The world’s leading developed and developing countries have been told a tax on financial transactions could help them raise around $100bn a year to meet the costs of the Covid-19 pandemic, tackle climate change and boost job creation.

Ahead of a meeting of G20 finance ministers in Venice on Friday, a letter from more than 100 economists said the immediate introduction of a financial transactions tax (FTT) would make economies more resilient and generate much-needed public investment.

Nine members of the G20 already impose FTTs – including the UK’s stamp duty on share dealings – but the economists said all countries should make use of them, with the scope expanded and rates of tax increased.

The letter says:

In so doing, additional revenue of the order of $100bn could be generated on an annual basis, at least 50% of which should be devoted to developing countries to support health, education and to strengthen preparedness for future pandemics, with the other 50% spent to assist those most in need at home, particularly in the protection and provision of employment.”

The EU has fined Volkswagen and BMW €875m (£750m) after finding that the German carmakers colluded with another rival, the Mercedes-Benz owner Daimler, to delay emissions-cleaning technology.

The European Commission said that the carmakers had “breached EU antitrust rules by colluding on technical development in the area of nitrogen oxide cleaning”.

Volkswagen, the world’s largest manufacturer of cars, will pay €502m, a reduction of more than half the original fine because it cooperated with the investigation. BMW will pay €372m, far lower than the provision for well over €1bn that it had initially made. Daimler escaped without a fine because it had revealed the cartel to the commission.

Wall Street has joined the selloff, with heavy losses at the open as growth worries hit markets.

The Dow Jones industrial average has dropped by around 496 points, or 1.4%, to 34,185 points in early trading.

The broader S&P 500 index is down 1.5%, shedding 65 points to 4,293 points, away from this week’s record highs.

The tech-focused Nasdaq Composite is also sharply lower, down 1.8% or 262 points at 14,402 -- away from its own record highs earlier this week.

The number of Americans filing new claims for unemployment benefit has risen unexpectedly - which may fuel concerns that the growth rebound is fading.

There were 373,000 initial claims for jobless support last week, more than expected (but still near a pandemic low) and a rise of 2,000.

The previous week’s total has been revised higher too, from 364,000 to 371,000.

Economists had expected jobless claims to fall to around 350,000 (these figures are seasonally adjusted), as the recovery in the labor market continued and the vaccine rollout helped companies to reopen.

Claims are still much lower than earlier in the pandemic (a year ago, 1.4 million Americans filed new unemployment claims). The average weekly jobless claims over the last four weeks hit the lowest since the pandemic began, at 394,500.

Splitting out seasonal adjustments, and jobless claims rose last week by over 3,000 to 369,661. In addition, another 99,001 self-employed workers and freelancers filed new claims for through the Pandemic Unemployment Assistance.

This small uptick last week may show that the steady fall in claims since the vaccine rollout spurred growth is fading....

The European Central Bank has also pledged to give more weight to the climate crisis when setting monetary policy in the eurozone.

Under a new “new action plan”, the ECB will shift its asset-purchase stimulus programme away from heavy carbon-emitting companies which are not aligned with the EU’s climate goals.

It will also make adjustments to disclosure rules and risk assessment.

The ECB’s Governing Council says:

Addressing climate change is a global challenge and a policy priority for the European Union. While governments and parliaments have the primary responsibility to act on climate change, within its mandate, the ECB recognises the need to further incorporate climate considerations into its policy framework.

Under this new plan, the ECB commits:

• to further incorporating climate change considerations into its monetary policy framework;
• to expanding its analytical capacity in macroeconomic modelling, statistics and monetary policy with regard to climate change;
• to including climate change considerations in monetary policy operations in the areas of disclosure, risk assessment, collateral framework and corporate sector asset purchases;
• to implementing the action plan in line with progress on the EU policies and initiatives in the field of environmental sustainability disclosure and reporting.

The plan means that the ECB will adjust the framework under which it buys corporate bonds through its stimulus programme to incorporate climate change criteria, and the commitment to net zero:

“These will include the alignment of issuers with, at a minimum, EU legislation implementing the Paris agreement through climate change-related metrics or commitments of the issuers to such goals.”

It will also consider climate risks when reviewing which assets it accepts as collateral from banks:

Collateral framework. The ECB will consider relevant climate change risks when reviewing the valuation and risk control frameworks for assets mobilised as collateral by counterparties for Eurosystem credit operations. This will ensure that they reflect all relevant risks, including those arising from climate change.

It will also start conducting climate stress tests of the Eurosystem balance sheet in 2022 to assess the Eurosystem’s risk exposure to climate change.

The ECB insists that climate issues falls within its remit, as the transition to net zero and the climate crisis will have an impact on inflation, output, employment, interest rates, investment and productivity; financial stability; and the transmission of monetary policy.

It will also affect the value and the risk profile of the assets held on the Eurosystem’s balance sheet, potentially causing climate-related financial risks to pile up, it says, adding:

With this action plan, the ECB will increase its contribution to addressing climate change, in line with its obligations under the EU Treaties.

Economics professor Daniela Gabor argues the ECB should have gone even further:

On the other hand, historian Adam Tooze argues that the ECB deserves credit for making such a move.

The ECB’s new symmetric 2% inflation target gives the central bank ample room to run accommodative monetary policy for longer without having to fight markets, says Ima Sammani, FX market analyst at Monex Europe:

“The highly anticipated news has helped EURUSD climb higher over the course of today’s session, rebutting the broader G10 market move into haven currencies, as concerns over growth remain prevalent.

By committing to a policy stance that will be growth supportive over the recovery period, the euro is merely reacting to the prospect of downside risks to the growth outlook dissipating somewhat.”

Reuters is rounding up reaction here.

Here’s a flavour:

Christoph Rieger, head of rates & credit research at Commerzbank:

“The inclination to tolerate higher inflation is deeply rooted in the ECB’s thinking. They are stressing the importance of having an inflation buffer.

“There is a justification for them to act forcefully against low-inflation risks that they see arise.

“Tying this with some of the other colour we’ve seen from the ECB of late underlines that it is determined to keep policy loose and allow inflation to establish itself at higher levels.

Colin Asher, senior economist at Mizuho:

“Clearly the ECB is moving in a sensible direction. In the past the ECB has tightened rates prematurely a couple of times and this means the risk of such a mistake in future is small.

But while the ECB is moving in a dovish direction, it is being outpaced by the Fed which has already adopted a formal inflation targeting framework and is actively trying to run the economy hot.”

And Frederik Ducrozet of Pictet Asset Management tweets:

The European Central Bank has lifted its inflation target, giving it more flexibility to stimulate the eurozone economy without breaking its commitment to price stability.

After reviewing its monetary policy strategy, the ECB decided to aim for a 2% inflation target over the medium term (as the Bank of England already does, for example).

Previously, the ECB had aimed to keep inflation below, but close to 2%, so this change would allow it to engage in deeper, or longer stimulus measures if required.

The new target is ‘symmetrical’, meaning that falling below 2% inflation is just as undesirable as rising above it.

Explaining the new policy, the ECB signals that it would accept a period of moderately above-target inflation, to avoid low inflation becoming ‘entrenched’:

When the economy is operating close to the lower bound on nominal interest rates, it requires especially forceful or persistent monetary policy action to avoid negative deviations from the inflation target becoming entrenched.

This may also imply a transitory period in which inflation is moderately above target.

The ECB has long struggled to raise inflation to target -- although CPI did hit 2% in May, for the first time in two years. The old target had created concerns that the ECB was more concerned about exceeding the target, rather than undershooting it.

The Bank has also acknowledged today that eurozone inflation measures should include a measure of owner-occupied housing costs, to “better represent the inflation relevant for households”.

But, adding that to the Harmonised Index of Consumer Prices (HICP) will take time...

So in the meantime, the Governing Council in its monetary policy assessments will take into account inflation measures that include initial estimates of the cost of owner-occupied housing to supplement its set of broader inflation measures.

Christine Lagarde, President of the ECB, who launched the review back in January 2020 shortly after joining the bank, says:

While taking the ECB’s primary mandate of price stability as a given, the review has allowed us to challenge our thinking, engage with numerous stakeholders, reflect, discuss and reach common ground on how to adapt our strategy.

The new strategy is a strong foundation that will guide us in the conduct of monetary policy in the years to come.”

Wall Street is also heading for a lower open, according to the futures market, as investors continue to ditch shares in favour of bonds:

US government bond yields are continuing to fall, as bond prices rise -- a sign that investors are less concerned about inflation and more worried about growth.

Sophie Griffiths, market analyst at OANDA, says the mood in the markets is starting to sour:

Concerns over the health of the economic recovery are denting risk sentiment and hitting demand for stocks even as the Federal Reserve moves towards tapering asset purchases.

Inflation concerns and fears that the Federal Reserve could move to start tightening monetary policy have been lingering over the past few weeks, particularly since its hawkish shift at the June meeting.

The minutes from the Fed’s June policy meeting confirmed that the central bank is moving towards tapering its asset purchases, potentially as soon as this year. However, the minutes also revealed that more evidence of a robust economic recovery would be needed to set a more defined timeline for tapering.

Interestingly the minutes come as the bond market continues to show traders are increasingly less concerned with the risk of rising inflation and interest rate rises. This is pretty much the polar opposite of what some Fed policymakers appear to be worried about when they adopted the view of two interest rate rises in 2023. This certainly isn’t the first time the bond market and the Fed have been out of sync this year. Today, bond yields continue to slump lower. The yield on the 10-year treasury has tumbled to 1.26%, a fresh four-month low.

The overriding concern being reflected in the bond market is that peak growth has been reached, and the benefits from fiscal policy are starting to fade. Recent data has been disappointing. The Citigroup Economic Surprise Index is at its lowest level since February.

Banks in Europe are taking the biggest hit on the back of falling government bond yields. Other cyclical stocks such as automotive and miners are also firmly out of favour on global growth concerns.

Back in the markets, the selloff is picking up, with the FTSE 100 index now down 130 points or 1.7% at 7020 points, its lowest since 30th June.

Nearly every stock is lower, led by Persimmon (-4%), hotel operator Whitbread (-4%), Barclays bank (-4%), manufacturing company Melrose (-4%), followed by miner Anglo American (3.75%) and catering group Compass (-3.6%).

Concerns over the strength of the economic recovery appear to be rising -- with some recent economic data signaling that growth may have peaked [China’s factory growth slowed last month, as did America’s service sector].

Anxiety over the delta variant may also be hurting hospitality and travel firms, as Covid-19 cases continuing to rise. The global coronavirus death toll passed four million late on Wednesday.

Russ Mould, investment director at AJ Bell, says:

Miners and banks are the principal sectors weighing on the index, suggesting that investors have started to worry again about the strength of the economic recovery.

Miners’ fortunes are heavily tied to commodity prices and the cost of metals and minerals is typically determined by supply and demand for industrial projects around the world.

“Banks are also heavily influenced by economic activity. A strong period of growth means there could be greater opportunities to lend money to businesses and such a backdrop might also point to rising interest rates which increases the chance for the banking sector to make higher profit margins. If the economic outlook is not as strong, then investors start to go off banks for fear that it will be harder for them to push up earnings.

“A pullback in the oil price is also bad for the FTSE 100 given how oil producers Royal Dutch Shell and BP are major constituents of the stock index and a decline in their share prices acts as a drag on the UK market. Both Shell and BP’s shares were weak as Brent Crude prices lost their shine, with the black stuff falling 0.5% to $73.09 per barrel.

“In Asia, Hong Kong’s Hang Seng slumped by nearly 3% as Chinese tech stocks experienced a major sell-off amid fears of further regulatory interference.

The takeaway delivery company Deliveroo has raised its forecasts for sales this year after “strong growth” during the first six months of 2021, a period that included its rocky stock market listing.

Deliveroo said on Thursday it expected the value of transactions through its platform during 2021 to be between 50% and 60% higher than 2020, suggesting that total transactions could be worth well over £6bn for the year.

The company’s fortunes have been transformed since the start of the coronavirus pandemic. In April 2020 Deliveroo warned there had been a “significant decline in revenues” when UK governments imposed national lockdowns. Yet by the end of the year it was preparing to float its shares on the London Stock Exchange as repeated lockdowns boosted demand for home delivery.

Transaction volumes on Deliveroo’s platform increased to £1.7bn in the second quarter of 2021. That was a 76% rise compared with the April to June period in 2020, and an increase of £100m compared with the first three months of 2021.

Here’s Jasper’s full story:

Shares in Deliveroo have risen 3% this morning to 330p - their highest level since their opening day plunge on 31st March. But that still leaves them around 15% below their 390p float price....

Hong Kong’s stock market has fallen to its lowest level since January, driven down by the selloff in technology shares after Beijing’s clampdown.

The Hang Seng index has closed down 2.9%, shedding 807 points to 27,153 points, its lowest since the first week of the year.

An index of tech stocks listed in Hong Kong slumped to their lowest level since last October with technology giant Tencent closing 3.7% lower, and e-commerce players Alibaba losing 4.1%, and JD.com losing 3.6%.

Regulatory worries hit the market, explains Reuters:

China’s market regulator said on Wednesday it had fined a number of internet companies including Didi Chuxing, Tencent and Alibaba for failing to report earlier merger and acquisition deals for approval, according to a statement on the website of the State Administration of Market Regulation (SAMR).

Amid persistent regulatory worries, Linus Yip, chief strategist at First Shanghai Securities said “those leading tech companies are still in the process of seeking a bottom.”

China State Council’s pledge to do more to support the real economy also dampened the mood, as it may signal the recovery is slower than expected.

European markets have fallen sharply into the red this morning.

The FTSE 100 has fallen by around 95 points, or 1.3%, to around 7056 points - a one-week low.

Mining companies, financial stocks, energy firms and consumer goods and service makers are leading the selloff in London.

Anglo American (-3.6%) which produces platinum, copper, nickel, iron ore, coal and diamonds, is the top faller, followed by copper giant Antofagasta (-3.1%).

NatWest bank are down 3%.

Neil Wilson of Markets.com sums up the situation:

Asian shares were broadly weaker overnight, with a steep fall in South Korea registered as daily Covid cases there surged.

Bonds are still bid as weaker hands get washed out with the 10yr Treasury note yielding 1.28%, a new 5-month low in the wake of the Fed meeting minutes - it’s either sending a warning signal or it’s just a flush before the move higher.

US stock markets were mildly higher yesterday, with futures pointing to a drop at the open. Apple shares hit a fresh record, whilst meme stock favourites such as GME, WISH and AMC fell sharply. In London, money transfer app Wise got off to a solid start as shares rallied on the first day of trade. Shares in troubled Chinese ride hailing app Didi fell another 5% as it faces a lawsuit from US shareholders.

Minutes from the FOMC’s meeting in June showed pretty much what we knew; policymakers are moving but with a degree of caution.

“Various participants mentioned that they expected the conditions for beginning to reduce the pace of asset purchases to be met somewhat earlier than they had anticipated” but it is “their intention to provide notice in advance of an announcement to reduce the pace”.

Meanwhile China is back in the game – the State Council issued a statement saying it would seek “to increase financial support to the real economy” by using “monetary policy tools such as RRR cuts”.

Anxiety over China’s recovery is also weighing on the markets today, after the country’s cabinet pledged do to more to support the economy.

A State Council executive meeting chaired by Premier Li Keqiang decided on Wednesday to increase the financial support for the real economy, particularly for micro, small and medium-sized enterprises

The Council, China’s equivalent of a cabinet, also flagged that People’s Bank of China could make more liquidity available to banks to boost lending, through timely cuts in the bank reserve requirement ratio (RRR).

Lowering RRR would allow banks to keep less capital in reserve, and lend more to businesses.

That’s something of a u-turn, as policymakers had been tightening policy as its economy recovered.

China Daily has more details:

Such measures are expected to mitigate the impact of commodity price hikes on the operation of companies, the meeting said, adding that the country will refrain from mass stimulus, maintain the stability of monetary policy and enhance its effectiveness.

The meeting also decided to roll out monetary tools to support carbon emission reduction, and provide incentives for more private funds to finance the cuts.

China’s government bond prices have jumped, pushing down the yield, implying investors are anticipating monetary policy easing, and worrying about softer growth.

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

China’s crackdown on technology companies is hitting the markets again today, amid concerns that the rebound in global growth may be fading.

Stock markets across Asia have fallen to a six-week low after Beijing sent shockwaves through global financial circles with plans to tighten restrictions on overseas listings of Chinese companies, as it puts its tech giants under much tighter scrutiny.

China’s CSI 300 index has fallen over 1%, while Hong Kong’s Hang Seng has tumbled 2.75%, helping to pull the MSCI’s index of Asia shares outside Japan down 1% to its lowest since late May.

An index of tech shares in Hong Kong (where several of China’s biggest online giants are listed) fell 3.75%, and has now slumped by almost 12% over the last seven sessions.

Technology giants Tencent (-3.75% today) and Alibaba (-3.8%) have both fallen to their lowest levels of this year today.

Last night, shares in ride-hailing operation Didi slumped another 5% in New York, further below last month’s float price, having crashed 22% on Tuesday after regulators launched a probe into allegations it had illegally collected users’ personal data.

CNBC says the proposal to tighten restrictions on overseas listings could disrupt “a $2 trillion market loved by some of the biggest American investors”, and threaten IPO plans.

Beijing’s State Council said in a statement on Tuesday that the rules of “the overseas listing system for domestic enterprises” will be updated, while it will also tighten restrictions on cross-border data flows and security.

China’s market regulator also revealed yesterday it has fined a number of internet companies for failing to report earlier merger and acquisition deals for approval -- another ratcheting up of pressure.

Associated Press explains:

Companies including internet giants Alibaba and Tencent were fined Wednesday by anti-monopoly regulators in a new move to tighten control over their fast-developing industries.

In 22 cases, companies were fined 500,000 yuan ($75,000) each for actions including acquiring stakes in other companies that might improperly increase their market power, the State Administration for Market Regulation announced. It said violators include six companies owned by Alibaba Group, five by Tencent Holding and two by retailer Suning.com.

Kyle Rodda of IG says the clampdown is causing nervousness in the markets:

The Hang Seng has copped a fair whack today, as Hong Kong equities remain at the coal front of the Chinese Communist Party’s crackdown on big-tech, the private sector and, really, the region as a whole. That risk will eventually be priced-out of the market, when the CCP thinks it’s made its authority clear enough.

But while that brinkmanship persists, it’ll keep investors on their toes and perhaps away from investing in the region’s tech giants.

Investors are also pondering whether the recovery rebound is fading, after America’s service sector saw growth slow last month.

This has sent yields (or interest rates) on US government debt sliding, indicating traders are less worried about a surge of inflation forcing a tightening of monetary policy.

The minutes of the Federal Reserve’s latest meeting, released yesterday, show that officials held a vigorous discussion on whether the economic rebound in the US would soon be strong enough to justify slowing, or tapering, its pandemic-era stimulus measures.

Also coming up today

The European Central Bank is publishing the results of a strategy review today, which could see a change to its price stability target for the first time in almost two decades.

The current goal of inflation “below, but close to, 2%” could be replaced with a more flexible target, with more room to overshoot (although the ECB’s problem has been undershooting inflation).

The ECB is also expected to announce a green shift in its monetary policy, by tilting its asset purchase schemes and collateral rules away from companies with high carbon emissions without a plan to hit net zero by 2050.

Bloomberg explains:

Some officials were in favor of a precise goal of 2% with flexibility around it, while others preferred a policy closer to the Federal Reserve’s average inflation targeting.

A key tussle in the climate-change talks was over whether the ECB should stick to its principle of mirroring the composition of the market when buying bonds -- known as “market neutrality.” That was resolved when Bundesbank President Jens Weidmann signaled last month that he could support tilting purchases toward greener assets if it means protecting the balance sheet from climate and transition risks.

The agenda

• 9.30am BST: Economic activity and social change in the UK, real-time indicators, published by Office for National Statistics:
  
• Noon BST: European Central Bank publishes results of its strategy review
• 1.30pm BST: US weekly jobless figures
• 4pm BST: EIA weekly oil inventory data