Pound falls near two-year low; ECB vows more stimulus if needed - as it happened
The pound has hit its lowest level since January amid Brexit worries, as the European Central Bank's new chief economists takes questions
- Latest: ECB chief economist pledges to use tools to help eurozone
- Pound slides below $1.25
- Hard Brexit worries weigh on sterling
- Slump in retail sales also worries traders
- Introduction: Chemicals giant hurt by trade war
4.50pm BST
And finally, European stock markets have ended the day lower than they started it.
Britain's FTSE 100 only lost 12 points, or 0.17%, as the weak pound propped up the index by boosting major exporters.
4.41pm BST
The pound remains under fire tonight, at its weakest level since January's flash crash (and a two year low, if you ignore it).
Sterling is still bobbing under the $1.25 mark, currently around $1.246 against the US dollar tonight.
Related: Speaker thwarts Dominic Grieve move against no-deal Brexit
Recession concerns coupled with fears over Brexit are proving too much for pound traders to swallow. And who could blame them? The negative news keeps stacking up.
Today the BRC revealed that retail sales slumped -1.6% year on year, confirming that any wage rise UK households are enjoying is not being reflected at the tills. Adding to the bad news a contraction in the UK economy is as good as confirmed for Q2, with analysts pencilling in a 0.1% decline in GDP, down from 0%. The outlook for Q3 is equally gloomy.
4.09pm BST
ECB chief economist Philip Lane has also denied that central banks pump up the markets...even though asset prices have done very nicely from years of stimulus.
Lane: Our goal is not to make markets happy, but rather to provide favourable financing conditions that can stimulate the real economy and anchor inflation expectations #AskECB https://t.co/9xbmqiANqN
Lane: Definitely the liver bird #LiverpoolFC #youllneverwalkalone #LFC #AskECB https://t.co/1fIoWgEPG0
4.03pm BST
Lane is sticking strictly to the script in his Q&A, insisting that the ECB remains independent from political pressure....
Lane: The ECB is, and will remain, fully independent and sets its policies in pursuit of its mandate of maintaining price stability #AskECB https://t.co/Nfaoe0EgPL
Lane: Our asset purchases have been very successful by lowering financing conditions for firms and households and have led to the creation of millions of new jobs over recent years. #AskECB https://t.co/ZTo73egcOu
Lane: She is an excellent choice for the ECB. I am very much looking forward to working with her. #AskECB https://t.co/m23AIXM3qF
3.41pm BST
On cryptocurrencies, the ECB is keen not to give investment advice -- bitcoin fans are on their own!
Lane: We are not here to give investment advice - remember, you invest at your own risk. By the way, it is a high hurdle for a crypto-asset to satisfy the definition of a currency. More in our explainer https://t.co/lxCIuhzlZH #AskECB https://t.co/zu5x9HKdmZ
Lane: Benoi(R)t CAuri(C), my colleague on the ECB's Executive Board, leads the G7 working group on stablecoins. The group will present its initial findings on 17 July #AskECB https://t.co/b3Fyp840wn
3.39pm BST
Despite the sharp slowdown in Europe, the ECB reckons the eurozone isn't going into recession.
Lane: We do not see a recession, although the prolongation of uncertainties is weighing on our growth outlook #AskECB https://t.co/m59Y0x1e6X
3.27pm BST
ECB chief economist Philip Lane says the central bank is ready to take action to stimulate growth and inflation if needed.
Lans says he and his colleagues have the tools they need, and are keeping a close eye on the economy. Currently there are "downside risks" to growth, he adds.
Lane: We meet every six weeks to discuss monetary policy and take decisions. We continuously assess the state of the economy and stand ready to act to keep inflation on a path to our aim #AskECB https://t.co/z92DQCG28o
Lane: While the euro area is doing well along some dimensions, inflation remains below target and there are downside risks to the growth outlook. Substantial accommodation is still required to bring inflation back to aim. If more easing is needed, we have the tools #AskECB https://t.co/rdnMJD3T7p
3.23pm BST
Heads-up. Philip Lane, the European Central Bank's new chief economist, is holding an online Q&A right now.
It's your chance to ask about the eurozone economy, whether a fresh stimulus programme is needed, and Lane's views on issues such as cryptocurrencies, trade wars, Brexit etc.
Good afternoon, this is Philip R. Lane. I joined the ECB as Chief Economist on 1 June. I'm here to answer your questions for the next 45 minutes. Please use #AskECB to join the conversation. pic.twitter.com/GeqaBfKryA
2.59pm BST
The US stock market has dipped at the open, following the small losses in Europe this morning.
The Dow Jones industrial average has dropped by 104 points, or -0.4%, to 26,701 in early trading.
Dow skids 100 points lower at the open as stocks head south for 3rd straight day ahead of Powell testimony https://t.co/jkwrU6wy4W pic.twitter.com/VYB7xTPJpS
Markets remain nervous about the Fed and with earnings season around the corner. In particular, there may just be a growing realisation that the market has banked on the Fed turning more dovish than it is inclined to right now.
Equity markets are pricing in a lot of good news, and precious little of the bad. As we approach earnings season, revisions to corporate profit guidance could undermine the positivity we are witnessing in global equity markets right now.
2.52pm BST
Speaking of Jerome Powell.... one of Donald Trump's top advisors has denied that the Fed chair's job is at risk.
Fed Chair Jay Powell's job is safe, says Larry Kudlow
"There is no effort to remove him. I will say that unequivocally at the present time. Yes, he's safe" - Kudlow pic.twitter.com/IWcrsjjWre
2.38pm BST
BlackRock's Rupert Harrison has been expanding on his concerns about sterling, in this exchange with Reuters' David Milliken.
Sterling within a whisker of January's 'flash crash' low, briefly below $1.2440 (next milestone: April 2017). Earlier today BlackRock's @rbrharrison was warning that FX markets underpriced risk of Brexit-related #GBP volatility over next 9-12 months pic.twitter.com/Y2Fjze67zn
Indeed. Volatility underpriced in both directions - probability of tail outcomes (no deal or no Brexit) has risen
Strange how market doesn't think sterling volatility is likely to be much greater than it was during late 1990s/early 2000s! pic.twitter.com/1Wb0hYDPQx
I think a lot of people have given up trying to play sterling through options markets because it's so hard to call the direction. As a result vol is underpriced but that can reset very quickly
2.24pm BST
Over in Washington, Federal Reserve chairman Jerome Powell has warned that the stress tests used to assess the nation's largest banks need to evolve.
Otherwise, Powell says, the fast-changing financial system could make them obsolete. More here.
Fed Chair Powell: Stress tests for banks put into place following economic meltdown are important, but must evolve. @AP @mcrutsinger reports. https://t.co/8vfkCcr2zp
Powell's point: stress tests must guard against complacency by banks and regulators. https://t.co/H9VEmsmc4d
2.01pm BST
The shake-up at the top of the European Central Bank is an ideal opportunity to shake up the eurozone's top monetary authority.
So argues Stefan Gerlach, chief economist at EFG Bank in Zurich and a former deputy governor of the Central Bank of Ireland.
OMT, Mario Draghi's chosen tool for fulfilling his 2012 vow to do "whatever it takes to preserve the euro," was controversial from the moment it was announced, with the Bundesbank president, Jens Weidmann, - one of Lagarde's main rivals for the ECB presidency - arguing fiercely against it in public. But that was seven years ago, and OMT has never actually been used.
Is the governing council still committed to it? Or have the events - and council membership changes - of the past few years rendered that commitment obsolete?
Related: Christine Lagarde's arrival would be ideal time for ECB review | Stefan Gerlach
1.48pm BST
EU finance ministers have launched discussions on how to fill the shoes of Christine Lagarde at the International Monetary Fund.
Indeed we had a discussion about the process of nominating the next IMF director-president. The process will start, but we do not have a clear plan, a roadmap yet. We will start the work right now.
We did not discuss names yet. They will then come later.
1.35pm BST
Back on the pound.... and a top advisor at asset manager BlackRock has warned that markets are underestimating the risk of volatility from the Brexit crisis.
Rupert Harrison, portfolio manager (and a former top advisor in the UK Treasury) told clients that the risks of an "extreme" Brexit outcome - either Britain leaving the European Union without a deal, or deciding to stay in the block - have risen.
"It's even more uncertain than it has been at any point in the process.
You can imagine a very, very wide range of outcomes in the next 12 months, and currently the options markets in currencies are not reflecting the scale of that potential volatility."
"The cumulative impact of the uncertainty, as well as ... all the stocking and destocking that we've seen, has definitely had a negative impact on momentum, which has become significantly more negative over the last three months or so."
1.24pm BST
The boss of BMW has warned that the Brexit crisis is intensifying,and that manufacturers don't have the "planning reliability" they need.
Speaking at the launch of BMW's new electric mini, Oliver Zipse warned that recent Brexit developments are a "bad progression".
German carmakers not riding to the rescue pt. 74:
BMW production boss Zipse:
" Brexit developments are "bad progression"
" BMW stops building engines in UK for vehicles heading for S. Africa (had previously been mooted IIRC).
" Has adapted systems for border crossings pic.twitter.com/UzPsOlbrgB
1.15pm BST
Britain's car industry has received a boost -- BMW has unveiled a new electric-powered Mini to be built at its Cowley car plant in Oxford.
BMW said it had 15,000 expressions of interest before order books open on Tuesday. The first deliveries to customers are expected in the first quarter of 2020, with a list price of 24,400, after the government's plug-in car grant of 3,500 has been applied.
The investment in the new Mini will preserve the jobs of about 5,000 workers at the Oxford plant at an uncertain time for an industry awaiting Brexit clarity. The plant produced 234,501 Mini and Mini Clubman cars in 2018, an increase of 4.8% year on year.
Related: BMW unveils electric Mini as it charges into new era
12.48pm BST
The pound has now fallen by 5%, or seven cents, against the US dollar in the last two months.
The selloff began as pressure mounted on Theresa May to quit, and intensified as most of the candidates to replace the PM backed the idea of a hard Brexit.
12.30pm BST
Fawad Razaqzada of Forex.com says worries about tomorrow's monthly UK GDP report (for May) are pushing sterling close to a two-year low today.
He writes:
The pound continues to be undermined by concerns that ongoing Brexit uncertainty is taking its toll on the UK economy. We have seen the release of some very poor domestic macro data in recent weeks. That run could continue tomorrow if the latest monthly GDP, construction output and manufacturing production figures disappoint expectations.
All these numbers fell noticeably last time and judging by the latest PMI data, I am not expecting to see a sharp rebound. Another poor set of figures could increase the pressure on the pound even more.
12.05pm BST
With the pound under pressures, David Bloom, global head of currency strategy at HSBC, says it's very hard to value the currency right now.
If we go to a hard Brexit, sterling could fall below $1.10
11.41am BST
Brexit news: The opposition Labour Party has just announced that Britain's next prime minister must put their plan to the people in a referendum.
And significantly, leader Jeremy Corbyn says Labour would campaign for remain against No Deal or "a damaging Tory Brexit".
I have spent the past few weeks consulting with the shadow cabinet, MPs, affiliated unions and the NEC. I have also had feedback from members via the National Policy Forum consultation on Brexit.
Whoever becomes the new Prime Minister should have the confidence to put their deal, or No Deal, back to the people in a public vote.
But nothing in the lengthy email from JC to members about Labour's position at/after a general election - only that Labour wants one.
See this from Corbyn's email. Labour's Brexit plan is "sensible" and "could bring the country together". This is not support for Remain if Labour get into power. When Labour commit to a 2nd ref when in power - that's a shift. When they support Remain in that ref - that's a shift. pic.twitter.com/MiS5rKr4kW
11.17am BST
Britain's economic outlook is set to darken this autumn, as no-deal Brexit worries mount and companies struggle.
That's according to Dean Turner, UK economist at UBS Global Wealth Management, in new analysis that helps explains why the pound is under pressure today.
It has been a tough week for those of us following events in the UK. I'm not referring to the ongoing leadership contest between Jeremy Hunt and Boris Johnson. If anything that is a great source of amusement to most economists, as we wonder where in the UK we grow the "magic money-trees" that are going to pay for all the recent campaign promises. I, for one, am sitting here, spade in hand, ready to go and dig one up to plant in my backyard when they reveal their location.
No, I am actually referring to the economic data and shifting views of policymakers at the Bank of England. The message, on the whole, is one of much more challenging times ahead for the economy.
10.49am BST
If you ignore a 'mini-crash' in early January, the pound is now languishing at its lowest levels against the US dollar since spring 2017.
Hamish Muress, senior currency strategist at OFX, fears sterling could fall further.
"Whilst the Brexit conundrum remains unresolved, the pound is much more vulnerable to the strengths of other currencies.
Even tomorrow's UK GDP figures are unlikely to offer much relief, and Sterling could reach new lows once again."
10.37am BST
The pound is also suffering from worries that the UK economy could be shrinking.
Overnight, new figures showed that UK retail sales experienced their "worst June on record", as uncertainty over Brexit continued to affect the economy.
"Businesses and the public desperately need clarity on Britain's future relationship with the EU. The continued risk of a no-deal Brexit is harming consumer confidence and forcing retailers to spend hundreds of millions of pounds putting in place mitigations - this represents time and resources that would be better spent improving customer experience and prices.
It is vital that the next prime minister can find a solution that avoids a no-deal Brexit on 31 October, just before the busy Black Friday and Christmas periods.
Related: Consumer spending at weakest since mid-90s amid Brexit chaos - BRC
The final leg of support for a Brexit riddled economy looks to have been swiped away overnight as the BRC Sales Monitor points to a third consecutive decline in official retail sales figures, cementing the prospect of a negative Q2 GDP reading."
10.20am BST
Fears over the health of the UK economy, and worries about Brexit, are driving the pound down this morning.
Sterling has lost half a cent against the US dollar, sliding as low as $1.246.
"We need a change of direction. That's why we must treat 31st October as a real deadline for leaving the EU, come what may, not a fake one."
If the [31 October] deadline comes and goes, and the EU does not extend, then it happens.
I think it's going to be another one of those 'down to the wire' moments.
No end in sight for #pound sell off"#GBPUSD below 1.2500-level opens door for retest of lows from late 2016/early 2017.
More acute UK economic weakness , a dovish shift in #BoE policy, & heightened #Brexit uncertainty are weighing heavily.#FXDaily https://t.co/DZO7IvbOCG pic.twitter.com/rI6zwgYL4t
9.52am BST
Every European stock market is down this morning.
European shares are extending yesterday's losses, following a mixed trading session in Asia where tensions between Japan and South Korea scared stock investors.
In Europe, and even globally, investors' sentiment is still being slashed by last week's better than expected US job report. Most traders who were anticipating a more dovish Fed due to a global slowdown caused by President Trump's trade war with China have shifted their trading stance.
9.20am BST
Deutsche Bank is also having a bad morning.
Its shares are down 5% below a6.50, adding to Monday's 5.4% slide. That means they've lost a tenth of their value since the bank revealed its new restructuring plan.
Market to watch: Deutsche Bank
It's been a bad start to the week for Deutsche Bank. The German firm's price has fallen over 13% after plans to cut 18,000 jobs globally were announced.
78% retail CFD accounts lose money. pic.twitter.com/rUKRtKvmR3
The presentation of the strategic plan confirmed our view that execution of the new business plan remains key. Execution risk seems higher though than we initially expected given more headwinds to capital.
9.01am BST
European stock markets have hit a one-week low, dragged down by the chemicals industry.
Miners and industrial groups are also out of favour, amid fresh worries about the impact of the global slowdown on corporate profits.
8.41am BST
BASF's struggles will fuel concerns that Germany's economy is dangerously close to a recession.
Manufacturing companies across Europe's largest economy have been hurt by trade tensions -- lower economic growth means less demand for German-made products.
Warnings of economic weakness had been racking up from chemical companies including German lubricant maker Fuchs Petrolub SE and U.S. manufacturer H.B. Fuller Co. amid a deterioration in manufacturing.
The diminished outlook underscores the difficulties in the chemical sector as demand weakens in industries from cars to farming to electronics
8.29am BST
Worryingly, BASF blamed its woes on "significantly weaker-than-expected industrial production", particularly in China's car industry.
8.26am BST
BASF's profit warning is hurting the wider German chemicals industry, as investors worry that trade conflicts are hurting the sector.
8.13am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
"To date, the conflicts between the United States and its trading partners, particularly China, have not eased.
"In fact, the G20 summit at the end of June has shown that a rapid detente is not to be expected in the second half of 2019. Overall, uncertainty remains high."
Related: Deutsche Bank starts cutting London jobs with 18,000 at risk worldwide
Continue reading...