Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
After yesterday’s heavy losses, European markets are expected to bounce back today ahead of the US Federal Reserve’s rate decision. A number of disappointing corporate earnings reports and weak economic data, along with trade and Brexit worries sent shares lower yesterday.
The Fed is widely expected to cut interest rates today for the first time in a decade, by a quarter point to a target range of 2% to 2.25%. The Fed’s policy statement and chair Jerome Powell’s press conference will be closely watched for any clues as to whether there will be further rate cuts in coming months.
Economists at Daiwa said:
We would expect a relatively dovish assessment, underscoring the downside risks to the outlook from abroad and concerns that US inflation will remain below target for far longer than originally anticipated, therefore leaving the door open for further cuts this year.
Before that, in the eurozone we will get the first estimates of GDP for the second quarter and July inflation. Last week, European Central Bank president Mario Draghi issued a bleak assessment, saying that the eurozone’s economic outlook is getting “worse and worse” – and that the bank should inject more stimulus. GDP growth is expected to have slowed to 0.2% between April and June, half the pace seen in the first three months of the year.
However, German retail sales for June were much better than expected with a monthly increase of 3.5%, following a decline of 0.6% in June, according to data released this morning.
In Asia, shares fell, rattled by fresh trade war fears after Donald Trump issued new threats to Beijing. As a new round of trade talks between the US and China started in Shanghai, Trump tweeted that if he is re-elected in November 2020, “the deal that they get will be much tougher than what we are negotiating now…or no deal at all”.
The pound remains under pressure amid rising fears of a disorderly Brexit and is trading at $1.2155, after falling to $1.2120 on Tuesday, rattled by the no-deal rhetoric by Boris Johnson’s government. It has lost more than 4% so far this month and is on track for its worst monthly performance since October 2016.
The latest house price index from the building society Nationwide, out this morning, showed house prices rose 0.3% in July from June, while the annual rate slowed to 0.3% from 0.5%. Nationwide said uncertainty about Brexit and its impact on the economy were acting as a drag on the market.
- 8:55am BST: German unemployment (July)
- 10am BST: Eurozone unemployment (June)
- 10am BST: Eurozone GDP (Q2) – flash estimate. Expectation: 0.2%
- 10am BST: Eurozone inflation (July) – flash estimate
- 10am BST: Italian GDP (Q2)
- 7pm BST: Federal Reserve rate decision