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European stocks rally on hopes of new Italian coalition: as it happened

Louis Ashworth
Italy’s biggest leftist parties are holding talks to form a coalition - AFP

5:31PM

Wrap-up: Italy leads the charge as Europe rallies

Members of Italian elite military unit Cuirassiers' Regiment, who are honor guards for the Italian president, change positions as Sergio Mattarella holds consultations on political crisis at the Quirinal Palace in Rome Credit:  REMO CASILLI/REUTERS

With further coalition talks set for later this afternoon, Italy’s FTSE MiB closed on a high, gaining 314.47 points, or 1.52pc.

That positivity, and the absence of any sharp post-G7 news on the trade war, was enough to prompt a rally across continental stocks, with respectable gains of around 0.6pc for most of Europe’s blue chips.

Dragging its feet was the FTSE 100. As well as some poor individual stock performances, it felt the downside of a big day for the pound, which climbed strongly against the euro and dollar. If sterling can keep up gains over the next couple of days, it may reach pre-Boris Johnson levels again.

On the trade war front, we’re still not exactly clear what to expect. Certainly, Donald Trump came away from the G7 this year in a much more upbeat mood than last time around:

The fundamentals remain the same, however: talks next month are probably going ahead, though we don’t know much about how and when, and tariffs are still also set to increase. Markets are unlikely to happily tolerate such a tumultuous status quo.

That’s all for today. I’ll be back tomorrow with the latest news on business, markets and economics. Have a good night!

4:50PM

US stocks flatten as FTSE flips negative

Despite a strong start out of the gate, Wall Street has pulled back slightly, with the main US indices flat as pancakes.

Meanwhile, the weight from British American Tobacco, now off 4.4pc, has proved too much for the FTSE 100 — which returned to negative territory to close 0.08pc down.

4:48PM

Deloitte partners bag biggest payday in 10 years

Deloitte partners will get an average profit share of £882,000 each Credit: HANNAH MCKAY/REUTERS

The overall picture for UK auditors might be a little dark currently, but that’s clearly not causing too many worries at Big Four firm Deloitte, where partners took an average profit share of £882,000 for the year to May. My colleague Harriet Russell reports: 

The bumper pay packets come at a difficult time for Britain’s big accountancy firms as criticism mounts over significant audit failings. 

Deloitte is the first of the Big Four firms to announce annual results, with PwC, EY and KPMG due to follow.

UK partners at PwC made an average of £712,000 last year, while EY partners made £693,000, and those at KPMG £601,000. 

Deloitte’s UK revenues, which include fees from its Swiss division, rose nearly 11pc to £3.97bn in the 12 months, while distributable pre-tax profits were up more than 5pc to £617m following the sale of an investment and currency fluctuations. 

4:26PM

Full report: Philip Morris and Altria in talks over $200bn reunion of tobacco giants

If the merger goes ahead, both companies would join under the Philip Morris name Credit:  LAURENT GILLIERON/EPA-EFE/REX

We have a full article up now on merger talks between Philip Morris International and rival Altria, which could see the companies reunite. Bloomberg reports:

The companies, which jointly own the Malboro brand, divided in the wake of pressure from US investors who wanted higher dividends and more share buybacks.

It was also pitched as a way to set free faster-growing overseas operations while the American business battled legal action from smokers.

You can read the full report here.

4:20PM

Squabbles over jobs split Five Star and Democratic Party

Italian Democratic Party Nicola Zingaretti, Prime Minister Giuseppe Conte and Industry Minister and deputy PM Luigi Di Maio Credit:  VINCENZO PINTO/ AFP

We’ve been getting slightly mixed signals out of Rome today, but merely the suggestion of stability — in form of more Giuseppe Conte, and no election — has been enough to drive Italy’s FTSE MiB to pack-leading performance. Reuters reports:

The anti-establishment Five Star suspended negotiations with the centre-left PD until it clearly committed to the return of outgoing Prime Minister Giuseppe Conte as PM.

The PD meanwhile accused Five Star of undermining the formation of a new cabinet by demanding the interior ministry for its leader, Luigi Di Maio.

“The government agreement is at risk of failure due to the personal ambitions of Luigi Di Maio, who wants to be the minister of the interior and the deputy prime Minister,” a PD spokesman said.

“Di Maio pays attention to nobody and proceeds through ultimatums,” he added.

In response, Five Star said Di Maio — a deputy prime minister in the outgoing administration who also served as industry and labour minister — had never demanded the interior ministry.

4:04PM

US consumer confidence continues to climbs despite recession fears

There may be signs of a global slowdown and recession warnings ringing from the US bond markets, but American consumers are showing no sign of negativity:

That’s potentially good news for the US economy, as consistently strong consumer spending behaviour has unpinned recent growth.

A word of warning, however: the figures, of course, only show confidence. And a quick look back on the charts above should serve as a reminder of how quickly things can change, even when consumers are feeling very upbeat (hint: the Great Recession).

3:47PM

Conte grabs Trump endorsement...

Donald Trump (left) and Giuseppe Conte speak at the G7, with Emmanuel Macron in the foreground Credit: Getty Images Europe/Pool

It looks like Italian Prime Minister Giuseppe Conte, who the Five Star party are trying to keep in place as part of coalition talks with the (Italian) Democratic Party, made a good impression on Donald Trump over the weekend:

3:33PM

British American Tobacco shares smoked as rivals plot merger

News that tobacco giant Philip Morris International is in talks over a tie-up with Altria (see 14:36pm update) have rocked rival British American Tobacco, whose shares are off 2.5pc at the moment.

That’s a big drag on the FTSE 100, with the blue-chip index just barely in positive territory at 0.07pc up.

If the deal is agreed, it would bring Altria and PMI back together after the latter was spun off a decade ago.

3:16PM

Wall Street joins rally

Stock indices in New York have opened higher, joining the European rally, with apparent relief at Donald Trump’s claims that the US is preparing for talks with China (despite Beijing not quite agreeing on the shape of events).

  • The S&P 500 is up 0.5
  • The Dow Jones Industrial Average is up 0.35pc
  • The Nasdaq is up 0.55pc

It’s notable that the climb is continuing despite signs the two-year/10-year yield curve inversion is hanging around (see 10:15am update):

3:07PM

Italian Democratic Party Senator says talk are progressing

Andrea Marcucci (centre) is the PD Senate whip Credit:  MASSIMO PERCOSSI/EPA-EFE/REX

The latest from Rome: speaking to Italian media, Democratic Party (PD) Senator Andrea Marcucci has said progress is occurring in negotiations over a potential coalition with the left-wing populist Five Star movement.

That is likely to further feed the FTSE MiB’s rally, as investors hope that an election can be avoided. The index is up 1.7pc.

3:02PM

Polymetal cashes in on gold rush as it shoots towards FTSE 100

The price of gold has risen amid market uncertainty Credit:  Bloomberg News

Marks & Spencer’s loss (see 9:43am update) looks likely to be Polymetal’s gain, with the Russian gold and silver miner heading for a place in the blue-chip index during next week’s shuffle. Assistant business editor Jon Yeomans reports: 

The company was buoyed by the ramp-up of Kyzyl, a new mine in Kazakhstan, which began operations last year. 

The price of gold has surged in recent months on the back of rising volatility in stock markets, with nervous investors increasingly drawn to safe havens.

Gold is trading at about $1,530 (£1,239) an ounce, its highest level in six years, but the surge came a little too late for Polymetal’s first-half numbers. 

Polymetal has been in the FTSE 100 before: first in 2011, and against in 2016, but has fallen out again both times.

If M&S does lose its place, it will leave  just 27 of the index’s original members in place. AJ Bell analyst Russ Mould has taken a close look. He writes:

M&S is one of just 28 original members that are still in the FTSE 100, 35 years after its launch. Sixteen, including M&S, are still there under the same name while 12 more are present under a different identity and a further 13 are now part of another FTSE 100 constituent following merger and acquisition activity.

AJ Bell produced this graphic showing whether the original 100 have ended up:

AJ Bell

2:46PM

Round-up: Renold’s accounting probe finds ‘intentional misstatements’, mortgage rate hits two-year high, ‘Mr Volkwagen’ dies, plus: biotech in the Welsh valleys

Ferdinand Piech (left) with German Chancellor Angela Merkel in 2012 Credit: Fabian Bimmer/ REUTERS

Here are some of this afternoon’s top stories:

And here’s something you may want to know more about, from my colleague Julia Bradshaw:

  • Biotech boom has Welsh valleys singing a new tune: Coal mines, green valleys, herds of sheep and male choirs are often associated with Wales, while medical science is not. However, the country is punching well above its weight in the sector and working hard to convince companies to cross the border.

2:36PM

Philip Morris announces merger talks with rival Altria

Some smoke signals are arriving from New York, where tobacco giant Philip Morris International has announced it is in merger talks with rival Altria. The company said in a filing:

Philip Morris International Inc. (PM) today announced that it is in discussions with Altria Group, Inc. (MO) regarding a potential all-stock, merger of equals. There can be no assurance that any agreement or transaction will result from these discussions. 

Any transaction would be subject to the approval of the both companies’ boards and shareholders, regulators, and would other conditions.

2:32PM

Standard Life Aberdeen climbs as holdings make gains

Standard Life Aberdeen boss Keith Skeoch Credit:  GRAHAM FLACK

Standard Life Aberdeen is one of the FTSE 100’s top climbers today, up just under 4pc after two of its key balance-sheet holdings — India-based HDFC Life and HDFC Asset Management — posted gains of 5.5pc and 7.5pc apiece.

SLA is giving the biggest upwards pull to the blue-chip index, which is now posting gains of 0.2pc. The biggest movement on the index is Abu Dhabi-based healthcare provider NMC Health, which has been highly volatile during recent weeks.

2:07PM

Carpetright shareholder buys up debt

Carpetright is in the middle over a turnaround plan Credit: Chris Ratcliffe/ Bloomberg News

Carpetright has been given a big boost after hedge fund Medior, one of its biggest investors, said it would shoulder a big chunk of the company’s debt. Laura Onita reports:

Carpetright is in the middle of a turnaround plan after high rents, a downturn in sales and fewer shoppers starting big DIY projects weighed on its growth. It had to strike a rescue deal with its landlords and other creditors last year, entering into a form of insolvency known as a company voluntary agreement (CVA).

  • You can read her full report here: Boost for Carpetright as biggest investor takes on debt pile

1:36PM

European equities strengthen gains as FTSE inches closer to flat

Five Star members meet the press after meeting with members of the Democratic Party delegation Credit:  MASSIMO PERCOSSI/EPA-EFE/REX

The European rally is only getting stronger, with bourses lifted further in recent minutes after senior Five Star politician Francesco D’Uva, part of the team negotiating coalition conditions with the Democratic party, told news agency Ansa talks have not broken down despite earlier reports. 

  • The FTSE 100 is down 0.12pc
  • Germany’s DAX is up 0.6pc
  • France’s CAC 40 is up 0.41pc
  • Spain’s IBEX is up 0.8pc
  • Italy’s FTSE MiB is up 1.3pc

1:31PM

Opposition leaders seek ‘practical ways to prevent no-deal’

Labour leader Jeremy Corbyn Credit:  DANIEL LEAL-OLIVAS/ AFP

Over on our politics live blog, Danielle Sheridan has the latest on those anti-no-deal talks among opposition parties. In a joint statement, the Labour Party, SNP, Liberal Democrats, Plaid Cymru, the Green Party and the Independent Group for Change said:

The attendees agreed that Boris Johnson has shown himself open to using anti-democratic means to force through no deal.

The attendees agreed on the urgency to act together to find practical ways to prevent no-deal, including the possibility of passing legislation and a vote of no confidence.

12:18PM

FTSE MiB breaks 1pc gain again despite deadlocked talks

Italy’s blue-chip index is continuing to outperform its peers, up more than 1pc currently as talks continue between its leftist parties (see 11:17am update).

NB: It looks like there was a slight glitch with the image embed in my previous post. Please refresh the page and it should sort itself out. Apologies!

12:14PM

Index flinger: Why do companies move between indices?

With Marks & Spencer on the chopping block next week (see 9:43am update), here’s a quick explanation of the relegation and promotion process (all prices from the close of trade on Friday):

For a movement to occur, either a non-FTSE 100 company must surpass the market cap of the 90th-placed blue-chip (currently developer British Land, at £4.62bn)  OR a current FTSE 100 company must drop below the 111th-ranked company (currently repairs firm HomeServe, at £3.68bn) by the deadline.

The stock exchange movement brackets Credit: FTSE Russell

There is a chance that more mid-caps might push their way up: at the close of trading on Friday: these are Hikma Pharmaceuticals at £4.93bn, and engineering firm Meggitt at £4.81bn. Both could jump the 90th place barrier, with Meggitt big enough to push into the high 80s even if M&S’s relegation raises the barrier higher.

M&S is currently valued at £3.64bn by market capitalisation, after shares shed over a fifth of their value in recent months as it battles high-street headaches and internal issues. Its place would likely go to FTSE 250 leader Polymetal, a Russian gold and silver miner that is worth £5.24bn — having risen nearly 40pc since the start of May.

If more movement does occur, British Gas owner Centrica and insurer Direct Line are next in line for the chopping block.

You can find more details on the process works here.

11:54AM

Investors in a ‘state of confusion’

There’s one person who really matters to Wall Street investors currently... Credit:  ANDREW KELLY/REUTERS

With Europe still broadly upbeat, the UK is only dark spot among the region’s blue-chips, sulking at 0.3pc down. Oanda’s Craig Erlam writes:

It’s been a rollercoaster ride of trade war sentiment over the last few months and it seems traders have now entered into a state of confusion at where things actually currently stand...

...Despite all of this, stock markets aren't exactly doing terribly just yet, which is probably what is giving the President such a feeling of confidence. Of course, that is predicated on the belief that the Fed will reluctantly cut rates at least a couple more times this year, despite suggestions from within that this is far from guaranteed.

11:17AM

Sinking Salvini: Has Italy’s punchy populist blown his shot at the top job?

Matteo Salvini takes a sea swim earlier this month Credit: ANTONIO PARRINELLO/REUTERS

Italy’s FTSE MiB blue-chip index is up about 0.6pc, having touched a 1pc rise earlier in the session.

Investors are seizing on hopes that the Five Star (MS5) movement and Democratic Party (PD) might be able to form a coalition — though talks are stuck currently after  MS5 demanded any deal maintained Giuseppe Conte — installed as a neutral figure to lead the previous government — as Prime Minister.

The potential deal is a major blow to Matteo Salvini, leader of the right-wing populist League party, who just weeks ago was seen as a shoe-in for the top job. My colleagues Nick Squires and Andreas Vogt report:

Just as the torrid days of early August have given way to thunderstorms and torrential rain across much of Italy, dark clouds have descended over Mr Salvini’s ambitions.

His tactic appears to have backfired. Instead of marching triumphantly towards elections, hand in hand with the far-Right Brothers of Italy party, Mr Salvini now risks being shut out of power altogether.

11:01AM

FTSE lags as European stocks turn flat

European stocks have now almost totally flattened, with the continent-wide STOXX 600 up 0.06pc. The blue-chips are a bit more even overall, with continued gains on the FTSE MiB and Spain’s IBEX offsetting a weak FTSE, with is still about 0.3pc down.

The UK blue-chip index is feeling pressure from the pound’s strength, which drags on exporters, and weight from big fallers British American Tobacco and AstraZeneca, the latter of which is trading without its next dividend.

Pending any major trade war rumblings, stocks might be expected to pare up some of their losses in the next few days as heavyweight pension funds adjust their positions, but the FTSE 100 is currently on track for its worst month in over four years.

script src="https://tmgpulse.azureedge.net/scripts/article/article-1.js" charset="UTF-8"> 10:43AM

Five things you should read this morning

While we wait for more news on the Brexit front and Donald Trump snoozes in the White House (possibly dreaming dreams of nuking hurricanes), here’s five stories from today and over the weekend that you shouldn’t miss:

  1. Chaotic culture, missed payments and mass exits: The inside story of Solarplicity’s fall from graceMy colleague Vinjeru Mkandawire has taken a deep-dive look at the energy firm after its turbulent summer.
  2. Falling apart at the seams: Why fashion darling Farfetch's value plummeted by $2bnRetail reporter Laura Onita has pulled apart the problems wracking London tech darling Farfetch.
  3. KFC to hold US trial of vegan ‘chicken’ nuggets (Guardian): The Guardian reports that the fast-food giant is looking at plant alternatives to its southern-fried chicken dishes.
  4. Flight shame: can airlines ever reduce their emissions? (FT): The Financial Times  has looked at whether airlines can find tech solutions to reduce the climate damage done by flying (£).
  5. Fred Perry wrestles with US far-right group Proud Boys (Times): The Times has looked at fashion brand Fred Perry’s efforts to disassociate itself from US far-right group The Proud Boys, and how other brands have coped with unwanted customers (£).

10:31AM

Full report: Weak pound lifts Bunzl

Bunzl makes more than 87pc of its sales outside the UK but does its financial reporting in sterling

My colleague Michael O’Dwyer has a full report on Bunzl’s half-year results (see 8:47am update). He writes:

The FTSE 100 packaging and distribution company reported a pre-tax profit of £201m, up from £197m in the same period last year, on revenues of £4.5bn. 

The results were flattered by the weak pound as Bunzl makes more than 87pc of its sales outside the UK but does its financial reporting in sterling. Sales rose 4.3pc but only 1.2pc when the effect of currency changes since last year were stripped out. 

10:15AM

Today in yield curves...

I know, I know: this blog has been talking about inverted yield curves a lot recently.

Global stocks had their worst day of the year a fortnight ago, after the difference between yields on two-year and 10-year US treasuries (government bonds) flipped negative.

That has spooked people, because a 2yr/10yr inversion is an almost-flawless indicator that a US recession is coming. 

IMPORTANT NOTE: Before I am accused of doomsaying, the following caveats must, as ever, be noted:

  1. Just because the yield curve inverted doesn’t mean a recession definitely will  happen, only that it is (arguably very) likely.
  2. Downturns have historically taken up to two years after an inversion to actually arrive.

So what has happened today?

Since its re-inversion on the 14th, the yield curve has actually been generally positive (read: flat), dipping back into the red a few times over the nearly two weeks since then.

If sentiment continues to drop (the curve is dictating by investors’ demand for bonds, which are usually sought-after when there is economic doubt), we should expect the curve to enter a period of sustained inversion soon.

That point may be near: the 2yr/10yr yield curve closed negative for the first time since mid-2007 (right before the financial crisis) yesterday, a sign that the negative sentiment survived the session, and meaning there’s it faces an uphill fight when Wall Street re-opens in a few hours.

9:56AM

Pound holds gains as politicians plot to block no-deal Brexit

Sterling is holding its gains against the dollar and euro this morning, having one of its better recent days as markets take heart at opposition party politicians’ efforts to stop a no-deal Brexit.

9:51AM

German GDP figures, English words

Just in case the German labels on the GDP that I shared earlier were too much to bear (see 8:09am update), here’s an English version of the graph, showing the confirmed 0.1pc contraction that took place during the second quarter.

9:43AM

Marks & Spencer heads for fall from FTSE 100

M&S was one of the blue-chip index’s founding members Credit:  TOLGA AKMEN/ AFP

Middle England favourite Marks & Spencer is one of the bigger risers on the FTSE 100 today, up about 0.65pc.

The retailer needs to move a lot further, however, if it wants to avoid relegation from the blue-chip index next week. The next FTSE reshuffle will happen next Wednesday, based on results from the close of trading on Tuesday, September 3rd. We reported yesterday:

M&S is expected to slip into the mid-cap FTSE 250 as part of a quarterly reshuffle a week on Wednesday unless it can manage a lift in its share price by the close of trading the day before.

The retailer, attempting to reinvent itself as an online supermarket, is valued at £3.64bn, after its shares shed more than a fifth of their value in recent months.

Columnist Matthew Lynn has taken a closer look at the likely move, and what it says about the high street stalwart. He writes:

The FTSE gets reshuffled frequently, and some companies, a little like Crystal Palace in the Premier League, go in and out all the time. But M&S is something different. Along with BAT Industries and Tesco, it is one of the relatively few companies to have been part of the benchmark index since its inception. It has been a bellwether for the state of retailing, and a champion of British business, for as long as anyone can remember. Even a few years ago, the FTSE without it would have been unthinkable. Not any more, however.

9:29AM

Market movers? Corbyn’s Brexit runners and Conte’s (re)coronation

Can you hang on? Giuseppe Conte at the G7 Summit over the weekend Credit:  Dylan Martinez/ PA

With things still quiet on the business front, it looks like politics tides might once again be shifting markets today (and that’s with hours Donald Trump’s usual wake-up time).

In Westminster, Labour leader Jeremy Corbyn is convening a meeting of MPs opposed to a no-deal Brexit, to look into ways of stopping the UK leaving the EU without a deal at the end of October. There are 65 days to go until the scheduled Brexit date.

SpreadEx’s Connor Campbell writes: 

The latest headlines suggest that Jeremy Corbyn could back a pre-Brexit election to try and avert no deal, though that level of uncertainty would be only mild comfort to the pound.

Meanwhile, in Italy, reports say the populist Five Star movement are nearing a deal with the Democratic Party that would keep Giuseppe Conte in place as Prime Minister. That would block Matteo Salvini’s immediate path to power, and have left the FTSE MiB, Italy’s blue-chip index, outperforming the rest of the continent at 0.7pc up.

CMC Markets’ Michael Hewson says:

This could turn out to be a very unstable compromise given that the whole reason for Five Star’s existence is its antipathy to the established order, of which the Democratic Party is a key pillar. Any collaboration would in all likelihood be highly unpopular with their support base, and while keeping the party in power in the short term, would in all probability guarantee their electoral demise in the long term, and make the prospect of a League win highly more probable when there are new elections.

9:02AM

J&J opioid fine: How a painkiller scandal dragged down Indivior

Johnson & Johnson was ordered to pay $572m by Judge Thad Balkman Credit: Sue Ogrocki/ Pool AP

The overnight ruling against Johnson & Johnson  may open the floodgates for more legal cases, as the fallout for a national scandal over drug companies’ role in abetting opioid abuse continues.

As Telegraph Money’s Questor column noted in April, events quickly spiralled out of hand for Indivior as its role in the crisis came into question.

8:47AM

Bunzl earnings flat

A Bunzl warehouse Credit: Bunzl

There’s still a few days left of the quiet summer season, so it’s slim pickings for corporate results. Business supplies giant Bunzl has reported, however, with a weak pound not enough to lift its earnings.

The FTSE 100 company has stuck to its predictions for the full year, despite saying global economic worries were impacting its growth. Adjusted operation profits at constant currency rates rose just 0.3pc.

Analysts are fairly downbeat on the announcement, with concerns that Bunzl isn’t exploiting its cash-rich position to fuel growth through acquisitions.

RBC analyst Kate Sommerville said:

Today’s statement will continue to raise concerns given the topline pressure against the backdrop of underlying margin pressure and minimal M&A.

Jefferies analysts added:

With strong [free cash flow] and a well placed balance sheet the lack of further M&A conversion may be a disappointment.

8:35AM

Trade war cheat sheet

Donald Trump (left) and China’s Xi Jinping

You may have spent the long Bank Holiday weekend in the a garden somewhere, basking in the August sunlight and  enjoying the conversation and company of treasured family members.

But a worry might have flitted across your mind: What if they ask me about the trade war?

With Donald Trump flip-flopping nearly by the hour, and the mix of new tariffs, delayed tariffs and ramped-up tariffs getting ever-more complicated, nobody would blame you for having slightly lost track.

To help you keep up, I’ve put together a guide to the broad strokes, including how tariffs stands, what’s being impacted, and how we even ended up in this mess.

And for anyone who wants a quick visual overview, here’s where tariffs stands based on the latest pronouncements from the US and China:

8:12AM

European stocks open down

European stocks have opened slightly down, with that confirmed German figure a rude awakening after post-G7 cheer.

  • The FTSE 100 is down 0.42pc
  • Germany’s DAX is down 0.24pc
  • France’s CAC 40 is down 0.37pc
  • Spain’s IBEX is down 0.11pc

8:09AM

Germany confirms second-quarter contraction

German statistical office Destatis confirmed the country’s 0.1pc GDP contraction this morning — leaving it unchanged from the first estimate that was announced earlier this month:

They’re only posted a version in German so far, but I’ve put the earlier English version below for clarity.

Here’s the English version, based on Destatis’s first report earlier this month:

8:03AM

Should Germany spend money to make money? 

German Chancellor Angela Merkel (right) and finance minister Olaf Scholz Credit:  CLEMENS BILAN/EPA-EFE/REX

Troubled times for the German economy are challenging the government’s conventional anti-deficit wisdom, causing some to question whether Berlin should shake its commitment to “black zero” — a balanced budget.

Economics reporter Tom Rees has taken a closer look. He writes:

Some economists fear a “golden decade” for the German economy is drawing to a close and a serious slump is taking hold. 

Joachim Lang, general secretary of the BDI, an industrial trade body, warned that the slump could last years if the government does not take action. The policy of “black zero” should be reviewed and German fiscal policy “must change”, he said.

7:42AM

Johnson & Johnson ordered to pay $572 million in landmark opioids case 

Credit: CHARLY TRIBALLEAU/AFP

An opioid “kingpin” motivated by greed — that’s how lawyers for the state of Oklahoma described Johnson & Johnson. 

Late last night (UK time), the US pharmaceutical giant was ordered to pay $572m (£468m) to the state of Oklahoma in the first court case to find a drug company responsible for fueling America’s opioid epidemic

In a landmark ruling, a judge said it had contributed to a “public nuisance” through deceptive promotion of highly addictive prescription painkillers.

7:27AM

G7 Summit buoys trade deal hopes

US President Donald Trump was at the G7 summit in Biarritz, France Credit: CARLOS BARRIA/REUTERS

Good morning. Markets in the UK were closed yesterday for the Bank Holiday, but talks at the G7 Summit over the weekend caused shares to rally elsewhere, after US President Donald Trump appeared to strike a hopeful tone on the likelihood that a US-China trade deal would be agreed. 

Speaking at the end of the summit, Mr Trump said the Chinese wanted “to make a deal very badly”, prompting all three main US indices to rise, the Chinese yuan to pare losses and pushing the Euro Stoxx 50 Index higher.

5 things to start your day

1) German business confidence has sunk to its lowest level in nearly seven years according to a closely-watched measure, as the country’s ailing manufacturing sector drags it to the brink of recession. The euro slipped yesterday on the news from Germany.

2) Small companies are being crippled by an “air-con tax” which means their business rates increase if they install equipment to keep workers cool in the heatwave. The Federation of Small Businesses branded the tax “ludicrous”.

3) The owner of the Daily Mail has cashed in its energy information arm for £300m in the latest stage of a radical pruning that has increased its focus on the tough newspaper market. According to sources, DMGT is now pursuing national newspaperthe i.

4) Marks & Spencer faces relegation from the FTSE 100 next week, after its shares shed more than a fifth of their value in recent months. The retailer is currently valued at £3.64bn.

5) The French media giant Vivendi has launched a legal challenge in Italy in a bid to stop the billionaire Berlusconi dynasty creating a pan-European television empire. Vivendi owns a 29pc stake in Mediaset, the Berlusconi-controlled broadcaster, but is barred by Italian regulators from voting on plans to merge it with its Spanish sister company.

What happened overnight

Asian markets also danced to Mr Trump’s tune as losses inflicted by trade war tensions on Monday were partially recouped after sunnier language from the president. Having described his Chinese opposite number Xi Jinping as the “enemy” on Friday, Mr Trump called him a “great leader” four times and claimed Chinese officials had phoned the White House looking to resume negotiations (although China did not confirm the phone calls).

“Sorry!” Mr Trump told reporters at the G7 Summit. “It’s the way I negotiate.”

Accordingly, the Nikkei climbed 1pc, led by Subaru and tyre makers — Mr Trump also said he was no longer considering tariffs on Japanese cars. Australia’s S&P ASX 200 index went up by 0.5pc, after giving up 1.3pc on Monday; the Shanghai Composite added 1.4pc; while indexes in South Korea, Taiwan and Singapore made modest gains. Hong Kong’s Hang Seng Index is down 0.3pc amid fears of further chaos on the streets.

The dollar index also rose a small amount, while Brent Crude went up by 0.4pc and US crude by 0.6pc after both fell 1pc. On the other hand, gold prices held steady after Monday’s surge, and the yen, which is often bought in times of economic uncertainty, gained in value. 

Coming up today

Interim results: Bunzl, Polymetal, Raven Property 

Economics: UK finance loans for housing, consumer confidence (US)