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Markets slump as recession warning lights start to blink: as it happened

Major indicatorsuggests United States is heading for recession
German economy shrank 0.1pc in the first quarter as trade fears weighed on exports
European stocks tumble as slowdown fears take hold
Analysis: The four reasons Germany is plunging towards recession
European and US markets slumped after new data shows Germanys economy shrank in the second quarter, and an inverted US bond yield curve sparked fresh recession warnings.
Stocks were down across the continent as traders fled to safe haven assets such as gold and the Japanese yenin anticipation of an upcoming economic storm.
The US yield curve has inverted ahead of nearly every downturn in the country for the past 50 years, with only one false signal across the period.
GDP data released this morning showed Germanys economy is already halfway to recession, after shrinking in the three months to June as global tensions put pressure on its export-driven manufacturing sector.
5:33PM
Wrap-up: A return to recoil
Markets slump as recession warning lights start to blink: as it happened

A US trader at the New York Stock Exchange yesterday

Credit:
EDUARDO MUNOZ/REUTERS
When sorrows come, they come not single spies, but in battalions Claudius,Hamlet.
Today was bound to get ugly, but after the expectedgut punch from Germanys GDPfigures, the one-two jab of UK and US yield curves flipping negative was just too much for a global equities traders who just wants to get out of the ring.
Pain on the markets is coming in waves, and yesterdays post-tariff delay euphoria was bound to be short lived. After all, what has changed? Even with a reduced set of US levies on China, it still means $110bn of goods are about to get more expensive. And, as much as Donald Trump may relish playing Father Christmas, his December delay means trade worries are effectively guaranteed to run for months.
In Europe, it looks increasingly like action is needed. Todays data may not be enough to prompt an urgent response from the German government, but its economic malaise has at least one thing in common with the UKs: Brexit is hanging over everything. Tomorrow might be a happy day for UK data, with retail figures expected to show a bounce-back, but the status quo seems to be steady decline and that isnt hurtingBritain alone.
Thanks to everyone who followed along today. Ill be back tomorrow follow Telegraph Business on Twitter for the latest news!
5:04PM
Europe closes deep in the red
Indices are now closed across Europe.Its not a pretty picture:
The FTSE 100 closed 1.42pc down at 7,147.88
Frances CAC 40 closed 2.08pc down at 5,251.30
Germanys DAX closed down 2.19pc at 11,492.66
Spains IBEX closed down 1.98pc at 8,522.70
Italys FTSE MiB closed down 2.53pc at 20,020.28
Over in the US, the Nasdaq is now nearly 3pc off, a massive slump following gains yesterday. Donald Trump is currently tweeting Fox News praise of his economic management, so dont expect an intervention fromthat cornersoon.
4:51PM
Full report: Recession alarms blaring as US bond yield curve flips
Economics correspondent Tom Rees has a full report on the days main event: the dramatic flipping of US bonds yield curve. He writes:

Adownturn typically follows an inversion in the next 12 to 18 months; it last blared a recession warning in 2006, in the run-up to the financial crisis.
You can read his full report here:Bond markets scream recessionas Treasury yield curve inverts
4:33PM
FTSE lowest since June as investors run for cover
It looks like the FTSE didnt quite pass its June low, but it got very close meaning all the summers gains have now slipped away. The broader picture across global equities is of a bloodbath:
Markets slump as recession warning lights start to blink: as it happened

Credit:
Bloomberg
4:27PM
Admiral finds calm waters as FTSE 100 turns choppy
Markets slump as recession warning lights start to blink: as it happened

Admiral and its subgroups sell a variety of insurance products
Its hard to find much of an upside on the FTSE 100 today, with only a handful of stocks above watercurrently. Even miner Fresnillo, which has been swimming against the current asgold continues to rise, is just 0.2pc up.
Only one share appears to be safe and dry today: insurer Admiral, which is up 3.7pc currently after posting first-half numbers that strongly beat expectations. Its UK household insurance arm has got the wind in its sails, swinging to a ?4.2m profit from a ?1.9m loss the year before.
4:03PM
Worried about a market downturn? This is how to keep your investments safe
Recession fears have sent global markets into another rout, with the risk-off approach that has marked recent weeks in full effect currently.
If youre an investor, that can make it hard to know how to move. Telegraph Moneys Richard Evans and Jonathan Jones have taken a look at at what negative-yield bonds and falling equities mean, and prepared a list of the best defensive funds designed to weather an storm on the markets.
You can read their full breakdown here:Telegraph Defensive 10: our favourite investment funds for protection in falling markets
'Telegraph 25': the definitive list of our favourite investment funds
3:30PM
WeWork extends losses as it unveils IPO plans
Markets slump as recession warning lights start to blink: as it happened

The company now has 527,000 clients in 111 cities

Credit:
Luke MacGregor/Bloomberg
WeWork unveiled its float plans earlier this after, revealing its losses rose to $905m in the first half of the year. Its hoping to make a big splash on the markets when it lists in New York, which could be a soon as this September. Telegraphtech reporter Matthew Field writes:

If it goes ahead with the IPO, it would be the biggest company by value to list on the US stock market this year after ride-hailing firm Uber's $82bn float in April.
It made $1.54bn in revenues in the first half of the year, according to a filing with the US Securities and Exchange Commission, for a pre-tax loss of $905m, compared to $723m in the same period a year ago.
But with its steep losses, WeWork faces some of the same headwinds. Like many of these other venture capital-backed firms, WeWork has burned through cash and has never made a profit.
You can read his full report here:WeWork burns through more than $900m in six months as it files for highly-anticipated float
Technology intelligence - newsletter promo - EOA
3:14PM
Wall Street drops sharply
Markets slump as recession warning lights start to blink: as it happened

Wall Street stocks all shed value at open

Credit:
dbimages / Alamy Stock Photo
New York fell out of bed with a thud, with the Nasdaq leading fallers at 2pc down. Losses in Europe have extended further, with Germanys DAX just above 2pc off, and Italys FTSE MiB losing about 2.3pc amid political turmoil.
The latest round of losses mean every top global index is now down for August so far, with Italy, the UK, Mexico and Germany among the biggest losers. The FTSE is only inches off its sharpest fall in four years.
No index has suffered more than Hong Kongs Hang Seng, however: the financial hubs top bourse has dropped by 8.91pc so far this month as demonstrations bring the city to a standstill, and is sat at a lower level than it started the year
2:55PM
FirstGroup boss plays down legal threat to West Coast franchise
Markets slump as recession warning lights start to blink: as it happened

Virgin currently operates the West Coast Main Line but was disqualified from winning the new contract in a row over pensions liabilities.

Credit:
Jeff J Mitchell/Getty Images
Speaking of HS2, FirstGroup's boss is insisting thata pending legal challenge by its rivals for the West Coast and HS2 franchise could derail his companys newly-won contract to operate the lines.
He told theTelegraph:

"We have signed a contract today and its not really for us to talk about the outcome of that case but as far as were concerned we have a contract."

Virgin, Stagecoach and Arriva took legal actionafter they were barred from bidding for rail franchises earlier this year. Their bids were deemed non-compliant after they refused to take responsibility for billions of pounds of pension liabilities.
You can read the full report here:FirstGroup boss insists legal threat won't derail West Coast franchise
The shares are trading marginally lower this afternoon:
Markets Hub I FirstGroup
2:27PM
Balfour Beatty boss calls for clarity on Heathrow and HS2
Markets slump as recession warning lights start to blink: as it happened

The boss of builder Balfour Beatty called on Boris Johnsons new Government to clarify its plans for HS2 and Heathrow Airports proposed third runway, warning that delay and procrastination is the enemy of our industry.
Jack Torrancehas the full details of that and of the construction goup's first half results. He writes:

Balfour reported a 26pc rise in profits to ?63m for the first half of the year as it continues to defy a malaise sweeping the construction industry.
Balfour has bounced back from a series of setbacks that left its finances in the doldrums five years ago.

You can read Jack'sfull report here.
The shares are up more than 8pc today:
Markets Hub - Balfour Beatty PLC
1:59PM
Macys set for sharp slump at open
Markets slump as recession warning lights start to blink: as it happened

Macys is considered a bellwether for Middle Americas shopping trends

Credit:
AFP/DON EMMERT
US markets open in just over half an hour, and it looks like Macys might be an immediate victim.
The department store chain, considered a bellwether for Middle Americas shopping tastes, missed its earnings estimate for the second quarter, sending investors rushing to the checkout. Its shares are down about 12pc intrading before the bell.
1:50PM
FTSE slumps to five-month low
Its a close-run thing, but it looks like the slumping FTSE 100 has hit its lowest level since mid-March, back during the build-up to the Brexit delay.
Sentiment about the UKs relationship with the EU can hardly have improved since, with Boris Johnsons latest stance on the subject that: Our European friends are not moving. They are not compromising at all.
That will have done little to improve the sentiment among traders and businesses, many of whom have warned about dangers of prolonged uncertainty.
Heres how blue-chip stock indices looked across Europe a few minutes ago:
Markets slump as recession warning lights start to blink: as it happened

Credit:
Bloomberg

1:40PM
Full report: Sports Direct back in crisis mode as auditor throws in the towel
Markets slump as recession warning lights start to blink: as it happened

Mike Ashleys firm is having a hard time finding someone to check its books

Credit:
Joe Giddens/PA
The latest twist in the Sports Direct saga feels small as global markets quake, but Mike Ashleys colourful business empire has pulled off the questionable achievement of driving away all its possible auditors. Retail correspondent Laura Onita has the latest. She writes:

Sports Direct was thrown into fresh crisis after its auditor Grant Thornton resigned, casting doubt over the retailer's future as a listed company if it fails to find a replacement.
You can read her full report here:Fresh crisis at Sports Direct after auditor Grant Thornton quits
Heres how the retailers shares have fared over a wild few years:
Back to the big picture, heres BBC Newsnights Ben Chu with more on that inverted yield curve/recession relation:
....does this signal from the bond market presage another recession?
Strong correlation when the equivalent happens in the US government debt market.
But less clear in UK, where past inversions haven't always been followed by recession: pic.twitter.com/1LAydx3KK6 Ben Chu (@BenChu_) August 14, 2019
12:51PM
Speaking of charts...
...the 2yr/10yr US bond yield spread is now sharply negative, about 1.4pc down it looks like negative sentiment is winning out. If theres one thing recent weeks have shown us, however, its that a lot can change, very quickly.
Boom! 10-year US Treasury #yield below 1.60%. pic.twitter.com/TbG1C6j4p9 jeroen blokland (@jsblokland) August 14, 2019
12:48PM
Round-up: Prudential plans name change, Avast feels the wind in its sails, plus: will a no-deal Brexit drive UK car firms abroad?
Markets slump as recession warning lights start to blink: as it happened

Prudential sponsors RideLondon

Credit:
Alex Livesey/Velo
Two top stories from today: Prudential will soon be known as M&G, while cybersecurity firm Avast has posted a profit surge. From my colleagues Harriet Russell and Mason Boycott-Owen:
Prudential opts for M&G name in ?7bn split:Britainslargest insurer Prudential will be known as M&G Plc after completing a ?7bn demerger at the end of the year.
Avast boosts profits on rising demand for privacy products:Cybersecurity firm Avast posted a surge in profit at the start of the year as customers flocked to its anti-virus and privacy products.
Heres something you may want to know more about:This week, Telegraph Industry Editor Alan Tovey is taking an in-depth look at what a no-deal Brexit could mean for Britains car industry.
In his latest piece, hes looked at whether the UK crashing out at the end of October could send automotive manufacturers shifting overseas. You can read his report here:
Will a no-deal Brexit compel car makers to move overseas?
NB: If any of the interactive charts from earlier today are showing large negative figures, please refresh the page, which should solve the issues (though they wont make the actual yield curves any more encouraging). Apologies for the hassle!
12:26PM
Deutsche Bank: Germany is likely to be in technical recession
Markets slump as recession warning lights start to blink: as it happened

Credit:
Deutsche Bank
Analystsat Deutsche Bank have weighed in on this mornings German GDP drop. They write:

The substantial declines of both, the ifo and PMI survey in July as well as yesterdays slump in the August ZEW (-44.1 after -24.5) suggest that the GDP will shrink again in Q3 pushing Germany into a technical recession.

To unpack those figures a little:
Ifo is the findings of the highly-respected Ifo Institute in Munich, whichsaid its business climate indicator for German manufacturing went into free fall in July.
PMI refers to purchasing managers index data on new orders and exports, which showed eurozone manufacturers suffered their worst month since 2012 in July, led by a German fall.
The ZEWfigures, released yesterday,measure economic sentiment. They showed a massive slump, far worse than had been expected, as German investors grow more fearful about the global economy.
Deutsches analysts continue:

The crucial question for Q3 is private consumption...Given the high uncertainty and the current talk of a recession, the risk-averse German households may put part of these increases into savings. Our pessimism is also corroborated by profit alerts of large companies whichhave already led to monthly declines in employment in the manufacturing sector.

They are sceptical about the likelihood of immediate stimulus from the German government, however, pointing to the countrys strong labour market.
It appears that analysis may immediately be proved right: a German government spokesperson just told reporters there is no current need for extra intervention at this point.
12:07PM
US 2yr/10yr yield goes positive again
The yield curve just slightly de-inverted itself, and is now more-or-less exactly flat. The damage has been done, however, and its likely that it will start holding a negative level soon if current trends continue.
11:44AM
Yield curves are inverted: what does it mean?
From my colleague Tom Rees:

The most-closely watched recession indicator on global markets is flashing red.
The US Treasury yield curve which has a formidable track record of predicting recessions - has inverted for the first time since 2007.
It means that short-dated bonds have a higher yield than long-term debt, suggesting that investors expect the US central bank to slash interest rates as clouds gather on the horizon for the global economy.
The yield curve has inverted before every downturn in the US for the last 50 years and gave a false signal just once in that period.
However, some analysts warn that the markets recession gauge has been distorted by the vast money-printing programmes. Quantitative easing the bond-buying programmes used by central banks to reboot the economy has put downward pressure on yields on long-dated bonds.
Have investors just seen another false signal, or is the global economy sliding towards recession?
11:36AM
European markets plunge after bond yields pass crucial warning point
As if this mornings German GDP data wasnt enough, the US yield curve inversion has sent investors reeling away from anything seen as risky.
Stock prices are down across the EU, which the DAX now leading fallers at 1.45pc off
US futures (bets on how shares will perform) are down sharply, with the Dow Jones Industrial average set for a 1pc fall at open
The price of gold is rising again as traders look for haven assets
The Japanese yen and Swiss franc are both gathering strength
10yr2yr treasury yield curve finally inverted for the first time since 2007. US futures are tumbling on recession fear while gold price is surging. What a day!! pic.twitter.com/UYsBdabTLc Margaret Yang, CFA (@margaretyjy) August 14, 2019
11:26AM
Recession fears grow as US yield curve inverts
Heres how that US inversion looks (nb: I have picked up a slightly longer time period here).
David Absolon fromHeartwood Investment Management says:

In the worst case scenario, where the current unease in the global economy develops into recessionary conditions, central banks would very likely slash interest rates and enact more quantitative easing. These actions would lead to a further rise in the amount of negative yielding debt globally, as well as a further collapse in yield curves (meaning that investors would require disproportionately higher compensation for short-term lending relative to long-term lending, reflecting significant near-term uncertainty).

Markets.coms Neil Wilson adds:

To recap well-worn turf, this inversion been a reliable indicator of recession many times in the past (see chart highlighting the last three), calling seven out of the last nine. There is undoubtedly a chance of this, although we must caution that so far the US data has been pretty sturdy in the face of global headwinds and the trade policies of the White House.
Markets slump as recession warning lights start to blink: as it happened

Credit:
Markets.com

11:08AM
Breaking: US 2yr/10yr bonds inverted
And just like that, the US has joined in, with its two-year/10-year yield curve has inverted for the first time since 2007. This usually indicates a recession is coming.
The two-year/30-year curve has also hit a record low.
BREAKING:

*U.S. 10-YEAR YIELD BELOW 2-YEAR RATE FOR FIRST TIME SINCE 2007

The last three times this happened, U.S. recessions soon followed.https://t.co/FLWU7cF1L1 pic.twitter.com/n3cQf0yKyD Joe Weisenthal (@TheStalwart) August 14, 2019
11:01AM
Heres how that inversion looks in the long-term...
10:55AM
UK two-year/10-year bond yield curve inverts
The yield gap between two- and 10-year UK bonds just went below zero for the first time since 2008.
That means the gains on a two-year bond held to maturity are better than those from a 10-year bond, reflecting negative sentiment. Traders have been rushing to bonds, seen as a haven during uncertainty, amid worries about the global economic climate sending prices up.
Read more: Business Slide in bond yields deepens fears of worldwide recession
Thoughthis is a significant shift, the figure to watch is the gap between two- and 10-year US bonds. A negative rate there (known as an inverted yield curve) has historically been a pretty consistent sign that a recession is coming.
UK 2s/10s yield curve inverts for the first time since 2008. pic.twitter.com/WSywSUJYqb Holger Zschaepitz (@Schuldensuehner) August 14, 2019
UK 2s10s goes, now for the US Neil Wilson (@marketsneil) August 14, 2019
10:43AM
Full report: Rail fares set to rise 2.8pc
Deputy economics editor Tim Wallace has got a full report on this mornings retail price index inflation figures, and what they mean for commuters. He writes:

It means a worker with a ?3,000 annual season ticket can expect to pay an extra ?84 on next years travel.
The increase is not as painful as it could have been - easing food and housing pressures brought the annual rate of RPI inflation down from 3pc in May and 2.9pc in June.
Read his full report here:Rail fares to rise 2.8pc as inflation rate slows
10:33AM
Eurozone growth halved in second quarter
Apparently weighed down by Germanys contraction, growth across the eurozone halved during the second quarter, falling from 0.4pc in the first quarter to 0.2pc in the three months to June. The wider EU grew 0.2pc across the period, compared to 0.5pc between January and March, as its two biggest economies (German and the UK) both contracted.
Markets slump as recession warning lights start to blink: as it happened

INGanalystBert Colijn said the overall drop strengthens the case for the European Central Bank to make a dovish move:

As the industrial recession in the Eurozone appears to be deepening, the pressure on the service sector intensifies...With more downside risks down the line like Brexit, Italian political turmoil and trade war uncertainty, that debate seems to be legitimate. The ECB has all but decided on a next stimulus package for September, but the question is whether governments are willing to provide additional support if downside risks were to materialize.
10:17AM
Analyst: UK inflation likely to sink later in the year
Markets slump as recession warning lights start to blink: as it happened

Fortnite: Video game prices pushed inflation upwards
Reacting to this mornings UK inflation figures, Pantheon Macroecnomics Samuel Tombs says:

The unexpected rise in CPI inflation in July partly was driven by an unprecedented 8.4pc month-to-month jump in computer game prices, which have become an extremely volatile component of the CPI lately...Looking ahead, we still expect CPI inflation to fall below the 2pc target later this year, though the drop will be driven entirely by a further fall in energy prices.
July's upside CPI inflation surprise partly reflects a record 8%m/m surge in computer game prices - that's just noise. But it also reflected a rise in "underlying" services inflation; the MPC's measure (black line below) rose to a 23mth high. The wage-price link is alive and well pic.twitter.com/t0x9aER010 Samuel Tombs (@samueltombs) August 14, 2019
Nancy Curtin, from asset manager Close Brothers, adds of the figures:

This doesnt paint a rosy picture for businesses, as theyre concerned about the double threat of a no-deal Brexit at home and faltering demand in the rest of the world. With trade tensions simmering, global growth continues to be a concern. On a brighter note, were likely to see a similar stockpiling situation to Q1 in the run-up to the Brexit deadline. This will offer short-lived but welcome stimulus to domestic manufacturing output. A smooth transition out of the EU would likely ease inflationary pressures, but the Bank of England will keep an eye on the data.
10:09AM
Analysis: Germany sinks towards recession after another contraction
Markets slump as recession warning lights start to blink: as it happened

A German worker stacks porcelain bowls

Credit:
CLEMENS BILAN/EPA-EFE/REX
Germanys DAX index is now down 0.6pc, dragging other European stocks down with it. Economics correspondent Tom Rees has taken a close look at this mornings figures, and explained why they show Europes biggest economy could well be on its way into a recession. He writes:

Germany has been caught up in the cross-fire between the White House and Beijing as factories around the world grapple with climbing trade tensions.
Its dependency on export markets has made it highly vulnerable to Donald Trumps trade war upending global manufacturing with German industrial production tumbling 5.2pc year-on-year in June, the biggest drop since 2009.
You can read his full report here:Trade war and no-deal Brexit fears weigh on Germanysstruggling economy
9:59AM
Sports Direct sinks on FTSE 250 as auditor quits
Markets slump as recession warning lights start to blink: as it happened

Sports Direct chief executive Mike Ashley

Credit:
Kirsty O'Connor/PA
Retailer Sports Direct is leading fallers on the FTSE 250 today, down about 8pc currently after announcing it had dropped its auditor Grant Thornton a odd move, given it was already known the bean counters planned to quit.
As a quick reminder, Sports Direct published its annual report late, after a string of farcical delays, late last month. The retailer announced it was facing a ?605m tax bill, which the Telegraph revealed Grant Thornton was only informed of hours before the report was due for release.
In a long report attached to the results, chief executive Mike Ashley railed against his perceived enemies, and said Sports Direct was planning to find a new auditor, claiming only one of the Big Four (Deloitte, EY, KPMG and PwC) would do.
A few days after the fiasco, the Financial Timesreported that Grant Thornton had announced its intention to quit.
Sports Direct released its annual report yesterday, which included a statement (signed off before its results fiasco), that read:

We are pleased that Grant Thornton have agreed to remain as our auditor which makes sound commercial sense during these increasingly challenging times for UK retail
annual report of SD apparently all signed and dated Jul 26th...before GT would have said 'we quit'

so how did they publish it as is yesterday? Neil Wilson (@marketsneil) August 14, 2019
The retailer claimed in a statement released this morning that Grant Thornton had only announced plans to quit yesterday:

Sports Direct announces that, subsequent to the publication of Sports Direct's annual report and accounts on 13 August 2019, on 13 August 2019 Sports Direct received notice from Grant Thornton UK LLP (GT) that, following a review of its client portfolio, GT intends not to seek reappointment as the Company's auditors and will cease to hold office as auditors of the Company with effect from 11 September 2019, being the date of the Company's annual general meeting.
A further announcement will be made in due course.

The saga, it would appear, is set to continue. To add to Mr Ashleys accountancy headaches, theFTnow reports that Sports Direct is struggling to find a replacement auditor, with the Big Four apparently reticent.
9:43AM
Video game prices push inflation up
Markets slump as recession warning lights start to blink: as it happened

Heres more detail from the ONS on the CPIH figures, which looks at inflation within household expenses:

...the largest effect came from games, toys and hobbies (in particular from computer games and consoles) where prices overall rose by 8.4pc between June and July 2019 compared with a rise of 4.1pc between the same two months a year ago. Price movements for these items can often be relatively large depending on the composition of bestseller charts and the upward contribution between the latest two months follows a downward contribution, from computer games purchased online and games consoles, between May and June 2019.
9:38AM
Inflation rate unexpectedly rises above Bank of England target
Markets slump as recession warning lights start to blink: as it happened

The Bank of Englands target rate for year-on-year inflation is 2pc

Credit:
Peter Macdiarmid/Getty Images
The Consumer Price Index rose 2.1pc year-on-year during July, beating expectations (as gathered by Bloomberg) that it would fall to 1.9pc, and outpacing the Bank of Englands target rate.
The overall inflation number released this morning are unlikely to cause much movement at the Bank, where interest rates are expected to be held until theres a major shift in Brexit negotiations.
Recovering prices from computer games unpinned the growth, as did a rise in restaurant and hotel prices.
Good morning from the UK, which is slowly sinking into #stagflation with the Bank of England only able to watch and #Brexit at the wheel:

CPI YoY % up to 2.1% from 2.0%
GDP YoY % down to 1.2% from 1.8%#BrexitReality #QEinfinity pic.twitter.com/Gq8H1Tm5iT Alberto Gallo (@macrocredit) August 14, 2019
9:30AM
Breaking: UK inflation figures released
CPI year-on-year: 2.1pc (prior 2.0pc, est: 1.9pc)
CPI core year-on-year: 1.8pc (prior: 1.8pc, est: 1.8pc)
July CPI: 0.1pc (June: 0pc, est: 0.1pc)
RPI year-on-year: 2.8pc (prior: 2.9pc, est: 2.8pc)
July RPI: 0pc (June: 0.1pc, est: 0pc)
9:20AM
Coming up: Rail passengers prepare for annual kick in the teeth
Markets slump as recession warning lights start to blink: as it happened

A Southern Rail train

Credit:
Paul Grover for the Telegraph
In about 10 minutes, well get the UKs latest inflation figures, which comes in two broad flavours: Consumer Price Index(CPI) and Retail Price Index (RPI). A lower-than-expected figurefor CPI is likely to have an impact on the pound (currently having a flat day). CMC Markets Michael Hewson explains:

In June the headline CPI came in on the Bank of Englands target rate of 2pc, and could well slip back to 1.9pc, which would mean that real wages are rising at 2pc per annum, though with RPI at 2.9pc it sounds better than it is. Core prices are also set to slide as well, down to 1.8pc.
Given all the doom and gloom surrounding Brexit, and concerns about job losses, this is welcome news, though how long it will last remains to be seen.

For many people, however, RPI is the figures to watch. Thats because it is the number used to calculate how much rail fairs rise by. My colleague Oliver Gill writes this morning:

Consumer groups will be up in arms. Unions will once again hold this up as a banner of how private capital fails. Therell be a steady stream of figureheads demanding change and saying enough is enough.
In one sense, its absolutely bonkers that train price increases are linked to the retail price index (RPI). This higher rate hasnt been this countrys official measure for more than eight years. Not for the first time, the railways are open to criticism of being gravely behind the times.
Linking fares to the consumer price index (CPI) instead would give passengers some reprieve. Roughly speaking, using it would save a tenner on the price of a ?1,000 season ticket. The problem is, such a change upsets a delicate financial equilibrium.
You can read his full explanation of the figures and why they cause so much trouble here:Ministers must admit to the real reason why train tickets are going up
Average fares have risen nearly three times faster than wages
9:07AM
Perfect time for Germany to ramp up investment
The German government is facing increased calls to ramp up spending to stimulate economic growth following this mornings GDP figures. Matthias Weber, an economist at the University of St. Gallen in Switzerland, says:

While the industrial sector is already in recession, the service sector is currently still doing fine but will likely follow soon. Given the current economic situation at the beginning of a recession, now would be the perfect time for Germany to support the economy by investing in its future. Public investments in railways, roads, bridges, childcare centers, public schools, and renewable energy are much needed. Such investments could currently be made at an extremely low (even negative) interest rate and they would boost the slowing aggregate demand.

The second-quarter contraction put further pressure on German bond yields as investors continue to movetowards safe-haven assets.
New deal = new record-low German bond #yield. Now at -0.62%! pic.twitter.com/nR5esO1VM9 jeroen blokland (@jsblokland) August 14, 2019
Heres our read on whats going on in the worlds increasingly haywire bond market:Slide in bond yields deepens fears of worldwide recession
8:58AM
National Grid boss: Government must probe why railways and hospitals lost power during blackouts
Markets slump as recession warning lights start to blink: as it happened

People wait outside Kings Cross during last Fridays blackout

Credit:
Lewis Pennock/PA
National Grid boss John Pettigrew has said the government must look into why power was cut to critical bits of infrastructure including hospitals and railwaysduring the blackout last week.
Speaking to the Financial Times, Mr Pettigrew said National Grid had restored power quickly, and said problems had been caused a a local network level.
He told the paper:

The network was back and in normal operation within seven minutes but the disruption was massive, so its absolutely critical we look at the prioritisation of demand.
You can read the FTs full interview with Mr Pettigrew here:National Grid chief questions hospital power cuts (?)
8:45AM
Round-up: Government urges no-deal preparation, FirstGroup wins West Coast and HS2 franchises
Markets slump as recession warning lights start to blink: as it happened

Michael Gove is in charge of preparations for a no-deal Brexit

Credit:
Heathcliff O'Malley
Two big stories from this morning:
Government urges industry groups to prepare businesses for no-deal Brexit:The Government has asked industry groups to come up with creative and practical ways to help businesses prepare for a no-deal Brexit.
FirstGroup wins lucrative West Coast rail and HS2 franchises:Firstgroup and Trenitalia have won the contract to run the West Coast rail franchise and the HS2 high speed railway, when it is built, in a deal that will see the Government share economic risk with the private operators.
8:25AM
Merkel: Were heading into a difficult phase re-cap
Markets slump as recession warning lights start to blink: as it happened

Angela Merkel (right) with defence minister and heir apparent Annegret Kramp-Karrenbauer

Credit:
Markus Schreiber/AP
It was Angela Merkels first day back from her summer holidays on Monday, and theGerman Chancellor must have known she was returning to bad news.
Todays figures showed an expected 0.1pc second-quarter GDP contraction in Europes largest economy, as the export-heavy nation struggles with global disruption.
Gross domestic product in the 2nd quarter of 2019 down 0.1% on the previous quarter. https://t.co/fsQPJMuMGi #GDP pic.twitter.com/H1RSx7EDYf Destatis news (@destatis_news) August 14, 2019
At a town hall yesterday, Ms Merkel was pushed on the state of Germanys economy.
Its true, were heading into a difficult phase,she said, adding of todays figures:We will react depending on the situation.
Domestic demand is still somewhat propping up the economy, the outgoing Chancellor added.
Germany published its draft budget yesterday, which maintained a policy of not increasing net debt: suggesting the plan isnt to spend its way to growth.
If the German economy is on its way to a recession, that will be confirmed in November. Sorting out the countrys economic issues, however, may ultimately fall to Ms Merkels successor. The Chancellor reiterated yesterday that she will not seek public office again after she steps down in 2021.
8:11AM
ING: The end of a golden decade for Germany
Markets slump as recession warning lights start to blink: as it happened

Is it time for a shake-up in German industry?

Credit:
Ralph Orlowski/REUTERS
ING economistCarsten Brzeski has assessed this mornings GDPfigures, and what kind of action they may prompt from Germanys government and the European Central Bank, which last month hinted that it was preparing a package of measures to help stimulate the economy. He writes:

Todays GDP report definitely marks the end of a golden decade for the German economy. Since the end of the 2008/09 recession, the economy has grown by an average of 0.5pc [quarter on quarter]every quarter. In fact, the economy grew in 35 out of the last 40 quarters. However, under the surface of these impressive headline numbers, a worrisome trend has emerged. Since 3Q 2018, the economy has been in a de facto stagnation, with quarterly GDP growth at an average of zero percent...
...There is no need to panic, but instead to act. Looking ahead, the future path of the German economy highly depends on external events and government action. Obviously, any relief in the ongoing trade conflicts would benefit the German economy. Companies could still use extremely favourable financing conditions and invest. However, the principle of hope is not enough. The pressure on the German government to act will increase.

MrBrzeski said Europes largest economy now needs a stimulus package aimed at digitisation, climate protection, energy transition, infrastructure and education.
Markets.coms Neil Wilson added:

The export heavy economy is suffering as global trade contracts. Unless maybe Merkel and co can shake off their dogma its only been a hundred years since hyperinflation.
?? No upside surprise in Germany. Real GDP fell by 0.1% q-o-q in Q2, decelerating from a 0.4% rise in Q1. We dont have numerical details but destatis mentioned that domestic demand contributed positively to growth, while foreign trade was a drag (1/n) pic.twitter.com/sZoh7KKUyM Nadia Gharbi (@nghrbi) August 14, 2019
7:56AM
Final details on second quarter will reveal reasons underpinning contraction
Claus Vistesen, from Pantheon Macroeconomics, says the data is Not pretty, but slightly better than we had feared based on the monthly data. He adds:

This information is of very little use, though, until we see the final breakdown between investment and inventories. Looking ahead, early Q3 sentiment data suggest that the economy remains weak. The risk of a recession is now elevated, but indicators for domestic private demand remain relatively resilient, especially in the services sector and with respect to consumers spending. By contrast, leading indicators for manufacturing and construction suggest that investment is slowing, and todays data suggest that the final Q2 details will confirm this.

Its worth remembering that todays data follows a mega slump in German investor confidence, as revealed yesterday by research group ZEW. Heres our full report on that data:
Shock slump in German confidence adds to recession fears
7:33AM
Door is wide open to a German recession
The mood in Germany is not great. Here's whatKlaus Borger, an economist at public investment bank KfW, has said about the GDP figures:

With the escalating trade conflicts of the USA, the ever more probable chaos (of) Brexit and the weaker world economy, the perfect storm has been brewing since the summer of last year. The door at least to a technical recession... is wide open.

Germanys most important export, cars, have driven the decline in its ailing manufacturing sector, but its not the only issue facing the country. My colleague Tom Rees had examined the fourkey problems facing the stumbling German economy:
Is Germany sinking towards recession after another contraction?
7:16AM
German contraction, train ticket hike and trade wars
Markets slump as recession warning lights start to blink: as it happened

A Volkswagen factory worker

Credit:
FILIP SINGER/EPA
Good morning. The big news out this morning is that fears have increased thatGermany is heading for a recession after suffering a 0.1pc contraction in its economy in the second quarter of the year.
The shrinkage means Germany is now lagging the other largest economies in the eurozone, after the second quarter saw Italy flatline and France grow 0.2 percent.
As hard data and soft indicators such as surveys of business, investor and consumer sentiment have eroded in recent weeks and months, economists have warned Europe's powerhouse could suffer falling output and even a technical recession two successive quarters of negative growth.
Federal statistics authority Destatis said higher spending by private households and the state as well as increased investments helped support the economy at home.
But foreign trade developments braked economic growth, since exports fell back more sharply than imports compared with the previous quarter, the statisticians added.
Elsewhere, markets may be pushed higher today after President Donald Trumpdelayed tariffs on some Chinese goods, including laptops and mobile phones, until December 15.
The reprieve came after a call between US trade representative Robert Lighthizer and Chinese vice-premier Liu He ahead of tariffs that would have hit $300bn (?249bn) of imports from China on September1. The two sides plan more talks in the next two weeks, according to Chinese state-run media.

5 things to start your day


1) Confidence in the German economy has crashed to its lowest level since the depths of the eurozone debt crisis, fuelling fears of a recession.
2)Fears are growing that the jobs miracle could be close to its end as unemployment edged up in June, the number of vacancies slid and productivity took its biggest plunge since 2013
Wages and unemployment
3)Today we'll find out how much more a train ticket will cost next year. Inflation figures released later will be used by the rail industry to calculate Januarys rises.
Increases in annual season ticket prices
4)Hong Kong protests
See also:
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