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:
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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.
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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...Macron-Merkel plan to borrow on behalf of EU to help worst-hit countries is already being challenged by ‘frugal four’
When France and Germany announced a plan to raise €500bn (£448bn) on financial markets to fund a European coronavirus recovery plan, leaders sought to underscore the magnitude of the moment.
The French president, Emmanuel Macron, hailed “a real change of philosophy”, with the plan for the European commission to borrow money on behalf of the entire EU and issue grants to the most stricken industries and regions. Angela Merkel, the German chancellor, declared: “The nation state has no future standing alone,” and the German finance minister, Olaf Scholz, evoked the legacy of the US founding father Alexander Hamilton, who helped to transform the US into a true political unit with his scheme for the national government to take on debts accrued by individual states.
Continue reading...European commission has warned of possible legal action over constitutional court ruling
Angela Merkel has stepped in to try to find a way out of a damaging clash between Germany and Brussels after the EU threatened to bring infringement proceedings over a ruling by the country’s constitutional court.
The German chancellor stressed that the dispute was solvable, after the European commission president, Ursula von der Leyen, issued an unusual statement on Sunday warning of possible legal action against Berlin.
Continue reading...France and Netherlands at odds on finance ministers’ €500bn compromise
France and the Netherlands have openly clashed over the meaning of a messy compromise struck by finance ministers which has unlocked a €500bn (£438bn) pandemic rescue package for European economies but left major issues unresolved.
Hours after a breakthrough was secured late on Thursday evening to allow immediate support for businesses and healthcare systems, it became clear on Friday that there remained bitter divisions within the EU over the longer-term task of rebuilding the European economy.
Continue reading...Compromise reached after Netherlands relents on ‘economic surveillance’ of beneficiary nations
A messy compromise to unlock €500bn (£438bn) of EU support for countries hit hardest by the coronavirus pandemic has been struck after Italy’s prime minister, Giuseppe Conte, warned that the existence of the bloc was at stake.
EU finance ministers on a video conference call struck a deal late on Thursday after the Netherlands shifted on a demand for “economic surveillance” of countries benefiting from €240bn of credit lines via the European stability mechanism, a bailout fund for struggling member states.
Continue reading...Leaders are warned that if division prevails, pandemic will be more destructive than Brexit, migration and bailout crises
The European Union has weathered the storms of eurozone bailouts, the migration crisis and Brexit, but some fear coronavirus could be even more destructive.
In a rare intervention Jacques Delors, the former European commission president who helped build the modern EU, broke his silence last weekend to warn that lack of solidarity posed “a mortal danger to the European Union”.
Continue reading...International trade slump and coronavirus outbreak combine to weaken consumer demand
Japan’s economy is heading for a recession this year after figures showed the world’s third largest economy slumped by an annual rate of 6.3% during the last quarter of 2019.
Germany, the world’s fourth largest economy, is also expected to stumble as the coronavirus epidemic and a slump in trade with China combine with weak consumer demand to drag growth lower.
Continue reading...Mario Draghi says bank will reboot quantitative easing in month Lagarde succeeds him
The European Central Bank has announced a fresh stimulus package in an attempt to prevent the fragile eurozone economy from grinding to a halt, with an interest rate cut and plans to pump €20bn (£19bn) a month into the financial markets.
In one of his final acts in his ECB presidency, before Christine Lagarde takes charge in November, Mario Draghi said governments across the eurozone needed to take greater steps to reboot growth by ramping up public spending or cutting taxes.
Continue reading...Rolling coverage of business, economics and markets as factories in Europe’s largest economy stutter
Eurozone growth came in unchanged on its third estimate: 0.2% growth in the second quarter of the year.
A minor beat on the headline year-on-year growth rate, remaining at 1.2% against 1.1% expectations, but otherwise no shocks.
Labour has confirmed that it will not vote for an election on Monday even if a bill intended to stop a no-deal Brexit passes before then.
If we vote to have a general election, then no matter what it is that Boris Johnson promises, it is up to him to advise the Queen when the general election should be. And given that he has shown himself to be a manifest liar, and someone who has said that he will die in a ditch rather than stop no deal, and indeed his adviser, [Dominic] Cummings, has been swearing and shouting at MPs saying they are leaving on 31 [October] no matter what, our first priority has to be that we must stop no deal and we must make sure that that is going to happen.
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