Trump hits out as ECB launches new stimulus programme to fight recession - as it happened
European Central Bank has voted to restart its QE programme, and hit banks with deeper negative interest rates to make them lend
- THIS IS WHAT THE ECB JUST ANNOUNCED
- ECB president Mario Draghi press conference highlights from 1.30pm
- Latest: Draghi says governments must boost spending
- President Trump claims ECB is weakening the euro
- BREAKING: New Stimulus Package from the ECB
- QE restarted - at a20bn per month
5.27pm BST
Time for a recap:
Europe's top central banker has swapped barbs with the President of the United States after announcing a new stimulus package designed to prevent the eurozone sliding into recession.
European Central Bank, acting quickly, Cuts Rates 10 Basis Points. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting U.S. exports.... And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!
We have a mandate. We pursue price stability and we don't target exchange rates. Period.
Almost all the things that you see in Europe, the creation of more than 11 million jobs in a short period of time, the recovery, the sustained growth for several quarters, were by and large produced by our monetary policy. There was very little else" Now it's high time for the fiscal policy to take charge."
Draghi: We are very concerned about the pension industry and related services. Negative rates are necessary instruments of monetary policy. It has created a lot of positive effects. How do we speed up these effects so that interest rates can go up? The answer is fiscal policy.
Will the ECB package make a major difference? Probably not. The impact of further easing on business and household spending is likely to be very small. In a situation that is almost akin to a liquidity trap, ever more negative rates comes close to pushing on a string. Nonetheless, further easing can still help to contain the downside risks. First, the ECB can prevent market turbulence which could potentially exacerbate the drag on the real economy from the challenging environment of trade wars, Brexit and the Chinese slowdown. Second, by lowering funding costs further, it can make it easier for governments to finance a modest fiscal expansion and nudge countries with some extra fiscal space to actually use it - think Germany.
Relative to previous net asset purchases of a60bn or even a80bn per month, the ECB's new open-ended purchase programme looks modest. On their own, purchases of a240bn in one year will raise the balance sheet of the Eurosystem by c2ppt of GDP in a year from its current level of close to 40%.
5.08pm BST
Newsflash: Bloomberg is reporting that several members of the ECB governing council opposed parts of today's stimulus programme.
That includes some of Europe's largest economies - Germany, France and the Netherlands, along with Estonia and Austria.
Draghi said there was no need for a vote. Now we're learning the dissenters on QE resumption: France, Germany, The Netherlands, Estonia, Austria...
5.03pm BST
After fluctuating through the afternoon, European stock markets have closed at their highest levels in six weeks.
Investors are welcoming the ECB's new stimulus package, while also aware that monetary policy alone won't save the world economy (which is why Draghi is pushing for government's to step up).
"Markets are cornering central banks into this new round of cuts. The ECB really had very little choice today and the Fed's next cuts are more or less pre-determined, too.
"Does it help? Of course, it helps. Is it enough? Almost certainly not. The real drag on economic growth comes from a natural slowing at this stage in the cycle and uncertainty over trade.
4.52pm BST
One of the most complicated parts of the ECB's stimulus is the changes to its TLTRO programme -- cheap long-term loans for commercial banks.
Fortunately Tom Kinmonth, fixed income strategist at ABN Amro, has analysed the changes, and concluded that they are rather more attractive for commercial banks.
Under TLTRO III, banks can soon take loans from the ECB for three years at a rate as low of -0.5%, if they meet specific loan lending criteria. The ECB will pay banks to take money. The new modalities are considerably better than the originally planned conditions which were 2 years at +0.1%...
Under the original rules of the TLTRO III programme hardly banks would have stood to significantly benefit when considering the current market conditions. Whereas, under the new programme's conditions every bank in Europe stands to benefit in regard to funding costs.
As such, the change today in the modalities of thus ECB programme is a credit positive for the European banking sector. Banks will breathe a sigh of relief on this matter.
4.26pm BST
The ECB has now uploaded Mario Draghi's statement, online here.
In view of the weakening economic outlook and the continued prominence of downside risks, governments with fiscal space should act in an effective and timely manner.
4.19pm BST
Melanie Baker, senior economist at Royal London Asset Management, believes the ECB's package (a rate cut, more QE and sweetened loans for banks) will boost Europe's economy.
"The easing measures from the ECB today were welcome news for global growth prospects. By going for a package, rather than piecemeal measures, and a more open-ended form of QE, there is a better chance that there will ultimately be a visible positive impact on the euro area economy, both in terms of growth and inflation outcomes.
In general, we still see the global outlook as something of a tug-of-war between stimulus and trade tensions. More fiscal stimulus would help, as will a likely Fed rate cut next week. But higher tariffs, persistent trade tensions and high levels of trade-related uncertainty for businesses remain key concerns."
4.15pm BST
The decision to restart the ECB's stimulus programme shows Europe's economy is deteriorating, says Ediz Fahri, senior economist at data firm Dun & Bradstreet.
The ECB has just announced its decision to restart its asset purchase programme (APP) this November, in which a20bn of bonds are set to be purchased each month.
Meanwhile, Mario Draghi's decision to lower the deposit rate for the first time since March 2016, signals towards the ECB's efforts to kickstart the euro area's growth engine and bring inflation back closer to the 2.0% target.
4.09pm BST
Mario Draghi was correct to call for more eurozone government spending, argues Ken Wattret, chief European economist at IHS Markit.
But the call may not be needed until Europe's economy is in real trouble, he fears....
The need for fiscal policy to complement monetary policy accommodation again featured more prominently [at today's ECB press conference].
Draghi called for "effective, timely" action from member states which have fiscal space. Christine Lagarde is on the same page clearly. The likelihood of fiscal stimulus is clearly increasing, including from Germany, which is already in recession (bar the confirmation from Q3 GDP).
3.30pm BST
My colleague Richard Partington has filed a news story, explaining what the ECB has done today, and why:
The European Central Bank has announced a fresh stimulus package in an attempt to prevent the fragile eurozone economy from grinding to a halt, with an interest rate cut and plans to pump a20bn (19bn) a month into the financial markets.
In one of the final acts of Mario Draghi's presidency before Christine Lagardetakes charge of the ECB in November, the central bank said it would reboot its quantitative easing (QE) programme of bond-buying programme in that same month.
Related: ECB announces fresh stimulus as eurozone economy falters
3.26pm BST
ING's chief economist, Carsten Brzeski, reckons the European Central Bank is getting worried:
As expected, the ECB has become more alarmed about the outlook for the economy and inflation. As Draghi said during the press conference, the base case scenario was still a benign scenario as it didn't include the risk of a no-deal Brexit and trade wars.
Nevertheless, the ECB staff projections presented downward revisions to both growth and inflation (as covered here)."
3.25pm BST
Mike Bell, global market strategist at J.P. Morgan Asset Management, believes European leaders should heed Draghi's advice.
He also thinks the ECB is trying to keep the euro weak - exactly what president Trump is so cross about.
"The ECB have played their hand and Draghi has gone out with a bang. The ball now rests firmly in the court of those European governments with the fiscal capacity to join in the easing game.
The ECB have certainly got ahead of the pack in an ambitious effort to keep the currency low in the face of potential further stimulus from foreign central banks.
3.14pm BST
Lukman Otunuga, senior research analyst at FXTM, says Mario Draghi has made one last push to stimulate the eurozone - before he leaves the European Central Bank next month.
But, he also believes more measure may be required, given the weakness of Europe's economy.
Although Draghi has done "whatever it takes" before he hands the mantle over to Christine Lagarde, it seems markets are disappointed with the ECB's actions. Given the concerns revolving around the health of the Eurozone economy, most were expecting Draghi to launch a monetary policy bazooka before his departure.
However, the argument for the ECB saving some ammunition in the monetary policy toolbox could be for when economic conditions worsen. It is worth keeping in mind that the Eurozone is not only dealing with developments at home, but risks in the form of Brexit and Trump imposing tariffs on European goods. With the ECB cutting its growth forecasts for 2019 and 2020, there is potential for further easing down the line should global and domestic economic conditions deteriorate further.
3.06pm BST
Analyst Arne Petimezas of AFS Group is disappointed that the ECB hasn't announced a larger package today.
Draghi gives member state carte blanche for fiscal pump priming. But there are too few signs of a Euro Area fiscal stimulus package. By itself today's package is a disappointment: fiddling in the margins. Unsurprisingly, ECB staff don't see 2% inflation in the forecast horizon.
3.03pm BST
Ronald Temple, co-head of multi asset at Lazard Asset Management, says Mario Draghi is quite right to call for higher government spending:
"Today the ECB used more of its dwindling ammunition to try to stimulate growth. Draghi rightly emphasized the imperative of fiscal stimulus and structural reforms. Unfortunately, Eurozone governments have failed to deliver on this count for a decade now, in spite of ever lower financing costs.
The ECB has done its job; now it's time for the governments to step up."
2.58pm BST
Never play the Forex, folks.
After plunging earlier, the euro has now bounced back and is up around 0.15% against the US dollar today.
There it is #EURUSD pic.twitter.com/XDbtBmBucq
The @ecb press releases:
- QE possible with negative rates in all programmes, including CSPP (https://t.co/LwXZFZBlXO)
- 3Y TLTRO-III without 10bp rate premium (https://t.co/FGe5wXIhI0)
- Two-tier system with exemptions multiple set at 6x initially (https://t.co/m58boyeLbv)
CORRECTION: The new tiering is not a Japanese but a Swiss model! Exemptions multiple will be set at 6x the minimum reserve requirements, to be reviewed over time. Less generous than expected. Initial wording was misleading. https://t.co/utpN4jZivK
2.36pm BST
Q: If governments don't heed your advice to boost spending, will the ECB be forced to resort to helicopter money?
Mario Draghi says the governing council hasn't discussed helicopter money [literally giving cash away to citizens].
Giving money to people is a fiscal policy task, not a monetary policy task.
2.32pm BST
Q: What about criticism from politicians and bankers about negative interest rates?
Negative interest rates are a necessity to help us meet our mandate, Mario Draghi replies firmly.
2.26pm BST
Eurozone bonds prices are surging, as investors react to the ECB's pledge to buy a20bn of new debt each month.
This has driven yields (or interest rate on the bonds) down.
Entire German Yield Curve back in negative territory w/German 30y yield now at -0.09% on #ECB QE infinity.
2.22pm BST
Q: Are you worried that Germany is in recession?
2.18pm BST
Q: Are people right to be concerned about the negative side effects of QE and record low interest rates?
Draghi replies that the ECB is aware of the side effects of our monetary policy and we are closely monitoring all these effects.
2.16pm BST
Draghi, asked what happens if the US intervenes in the dollar: "We stick with the G20 consensus. Namely, that we will never pursue competitive devaluation. So we expect that all the all the G20 members would underwrite the same consensus."
2.14pm BST
Q: What would the ECB do if America deliberately weakened the dollar?
Draghi says that all G20 members are expected to abide by a consensus not to engage in "competitive devaluations" (currency wars).
2.12pm BST
Allianz's chief economist, Mohamed El-Erian, points out that the ECB has certainly weakened the euro - even though Draghi denies it is deliberate.
.#Euro reaction of to the @ECB measures reinforces the already-notable weakening of the European currency against the dollar (chart). While Mario #Draghi again denied the central bank is targeting a weaker currency, this view is not shared by President @realDonaldTrump and other pic.twitter.com/O480WC64CJ
2.07pm BST
Q: What do you think about Donald Trump's tweet?
ECB president Draghi steps forward and sweeps the president's attack aside.
We have a mandate. We pursue price stability and we don't target exchange rates. Period.
2.04pm BST
More reaction:
Draghi goes nuclear: Fiscal policy should become the main instrument
Google Translate says: "Please please please spend some money, Mrs. Merkel."
2.03pm BST
Mario Draghi is doubling down on his call for governments to raise their spending.
If fiscal policy was more effective then our stimulus policies would work better, with less negative side effects, he says.
#Draghi "It's high time for fiscal policy to take charge " . This is a game changer. And correct. #ECB #Riksbank #fiscalpolicy https://t.co/oTyxFEUf2e
#Draghi says there was #unanimity that fiscal policy should become the main instrument. Little joke. That seems to be the only point of unanimity. #ECB
Draghi: "Fiscal policy should be the main instrument." pic.twitter.com/8PHkBjheXm
1.59pm BST
Onto questions....
Q: What was the mood like at today's meeting, as several members of the governing council had opposed restarting QE? (including the German and Dutch central bank chiefs).
The consensus was so broad that we didn't take a vote.
LOL, mon policymakers are unanimous that fiscal policy must now take over ... is the ECB really sure that this is the signal they want to send? Anyway, sign of the times ...
1.50pm BST
Draghi ends his statement by calling on governments to raise spending, where possible, to give the eurozone a fiscal boost.
1.49pm BST
Shares are rising across Europe, as equities benefit from the ECB's latest stimulus plans.
The French and German markets are both up 0.5%, pushing the EU-wide Stoxx 600 index to its highest level since late July.
1.48pm BST
The euro is continuing to fall as Draghi speaks, which will NOT please president Trump.
It's now lost three-quarters of a cent, dropping to $1.0927. That's very close to the two-year low hit last week.
1.47pm BST
The ECB has also cut its inflation forecasts.
Draghi blames the lower oil price, and "global trade issues" [a jibe to Donald Trump?!]
ECB Staff projections
- Inflation forecast
2019: 1.2% (1.3%)
2020: 1% (1.4%)
2021: 1.5% (1.6%)
1.44pm BST
The ECB has cut its growth forecasts for 2019 and 2020.
It now expects GDP to rise by 1.1% this year, down from 1.2%. In 2020, growth is seen picking up to 1.2%, not the 1.4% previously expected.
ECB Staff projections
- Growth forecast
2019: 1.1% (1.2%)
2020: 1.2% (1.4%)
2021: 1.4% (1.4%)
1.42pm BST
President Draghi singles out the US-China trade war as a key cause of Europe's problems.
He says that global trade tensions are hurting the eurozone -- particularly its factories (as we saw this morning, when output slumped by 0.4% in July).
1.40pm BST
Draghi confirms that the ECB has cut its deposit rate (for commercial bank deposits) to minus 0.5%, and will keep interest rates at record lows indefinitely, until inflation has robustly picked up.
He also outlines the changes to the TLTRO loans programme, to make them more attractive to banks (as summarised here).
1.32pm BST
ECB president Mario Draghi is about to explain why he and his colleagues have decided to launch a new stimulus programme. You can watch it live here.
I've embedded it at the top of this blog too (you might need to refresh to see it).
Watch ECB press conference live: President Mario Draghi explains today's monetary policy decisions https://t.co/AN04eElLTj
1.29pm BST
Trump's latest blast comes a day after he accused the US Federal Reserve of being "boneheads" for keeping interest rates too high.....
1.27pm BST
Here's a handy reminder of the European Central Bank's new stimulus programme, from ING.
1.25pm BST
Newsflash: US president Donald Trump has reacted, accusing the European Central Bank of fighting a currency war.
In a sharply worded tweet, Trump says the ECB is is depreciating the euro - at the expense of US exporters.
European Central Bank, acting quickly, Cuts Rates 10 Basis Points. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting U.S. exports.... And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!
1.21pm BST
ING's Carsten Brzeski says this is Mario Draghi's final "Whatever it takes" moment (a tribute to his successful pledge to protect the euro in 2012).
He writes:
The final showdown has started with a big bang. The ECB just announced a big policy package to revive the Eurozone economy and to bring inflation back to target....
This is Mario Draghi's final "whatever it takes". Depsite all market excitement now, the question remains whether this will be enough to get growth and inflation back on track as the real elephant in the room is fiscal policy. It is clear that without fiscal stimulus, Draghi's final stunt will not necessarily lead to a happy end.
This is the Mario Draghi's final "whatever it takes". Despite all the market excitement now, the question is this: Will it be enough to get growth and inflation back on track? The real elephant in the room is fiscal policy, says our @carstenbrzeski https://t.co/N7uwP7z5V0
1.20pm BST
Marchel Alexandrovich, Senior European Economist, Jefferies, says the ECB has unleashed an "aggressive package of easing measures"
The depo rate [has been] cut by 10bp, forward guidance extended, a new indefinite a20bn per month programme of QE, improved TLTRO terms and a tiered system for bank deposits.
1.19pm BST
Financial experts are scrambling to react to today's package of measures from the European Central Bank.
Dr Julia Coronado of MacroPolicy Perspectives is impressed that the ECB has torn up its old forward guidance on interest rates.
now THAT is what I call forward guidance!
Finally, @ecb making modifications to TLTRO program and tiering of #interestrates in attempt to reduce negative impact on banks of #NIRP
Draghi's tenure is ending as it began, with a historic upgrade to the ECB's crisis policy toolkit:
Deposit rate cut 10bp to -0.5%, w/ a dovish bias
Open-ended QE2 from 1 Nov, at 20bn pm, linked to new rates guidance
Forward guidance updated to link rates to meeting HICP mandate
1.11pm BST
Another important move: The ECB is making its TLTRO programme of long-term loans to commercial banks more attractive.
Banks whose lending crosses a certain benchmark will receive a more generous interest rate on their loan. Significantly, it could be as low as the ECB's own deposit rate -- which has just been lowered to -o.5%.
For banks whose eligible net lending exceeds a benchmark, the rate applied in TLTRO III operations will be lower, and can be as low as the average interest rate on the deposit facility prevailing over the life of the operation. The maturity of the operations will be extended from two to three years.
1.03pm BST
The euro has fallen to its lowest level in more than a week.
It's down half a cent against the US dollar at $1.0957, as traders react to this new stimulus package.
EURO Tanks as ECB announces
1. Rate cut to -0.5
2. Two tier system for neg rates
3. Changes guidance - rates at present or lower until "robustly converges"
4. Restarts QE, buy EUR20B a month from Nov 1
1.01pm BST
The ECB's statement is online, here: Monetary policy decisions
Financial news service RANsquawk have helpfully highlighted all the changes:
ECB STATEMENT CHANGES >>> pic.twitter.com/NL62Loi229
1.00pm BST
Deeper negative interest rates are bad news for Europe's banks. They mean even bigger losses for leaving bank deposits overnight with the ECB.
But the ECB has got some good news for them. It will introduce a new "two-tiered" system, under which some banks' holdings are exempt from the negative deposit facility rate.
12.57pm BST
The ECB's Governing Council is pledging to keep rolling over its existing quantitative easing programme too -- another attempt to stimulate the eurozone's sickly economy.
It says:
Reinvestments of the principal payments from maturing securities purchased under the APP will continue, in full, for an extended period of time past the date when the Governing Council starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.
12.55pm BST
The ECB is also pledging to leave its interest rates at their current record lows, or even lower, until inflation has picked up.
It says:
The Governing Council now expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.
12.50pm BST
BREAKING: The European Central Bank has announced a new stimulus package, in an attempt to boost growth in the eurozone.
It is cutting its deposit rate -- charged on commercial bank deposits at the ECB -- to a new all-time low of minus 0.5%. It was previously -0.4%.
#ECB Cuts Deposit Rate to -0.5% from -0.4%, introduces QE from Nov1 at a20bn/mth. Changes guidance. pic.twitter.com/OraPQaBGC2
12.41pm BST
Here's the latest buzz....with just a few minutes to go.
Ok #ECB time in 9 mins
EURUSD at 1.10
Expecting 10-20bps cuts, new QE, forward guidance to say rates won't go up in our lifetimes pic.twitter.com/bwEKOrcTbQ
Stand By Your Desks! The ECB interest-rate announcement is due soon and most likely is a 0.1% cut to -0.5%. Next would be a cut to -0.6% and least likely is unchanged. #Euro
Markets have taken an upbeat turn this week. That suggests they reckon ECB boss Mario Draghi really will manage to do "whatever it takes" all over again this afternoon. Be interesting to see what he does.
12.37pm BST
This morning's weak factory output figures should worry the ECB, says Sven Schulte-Hillen, acquisition and finance partner at Pinsent Masons.
But... lowering interest rates and boosting QE may not be enough to help.
"The decline in production clearly demonstrates that the EU is facing downward economic pressure. I'm confident many across Germany will be encouraged by the ECB attempting to tackle this early and halt a recession. However, many will question how effective the ECB means will be.
Lowering interest rates will of course increase pressure on the banks to kick-start lending, lower the value of the Euro and give the EU a currency boost. But as Germany grapples with macro-economic and political hurdles, such as a possible no-deal Brexit and Trump's trade war, interest rates are not the only mechanism that need to be adjusted."
12.30pm BST
Just 15 minutes to go! So here's a reminder of what the ECB could announce.....
ECB cheat sheet.#Ready #NoMoreBets pic.twitter.com/tskGp3A3KC
12.18pm BST
Just in: Turkey's central bank has slashed interest rates dramatically -- but not by as much as some traders expected.
The Central Bank of Turkey has cut its benchmark interest rate from 19.75% to 16.5%, a cut of 325 basis points.
#Turkey's #lira gains as much as 1.3% vs the dollar after the central bank cut rates by 325bps to 16.5%. That's a big cut, but traders are focusing more on slowing inflation. @TheTerminal @markets pic.twitter.com/9RE4x4dz9k
Lira flying on this. Market "whisper number" was a cut of 400 or more. pic.twitter.com/zFqhBW3rMA
In addition to the stable course of the Turkish lira, improvement in inflation expectations and mild domestic demand conditions supported the disinflation in core indicators.
12.14pm BST
The ECB has made its decision!
Members of the governing council have been spotted leaving their headquarters in Frankfurt. That means we've not got long to wait......
The governing council session at the #ECB is over, central bankers have just left. Another 40 minutes to go until the official communique a@SquawkBoxEuropea(C) a@CNBCia(C) a@AnnetteCNBCa(C) pic.twitter.com/W8I9WU5SCY
12.08pm BST
Critics of the European Central Bank will question whether a new bond-buying programme will really work.
The ECB has already swelled its balance sheet by over a2.6 trillion, as it snapped up huge amounts of eurozone debt with newly created money. At one stage it was buying a80bn of assets every month.
My favorite chart into #ECB
Even with all this talk of bazooka, easing, accommodation, tiering.. 5y5y inflation expectations are close to the lows/ have not budged
This is the problem. Simple as that. pic.twitter.com/wZzH6jKpuT
Eurozone #inflation expectations v #ECB balance sheet. It's time for another bazooka! pic.twitter.com/wgI1TSHnbf
11.53am BST
Excitement is building in the markets as investors anticipate today's monetary policy decision from the European Central Bank, in under an hour.
Some form of stimulus package feels inevitable - unless the ECB wants to crush market expectations and trigger a whopping sell-off. But what form will it take?
We expect a package of monetary stimulus from the ECB on Thursday.
Given the pullback in ECB stimulus expectations over recent days, we think there is considerable room for a market surprise on the size of net asset purchases, which will push yields lower, curves flatter and sovereign and credit spreads tighter.
11.11am BST
The disappointing drop in eurozone factory output in July shows that Europe's economy struggled over the summer.
Worryingly, industrial production has been dropping on a year-on-year basis through 2019.
The euro region's industrial woes persisted at the start of the third quarter as a German factory slump dragged down output more than economists predicted.
Production fell 0.4% in July, deepening a decline from the previous month. The drop was led by Germany, Europe's biggest economy, which is suffering the most in the region as a global slowdown in trade hurts its exporters.
The euro region's industrial woes persist at the start of the third quarter https://t.co/umvlEvCAmB
10.13am BST
More gloom! Eurozone factory output contracted by 0.4% in July, new figures show.
That's worse than the 0.1% decline expected, and shows that Europe's manufacturers is still struggling.
Production of capital goods fell by 3.4%, intermediate goods by 3.0% and energy by 1.4%, while production of non-durable consumer goods rose by 1.5% and durable consumer goods by 1.8%
Euro area #IndustrialProduction -0.4% in July over June, -2.0% over July 2018 https://t.co/XpWqxOtypr pic.twitter.com/sWhWsxcbfb
Eurozone 's industrial production plunges by -0.4% MoM in July, more than expected -0.1% and by -2.0% YoY, much more than expected -1.3%. It's another clear recession sign, just a couple of hours ahead of the #ECB 's meeting, with the new #QE decision on the table@graemewearden
10.02am BST
The German recession would be much more painful if Britain crashed out of the EU without a deal, IFO adds.
A deeper US-China trade war would also drive GDP deeper down, it adds:
Even if their concrete economic consequences are difficult to calculate - because they lack historical experience - they would certainly deepen and prolong the recessionary tendencies in the German economy.
9.59am BST
IFO is also worried that German employers are cutting staff -- a classic sign of a recession.
Its new economic forecast says:
While employment in the manufacturing sector has been falling since the spring, so far the strong growth in private service providers and in the construction industry has come to a standstill in the summer.
Unemployment is already rising for the fourth month in a row and the proportion of companies have announced the short-time working, has increased significantly.
9.54am BST
Ouch! Germany's economy will fall into recession this quarter, according to new gloomy forecasts from the Munich-based IFO thinktank.
"The outlook is weighed down by high uncertainties."
9.21am BST
European stock markets have hit their highest levels in six weeks.
Traders are welcoming Donald Trump's decision to delay China's tariffs, and also hopeful that the ECB will announce a chunky stimulus package this lunchtime.
9.12am BST
Update: The Co-op has also revealed that it is stockpiling water and toilet paper ahead of Brexit.
Speaking to reporters now, the company also warns there could be some shortages of some fresh food in the event of No-Deal, and that retailers may need to use more air freight services to get fruit and flowers into the UK.
9.03am BST
Beijing has welcomed Donald Trump's decision to delay raising tariffs on Chinese imports for a fortnight (see earlier post).
The Commerce Ministry says it is a welcome goodwill gesture, and that China hopes that both sides will create "favourable conditions for talks".
Reuters: #China's commerce ministry says, asked about possible #US agri product purchasses, possible purchases include soybeans, pork
8.42am BST
The Co-operative Group are also worried about Brexit.
Like all big businesses, we've continued with our Brexit planning since the end of March and we know we need to be ready for all eventualities. If a negotiated withdrawal from the EU doesn't take place at the end of October, we expect some disruption to our supply chain, at least in the short term, and we'll do our best to protect our members from any inconvenience. We're particularly concerned about what a no-deal Brexit will mean for the British farmers whose produce we've championed over the last few years.
We're also mindful of how Brexit has exposed deep divisions within our communities with strong feelings of disempowerment and neglect expressed by many. These are serious matters that an economic resolution to Brexit will only partially address.
Related: Brexit: no-deal chaos fears as secret Yellowhammer papers published
8.29am BST
It's a bleak morning for John Lewis.
The group, which owns Waitrose as well as the John Lewis department stores, dived 25.9m into the red in the six months to 27 July after making an underlying pretax profit of 0.8m in the same period a year before.
Sir Charlie Mayfield, chairman of the staff-owned retailer, said the loss reflected lower sales in some categories, including homewares, cost inflation and IT costs.
Related: John Lewis warns of no-deal Brexit impact
"Despite its relative strength, John Lewis is not immune to tough retail conditions. It risks heading towards a price cut trap, partly because its 'Never Knowingly Undersold' brand positioning forces it to pursue rivals' discounts. Add to this customers that are tougher than ever to lure into stores, and today's results present a stark warning.
8.21am BST
There's a risk that the ECB disappoints the markets today.
It's widely assumed that Mario Draghi will announce new stimulus moves, so anything that falls short could trigger a sell-off.
Mario Draghi will try his best to please the market either with his words or with his action. This is going to be a remarkable shift in the ECB's policy especially, when the bank was so confident only 9 months ago when it said it was done with cutting rates and buying debt.
8.00am BST
Hopes of a trade war breakthrough are growing after the US surprisingly delayed its latest tariffs on imports from China.
Donald Trump announced that plans to hike the tariff on $250bn of Chinese goods, from 25% to 30%, will be delayed for two weeks.
At the request of the Vice Premier of China, Liu He, and due to the fact that the People's Republic of China will be celebrating their 70th Anniversary....
....on October 1st, we have agreed, as a gesture of good will, to move the increased Tariffs on 250 Billion Dollars worth of goods (25% to 30%), from October 1st to October 15th.
7.50am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The only debate is about the form of the easing that will be provided. How swiftly things change: it was all so different 18 months ago.
At the start of 2018, everyone was optimistic about the Eurozone's prospects. After a year of stellar growth (for the Eurozone at least) in 2017, the path seemed clear for the ECB to prepare the ground for lift off. After a decade in the doldrums, the economy was booming and the ECB could taper its asset purchases and start to push policy interest rates up from historic lows.
European Opening Calls:#FTSE 7375 +0.50%#DAX 12433 +0.59%#CAC 5649 +0.55%#MIB 22026 +0.61%#IBEX 9106 +0.51%#STOXX 3537 +0.58%
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