Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
This morning, Britain’s energy regulator has raised the cap on energy prices for millions of households for the first time in two years, after a big rise in wholesale energy costs. Ofgem announced that from April, the price cap will return to pre-pandemic levels as demand for energy has recovered, which has pushed wholesale prices back up to more normal levels.
For six months from 1 April, the price cap will increase by £96 to £1,138 for 11 million default tariff customers, and by £87 to £1,156 for 4 million pre-payment meter customers.
The price cap is designed to protect consumers who have not switched energy supplier to ensure they pay a fair price. Ofgem adjusts the cap twice a year to reflect suppliers’ costs of providing electricity and gas.
Ofgem has also allowed suppliers to to claim £23 back from the new default tariff price cap level to cover higher levels of bad debt from more customers being unable to pay their energy bills due to the impact of Covid-19.
Jonathan Brearley, chief executive of Ofgem, said:
Energy bill increases are never welcome, especially as many households are struggling with the impact of the pandemic. We have carefully scrutinised these changes to ensure that customers only pay a fair price for their energy.
The price cap offers a safety net against poor pricing practices, saving customers up to £100 a year, but if they want to avoid the increase in April they should shop around for a cheaper deal.
As the UK still faces challenges around Covid-19, during this exceptional time I expect suppliers to set their prices competitively, treat all customers fairly and ensure that any household in financial distress is given access to the support they need.
It’s non-farm payrolls day. The US releases its closely watched jobs data for January this afternoon, and the expectation is that the economy added 50,000 new jobs, versus 140,000 lost in December.
Ipek Ozkardeskaya, senior analyst at Swissquote, says:
On Wednesday, the ADP report surprised to the upside, printing a solid 174,000 private jobs additions last month, bringing some to think that we could see a similar positive surprise at today’s NFP release. However, it’s worth noting that the correlation between the ADP and NFP is not strong enough to use the ADP number as an indication of the upcoming NFP figure.
But the rebound in the most recent PMI data hints at a better-than-expected recovery in US economic activity in January, and we have seen three-consecutive-week fall in unemployment claims following a jump earlier in the year. So, there are factors that would support the expectation of a stronger NFP figure this month.
Either way, it’s hard to predict how investors would behave faced with a good or a bad data. A strong figure seems unlikely to discourage risk lovers, but a too strong data could weigh on investor sentiment and lead to some profit taking in risk positions. What’s the limit between strong and too strong is anybody’s guess.
Stock markets continued to rise yesterday with the exception of the FTSE 100 in London, which slipped 0.06%. In Asia, Japan’s Nikkei closed 1.54% higher while Hong Kong’s Hang Seng rose 0.45% and the Australian market gained 1.07%. Futures suggest a positive start in Europe today. Ozkardeskaya says “appetite in FTSE will likely remain limited due to the BoE-boosted pound sterling and despite firm commodity and oil prices”.
The pound rallied yesterday to a near nine-month high against the euro, as the Bank of England put negative interest rates on the back burner. It gave banks six months to prepare for any cut below zero.
- 8:30am GMT: UK Halifax house price index for January
- 11:30pm GMT: Bank of England deputy governor Sam Woods speaking at the German symposium at the London School Economics with Andrew Enria, chair of the supervisory board of the European Central Bank, on “The Pandemic and Beyond: Rethinking Financial Stability and Supervision”
- 1:30pm GMT: US Non-farm payrolls for January (forecast: 50,000)
- 1:30pm GMT: Bank of England governor Andrew Bailey, European Central Bank Vice President Luis de Guindos and BOE policymaker Silvana Tenreyro speak on panel “Modern challenges for the modern central bank” at the LSE