Crossrail to finally open; German exports to Russia plunge; climate protests at Barclays AGM – as it happened

Ahead of the Fed decision later, here’s a round-up of today’s stories.

And some great reading ahead of Bank of England day tomorrow:

UK lawyers will still be able to service Russian clients despite the UK’s ban on service sector exports, my colleague Jasper Jolly reports:

Since well before the latest invasion of Ukraine there has been widespread support in parliament, including from Conservative party MPs, for measures to prevent London companies from being “enablers” to Russian companies that play an important role in supporting Vladimir Putin’s regime.

Yvette Cooper, the shadow home secretary, told parliament in March it was “shameful” that Russian companies could “launder their money and their reputations through our capital city”, pointing to “an industry of enablers”.

However, it is understood that the measures will not affect the legal profession or other important services sectors such as software development and cloud services.

That means law firms will be free to continue to serve Russian clients. In some cases lawyers may even be able to serve clients who are subject to sanctions under licences provided by the Treasury.

Here’s his full story:

Leading anti-corruption campaigner Bill Browder has welcomed the UK’s ban on service sector companies working with Russia, calling it ‘big and welcome news’:

Browder, a prominent critic of Russian president Vladimir Putin, sucessfully lobbied for the Magnitsky Act. It allowed the US to sanction Russian officials responsible for the death of Browder’s tax lawyer Sergei Magnitsky, who died in a Moscow prison in 2009 after uncovering a $230m fraud.

Browder has also called for the US to issue visa bans against British lawyers who worked with Russian oligarchs, using the UK legal system against journalists and whistleblowers.

Iain Wright, managing director, reputation and influence at accountancy body ICAEW, said many firms had already cut ties with Russia:

“The UK government has announced a further package of sanctions aimed at demonstrating to the Russian elite the political and financial costs of their aggression against Ukraine.

“Many of our individual members and member firms have already taken proactive steps to disengage as appropriate with Russia. ICAEW is confident that chartered accountants, whether in practice or in business, will be ready and willing to play the fullest possible role in making these further measures effective.”

US stocks have now dropped into the red, with the tech-focused Nasdaq index down 1% ahead of today’s decision from the Fed.

Growth across the US services sector has slowed, adding to concerns over the global economy, as firms continue to be hit by surging prices.

The Institute for Supply Management’s non-manufacturing activity index has dropped to 57.1 last month, from 58.3 in March, showing weaker growth than expected.

Services firms reported that new order growth slowed, and that they had cut jobs.

A measure of input prices hit a record high, due to soaring commodity and energy prices, and rising wages.

Helpfully, the ISM also tell us what survey respondents are saying – with many citing rising prices, problems hiring staff, and supply chain woes.

Here are a few examples:

• “Pricing pressures and product availability issues continue to be extremely problematic.” [Accommodation & Food Services]
• “Large construction projects have been mostly constrained due to continued supply chain issues and large cost increases. Continued shortages in account management continue to be a source of frustration for day-to-day operations and service.” [Educational Services]
• “Overall business has softened.” [Information]
• “Continued delays due to supply chain logistics issues; increased pricing across the board.” [Retail Trade]
• “Fuel and chemicals continue to go up in price.” [Utilities]
• “Cost pressures beginning to slow demand.” [Wholesale Trade]

Wall Street trading has begun cautiously as traders wait for the Federal Reserve to set US interest rates later today (2pm New York, or 7pm BST).

The S&P 500 stock index has gained 8 points, or 0.2%, in early trading to 4,184 points.

Energy and materials stocks are up, following the jump in the oil price after the EU proposed a phased embargo on Russian oil. US crude is now up over 4% at $106.65 per barrel.

The Fed is expected to raise its target borrowing rate by 50 basis points, the first half-point rate rise since 2000, as it tries to pull US inflation down from a 40-year high of 8.5%.

That would lift the fed funds target rate range to 0.75% to 1%. In March, the Fed lifted rates by a quarter-point, up from almost zero.

Matthew Ryan, senior market analyst at Ebury, says a 50-basis hike now looks like the ‘bare minumum’ (rather than the ‘usual’ 25bp move).

Speaking during an IMF panel of central bankers last month, FOMC chair Jerome Powell stressed that it was ‘absolutely essential’ to restore price stability, and that rates would need to be raised ‘expeditiously’ in order for the bank to reach its goals.

Markets have subsequently ramped up bets in favour of an aggressive pace of US hikes this year, with fed fund futures now pricing in more than 250 basis points of tightening by year-end. With such an aggressive pace of hikes already priced in by markets, we think that the bar for a hawkish surprise from the Fed is now very high.

“A 50-basis point hike will be seen as the bare minimum – we think that it is a nailed-on certainty.

25 years since Bank of England got control of UK interest rates

Larry Elliott

Speaking of central banks… it’s 25 years this week since the Bank of England was given control over UK interest rates, after the Labour party won the 1997 election.

Our economics editor Larry Elliott has written about how the move was dramatically revealed. Here’s a flavour:

Gordon Brown had a surprise in store for Eddie George when he summoned the then governor of the Bank of England to a meeting at 11 Downing Street on bank holiday Monday, 25 years ago this week.

For the past two years, Labour’s new chancellor had been working on a plan to give Threadneedle Street the right to set interest rates and now he was ready to tell George about it. Secrecy was complete. The first the City heard of the idea that henceforth it would be the Bank’s job to hit the government’s inflation target, was when it was announced 24 hours later.

Accompanying George was his private secretary Andrew Bailey, since elevated to the governor’s office himself. Bailey was there to see George’s surprise at Brown’s news – but now he has to steer the Bank through its trickiest time since independence. The annual inflation rate is 7% – its highest in three decades – and is set to move even further away from the official 2% target. The City expects the Bank to raise borrowing costs to 1% on Thursday – the fourth time in a row it has raised rates.

Speaking before the quiet period when the Bank avoids public pronouncements about the looming interest rate decision, Bailey said nobody at Threadneedle Street had seen Brown’s independence announcement coming.

“It had, of course, been mused on as a concept for some years – but the idea that the New Labour government would implement it, immediately surprised almost everyone, I think,”

Bailey recalled Brown producing a letter outlining his plans.

“Eddie, of course, was very supportive of the decision – and the famous letter now sits in the Bank of England’s museum. Though I confess it is not in mint condition, as for a number of weeks after Gordon handed it over, it went around in my briefcase.”

Here’s the full story:

India’s central bank announced a surprise interest rate rise today, in the latest sign that surging inflation is forcing policymakers to tighten policy.

The Reserve Bank of India’s monetary policy committee raised the key lending rate by 40 basis points to 4.4%, up from the record low of 4% set in the pandemic.

RBI governor Shaktikanta Das made the surprise announcement during an online media briefing on Wednesday.

The BBC has more details:

The decision came amid soaring prices of food and fuel, with inflation at an 18-month high and higher global prices filtering through into India.

“Inflation-sensitive items relevant to India such as edible oils are facing shortages due to the conflict in Europe and export bans by key producers. The jump in fertiliser prices and other input costs has a direct impact on food prices in India,” Mr Das said.

India’s main stock index, the Sensex, tumbled 2.3% on the news.

US companies added fewer new jobs last month than expected.

Private payrolls increased by just 247,000 for April, payrolls processing firm ADP reports, below estimates for a 390,000 gain. That’s weaker than the 479,000 new jobs in March,

ADP chief economist Nela Richardson says firms struggled to find workers, with more than 11.5m job openings (a record).

“In April, the labor market recovery showed signs of slowing as the economy approaches full employment.

“While hiring demand remains strong, labor supply shortages caused job gains to soften for both goods producers and services providers.”

According to ADP, small US firms cut 120,000 jobs last month, while large ones added 321,000.

The official US Non-Farm Payroll jobs report is released on Friday. It’s expected to show an increase of 400,000, and a drop in the unemployment rate to 3.5%

The UK has also announced 63 new sanctions, including travel bans and assets freezes for individuals linked to Russian broadcasters and newspapers, and sanctions against mainstream media organisations.

Those sanctioned today include employees of Channel One, a major state-owned outlet in Russia, which had described the invasion of Ukraine as a “special military operation”, PA Media explains.

The Government has also imposed sanctions on war correspondents embedded with Russian forces in Ukraine, including:

• Evgeny Poddubny, a war correspondent for the All-Russia State Television and Radio Broadcasting Company;
• Alexander Kots, a war correspondent for Russian newspaper Komsomolskaya Pravda; and
• Dmitry Steshin, a Russian journalist and special correspondent for Komsomolskaya Pravda.

Organisations including major, state-owned broadcaster, All Russia State Television and Radio Broadcasting, will also face sanctions.

Other media companies sanctioned include: InfoRos, a news agency spreading “destabilising disinformation about Ukraine”; SouthFront, a disinformation website; and the Strategic Culture Foundation, an online journal spreading disinformation about the invasion.

The Uk is also forcing “social media, internet services and app store companies” to take action to block content from Russian state media outlets RT and Sputnik, which have spread disinformation about the war.

Culture minister Chris Philp said:

“For too long RT and Sputnik have churned out dangerous nonsense dressed up as serious news to justify Putin’s invasion of Ukraine.

“These outlets have already been booted off the airwaves in Britain and we’ve barred anyone from doing business with them.

“Now we’ve moved to pull the plug on their websites, social media accounts and apps to further stop the spread of their lies.”

Russian businesses will be banned from using UK professional services firms such as accountancy companies, in the latest round of sanctions following the invasion of Ukraine.

Measures announced by the Foreign Secretary, Liz Truss, will see Russian businesses cut off from the UK’s accountancy, management consultancy and PR sectors.

According to the Government, Russia is “heavily reliant” on service companies in Western countries, and cutting off UK services will account for 10% of Russian imports in the sectors affected.

Ms Truss said:

“Doing business with Putin’s regime is morally bankrupt and helps fund a war machine that is causing untold suffering across Ukraine.

“Cutting Russia’s access to British services will put more pressure on the Kremlin and ultimately help ensure Putin fails in Ukraine.”

Business Secretary, Kwasi Kwarteng, added that the UK’s professional services exports are extraordinarily valuable to many countries, “which is exactly why we’re locking Russia out”.

“By restricting Russia’s access to our world-class management consultants, accountants and PR firms, we’re ratcheting up economic pressure on the Kremlin to change course.”

In March, the UK’s Big Four accountancy firms – EY, Deloitte, KPMG and PwC – all said they would cut off their businesses in Russia and Belarus, as multinational firms cut ties with the two countries.

Extinction Rebellion’s Money Rebellion group have tweeted about the Standard Chartered AGM protests:

Climate activists and other disgruntled investors glued themselves to chairs, set off alarms and chanted slogans at shareholder meetings hosted by Barclays, and also Standard Chartered, Reuters reports.

Amid anger over lenders’ financial support for Big Coal, protesters also repeatedly interrupted Barclays chairman Nigel Higgins as he tried to get the meeting there underway.

“Stop the greenwashing, take it off the table,” a man who did not give his name said, before being escorted out of the meeting, which is being held in the northern English city of Manchester to reflect Barclays’ increased focus on regional lending.

After gluing her hand to her chair, a second female protester shouted:

“Your climate policy is not worth the paper it’s written on,”

Meanwhile, climate activists attending the StanChart meeting in London were heard chanting, “Life on Earth before your profit, Standard Chartered, please just stop it”, while wearing masks of the face of CEO Bill Winters adorned with devil horns.

Last November, we reported that Barclays had financed $5.6bn of new fossil fuel projects from January 2021 to the eve of the UN climate summit, more than any other UK bank, while Standard Chartered had made $4.3bn available.

Here is more footage from the Barclays AGM protests:

Climate protesters have disrupted Barclays annual general meeting this morning, accusing the bank of ‘greenwashing’ for continuing to fund fossil fuel projects.

The AGM in Manchester was briefly suspended after a series of activists spoke out, and were removed by security, with some gluing themselves to chairs.

PA Media has more details:

Chairman Nigel Higgins was forced to pause the meeting while security removed the protesters as he was repeatedly interrupted, with the activists dominating the first 45 minutes and setting off alarms.

One woman protester glued herself to her seat in the audience to avoid being removed.

Protesters criticised the group over its investment strategy, claiming the bank is continuing to invest heavily in fossil fuels and accused it of “greenwashing”.

One activist said the bank is “morally bankrupt”.

He said: “Barclays has ploughed 160 billion US dollars (£128bn) into fossil fuel extraction.”

Another called on the firm to “change your policy”.

He said: “You did say you were going to do it last year and you failed.

“Please, I’m begging you, after this meeting, change your policy.”

Mr Higgins – appearing flustered amid the disruption – had asked protesters to wait until the question and answer session at the end of the meeting, but was forced to ask security to step in.

Reuters’ banking correspondent Lawrence White reports that the AGM was briefly halted after a protester glued herself to her chair:

Extinction Rebellion (XR) protestors have also been protesting outside a Barclays bank branch in Oxford this morning.

The boss of fashion retailer Joules is to quit, as the company warns the soaring cost of living has hit company profits.

Nick Jones is stepping down as Joules’ chief executive in the first half of the next financial year, after three years at the business.

The news comes as Joules warns that “challenging” market conditions and weak consumer confidence have hit recent trading, saying:

“Joules has not been immune to these sector-wide pressures, which have led the group’s profit performance to fall below management’s expectations.”

Reduced demand for full-price items hit Joules profit margins, while demand for home and garden products had been “subdued”.

Shares in the company have tumbled almost a third.

Sarah Butler

Boohoo has admitted its clothing prices are likely to rise this year after profits almost halved amid weakening consumer demand and rising costs.

The online fashion specialist said pre-tax profits fell 94% to £7.8m in the year to 28 February. Sales rose 14% to almost £2bn but growth was down more than 40% in the previous year, as deliveries overseas were held up by disruption to international shipping and wavering demand during the pandemic.

The cost of shipping and flying in goods from factories was up £22m, while the bill for posting them out to customers rose £38m. Marketing costs also soared as Boohoo relaunched new brands bought during the pandemic including Debenhams, Dorothy Perkins and Burton.

Profits and sales took a hit as customers returned more unwanted items than they had during the pandemic lockdowns, when the group sold more stretchy garments, such as leggings and hoodies, where an exact fit was less important.

Shares in Boohoo have tumbled 12%.

Sarah Riding, retail and supply chain partner at the law firm Gowling WLG, says the increase in returns is “a severe chink in the amour of the retailer”:

“Regaining this lost ground must now be prioritised through tightening up their returns process and vitally, improving visibility. This is paramount, not only because returns have become a normal and regular aspect of modern consumer behaviour, but because the longer items are out of the supply chain, the less profitable they become.”

This map shows how the Elizabeth line will operate (apologies, you may have to zoom in to see the detail).

Passengers travelling in/out on the existing outer branches will change at Paddington or Liverpool Street station until the autumn.

Then, services from Reading, Heathrow and Shenfield should connect with the central tunnels.