Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
After last week’s turbulent markets, investors are fervently hoping that world leaders and central bank chiefs will take action to ward off a recession.
The bond markets continue to flash warning lights, with sovereign debt yields at record lows, as the global economy appears to weaken. But there are also signs that politicians are taking notice.
Overnight, US president Donald Trump played down fears that America could fall into recession in 2020.
He told reporters that few economists were predicting a recession, insisting that the US public are prosperous (thanks to his own tax cuts):
“We are doing tremendously well.
Consumers are rich, tax cut loaded up with money. I saw Walmart numbers through the roof, better than any poll.”
However… we do know that America’s economy slowed in the last quarter, growing by just 0.5% — the weakest growth in over two years.
Trump certainly doesn’t want a recession to strike ahead of next year’s presidential race, and the White House is hoping that the world’s biggest central bankers will act, fast.
Trump’s trade advisor, Peter Navarro, insisted on Sunday that the markets would rise in the months ahead, predicting:
“What I can tell you with certainty is that we’re going to have a strong economy through 2020 and beyond with a bull market . . . the Fed will be lowering rates.
The ECB will be engaging in monetary stimulus. China will be engaging in fiscal stimulus.”
But…. such measures might not work, if the world is plunged into a deeper trade war.
Trump insisted on Twitter last night that Washington and Beijing are talking, but also claimed (wrongly) that recent tariffs are bringing money into the country (they’re actually paid by US importers).
Hopes that a recession can be avoided have lifted shares in Asia overnight — with Japan’s Nikkei up 0.7% and China gaining 2%. Investors also applauded the news that China’s central bank is reforming its lending rules, and bringing in a more market-driven benchmark which could lower borrowing costs.
European stock markets are also expected to rally, adding to Friday’s gains (and clawing back some of last week’s losses).
Britain’s FTSE 100 has just jumped by 50 points, or 0.75%, at the start of trading.
Otherwise, it’s a quiet-looking day in the City as the August lull kicks in. An updated assessment of eurozone inflation is likely to confirm that price pressures remain weak.
- 10am: Eurozone consumer prices index for July (expected to confirm inflation at just 0.9% per year)