Markets hit by China lockdown fears; More British adults struggling to pay bills – business live – The Guardian

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Introduction: China lockdown worries hit markets

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

Stock markets are beginning the new week on the back foot amid anxiety over China’s Covid-19 lockdowns and the health of the global economy.

Growth fears are rising as authorities in Beijing began a mass testing push after a spike in Covid cases.

Around 3.5 million residents and workers in its biggest district, Chaoyang, must report for three coronavirus tests this week.

More than a dozen residential buildings were put under lockdown in Chaoyang, an affluent downtown area home to embassies and international businesses. Fears of a City-wide lockdown sent Beijingers racing to supermarkets to stock up on food today.

The city has also imposed tight entry controls, and some gyms and after-school activity providers have stopped in-person classes.

With Shanghai further tightening its restrictions on the movement of some residents in the financial hub last week, concerns that tough lockdowns could stall China’s recovery are growing. That would have a knock-on impact on the global economy, creating more supply chain disruption and hitting energy demand.

China’s stock market has taken a slide, with the benchmark CSI300 index tumbling 3.5% today to its lowest level since late May 2020.

Other Asia-Pacific markets have been hit too, with Hong Kong’s Hang Seng shedding 3.3%, Japan’s Nikkei down 1.5% and Australia’s S&P/ASX index losing 1.6%.

Commodities are weakening too, with iron ore prices falling and oil at a two-week low.

China faces a “rapidly deteriorating growth outlook amid zero-Covid restrictions”, says Alvin Tan, analyst at RBC Capital Markets.

The renminbi has come under further pressure overnight after news that a Beijing district has to undergo three days of Covid testing starting today, plus Shanghai entering a fourth week of lockdown. Crude oil, iron ore, and Chinese equities have all slumped.

European markets are set for a lower open, adding to last Friday’s losses, with the main indices down over 1% in pre-market trading.

Wall Street ended last week with a tumble, after Federal Reserve chair Jerome Powell said it was ‘absolutely essential,’ to tame inflation, and that the Fed could lift interest rates by 50 basis points in May.

Also coming up today…

The CBI’s latest industrial trends report will highlight the pressures on UK factories from rising costs, while the IFO institute will update us on Germany’s business confidence.

And Twitter has reportedly begun negotiations with Elon Musk after pressure from shareholders, after Musk disclosed details of how his $43bn acquisition offer would be finances.

Reuters reports:

The company’s decision to engage with Musk, taken earlier on Sunday, did not mean it would accept his $54.20 a share bid, the sources said. It signified, however, that Twitter was exploring whether a sale to Musk was possible on attractive terms.

Musk, chief executive of Tesla, has been meeting with Twitter shareholders in the last few days seeking support for his bid. He has said Twitter needs to be taken private to grow and become a genuine platform for free speech.

The agenda

  • 9am BST: Ifo survey of Germany’s business climate in April
  • 10am BST: Eurozone construction output report for February
  • 11am BST: CBI’s industrial trends survey of UK factories in April
  • 1.30pm BST: Chicago Federal Reserve’s national activity index
  • 3.30pm BST: Dallas Federal Reserve manufacturing index

Jasper Jolly

Two of Britain’s supermarket chains are cutting the prices of essential items, as the cost of living squeeze hits consumers.

My colleague Jasper Jolly explains:

Asda has said it will spend £73m to cut or freeze prices on 100 products, while Morrisons says it will cut prices on 500 products as Britain’s supermarkets fight to keep customers amid rising inflation.

The Morrisons products subject to price cuts represent 6% of its total sales, and include items such as eggs, cereal, cooking sauces, chicken and sausages. Asda said its price reductions would be on fresh fruit and vegetables, fresh meat, rice and noodles.

Recent increases in oil prices, global supply chain disruption caused by coronavirus lockdowns and Russia’s war on Ukraine have fuelled soaring inflation across the world, putting a strain on household finances.

Here’s the full story:

Disabled employees are particularly vulnerable to the cost of living crisis, due to the pay gap with non-disabled workers.

The UK’s disability pay gap was 13.8% last year, with workers with a disability earning almost £2 per hour less. Back in 2014 the gap was 11.7%.

Disabled employees earned a median of £12.10 per hour and non-disabled employees a median of £14.03 per hour in 2021, new data from the ONS today shows:

Disabled employees who were limited a lot in their day-to-day activities had a wider pay gap than disabled employees whose day-to-day activities were limited a little – 19.9% and 12.1% respectively in 2021. pic.twitter.com/8ZCTeBtcEN

— Office for National Statistics (ONS) (@ONS) April 25, 2022

The pay gap becomes smaller for disabled employees with most major types of impairments when adjusting statistically for pay using characteristics such as occupation, qualifications or age.

Those with autism have the largest narrowing in their pay gap https://t.co/MbpQizE7aX pic.twitter.com/G7owQm1eVV

— Office for National Statistics (ONS) (@ONS) April 25, 2022

The TUC warns that disabled workers face a “living standards emergency”, with a pay difference of over £3,500 per year (based on a 35-hour week).

TUC General Secretary Frances O’Grady said:

Disabled workers were among the hardest hit during the pandemic

And now millions of disabled workers face a living standards emergency – with lower pay than non-disabled workers, but higher energy and transport costs.

With bills and prices sky-rocketing, the government must act now to help disabled workers and all struggling families.

That means coming back to parliament with an emergency budget to boost pay and universal credit, and cut energy bills.

Today’s market selloff has pulled emerging markets into correction territory, now down 10% from their peak earlier this month.

MSCI Emerging Market Stock Index suffers biggest daily fall since mid-March, index in correction territory after falling more than 10% from April 5 peak.#StockMarket

— CN Wire (@Sino_Market) April 25, 2022

European markets continue to tumble too:

*STOXX EUROPE 600 INDEX EXTENDS LOSSES, FALLS 2%

— lemasabachthani (@lemasabachthani) April 25, 2022

The cost-of-living crisis is escalating quickly with almost a quarter of people having trouble in paying their household bills, says Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown:

Pretty much everyone is feeling the pinch but those on lower incomes are particularly badly affected with prices rising fastest on life’s essentials such as food and heating bills.

People report trying to use less fuel as a means of keeping costs down and there are also signs people are cutting back on their food shops. However, people can only cut back so far on these things so there is precious little room for manoeuvre.

So far, the current situation hasn’t translated into people falling behind with rents or mortgages – only around 3% of people have reported this, a figure that has remained largely stable. However, this could be because people are burning through their lockdown savings in a bid to meet their day to day living costs while others opt to borrow more to meet their needs. Mortgage payers have had the option to fix their costs in recent months, but those who rent will feel very exposed to further increases in the coming months.”

The jump in people strugging to pay their bills shows that the cost of living crisis is hitting British families hard.

Jack Leslie, senior economist at the Resolution Foundation, says the government must provide more help, targeted at poorer households:

“The combination of shrinking pay packets and rising costs means that the pressure on households is building, with lower-income families set to feel the squeeze the most, and over a third of the most deprived fifth of households in England already saying it has been difficult or very difficult to pay their usual bills. This is set to get worse, with the estimated number of households experiencing fuel stress hitting five million this month.

“Going forwards, the Government must do it all it can to protect those who will be hardest hit – with support for low-income households a priority.”

Today’s @ONS release shows that the cost of living crisis is already hitting UK families hard, says RF’s @jackhleslie – going forwards, the Government must do it all it can to protect those who will be hardest hit – with support for low-income households a priority. pic.twitter.com/B91b0lvtIm

— Resolution Foundation (@resfoundation) April 25, 2022

A quarter of British adults struggling to pay bills

Nearly a quarter of British households are struggling to pay their bills, as rising inflation drives the cost of living crisis.

New data from the Office for National Statistics has found that almost all adults are facing rising costs, forcing some to borrow money, and leaving many with nothing left to save.

Around 1 in 3 (34%) adults living in the most deprived areas of Great Britain reported it was difficult or very difficult to pay their usual household bills in the last month.

Across all adults, 23% were finding it hard to pay bills, up from 17% last November.

We’ve published new analysis on the impact of rising costs of living on adults in Great Britain (for the period 16-27 Mar 2022).

Around 9 in 10 (87%) adults reported an increase in their cost of living over the past month – compared with 62% in Nov 2021 https://t.co/d8t4fYgfTi pic.twitter.com/JkxfJa7zsA

— Office for National Statistics (ONS) (@ONS) April 25, 2022

Over 40% of adults were finding energy bills particularly difficult in March (just before the 54% hike in the energy price cap this month).

Tenants are also being hit by rising rents, according to the ONS’s latest research on the rising cost of living.

Here’s the details:

  • Around 9 in 10 (87%) adults reported an increase in their cost of living over the previous month in March 2022 (16 to 27 March 2022), an increase of 25 percentage points compared with around 6 in 10 (62%) adults in November 2021.
  • Nearly a quarter (23%) of adults reported that it was very difficult or difficult to pay their usual household bills in the last month, compared with a year ago; an increase from 17% in November 2021.
  • Focusing on the latest period, among those who pay energy bills, around 4 in 10 (43%) reported that it was very or somewhat difficult to afford their energy bills in March.
  • Of adults currently paying off a mortgage and/or loan, or rent, or shared ownership, 30% reported that it was very or somewhat difficult to afford housing costs, and 3% claimed to be behind on rent or mortgage payments. Among all adults, 17% reported borrowing more money or using more credit than they did a year ago.
  • Among all adults, 43% reported that they would not be able to save money in the next 12 months; this is the highest this percentage has been since this question was first asked in March 2020.

Palm oil prices have jumped today after top producer Indonesia announced a ban on exports of cooking oil, a move that could add to food inflation.

Indonesia’s government announced on Friday that shipments will be halted from April 28, and not resume until a domestic shortage resolved.

Benchmark palm oil futures have jumped as much as 7% following the surprise announcement.

Bloomberg says:

The move by Indonesia, which accounts for a third of global edible oil exports, adds to a raft of crop protectionism around the world since the war erupted in Ukraine, as governments seek to protect their own food supply with agriculture prices surging.

The ban threatens to further fan food inflation, which has been surging at a rampant pace, and raises the risk of a full-blown hunger crisis.

German business morale rises despite Ukraine war

German business confidence has stabilised. at a low level, after slumping in March as high energy prices and the Ukraine war hit firms.

The business climate index released by the IFO institute has risen to 91.8 points in April from 90.8 points in March, better than the 89.1 expected.

Although current conditions were little changed, firms were less pessimistic about their outlook, suggesting the German economy is holding up in the face of economic uncertainty.

Ifo President Clemens Fuest said.

“After the initial shock of the Russian attack, the German economy has shown its resilience.

IFO says it doesn’t see Germany falling into recession in the first quarter of this year, but flags that China’s lockdowns will affect its economy in the coming months.

Good Morning from #Germany where business climate unexpectedly improves despite Ukraine war & China lockdown. Ifo Business Confidence rose to 91.8 in Apr from 90.8 in March & way above expected 89. Expectations rose to 86.7 vs drop to 83.5 exp. Current conditions 97.2 vs 95.9 exp pic.twitter.com/nmaJy3bRV0

— Holger Zschaepitz (@Schuldensuehner) April 25, 2022

Last Friday, the Bundesbank warned that an immediate embargo on Russian gas imports would plunge Germany into recession, and cost the equivalent of €165bn (£138bn) in lost output this year.

The selloff in London is gathering pace, with the FTSE 100 index now down 2.15% or 161 points at 7358 points, a fresh five-week low.

Pound hits 18-month low against the dollar

Elsewhere in the markets, the pound has hit its lowest level against the US dollar since September 2020.

Sterling has dropped by almost a cent to $1.2750, adding to its tumble on Friday.

The pound has been hit by weak economic data, including a tumble in retail sales in March as the cost of living crisis hit spending.

The prospect of aggressive rate hikes by the US Federal Reserve is driving up the dollar.

🇬🇧 Sterling fell on Monday to its lowest since September 2020 against a strengthening dollar and edged lower versus the euro, while money markets scaled back their bets on future monetary policy tightening from the BoE.

via Reuters on @PiQSuite pic.twitter.com/fHmYTMlThp

— PiQ  (@PriapusIQ) April 25, 2022

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