UK deficit rises; gold hits six-year high; Trump blasts Fed - as it happened
Rolling coverage of the latest economic and financial news, as gold bullion prices burst through $1,450 per ounce and the UK's budget deficit swells
- Latest: Trump criticises Federal Reserve
- UK deficit surges over 7bn in June
- Deficit cast shadow over new PM's plans
Earlier:
- Introduction: Gold hits levels not seen since 2013
- Gold boosted by prospect of US interest rate cuts
- Iran seizes tanker; US shoots down drone (but whose?!)
3.55pm BST
A quick recap
3.34pm BST
US consumers don't appear to share Donald Trump's concerns about interest rates.
The University of Michigan's monthly survey of consumer sentiment has shown a small increase, to 98.4 from 98.2 last month. That's close to a 10-year high.
#UnitedStates Michigan Consumer Sentiment Prel at 98.4 https://t.co/CYGdEmm87g pic.twitter.com/mJw2QB3XBP
3.23pm BST
What does Donald Trump mean when he says he preferred New York Fed President John Williams' "first statement much better than his second"?
Well, Williams caused excitement yesterday when he outlined the virtue of pro-active, early, interest rate cuts - rather than waiting for problems to develop.
"This was an academic speech on 20 years of research. It was not about potential policy actions at the upcoming FOMC meeting."
3.07pm BST
Another day, another attack on the US central bank from the White House.
Central bank independence looks ancient history, as president Trump argues that US interest rates should be a LOT lower.
Because of the faulty thought process we have going for us at the Federal Reserve, we pay much higher interest rates than countries that are no match for us economically. In other words, our interest costs are much higher than other countries, when they should be lower. Correct!
I like New York Fed President John Williams first statement much better than his second. His first statement is 100% correct in that the Fed "raised" far too fast & too early. Also must stop with the crazy quantitative tightening. We are in a World competition, & winning big,...
....but it is no thanks to the Federal Reserve. Had they not acted so fast and "so much," we would be doing even better than we are doing right now. This is our chance to build unparalleled wealth and success for the U.S., GROWTH, which would greatly reduce % debt. Don't blow it!
....Fed: There is almost no inflation!
2.54pm BST
Retail news: a private equity firm has bought a controlling stake in department store Liberty London, in a deal valuing the landmark at 300m.
More here:
Related: Liberty store sold for 300m to private equity group
2.51pm BST
We mentioned this morning that gold has hit a six-year high, but it's actually an EIGHT year high once you priced it in sterling rather than dollars.
That's because of the pound's recent weakness following the EU referendum.
"Rising debt and falling interest rates are conspiring with the UK's Brexit mess to push down Sterling as gold sets multi-year highs.
"The last and only other time gold traded this high for UK savers was summer 2011, when the global financial crisis peaked with the near-collapse of the Euro and the worst rioting across England in modern times."
2.41pm BST
Shares in Microsoft have hit a record high, after it reported strong revenue growth from cloud computing services and its Surface laptop business.
2.39pm BST
Over in New York, stocks are rising at the start of trading as investors anticipate US interest rate cuts soon.
The Dow Jones industrial average has gained 110 points, or 0.4%, to 27,333, while the S&P 500 has gained 0.35% to 3,005 -- close to this week's record highs.
#BREAKING: SPX Futures Cimb Above 3,000 As Fed's Bullard In Agreement Of A 25 bps rate cut in July pic.twitter.com/5t3seEktej
U.S. stocks rise at the openhttps://t.co/wVdoMCQtf4 pic.twitter.com/ZZ68pYUCsU
2.26pm BST
As if the weak pound was enough trouble, families are also facing higher petrol costs .
"The tragedy with soaring summer pump prices is not only hard-earned holidaymakers' money disappearing at the pump but the loss of income for the tourism industry.
"If every car that heads to the South West, Wales, the Lake District, Scotland or other UK holiday destinations pays an extra 7 a tank for fuel compared to two years ago, that is many millions of pounds not being spent in places where a good tourist season is make or break for those communities."
1.45pm BST
Our economics editor, Larry Elliott, says June's public finances in June show the scale of the challenge facing Boris Johnson or Jeremy Hunt:
Pledges by Boris Johnson and Jeremy Hunt to cut taxes and increase spending have come just as the UK's public finances have shown a marked deterioration, according to the latest official figures.
In what analysts called a "reality check" for the two Conservative prime ministerial contenders, the Office for National Statistics said the government needed to borrow 7.2bn last month - more than double the 3.3bn in the same month a year ago.
Related: Worsening public finances give next PM a sharp 'reality check'
1.21pm BST
2019 has been a strong year for stock markets so far, with Wall Street up 20%, Britain's FTSE 100 gaining 11% and China's CSI 300 rallying by 17%.
But we're now entering the summer lull, and analysts are wondering if a correction is close.
"We're not looking for the bottom to fallout like last year, but I do expect a 10% correction in the next three months,"
"We think there's still some unfinished business and it's not going to be scary, but it will be a better opportunity to buy stocks over the next three to six months, and maybe 18 months. We tell people don't chase break outs when everyone is getting excited."
Need to Know: Morgan Stanley investment chief warns of oncoming 10% correction https://t.co/4lUK2c9Dbz
12.32pm BST
Over in Milan, stocks are sliding as investor worry that Italy's coalition government could collapse.
Tensions have been growing for weeks between the right-wing League party, and the anti-establishment Movement Five Star. Now, League leader Matteo Salvini (Italy's deputy PM) has criticised his coalition partners, revealing he will meet M5S's Luigi Di Maio soon.
Salvini is unhappy that M5S are blocking certain government policies, saying:
"We will certainly meet ... the problem is not Di Maio, but opposition coming from many 5-Star politicians.
"There is an obvious and total block on proposals, initiatives, projects and infrastructure by some 5-Star ministers that hurts Italy.
State of play in #Italy politics - Salvini's Lega started as junior partner in coalition with Five Star Movement - now Lega tops polls ahead of likely snap election pic.twitter.com/rzm0hH9eMt
11.32am BST
Here's our news story on how gold had been boosted by tensions in the Gulf, and the prospect of interest rate cuts:
Related: Gold price hits six-year high as investors await US interest rate cut
11.23am BST
The jump in UK borrowing casts a shadow over the coronation of the next Conservative Party leader next week.
Related: Do spending plans of Boris Johnson and Jeremy Hunt add up?
Disappointing news on the public finances to greet the new Prime Minister and Chancellor when they shortly take office with the June shortfall on the budget deficit more than doubling year-on-year.
Furthermore June meant that the public finances have seen year-on-year deterioration through the first three months of fiscal year 2019/20.
Much will depend on whether the economy can shrug off its current weakness as well as on Brexit developments. It will also be influenced by any changes to fiscal policy by the new Prime Minister and Chancellor.
10.50am BST
Bloomberg's Jill Ward points out that the cost of servicing Britain's national debt rose in June -- helping to push the deficit higher.
Britain posts its largest June budget deficit in four years as spending surged and taxes failed to grow https://t.co/xvas4ebsyn
10.35am BST
A no-deal Brexit crisis would make the UK public finances look even worse, points out Mike Jakeman, senior economist at PwC:
There remains an unusual amount of uncertainty around the short-term future of the public finances at present. A no-deal Brexit would hit both government revenue (through lower tax receipts) and expenditure (through the need for fiscal stimulus package). The government would be likely to have to reconsider its medium-term targets for the deficit and debt.
But even if a no-deal Brexit is avoided, a new chancellor is likely to bring new priorities and, with a spending review on the horizon, could sanction a period of looser fiscal policy."
10.34am BST
Britain's public finances appear to be 'heading off track', warns Ruth Gregory of Capital Economics.
She says the jump in borrowing last month, from 3.3bn to 7.2nbn, shows that Britain is set to miss its borrowing targets for the 2019-20 financial.
June's public finance figures continued the underlying deterioration in the fiscal position evident since the beginning of the financial year, providing a timely reminder that the new PM won't get a free "fiscal lunch"....
There will be further bad news for the new PM in September as a change in the accounting treatment of student loans in September will raise the deficit by more than 10bn a year.
10.28am BST
Economist Rupert Seggins shows how government spending has outpaced the tax take this financial year:
UK public setor borrowing up 4.5bn to 17.9bn in the 3 months to June. Appears mainly down to increased spending on purchases of goods & services (+3.2bn), interest payments (+1.8bn) & staff costs (+1.3bn) meaning overall spending outstripped a 4.9bn increase in receipts. pic.twitter.com/G9OB3ODd6O
Growth in total central government receipts has slowed this financial year, from 4.5% to 2.9%. Largely down to the lower contributions from VAT (1.7% to 0.8%) & corporation tax (0.8% to 0%). pic.twitter.com/3X7cv2QCO9
10.26am BST
John McDonnell MP, Labour's Shadow Chancellor, is concerned that Britain's deficit is going up....
"With the Conservatives obsessed with No Deal Brexit and a race to the bottom on taxes, the outlook for our public services after years of austerity is grim.
"Instead of investing to grow they have passed on the deficit to hospitals and local councils, overseeing stagnating wages and productivity.
9.52am BST
June's budget deficit figures are much worst than expected, points out Helia Ebrahimi of Channel 4.
Wow just out UK govt deficit doubles in June compared to same time last yr says @ONS
7.2bn borrowing in June up 3.8bn
Govt deficit in first 3 months of FY now 17.9bn, up a third on last year says @ONS still time for figures to turn around but weak economic backdrop won't help
UK budget deficit up by a third in first 3 months of 2019/20 tax year - not a good starting point given Johnson and Hunt's "expensive" spending pledges https://t.co/ccgOzsxibY
9.49am BST
The surge in borrowing in June suggests Britain could miss its borrowing targets this financial year.
The UK was expected to borrow 29.3bn in the 2019-20 financial year, up from 23.5bn in the 12 months to March.
9.35am BST
Newsflash: Britain's budget deficit is rising faster than planned, after the government was forced to borrow more than seven billion pounds last month to balance the books.
That's the largest deficit for a June in four years, and suggests that the UK's fiscal position may be weakening ahead of the Brexit vote.
9.29am BST
Iran insists that America has not shot down one of its drones... and is now suggesting that US forces could have downed one of their own!
The deputy foreign minister, Abbas Araqchi, tweeted that he was "worried" that the USS Boxer had accidentally hit one of its own side's unmanned aerial systems (UAS).
We have not lost any drone in the Strait of Hormuz nor anywhere else. I am worried that USS Boxer has shot down their own UAS by mistake!
9.09am BST
The oil price has jumped 1% today, after America claimed to have shot down an Iranian drone.
"Reports that the US brought down an Iranian drone in the Strait of Hormuz will escalate tensions even further. Iranian officials have thus far taken care not to react to the incident in a way that provoke further conflict; officials' immediate response was to deny that any Iranian aircraft had been lost. Nonetheless, Iran has made it clear in recent weeks that it rejects any Western presence in the Strait of Hormuz--officials warned the UK to withdraw its ships from the region earlier this month, saying that it could ensure regional security alone. The latest skirmish with the US is likely to put Iran even more on guard.
We still do not expect either party to willingly enter into open conflict; Iran is ill equipped to wage an expensive conflict, and doing so would probably alienate its remaining allies in Europe. The US government will not want to start a deeply unpopular foreign conflict just as the campaign season ramps up for 2020. However, the risk of a policy miscalculation remains high in this heated environment, meaning that more skirmishes are likely in the coming weeks."
8.49am BST
Billionaire investor Ray Dalio has fuelled the gold boom this week, arguing that investors should pile into the precious metal.
"Those [investments] that will most likely do best will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold.
I believe that it would be both risk-reducing and return-enhancing to consider adding gold to one's portfolio."
8.33am BST
Gold struck its all-time high back in 2011, after the financial crisis, when it peaked over $1,900.
We're nowhere near those levels yet, but Fawad Razaqzada, market analyst at Forex.com, suspects bullion will keep rising through 2019.
The underlying trend is bullish for gold and silver, due to the falling government bond yields and the recent struggles for the dollar and stocks. So, as things stand, these are good times for buck-denominated and noninterest-bearing precious metals.
8.22am BST
Stock markets are taking a cue from gold this morning, with gains across the globe.
Japan's Nikkei has jumped 2%, and China's CSI 300 index gained 1%, on hope of a US interest rate cut soon.
Global mkts switch into Risk On mode as Fed props up rate cut expectations and on better tech earnings. Bets rise on 50 bp reduction in Jul w/ dovish comments from Fed's Williams. US yields fall, Gold hits 6y high. Oil bounces after US Navy destroyed Iranian drone. Bitcoin >10k. pic.twitter.com/kTKTK4uQDY
7.53am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It's better to deal with the short-term pain of a shot than to take the risk that they'll contract a disease later on."
I want to apprise everyone of an incident in the Strait of Hormuz today, involving #USSBoxer, a U.S. Navy amphibious assault ship. The BOXER took defensive action against an Iranian drone.... pic.twitter.com/Zql6nAUGxF
"The extra push for gold prices came from comments by NY Fed President John Williams which implied quite aggressive rate-cutting, plus the Iranian drone news and the seizure of a tanker by the Iranians in the Straits of Hormuz."
Related: Iran says it has seized foreign oil tanker in Gulf
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