had been expected to show a 0.5pc growth, according to a consensus from Pantheon Macroeconomics. 

It follows a decline of 0.5pc in November, which reversed some of the 0.9pc gain seen in October. 

This came after a 1.5pc drop in September, when stores were closed for the funeral of Queen Elizabeth II.

Retailers will be worried by consumer confidence figures for January, showing that people have a poor view of their personal finances and prospects.

GfK’s monthly consumer confidence index fell to a near record low of minus 45, down three points on December. 

The 1pc fall in the volume of goods bought in shops and online meant retailers suffered the sharpest decline in sales in 2022 since records began in 1997. 

The 5.8pc fall in sales from a year ago comes as consumers grapple with inflation that stood at 10.5pc in December after hitting a 41-year high of 11.1pc in October.

The drop in sales last month was driven by non food sales as “consumers cut back on spending because of increased prices and affordability concerns,” according to the ONS.

07:10 AM

Good morning

It may have been the first Christmas unaffected by Covid since 2019, but shoppers did not deliver the usual boost to retail sales last month. 

Retail sales were down 1pc compared to November and fell 5.8pc on the previous year.

Retail sales excluding fuel were down 1.1pc and fell 6.1pc on the previous December.

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What happened overnight 

Most Asian equity markets edged higher and the US dollar hung near its weakest level since May.

US Treasury yields remained elevated in Tokyo after bouncing off four-month lows overnight. Japanese government bond yields stayed depressed, two days after the Bank of Japan defied investor pressure to loosen yield curve controls further.

Japan’s Nikkei climbed 0.2pc, while Australia’s benchmark inched up 0.1pc higher, although South Korea’s Kospi dropped 0.3pc. Hong Kong’s Hang Seng advanced 0.8pc and mainland blue chips gained 0.3pc.

It came after the FTSE 100 and FTSE 250 indexes in London were struck by the nervousness stalking global markets.

The FTSE 100 of bigger firms – largely miners, energy firms and banks – closed down 1.1pc, its biggest slide in more than a month, while the more domestically-focused FTSE 250 dipped 1.6pc by the end of trading.

Zeroavia, an Anglo-US startup, has flight tested its hydrogen engine on a 19-seater plane, the biggest to be powered by the gas in a “major moment” for green travel.

The company flew its Dornier 228 test aircraft for six minutes over the Cotswold countryside, powered by a hydrogen-electric engine on one wing and a jet fuel-powered turboprop engine on the other.

Hydrogen is seen as a logical choice to replace kerosene as a green fuel as it can be made by spotting water molecules using electricity from wind turbines, solar power and other zero-carbon sources.