Pound hits 20-month low against US dollar after Brexit vote postponed – as it happened

Graeme Wearden

from Economics | The Guardian on 2018-12-10 18:56 (#44NVS)

News that Theresa May will abandon plans for Tuesday's vote on her Brexit deal is rocking the financial markets

6.56pm GMT

Following one of its most volatile trading sessions in the last few volatile years, sterling seems to have settled around $1.255 tonight, a level last seen in April 2017.

The pound has dropped to its lowest level for almost two years amid the growing risks to the British economy from political paralysis over Brexit and on a no-deal scenario.

Theresa May's decision to delay the parliamentary vote on her Brexit plan to avoid an embarrassing defeat for the government sent sterling tumbling by more than 1.3% against the dollar and by more than 1.1% against the euro on the foreign exchanges.

6.33pm GMT

After a rough day's trading, Britain's FTSE 250 index has lost almost 2% of its value today.

The FTSE 250, which contains UK-focused firms, shed 351 points to 17492. Holiday firm Thomas Cook shed almost 14%, housebuilder Crest Nicholson shed 8.5%, transpor group Stagecoach lost 8.3%, and Domino's Pizza lost 8%.

The vote was meant to be taking place after five days of intense debate in Parliament over Theresa May's proposed Brexit deal but instead the change of plans ended up with MPs baying for blood including Jeremy Corbyn asking for the PM to "give way."

There is no clear indication about where the MPs or the Prime Minister plans to take things next.

6.14pm GMT

UK business groups are united in horror at events in parliament today:

Business groups:
@britishchambers: "Firms are looking on with utter dismay"
@CBItweets: "Yet another blow for companies desperate for clarity"
@IoD_Press: "Another extension of the frustration and uncertainty"
@the_brc: "Particularly concerning"

6.04pm GMT

Theresa May has insisted several times this afternoon that she will not countenance a People's Vote on her withdrawal deal.

Instead, she insists, parliamentarians need to implement the 2016 vote -- despite some MPs reporting that constituents have urged them to reject her deal.

Since May's deal was announced I've received over 600 letters/emails about Brexit:
People's Vote w/ Remain (85%)
Support Theresa May's deal (8%)
Pro-brexit/No deal (5%)
Other (Norway/Canada etc.) (2%)

PM May is going back to Brussels on Thursday for an EU council meeting and the hope from her side is that further cosmetic concessions can be agreed around the controversial backstop, but in our view that equation does not quite seem to balance given the EU has already announced that it will not engage the UK government on further deal amendments.

"Sterling has once again come under selling pressure, reflecting the ongoing Brexit paralysis. We believe delaying the vote is perhaps just another step towards a second referendum (which clearly cannot take place before the March deadline, but possibly could happen within perhaps six months assuming the March deadline is further extended) as we cannot see another way for this purgatory that the UK inadvertently voted for to end."

6.03pm GMT

Rather than a crunch vote on Tuesday, the markets now face days of uncertainty, or quite possibly several weeks.

Theresa May is refusing to say when the delayed Meaningful Vote will take place, only that it will be held once she has secured new reassurances on the backstop.

Hang on. What happens if the Govt never brings this deal back for a vote at all? They can't just avoid a vote on no deal because they pulled the vote in the middle of the debate on this deal! As I was typing @JustineGreening just asked q on this but got no clear answer. https://t.co/PD0xiOMaug

PM making our country look chaotic & ridiculous. 5hrs ago Ministers & No10 were insisting vote was going ahead. Now we don't know when or even what PM wants it to be on. How can there be trust & credibility in this process if no one can trust anything Ministers are told to say? pic.twitter.com/8TU45QdKB4

5.50pm GMT

Over the past 24 hours the pound has been comfortably the worst-performing major currency in the world #Brexit pic.twitter.com/9dto4fCHUW

5.37pm GMT

The cost of insuring UK government debt against default has jumped to its highest level since the EU referendum, in another sign that investors are getting jittery.

UK sovereign 5Y CDS now quoted at 38bps, widest level since the post-referendum days of July 2016

5.31pm GMT

It's been a roller-coaster week for sterling but the past half hour or so takes the biscuit. Here's the pound vs the US dollar over the past week or so: pic.twitter.com/sAobl18geM

5.23pm GMT

The pound remains on track for one of its worst days since the 2016 referendum.

It's recovering, slightly, from its lowest point today -- but still down 1.6 cents at $1.256.

It is not just the likelihood of a no-deal Brexit that investors are factoring into their valuations of the British Pound.

Investors are also re-pricing into the market the increased likelihood that Theresa May will once again be at threat to expectations of a leadership challenge. Another emerging danger is that the decision taken today raises the threat level that the UK is falling into a disorderly Brexit trap.

5.01pm GMT

The news that Theresa May has kicked the Brexit vote down the parliamentary corridors will have disappointed many British business leaders.

After two and a half years of uncertainty, UK PLC really wants Brexit sorted out. Many also fear a no-deal Brexit, especially those which haven't (or can't) drawn up contingency plans to protect themselves.

"Avoiding no deal continues to be the main priority for our members but, with Parliament seemingly gridlocked, the Government must also be much clearer about its own contingency plans, even if only regarding the areas they can control, such as imports.

Many companies are still in the dark about what HMRC and border agencies would require the day after Brexit if there is no transition period. Partly because of a lack of information, only 14% of IoD members say they are fully prepared to manage no-deal, highlighting the scale of the challenge if a withdrawal agreement isn't ratified."

4.36pm GMT

Lee McDarby, Corporate IP Managing Director at foreign exchange firm moneycorp, says Theresa May's decision to delay the Brexit vote will hurt the economy:

"Over the course of the afternoon we've seen wild swings in the value of Sterling, including a 20 month low against the dollar.

Every time the Prime Minister kicks the can down the road, the uncertainty dents British business plans for 2019. Right now it seems the markets are just looking for some certainty on the future of the UK, regardless of its shape or form."

4.30pm GMT

The pound's thumping today suggest that investors see a growing danger that the UK crashes out of the EU at the end of March, without a transition deal.

But a sterling crisis might encourage MPs to back Theresa May's deal, despite all their misgivings.

In our - admittedly low confidence - base case, stress in financial markets and pressure from businesses should lead to a last-minute approval of the deal in Parliament.

However, the situation is fluid and other outcomes carry significant probabilities.

4.14pm GMT

The pound has fallen further against the euro too. Now down 1.4%, or one and a half eurocents, at a1.1014.

That means the euro is worth 90.7p, its strongest position since late August. This makes imports from Europe more expensive, and UK exports more competitive.

4.09pm GMT

So much for Theresa May's speech being priced in! This chart shows how sterling has taken a deeper bath, as MP after MP criticise the PM's handling of the Brexit negotiations.

3.56pm GMT

Boom! The pound is in freefall.....dropping to a new 20-month low of $1.2555 against the US dollar.

That's a loss of 1.4%, down 1.8 cents today.

Corbyn demanding that May allows parliament to set the terms of her coming negotiation with EUCO.

Corbyn: "Extremely serious and unprecedented situation. The Government has lost control of events and is in complete disarray" pic.twitter.com/Y0zlERbhSZ

and we're below 1.2600 #gbp

3.47pm GMT

The PM's position in a nutshell:

PM goes on offensive.

She says those backing 2nd ref must 'be honest' that this risks dividing country again.

If you want to stay in SM + CU this will require free movement & Budget contributions.

If you want no deal this will cause significant economic damage.

3.45pm GMT

Theresa May is now challenging MPs to support her deal, calling for compromise.

She says MPs must admit that a second referendum risks dividing the UK again, that single market membership means maintaining free movement of people, and no deal would cause economic damage.

'Does this house want to deliver Brexit?' says May
'NO!' comes the cry pic.twitter.com/wMx3p4u0MA

The Brexit problem here in Westminster summed up in a moment - PM says House faces fundamental question, do we want to deliver Brexit? SNP benches and some on Labour backbenches shout "NO"! Most laugh. Except it's not really that funny.

3.41pm GMT

Theresa May has confirmed that the government has decided to defer the Brexit vote scheduled for tomorrow.

The PM says there is 'broad support' for much of her deal (cue heckling from the opposition benches), but also admits that the government would lose the vote, due to concern over the Irish backstop.

3.34pm GMT

Theresa May is giving her statement to the House of Commons now.

Our Politics Live blog will have full coverage. I'll track financial reaction to the key points.

3.33pm GMT

Theresa May has been working the phones....but not finding many friends at the other end of the line.

Just off call with PM. Expressed my deep frustration that the interests of a divided Tory party are taking priority over the interests of country and that delaying the vote is an abdication of responsibility, leading to even greater chaos.

3.32pm GMT

The Sun's political editor, Tom Newton Dunn, has tweeted that MPs might not get to vote on Theresa May's Brexit deal until 2019.

Latest: I am told the PM will tell MPs she will not dump the backstop or reopen the Withdrawal Agreement, but instead seek legal assurances from the EU that it will not last indefinitely (1)

PM will also say the meaningful vote will be suspended, indefinitely, until that happens. So, could well be not vote until after Xmas. Even if May succeeds, will it be enough to win over the DUP and ERG? (2)

3.27pm GMT

More pressure on the PM, from the head of the DUP - who have been propping her government up since the 2017 election.

Just finished a call with the Prime Minister. My message was clear. The backstop must go. Too much time has been wasted. Need a better deal. Disappointed it has taken so long for Prime Minister to listen.

3.19pm GMT

Andy Scott, Associate Director at financial risk management consultancy JCRA, fears the pound will suffer further losses as the Brexit drama plays out:

Theresa May is reported to be planning to travel to Brussels to seek a legally-binding assurance on the back stop, in an attempt to gain support of MPs who fear being trapped indefinitely under the current proposal.

But with her authority severely depleted, the political stakes are high for May whose position as Prime Minister could soon be deemed untenable.

3.15pm GMT

One well-connected source floats the possibility of a joint letter signed by the British and Irish governments to spell out what would constitute acceptable alternative arrangements to the backstop

3.13pm GMT

The slump in the pound today shows that international investors are losing faith in Theresa May's government, says the BBC's Simon Jack:

Q: Why is the value of pound falling? FX traders A: "when international investors see government in crisis they go away till there's crumb of clarity". Q: Does it make no deal more likely? A: The single line of least resistance (no one has to do anything) is no deal.

3.09pm GMT

MPs are due to hear from Theresa May in less than 30 minutes time, in what's certain to be a testing appearance at the dispatch box.

Paul Hardy, Brexit director at legal firm DLA Piper, argues that the pain may not be worth it:

"The political cost to Theresa May of delaying the vote could only be justified if she can come back from Brussels with significant changes to the draft Withdrawal Treaty - this is the legally binding document which puts the Irish backstop in place.

This seems unlikely if the comments of the European Commission President, Jean-Claude Junker, made at the time the deal was adopted are taken at face value: "This is the best deal possible. I'm inviting those who have to ratify this deal in the House of Commons to take this into consideration. This is the best deal for the UK, the best deal for Europe, this is the only deal possible"."

2.44pm GMT

At today's 18-month low of $1.261, the pound in your pocket is worth 15% less than on the day of the EU referendum.

However, it's still stronger than in the aftermath of the vote; sterling hit a 31-year low below $1.20 in January 2017, before managing a small recovery.

The pound is tumbling again today. But a glance back through history shows this is hardly the first time - or indeed the biggest falls. Presenting sterling vs the dollar since 1870: pic.twitter.com/55z4wwkYXm

2.27pm GMT

We also have fresh evidence that all the Brexit uncertainty is weighing on the economy.

The National Institute of Economic and Social Research has estimated that UK growth will slow to 0.4% in the current quarter, down from 0.6% in July-September.

OUT NOW:
Our latest monthly #GDP Tracker suggests that UK economic #growth is set to slow to a quarterly rate of 0.4% in 2018Q4 from 0.6% 2018Q3 - Read here in full: https://t.co/UTIU0b4ECr

2.22pm GMT

Sterling's weakness isn't helped by confusion over whether Theresa May can actually scrap tomorrow's vote or not!

Govt whips apparently confident they can delay the vote - but it may be when the try that the 'house erupts' - according to one MP

The PM does not get to pull a vote. The House will have to vote to pull a vote. I will oppose. We need to see this deal off once and for all.

A government source has said that there won't be a vote on a business motion to cancel Tuesday's vote. (See 1.38pm.) "We are replacing the business with a new statement but it isn't a motion and therefore isn't voteable," the source said.

1.48pm GMT

A further burst of selling pressure is threatening to send sterling below $1.26, for the first time since June 2017.

As you can see, the pound has suffered a series of sickening jolts in the last few hours, since news broke that Theresa May was holding an emergency call with the cabinet.

PM expected to say that she's listened to concerns about the backstop and is heading back to Brussels.

Sources tell me PM will return to Brussels in an attempt to renegotiate the backstop. Statement at 3.30.

So @jeremycorbyn - if Labour, as official opposition, lodges motion of no confidence in this incompetent government tomorrow, @theSNP will support & we can then work together to give people the chance to stop Brexit in another vote. This shambles can't go on - so how about it?

1.28pm GMT

The pound is continuing to lose ground, as traders prepare to hear from Theresa May this afternoon.

Sterling is now down a whole eurocent against the euro at a1.1078, the lowest since September. That means the euro is worth more than 90p.

Cable LOD, 1.2630 now, fresh 18-month low. pic.twitter.com/VLLvMlaUog

The risk of a disastrous vote scenario was too high and therefore they felt it prudent to delay for now. Don't honestly know if that is a good or bad thing.

Either the vote was going to be so bad that postponing it is a good thing, or the postponement of the vote tells you how far away from a good scenario they are.

1.15pm GMT

Conservative MP John Redwood is speaking on Bloomberg TV now.

Redwood - a long-standing Brexiteer - argues that the UK should leave the EU without a deal, thus saving the 39bn divorce payment:

We won't be crashing out, we'll be cashing in.

People think that leaving without a deal would be bad for sterling.

1.05pm GMT

Number 10 insiders tell me they think a second referendum is on the cards. "We're not preparing for it and she doesn't want it but it might be the only way. We think that's where we'll end up". https://t.co/cb3XslVKeW

1.03pm GMT

Scrapping today's vote may allow Theresa May to live another day...but it could also hasten her political end.

So argues Mujtaba Rahman, political analyst at Eurasia Group, who points out that the PM's last-ditch attempts to improve her deal have failed:

She tried to limit the damage in tomorrow's vote by seeking last-minute concessions from several EU leaders in telephone calls over the weekend. She hoped changes to the Irish backstop could be announced just before tomorrow's vote. But the EU offered only "clarifications" - not "sweeteners" - and rejected May's desperate pleas to reopen the Withdrawal Agreement.

Indeed, in Brussels this morning, the sense was that May's last minute phone diplomacy was lacking in detailed "asks". She also refused to share what her strategy was going to be regarding management of the Commons - both before and after the vote.

May will likely respond to the overwhelming message from Tory MPs by seeking emergency talks in Brussels with European Commission and Council leaders before the two-day regular summit of EU leaders on Thursday and Friday. But we remain of the view that any substantive reopening of the Withdrawal Agreement is unlikely. EU leaders will not be pleased with new demands from May, especially as she only signed off on the deal a few weeks ago.

The decision to shelve the vote is not without cost for May. It is a very unusual course during a five-day Commons debate, and makes her look weak. It will revive accusations that she is in office, not power, and add to the "end of days" atmosphere at Westminster. However, it was probably the lesser of two evils. If May had lost by a three-figure margin, she could have been forced out of office this week.

12.52pm GMT

The financial markets have been plunged into fresh upheaval today, says Simon Harvey, FX Analyst at Monex Europe:

"When the market thought uncertainty had finally peaked, May's delay proves it wrong"

12.48pm GMT

Three statement from 330pm - you'd think this was a pretty clear hint that they're going to try to pull tomorrow's Meaningful Vote

1. PM - Exiting the EU
2. Leadsom - Business Statement
3. Barclay - ECJ ruling on Art 50

12.37pm GMT

The chaos in Westminster is hurting the stock market too.

Shares in house builders, who are vulnerable to an economic slowdown, are falling. Barratt Development are down 3%, Taylor Wimpey has lost 2%, and Crest Nicholson down 7%.

12.25pm GMT

No prizes for spotting the moment when traders heard that the Brexit vote might be off....

Sterling is on the slide again. Down below $1.27. Lowest for 18 months or so. pic.twitter.com/CWKIZtnU08

12.24pm GMT

This chart shows how the pound has now dropped to its lowest level against the US dollar since June 2017

12.21pm GMT

City traders are scrambling to keep up with events in Westminster. The latest news is that Theresa May will address parliament this afternoon....

Breaking: The Prime Minister will be making an oral statement today at 330pm titled "Exiting the European Union".

The confusion over whether tomorrow's Brexit vote will go ahead provides the market an insight into the chaos and disagreement within Downing Street. Rumours that Theresa May is set to pull tomorrow's vote contradict those of a Downing Street spokesperson, and the fact the news was broken over a conference call instead of in a cabinet meeting speaks volumes.

"Many predicted that tomorrow would be the big day for any movement in the pound. However, it has already reached three-month lows against the euro and, depending on whether the vote tomorrow goes ahead, could hit lows last seen against the dollar in August."

12.02pm GMT

Back in the financial markets, the pound is suddenly sliding amid reports that the government will cancel tomorrow's parliamentary vote on the Brexit withdrawal deal.

Theresa May is holding a conference call with ministers right now; some have apparently revealed that the vote, due on Tuesday night, has been ditched.

Two cabinet sources tell me vote being pulled - not, repeat not, yet officially confirmed

If she is pulling the vote to go back to Brussels it could suggest a renegotiation of the backstop, or at least clarification. We must note that the EU has categorically said this is the only deal and it seems unlikely it would revisit.

Alternatively, this opens up the prospect of May herself going for a second referendum, with voters asked whether they accept this deal or no deal. A complete shambles is about the only way to describe this situation and investors are right to be very cautious about UK assets.

11.52am GMT

S.M. Lodha, chairman of UK insulation firm Western Thermal Group, fears that the UK economy will continue to struggle until Brexit is resolved:

It is evident that this economic slowdown has been impacted by the extremely low business confidence levels amongst businesses and entrepreneurs in the UK with the ongoing Brexit negotiations leaving businesses in a state of hesitancy and reluctance to invest in opportunities or growth.

As long as the UK's future continues to be uncertain, the more business growth will be stagnated."

11.25am GMT

Another reason to worry....

The composite leading indicator (CLI) is an OECD measure of economic turning points, sometimes called an early recession warning system. Higher is better (more growth), lower is worse. The UK's CLI now comfortably the lowest in the G7 and still heading south... pic.twitter.com/zaoJe2le8U

11.20am GMT

Marina Mensah-Afoakwah, senior economist at the CEBR think tank, also blame Brexit for the UK's slowing economy:

"Today's data show that the UK economy has continued its slowdown into Autumn, as business and consumer confidence take a hit amidst Brexit uncertainty.

October's GDP growth was mainly driven by services. Rolling three-month growth in the sector was 0.3% in October, which contributed 0.23 percentage points to overall GDP growth. This was largely as a result of growth in IT and professional services, which grew by 1.7% and 1.3% respectively. Construction also contributed positive growth, up 1.2% in October.

However, the manufacturing sector saw no growth at all in the three months to October, mainly due to a decline in the pharmaceutical industry. While in the three months to October growth in the manufacturing industry was flat, monthly figures for October show that sector actually contracted by 0.9%.

10.55am GMT

Economist Rupert Seggins has analysed today's growth figures, and pulled out some key points:

1. UK economy grew 1.5%y/y (4th month in a row) or 0.4%q/q in the three months to October. Main contributions came from: professional services, info & comms services, wholesale & retail and construction. Manufacturing's boost to growth has faded. pic.twitter.com/S5Fk8jwY0E

2. Production sectors as a whole grew by 0.3%q/q in the three months to October. Main contributions to growth came from gas & electric and mining & quarrying. 0% chnge in manufacturing output on the previous three months. pic.twitter.com/fnC4FHMA1U

3. In the construction sector, we had overall growth in output of 1.2%q/q growth in the three months to October. Main thing holding up the numbers was house building and infrastructure. Repeair & maintenance, office and factory & warehouse construction all dragged on growth. pic.twitter.com/iGh8pZNupV

10.30am GMT

Although monthly GDP figures are volatile, it's clear that the UK economy has slowed since the summer:

10.26am GMT

The British Chambers of Commerce, which represents UK firms, has no doubt what to blame for the slowdown -- BREXIT.

Suren Thiru, head of economics at the BCC, says rising cost pressures (due to the weak pound) and the "drag effect of persistent Brexit uncertainty" is taking its toll on the UK economy.

"The slowdown on the underlying three-month measure of GDP was largely driven by weaker service sector growth as car sales fell. That said, the service sector still made the largest contribution to overall economic activity, with manufacturing and construction adding little to overall UK growth.

"The widening in the UK's trade deficit is a concern and reflects a sharp rise in goods imports. Trading conditions for UK exporters are deteriorating amid moderating global growth and uncertainty over Brexit.

Businesses continue to report that the persistent weakness in sterling is hurting as much as its helping, with the weakening currency raising input costs.

10.08am GMT

In another blow, Britain's trade gap with the rest of the world has widened.

The ONS reports that the total trade deficit in goods and services widened by 3.1bn in August-October to 10.3bn.

9.57am GMT

Geoff Tily, senior economist at the TUC, is concerned that the UK has barely posted any growth since the summer:

ONS monthly GDP shows third consecutive weak figure, suggesting UK economy slowed significantly from August. Manufacturing declined 0.9 per cent in October, with a 6.6% reduction in motor vehicle production. pic.twitter.com/1tr9a7uu82

#UK #economy got off to lacklustre start to Q4 as #GDP edged up 0.1% m/m in October. 3-month growth rate slowed to 0.4% from 0.6% in September (Q3). #Services output rose 0.2% m/m but #industrial production fell 0.6% m/m. #Construction output down 0.2% after recent healthy gains

There is no doubt that the UK's economic data has deteriorated and the confidence has shattered among entrepreneurs. The ongoing Brexit saga has created nothing but the bad environment.

9.53am GMT

This chart shows how the UK's growth rate has petered out, as the bumper consumer spending boost in July drops out of the data.

9.48am GMT

Rob Kent-Smith, head of national accounts at the ONS, says the UK economy has weakened this autumn:

"GDP growth slowed going into the autumn after a strong summer, with a softening in services sector growth mainly due to a fall in car sales. This was offset by a strong showing from IT and accountancy.

"Manufacturing saw no growth at all in the latest three months, mainly due to a decline in the often-erratic pharmaceutical industry.

9.44am GMT

Britain's economy has now barely grown over the last three months.

Today's growth report shows that GDP was flat in August and September, before inching up by 0.1% in October

9.34am GMT

Newsflash: the UK economy only grew by 0.1% in October, as manufacturing stumbles.

This dragged the UK's quarterly growth rate down to just 0.4%, from 0.6% in July-September.

0.4% growth in #GDP in the 3-months to October, down from 0.6% in the 3-months to September https://t.co/TqaDo6UNae pic.twitter.com/LdKFpJAHU7

9.26am GMT

Over in Japan, prosecutors in Japan have charged Carlos Ghosn with under-reporting his income -- three weeks after the former Nissan chairman was dramatically arrested.

And in another twist, prosecutors also indicted Nissan for filing false financial statements. That could leave other senior executives facing tough question, such as CEO Hiroto Saikawa, who was scathing about Ghosn's performance after his arrest.

9.06am GMT

Brexit anxiety is also bubbling in the markets today, as investors prepare for MPs to (probably) reject Theresa May's deal tomorrow.

The government is on track for a stonking defeat (assuming the vote goes ahead), meaning there's plenty of chatter about leadership bids, no-confidence votes, and general elections.

Given the way political risk is starting to be priced into the market, we could see further losses if, or rather when, the prime minister loses her Brexit vote.

Whilst a weaker pound could offer some support, a very high political risk premium would tend to trump that and drag the market lower. Investors will have to start, if they haven't already, price in the risk of a General Election and Labour-led government.

8.46am GMT

O.M.G

Shares in UK outsourcing firm Interserve have cratered by three-quarters this morning, to just 6p, as the government contractor battles to negotiate its second rescue deal this year.

Interserve share price obliterated this morning on news of debt-for-equity takeover by lenders. Down 70% in early trading to 7p, valuing the outsourcer at just 10m. Company set to fall into hands of hedge funds and banks in coming weeks just months after big refinancing

8.35am GMT

European stock markets have followed Asia's lead, dropping by around 0.6% in early trading.

That takes them back towards last Thursday's two-year lows, wiping out some of Friday's rally.

The US ambassador to China has been summoned by Beijing in protest at the arrest of Huawei's CFO, and that's driving sentiment across Asia.

Hopes of fruitful trade negotiations have taken a beating since the optimism that was around a week ago when the Buenos Aires G20 meeting prompted hope of a rally into the end of the year for equities.

8.26am GMT

Today's losses have dragged the Australian stock market to a two-year low (a milestone which Britain's FTSE 100 struck last week).

8.17am GMT

Stock markets have also been hit by the news that Japan has suffered its worst contraction in four years.

7.46am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

It's a new week, but the same old story. Global financial markets are sliding amid worries about trade war tensions and the health of the global economy.

A high level of circumspection continues to engulf the global market.

Another day another reason to sell risk. Equity markets remain in a world of pain with everyone in search of a very elusive silver lining, or even Santa for that matter.

To Nader Naeimi, a Sydney-based fund manager at AMP Capital Investors Ltd., the recent market weakness has been "narrative based" as opposed to "fundamentally based," and investors are in a "get-me-out-of-here mood."

With every single market in the red, Asia's benchmark MSCI Asia Pacific Index has erased November's 2.7 percent climb and is heading to its lowest level since end-October.

Investors are in a "get-me-out-of-here mood" as Asian stocks spiral https://t.co/VqluMQX687 pic.twitter.com/6Sv3aQKBdr

EU futures rally through 0700.

UPDATED -European Opening Calls:#FTSE 6746 -0.47%#DAX 10697 -0.85%#CAC 4789 -0.51%#MIB 18597 -0.78%#IBEX 8767 -0.55%

"The biggest concerns for equity markets currently is the U.S.-China trade conflict and the Huawei incident.

The trade theme will preoccupy the markets through the 90-day truce period between the United States and China, waiting for any signs of concession between the parties."

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