Some more on those sterling gains: it is not just dollar weakness boosting it this afternoon in London; some Brexit optimism is apparently taking hold as well.

The pound is up by about 0.8% for the day, hovering around $1.24 against the US dollar.

Sterling earlier hit a high of $1.2413 – the strongest in eight days – thanks to some hints that Conservative Brexit hardliners could be ready to compromise on a withdrawal deal.

“There does seem to be maybe some reason to be optimistic in terms of the Brexit plan,” said Jane Foley, senior forex strategist at Rabobank, via Reuters.

We know this is not a done deal, but it hasn’t yet been written off.

But perhaps don’t get too carried away: EU leaders have not exactly welcomed Boris Johnson’s latest proposals with open arms.

Johnson’s plans for an alternative to the backstop “fall short in a number of aspects”, said Irish taoiseach Leo Varadkar.

You can read more about the Brexit action on the politics live blog here:

Stock markets have regained some of their losses after investors digested the weaker-than-expected services data.

The FTSE 100 is now only down by 0.45% for the day as we approach the close in London.

In the US the Dow, Nasdaq and S&P 500 have all turned positive – a fairly dramatic rebound after the flurry of selling in the aftermath of the data release.

Economists are braced for a slowdown in the US economy.

Any optimism among investors has been snuffed out, according to Neil Wilson, chief market analyst for Markets.com.

Whilst still showing the sector in expansion, this was a major miss versus expectations. The market is reacting to the signs of a slowdown in the global economy. The fact these ISM numbers are printing weaker shows even the US is not immune.

The trade war is biting services too with respondents saying they are mostly concerned about tariffs.

You can read the full report from the ISM (the Institute for Supply Management) and see more quotes on tariffs here.

The US may belatedly be catching the cold being suffered by the rest of the world economy, according to Ranko Berich, head of market analysis at Monex Europe.

He said:

Although it’s not a surprise that major G10 economies are seeing a manufacturing shock and it is spreading to the rest of their economies, it is new information that we are now seeing this dynamic emerge in the United States.

It’s increasingly difficult for the hawkish members of the Fed to argue that what we’re seeing is a transitory disruption in the survey data.

Those weak data have added to the case for interest rate cuts from the US Federal Reserve if markets are to be believed.

Interest rate futures, which investors use to hedge against changes in borrowing costs, show a much increased probability of a Fed rate cut at the end of the month. The market implies a 92.5% chance of lower rates, up from 77% yesterday.

The Fed’s next meeting is on 29-30 October. The central bank’s economists will not be publishing updated forecasts, but with gathering storm clouds investors clearly think Jerome Powell, the Fed’s chair, will go anyway.

Gold prices jumped as well following the PMI data miss, as investors scurried for safe havens.

Spot gold prices are up by 0.95% today, with one troy ounce setting you back about $1,512, up from less than $1,497 earlier this morning.

The FTSE 100 is now down by 1.6% for the day.

Investors in UK Plc (or at least the multinationals who are listed in London) have suffered this week amid the global selloff.

You can see the latest blow at the bottom-right corner of the graph.

The US dollar dropped in the aftermath of the data – briefly pushing the British pound above $1.24.

This chart tells a pretty clear story about the US economy.

With manufacturing potentially in recession and the services sector slowing, it is not necessarily one with a happy ending.

The Dow Jones industrial average has now lost 1% for the day.

The index of US blue chip stocks has fallen by more than 3% in the last two days – this would be the third day in a row of a drop of more than 1% if it holds.

US stocks have fallen sharply in the wake of the data.

The S&P 500 was back down by 0.59% two minutes after the release.

The IHS data are a precursor to the more closely followed ISM figures, due in less than five minutes.

August’s ISM reading came in at 56.4, indicating a continued strong expansion. Consensus expectations are for a fall back to 55 (although still firmly above that 50-point growth mark).

You can see from the graph above that US services expansion has slowed markedly in recent months.

Chris Williamson, chief business economist at IHS Markit, said:

A disappointing service sector PMI follows news of lacklustre manufacturing and means the past two months have seen one of the weakest back-to-back expansions of business activity since 2009, sending a signal of slower GDP growth in the third quarter.

The surveys are consistent with the economy growing at a 1.5% annualised rate in the third quarter, with forward-looking indicators suggesting further momentum could be lost in the fourth quarter.

In particular, inflows of new business have almost stalled, with September seeing the smallest increase since 2009, and business expectations about the year ahead remain stuck at one of the gloomiest levels since at least 2012.

However, the sector saw the slowest rise in new business since the start of data collection in October 2009, IHS Markit said.

Markets appear to be relieved, with the S&P 500 and Nasdaq now positive in the wake of the data. But while the headline may be relatively strong, the other indications in the survey are far from positive.

From IHS Markit:

September data indicated only a slight increase in business activity across the U.S. service sector, with the expansion constrained by the slowest monthly rise in new business recorded since data collection began in October 2009. Subsequently, firms reduced their workforce numbers for the first time since early-2010. Business confidence also remained subdued amid ongoing economic uncertainty.

The US services sector continued to expand in September, according to IHS Markit’s services PMI.

The indicator came in at 50.9 points, above the 50-point mark which indicates an expansion. That was in line with expectations and 0.2 percentage points above the previous month.

Coming up shortly we have a pair of health checks for the US services industry.

First up, IHS Markit will publish its US services purchasing managers’ index (PMI) at 2:45pm BST, followed by the ISM non-manufacturing PMI on the hour.

Wall Street opened flat, but investors will have their eyes on the PMI data to see if it flashes another warning light about the state of the US economy – and whether it is at risk of falling into a recession.

Jasper Jolly here to take you through the data publication.

Wall Street has opened largely flat, following yesterday’s heavy sell-off when the Dow Jones lost almost 500 points.

• Dow Jones down nearly 40 points, or 0.15%, to 26,039
• S&P 500 down 2.2 points, or 0.08%, at 2,885
• Nasdaq up 1.7 points, or 0.02%, to 7,787

The pound is having a good day, trading nearly 0.6% higher against the dollar and the euro. Yesterday sterling fell by a similar amount, as Boris Johnson set out his Brexit plan at the Tory party conference in Manchester. It has not been well received in Brussels, where Michel Barnier, the EU’s chief negotiator, described the prime minister’s new plan for the Irish border as a trap.

The pound is up even though the European parliament has told Johnson that his proposals for the Irish border do not “even remotely” amount to an acceptable deal for the EU – comments that were echoed by Ireland’s deputy prime minister, Simon Coveney.

US jobless claims rose to 219,00 last week from 215,000 the week before, more than expected. The four-week average, however, was unchanged at 212,500, according to figures just released by the US Labor Department.

The Scottish Labour party is similarly concerned. Labour’s shadow cabinet secretary for finance, jobs and fair work, Rhoda Grant said:

People’s jobs and living standards should not be put at risk because of a dispute between politicians.

The UK government must do all it can to ensure the United States reverses this decision.

The Scottish Conservatives have also expressed concerns. Shadow finance secretary Murdo Fraser said:

This is obviously a very serious blow to the Scotch whisky industry. We will be speaking to our colleagues in the UK government to see what can be done to sort this out.

Ultimately, the responsibility here lies with the EU as it stands, and they are the ones who will need to explain to the sector why this has happened. This is something that needs to be resolved as a matter of urgency.”

The Scottish government has also waded into the trade row, saying news of the tariffs was “deeply concerning for Scotch whisky and other Scottish products exported to the US”.

We still hope that Scottish exports will not become collateral damage in this trade dispute and support the EU’s ongoing work towards a negotiated settlement with the US.

We have made our concerns about the impact on whisky and other Scottish produce clear to UK ministers, and expect them to do all they can to protect Scottish exports.

The Scottish government also said that the tariffs indicated that the UK would not be able to offset the damage from Brexit by striking a trade deal with the US.

When Scotland’s food and drink businesses are facing the potential impact of a ‘no deal’ Brexit, the last thing they need is the further uncertainty of increased tariffs on exports to US.

The imposition of these tariffs also seriously undermines suggestions by the UK government that a potential free trade deal with the United States could easily or quickly offset the damage done by Brexit.

The US is the biggest export market for Scotch whisky.

The Malt Whisky Trail reckons that while the tariffs are obviously unwelcome they will not stop Americans buying whisky. It represents seven whisky distilleries including single malt brands Glenfiddich and Glenlivet, which are both popular in the US.

The group’s chair, James Johnston, said:

This ruling is unwelcome but the quality, consistency and character of the Speyside malt defines the uniqueness of a product which will continue to stand up in economically challenging situations.

The Scottish food and drink sector has grown three times faster than the rest of the Scottish economy over the past decade and is responsible for over half of all manufacturing jobs along the Malt Whisky Trail.

Cashmere is also affected.

It is particularly concerning to see that this judgement will also impose a tariff on cashmere given the fact that Johnston’s of Elgin is another major employer in the region and specialises in fine cashmere clothing. However the remarkable growth of the sector is down to its success in opening up new overseas markets, underpinned with unquestionably high-end products. Keeping it all in context, whilst the US may impose new tariffs, sales to new markets such as China and the Middle East are booming.

GMB Scotland has condemned Trump’s planned 25% tariffs on Scottish whisky, which threaten to escalate the trade war between the US and EU.

Scotch whisky exports to the US were worth $1.3bn (£1bn) last year.

Gary Smith, GMB Scotland Secretary, said:

This is a troubling glimpse into the post-Brexit future and everyone with the Scottish economy’s best interests at heart should be concerned about our prospects following this development.

Scotland and the rest of the UK are sitting ducks after 31 October. The collective strength we have in the EU trading bloc will be gone and there is simply no such thing as a ‘special relationship’ with the United States - Trump will squeeze the UK economy for everything he can get.

That’s why we have consistently called on the UK government to bring forward measures to defend whisky and white spirits manufacturing in the face of Brexit uncertainty and to stand-up to US demands on the removal of the geographical indicator protection for single malt production. Those calls have fallen on deaf ears.

In Westminster, Extinction Rebellion protesters have sprayed fake blood on the steps of the Treasury in central London. They used an old fire engine to spray 1,800 litres water coloured with red food dye towards the building. Four protesters stood on top of the vehicle, which bore a banner reading “Stop funding climate death”.

Over in Germany, the picture is similarly gloomy. Service industries in Europe’s biggest economy grew at the weakest pace for three years last month, due to weaker demand from within the country while new exports dropped the most in over five years.

Germany’s business sector as a whole, including manufacturers, shrank for the first time since April 2013. France and Spain are still growing, albeit at a slower pace, while Italy saw a small pickup in private-sector growth.

Expansion in the eurozone as a whole shuddered to a halt last month, with the PMI reading the worst since June 2013.

Barclays economist Fabrice Montagné says the September PMI survey leaves little scope for optimism,

signalling a broad based weakening of economic conditions with Brexit being mentioned by businesses as the main culprit for falling demand. At face value, the survey suggests a 0.1% q/q contraction in Q3 GDP, much lower than our forecast of 0.3% q/q growth.

Brexit is now visible in the data: Brexit is referenced throughout the September report with businesses mentioning mitigation measures, restructuring and subdued demand as the main sources of weakness in activity.

Overseas clients have reportedly been cutting off British counterparties, diverting activity away from the UK in anticipation of a hard Brexit outcome. Lack of demand for UK services resulted in lower prices charged despite higher input prices and workforce reduction for nearly a fifth of the survey respondents - even though, for now, companies appear to be avoiding outright redundancies by not replacing departing workers.

The services PMI suggests that after rising by 0.1% quarter-on-quarter in the second quarter, growth in the biggest part of the economy has now all-but fizzled out, says Ruth Gregory, senior UK economist at Capital Economics.

While we still think that the economy has avoided a recession in Q3, the data reinforce our view that the economy’s performance will remain well below par until Brexit is resolved.

Admittedly, we can take some comfort from the fact that the surveys have not been a foolproof guide to the official data recently. They did not pick up the impact of Brexit preparations ahead of the 29^th March Brexit deadline and will probably fail to do so again. That could add an extra 0.1ppt to quarterly GDP growth in Q3.

And the PMIs exclude the recent resilience in the retail and government sectors. In addition, July’s surprisingly strong rise in GDP of 0.3% m/m suggest that the economy did at least start the quarter on a solid footing.

Today’s batch of PMI surveys were pretty bleak, especially for the UK, Germany and the eurozone as a whole.

Worryingly, Britain’s dominant services sector, which includes restaurants, hotels and financial firms, is now declining, joining manufacturing and construction. The headline figure fell to a six-month low of 49.5. (The 50 mark separates expansion from contraction) The orders reading was 48.7, pointing to falling orders, while the employment reading (47.8) suggests jobs are being cut at the fastest rate since November 2009.

JPMorgan Chase economist Allan Monks says:

This signals that the weakness seen to date will broaden out to the consumer and wider economy.

While the focus is often on the large growth drag coming from Brexit, it should be remembered that this is happening against a weakening global backdrop.

It means that we could get an interest rate cut from the Bank of England in coming months.

Monks adds:

Last week we revised our growth and BoE forecasts, putting in a January cut. We highlighted the risk of an easing this year. That risk has risen following the September PMI.

It is worth knowing that a recession is commonly defined as two or more quarters of economic contraction. By this definition the UK was last in recession at the height of the financial crisis in 2008-09.

We have had a spate of gloomy business surveys this morning suggesting the downturn in manufacturing spread to service industries in the UK and the eurozone last month.

Separate official figures from the EU’s statistics office Eurostat show that retail sales in the eurozone bounced back to 0.3% monthly growth in August after a 0.5% drop in July, driven by strong sales of electronics, computers and internet shopping. However, the numbers tend to jump around. June recorded stronger growth of 0.8%.

Inflation pressures also eased. Prices charged by manufacturers fell more than expected, by 0.5% in August from the previous month, reflecting a sharp decline in energy prices.

Some of Ted Baker’s problems are self-inflicted, but its sales decline (down 2.5% in the six months to 10 August) is another sign of how tough things are on the high street.

Its new chief executive Lindsay Page, who took over from Ray Kelvin in April, told Reuters:

We have faced probably the most difficult trading conditions that I can ever recall in 30 years.

Shares in FTSE 250-listed Ted Baker, the fashion chain, have plummeted this morning. They are currently down 35% at 594.13p.

The fashion retailer dived to a first-half loss and warned on its full-year performance, its third warning this year. Trading in the first half has been worse than expected, Ted Baker said, and the second half had started slowly because of an unseasonably warm September.

There has also been a financial hit from the £2m cost of an investigation and “legal matters” relating to allegations of misconduct by the former chief executive Ray Kelvin who stepped down in March.

Time for another look at the markets. London’s FTSE 100 index is sliding for a fourth day. Yesterday it suffered its worst one-day drop since before the June 2016 Brexit vote, and today it is down 0.58%, some 41 points, at 7,080.

Selling has been triggered by worries over the UK and world economy, along with Brexit uncertainty and Donald’s Trump’s latest salvo in the trade dispute with the EU.

The new 25% US tariffs are due to come in in a fortnight and will affect hundreds of European agricultural products, including British woollen jumpers, olives from France, Germany and Spain, pork, salami, butter and yogurt. However, cognac and champagne are excluded. Here is the full list.

The UK economy shrank by 0.2% in the three months to June, so if it contracts again in the third quarter, as the PMI report suggests, it would mean that it is in recession.

However, it is worth noting that GDP rose 0.3% in July, the start of the third quarter. How much of this was down to Brexit stockpiling is anyone’s guess...

All three sectors – services, manufacturing and construction – registered lower output in September. Excluding July 2016, following the EU referendum, this was the first broad-based decline since April 2009. Construction recorded the steepest drop in activity.

Chris Williamson, chief business economist at IHS Markit, which compiles the survey, said:

A trio of grim reports on the economy means that the vast service sector has now joined manufacturing and construction in decline. Only the collapse in confidence immediately following the 2016 referendum has seen a steeper overall deterioration in the economy during the past decade, but September’s decline is all the more ominous, being the result of an insidious weakening of demand over the past year rather than a sudden shock.

At current levels the surveys point to GDP falling by 0.1% in the third quarter which, coming on the heels of a decline in the second quarter, would mean the UK is facing a heightened risk of recession.

He said that Brexit-related concerns were at the forefront of people’s minds, linked by companies to falling sales, cancelled and postponed projects, a lack of investment and job losses.

While the early summer had seen resilient jobs growth, the surveys indicate that employment is now falling at the fastest rate since December 2009.

The increasingly dire readings push the surveys further into territory that would normally be associated with policy stimulus from the Bank of England, suggesting a greater likelihood that the next move in interest rates will be a cut.

This means the all-sector output index, which comprises services, manufacturing and construction, fell to 48.8 from 49.7, indicating a faster rate of contraction. This marked the first back-to-back contraction since the final two months of 2012.

Neil Wilson, chief market analyst at Markets.com, says the latest batch of services PMIs for the eurozone confirm a broad slowdown in economic activity.

The worry is that these latest readings appear to confirm worst fears that the manufacturing slump is leaching into the services sector with falling confidence, investment and now activity. Manufacturing is at its worst since 2012, but now service sector growth is at a six-year low. Undoubtedly the risk of a no-deal Brexit is weighing on business confidence and investment, hurting output across the board.

The German services PMI was a real blow. Business activity grew at the weakest pace in three years, while inflows of new work were at a 5-year low. Germany is set for a technical recession. Whilst German is leading the way south, France and Italy are also contributing to the weakness, while Ireland and Spain are also weak.

The FTSE 100 index continues to slide, losing 36 points or 0.5% to 7,086. European stock markets are faring better today after yesterday’s sharp declines. France’s CAC and Italy’s FTSE MiB are both about 0.5% ahead. Markets in Germany are closed for the day of German unity.

In France, private-sector growth slowed last month, with the business activity index dropping to 50.8 from 52.9, the weakest growth rate since April. Service-sector expansion slowed and manufacturing production is in decline.

Italy’s composite output index also rose slightly to 50.6 from 50.3, signalling the fourth consecutive month of growth in Italy’s private sector. This was driven by a pick-up in services which outweighed a sharper contraction in manufacturing production, which shrank for the 14th month in a row.

Italy is next. Its service industries expanded at a faster pace last month, with the PMI headline reading rising to 51.4 from 50.6 in August. Domestic demand improved, while new export sales shrank for a third month.

Spain’s composite output index, which comprises the manufacturing and service sectors, fell to 51.7 last month, from 52.6 in August. The latest reading matched July’s 68-month low, as the manufacturing downturn deepened and service growth softened.

The first of the PMIs is out. Spain’s service sector continued to expand in September, albeit at a slower rate. The headline business activity index fell to 53.3 from 54.3 in August. A reading above 50 indicates expansion; a reading below points to contraction.

We’ve had another high-profile departure from a major company, prompting one observer to say there must be something in the water.

Alison Cooper will stand down as chief executive of tobacco giant Imperial Brands, the company behind Davidoff and Lambert & Butler cigarettes, after nine years at the helm. Sadly, this further reduces the limited number of female bosses of FTSE 100 companies.

It comes after the departure of the Tesco boss Dave Lewis, Metro Bank’s founding chairman Vernon Hill, and Martin Gilbert, a City veteran and deputy chairman of Standard Life Aberdeen, who had stood down from the post of co-chief executive earlier in the year. All were announced yesterday.

Cooper departs as the tobacco industry faces health fears over vaping, while traditional cigarette sales are in long-term decline. Some questioned the timing of her exit.

Michael Hewson, chief market analyst at CMC Markets UK, says

The timing of the move is curious, given that the company as well as the sector is facing some serious headwinds as we move into the end of the year and look to 2020. Last week the company saw its share price fall sharply to nine-year lows after the company announced that it was cutting its revenue guidance on the back of concerns that the health problems now being expressed about vaping could result in a sharp slowdown in sales.

In August we heard early reports about a series of deaths from the 18-35 age group which may have been linked to vaping.

The tobacco industry is now facing the prospect of an existential crisis, with a slowdown on normal cigarette sales already cutting into profits, e-cigarettes were supposed to be the next key growth area. This strategy now appears to be under threat after the US threatened to ban e-cigarettes from the market, until the US Food and Drug administration has done a more significant study. Given these problems looking for a new CEO would appear to be the least of its problems.

Interestingly, there was no quote from Cooper in the company’s announcement. Chairman Mark Williamson paid tribute to her, saying:

Alison has worked tirelessly and with great energy and passion during her 20 years with Imperial.

And we’re off.

The FTSE 100 index in London has fallen some 8 points to 7,114 in early trading, a 0.1% drop. France’s CAC has inched 0.1% higher and Spain’s Ibex added 0.2% in early trading, after heavy losses yesterday.