Good morning and welcome to our continued coverage of the world economy, financial markets, the eurozone and business.
Growth concerns are weighing on markets amid warnings of an economic slowdown on both sides of the Atlantic as the pandemic continues to disrupt global supply chains.
Anxiety over an economic slowdown has intensified, after the US Federal Reserve warned that the US economy “dipped slightly” in August, amid rising coronavirus cases and growing supply chain problems and shortages of workforce.
In its latest summary of current US economic conditions, the Fed warned that the renewed rise in the coronavirus has affected restaurants, travel and tourism, saying:
“The slowdown in economic activity was largely due to a decline in dining out, travel and tourism in most districts, reflecting safety concerns due to the increase in the Delta variant and, in some cases, to international travel restrictions. “
The Fed’s ‘Beige Book’ also noted that companies are experiencing inflationary pressures and struggling to obtain raw materials and parts, and to hire staff (a familiar tale this year).
“With the widespread scarcity of resources, the pressures on input prices continued to be widespread.”
The companies also reported:
“Substantial increase in the cost of metals and metal-based products, freight and transportation services, and construction materials”
This dampened the mood on Wall Street a bit and hit Asia-Pacific stocks today. European markets are expected to fall as well, adding to yesterday’s decline.
From Japan Nikkei 225 is down 0.7%, while Australia S & P / ASX 200 has fallen by 1.9%, Hong Kong Hang seng has lost 2% and South Korea Kospi 200 it is down 1.75%.
Hong Kong’s tech giants led the sharp sell-off after China further tightened its grip on the gaming sector. convene companies such as Tencent and NetEase to ensure they implement new rules for the sector.
And in a sign that the pandemic continues to cause disruption, Japan said on Thursday that it will extend emergency COVID-19 restrictions in Tokyo and other regions until the end of this month.
The move is meant to curb infections and prevent hospitals from being overwhelmed, and Tokyo said it was too early to lower its guard.
The Bank of England also sees signs that the UK’s recovery is slowing as the supply of goods remains disrupted and companies scrambling to fill vacancies.
Governor Andrew Bailey told MPs:
At this moment we are seeing a certain stabilization of the recovery, the short-term indicators are suggesting it.
The Bank’s governor suggested that Covid’s disruption to global supply chains, which have shifted industries from car manufacturing to hospitality, had proven to be more persistent than expected down Threadneedle Street earlier this year, as Higher rates of coronavirus infections and increased demand for manufactured goods put pressure on Shipping.
He said there was an expectation that consumer demand for goods would increasingly shift to services as pandemic restrictions were relaxed, but that so far had not happened as much as expected.
“There is an underlying story of unbalanced demand, which we think is on its way to correct by now.”
The European Central Bank will assess the state of the eurozone economy as it meets to set monetary policy.
Some ECB officials are pushing to reduce their stimulus program after inflation peaked in a decade.
Ipek Ozkardeskaya, senior analyst at Swissquote, says:
One reason the ECB hawks are returning to command is rising inflation. The European CPI reached the 3% mark in August. The latest jump in the CPI fueled fears among inflation-skeptical member states such as Germany, Austria and the Netherlands, which began calling for a reduction in ECB asset purchases sooner rather than later.
The question is when and how? I believe that the divergent views at the heart of the ECB will not allow the bank to make any abrupt moves in the near future. We will most likely see the ECB slow down its PEPP purchases, but a reduction in the overall size of the pandemic program, a change in the regular APP, or a normalization of rates are highly unlikely.
Today’s meeting will give an insight into how the ECB will cope with rising inflation and stressed aggressive members, what the conciliatory balance will look like, and where the euro should be heading next. We will most likely see President Christine Lagarde calming pigeon nerves at today’s press conference, which should trigger some weakness in the euro against the dollar in the short term.
We also get the latest summary of UK economic indicators from the Office for National Statistics and the US weekly unemployment figures, where vacancies hit a new high yesterday.
- 7am BST: German Trade Balance for July
- 9.30am BST: Business information and impact on the UK economy
- 12:45 pm BST: European Central Bank interest rate decision
- 1.30pm BST: European Central Bank press conference
- 1.30pm BST: US weekly unemployment report
George is Digismak’s reported cum editor with 13 years of experience in Journalism