China is driving global debt back towards unsustainable levels amid an “unparalleled” borrowing binge by property developers and local governments, according to the International Monetary Fund.
The Fund said debt in the world’s second largest economy rose by 7.3 percentage points to 272pc of gross domestic product (GDP) in 2022.
This includes large increases in both public and private debt and contrasts with a 10 percentage point decline in overall global debt levels to 238pc of world GDP. Debt fell globally as economies continued to recover from the pandemic and governments spent less on wage subsidies.
The IMF warned that a declining global debt share in 2022 risked being just a “pandemic blip” and said there was an urgent need to “restore fiscal sustainability”.
“Global debt, which remained significantly higher than its pre-pandemic level last year, may return to its long-term rising trend,” it said in its latest global debt monitor. “Governments should take urgent steps to help reduce debt vulnerabilities and reverse this trend.”
The Fund described China as an “important force driving global debt in recent decades”.
Many Chinese companies have gorged on cheap credit during years of low interest rates. However, many property developers are now as interest rates rise, putting pressure not only on refinancing costs but also the value of their properties.
Country Garden, China’s biggest private property developer, is now fighting for survival after suffering heavy losses on its portfolio stemming from a focus on smaller cities that have been hit harder by the housing slump.
Local governments are also struggling with mounting bills after borrowing huge amounts to finance day-to-day spending as well as infrastructure projects.
China’s total debt-to-GDP ratio has increased almost four-fold from around 70pc in the mid-1980s, according to IMF data.
It said the rise in China’s debt ratio to GDP was “unparalleled in other large economies”, with the rise “considerably steeper from 2009 onwards”, after policymakers unleashed a massive spending spree in the wake of the financial crisis to keep the country out of recession.
The IMF said it was vital that policymakers were “unwavering over the next few years in their commitment to preserving debt sustainability”.
”For private sector debt, those policies could include vigilant monitoring of household and non-financial corporate debt burdens and related financial stability risks,” it said.
“For public debt vulnerabilities, building a credible fiscal framework could guide the process to balance spending needs with debt sustainability.”
07:15 PM BST
That’s all from us. I’ll leave you with the latest from columnist Jeremy Warner: The French can only envy the quiet resilience of British manufacturing
06:37 PM BST
Deloitte to axe 800 jobs in UK
Deloitte is planning to axe 800 jobs in Britain as the economy stutters.
The firm’s UK business, which employs 27,000 people, is poised to cut 3pc of roles across its consulting, financial advisory and risk advisory business.
The proposed redundancies are also expected to affect a small number of staff in Deloitte’s UK audit group and business services team.
Staff at the Big Four firm were told about the potential layoffs on Wednesday, Financial News first reported.
Richard Houston, chief executive of Deloitte, said: “Today we announced some targeted restructuring across our businesses, which may – subject to consultation – put some roles at risk of redundancy.
“This follows a slowdown in growth, which, combined with the ongoing economic uncertainty, means we have to consider the shape of our business and may mean we have to make some difficult decisions.”
It comes as the Big Four accounting and consulting giants cut back on their years-long hiring spree, as global economic uncertainty weighs down on demand for services.
06:16 PM BST
China claims to have identified ‘security incidents’ in iPhones in latest attack on Apple
China claims to have identified “security incidents” with Apple’s iPhones as Beijing ramps up pressure on the tech giant.
Senior technology reporter Matthew Field has more:
Communist party officials are reportedly planning to restrict the use of iPhones in the workplace across government departments and at state-backed companies.
Mao Ding, a foreign ministry spokesman, told reporters: “We notice that there have been some security incidents concerning Apple phones.”
China’s foreign ministry did not provide details of its concerns, attributing them to “media reports”.
Russian officials have in recent weeks accused Apple of colluding with America’s security services to implant spyware on diplomats’ phones. Apple has insisted it “never worked with any government to build a backdoor into any Apple product, and never will”.
Addressing recent reports that Beijing had ordered officials not to use iPhones at work, Ms Ding added: “China has not issued laws and regulations to ban the purchase and use of mobile phones from foreign brands such as Apple.”
However, concerns that China could crackdown on Apple have knocked more than $300bn from the value of the $2.7 trillion business. Apple’s shares are down 6pc in the past week.
China represents a key market for Apple, accounting for roughly a fifth of its sales. It is also where the majority of its devices are manufactured.
Allegations of “security incidents” linked to its smartphones came hours after Apple boss Tim Cook launched the new iPhone 15 smartphone at an event in California. Apple will release four new phones, including the iPhone 15 Pro, on September 22.
Adding to Apple’s woes in China is the fact that Huawei, Apple’s Chinese rival, recently launched a powerful new smartphone: the Mate 60 Pro. Local media claimed the phone was capable of 5G data speeds and appeared to have circumvented US efforts to restrict Huawei’s access to the technology.
Gokul Hariharan, an analyst at JP Morgan, said the new phone was “likely to halt iPhone market share gains in China and could put some downward pressure” on the iPhone 15 launch.
An Apple spokesman was contacted for comment.
05:53 PM BST
FTSE 100 finishes flat after GDP figures
The FTSE 100 bounced back on Wednesday after being hit by the news that the economy had shrunk more rapidly than expected in July.
By the end of the day a strong performance from banks Barclays and HSBC, as well as some housebuilders, helped the FTSE finish more or less flat
It closed down just 0.02pc a 1.54 point drop that left the index at 7,525.99.
The index had earlier fallen as low as 7,490 after data from the Office for National Statistics revealed that the UK’s gross domestic product (GDP) fell by 0.5pc in July, following a similar-sized rise the month before.
05:25 PM BST
Former Prudential chief to take the reins at St James’ Place
St James’s Place (SJP) has tapped Prudential’s former finance chief to replace Andrew Croft as chief executive, as the UK’s largest wealth manager comes under pressure over its fees.
Banking correspondent Simon Foy reports…
Mark Fitzpatrick, a former senior executive at the FTSE 100 insurer, will join SJP’s board in October and take the reins as chief executive on December 1, the company said.
It comes as the City watchdog’s new “consumer duty” has increased scrutiny of the fees that wealth managers charge clients. SJP was forced to reduce some fees in July owing to the regulator’s new regime.
Analysts at UBS forecast that the recent fee cut will hit the company’s profits by around 8pc next year.
Paul Manduca, chairman of SJP, said: “Mark has a well-established track record in retail financial services and the board believes he will bring expertise and energy to the role.”
Mr Fitzpatrick served as Prudential’s finance chief between 2017 and 2022 and briefly became the insurer’s interim chief executive.
Mr Croft, a veteran of SJP who became chief executive in 2018, will stay on until next year to help with the leadership transition.
SJP has more than 4,500 financial advisers across the UK who act as third-party “partners” to SJP but are not directly employed by the company.
In 2019, SJP came under fire over its so-called “cruise and cufflinks” incentive scheme for its advisers. The company was accused of offering lavish rewards to its advisers for pushing clients into SJP products.
Incentives awarded included Montblanc pens and Mulberry bags as well as cruises, holidays abroad and cufflinks. SJP has since dropped the incentive programme.
Mr Fitzpatrick said: “St. James’s Place is a business full of people who are passionate about helping families and individuals secure their financial futures. The distinctive quality of the service provided by its partners is more important now than ever, and I cannot wait to join the team.
“By continuing to do the right thing for clients and adapting with agility to our fast-changing world, I am confident that St. James’s Place will be in a strong position to create value for all stakeholders in the years to come.”
Shares in SJP fell 0.5pc to 853p in morning trading, valuing the company at £4.7bn.
05:18 PM BST
Saudi-Russian alliance proves ‘formidable challenge’ for oil prices, warns IEA
The Saudi-Russian alliance has become a “formidable challenge” likely to drive oil prices even higher, the world’s energy watchdog has warned.
Economics reporter Melissa Lawford has the story:
The decision by Saudi Arabia and Russia to extend supply cuts until the end of 2023 will spark a “significant supply shortfall”, according to the International Energy Agency.
Global demand will eclipse supply with a deficit of more than one million barrels per day (mb/d) until the end of the year, its latest report revealed.
At the start of September, Russia and Saudi Arabia announced they would extend their cuts to oil supplies to the end of the year, which sent prices to a 10-month high.
“The Saudi-Russian alliance is proving a formidable challenge for oil markets,” the IEA said.
Read the full story here…
04:34 PM BST
Energy bills will be worse than last year for some households, Ofgem warns
Energy bills will be higher than last year for some households, Ofgem has told MPs.
The UK’s gas and electricity regulator told MPs that although wholesale energy prices have stabilised since last year, the loss of government subsidies means that families face higher bills.
Households each received a one-off £400 discount from their energy bills last winter under a government support scheme, which ended in March 2023.
The Government has confirmed that the £400 energy rebate will not be repeated this winter, even as households face rising living costs.
Jonathan Brearley, chief executive of Ofgem, told the Commons energy security and net zero committee on Wednesday: “This time last year, we were anticipating and seeing prices at around £4,200 a year without Government support. And last year, Government did step in to give tens of billions of pounds of support to customers.
”But there is a reality for customers this year: That support is not available. So for many people, their bills will be very similar this year and possibly worse for some than they were last year.”
04:00 PM BST
Thousands of HMRC staff are not going into the office at all
Thousands of HM Revenue and Customs staff are routinely failing to show up to the office even for one day a week as customer service falls to “unacceptable levels”.
As many as two in five workers at regional HMRC centres did not go into the office at all in the year to March, figures obtained under Freedom of Information laws show.
It is the latest evidence of civil servants increasingly shunning the office to work remotely. The figures come amid complaints that letters to the tax office have gone unanswered for months and call waiting times exceed 20 minutes on average.
Money reporters Harry Brennan and Noah Eastwood have the story…
03:31 PM BST
I’m heading off now. Adam Mawardi will be sure to keep you informed from here.
I’ll leave you with a look at the pound, which is now flat against the dollar on the day after falling as much as 0.3pc after the UK economy shrank by a larger-than-expected 0.5pc in July.
It comes as US inflation increased in August as a result of rising fuel prices, with underlying prices rising monthly for the first time since February.
The Federal Reserve will decide next week whether to increase or hold interest rates at 5.25pc to 5.5pc.
Seema Shah, chief global strategist at Principal Asset Management said:
The inflation print likely is not enough to tilt next week’s Fed call towards a hike, yet it also hasn’t entirely cleared up the question of a November pause vs hike.
The rise in headline should come as no surprise given the recent run-up in energy prices and the Fed will likely look through the number… for now.
But the general expectation was that core inflation would remain stable, if not decelerate this month, so the upside surprise probably leaves the Fed with a bad taste in its mouth and keeps it wondering if it still has more work to do.
03:19 PM BST
BP board faces questions over Bernard Looney’s relationships with staff
BP’s board is under growing pressure to explain what they knew about former chief executive Bernard Looney’s personal relationships with colleagues and when, after his sudden departure over the scandal.
Our energy editor Jonathan Leake has the latest:
Mr Looney, 53, resigned on Tuesday night after admitting failing to disclose the extent of those past relationships.
The announcement took investors by surprise. However, BP said it had first investigated claims that Mr Looney had had relationships with colleagues in May 2022 after a tip-off from a whistleblower.
Figures within the oil industry claimed it had been “common knowledge” that Mr Looney had relationships with colleagues.
One insider said: “These stories have been circulating for years in conversations and WhatsApp groups.”
Read how Mr Looney’s departure came after new allegations about relationships came to light.
03:04 PM BST
US wages outpacing inflation
An encouraging trend for American consumers in the data on inflation.
Real wages are now growing, although that may cause some headaches for the Federal Reserve if policymakers think rising living standards could fuel inflation:
02:37 PM BST
Wall Street opens higher
US markets have gained at the opening bell after inflation figures came in broadly as expected.
The Dow Jones Industrial Average has risen 0.2pc to 34,731.79 while the S&P 500 has lifted 0.2pc to 4,472.11.
The tech-heavy Nasdaq Composite has moved 0.3pc higher to 13,819.21.
02:28 PM BST
The Range poised to buy Wilko brand
The Range will reportedly buy the Wilko brand in a deal worth about £5m in a move that will preserve one of Britain’s most famous high street names.
The deal, which is expected to be announced later today, has been agreed with administrators PwC, according to Sky News, a day after Poundland owner Pepco agreed to buy up to 71 Wilko stores following the collapse of the high street chain.
On Monday, the first batch of store closures began, with 24 shops shut across the UK.
Family-owned Wilko, founded in 1930, employed 12,500 staff and ran 400 shops before it hired administrators early last month after it came under pressure from weak consumer spending and debts to suppliers.
02:09 PM BST
Core inflation increase puts pressure on US Federal Reserve
Soaring petrol prices meant US inflation jumped even more quickly than analysts had expected in August, bringing fresh pressure on the Fed for further interest rate rises.
Our economics reporter Melissa Lawford has the latest:
The US consumer prices index rose by 3.7pc year-on-year in August, up from growth of 3.2pc the previous month, according to the US Bureau of Labour Statistics. This surpassed the consensus forecast of 3.6pc.
On a monthly basis, CPI climbed by 0.6pc, matching the consensus forecast. However, core inflation – a key measure for the Fed’s decision-making process – rose by 0.3pc, above analysts’ expectations of 0.2pc growth.
This was the first time monthly core inflation had climbed in six months.
A jump in gasoline prices, which surged by 10.6pc year-on-year following an increase in oil prices this summer, was the single largest contributor to the headline growth rate.
John Leiper, Chief Investment Officer at Titan Asset Management, said that the Fed was still likely to hold rates at the next meeting, but future rises could now be more likely. “Markets are pricing in a slightly higher chance of another hike later this year,” Mr Leiper said.
Hugh Grieves, fund manager at asset manager Premier Miton said: “The worry for the Fed will be that higher energy costs start spreading into the wider economy, raising the risk of core inflation reigniting towards the end of the year and forcing central banks to begin raising rates once more.”
02:03 PM BST
UK ‘risks interest rates overdose’ after GDP blow
The Bank of England is under pressure to leave interest rates unchanged at 5.25pc next week after official figures showed the economy suffered its worst slump in seven months.
Policymakers will gather on Thursday, September 21, to decide whether to raise interest rates to their highest level since 2007.
Catherine Mann, a member of the Monetary Policy Committee, said this week she would rather “err on the side of over-tightening” Britain’s money supply, while incoming deputy governor Sarah Breeden told MPs that the UK is still at risk of inflation becoming “embedded”.
However, economists have urged policymakers to hold rates steady amid fears another hike could strangle growth in the economy.
Kitty Ussher, chief economist at the Institute of Directors, said: “Today’s data supports our call for the Bank of England to keep interest rates steady next week to give time for its medicine to work rather than risking an overdose.”
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales (ICAEW), said the Bank of England is at risk of “overshooting on rate hikes”.
Neil Birrell, chief investment officer at asset manager Premier Miton, said the fall in GDP “does suggest that higher interest rates and sticky inflation are having a more significant effect on the economy”.
James Smith, developed markets economist at ING, warned: “We think the economy is likely to more or less flatline over coming quarters – and a mild recession can’t be ruled out.”
01:51 PM BST
Pound claws back some losses as US inflation increases
Underlying prices increased in the US for the first time in six months but markets have not interpreted that as a signal that the Federal Reserve could keep interest rates higher for longer.
The core consumer prices index, which strips out volatile food and energy prices, advanced by 0.3pc in August from July, according to the Labor Department.
However, the annual figure eased to 4.3pc, down from 4.7pc in the year to July.
The pound has clawed back some of its losses since the data was released, leaving it down 0.2pc at less than $1.25.
Wall Street appears on track for a more positive but muted open, with the Dow Jones Industrial Average and the S&P 500 flat in premarket trading and the Nasdaq 100 down 0.1pc.
01:37 PM BST
US inflation ‘more or less in line with expectations’
Rising fuel prices accounted for half of the rise in inflation in the US last month, official figures show.
Housing costs increased for the 40th consecutive month and energy rose by 5.6pc in August, as it did in July, according to the Labor Department.
01:31 PM BST
US inflation increases amid rising fuel prices
US inflation increased last month as an increase in oil prices forced up the price of fuel.
The consumer prices index increased to 3.7pc in the year to August from 3.2pc the previous month, the Labor Department said.
However, core inflation, which strips out volatile food and energy prices, fell from 4.7pc to 4.3pc.
01:16 PM BST
Former Patisserie Valerie finance chief charged with fraud
The former chief financial officer of the company that owned collapsed bakery Patisserie Valerie and three others have been charged with conspiracy to defraud, the Serious Fraud Office (SFO) said.
Christopher Marsh, who held the financial job for 12 years, has been charged alongside his wife, accountant Louise Marsh, as well as financial controller Pritesh Mistry and financial consultant Nileshkumar Lad.
The SFO opened a full investigation, codenamed “Operation Venom”, in October 2018, two days after the company abruptly suspended trading, closing 70 stores and causing the loss of over 900 jobs across the country when its debts were revealed.
The SFO has charged all four suspects with conspiring to inflate the cash in Patisserie Holdings’ balance sheets and annual reports from 2015 to 2018, including by providing false documentation to the company’s auditors.
During this time, it is alleged that the company also reported holding £28m in accounts, yet concealed £10m in debts from its investors and creditors.
The defendants will appear at Westminster Magistrates’ Court on October 10.
12:29 PM BST
UK economy will shrink in third quarter, say economists
The National Institute of Economic and Social Research has predicted the UK economy will weaken in the third quarter of the year:
12:10 PM BST
Aviva offloads Singlife stake for £800m
Aviva has netted £800m after selling its stake in a joint venture in Singapore, as the FTSE 100 insurer continues to slim itself down.
The sale of its debt and equity investments in Singapore Life Holdings to a Japanese insurer means that Amanda Blanc, Aviva’s chief executive, has raised around £8bn from international disposals over the last three years.
Ms Blanc said that the Singapore sale was “a good outcome for Aviva”, adding: “The transaction further simplifies the business and we are in a very strong position to build on our trading momentum in the UK, Ireland and Canada.”
Ms Blanc, who took over as chief executive in 2020, has successfully slimmed down the insurer after her predecessors failed to get a handle on Aviva’s sprawling international business.
Aviva’s shares have barely budged since Ms Blanc took the helm three years ago. The shares have risen 2.3pc today.
11:47 AM BST
Avanti to cut Glasgow station staff by third with ticket office closures
Avanti West Coast has said it is proposing to slash the number of staff it has at Glasgow Central station by more than a third as part of plans to close its ticket office there.
Managing director Andy Mellors told MPs:
We have about 27 staff, I think it is, at the moment at Glasgow Central.
These proposals would, if they were enacted in full as we proposed, reduce that number by about nine or 10.
I must stress that we are only one of the organisations that provides customer support and presence at that station.
He added that the proportion of Avanti West Coast journeys made from Glasgow Central using a ticket bought from its office at the station is 1pc.
11:37 AM BST
Closing ticket offices is about cutting costs, says rail boss
Simon Moorhead, chief information officer at the Rail Delivery Group (RDG), which represents train operators, has told MPs that closing station ticket offices is partly about cutting costs.
Asked by the Transport select committee if that was the reason for the proposals, he said:
Cost is a part of it but primarily we’re following the needs of our customers and the demands of our customers.
This year, around 80pc of the tickets that have been issued are either bought online through digital channels or they are with customers tapping in and tapping out from gate lines or machines on platforms.
He added: “The customer trends have been very clear over recent years.”
11:22 AM BST
US markets slip ahead of expected rise in inflation
Wall Street traders are refraining from any big bets ahead of US inflation data released before markets open.
The recent rally in energy prices is expected to push headline inflation higher in August, which prompted a weak session for US markets on Tuesday.
The Labor Department’s data is expected to show the core consumer price index easing to 4.3pc year-on-year in August from 4.7pc. Headline inflation, however, is expected to rise to 3.6pc.
Tim Waterer, chief market analyst at KCM Trade, said:
All indications are that higher oil costs are going to influence the headline inflation print. Any rise in the core data could really put markets on edge given possible interest rate implications.
If inflation takes a step higher, this will highlight the challenge faced not only by the Federal Reserve, but by central banks around the globe, that inflation can rear its ugly head again at inopportune times.
Interest rate traders forecast a 93pc chance of the Fed holding rates in September but just over a 50pc likelihood of a pause in November and December, according to the CME FedWatch Tool.
In premarket trading, the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 have all fallen around 0.2pc.
10:59 AM BST
Eurozone bond yields surge as markets ramp up bets on ECB rate rise
Government borrowing costs have fallen in Britain as markets expect the Bank of England to only raise interest rates one more time following data showing the UK economy shrank in July.
However, across Europe, bond yields are rising.
Traders have ramped up bets for a European Central Bank (ECB) rate rise this week, sending Italy’s 10-year bond yield to a six-month high after a Reuters report that policymakers expect inflation to remain above 3pc next year.
Money markets have priced in a roughly a 75pc chance the ECB will raise rates to a record 4pc on Thursday, up from around a 40pc chance on Monday and just 25pc a week ago.
A further rate hike at some point this year is now fully priced in.
Germany’s 10-year bund yield has risen three basis points to 3.15pc while the UK’s 10-year gilt coupon has fallen two basis points to 4.99pc.
10:45 AM BST
Gas prices rise as Australian strikes poised to ramp up
European wholesale gas prices have risen as Australian strikes continue and amid maintenance works at Norway’s largest North Sea field.
Full strikes are poised to begin on Thursday at Chevron’s two liquified natural gas plants (LNG) at Wheatstone and Gorgon, which produced around 7pc of the world’s supplies last year.
Meanwhile, supplies have been squeezed by delays to maintenance works at Norway’s Troll field.
Dutch front-month futures, Europe’s gas benchmark, have risen 2.9pc today toward €36 per megawatt hour, but have fluctuated around that level for around three weeks.
10:25 AM BST
H&M to begin selling second-hand clothes
H&M plans to sell second-hand clothes and accessories at its flagship store in London as pressure increases on fast fashion companies to reduce their environmental impact.
The retailer said it is “part of the problem” as the European Union plans new regulations to crack down on textile waste
The “PRE-LOVED” womenswear collection at H&M’s Regent Street store will open on October 5 and will include garments from several other brands and designers as well as H&M group brands, which include Arket, Cos, Monki and Weekday.
The autumn-winter 2023 collection of the second-hand offerings will include metallic dresses and shirts, trench coats, and “trendy knits”, H&M said, with new items added every day.
Zara last week launched its online second-hand service in France, having trialled it in Britain since November last year.
10:10 AM BST
Rail ticket office closure consultation ‘a sham,’ says RMT boss
The consultation into proposals for a widespread closure of railway station ticket offices in England was “a sham” according to the boss of the Rail, Maritime and Transport (RMT) union.
Train station ticket offices are set to be almost entirely scrapped as rail firms push ahead with modernisation plans.
More than 680,000 responses were submitted to the consultation on the plans, which ended on September 1.
RMT general secretary Mick Lynch told the Transport select committee:
We think the whole thing has been a sham designed to be rammed through while people were looking the other way.
It all goes back to the Secretary of State (Mark Harper). The Secretary of State initiated these changes through the contracts he has with the TOCs (train operating companies).
He directs everything they do these days, every letter that’s sent, he gets access to. Of course, if the watchdogs object (to the closures) on the limited basis they’re allowed to, the decision will end up with him as well.
It’s a controlled show. The whole thing is designed so that they can force this through in a way that they want.
09:55 AM BST
BP shares fall after boss’s shock departure
BP has seen its shares weather the storm caused by the shock departure of boss Bernard Looney after he admitted failing to disclose the extent of past relationships with colleagues.
Shares in the FTSE 100 oil giant dropped as much as 1.8pc after the London market opened on Wednesday, but soon reduced its losses and was last down 0.9pc in morning trading.
Mr Looney resigned on Tuesday night after the group said he accepted not being “fully transparent” in his previous disclosures.
The Irishman, 53, is being replaced on an interim basis by the group’s chief financial officer, Murray Auchincloss.
Market experts said that while this was an unexpected blow to the group, investor nerves have been calmed by Mr Auchincloss stepping up to take on the role temporarily as well as the strength in BP’s wider management team.
Rising oil prices are also helping prop up BP’s share price.
09:38 AM BST
Oil market faces ‘significant’ shortfall in supply, warns IEA
Oil cuts by Saudi Arabia and Russia will cause a “significant” global supply shortfall through the end of the year, raising the risk of further market volatility, the International Energy Agency has said.
The warning in the IEA’s monthly market report comes a day after oil prices jumped following an update from the Opec cartel showing that the gap between global supply and demand would be the widest since 2007.
In an effort to prop up prices, Saudi Arabia and Russia, its ally in the wider Opec+ group, announced earlier this month that they would extend voluntary cuts until the end of the year.
Brent crude tipped above $92 for the first time since November on Tuesday. It has held above that price after gaining 0.6pc so far today.
The Paris-based IEA said:
From September onwards, the loss of OPEC+ production, led by Saudi Arabia, will drive a significant supply shortfall through the fourth quarter.
Oil stocks will be at uncomfortably low levels, increasing the risk of another surge in volatility that would be in the interest of neither producers nor consumers, given the fragile economic environment.
09:26 AM BST
Eurozone inflation will not fall quickly to 2pc, warns von der Leyen
Ursula von der Leyen has said that inflation in the eurozone will not quickly fall to the European Central Bank’s 2pc target.
The European Commission president delivered the warning after the annual rate of inflation in the eurozone reached 5.3pc in August, below a peak of 10.6pc in October last year but still persistently high.
The European Commission predicted inflation would fall to 2.9pc 2024 in its latest forecast published on Monday.
During a speech at the European Parliament in Strasbourg, she said: “We know that returning to the ECB’s medium-term target will take some time.”
Ms Von der Leyen praised ECB chief Christine Lagarde and the Frankfurt-based bank, saying they were “working hard to keep inflation under control”.
The ECB will make its next decision on whether to raise rates to a record 4pc on Thursday.
08:56 AM BST
FTSE 100 gains as traders cut interest rate bets
The FTSE 100 has moved higher after data showed economic output in July contracted at the fastest pace this year, as markets increased bets that the Bank of England will begin cutting interest rates next summer.
The exporter-heavy index has risen 0.1pc while the midcap FTSE 250 index declined 0.1pc each in early trading.
The FTSE 100 has also been given a boost from a 0.3pc fall in the pound against the dollar, used by most companies in the index, as money markets increasingly believe another interest rate rise will be the last.
The GDP data underlined signs that the economy is weakening, perhaps by more than the Bank of England had expected ahead of its September policy meeting. Markets are increasingly betting that interest rates will begin to fall by May next year.
It comes after Asian shares fell after Wall Street wobbled overnight, with markets bracing for US inflation data later today.
Meanwhile, shares of BP initially dropped 1.6pc before recovering to gain 0.4pc after the oil giant’s chief executive Bernard Looney resigned on Tuesday with immediate effect for failing to fully disclose details of past personal relationships with colleagues.
08:44 AM BST
Mild recession can’t be ruled out, analysts warn
James Smith, developed markets economist at ING, said a recession – which means two consecutive quarters of decline – “can’t be ruled out” after the ONS revealed that the UK economy shrank by 0.5pc in July.
However, he pointed to data showing that in the three months to July, the economy had grown 0.2pc.
Cutting through the noise, the economy seems to be still growing, albeit fractionally.
The change in activity over the past three months relative to the three months before is still slightly positive.
We think the economy is likely to more or less flatline over coming quarters – and a mild recession can’t be ruled out.
08:35 AM BST
Birkenstock plans to list in New York
In case you missed it overnight, German footwear brand Birkenstock has revealed plans to float in the United States, planning to list its shares on the New York Stock Exchange.
The proposed terms of its share sale have not been revealed, but news reports previously said that the initial public offering (IPO) could value the sandal maker at more than $8bn (£6.4bn).
An IPO marks a new milestone for the brand, after the Birkenstock family brought in its first external management team more than a decade ago.
The brand, founded in 1774 to make orthopedic shoes, received a Hollywood boost recently when actress Margot Robbie donned a pair of pink Birkenstocks in the lead role of the hit movie “Barbie.”
By 1897, Konrad Birkenstock had made the first flexible sole fitting the contours of the feet, and the sandals made their way to the United States in the 1960s.
They were adopted by hippies who took to their no-frills comfort and also saw their utilitarian look as an anti-fashion badge of honour.
08:26 AM BST
Zara owner makes record half-year profits as it raises prices
The owner of Zara has reported a record net profit in the first half of this year thanks to strong sales as the world’s biggest fashion retailer raised prices.
Spanish group Inditex posted a net profit of €2.5bn (£2.2bn) in the first six months to July 31, beating its previous record of $1.79bn in the same period a year earlier.
It was also higher than the €2.4bn predicted by analysts at Factset.
Inditex attributed this momentum to the strong growth in sales, which reached €16.9bn, 13.5pc higher than in the same period a year earlier, which demonstrated “very satisfactory development both in stores and online”.
Its pre-tax earnings before charges rose by 15.7pc to €4.7bn, the company said.
Chief executive Oscar Garcia Maceiras said that in a complicated global context, the record first-half figures reflected the “determined progress” made by the retailer.
Inditex, which owns seven brands including upmarket Massimo Dutti and teen label Stradivarius, has been hit by the war in Ukraine that forced it to close its 514 shops in Russia, at the time its second-biggest market after Spain.
The group has also seen its production costs rise due to the global increase in transport and energy costs, which it decided to offset with gradual price increases.
08:16 AM BST
Redrow warns profits could halve this year amid housing downturn
Housebuilder Redrow has posted falling annual sales and profits and warned earnings could more than halve over the year ahead amid a “challenging and uncertain” property market.
The group posted a 4pc drop in underlying pre-tax profits to £395m for the year to July 2 as revenues dipped to £2.1bn from £2.1bn on a 5pc drop in home completions.
Its average private reservation rate per week for the year slumped to 0.46 down from 0.68 in 2022, while it said trading had worsened over the summer – with the reservation rate almost halving to 0.34 in the first 10 weeks of the new financial year.
Redrow cautioned that pre-tax profits are set to slump by up to 54pc in the year to next July – to between £180m and £200m – with revenues to fall to between £1.65bn and £1.7bn.
Redrow said: “Following the macroeconomic volatility of the last financial year, as we go into 2024 the market remains challenging and uncertain.”
Housebuilders have been hit hard by falling demand as soaring mortgage rates have had an impact on buyer finances.
Rivals such as Barratt Developments and Berkeley have also revealed the toll taken from the difficult market, with many in the sector resorting to increasing incentives to drum up demand.
08:12 AM BST
Reeves: Economy is hostage to Conservatives’ low growth trap
Labour’s shadow chancellor Rachel Reeves said:
Today is another dismal day for growth, and the British economy remains hostage to the Conservatives’ low growth trap that is leaving working people worse off.
After thirteen years of instability, the Conservatives have left the British economy weaker and families having to cope with higher taxes, higher mortgages and higher food and energy bills.
08:05 AM BST
UK markets mixed as economy shrinks
The FTSE 100 has risen after figures showed Britain’s economy contracted by more than expected in July.
The UK’s blue-chip index, which benefits from falls in the pound, has gained 0.3pc to 7,518.59 while the domestically-focused FTSE 250 has slumped 0.2pc to 18,509.67.
07:57 AM BST
Pound falls as pressure grows to hold interest rates steady
The pound has fallen after the UK economy shrank in July as pressure grows on the Bank of England to hold interest rates at 5.25pc to avoid choking off growth.
Sterling has dropped by 0.4pc against the dollar toward $1.24 and has slipped by 0.2pc against the euro, which is worth more than 86p.
07:53 AM BST
Shrinking economy shows strikes must be resolved, says minister
A minister said industrial action had played a part in the UK economy contracting by 0.5pc in July.
Health minister Maria Caulfield highlighted that the ONS had recorded that “strike action has had an influence on the growth figures”.
She told Sky News:
Once again, it reinforces our message that we want to get the strike action resolved.
But they did actually see growth in some sectors that is encouraging and our forecasts for future growth have recently been upgraded, and remain higher than some of our neighbouring countries such as Germany and France.
So, yes, we are disappointed with today’s figures, there are reasons for that and strike action has not helped.
But the forecasts then still remain positive in terms of the short-term future.
07:49 AM BST
Interest rates ‘should hold steady rather than risking an overdose’
As the economy shrank 0.5pc in July, the Institute of Directors’ chief economist Kitty Ussher said:
July’s negative GDP data is consistent with our own surveys that show a worsening in the overall business environment around the middle of the year.
Today’s data supports our call for the Bank of England to keep interest rates steady next week to give time for its medicine to work rather than risking an overdose.
There were some one-off factors that constrained the economy in July, notably industrial action that reduced public sector output, and also wet weather that reduced retail sales and construction activity.
However, neither of these factors explain other weaknesses such as in ICT, administrative services and manufacturing. Overall, today’s data should give the Bank of England pause for thought when it meets next week.
07:44 AM BST
Bank of England faces ‘quite the sandstorm’ ahead of interest rate decision
The Bank of England will decide next week whether to raise interest rates for a 15th consecutive time to 5.5pc.
The latest series of monthly growth figures hardly paint a clear picture for the Monetary Policy Committee:
07:39 AM BST
UK to ‘fall well short’ of Bank of England growth forecast, say economists
Britain’s economy could already be in recession and will struggle to hit growth forecast by the Bank of England after its sharp contraction in July, economists have warned.
Paul Dales, chief UK economist at Capital Economics, said:
The 0.5pc month on month fall in real GDP in July could possibly mean that the mild recession we have been expecting has begun.
Even so, with wage growth still uncomfortably strong, we suspect the Bank of England will still raise interest rates one final time next week, from 5.25pc to 5.5pc.
These data suggest GDP growth in Q3 as a whole is likely to fall well short of the Bank of England’s 0.4pc quarter on quarter forecast.
Even so, the strength of wage growth and the stickiness of core inflation (next update on this due next Wednesday) suggests to us the Bank will pull the interest rate trigger once more at the policy meeting next Thursday.
07:23 AM BST
Interest rates and inflation having ‘more significant effect’ on UK
Neil Birrell, chief investment officer at asset manager Premier Miton, said:
The UK economy shrank much more than expected in July, with the services sector notably weak, which may be seen as good news by some, particularly the Bank of England ahead of their meeting to discuss interest rates, although the speed of the slowdown could be indicating that recession is around the corner.
Either way, it does suggest that higher interest rates and sticky inflation are having a more significant effect on the economy. All eyes will be on the Bank for the announcement of the rate decision.
07:18 AM BST
Hunt: There are reasons to be confident about the future
After the economy shrank more than expected, Chancellor Jeremy Hunt said:
Only by halving inflation can we deliver the sustainable growth and pay rises that the country needs.
But there are many reasons to be confident about the future.
We were among the fastest in the G7 to recover from the pandemic and the IMF have said we will grow faster than Germany, France, and Italy in the long term.
07:16 AM BST
Economy hit by NHS and teacher strikes
ONS director of economic statistics Darren Morgan said:
Our initial estimate for July shows that GDP fell; however, the broader picture looks more positive, with the economy growing across the services, production and construction sectors in the last three months.
In July, industrial action by healthcare workers and teachers negatively impacted services, and it was a weaker month for construction and retail due to the poor weather.
Manufacturing also fell back following its rebound from the effect of May’s extra bank holiday.
A busy schedule of sporting events and increased theme park visits provided a slight boost.
07:13 AM BST
UK economy shrinks more than expected
The UK economy shrank by much more than expected in July as strikes hit healthcare and education.
Our economics reporter Melissa Lawford has the details:
Monthly UK real gross domestic product fell by 0.5pc in July, according to the Office for National Statistics (ONS).
This was a major swing from 0.5pc growth in June and exceeded the consensus expectation among economists of a 0.2pc monthly drop.
July marked the first month since June 2022 when monthly GDP dropped across all three sectors. Services output fell by 0.5pc, production output fell by 0.7pc and construction output fell by 0.5pc.
The data is the first monthly reading for the third quarter of the year and suggests that the economy could be at a new turning point.
It follows a major revision to previous GDP numbers by the ONS, showing that the UK economy shrank less and bounced back faster during the pandemic than previously understood.
Before, the ONS had said UK GDP at the end of 2021 was 1.2pc smaller than it was pre-lockdown. At the start of SEptember, the ONS said the economy was actually 0.6pc larger at this point than its pre-pandemic level. This dispelled the notion that the UK was the only G7 country that had failed to bounce back.
07:11 AM BST
Thanks for being with us. Britain’s economy shrank in July, official figures show, delivering a blow after a series of indications that the UK was doing better than previously expected.
Gross domestic product (GDP) shrank 0.5pc in July, according to the Office for National Statistics (ONS).
5 things to start your day
1) BP boss resigns over past relationships with colleagues | Abrupt exit comes at a time the oil giant is grappling to balance investments in fossil fuels and clean energy
2) Apple to ditch leather in effort to ‘protect the planet’ | US tech giant to use recycled fabric in its watch straps and phone cases in net zero push
3) Google paying $10bn a year to maintain monopoly, claims DOJ | Most high-profile antitrust trial since 1998 gets underway
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5) Judges must get tougher on shoplifters, says Primark chief | Retailer joins calls for stricter enforcement as thefts sweep Britain’s high streets
What happened overnight
Stocks fell Wednesday in Asia after a slide for technology stocks dragged Wall Street lower ahead of a key report on US inflation.
Hong Kong’s Hang Seng lost 0.3pc to 17,970.01 and the Shanghai Composite index sank 0.9pc to 3,109.88.
Japan’s Nikkei 225 index shed 0.4pc to 32,656.85, while the Kospi in Seoul edged 0.2pc lower, to 2,532.69. Australia’s S&P/ASX 200 gave up 0.8pc to 7,146.40.
Wall Street stocks closed lower on Tuesday as investors await key US consumer inflation data expected to influence the Federal Reserve’s upcoming interest rate decision.
The Dow Jones Industrial Average closed 0.1pc lower at 34,645.99.
The Nasdaq dipped 1pc to finish at 13,773.61, while the broad-based S&P 500 also lost 0.6pc at 4,461.90.
The benchmark yield on 10-year Treasury was little changed at 4.28pc.
Asian shares were subdued after Wall Street wobbled overnight. MSCI’s broadest index of Asia-Pacific shares outside Japan was flat while Tokyo’s Nikkei eased 0.2pc.
Australia’s resource-heavy shares lost 0.7pc, Chinese blue-chips were flat but Hong Kong’s Hang Seng index moved 0.6pc higher.
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