Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Can policymakers save us from recession? That’s the question on the lips of investors this morning, as hopes of new stimulus packages build.
Stocks have jumped in Asia overnight, following solid gains in Europe and in New York on Monday. After last week’s rush to sell shares, traders are judiciously picking them up again, in anticipation of central bank stimulus.
The European Central Bank seems certain to loosen monetary policy in September — imposing steeper negative rates on banks and perhaps kickstarting its QE bond-buying programme again.
The Federal Reserve may also ease next month, caving into pressure from Donald Trump to cut rates.
Yesterday the president demanded that the Fed slash a whole percentage point off rates “over a fairly short period of time”, which is certainly more radical than Wall Street, or the Fed itself, had in mind.
Donald J. Trump
(@realDonaldTrump)…..The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well. If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone!
Trump also insists that America isn’t heading into recession — but if he’s wrong, it’s clear that the White House will point the finger of blame towards the Fed, rather than its own belligerent trade policies.
Yesterday, the Bundesbank warned that Germany’s economy could be sliding into recession right now. With orders for cars and industrial equipment sliding, GDP could shrink this summer for the second quarter in a row.
The bank cited Brexit and the US-China trade war as key factors, adding:
“The overall economic performance could decline slightly once again. Central to this is the ongoing downturn in industry.”
That is intensifying the pressure on Berlin to boost spending, with chatter about a €50bn stimulus package.
Last night the Dow gained 249 points, taking it back over the 26,000 point mark for the first time in a week.
As Jim Reid of Deutsche Bank points out, markets have now recovered a large chunk of their recent losses.
Last night the S&P 500 ended +1.21% which means it’s now roughly an equal distance apart from the intraday post Trump trade tweet lows of early August and the highs prior to the tweet at the end of last month.
It’s also on a three-day winning run and believe it or not, has actually risen for seven of the last ten days even if it might not feel like it.
But government bond yields are still at, or near, historic lows — showing that the markets are still anxious about growth prospects.
Also coming up today
The CBI’s monthly healthcheck on Britain’s factories is likely to show that growth and new orders remained subdued this month, amid Brexit uncertainty and weaker global growth.
The agenda
- 11am BST: CBI survey of UK industry in August
