And finally... European stock markets have closed tonight with gains in London, but sharp losses in Madrid.

The FTSE 100 ended 37 points higher at 6,127 points, with mining stocks rising but travel stocks dropping.

In Dublin, Ryanair’s shares fell over 6% after it announced it was cutting a fifth of flights in September and October.

The latest Covid-19 restrictions also hit the Spanish IBEX index. It fell 1.1% after Germany imposed mandatory tests on anyone arriving from Spain.

Here’s a reminder of the main stories today

• UK household financial wellbeing has fallen again this month, as families are hit by falling wages and rising job insecurity
  
  
• Visits to UK high street stores are still down almost 40% year-on-year
  
  
• Ryanair is cutting 20% of flights, mainly to Spain, France, Ireland and Sweden after suffering a drop in bookings since Covid-19 cases rose.
  
  
• Two major City firms, Schroders and PwC, are encouraging staff to keep working from home
  
  
• Japan has suffered its worst plunge in GDP in decades, as the Covid-19 lockdown hit exports and consumer spending
  
  
• Talks between the US and China over their Phase One trade deal have been curiously postponed
  
  
• Germany’s central bank has predicted a strong recovery this summer....but will the pandemic derail it?
  
  
• The US S&P 500 index is inching towards its record highs again....
• Gold has jumped sharply, after Warren Buffett invested in a bullion producer.

Goodnight. GW

Over in New York, the stock market has risen slightly at the start of trading - back towards their record highs.

The S&P 500 index has gained 10 points, or 0.35, to 3,383.68 points -- only 10 points away from its highest level (back in February, before the pandemic).

The Dow Jones industrial average (which contains 30 major US companies) has crept up by 0.1% to 27,960.

Tech stocks are, once again, leading the way, with the Nasdaq up 0.6% to 11,086 points.

Investors clearly aren’t concerned that the US-China trade talks didn’t resume over the weekend - and perhaps relieved that the two sides didn’t fall out.

Here’s our full story on Ryanair’s decision to cut flight capacity in the next two months, by Gwyn Topham:

Ryanair is to cancel almost one in five flights from its September and October schedules after a drop in bookings in the last 10 days, as Covid-19 cases have increased in Europe, leading to fresh quarantine restrictions.

Europe’s biggest carrier said forward bookings had “noticeably weakened” and it would take 20% from its capacity to reflect demand, mainly cutting flight frequencies rather than routes.

Ryanair said the biggest cuts in its flight network would be to France, Spain and Sweden, as well as Ireland, which has imposed tight quarantine rules.

France was removed from the UK government’s travel corridor list with effect from 4am Saturday, following a week of speculation, forcing returning passengers to quarantine for 14 days. Spain was removed abruptly at the end of last month.

Ryanair said Ireland’s quarantine rules were now the most restrictive of any EU country and called on the Irish government to amend its “green list” of safe countries, which currently includes Germany.

More here:

Breaking: Budget airline Ryanair has announced it is cutting flights capacity in September and October by almost 20%, after seeing a drop in demand as new travel restrictions are imposed.

Bookings have “notably weakened over the last 10 days”, it says, due to the “continuing uncertainty over recent Covid case rates in some EU countries”.

Ryanair says the reduction will mainly come by flying fewer planes on routes, rather than stopping flying to some destinations all together.

The cuts will be “heavily focused” on Spain, France and Sweden, where rising recent Covid case rates have led to increased travel restrictions. It will also affect Ireland, which is imposing a 14-day quarantine on visitors from some countries including France and the UK.

Ryanair continues to push for better testing at airports, with a spokesperson saying:

“ These capacity cuts and frequency reductions for the months of Sept & Oct are necessary given the recent weakness in forward bookings due to Covid restrictions in a number of EU countries. Any affected passengers in Sept received email notification earlier today advising them of their options. Similar communications will be issued to the small number of affected passengers in Oct later today.

Over the past 2 weeks as a number of EU countries have raised travel restrictions, forward bookings especially for business travel into Sept & Oct have been negatively affected, and it makes sense to reduce frequencies so that we tailor our capacity to demand over the next 2 months.

Proper testing at airports, and effective tracing (as is being conducted in Germany and Italy) is the only realistic and proportionate method of supervising safe intra-EU air travel while effectively limiting the spread of the Covid-19 virus.”

While UK households struggle, the mood is a little brighter over in Germany.

The German central bank has predicted a rapid and broad-based recovery this year, after GDP shrank at a record rate of 10.5% in the last quarter.

The Bundesbank predicted that growth would surge now that the Covid-19 pandemic has been lifted, letting shops reopen and life return towards normality.

In its latest monthly report, it predicted that consumer spending would drive private consumption up:

“The clear and broad-based recovery in macroeconomic performance, which began after the low point in April, will continue.

“The German economy should grow very strongly in the summer quarter of 2020.”

However....the Bundesbank also pointed out that the global economy will remain under pressure until a vaccine is brought to market, which would hurt German exporters.

UK shoppers continue to shun the high street, in another sign that the economy is still suffering from Covid-19.

Retail intelligence firm Springboard reports that footfall on UK high streets was down nearly 40% last week, compared to a year earlier. On a weekly basis, footfall dropped by 0.5% - perhaps because it was too sweltering for shopping.

Visits to shopping centres rose by +2.4% week-on-week, but was still 37% lower than a year ago as people remained reluctant to go shopping -- either due to financial pressures or worries about the virus.

Diane Wehrle, Insights Director at Springboard says that shops in London suffered the most:

“The first week of the peak summer holiday period delivered spectacularly hot weather but largely lacklustre footfall performance. Customer activity across UK retail destinations rose marginally from the week before but the uplift was less than a third of the increase recorded in the previous week. It was clearly high streets - where footfall marginally decreased - that subdued the overall result, whilst in shopping centres and retail parks footfall rose from the week before.

“Despite the poor performance across high streets nationally, footfall in coastal and historic town centres rose marginally, undoubtedly due to the school holiday period and hot weather, whilst in regional cities and in London in particular footfall declined.”

UK household finances have continued to deteriorate as the Covid-19 pandemic pushed the country into a steep recession.

The latest Household Finance index, just released by data firm IHS Markit, shows that household spending fell again this month as take-home pay declined.

The survey also found that people are increasing worried about their financial prospects, and the risk of losing their job.

Markit says:

August data highlighted another reduction in income received from employment, with the latest decline sharp, despite easing further from May’s record drop.

Troublingly for the UK economic outlook, the survey measure of job security perceptions was also negative amid the ongoing COVID-19 pandemic and a substantial number of redundancies.

Here are the key points from the survey:

• Incomes from employment drop sharply again, while job security perceptions remain pessimistic
• Households continue to cut back on spending
• Renewed increase in demand for unsecured credit

This pulled the index down to 40.8 in August, from 41.5 in July.

That shows a “further, slightly sharper, deterioration in the financial situation of UK households” says Markit (any reading below 50 indicates that things got worse).

Markit adds:

Looking into the future was just as gloomy, as households in the UK remained highly pessimistic of their financial wellbeing over the coming 12 months.

Reaction to follow...

Fears of new Covid-19 lockdowns and travel restrictions are hitting shares in airline and hotel operators this morning.

The jump in cases in some European countries is dragging travel stocks down again, adding to Friday’s losses after the UK imposed a 14-day quarantine on arrivals from France.

Airline operator IAG is the top FTSE 100 faller, down 2.6%, back towards the seven-year lows hit earlier this month.

Holiday Inn owner Intercontinental Hotels has lost 1.6%.

On the FTSE 250, holiday operator TUI has fallen by 4% and cruise operator Carnival is down 2.5%.

On Saturday, France posted its highest daily infection total since easing its lockdown.

Neil Wilson of Market.com says Germany’s latest travel warning -- anyone returning from mainland Spain and the Balearic Islands must undergo mandatory COVID-19 testing - has also worried traders.

As noted in the week ahead, the number of new Covid-19 cases across Europe is the number one thing to watch in the coming days as it has the potential to send nascent economic recovery into reverse.

A sharp rise in cases in Spain, France and Germany will make traders nervous about new lockdowns and ensure that local equity markets remain volatile. Nevertheless, basic resources stocks registered strong gains in early trade to offset much of the losses elsewhere.

The wider FTSE 100 is now up 18 points, lifted by miners and building firms, at 6201.

But AJ Bell investment director Russ Mould sounds a cautious note:

“The negative news piling up on the global economy, relations between China and the US and a seeming second wave of coronavirus makes you wonder what stocks would be doing without the stimulus pledged by governments and central banks.

“Investors will be wary of reaching the point where the announcement of big financial packages no longer acts as a positive catalyst.

While offices are struggling, the residential housing market is booming.

The UK housing market has had its busiest month in more than 10 years in July, with the traditional summer lull replaced by a flurry of activity from buyers and sellers, according to the property website Rightmove.

It said the number of monthly sales agreed in Britain had been the highest since it started tracking the figure a decade ago, up by 38% on the same period last year and worth a combined total of more than £37bn.

Would-be sellers were also active, with more properties coming on to the market than in any month since 2008.

Property companies are under pressure this morning, amid fresh signs that office life will not be the same after the pandemic.

Asset manager Schroders told its staff they will not be hauled back to their desks in London this autumn. Before Covid-19, they were expected to be there most of the time.

Now, Schroders managers will take a “new approach to flexible working”, having seen that they can function well with staff working from home.

Accountancy firm PricewaterhouseCoopers is taking a similar view, saying it expects the majority of its staff to continue working remotely afterr the coronavirus pandemic has passed.

This shows a real change of approach for City firms, who had previously staff to trek to the capital every day for work. And while employees may welcome the work-life balance (and the reduced risk of catching some thing nasty on the Tube), it suggests demand for office space will be rather lower.

That’s bad news for property developers. Shares in British Land and Land Securities, two of the biggest players in the market, have both fallen by 2.5% this morning - making them among the biggest fallers on the FTSE 100.

China’s central bank has taken fresh measures to support its economy today.

The People’s Bank of China (PBoC) say it would provide 700-billion-yuan worth of medium-term loans. That’s more than enough to roll over the 550bn yuan injected in recent months, which mature later this month.

It also injected another 50 billion yuan into the economy, to keep borrowing costs stable. More here.

Investors are also digesting the news that the United States and China delayed a review of their Phase 1 trade deal.

The two sides were initially slated to talks for Saturday, but this didn’t actually happen.

According to Reuters, the postponement was due to “scheduling conflicts” and the need to allow China more time to buy US exports (a key part of the deal).

Reuters explains:

No new date for the initial six-month compliance review between U.S. Trade Representative Robert Lighthizer, U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He has been agreed, the sources said.

The officials were expected to hold a videoconference on Saturday, the six-month anniversary of the trade deal’s Feb. 15 entry into force as the coronavirus pandemic began spreading globally.

One source familiar with the talks said the delay was related to a conference of senior Communist Party leaders at the seaside town of Beidaihe on China’s northeast coast. The postponement did not reflect any substantive problem with the trade deal, the source said, adding: “The new date has not been finalized yet.”

More here: Exclusive: U.S.-China trade deal review postponed as China ramps up farm, energy purchases

Given the frosty nature of relations between Washington and Beijing (Huawei, TikToc...), this postponement does at least prevent the two sides falling out.

The slump in Japan’s economy last quarter was mainly driven by a slump in household spending, says Adam Cole of RBC:

Q2 GDP fell 7.8% q/q (non-annualised) – slightly better than expected and leaving Japan as one of the more mildly affected economies in Q2.

As expected, the bulk of the fall in GDP was accounted for by weaker consumer spending.

Japan’s economy has now shrunk for nine months, points out Robert Ward of The International Institute for Strategic Studies:

This chart from Jeroen Blokland of Robeco shows just how sharply the economy shrank:

Japan had been relying on the Olympics to drive its economy back to growth, points out Bjørn Sillemann of Danske Bank. But obviously that’s now been delayed by a year.

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

Global markets are subdued this morning, after Japan became the latest country to suffer a historic economic slump due to the Covid-19 pandemic.

And with factory output weaker than expected in June, the recovery in the world’s third-largest economy could be slower than hoped.

Japanese GDP shrank by 7.8% during the April-June quarter, as its pandemic lockdown hit growth. That wipes out all the growth achieved since 2011:

One Cabinet Office official told the Japan Times that it’s the worst slump since modern records began in 1955! It’s certainly the worst since the current dataset began in 1980.

The GDP report painted a now-familiar picture -- household spending slumped as shops shut and workers stayed home, while manufacturing was hammered by the plunge in global trade.

As my colleague Alison Rourke reports:

Private consumption, which accounts for more than half of Japan’s economy, fell 8.2% for the quarter, bigger than analysts’ forecast of a 7.1% drop. Capital expenditure declined 1.5% in the second quarter, less than a median market forecast for a 4.2% fall.

External demand, or exports minus imports, shaved 3.0% off GDP, as the pandemic dampened global demand, the data showed.

Economists expected a big slump in GDP, of course. They also expected a bounceback as the lockdown eased..... but industrial production only rose by 1.9% in June -- below the 2.7% jump expected, after plunging by 8.9% in May.

This hit sentiment in Tokyo, where the Nikkei has fallen by 192 points or 0.8% to 23,096.

European markets are likely to be subdued today too, after sliding on Friday when the UK imposed new quarantine restrictions on France.

Michael Hewson of CMC Markets detects “increasing nervousness” in the markets that economies are reaching the limits of what they can do, without increasing the risk of a new surge in Covid cases.

Asia markets have started the week on a mixed note with the latest Japanese Q2 GDP numbers showing that the world’s third biggest economy contracted by -7.8%, with private consumption sliding -8.2%, both by more than expected. In a development that is even more worrying is that industrial production in June only recovered a modest 1.9% significantly below expectations of 2.7%, and pointing to a weak recovery towards the end of Q2, as we look towards Q3.

As such equity markets here in Europe also look set to open on a mixed note with no clear sense of direction.

We’ll hear from Germany’s Bundesbank this morning - how does it see the recovery playing out? Plus we get new industrial production and housing data from America, which may show how the US economy is faring as the election race hots up.

The agenda

• 11am BST: German Bundesbank’s monthly report
• 1.30pm BST: Empire State survey of manufacturing in New York state
• 3pm BST: NAHB index of US housing market