Factory slowdown fuels global recession fears as markets reel from $13tn tumble – business live

Manufacturing output across the eurozone has fallen for the first time since the depths of initial Covid-19 lockdowns in early 2020.

The S&P Global Eurozone Manufacturing PMI, which tracks activity in the sector, shows that output fell for the first time in two years.

Growth slowed across euro area countries, with new orders and export demand both dropping, while business confidence slid to a 25-month low.

With demand falling, backlogs of work fell for the first time in almost two years.

The overall Manufacturing PMI came in at 52.1, down from May’s 54.6 (but slightly higher than the flash reading during June).

But the Output Index sank below the 50-point mark showing stagnation, to a 24-month low of 49.3.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said eurozone manufacturing has moved into decline in June as demand fell.

Orders for goods have fallen at an accelerating rate over the past two months, dropping in June in every country surveyed with the exception of the Netherlands, and even here the rate of growth has weakened markedly in recent months.

Demand is now weakening as firms report customers to be growing more cautious in relation to spending due to rising prices and the uncertain economic outlook.

The downturn looks set to gain momentum in coming months.

Bulb boss Hayden Wood to step down from collapsed energy firm

Mark Sweney

The chief executive and co-founder of the collapsed energy firm Bulb will leave at the end of July, having controversially continued to receive a six-figure salary while the firm is being propped up by billions in taxpayer loans.

Hayden Wood is leaving Britain’s seventh biggest energy supplier, which has about 1.5 million customers, as the government continues to seek a buyer to save Bulb.

He stayed on at the company after it went into “special administration” – the largest casualty of soaring energy crisis – in November last year.

Bulb was criticised for keeping on Wood, who co-founded what was once one of the UK’s most celebrated startups in east London in 2015, given its £1.7bn rescue was the biggest taxpayer bailout since government interventions in Royal Bank of Scotland and HBOS in 2008.

Here’s the full story;

Customer service standards have fallen to record lows at energy companies, with suppliers Utilita and Ovo Energy among the worst offenders, according to a new report.

Customers have had to wait longer for their calls to be answered and have regularly been unable to get hold of their supplier, research by Citizens Advice has found.

Many people have had to navigate an uncertain market that sent nearly 30 suppliers into administration and caused household bills to soar.

Dan Milmo

The EU has moved to rein in the “wild west” of crypto assets by agreeing a groundbreaking set of rules for the sector.

Representatives from the European parliament and EU states thrashed out an agreement on Thursday that contains measures to guard against market abuse and manipulation, as well as requiring that crypto firms provide details of the environmental impact of their assets.

Stefan Berger, the German MEP who led negotiations on behalf of the parliament, said:

“Today, we put order in the wild west of crypto assets and set clear rules for a harmonised market.”

The mood in the markets is likely to remain gloomy this summer, predicts Generali Investments.

They predict central banks will keep tightening monetary policy in an attempt to squeeze inflation and stop a wage-price spiral breaking out (so-called ‘second round effects’)

• Central banks are on a mission to fight the inflation beast – whatever it takes, even a recession. The financial mood will remain gloomy this summer as economic data deteriorates while central banks walk their hawkish talk.
• We expect the Federal Reserve to turn less aggressive this autumn, as it faces a deterioration of the economy and, eventually, employment data. Inflation headlines will also cool off by then, and more so in Q1.
• But for now, central banks are left lamenting about second-round effects. The ‘wishful-thinking’ approach to policy (inconsistent ECB and Fed forecasts) have also delayed the market reckoning about the economic pain. We also question the ECB’s political and legal capacity to reallocate its huge balance sheet as it tries to lean against fragmentation.

Markets are reeling from their worst first-half to a year in decades, as we blogged yesterday.

By last night’s close, MSCI’s World Equity Index has fallen by a fifth this year – the worst since it was created in 1990.

That wiped around $13 trillion off the index of global stocks since the start of January, Reuters has calculated, as investors baulked at central bankers’ determination to raise interest rates to cool inflation.

Wall Street posted its worst first half since 1970, as recession worries knocked the S&P 500 down over 20% during 2022.

Deutsche Bank’s Henry Allen and Jim Reid point out that government bonds, and corporate debt, also tumbled in value this year:

It’s hard to overstate just how bad markets have performed over recent months, with the returns in Q2 very much following in Q1’s footsteps. A range of asset classes saw significant losses, including equities, credit and sovereign bonds, whilst the US dollar and some commodities like oil were among the few exceptions.

In fact, in total return terms we’ve just seen the biggest H1 decline for the S&P 500 in 60 years, and in June alone just 2 of the 38 non-currency assets in our sample were in positive territory, which is the same as what we saw during the initial market chaos from the pandemic in March 2020. On a year-to-date basis as well, just 4 of 38 are in positive territory, which as it stands is even lower than the 7 assets that managed to score a positive return in 2008.

So how’s the second half of 2022 looking? Not great, with European markets opening in the red, and the FTSE 100 dropping 0.6%.

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

2022 has been a grim year for the markets, and a rough one for the global economy, as the Ukraine war and pandemic lockdowns in China have driven up inflation and slowed growth.

Six months into a year to forget, recession fears continue to rise as business and consumer confidence are hammered.

And the latest surveys of purchasing managers show that factories in several Asia-Pacific markets continue to suffer from supply disruptions, rising costs and material shortages,

South Korea’s manufacturing sector slowed further in June, as foreign demand continued to weakened.

Usamah Bhatti, economist at S&P Global Market Intelligence, explains:

“South Korean manufacturers were increasingly concerned that the risks posed by ongoing shortages, disruptions and inflationary pressures would take longer to dissipate.

As such, the degree of business optimism eased in June to the softest for eight months.”

Japan’s factories suffered a near-stagnation in new orders….

…while factory output fell in Taiwan for the third month running, as a rise in Covid-19 cases caused disruption.

Annabel Fiddes, economics associate director at S&P Global Market Intelligence, said Taiwanese manufacturers reported a further decline in output and a quicker drop in sales, adding:

The fact that firms currently project a fall in output over the coming year emphasises the challenges that lie ahead.

Not only are firms facing the unpredictable nature of COVID-19 waves, but strong inflationary pressures globally, stretched supply chains and uncertainty over the Russia-Ukraine war.

Asia’s stalling manufacturing activity will add to worries of a sharp global economic slowdown.

We learned yesterday that UK household incomes have fallen for an unprecedented fourth quarter in a row, even before the full impact of Russia’s invasion of Ukraine.

Pictet Wealth Management fears recessions in the US and Europe in the coming year “looks inevitable”, as interest rates are raised and real incomes are squeezed:

“One consequence of the unprecedented shocks facing the world economy, following the pandemic, the war in Europe, as well as major disruptions to supply chains, is that business cycles are likely to be shorter and more volatile than in the past two decades.

We get a healthcheck on eurozone, UK and US factories today, while eurozone inflation could hit a new record high. Economists predict eurozone CPI jumped by 8.4% per year in June, up from 8.1% in May.

The agenda

• 9am BST: Eurozone manufacturing PMI for June
• 9.30am BST: UK manufacturing PMI for June
• 9.30am BST: UK mortgage approvals and consumer credit for May
• 10am BST: Eurozone inflation for June (flash estimate)
• 3pm BST: US ISM Manufacturing PMI report for June