Fresh signs of weakness in Chinese economy and weak UK and eurozone data spook investors
Fears about the health of the global economy have intensified following downbeat news about service sector activity in China, the eurozone and the UK.
Share prices fell in Asia and the pound dropped to a 12-week low against the US dollar after fresh signs of weakness in China triggered speculation that its post-lockdown recovery was running out of steam.
Continue reading...Key data this week will offer a hint as to whether the eurozone’s powerhouse can shake off recent stagnation
Engine of the eurozone, industrial powerhouse, export world champion – just some of the ways Germany’s economy has been described over the years.
However, recent figures have indicated that the good times have come to an end, with Europe’s largest economy stuck in recession.
Continue reading...GDP shrank 0.1% in first quarter of 2023 and final three months of 2022 after revisions to earlier estimates
The eurozone slipped into recession in the first three months of the year, after official figures were revised to show the bloc’s economy shrank as the rising cost of living weighed on consumer spending.
Figures from Eurostat, the EU’s statistical agency, showed gross domestic product (GDP) fell by 0.1% in the first quarter of 2023 and the final three months of 2022 after revisions to earlier estimates. A technical recession is generally defined as two consecutive quarters of negative growth.
Continue reading...Comments by Christine Lagarde come after central bank raises interest rates for seventh time in succession
The president of the European Central Bank suggested companies were taking advantage of high inflation when raising prices, after the bank raised interest rates by a quarter of a percentage point to tackle the cost of living surge.
Christine Lagarde said wage pressures in the eurozone had strengthened, as workers try to recoup some of the purchasing power they have lost due to inflation, but hinted some firms were engaging in so-called greedflation.
Continue reading...Concerns half-point could set off domino effect across financial industry knocked by Credit Suisse crisis
The European Central Bank has raised interest rates across the eurozone by 0.5 percentage points, despite fears that higher borrowing costs could set off a domino effect across a banking sector already reeling from a collapse in confidence in Switzerland’s second largest lender, Credit Suisse.
Officials at the ECB, the central bank covering the 19-member euro bloc, said inflation was likely to remain high “for too long”, forcing it to continue with its planned run of rate increases.
Continue reading...Concerns that a big driver of price rises may be firms using inflation as excuse to increase profit margins
Fears that Europe’s companies are exploiting high inflation to increase their profit margins have prompted a warning from the European Central Bank that it is closely monitoring potential price gouging of consumers.
Policymakers have repeatedly called for wage restraint but concerns are mounting that a bigger driver of the wave of price rises may be companies using inflation as an excuse to increase profit margins, a trend unions have described as “greedflation”.
Continue reading...Study says global economy is in steepest slowdown after a post-recession recovery since 1970
The world may be edging toward a global recession as central banks simultaneously raise interest rates to combat persistent inflation, the World Bank has warned.
The three largest economies, – the US, China and the eurozone – have been slowing sharply, and even a “moderate hit to the global economy over the next year could tip it into recession”, the bank said in a study.
Continue reading...Those in Europe’s inflation hotspot remain calm about rising prices, but a lack of government intervention could fuel further increases – and discontent
Like his cappuccinos, Taniel Vaaderpass, 33, isn’t bitter. His usually profitable company, OA Coffee, one of Estonia’s biggest coffee bean roasting companies, may have posted a loss for the first time last year and is set to do so again this year, but Vaaderpass remains strikingly sanguine as he sits on the terrace of the cafe he also owns on a cobbled street in the old town of Tallinn.
The central causes of Vaaderpass’s misfortune is a 240% increase in the price of unroasted green coffee and a 20% surge in the cost of the gas he uses to roast his imported beans. He also felt the need to give his staff a 10% pay rise in January despite the lack of company profits.
Continue reading...Cost of living crisis comes as 19-member currency bloc beats growth forecasts in second quarter
Inflation in the eurozone reached a record high of 8.9% this month, closing the gap with the UK’s 9.4% rate.
Dearer energy was blamed for the lion’s share of the increase from 8.6% in June, as the fallout from the Russian invasion of Ukraine continues to hammer European economies.
Continue reading...Problems in the US, China and eurozone will result in first contraction since start of pandemic, report says
The International Monetary Fund has slashed its growth forecasts for the next 18 months after warning that the world’s three biggest economies are all stalling and inflation is higher than previously forecast.
In a downbeat update to its April world economic outlook (WEO), the IMF said problems in the US, China and the eurozone had resulted in global output falling in the second quarter of this year – the first contraction since the start of the Covid-19 pandemic.
Continue reading...Call for voluntary cut until March 2023 with binding reduction targets possible when Moscow ‘likely’ halts supplies
The European Union’s executive body has urged member states to slash their gas consumption by 15%, as it warned that a complete shutdown of Russian supplies was “likely”.
The EU has been scrambling to wean itself off Russian gas since the invasion of Ukraine, but is alarmed about a potential energy crisis this winter.
Continue reading...Body revises economic forecast and says outlook for EU and eurozone heavily dependent on course of war
Europe’s economy faces the twin blows of slower growth and higher inflation as it struggles to deal with the fallout from Russia’s invasion of Ukraine, the European Commission has warned.
In its summer forecast, the governing body in Brussels said the “protracted war” was sending shockwaves through the eurozone and the wider EU, leading to a marked slowdown in activity next year.
Continue reading...Christine Lagarde is failing to heed the lesson of last decade’s crisis: act quickly and act clearly
Perhaps the European Central Bank was feeling left out as the financial world turned its attention to the US Federal Reserve’s interest rate hike. But emergency meetings of major central banks are supposed to produce more substance than the weak offering that emerged from Frankfurt after a morning of contemplation: a plan to accelerate work on a “new anti-fragmentation instrument”.
The fragmentation in question is the widening of bond yields between eurozone countries. In short, as interest rate rises have come into view, weaker economies are having to pay meaningfully greater rates to borrow than the likes of Germany – about 2.4 percentage points more in the case of Italy.
Continue reading...Output is contracting as Beijing’s tough pandemic measures force some factories to shut down
Output from China’s manufacturing sector slowed to its weakest in almost two years in January as the country’s tough anti-Covid measures forced factories into temporary shutdowns.
A monthly snapshot of industry in the world’s second biggest economy showed production being hard hit by Beijing’s zero-tolerance approach to the pandemic.
Continue reading...Rolling coverage of the latest economic and financial news
Earlier:
Time to wrap up....
Here’s today’s main stories:
Related: Alibaba shares plunge as Beijing ‘seeks to break up Ant’s Alipay’
Related: Stock market pullback likely by year end, Deutsche Bank survey finds
Related: Evergrande investors face 75% hit as company edges closer to restructure
Related: UK cancels Covid vaccine deal with French firm Valneva
Related: Higher taxes could leave low-paid frontline workers £1,000 worse off
Related: EU Brexit controls are pointless bureaucracy, says M&S chairman
Related: Brexit trade barriers added £600m in costs to UK importers this year
Related: Primark hit by ‘pingdemic’ but it says supply crisis won’t lead to shortages
Related: West End theatres bank on staging a revival with big-budget productions
Related: All Sainsbury’s stores to stay shut on Boxing Day as a ‘thank you’ to staff
Related: UK to offer £265m in subsidies for renewable energy developers
European stock markets have shrugged off growth fears and talk of a stock market pullback, to end the day higher.
In London, the FTSE 100 gained 39 points or 0.55% to end at 7068 points. Royal Mail (+3%), Lloyds Banking Group (+2.8%), and hedge fund management group Pershing Square (+2.6%) led the risers.
Spain's Ibex up 1.3%. German Dax up 0.6%
The major European indices are ending the day with gains across the board:
German DAX, +0.56%
France's CAC, +0.2%
UK's FTSE 100, +0.55%
Spain's Ibex, +1.3%
Italy's FTSE MIB, +0.9%
In other markets as European/London traders look to exit:
Twelve months after the pandemic struck the Guardian’s economic tracker reveals real risk of lasting damage
When Boris Johnson announced the first stay-at-home order, effectively shutting down whole sections of the economy, it was hoped the tide could be turned within 12 weeks. As many months later, lockdown measures are being relaxed for a third time and Britain still faces a lengthy road to recovery from the worst recession for 300 years.
As restrictions ease, the chief economist at the Bank of England, Andy Haldane, warned that despite the reopening of the economy, the risk of a “jobs equivalent of long Covid” remains for workers across the country.
Continue reading...US stock market is suffering its worst day since June, as Apple and Tesla lead stock markets into the red
Earlier:
US traders can now catch their collectives breath after the choppiest trading session in several weeks.
It wasn’t as dramatic as the massive selloffs back in February and March (which still give me the shivers), but certainly a volatile day.
Related: Coronavirus live news: Robert Pattinson 'tests positive for Covid-19, halting Batman production'
Today’s losses mean the Dow is slightly negative for 2020, while the tech-heavy Nasdaq Composite index is still up 27% since January.
Continue reading...Too much is being read into the greenback’s recent weakening against the euro
The dollar is in freefall! The global greenback is doomed! screamed recent headlines. Actually, such sensational headlines are “too sensational”, to echo that noted authority on currencies, Miss Prism, in Oscar Wilde’s The Importance of Being Earnest.
The dollar’s fall in July to a two-year low against the euro was the immediate impetus for these stories. In fact, the dollar’s recent slide is one in a series of readily explicable fluctuations. When the Covid-19 pandemic went global in March, the dollar strengthened on the back of safe-haven flows into US Treasuries, as it does at the start of every crisis. By May, the Federal Reserve, acting as global lender of last resort, had accommodated this mad scramble for dollars by pouring buckets of liquidity into financial markets and the greenback gave back its early gains.
Continue reading...The leaders of EU27 countries wore face masks as they greeted each other with elbow bumps, nods, bows and some variations at a summit to thrash out a deal on a multibillion coronavirus recovery fund for the bloc's economies.
There were birthday gifts for the German chancellor, Angela Merkel, who turned 66, and the Portuguese prime minister, António Costa, who turned 59
Continue reading...From champion of austerity to Europe’s biggest spender – Germany has travelled a long way in just a few months. The notoriously frugal ministry of finance has agreed to spend €130bn – a sum equal to 4% of national income – on more than 50 initiatives to promote growth across the country.
This breathtaking investment programme comes on top of the almost 30% of GDP the government has so far spent on rescuing businesses and protecting jobs during the coronavirus crisis.
Continue reading...