Section:GDN 1N PaGe:35 Edition Date:190815 Edition:01 Zone: Sent at 14/8/2019 19:25 cYanmaGentaYellowb
Thursday 15 Aug ust 2019 The Guardian •
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FTSE 100 All share Dow Indl Nikkei 225 £/€ £/$
1.2070+0.0035 -0.0001Fears of a global slump send
investors rushing for bonds
Phillip InmanThe prospect of Germany sliding into
recession and sharper than expected
slowdowns in China and the US sent
jittery fi nancial markets spiralling
downwards across the world to lows
last seen in May.
Investors dumped shares and
bought safer government bonds, add-
ing to the sense of panic that has grown
steadily following Donald Trump’s
threat this year of extending tariff s to
all Chinese exports to the US.
The inversion of the US yield curve,
known as Wall Street’s original “fear
gauge”, for the fi rst time since 2007
was another widely quoted sign that
the US economy faced the prospect of
a contraction, possibly next year, fur-
ther fuelling investors’ fears.
A climbdown by Trump, who has
delayed many of the tariff s on hi-tech
goods until after Christmas , failed to
prevent the rout after fi gures for China
and Germany revealed that their econ-
omies were in severe diffi culties.
China’s industrial production hit a
17-year low, while growth in retail salesin the world’s second-largest economy
proved to be lower than expected.
The German economy, the world’s
fourth largest , contracted by 0.1% in
the second quarter of the year, halv-
ing the growth rate of the 19-member
eurozone currency bloc from 0.4%
in the previous quarter to 0.2%. The
manufacturing sector, particularly the
important German car industry, has
been particularly hard hit.
Fiona Cincotta , at the spread-
betting fi rm CityIndex, said : “Doom
and gloom dominated after data
showed that Chinese industrial out-
put grew at the slowest pace in 17
years, whilst the German economy
contracted. Recession warning bells
rang out across the markets as Trump’s
delaying of tariff s on some Chinese
imports is a case of too little, too lat e- the damage to economies has already
been done.”
In New York, the Dow Jones indus-
trial average fell more than 700 points,
or 2.3%, while the index of technology
stocks, the Nasdaq , tumbled by 2.5%.
The top London-listed share index
lost 134 points, or 1.85%, after the
FTSE 100 dropped to 7,116 – its lowest
in more than two months.
Until recently, investors focused
on the likely impact of US tariff s on
growth in the US and China and on
stock markets’ share values rising
and falling with Washington’s running
commentary on talks with Beijing.
But the damage caused by the tariff
war on exporting nations in Europe
and east Asia has convinced many
analysts that the global economy is
caught in an unstoppable downshift
in growth. In response, investors have
rushed to buy safe government bonds,
including US Treasuries and UK gilts.
The stampede meant the USTreasury 10-year bond yield curve also
inverted for the fi rst time since 2007.
The gap between two-year and
10-year bond yields, which trans-
late into the eff ective interest paid on
government debt over diff erent time
periods, declined to –0.45 basis points,
the narrowest since June 2007.
When short-term Treasury bonds
pay a higher interest rate than long-
term bonds, it is generally regarded
as a sign that investors believe an eco-
nomic calamity is likely and central
banks will be forced to slash rates.
Central banks have responded to
the slowdown by cutting interest rates.
The US Federal Reserve, which raised
interest rates nine times from 2015 to
this year as the economy improved,
moved to reverse its policy in July, cut-
ting back by 0.25 percentage points.
Other central banks also cut rates,
while the European Central Bank,
which already applies negative inter-
est rates, has said it is likely to loosen
monetary policy soon. Some analysts
said the Fed would have to cut rates to
support the US economy.
Steen Jakobsen, chief economist at
Saxo Bank, said the speed of the down-
turn meant the Fed would need to go
ahead with rate cuts between meet-
ings. “The Fed is behind the curve and
has been since September. The only
way to ‘move ’ market now is [cutting
rates] between scheduled meetings.”▲ Germany’s manufacturing sector,
especially the car industry, shrank,
halving eurozone growth to 0.2%
PHOTOGRAPH: FABIAN BIMMER/REUTERSHouse prices
fall in whole
of south for
fi rst time
since 2009
Richard PartingtonHouse prices have fallen across the
south of England for the fi rst time
since the last recession in 2009 as
Brexit uncertainty holds down the
property market.
In a sign that falling prices in London
are spreading to other regions as the
departure date from the EU draws
near, the Offi ce for National Statistics
said the average cost of a home also
fell in the south-east and south-west
of England in the year to June.
The ONS said it was the fi rst time
that average prices had fallen in all
three regions of southern England,
covering an area extending south
from Milton Keynes to Land’s End in
the west and Dover in the east, since
September 2009.
House-price growth across the
country has slowed since the EU
referendum three years ago, dragged
down by London in particular, where
prices fell for the 16th month in
succession in June.
Average prices in England rose by
0.9% on the year, which is the weakest
national growth rate since 2012. The
average UK house price was £230,000
in June, about £2,000 higher than a
year ago.
While property values fell in
London and the south, they contin-
ued to climb in other areas, albeit at
slower rates than in recent years. The
biggest rise was in the east Midlands,
up 3.2% on the year. Prices also rose
in the east of England region, which
includes cities such as Cambridge,
Ipswich and Norwich.
House price aff ordability is still
stretched for many. According to
Halifax, the UK’s largest mortgage
lender, the average price of a home is
5.59 times average earnings, well above
the long-term average ratio of 4.29
between 1983 and 2019. Home own-
ership rates are falling, particularly
among the under-35s , meaning fall-
ing prices could help fi rst-time buyers
on to the property ladder.
Nick Leeming , the chairman of
the estate agent Jackson-Stops, said:
“Data makes it clear that continued
uncertainty as we creep ever closer
to leaving the EU without a deal has
caused hesitancy in some areas of the
property markets.ӣ2,000
Amount by which the average UK
house price increased, to £230,000,
Source: Refinitiv in June 2019 from a year earlierFTSE 100
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