Stock markets fall as ECB adds to warnings on trade war – as it happened

Central bank says that growth slowdown threatens financial stability

• Chinese media suggests rare earth minerals to be next battleground in dispute with Trump
• Tesco and Sainbury's lose market share to cheaper rivals
• The contenders in line to be ECB's next head

3.06pm BST

Wall Street has caught cold from a chilly atmosphere on European bourses, with all auguries suggesting that the US-China trade relationship continues to be the biggest threat to the global recovery.

European Central Bank vice-president Luis de Guindos warned that a trade war between the world's two largest economies remains the biggest risk to the world economy.

Related: US-China trade: what are rare-earth metals, and what's the dispute?

2.58pm BST

Stock markets around the world are sending a message to Donald Trump: end your trade war with China or face the nightmare scenario of running for a second term in the White House with the economy in serious trouble.

Trump seriously miscalculated if he thought Xi Jinping would quickly cave in to US pressure, writes the Guardian's Larry Elliott.

Related: Trump needs to make peace with China as well as interest rates cut | Larry Elliott

2.36pm BST

Wall Street's major indices have fallen as trading opened amid concerns that China could step up its trade dispute with the US.

The S&P 500 fell by 0.63% at the open to 2,784 points, a two-month low. The Dow Jones industrial average slumped to a near four-month low, down 0.69% to 25,173 points.

2.24pm BST

With a few minutes to go to the Wall Street opening bell, it appears that US markets will follow Europe down.

Futures prices for the S&P 500 suggest shares will fall by 0.6% as trading begins. Dow Jones industrial average futures suggest a 0.7% fall for those blue-chip stocks.

2.11pm BST

An update on Boeing, which is still in the middle of a crisis following the grounding of its 737 Max aircraft. The 737 Max was grounded because its safety features were implicated in two fatal crashes.

The International Air Transport Association (IATA) expects it could take until August before the Boeing Co 737 MAX returns to service, the airline group's head said on Wednesday, adding that the final say on the timing rested with regulators.

"We do not expect something before 10 to 12 weeks in re-entry into service," IATA director general Alexandre de Juniac told reporters in Seoul. "But it is not our hands. That is in the hands of regulators."

2.01pm BST

Pickering now puts the likelihood of a hard Brexit at 35%, up from 25%, because a Brexit-backing politician is odds-on to replace Theresa May as prime minister.

According to the bookmakers' implied odds, the next PM is likely to be a Brexiteer: Boris Johnson (38% chance), Michael Gove (18%), or Dominic Raab (18%). On its own, this would raise the hard Brexit risk.

Given the considerable likelihood of him becoming the next UK prime minister, it would definitely be wise for Boris Johnson to think carefully before making statements that have the potential to move financial assets. The last thing the UK needs is a prime minister who has the potential to trigger considerable instability in its currency and therefore undermine the willingness of international investors to cast a vote of confidence in its already Brexit-battered economy.

1.51pm BST

Sterling is essentially flat against the US dollar and the euro for today, but it remains near levels not seen since the start of the year because of traders' perceptions of Brexit risks.

With the dust settled (in the UK at least) on European parliament elections which were painful for both major parties, the chances of a compromise which would avoid a no-deal Brexit have lessened, according to Kallum Pickering, senior economist at Berenberg.

After haemorrhaging support to the Brexit Party, the Conservatives look set to harden their stance on Brexit as the party searches for a new leader and prime minister. The Labour Party, which suffered big losses to the pro-EU Liberal Democrats, looks set to fully back a second EU referendum shortly. Strong support for the Scottish National Party has renewed its drive for a second Scottish referendum.

Altogether, this lowers the odds of a compromise semi-soft or soft Brexit while increasing the likelihood of the more extreme outcomes. The latest sterling selloff reflects the heightened political uncertainty and rising tail risks.

1.35pm BST

More professions should be included on a list of jobs in which the UK has a shortage, according to an independent body tasked with examining the British immigration system.

Vets, web designers and architects should be included on the shortage occupations list, which would make it easier for people in those professions to gain a visa, the Migration Advisory Committee (MAC) said today.

In the current context of an extremely tight labour market vacancies are often going unfilled, particularly in STEM [science, technology, engineering and mathematics] areas. This is holding firms back from growing even faster, to the benefit of the UK economy.

It is crucial that migration policy takes into account economic realities. Widening the list will help relieve some of the strains businesses face in searching for talent.

1.22pm BST

The mayors of Greater Manchester and Liverpool city region have called on the transport secretary to terminate the Northern rail franchise after a year of sustained misery for passengers.

Related: Manchester and Liverpool mayors call for termination of Northern rail

12.36pm BST

European stock markets are all still very much in the red just after the middle of the trading day in London.

The FTSE 100 is down by 1.4%, while the mid-cap FTSE 250 has lost 1%.

12.01pm BST

The City regulator has banned a former trader who was cleared of rigging the Libor interest rate, saying he acted dishonestly and lacked integrity.

There was no legitimate reason for Mr Farr to make these trades and his actions were motivated by greed. His actions mean he has no place in financial services.

Today's ban reflects our commitment to making sure that people working in financial services act with integrity.

11.39am BST

Stock markets across Europe have fallen on Wednesday morning amid concerns over global growth. Economists are eyeing the trade dispute between the US and China as the most prominent threat to the long-running expansion.

The European Central Bank warned that the trade war could harm the global economy, and that a slowdown could be the trigger to a bout of financial instability.

Weaker than expected growth and a possible escalation of trade tensions could trigger further falls in asset prices.

11.24am BST

Here is some interesting news in the battle for the Conservative party leadership - and hence to be the UK's next prime minister: Boris Johnson will have to appear in court to face allegations of misconduct.

Related: Boris Johnson to appear in court over misconduct claims

11.10am BST

The risk-off attitude among investors is making its mark on oil markets as well.

Futures for Brent crude, the North Sea benchmark, are down by 2% today to below $69 per barrel. It earlier hit lows of $68.44.

10.53am BST

Back in the markets, the FTSE 100 has now lost more than 100 points for the day, or 1.5%. It's a fairly broad-based sell-off across sectors, with Ocado now the biggest faller, down 5.4% so far.

Every major European index has lost well over 1% so far. France's Cac 40 is down by 1.8%, Germany's Dax is down by 1.4%, and Italy's FTSE MIB has lost 1.5%.

10.43am BST

There is also an interesting chapter on the climate crisis in the European Central Bank's financial stability review.

Central banks have become increasingly vocal on the dangers posed by global heating - albeit couched in language about exposures to financial risks.

While significant macroeconomic impacts from climate change may occur in the more distant future, some impacts are already beginning to be felt.

10.21am BST

Risks to the eurozone from a no-deal Brexit - still a possibility after 31 October - are "manageable", but there is the small possibility that disruption could coincide with another global shock with damaging consequences, the ECB says.

The financial stability review says:

There remain tail macro-financial risks whereby a no-deal Brexit interacts with other global shocks, in an environment where risks to the euro area growth outlook are tilted to the downside.

If such a scenario occurs, the impact would likely be concentrated on particular countries, such as those with significant ties to the UK.

10.14am BST

Downside risks to the growth outlook "appear prominent", the ECB warns, and Italy is particularly in the crosshairs.

"Country-specific debt sustainability concerns" are a problem, the central bank warns. In case you don't know which country, they provide a handy chart with a large "IT" in the corner:

10.06am BST

Slower economic growth could spark greater financial market volatility and threaten the eurozone's financial stability, the European Central Bank warned today.

Economists across the world are looking nervously at indicators which show slowing growth in some of the largest economies. That has contributed to investor anxiety that the long recovery from the financial crisis may be coming to an end.

9.39am BST

Quite a striking graph here from the German unemployment data, published earlier.

The unemployment rate in the EU's largest economy rose to 5%, slightly above the consensus expectation of 4.9%. The below graph, from Pantheon Macroeconomics' chief Eurozone economist, Claus Vistesen, shows the monthly change in unemployment.

Unemployment claims, corrected for this one-off hit, rose by 10-to-15K. This isn't surprising. German GDP growth has slowed sharply in recent quarters, the [purchasing managers' indices] have been warning about falling employment in manufacturing and the IAB's unemployment index has deteriorated.

We think today's report could well be the beginning of a more sustained increase in German jobless claims.

9.29am BST

Tesco shares are struggling this morning (down 2.8%) after the latest data from Kantar indicated that its market share has fallen.

Tesco's market share fell from 27.7% to 27.3% in the 12 weeks to 19 May, while Sainsbury's and Asda (still stinging from the collapse of their merger) also saw drops in market share to 15.2% each.

9.16am BST

Some news with something of a read-across to British Steel, one of the big corporate stories of last week: the world's largest steelmaker has cut production in Europe because of weak demand.

Related: Hopes of saving British Steel rise as potential buyers emerge

8.57am BST

A British tech float for your delectation this morning: rail tickets website Trainline is planning to list next month.

8.46am BST

Confirmation that stocks have fallen across the board in Europe.

France's Cac 40 is the worst performer, while Spain's Ibex has also suffered. The FTSE 100 is down by 0.9%.

8.26am BST

And meanwhile, the UK has the spectacle of a Conservative leadership election for the next few weeks while a caretaker prime minister prepares for the exit.

Let's see how long this "clean campaign pledge" lasts. One of the signatories is already making (euphemism alert) four-letter digs at a rival - so that's going well.

Tory leadership latest

In an interview with the @FinancialTimes, @MattHancock has launched a broadside against Boris Johnson over his (and the Tories) anti-business stance.

"To the people who say 'fuck business', I say 'fuck, fuck business'."https://t.co/c5W8zb8ome

Related: John Bercow defies Eurosceptics with vow to stay on as Speaker

8.23am BST

Rare earths are truly in focus today: shares in Rainbow Rare Earths have jumped by 11% after China's barely veiled threat to use its hold on the supply of the valuable minerals in the trade dispute with the US.

8.13am BST

European stock markets have taken a heavy tumble as well at the open.

The FTSE 100 and FTSE 250 are both down by 0.7%.

8.04am BST

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

There is not much positive feeling around on markets this morning, with macroeconomic fears and trade tensions in the air. Asian markets have fallen, with Japan's Topix down by 0.9% and Hong Kong's Hang Seng index down by 0.35%.

Based on what I know, China is seriously considering restricting rare earth exports to the US. China may also take other countermeasures in the future.