Finally, Wall Street has ended the day higher, helped by the near-certainty of a US interest rate cut at the end of this month.

The Nasdaq closed up 0.75% at 8,202, a record closing high.

The S&P ended up 0.45% at 2,993, having risen over 3,000 points for the first time ever earlier in the day.

The Dow, which struck its own record high earlier, closed 76 points up at 26,860, up 0.3%.

More caution from Powell:

While Wall Street rallies, the UK stock market had a quieter day.

The FTSE 100 has closed 5 points lower at 7,540.

David Madden, Market Analyst at CMC Markets, says:

“Stocks are mixed as Jerome Powell, the head of the Fed, testifies in Washington D.C.

So far the central banker hasn’t give much away in terms of clues as to possible changes to monetary policy, although earlier in the day, he warned that uncertainties have continued. Some dealers are sitting on their hands until they get a clear view from Mr Powell. “

Donald Trump has forced the UK’s ambassador in Washington to resign, but Powell is adamant that he won’t be next.

Asked by California Democratic Representative Maxine Waters whether he would comply if he were to get a phone call from Trump saying he should pack his bags, Powell replied he would not.

“Of course, I would not do that,”

“The answer would be, ‘No.’”

Waters pushed the point, asking, “Do you believe the President doesn’t have the authority?”

Powell replies: “What I have said is the law gives me a four-year term and I fully intend to serve it.”

Fed chair Jerome Powell is now delivering his testimony to the House.

He’s outlining how the economic outlook has weakened, citing how businesses are reluctant to invest when they’re uncertain how issues such as trade will play out.

Powell also insists he will serve a full term, despite speculation president Trump might force him out.

Today’s rally means the S&P 500 has gained almost 20% since the start of 2019.

We have a hat-trick! The Dow Jones industrial average has hit its own record high, at 26,971.

The S&P continues to hit new heights too, clambering over the 3,000 point mark, while the Nasdaq has ascended by over 1% into new heady heights.

The tech-focused Nasdaq index has also just hit a new record high, rising over 8,176 points for the first time.

Shares in technology stocks, miners and industrial companies are all rallying on Wall Street, on hopes that a rate cut will prop up the US economy and boost growth.

Some traders are speculating that the Fed could wheel out the big bazooka, and cut US interest rates by 50 basis points (from 2.75% to 2.25%).

A quarter-point cut looks more likely, though.

Ding ding! Stocks are rising as the opening bell rings out on Wall Street, as investors welcome the prospect of a US rate cut.

The Dow Jones industrial average and the broader S&P 500 are both up around 0.4%, heading close to their record highs.

Paul Ashworth, chief US economist at Capital Economics, predicts Powell will cut US interest rates three times in the next nine months - starting in a couple of weeks.

Our expectations is that GDP growth will fall below 1% annualised in the second half of this year and, as a result, we expect the Fed to cut interest rates by an additional 25bp in both this December and March next year. That 75bp reduction is a little less than the 100bp currently priced in to futures markets.

Richard Flynn, Managing Director at Charles Schwab, says investors are hoping that the Federal Reserve will cut rates astutely, and protect America from recession.

Here’s his take on Powell’s testimony:

“Recession risk is rising, but markets are hoping that even a small rate cut later this month will keep a downturn at bay. Against a backdrop of looser monetary policy globally, declining US business confidence and stagnant capex, plus no end in sight to the US-China trade dispute, lower rates—which tend to spur borrowing and business investment—could help balance out the negative effects of slowing growth and an ongoing trade war.

“However, the market’s response to rate cuts may depend on how close we are to a recession. If the economy holds up and the rate cuts are simply “insurance,” stock markets could rally strongly. However, if the economy weakens, the market’s rate-cut optimism could turn negative. With fed funds futures now discounting more than 100 basis points of easing by the end of next year, equities may be at risk if the economy’s deterioration supports that much easing—but also at risk if the Fed under-delivers.”

Wall Street has got the message....

Bad News is Good News again, it seems.

Stocks, bonds and commodities have all risen, since Jay Powell’s downbeat assessment of the US economy hit the wires.

That’s because a weak economic outlook justifies a cut in US interest rate, or possibly even two by the end of this year.

It doesn’t take much reading between the lines to conclude that Fed chair Powell expects to cut interest rates at the next FOMC meeting, at the end of this month.

Jerome Powell also warns that US businesses are cutting investment, factories are slowing, and the US housing market is weakening.

He tells Congress:

While growth in consumer spending was weak in the first quarter, incoming data show that it has bounced back and is now running at a solid pace. However, growth in business investment seems to have slowed notably, and overall growth in the second quarter appears to have moderated.

The slowdown in business fixed investment may reflect concerns about trade tensions and slower growth in the global economy. In addition, housing investment and manufacturing output declined in the first quarter and appear to have decreased again in the second quarter.

Nearly time to hear from Fed chair Jerome Powell:

The UK isn’t the only economy finding conditions tough.... Europe is also looking weak.

The European Commission has just cut its eurozone growth forecast for 2020 to 1.4%, from 1.5% previously.

2019 is still expected to be weak, with growth of just 1.2% - dragged down by Germany and Italy.

Here’s the new forecasts, which also show the UK close to the bottom:

Here’s our news story on the UK GDP report for May:

Encouragingly, PwC’s chief economist John Hawksworth believes Britain is fending off the risk of a recession.... but agrees that Brexit is hurting the economy.

Looking through the noise in the monthly data, underlying growth in the economy continues at an annualised rate of around 1-1.5%.

This is below its long-term historical average rate of around 2%, but there are no signs yet that Brexit-related uncertainty has pushed the economy as a whole into recession, although it has clearly dampened business investment and the housing market.”

Here’s the British Chambers Of Commerce’s take:

UK car production surged by nearly 25% in May, as factories returned to life after shutting down in April.

That’s a record-breaking surge, but unfortunately it still leaves the sector smaller than in March.

Industry experts have warned that the government’s botched Brexit plans have hurt carmakers, forcing bosses to bring forward their summer shutdowns to April, in case of a no-deal crisis.

Major carmakers such as Jaguar Land Rover, BMW and Peugeot all shut factories earlier than usual, creating expensive shutdowns that weren’t actually needed once the Brexit deadline was hoofed into the autumn.

TUC chief economist Geoff Tily is also concerned that Britain’s service sector is weak:

Yael Selfin, chief economist at KPMG UK, is worried that Britain’s services sector stagnated in May:

“The deteriorating picture across the UK’s service industries is of particular concern. Services provide us with a better indication of the economy’s direction at this juncture, because they were less affected by stockpiling movements earlier in the year. The current statistics point to the UK economy grinding to a halt in Q2.

”Financial services output has now been contracting for 15 consecutive months, with Brexit likely to inflict permanent damage on the sector’s growth prospects. Weakness in retail and wholesale trade confirms recent surveys’ prognosis that households are rethinking their spending plans.

“The small rebound in manufacturing and construction in May is insufficient to compensate for the weaker trend in services, and we expect Q2 overall to see almost no growth from the previous quarter.

Ben Brettell, senior economist at Hargreaves Lansdown, says ‘storm clouds’ are gathering over the UK economy:

Consumers and business remain hamstrung by Brexit uncertainty.

For example yesterday the British Retail Consortium’s report showed average sales growth weakened to 0.6% in the 12 months to June, which is the slowest increase since it began calculating growth in 1995.

Sam Tombs of Pantheon Economics predicts that the economy stagnated in April-June, based on today’s data covering the period up to May.

Paul Dales, chief UK economist at Capital Economics, thinks Britain will avoid a full-blown recession this year.

However, he also believes the economy contracted in April-June, because some economic activity was dragged into January-March as firms prepared for Brexit.

He told clients this morning:

Despite the 0.3% m/m rebound in monthly GDP in May, it looks as though the economy contracted by around 0.1% q/q in Q2.

That would be the first contraction since Q4 2012, although before today’s release we had expected a 0.2% q/q fall.

There’s clearly a risk of a recession (two consecutive quarterly contractions), but we’re not expecting one.

Although today’s GDP figures are better than feared, the broad picture is that Britain’s economy is only growing slowly.

As this chart shows, the quarterly grow rate has dropped to 0.3% in March-May, down from 0.5% in the first quarter of this year.

This table shows how British industry bounced back in May, growing by 1.4% after a grim April.

But... the UK’s so-called dominant service sector stagnated in May. That’s a concern, as services companies make up around three-quarters of the economy

The ONS has also revised up its estimate of growth in March. It now thinks GDP rose by 0.1%, not shrinking by 0.1% as previously thought.

The UK economy picked up in May, as carmakers returned to work after shutting down in April.

Rob Kent-Smith, head of GDP at the ONS, explains:

“GDP grew moderately in the latest three months, with IT, communications and retail showing strength. Despite this, there has been a longer-term slowdown in the often-dominant services sector since summer 2018.

The economy returned to growth in the month of May, following the fall seen in April. This was mainly due to the partial recovery in car production.”

Just time for a reminder that GDP is an imperfect measure, from Robert F Kennedy half a century ago:

Tension is building in the City as investors await the UK GDP report, in just a few minutes....

Recruitment firm PageGroup has blamed Brexit uncertainty for a slump in UK income in the last quarter.

The company says demand for headhunting senior positions has weakened, suggesting UK businesses are tightening their spending.

It told the City:

The UK, now 16% of the Group, declined 2.4%, with continued Brexit related uncertainty impacting candidate and client confidence....

Michael Page, which is focused on more senior opportunities and continued to be impacted to a greater extent by the uncertainty, declined 6%.

Shares in PageGroup have slumped by 14%, after it also warned that profits will be at the lower end of expectations. Another sign of trouble ahead?....

Today’s monthly GDP report is particularly significant as it covers the period around Britain’s original Brexit deadline.

March was dominated by Theresa May’s failed attempt pass her Withdrawal Agreement, followed by MPs failure to agree an alternative plan. The can was then nudged into April, before being kicked Lucy Bronze-style into the autumn.

Any boost from pre-Brexit stockpiling in March will have faded in the months afterwards, while businesses are still reluctant to invest.

Kit Juckes of French bank Societe Generale fears today’s report will bode ill....

April data were very weak, June PMIs were weak as well, so there’s some room a bounce in the May numbers. But a small bounce will confirm that Q2 overall was very weak, with GDP probably falling.

Blame Brexit uncertainty, which reached a level that is too heavy for the economy to carry.

My colleague Aditya Chakrabortty has written a piercing analysis of the state of the UK economy, and it’s not cheerful reading.

Here’s a flavour:

The most watched surveys of British businesses, released in the past few days, suggest the private sector is already shrinking. In the construction sector, which has just had its worst month since the immediate aftermath of the financial crisis, they now talk of “quicksand”. Manufacturing has been pole-axed, while out in the much larger service sector things look utterly moribund. Last week, it was briefly cheaper for the British government to borrow over five years than for two – the first time that has happened since just before the death in 2008 of Lehman Brothers. Even in a world turned upside-down by central banks pumping hundreds of billions of dollars into money markets, that is usually taken as indicating that a sharp slowdown lies around the corner. This one will be nowhere near as disastrous as the crash of 2008-9; but it will underline how far the world remains lodged in the shadow of that crisis.

“The early evidence suggests the UK is already in a recession and that we’re just waiting for more data to prove it,” says David Blanchflower. As a rate-setter at the Bank of England in 2008, he was one of the few policymakers to spot that crash coming; but when central bankers and government ministers did finally wake up, at least they had plenty of firepower to draw on.