Global stock indices plunged yesterday and overnight

By Suzanne Evans, Director, Political Insight

Global stock indices plunged yesterday and overnight. The FTSE 100 reeled on Wednesday, falling 1.1% by the end of trade as investors digested the latest inflation data from the Office for National Statistics (ONS) which has soared to a 40-year high of 9%. London’s bluechip index continues to dive this morning: chased downward by the spectre of recession it sits 1.96% down at the time of writing. In France, the CAC reversed earlier gains, down 0.9% on the day, and continuing to fall by 1.90% now. The DAX declined 0.8% in Frankfurt yesterday and is down again 1.96% this morning. Asian marketsalso posted big early losses - Hong Kong was down by more than 3% and Tokyo was down around 2.5% - after Wall Street suffered one of its worst batterings in two years in the previous session. All three major US indices plummeted, with the Dow sinking more than 1,150 points or 3.6 percent, and the Nasdaq plunging 4.7 percent. The benchmark S&P 500 plunged 4% overnight – its biggest drop since June 2020.
 
The pound also sank yesterday, falling back near a five-year low, over stagflation fears after stark data on inflation, jobs, and the slow growth of the UK economy, Yahoo Finance says. Sterling slipped 0.7% to £1.240 against the US dollar in afternoon trading, reversing most of the gains made the day before when it touched its highest level since 5 May, having jumped 1.4% after data showed the unemployment rate had dropped to its lowest since 1984.
 
In a speech at the annual dinner for the Confederation of British Industry(CBI) last night, Chancellor Rishi Sunak said he is "ready to do more" to help millions of households in an effort to tackle the cost-of-living crisis as inflation surges to the highest level in four decades. However, he also spoke of a “perfect storm” of shocks rocking Britain, warning that “the next few months will be tough”. “I hardly need to tell this audience that the economic situation is extremely serious,” he said. Sunak reiterated what he has already done to help the situation, highlighting £22 billion in direct support via council tax discounts and temporary energy bill cuts, a forthcoming rise in the national insurance threshold to £12,500 amounting to “a £6 billion tax cut for working people,” and pledging to “go further” as the "situation evolves". He also called on businesses to “invest more, train more, and innovate more” and promised that in his Autumn Budget he would “cut your taxes to encourage you to do all those things”. "That is the path to higher productivity, higher living standards, and a more prosperous and secure future," he said.
 
A windfall tax on oil and gas producers would put investment and jobs at risk, the government has been warned. In a letter to Business Secretary Kwasi Kwarteng, industry body Offshore Energies UK (OEUK) highlighted the £7.8 billion in taxes the industry is already expected to pay as a result of the boom and stressed the need for “stability and predictability” in the fiscal regime. In the letter, OEUK CEO Deirdre Michie said: “The offshore oil and gas industry and its supply chain work to long-term investment cycles with multiple and complex risks, that result in projects having to be worked for many years before a commitment can be made.” A “stable and predictable regime” had historically resulted in increased investment and activity, leading in turn to a growth in tax revenue, she said, pointing out that “when windfall taxes have been used in the past, data demonstrates that investment has fallen away, undermining capex (capital expenditure) and opex (operational expenditure) activities, jobs and production”. “Therefore, we continue to reinforce the need for stability and predictability in the fiscal regime to be maintained,” the letter concluded.
 
Marks and Spencer is said by the BBC to have warned the Government that an online sales tax would do more harm than good to the high street. Chancellor Rishi Sunak launched a consultation into the idea in February as a way to ease the business rates burden on high street stores. However, in a letter to Sunak seen by the broadcaster, the chain’s CFO Eoin Tonge said: “Introducing an additional tax on retail, already overburdened, will simply mean retailers cut their cloth accordingly. This rationalisation will always start with the least profitable parts of a business, which, in the case of multi-channel retailers, will more often than not be high street stores.” He said that would not benefit high street stores but cause them “damage”.
 
Today is ‘gender pensions gap day,’ the day women pensioners in the UK effectively start getting paid once the gender pensions income gap is considered. According to figures from Prospect union, the gap stands at 38% - more than twice the current 15.4% gender pay gap – and means retired women receive the equivalent of four and a half months less than men in pensions payments each year. In two-thirds of industries women have built up workplace pensions worth less than half as much as men, the Trades Union Congress(TUC) says, mostly because of the unequal division of caring responsibilities meaning women are much more likely to take time out of work or work part-time to look after children, making it harder to build up a workplace pension. The TUC says it could take 54 years to eliminate the gap unless the government acts by investing in childcare and removing the £10,000 earnings threshold so that employers must put all workers into a workplace pension and ensure contributions are calculated from the first pound of earnings.
 
The number of new detached homes being registered has increased to the highest level in nearly 20 years in the first quarter of this year, according to industry body the National House Building Council (NHBC). Some 16,090 registrations for detached homes were recorded as housebuilders continued to respond to buyers looking for extra space to suit working from home. The figure is the highest since the second quarter of 2002 when 16,828 detached houses were registered.
 
Two of Britain’s largest food and drink chains have warned thy are struggling absorb rising energy and food costs. Mitchells & Butlers, which runs pub chain O’Neill’s and All Bar One, and the Harvester and Toby Carvery restaurant chains, says it is facing a difficult trading environment. Meanwhile, Burton-upon-Trent based brewery and pub chain Marston’s says it is working to mitigate inflationary rises through a combination of cost-cutting and “pricing strategies”. Mitchells & Butlers, which operates some 1600 UK venues, is forecasting that its costs for the full year would be about 11.5% higher than in 2019 and believes those costs could rise by another 6% next year, depending on the volatility in energy markets. Marston’s, which runs about 1,500 pubs, said it had reduced the numbers of dishes and menus available in its venues and is phasing out its cheapest two-for-one food offer.
 
It’s been announced that another 28 Lloyds and Halifax branches are to close, two months after FTSE 100 owners Lloyds Banking Group announced the closure of 60 high street premises. Unite the Union said the move would affect 69 full-time staff and was “completely inexcusable”. “The management is letting down customers and their dedicated workforce," a Unite spokesperson said, adding that across the financial services sector, more than 5,000 bank and building society branches had been cut from high streets since 2015.
 
Despite just posting a pre-tax loss of £557 million over the six months to the end of March, airline easyJet says it expects to be back to carrying nearly as many customers at the end of this financial year as it did before the pandemic. The budget flight provider pointed out it had reduced half-yearly losses, down from £645 million a year earlier. CEO Johan Lundgren said: “The pent-up demand and removal of travel restrictions provided for a strong and sustained recovery in trading which has been further boosted as a result of our actions.” easyJet said it will put nearly as many seats on sale in the last three months of this financial year as it did in 2019. Capacity on sale will be 97%, it added.
 
Royal Mail says it will need to hike prices and slash costs to offset soaring inflation, higher wage demands, and surging energy and fuel costs. Although posting an 8% rise in underlying operating profits to £758 million for the year to the end of March, pre-tax profits fell 8.8% to £662 million for the year and the group cautioned over “significant headwinds” which mean it faces cutting costs by more than £350 million. The cost of posting a letter has already gone up by an average of around 7% and parcel prices by an average of about 4%, PA Media says.
 
The Telegraph has revealed that the Bank of England’s Monetary Policy Committee is still setting interest rates over video link despite work from home guidance being scrapped in January. It seems the Bank is refusing to change its hybrid working policy despite criticism from MPs that public servants should return to their desks more frequently.
 
A New York man has a beef to pick with McDonald's and Wendy's, the BBC. says. He is claiming that misleading adverts make their burgers look much bigger than they actually are. In a proposed class-action lawsuit, he accuses the fast-food giants of unfair and deceptive trade practices and is seeking $50m (£40.3m) in damages for himself and other similarly duped customers. The lawsuit says the photographs of McDonald's and Wendy's burgers are at least 15% larger than they are in real life. In the UK, regulators banned a Burger King ad in 2010, upholding complaints that the chain's chicken sandwiches were much smaller than advertised.
But it's relatively unusual to see this kind of case in the US, where many advertising disputes are between competitors and resolved quietly through an industry body, said Deborah Gerhardt, law professor at the University of North Carolina-Chapel Hill.

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