UK recession fears mount after worst month for companies since 2016 - as it happened

Data firm Markit warns that UK private sector weakened in June, suggesting the economy may have contracted in April-June

• Full details: Grim PMIs in June
• Latest: UK private sector suffers worst downturn since 2016
• Economists: UK GDP probably contracted in Q2
• PMI survey dropped to 49.2 in June, from 50.7 in May
• Services stagnated in June as manufacturing and construction declined
• FCA proposes ban on cryptocurrency products

3.11pm BST

Time for a recap:

Britain's economy appears to have suffered its first quarterly contraction in almost seven years, after a slump in company activity during June.

"The latest downturn has followed a gradual deterioration in demand over the past year as Brexit-related uncertainty has increasingly exacerbated the impact of a broader global economic slowdown.

Risks also remain skewed to the downside as sentiment about the year ahead is worryingly subdued, suggesting the third quarter could see businesses continue to struggle."

With a dampened mood across the sector, if a General Election is also thrown into the pot of political turmoil in the coming months, then the service sector runs an even greater risk of following the manufacturing and construction sectors into cutbacks, cost-cutting and reduced workforces."

Related: Brexit: UK economy may be shrinking on back of no-deal fears

Related: No-deal Brexit could hit Christmas supply of toys, says Sainsbury's

3.02pm BST

The latest surveys of America's services sector confirms that its economy is slowing, as business confidence takes a knock....

US service providers registered another subdued increase in business activity in June, #PMI rose slightly to 51.5 (50.9 - May). New orders rose further, as employment increased moderately. Confidence at 3-year low amid greater uncertainty. More: https://t.co/sgOz7zsGWm pic.twitter.com/xWOZm19eP9

US business confidence dropped to lowest since July 2012 reports @IHSMarkitPMI despite an upturn in new business. Trade wars and geopolitics concerns the big worries for US companies in year ahead

2.38pm BST

Newsflash: The US stock market has hit a new all-time high at the start of trading in New York.

1.55pm BST

Donald Trump's efforts to cut the US trade deficit have suffered a blow.

The US trade deficit rose to a five-month high in May as imbalances with China and Mexico widened, according to Commerce Department data.

Trade Deficit increased to $55.5 Billion in Mayhttps://t.co/tGpUnPJt8J pic.twitter.com/uCbUc0lhL4

1.22pm BST

Ouch! Disappointing jobs data from America suggests the UK isn't the only economy slowing.

Just 102,000 new private sector jobs were created by US firms in June, according to data from payroll operator ADP. Economists had expected 140,000 new hires, so this is a bit of a blow.

ADP Payrolls (Jun) 102k

1.06pm BST

A recession is typically defined as two quarters of negative growth in a row.

If Markit are right, then the UK is halfway there, for the first time since the financial crisis a decade ago.

1.02pm BST

Associated Press's economics expert Pan Pylas also fears Britain is close to falling into recession, judging by this morning's PMI data.

Britain's economy showed alarming signs of a sharp slowdown, possibly even into recession, as uncertainty over Brexit combines with a less benign global backdrop, according to a closely watched survey of business activity in the U.K. released Wednesday.

The survey, from financial information firm IHS Markit and the Chartered Institute of Procurement & Supply, showed that the economy contracted in June at its steepest rate since the immediate aftermath of the country's vote three years ago to leave the European Union.

UK recessionary risk

Sterling made a return to underperforming ways after much worse than expected manufacturing and construction PMI data, which were followed up by some dovish remarks from BoE Governor Carney late yesterday. Read more: https://t.co/5AeGPBklBQ#HotForex pic.twitter.com/nDmaS42DNV

Composite PMI below 50 indicates UK growth to contract by 0.1% in 2Q ... Just as well we are talking about less free trade and more isolation via #Brexit. pic.twitter.com/VynjOMrFsj

12.34pm BST

A recession is bad enough, but a no-deal Brexit could also ruin Christmas!

The boss of supermarket chain Sainsbury has warned that supplies of toys and electronics for Christmas could be hit if Britain crashed out of the EU on Halloween (the current deadline).

Related: No-deal Brexit could hit Christmas supply of toys, says Sainsbury's

12.16pm BST

Labour's shadow chancellor, John McDonnell MP, says June's weak PMI reports show the government is botching the job of managing the economy.

"This will spark yet more concern about the serious damage being caused by the Tory mismanagement of the economy and the threat of a disastrous no-deal Brexit."

When a country wants to find international investment, they come to the UK. Take Vietnam (one of the fastest-growing economies) which is set to host its largest ever investment conference here. I met with Minister of Finance Dinh Tien Dung to discuss what else the UK has to offer pic.twitter.com/jyLlzYf4qz

11.30am BST

Fears that the UK economy is shrinking has knocked the pound lower.

Sterling is down 0.3%, hitting $1.256 against the US dollar (a two-week low) and a1.113 against the euro.

11.15am BST

This chart from Bloomberg shows how the UK economy weakened sharply in the last few months:

The U.K. economy probably shrank for the first time since 2012 in the second quarter as Brexit uncertainty and fears for the global outlook took their toll on output in June, according to IHS Markit.

The report comes a day after Bank of England Governor Mark Carney warned of damage to the global economy from rising protectionism, adding that the U.K. faces the additional threat of a no-deal Brexit on business investment.

11.02am BST

Here's my colleague Richard Partington on today's worrying UK data:

The UK economy has suffered its first quarterly contraction in seven years, a closely watched survey suggests, amid growing fears over a no-deal Brexit.

According to IHS Markit and the Chartered Institute of Procurement and Supply (Cips), growth in the UK's dominant service sector, which accounts for four-fifths of the UK economy, came almost to a standstill last month.

Brexit: UK economy may be shrinking on back of no-deal fears https://t.co/WVKywUB6hA

10.53am BST

You can read the PMI survey yourself, online here.

It's important to remember that the PMIs are not official government data -- they're calculated by IHS Markit based on interviews with purchasing managers.

This morning's UK Services print completed the trifecta of woeful PMI figures for the week as it dropped below expectations at 50.2 vs 51.0.

With Manufacturing PMI at 6-year lows, Construction PMI showing the steepest decline since the recession and BOE Governor Carney stating that the central bank is stepping up planning to overcome the potential impact of a no deal Brexit, the short-term future looks bleak for the UK.

The purchasing managers' indices, or PMIs, track services sector companies, manufacturers and building firms around the world.

10.32am BST

Ranko Berich, head of market analysis at Monex Europe, says:

Whoever ends up in No 10 will inherit an economy on the brink of contraction - and will have very limited margin for error in the next phase of the Brexit mess.

10.29am BST

Capital Economics also predict the UK shrank by 0.2% in the last quarter (they'd previously expected a 0.1% contraction).

Worryingly, they also fear the economy might not bounce back in the current quarter (July-September).

A shift in activity to before the Brexit date [29th March] accounts for some of the weakness. But the fact the surveys have not picked up towards the end of the quarter, and global manufacturing is slowing, means the risk is that the economy fails to bounce back in Q3.

10.24am BST

Economist Howard Archer of EY Item Club fears that the UK shrank by 0.2% in the April-June quarter, having analysed today's PMI report.

That would be the first quarterly contraction since 2012.

An unwinding of the substantial stockpiling that occurred in the first quarter has clearly weighed on the UK economy in the second quarter, while it has also been hampered by extended Brexit uncertainties, an unsettled UK political situation and a challenging global economic environment.

It also looks like consumers took a marked breather in the second quarter after spending at a fair pace in the first quarter.

10.19am BST

Quite....

The main takeaway from the weak UK PMIs is that the economy is on the brink and the last thing anyone needs right now is another "no deal" scare, let alone one worse than the previous ones

10.12am BST

If Markit's PMI report is accurate, Britain's next prime minister could inherit an economy half-way into recession.

Here's Sky News's take:

The authors of a respected economic survey are predicting the UK economy contracted in the second quarter of the year, raising fears of a potential recession ahead.

According to an all-sector calculation, following the final IHS Markit/CIPS purchasing managers' index (PMI) reading for June, the economy will have recorded negative growth of 0.1% between April and June.

10.08am BST

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, fears that an autumn general election could drive the UK economy deeper into the mire.

Here's his take on today's gloomy PMI report:

"Service sector growth slid back last month reversing the small gains made in May, as the wave of political uncertainty and weakening economy continued to undermine confidence and the appetite for new orders.

"This unwillingness to spend and invest by clients and consumers resulted in service companies upping the ante to compete for dwindling business opportunities. With the softest rise in prices charged to customers in three months, firms hesitated to increase their own prices for fear of losing ground in the marketplace.

9.57am BST

Many of the companies interviewed by Markit warned that they are running short of new work to keep their staff busy, as they complete existing contracts.

Uncertainty over Brexit, and over who will replace Theresa May as prime minister, appears to be hurting the economy. Some companies fear that "domestic political uncertainty and subdued global economic conditions" would continue to hold back corporate spending.

9.47am BST

Today's PMI survey is very worrying -- it suggests the UK economy has suffered its second-worst month since the financial crisis!

Collectively, the PMI surveys indicate that the UK economy has slipped into contraction for the first time since July 2016, suffering the second-steepest fall in output since the height of the global financial crisis in April 2009. 2/ pic.twitter.com/5EtOtjiULJ

The June all-sector #PMI reading alone is indicative of the UK economy contracting at a quarterly rate of 0.2%, and rounds of a second quarter for which the survey points to a 0.1% contraction of GDP. 3/ pic.twitter.com/IdiXsyoxTT

June #PMI indicates essentially stagnant #UK #services activity in June as index down to 50.2 (51.0 in May). Compounding weakness, new business contracted slightly. Completes miserable set of June UK PMI's. Fuels our belief UK economy likely contracted 0.2% q/q in Q2

9.40am BST

NEWSFLASH: Britain's service sector slowed to near stagnation last month, as the wider private sector went into contraction.

That's according to Markit's latest survey of UK purchasing managers, just released, which suggests the UK contracted slightly in the April-June quarter.

"The near-stagnation of the services sector in June is one of the worst performances seen over the past decade and comes on the heels of steep declines in both manufacturing and construction. Collectively, the PMI surveys indicate that the economy has slipped into contraction for the first time since July 2016, suffering the second-steepest fall in output since the global financial crisis in April 2009.

"The June reading rounds off a second quarter for which the surveys point to a 0.1% contraction of GDP.

9.31am BST

Data firm Markit has some good-ish news for Christine Lagarde -- the eurozone economy strengthened a little last month.

Its Eurozone PMI composite Output Index has risen to 52.2, up from 51.8 in May. That's the highest reading since November 2018, signalling a pick-up in economic growth of the single currency area.

Euro area growth was solid in June according to #PMI, with composite output rising at strongest since last Nov. (PMI at 52.2; 51.8 - May). However, Q2 #PMI data is indicative of approx 0.2% growth. More: https://t.co/tbuHjFVBvK pic.twitter.com/Fh2oKlxihU

9.12am BST

Several City economists and analysts are expressing concerns over Christine Lagarde's suitability to run the European Central Bank.

Given her relative inexperience with the ECB's (complicated) policy toolkit, there is a credibility risk, especially if and when things get more complicated economically, but markets will like the fact that she is a skilled and well connected political operator.

The euro weakened a touch in response to the announcement, possibly reflecting the fact that a more hawkish individual was not chosen. It's probable that the intellectual economic legwork will now need to be carried solely by Chief Economist Lane, the only trained economist at the top of the new leadership team (recently-appointed Vice President de Guindos is, like Lagarde, a lawyer by training). That said, a lawyer could prove to be useful in the current environment, with the focus on the legal limits of ECB asset purchases, "disenfranchisement," the risk of debt restructurings, and the prohibition on monetary financing of governments.

In normal times she'd be fine, but it is not quite normal times now.

She is not known to have engaged in a monetary policy discussion at G7 level.

Good questions raised by @ErikFossing . #Lagarde is first and foremost a brilliant, smart and sensitive politician. I'm not sure this is enough to deal with the next #euro crisis and this is an understatement https://t.co/0q6GZx1yOk

The appointment of Lagarde as ECB president will a) raise questions about politicization of the role, above all because b) in sharp contrast to Draghi, Lagarde does not have any background in economics or indeed monetary policy formulation.

By extension this puts even greater emphasis on finding a successor for the excellent, always thoughtful and extraordinarily Benoit Coeure as director of operations - who would have been the ideal choice as Draghi's successor.

If confirmed - Lagarde would be the first ECB president ever without any experience in monetary policy. We think her management experience, including time as chairwoman of the IMF, would help her to lead the ECB as an institution.

However, Lagarde will likely face many challenges along the way. While the IMF chief is considered a qualified candidate, that won't necessarily make Europe a more attractive place to invest over a tactical horizon."

9.00am BST

Oof! Italy's two-year bond yield has just dropped below zero, hitting -0.03% for the first time in 14 months.

8.44am BST

European stock markets are also rallying, matching the gains in the bond market, following Lagarde's nomination.

The EU-wide Stoxx 600 index is up 0.4% at 390 points, its highest level since the start of May. Utility companies, healthcare firms and consumer goods makers are all up.

8.35am BST

I imagine that bonds would be moving the other way if EU leaders had chosen Germany's Jens Weidmann as the new ECB president.

Weidmann has been a persistent critic of Mario Draghi's money-printing policies, and thus more inclined to raise interest rates or resist further stimulus move.

Lagarde, who has built a solid experience fighting against the never-ending financial crisis, is expected to walk on Mario Draghi's dovish footprints to help the Euro area coping with the weakening global economy.

Her nomination also means that Bundesbank's more hawkish Weidmann is left out, which is good news for Bund investors.

8.29am BST

Investors are expecting Christine Lagarde to take a similar approach to Mario Draghi, explains Frederik Ducrozet, a strategist at Pictet Wealth Management.

He told Reuters:

"We have to admit that we didn't see this coming, especially after she strongly denied being a candidate last year.

She should provide continuity after Draghi, an important driving factor for markets. The ECB's reaction function is unlikely to change dramatically under Lagarde's presidency."

8.18am BST

Boom! Belgium's 10-year government bond yield has just plunged below zero for the first time ever.

This comes as French and German bond yields also tumble deeper into negative territory, as the eurozone bond rally gathers pace.

Government bond yields in much of the euro zone fell to fresh record lows on Wednesday, after European Union leaders agreed to name France's Christine Lagarde as the new head of the European Central Bank.

Analysts expect Lagarde to continue current ECB chief Mario Draghi's dovish policy stance. If approved by the European parliament, Lagarde would succeed Draghi when his term expires at the end of October.

Ladies and Gentlemen, would you please welcome Spain's 7 year bond to the negative bond yield club. A first time entrant and a country where youth unemployment is STILL 34%. #buybitcoin #bondmarkets pic.twitter.com/weFmbaekB7

Euro area bond yields extend fall as traders digest Lagarde's ECB appointment https://t.co/2ONs4Jah2T https://t.co/n8mxZOj1s9 pic.twitter.com/kCy82cMw4A

8.11am BST

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

Related: Women to head top EU institutions for first time

The German 10-year bond #yield at -0.39%! Sure, why not... pic.twitter.com/UOpZ6vqn4K

"I am honored to have been nominated for the Presidency of the European Central Bank.

In light of this, and in consultation with the Ethics Committee of the IMF Executive Board, I have decided to temporarily relinquish my responsibilities as Managing Director of the IMF during the nomination period."

I am honored to have been nominated for the @ECB Presidency. In light of this, and in consultation with the Ethics Committee of the IMF Executive Board, I have decided to temporarily relinquish my responsibilities as IMF Managing Director during the nomination period.