Good morning, and welcome to our rolling coverage of the latest news from the world economy, the financial markets, the eurozone and business.
We get the latest healthcheck of the eurozone economy today, with provisional August manufacturing and services numbers for France and Germany, as well as the bloc as a whole.
Analysts expect a slight decline for the two countries, with Michael Hewson, chief market analyst at CMC Markets UK saying:
After a strong few months [Germany does] appear to be starting to show signs of plateauing. Expectations are for a modest decline from 58.1 to 57.7 in manufacturing, while services, which have been underperforming expected to pick up from 53.1 to 53.4.
The numbers from France are also expected to decline modestly with manufacturing slipping back to 54.5 from 54.9 and services to come in at 55.9, down from 56.0.
The German figure in particular will be under scrutiny after Tuesday’s disappointing economic sentiment figures, which appear to have been partly affected by the continuing emissions scandal at the country’s key car companies. Hewson again:
It was only a month ago that the head of the German IFO reported that business confidence had hit record highs in Europe’s largest economy with sentiment amongst German businesses at euphoric levels. This in itself should have acted as a warning sign given that euphoria as an emotion tends to dissipate quite quickly and subsequently be followed by either melancholy or depression.
This appears to be what German investors are experiencing if yesterday’s ZEW economic expectations is any guide, after it hit its lowest level this year, and a 10 month low.
The reality is that the truth is likely to be somewhere in between and today’s latest German flash PMI data along with this Friday’s IFO should give some clues as to whether investor concern with respect to German economic expectations is one that is shared by German businesses.
The fact is that investor confidence has been declining steadily since May, which is roughly around the same time that the German DAX topped out and started its steady decline to the three month lows we saw last week, and these two do have a tendency to correlate quite closely.
It could be that the growing scandal surrounding the German auto sector has the potential to make German businesses a little bit nervous given how many jobs rely on this powerful part of the German economy, which means this Friday’s IFO reading could be quite instructive.
Elsewhere European Central Bank president Mario Draghi is due to make a speech at a meeting on economic sciences in Lindau, Germany. It will be scrutinised for any hints as to when the central bank might beginning withdrawing its economic stimulus package. The euro has been weak recently as uncertainty surrounds the ECB’s plans, but it seems unlikely Draghi will give much away today, when it has already been suggested he will say little at the key meeting of central bankers at Jackson Hole in the US later this week.
Meanwhile markets are expect to get off to a mixed start, as investors await the Jackson Hole bunfight.
On Wall Street the Dow Jones Industrial Average added 0.9% on hopes that President Trump would now move to push through tax reforms. But there could be renewed nervousness today after a rally in Phoenix, when Trump returned to his populist tactics including a threat to shut down the federal government unless Congress provided funding for his promised border wall with Mexico.
In Asia the Nikkei 225 has moved slightly higher, but the Hong Kong stock exchange has shut after Typhoon Hato came within 60 kilometers of the country.
8.00 BST ECB president Mario Draghi speaks in Lindau, Germany
8.00 BST French manufacturing, services and composite PMIs
8.30 BST German manufacturing, services and composite PMIs
9.00 BST Eurozone manufacturing, services and composite PMIs