Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Investors have a lot to worry about today, with a currency crisis in Argentina, mass demonstrations in Hong Kong, and plenty of signs that the global economy is slowing.
These concerns are driving them into safe haven assets, and top of the list is gold. Bullion prices have soared to a new six-year high this morning, with gold changing hands for $1,523 per ounce – up 1% today.
This is the highest level since 2013; as this chart shows, gold has surged by almost 20% in the last three months.
Ilya Spivak, senior currency strategist with DailyFx, says traders are increasingly concerned that an economic downturn is looming.
“It is a pretty straight forward case of risk aversion. Crisis in Argentina and political deterioration in Hong Kong; underlying all of this, global growth is slowing.
“Central banks can only do so much because a lot of them are at near record low interest rates. There is not a lot of ammunition to deploy as counter measures to the slowdown in global growth.”
Gold’s latest rally follows a bad day on Wall Street yesterday, where the Dow Jones industrial average lost 389 points, or almost 1.5%, back to 25,897 points.
That followed a shocking day in Argentina, where the Buenos Aires market plunged by 30% (!) after left-wing politician Alberto Fernández scored a stunning victory over Conservative President Mauricio Macri in Sunday’s primary elections.
The peso also suffered a dramatic slump, to fresh record lows, as the markets faced the prospect of a new Argentinian debt crisis.
My colleague Richard Partington explains:
Argentina and several other developing nations have come under growing pressure over their high levels of foreign currency debt. The US dollar has appreciated in value as the US Federal Reserve has lifted interest rates, which has made it more expensive for these countries to repay their dollar-denominated debts.
Macri, the son of a self-made construction tycoon, had made “zero inflation” a campaign pledge before he came to power in 2015. In reality it has soared to more than 50% as the peso has weakened.
Considered a market-friendly leader, Macri has used austerity measures in an effort to stem the country’s currency crisis, provoking an angry public response.
Argentina relies on support from the International Monetary Fund through a $57bn (£47.2bn) loan intended to shore up the country’s ailing finances.
Anxiety over the protests in Hong Kong has also risen, following the shutdown of its airport yesterday. Several world leaders are pushing for calm, amid fears that China could resort to military action to crush the pro-democracy movement.
Also coming up today
The latest UK unemployment report, due this morning, could show that Britain’s labour market is still managing Brexit uncertainty.
Economists predict that basic wage growth picked up to 3.8% per year in the second quarter of 2019, up from 3.6% a month ago. The jobless rate is expected to stick at 3.8%, the lowest in over 40 years, even though the UK shrank during the last quarter.
The ZEW Institute’s survey of business confidence is due this morning, and could show that German investors are gloomier, due to trade war worries and the global slowdown.
Investors will also scrutinise the latest US inflation data. It could show that consumer prices rose by 0.3% last month, or 1.7% per year.
The agenda
- 9.30am BST: UK unemployment report for April-June
- 10am BST: German ZEW index of investor sentiment
- 1.30pm BST: US inflation report for July
