It was another record-breaking week for inflation as consumer prices in the eurozone increased by 5.1 per cent in January.
The figures added pressure to the ECB to tighten monetary policy. But, when the governing council meets today, most economists expect the central bank to freeze rates while it tapers asset purchasing – in stark contrast to the increasingly hawkish Fed and BoE.
But European markets aren’t convinced. Investors are betting that high inflation will force the ECB into at least two rate rises this year.
Meanwhile, concerns about higher interest rates, growth and geopolitics led the US stock market to its weakest January since the global financial crisis. The S&P 500 index fell 5.3 per cent last month, though it has since rallied, with yesterday marking four days of gains.
In the UK, policymakers at the BoE’s monetary committee meeting today voted to increase interest rates from 0.25 per cent to 0.5 per cent, in the central bank’s first back-to-back rise since 2004.
With even more pressure on household incomes, chancellor Rishi Sunak sought to soften the blow of soaring energy costs and tax rises (due in April) by announcing a support package, including cutting £200 from all energy bills with extra help for the vulnerable.
Indeed, forecasters expect policymakers to raise rates in order to avoid a wage-price spiral, whereby inflation becomes baked in as workers demand more pay to make up for higher living costs, and companies increase prices in response.
Elsewhere, from Vodafone to Unilever, activist investors continue to agitate. Indeed, activists are now on the shareholder register for at least nine businesses in the FTSE 100, attracted by the depressed price of UK-listed companies compared with other markets.
“The UK is a bargain basement right now, compared to the US,” Sarah Ketterer, chief executive of LA-based asset manager Causeway Capital Management, told the FT.
In fact, following a tough 2020, it is Big Oil whose hefty profits have fended off questions about long-term prospects. ExxonMobil and Chevron reported combined net annual profits of nearly $38.6bn in 2021. Both their share prices have also outperformed over the past year, after nearly a decade of poor returns.
Likewise, UK-based oil major Shell also pledged to up its dividend and buy back more shares after a bumper year. Its adjusted earnings for 2021 rose to $19.3bn, up from $4.8bn in 2020 when the pandemic dented demand for oil.
In stark contrast, ESG has also been in the headlines this week. City veteran Sir Ian Cheshire will become the first independent chair of the We Mean Business Coalition, an international non-profit that aims to get private businesses to take action on climate change.
But the Science Based Targets initiative, an oversight group that has become the arbiter of corporate climate action, was rattled as it faces a formal complaint about its governance and possible conflicts of interest.
Workplace culture was also brought into sharp focus. An investigation at miner Rio Tinto discovered that 21 women said they were raped or sexually assaulted at its mines over the past five years, alongside “systemic” bullying and high levels of racism across its operations.
So how can corporate cultures encourage honesty to tackle internal problems?The latest episode of our Working It podcast looks at whistleblowers – including what drives people to speak up and how managers can create environments where workers are able to raise concerns.
And finally, if your board is looking at ethics, you might be interested in the paradox of professionalism. Research shows that the greater a manager’s sense of professionalism, the more likely he or she is to accept a gift or bribe, writes management editor Andrew Hill.
“Deep professionals should embrace continued ethical training, to help embed principles, and embrace an understanding that they may be prone to bribes and influence-seeking,” he advises.
