Energy price cap to rise by £300 more than feared, analysts warn 

That's all from us, thank you for following! Before you go, have a look at the latest stories from our reporters:

• Oil companies adding £15 to cost of filing up a car as profits rise
• Elon Musk’s $44bn Twitter takeover close to collapse
• Heinz defeats Tesco in baked beans price row
• Russia and China accused of trying to turn Britain into a 'rule-taker'

A heatwave which is sweeping across Europe risks worsening the energy crisis, as households scramble to keep their homes cool.

This weekend and early next week, temperatures are set to go as high as 32 degrees celsius in the UK, and are hitting 45 degrees in Spain. 

Reuters said this was pushing power prices up as people turn on fans and air conditioning units to cool their homes, with the higher temperatures also cutting hydro production.

Day-ahead power in Britain reached £197.90 per megawatt hour Friday, the highest price for electricity delivered during a weekend since April. French day-ahead power prices rose to 148.62 euros per megawatt hour. 

Higher temperatures could amplify the drought conditions as more water evaporates from reservoirs and rivers, reducing hydro production even further. 

Elon Musk is planning to "significantly" increase childcare benefits at his companies, after previously saying the collapse in the birth rate is "the biggest danger civilisation faces by far". 

Musk, writing on Twitter, said more details of the extra benefits at his companies, which include Tesla and SpaceX, would be announced next month. "Kids are worth it if at all possible."

He said he was hopeful other companies would also improve their chilcare benefits.

"We must expand scope & scale of consciousness for civilization to flourish & understand nature of Universe. Consciousness resides most strongly in humans, therefore we need more people!"

It comes days after it emerged that Musk had fathered twins with one of his employees, and suggested he was  “doing [his] bit” to address “underpopulation”.

The world's largest cryptocurrency Bitcoin is set to record its best week since March as investors warm back up to riskier assets. 

Bitcoin has risen more than 13pc since Monday, according to CoinDesk, and is now trading at around $21,950, in the largest weekly gain in four months. 

Ben McMillan, chief investment officer at IDX Digital Assets, said: “Risk markets are up across the board [and so] it’s not surprising that crypto is trading higher.

“After a cascade of bad news and large liquidations, many crypto investors are still sitting on the sidelines waiting for the next shoe to drop.”

One of the City's best-known hedge fund managers Brevan Howard has reportedly kick-started a search for a new, US-based chairman.

Sky News is reporting that Brevan Howard is looking for "a US-based independent chair to provide leadership and governance to its board and to help accelerate the company's ambitious growth plans".

It comes amid speculation over a possible initial public offering for the company, whose co-founders include the billionaire Conservative Party donor Alan Howard. 

That's all from me for today – thanks for following! Hannah Boland will take things from here.

Two of Europe's biggest airlines have announced a fresh round of flight cancellations, adding to the disruption that's turning summer holiday travel into a nightmare.

The Dutch division of Air France-KLM plans to cancel as many as 20 round-trip flights across Europe every day until the end of August. Lufthansa is cancelling 770 flights in the coming week.

It's the latest wave of cancellations to hit passengers as airlines struggle to cope with the rebound in travel demand after the pandemic. Widespread strikes are also adding to the misery.

It comes after British Airways said it was cancelling another 10,000 flights over the summer, on top of the 16,000 it announced in May.

Read more: British Airways cancels another 10,300 flights over summer

Tesco has bowed to pressure from the US owner of Heinz following a price row and agreed to pay more to keep supermarket shelves stocked with baked beans and ketchup. 

Hannah Boland has the story:

Heinz, which is owned by Kraft Heinz, and Tesco said they had resolved a row over pricing which had seen supplies paused by the US group when Tesco refused to pay more for its products. Heinz sets a cost price for its goods, and then recommends what price retailers can sell them at. 

In a joint statement, the companies said: "Tesco and Heinz are pleased to have reached an agreement that will see the full range of Heinz products return to Tesco shelves and online, continuing to offer our customers great value on the nation’s favourite Heinz varieties. “Lorries full of Heinz products including Heinz Tomato Ketchup and Heinz Beanz will hit the road shortly, and Tesco colleagues will be working hard to ensure shelves are filled again over the coming days."

Tesco is understood to have agreed to pay more for Heinz products, after having previously said it was seeking to protect its customers from "unjustifiable price increases”.

The German Government is in talks with other gas suppliers about possible stabilisation measures but only Uniper has applied officially for bailout, economy minister Robert Habeck has said.

The Handelsblatt newspaper yesterday reported that Berlin was considering providing aid of up to €2bn (£1.7bn) to German gas importer VNG in case of a gas emergency.

Mr Habeck said Germany will do everything possible to stabilise the energy market, which has been hit by falling Russian gas supply, pushing gas importers to buy gas at very high prices.

He said: "We have enough gas. The supply situation is secured. But we are paying an immensely high price."

Few companies produce equipment more vital to the national interest than Ultra Electronics, writes Howard Mustoe.

So secret is the equipment that the defence business supplies to Britain’s fleet of nuclear submarines, that in takeover discussions this year, even its own advisers were not told the details of what it does.

However, after 102 years as an independent company, this crucial part of the UK’s nuclear deterrent is now in American hands.

This week ministers waved through a £2.6bn takeover of the business by Boston-based private equity buyer Advent International.

It was one of the final acts in a massive raid on British defence companies by US bidders that has been triggered by the weak pound and an accommodating sales culture.

Read Howard's full story here

Ofgem has put forward a raft of potential reforms to reduce the UK's reliance on gas imports amid an energy crisis fuelled by Russia's war in Ukraine.

The regulator said the plans were designed to "accelerate the transition towards cleaner, more secure and affordable supplies of home-grown energy".

It said existing market, regulatory and institutional arrangements were "not geared up" to running a net-zero power system in the most cost-effective way.

Ofgem outlined two key areas of reform:

• Strategic planning for the energy system by a new independent body at a national level and a potentially similar model at a local level
• Potential reforms to the electricity wholesale market, including limiting the price-setting potential of natural gas

Wall Street's three main indices have opened in the red after stronger-than-expected US jobs data fuelled concerns about further interest rate rises.

The benchmark S&P 500 fell 0.4pc, while the Dow Jones was down 0.1pc. The tech-heavy Nasdaq dropped more than 1pc.

Uniper has become the first major casualty of Russia's gas squeeze as it asked the German Government for a bailout

The energy giant called on Berlin to take a “relevant” equity stake. It also asked for additional funding through an increase in a state-backed credit facility.

Germany and Uniper have been locked in talks for weeks over a potential bailout, which is estimated to cost around €9bn.

Economy Minister Robert Habeck has previously warned of the possibility of Lehman Brothers-style contagion from energy supplier collapses and vowed to stem those risks. 

Uniper said its main shareholder Fortum Oyj, which is part-owned by the Finnish government, is in talks with Berlin. 

Fortum has proposed “a restructuring of Uniper aiming at establishing a security of supply company under the ownership of the German government.”

Seema Shah, chief strategist at Principal Global Investors, warns there are risks ahead despite strength in the US labour market.

Today’s job number should soothe fears of an imminent recession, but it does nothing to relieve fears of considerable further Fed tightening.

The job market remains severely tight, suggesting still-intense wage pressures. How can the Fed do anything other than persisting with rapid policy tightening? A 0.75pc increase is still on the cards for July.

In recent weeks, markets have become increasingly fearful that recession is around the corner. But with payrolls above 350,000, this is an economy that is still well-supported by a strong labour market.

Yet, cracks are undoubtedly forming and, with the Fed determined to contain inflation pressures, monetary tightening will only prompt economic activity to decelerate further over the coming months. Recession is not upon us, but it’s not too far away.

US employers added more jobs in June than forecast and the unemployment rate held near a five-year low in a sign the labour market is holding up better than expected.

Non-farm payrolls rose 372,000 last month following a revised 384,000 in May, according to the Labor Department. The unemployment rate held at 3.6pc and average hourly earnings rose 0.3pc.

The figures, which defied economists' expectations, highlight the start contrast between the resilience of the jobs market and an otherwise bleak economic outlook.

Inflation has surged to its highest in decades and the risk of recession is growing. The economic woes are taking their toll on President Joe Biden's approval ratings just months before the November mid-term elections.

It's not just Britain facing an energy crisis – the cost of electricity in France keeps rising to new record highs.

The French price for next year gained as much as 2.2pc to €464 per megawatt-hour today. That's well above the then-unprecedented spike to €408 in December and caps off a week that's seen prices rise by over a quarter.

Worries over the reliability of France's nuclear reactors are compounding fears of Russian supply cuts.

EDF is now facing a full nationalisation by the French state in a bid to solve operational issues at its ageing nuclear reactors that are undermining the country's power output.

Alongside the revised price cap predictions, there's also a grim update from Money Saving Expert Martin Lewis.

Mr Lewis and other representatives of consumer support charities held meetings with the UK's biggest energy suppliers this week, including Ovo, British Gas and Octopus.

The energy suppliers have committed to offering more help to struggling consumers this winter, but Mr Lewis says more must be done:

The aim of this meeting was to cut the crap and get together with the leaders of the big firms, without Government or regulators, to work together on the low-hanging fruit.

It was a very productive, fast and action-orientated two hours.

Yet far more is needed, and that must come from a functioning Government. This winter will be catastrophic, the hideous spikes in wholesale energy costs will translate by October into Ofgem setting a price cap for a typical bill of £3,000 – close to four times what some paid just two years go. It will push millions into poverty.

The Conservative Party must ensure there is a very quick succession process. We need a working and informed administration to tackle this at speed to forestall a very dangerous situation.

Dr Craig Lowrey, principal consultant at Cornwall Insight, warns there's little hope of relief from soaring energy bills.

As the energy market continues to grapple with global political and economic uncertainty, the corresponding high wholesale prices, and the UK’s continued reliance on energy imports has once again seen predictions for the domestic consumer default tariff cap rise to what are even more unaffordable levels.

There is always some hope that the market will stabilise and retreat in time for the setting of the January cap.

However, with the announcement of the October cap only a month away, the high wholesale prices are already being “baked in” to the figure, with little hope of relief from the predicted high energy bills.

Ofgem are continually reviewing the cap and there are a raft of consultations and potential reforms which could impact these forecasts. However, as it stands, energy consumers are facing the prospect of a very expensive winter.

The Government will outline its decision on whether or not to extend the windfall tax to electricity generators next week.

The Prime Minister's spokesman said the verdict was "due to come next week", adding: "The position is to not unpick previously agreed fiscal decisions."

The spokesman wouldn't be drawn on whether the proposed extension of the tax to cover power generators as well as oil and gas companies counted as a previously agreed fiscal decision.

Russia and China have been accused of “exploiting” technology in a war on the free world as the two nations try to force Britain to become “a rule-taker rather than a rule-maker”.

Gareth Corfield reports:

A report by the Foreign Affairs Committee warns today that foreign powers are “exploiting technological developments to further their geopolitical agendas”, risking Britain being left behind.

The cross-party Commons committee argues that “critical technologies underpinning our everyday lives are increasingly important as an arena of systemic competition between nation-states”.

Liam Byrne MP, a Labour member of the committee, said: “What we've got to do is make sure that Britain isn't the weak link in the defences of the Western alliance.

“China is building a digital Silk Road around the world. And there are very real concerns about how China will exfiltrate data and technology to provide power that its leadership is seeking by 2030.”

The committee’s report also calls on the Foreign, Commonwealth and Development Office to “fundamentally reassess” the ways in which it works with Britain’s allies to stop hostile foreign powers stealing British expertise and intellectual property for their own ends.

“Failure to adapt will have devastating consequences for our security, prosperity and global influence,” it said.

​Read Gareth's full story here

The City watchdog has appointed a new chair as it tries to mend its reputation after a series of scandals and it continues to face talks with unions.

The Financial Conduct Authority (FCA) said that former lawyer Ashley Alder will take up the role from the beginning of next year.

He takes over a regulator reeling from a series of missteps over recent years.

In March, the FCA set out plans to deliver £71.2m in compensation to former members of the British Steel Pension Scheme who were given poor advice about transferring money out of their pensions.

However, MPs argued that not everyone who deserved compensation would receive it.

The regulator has also faced a backlash over its response to the £236m collapse of London Capital & Finance, which pushed unregulated minibonds on retail investors, and the implosion of British fund manager Neil Woodford's flagship Equity Income Fund, which left many consumers out of pocket.

Mr Alder is currently chief financial officer of the Securities and Futures Commission of Hong Kong and previously held senior roles at multinational law firm Herbert Smith Freehills.

He is set to take on the role in January 2023 for a five year term and will succeed Richard Lloyd who has served as interim chair since May 2022.

Almost half of Britons have cut back on food purchases as prices surge, while others are having to spend more on their shopping.

New ONS figures show that 49pc of people said they bought less food than normal between June 22 and July 3, up from just 8pc when the survey began in September 2021.

Another 48pc said they had needed to spend more than usual on their food shopping. Overall, 91pc of people said their cost of living had risen over the past month.

Inflation hit a 40-year high of 9.1pc in May, with food and drink prices up 8.6pc. Price rises are set to peak above 11pc in October when the energy price cap jumps again, while Citi has forecast that food price inflation will hit 20pc by early next year.

The figures match reports from major supermarkets showing shoppers are under increasing financial pressure.

Sainsbury's reported a 4pc drop in underlying quarterly sales on Tuesday, while Tesco said customers were making smaller, more frequent shopping trips and buying cheaper own-brand items.

Here's some more detail on the euro's struggles, brought to you by my colleague Louis Ashworth:

Fears are high that Russia is preparing to cut off the supply of gas through the Nord Stream 1 pipeline, Europe’s biggest piece of energy infrastructure.

These concerns have piled pressure on the euro, which is already facing expectations of a bloc-wide slowdown and exchange rate weakness due to a strengthening dollar.

“No doubt the ECB will be quite concerned by the move – especially if it develops into a ‘sell the Eurozone’ mentality,” said ING’s Chris Turner.

The ECB is widely expected to increase interest rates at its meeting later this month, in what would be the first hike since 2011.

Meanwhile, one of Wall Street’s top ratings agencies has separately predicted Britain will fall into a recession during the second half of this year.

S&P Global says almost all growth this year will be from base effects compared with lockdowns in 2021, and said: “We expect the UK to experience technical recession in the second half of this year.”

A technical recession is typically defined as two quarters of successive growth.

BMW saw its sales drop by nearly a fifth in the second quarter, even as electric vehicle deliveries surged.

The German brand said sales of BMW Mini and Rolls-Royce cars dropped to about £563,536. In Europe and the US, sales were down by about a fifth. In China they fell 28pc.

Despite the overall decline, electric vehicle sales more than doubled in the first half of the year. BMW said it's on track to meet its target of doubling EV sales this year.

Oil is on course for a weekly loss after volatile trading that's seen concerns over a demand-sapping recession clash with worries about supply.

Benchmark Brent crude was trading lower at around $104 a barrel, while West Texas Intermediate was just under $102.

Prices have swung in a range of more than $16 this week – the biggest since March – and briefly dipped under $100. The weekly loss is set to hit around 5pc.

Investors remain concerned that efforts to tackle surging inflation could push major economies into recession, denting global demand. 

But that's clashing with ongoing worries about supply as traders shun Russian oil.

ICYMI – Advisers to two of West End's biggest landlords will pocket nearly £70m in fees following Shaftesbury and Capital & Counties £5bn merger.

Ben Woods has more:

Shaftesbury, whose portfolio stretches parts of Soho and Carnaby Street, is paying £35.7m to bankers, lawyers, legal and communications advisers, while Capco, which owns Covent Garden, is dishing out £33m. 

Capco's advisers include bankers Rothschild, UBS and Jefferies, while Evercore and Blackdown are supporting Shaftesbury on the deal that has faced investor opposition.

First mooted before the pandemic, the merger faces the hurdle of passing a shareholder vote on July 29. Two of Shaftesbury’s investors, Royal London Asset Management and Investec, have previously raised concerns about whether it is in the best interest of shareholders.

However, Norges Bank Investment Management, the Norwegian sovereign wealth fund, is poised to vote in favour of the deal. It holds 25pc and 15pc in Shaftesbury and Capco, respectively, as the largest investor of both.

The enlarged company portfolio would span 670 buildings, comprising 2.9m sq ft and 2,000 commercial and residential units.  

​Read Ben's full story here

The AA has issued its response to the CMA's fuel market review, and it's still not happy.

Jack Cousens, head of roads policy at the motoring group, takes aim at fuel retailers for the delay in passing savings on to consumers:

Pump price competition in the UK is broken. A month of major wholesale price falls without a penny coming off the average pump price of petrol is testament to that.

It is very welcome and timely that the Competition and Markets Authority probe into road fuel pricing has agreed with the AA that there is a need for further investigation.

However, the AA argues that the problem is not the gap between the oil price and wholesale price feeding through to the forecourts but the length of time it takes for that wholesale price to be reflected at the pump.

The fuel trade has no trouble in passing on rising costs to the customer but lags badly in passing on savings. It has been labelled ‘rocket and feather’ pricing, and it exists.

Regulators have found cause for concern in the fuel market due to the grow gap between the price of crude oil and wholesale prices charged to retailers.

The Competition and Markets Authority carried out an urgent review into the market following a request from Business Secretary Kwasi Kwarteng amid soaring pump prices.

It found that the refining spread – the gap between the price of crude oil when it enters refineries and the wholesale price when it leaves as petrol or diesel – had tripled in the last year from 10p to almost 35p.

Over the same period, retailer spread – the difference between the wholesale price and the price charged to motorists – fluctuated but remained about 10p per litre on average.

The CMA also found that on the whole the fuel duty cut appears to have been implemented, with the largest fuel retailers doing so immediately and others more gradually.

It's now launched a market study that will examine the road fuel market in more depth.

Sarah Cardell, CMA general counsel, said:

The recent rises in pump prices are a major worry for millions of drivers. While there is no escaping the global pressures pushing up fuel prices, the growing gap between the oil price, and the wholesale price of petrol and diesel, is a cause for concern.

We now need to get to the bottom of whether there are legitimate reasons for this and, if not, what action can be taken to address it.

The pound and euro have both lost ground this morning as the dollar continues to strengthen.

The Bloomberg dollar index hit a fresh two-year high this morning as investors ditched riskier assets and flocked to safe havens amid fears of a looming recession.

The pound shed 0.8pc to $1.1931 – just off its recent two-year lows. Meanwhile, the euro dropped 0.9pc to $1.0072, leaving it dangling just above parity.

Analysts are predicting that the euro will slump to parity against the dollar in the coming days, with recession woes compounded by fears of cuts to Russian gas supplies.

Lloyd's of London plans to stay in its iconic London building until at least 2031 in a show of confidence in the City.

The move to home working during the pandemic sparked fears of the death of face-to-face trading and raised questions over whether the world-famous insurance marketplace would keep its headquarters.

But Lloyd's has now decided to stay in the building, dismissing fears it could exercise a break clause in its lease that would see it leave in 2026, the Financial Times reports.

According to the report, there's now “zero chance” Lloyd’s will exit a lease that runs until 2031 and negotiations with Ping An, the Chinese owner of the building at One Lime Street, have moved on to the terms under which it could stay for even longer.

The FTSE 100 is struggling at the end of the week as investor sentiment soured after days of political turmoil.

The blue-chip index fell as much as 0.3pc, before treading water.

Miners including Rio Tinto and Anglo American were the biggest drag as metal prices slid on worries about China's Covid flare-ups.

Harbour Energy was the biggest riser, gaining 2.6pc after it said EIG had reduced its stake in the company.

The domestically-focused FTSE 250 was down 0.3pc. Housebuilder Vistry Group rose 1.5pc after it said profits will be at the top end of forecasts.

Elon Musk's deal to buy Twitter for $44bn could be in jeopardy over his complaints that the social media company is inaccurately reporting the number of spam bots on its platform.

Twitter has repeatedly said that spam accounts represent less than 5pc of its total user base. Meanwhile, Musk has complained that the actual number is much higher, and threatened to walk away from the deal.

The Tesla chief's team has concluded that Twitter can't verify its figures and has "stopped engaging" in discussions around funding the deal, the Washington Post reports. That's put the acquisition in "serious jeopardy", according to the report.

Musk's complaints about bots are widely seen as a negotiating tactic to reduce what he's obliged to pay.

A Twitter spokesman said:

Twitter has and will continue to cooperatively share information with Mr Musk to consummate the transaction in accordance with the terms of the merger agreement.

We believe this agreement is in the best interest of all shareholders. We intend to close the transaction nad enforce the merger agreement at the agreed price and terms.

JD Sports has hired the former head of Morrisons as its new chair as it tries to draw a line under Peter Cowgill's acrimonious departure.

Mr Cowgill stepped down from the sportswear retailer in May after 18 year as the company's executive chairman.

The resignation came after the company was fined £4.3m by the competition watchdog for exchanging information with Footasylum in February after it emerged Mr Cowgill held a clandestine meeting with the brand it was planning to acquire in a Bury car park. 

JD Sports said Andrew Higginson, who was chairman of Morrisons until its takeover last year, was appointed following an extensive search process by the board.

Helen Ashton, interim chair of JD Sports, said:

The board was impressed with the high-quality candidates that we met throughout the recruitment process.

Andy, however, stood out as the best candidate with his extensive board experience including as a chair and his strong track record in the international retail sector.

The FTSE 100 slipped into the red at the open as traders turn their attention to US jobs data due later today.

The blue-chip index was down 0.2pc to 7,173 points.

Fears are growing that Putin could turn off the taps completely in the coming months, sparking shortages this winter and leading to rationing and blackouts.

Governments are rapidly putting together contingency plans to help cope with a possible supply cut-off.

Here's a rundown of what some countries are planning:

Natural gas prices are on course for the longest stretch of weekly gains this year as worries mount about Putin's supply cuts.

Benchmark European prices eased this morning, but are still heading for a fourth straight week of increases.

The Nord Stream pipeline from Russia to Germany is due to shut on Monday for 10 days of maintenance, and there's mounting concern that flows won't return after the work.

Traders will have a close eye on scheduled talks between Putin and officials on energy issues.

Good morning. 

Germany has begun an unofficial process of rationing energy amid rising fears Putin's gas cuts could lead to blackouts this winter.

Economy minister Robert Habeck has placed the country in the second phase of its three-stage emergency gas plan, warning: "We have to be prepared for the situation to become critical."

While that stage doesn't include rationing, some local authorities and housing companies have taken matters into their own hands.

Vonovia, the country’s largest residential landlord, said it would lower the temperature of its tenants’ gas central heating to 17 degrees between 11pm and 6am, the Financial Times reports.

A housing association in Saxony said it would start rationing the supply of hot water, while Cologne is dimming its street lighting.

Things could still get worse. The key Nord Stream pipeline from Russia to Germany is due to shut down for maintenance work next week, and some fear it will never reopen.

5 things to start your day 

1)  Advisers pocket near £70m from Shaftesbury and Capital & Counties merger - Shareholders are poised to vote on the £5bn merger on July 29

2) HSBC banker quits and declares 'cancel culture destroys wealth and progress' - Stuart Kirk was suspended in May after attacking climate change 'nut jobs'

3) PwC partners receive record £1m payout - Sale windfall and 'exceptional' year push pay to new high

4)  Facebook threatened with European ban over data handling - Facebook told sending user details to US breaches EU's data laws

5)  Bank of England hawk urges ‘front loading’ interest rate rises - Businesses lose faith in the Bank's ability to keep inflation under control, new survey shows

What happened overnight 

Hong Kong stocks jumped early this morning, with the Hang Seng Index climbing 1.5pc.

The Shanghai Composite Index rose 0.5pc, while the Shenzhen Composite Index on China's second exchange added 0.4pc.

Tokyo stocks opened higher following gains on Wall Street. The benchmark Nikkei 225 index was up 0.5pc in early trade.

Coming up today

Corporate: Vistry Group (trading statement)

Economics: Non-farm payrolls, unemployment rate, average hourly earnings, labour force participation rate (US)