Time for a recap.

Economic storm clouds are gathering over Germany again, after growth fell into reverse and inflation rose.

German GDP fell by 0.1% in the second quarter of this year, new economic data shows, putting Europe’s largest economy on the brink of recession.

Analysts warned that Germany is the growth laggard of the eurozone, although Latvia (-1.1%), Sweden (-0.8%) and Hungary (-0.2%) all shrank by more.

ABN Amro explains:

German Q1 GDP undershot expectations, contracting by 0.1% qoq (consensus and our forecast +0.1% qoq) after expanding by 0.2% qoq in Q1

The details will be published late August. For now, Destatis pointed to fixed investment, particularly in transport equipment and buildings as the main drag on GDP growth. Indeed, investment in Germany has been generally weak with the level of investment still lagging 2019 levels by about 4%; this is especially the case for investment in transport equipment such as cars.

Furthermore, investment in buildings declined after being a source of strength in the Q1 GDP reading. This is not a surprise given the continued high level of interest rates, which have depressed demand and activity in the construction sector, particularly housing.

German inflation, on a harmonised basis, rose to 2.6% this month.

The drop in Germany’s GDP took the shine of a solid, unspectacular, growth performance by the wider eurozone, which expanded by 0.3% in April-June.

Spain was a bright light, growing by 0.8%, while France expanded by 0.3% – helped by the sale of a massive cruise ship to Royal Caribbean.

Analysts at Nomura say:

Euro area Q2 2024 GDP grew by 0.3% q-o-q. Core/periphery divergence continues, worsening even, with Germany contracting and Spain materially outperforming.

In other news….

Climate activists have voiced anger after BP beat profit expectations, and hiked its dividend.

Drinks company Diageo has been hit by a slump in demand in Latin America, cancelling out a jump in demand for its no-alcohol Guinness 0.0%.

Bakery chain Greggs has raised some prices, as it passes on the cost of a higher wage bill.

Pfizer has raised its profit guidance, as it shrugged off a drop in revenues from its Covid produces.

The number of job openings in the US has fallen slightly.

After falling sharply this morning, London’s blue-chip stocks have clawed their way back, mostly.

The FTSE 100 share index has ended the day down 18 points, or 0.2%, at 8274 points. Standard Chartered led the risers, after announcing its biggest ever share buyback this morning.

But medical device maker Convatec was the top faller, down 5.8%, after missing profit expectations.

The FTSE 250 index of medium-sized companies jumped 0.85%, led by wealth manager St James’s Place (+25%) after it outlined cost-cutting plans.

Trouble is mounting in the UK water industry, where Moody’s is threatening to downgrade Southern Water to a ‘junk’ rating.

SW (Finance) I PLC (Southern Water) is currently rated at Baa3 – the lowest investment-grade rating. Moody’s has now placed its bonds on review for a possible downgrade.

Moody’s says:

“The review for downgrade reflects our expectation that Ofwat’s draft determination would, if not materially changed... result in severe Outcome Delivery Incentive (ODI) penalties and total expenditure (totex) allowances below the level needed to fund Southern Water’s investment programme.

“Together with an allowed return that falls significantly short of Southern Water’s actual cost of capital, such under-performance may challenge the company’s ability to raise equity finance to maintain leverage at levels consistent with the current rating.”

Southern Water is subject to enforcement monitoring by regulator Ofwat after a record £126m fine in 2019 over “shocking” failures at the company’s sewage treatment sites that polluted rivers and beaches in southern England.

Last week, Moody’s downgraded Thames Water’s credit rating to “junk” status, adding to pressure on the English water company’s finances.

Pharmaceuticals giant Pfizer has lifted its profit forecast after recording its first rise in revenues since the height of the Covid-19 pandemic.

Pfizer grew its revenues by 2% year-on-year to $13.28bn, despite a drop in revenues from Covid products, as demand for its heart disease drug and its cancer therapy Padcev rise.

David Denton, Pfizer’s chief financial officer and executive vice president, says:

“This was Pfizer’s first quarter of topline revenue growth, on a year-over-year basis, since the fourth quarter of 2022 when our COVID revenues peaked.

The company now expects annual profit to be in the range of $2.45 to $2.65 per share, up from a prior profit forecast of $2.15 to $2.35 per share.

Pfizer also says it’s on track to cut costs by at least $4bn by the end of the year, through its “Cost Realignment Program”.

Microsoft has said it is investigating reports of users having problems accessing its services, with some reporting being unable to access email and other functions, PA Media reports.

An alert on the technology giant’s service status website said it is looking into a “network infrastructure” issue.

According to website status platform DownDetector, users of Microsoft 365, Microsoft Teams, Xbox Live and players of popular video game Minecraft were among those reporting issues.

The incident comes less than two weeks after a major IT outage knocked global infrastructure including transport and healthcare services offline because a flawed software update from cybersecurity firm CrowdStrike affected Microsoft devices.

On its service status website, Microsoft said:

“We are investigating reports of issues connecting to Microsoft services globally.

“Customers may experience timeouts connecting to Azure services. We have multiple engineering teams engaged to diagnose and resolve the issue. More details will be provided as soon as possible.”

Just in: the number of job openings across the US economy has dropped slightly, as its labour market slackens a little.

There were 8.184m job opportunies in the US at the end of June, down from 8.23m at the end of May, and 941,000 fewer than a year earlier.

The job openings rate held at 4.9 percent in June.

The Bureau of Labor Statistics says:

Job openings increased in accommodation and food services (+120,000) and in state and local government, excluding education (+94,000). The number of job openings decreased in durable goods manufacturing (-88,000) and in federal government (-62,000)

Over in the US, home prices have stagnated.

US house prices were unchanged in May, according to the Federal Housing Finance Agency, following a 0.3% rise in April.

During May, prices fell by 0.5% in the West North Central division, but gained 0.3% in the New England division.

“US house price movement was flat in May,” said Dr. Anju Vajja, Deputy Director for FHFA’s Division of Research and Statistics, adding:

“The slowdown in U.S. house price appreciation continued in May amid a slight rise in both mortgage rates and housing inventory.”

On an annual basis, house prices rose 5.7% compared with May 2023.

The UK’s Takeover Panel has doled out its harshest penalty for a code breach, after a long investigation into the company which once owned boutique hotel chains Malmaison and Hotel du Vin.

The Panel has concluded that ten parties should be “cold-shouldered”, a move which effectively bars them from any takeover-related activity, including buying or selling shares during a live takeover period.

The Panel found that several executives of MWB Group Holdings had acquired shares in the company which, when added to the shares held by a pre-existing concert party, meant they controlled more than half its share capital – which would, if disclosed, force them to make a formal takeover bid.

Omar Faruqui, Director General of the Panel, explains:

“Today’s ruling concludes the most complex investigation in the Panel’s 56-year history. Ten individuals have been cold-shouldered. They misled MWB Group shareholders and the market through a web of sham transactions and false trails stretching across many jurisdictions.

Exposing their deceit and wrong-doing is testament to the skill and determination of the Panel’s enforcement team.”

The ruling, which runs to over 100 pages, is online here.

The Panel also decided that three members of management, including former MWB CEO Richard Balfour-Lynn, should pay compensation to shareholders, and has rejected an appeal from Balfour-Lynn.

It has also publicly censured Andrew Blurton, a joint finance director of MWB at the time of some of the events in question.

MWB entered administration in November 2012 and was liquidated on 15 April 2018.

Another blow for Germany – its inflation rate has risen.

Inflation, on an EU-harmonised basis, rose to 2.6% per year in July, up from 2.5% in June, statistics body Destatis reports.

Britain’s competition watchdog has kicked off another probe into the artificial intelligence sector.

The Competition and Markets Authority (CMA) is examining whether Alphabet’s partnership with AI start-up Anthropic has created a “merger situation”, and if so wheter it weakens competition.

This is the latest in a series of moves by the CMA. Earlier this month it began a full investigation into Microsoft’s deal with AI startup Inflection, and in April it began seeking views on Amazon’s investment in Anthropic, which is a leading rival to OpenAI.

Other regulators also have concerns; in January, Alphabet, Amazon and Microsoft received inquiries from the US Federal Trade Commission on their investments and partnerships with Anthropic and OpenAI.

A major probe into whether people overpaid on their car loans has been extended by the UK’s financial watchdog.

The Financial Conduct Authority now expects to set out the next steps in its review into the past use of discretionary commission arrangements (DCAs) in May 2025, having previously aimed to do this by the end of September.

The FCA says:

We’re working hard to understand how DCAs affected the cost of credit for people borrowing money to buy a vehicle. We’re assessing thousands of records spanning 14 years.

The FCA’s investigation centres on the car loans market, and whether commission payments to brokers were too high. Those brokers were able to adjust the interest rates they charged customers, and some received “discretionary commission arrangements”, which meant they were paid more if the interest rate was higher.

The FCA says today that firms involved in our review have engaged constructively with the regulator, but many have struggled to supply data within the requested time.

Another wrinkle is that Barclays Partner Finance has begun judicial review proceedings of the Financial Ombudsman Service’s decision to uphold a complaint relating to its use of a DCA.

Thousands of car loan customers who took out loans before 2021 have been complaining to lenders and brokers.

The FCA says today it could bring in a redress scheme, so it is asking firms to pause complaint handling until 4 December 2025.

Shares in Close Brothers, which has provided motor finance deals, are down around a third since January, when the FCA announced it was investigating the market.

JP Morgan is still bullish on the outlook for the UK stock market.

In a new research note, its analysts say the backdrop for UK equities is “looking favourable”. They cite attractive valuations, improved political clarity and potentially lower bond yields, which all make dividend yields more attractive again.

JP Morgan is maintain its recommendation to remain ‘overweight’ on UK stocks.

They explain:

The elections event risk is behind us, and the new government is likely to provide more fiscal credibility and stability, with focus on domestic agenda, homebuilding and the consumer. Broadly, the beneficiaries stand to be Banks, Homebuilders, Real Estate and Utilities, while on the negative side we have Diversified Financials, E&P and Transportation.

Within the UK, we have a preference for Domestic over Exporters plays, as GBP is firmer, for UK consumer plays, and for Real Estate and Homebuilders - these typically start performing once the rate cuts begin.

Away from Europe, credit rating agency S&P has downgraded Bangladesh’s credit ratings to B+ from BB-, nearly two weeks after the government imposed a curfew to quell deadly student protests.

S&P cited a sustained decline in Bangladesh’s foreign exchange reserves, which it says shows there is persistent pressure on the country’s external metrics.

Earlier this month, the Bangladeshi government declared a national curfew and announced plans to deploy the army to tackle the country’s worst unrest in a decade, with AFP reporting that at least 105 people have died in the unrest.

The protests began this month on university campuses as students demanded an end to a quota system that reserves 30% of government jobs for family members of veterans who fought in Bangladesh’s war of independence in 1971.

Those protesting have argued that the policy is unfair and discriminatory as young people struggle for jobs during an economic downturn and instead benefits members of the ruling Awami League party, which is led by the Hasina.

Pushpin Singh, senior economist at the CEBR think tank, predicts the eurozone’s growth prospects will improve this year:

“Flash estimates from Eurostat indicate that the Eurozone economy grew by 0.3% on the quarter in Q2. This rate was above consensus expectations and matched the corresponding growth rate seen in Q1. The stronger-than-expected growth rate suggests the bloc has turned a corner since the start of the year.

Prospects are likely to improve further throughout the year, driven by recent policy loosening by the European Central Bank and expectations for further interest rate cuts down the line. Cebr expects the Eurozone economy to expand by 0.8% in 2024, up from 2023’s growth figure of 0.4%.”

Just in: The eurozone grew by 0.3% in the second quarter of this year, a little faster than expected, despite the economic problems in Germany.

Statistics body Eurostat has just reported that GDP increased by 0.3% in both the euro area and the EU in the April-June quarter, which matches the growth recorded in the first quarter of this year.

Economists had expected growth to slow to 0.2% in Q2, so this is a little better than expected.

Ireland (+1.2%) recorded the highest increase compared to the previous quarter, followed by Lithuania (+0.9%) and Spain (+0.8%), while France grew by 0.3% and Italy and Belgium both expanded by 0.2%.

The highest declines were recorded in Latvia (-1.1%), Sweden (-0.8%) and Hungary (-0.2%), while Germany’s 0.1% fall in GDP also dragged on growth.

The news that Germany’s GDP shrank in April-June (see 9.20am) shows how hard it will be to escape the cyclical and structural headwinds hitting its economy, says Carsten Brzeski, Global Head of Macro at ING.

He tells clients this morning that the German economy will continue to hover between hope and despair:

With both the US and the Chinese economies losing momentum, along with new trade tensions, there is very little hope for a strong export-driven recovery. Also, weak industrial orders, high inventory levels and precautionary savings are still weighing on the economy. On top of that, the increasing number of insolvencies and individual company announcements of forthcoming job restructurings are still hanging like the Sword of Damocles over the labour market this year.

However, despite a weak start to the second half of the year, don’t rule out potential positive surprises. In fact, extremely weak May data could have been exaggerated due to many public holidays and long weekends. Plus, only a small improvement in industrial order books is needed to get industrial production growing again, admittedly from low levels. The highest increase in real wages in more than a decade should also loosen even German consumers’ traditionally very tight wallets eventually.

All in all, today’s data once again confirms that Germany is the growth laggard of the eurozone. Caught between cyclical and structural headwinds, there is no easy way out of this long stagnation. Nevertheless, a rebound in the second half of the year is still possible, even though it is highly unlikely that it will be a strong one.

The picture is better in Italy, though, where the economy continues to grow.

Italian GDP rose by 0.2% in the April-June quarter, the fourth quarter of growth in a row.

Statistics body Istat reports that the services sector grew, while industry, and the agriculture, forestry and fishing sector, dragged on growth.

Newsflash: Germany’s economy is back on the brink of recession.

Germany’s GDP shrank by 0.1% in the second quarter of this year, new data from statistics body Destatis shows.

That’s a blow to Berlin’s government, which has been hit by an ailing train network, the surge in energy prices after Russia’s invasion of Ukraine, protests by farmers, weaker demand from China, and a rise in support for far-right politicians.

Economists had expected growth of 0.1% in the quarter.

The decline in activity was due to a fall in manufacturing and construction investments.

Destatis reports that “investments in equipment and buildings, adjusted for price, seasonal and calendar effects, in particular decreased” in the last quarter.

The drop in GDP in the last quarter follows 0.2% growth in the first quarter of 2024.

A technical recession is defined as two quartery contractions in a row.

This takes the shine off a decent start to today’s eurozone growth data, with both Spain (+0.8%) and France (+0.3%) beating expectations…..

France’s finance minister, Bruno le Maire, has predicted that growth could beat the outgoing government’s forecast this year.

He welcomed the better-than-expected 0.3% rise in GDP reported this morning, telling reporters:

“We will probably have growth after all that is better than the 1% forecast in February.

“For two years, France has outperformed; our economic policies work and are giving tangible results.”

We flagged earlier that a ship delivery boosted France’s exports in the last quarter.

Reuters is now reporting that the vessel in question is the Utopia of the Seas cruise ship, which was delivered to Royal Caribbean. The ship, which cost over £1bn, helped to lift France’s transport equipment exports by +1.8%, and overall exports by 0.6%.

The Daily Mail recently took a trip on Utopia of the Seas – they report it includes five pools, a zip line, an aqua park, a surf simulator, and an on-board train.

High street bakery chain Greggs is putting up some of its prices, after its pay bill was pushed up by the rise in the minimum wage this year.

Greggs’s CEO Roisin Currie has told the PA news agency that the company has increased the prices of some items on its menu by 5p and 10p in recent weeks, but has kept meal deal prices unchanged.

Currie – who said in March that price rises weren’t planned – says prices were raised to offset higher pay for its 32,000-strong workforce, having raised salaries earlier this year ahead of the increase in the National Living Wage.

She said:

“The biggest inflation cost right now is the increase in the National Living Wage and making sure our employees get the wage increases that are appropriate.

“That puts pressure on the cost increases within the business.”

Bank CEOs have largely welcomed prime minister Kier Starmer’s government with open arms, cheering the country’s economic trajectory and political stability after years of uncertainty.

And the boss of the London-headquartered but emerging markets-focused lender, Standard Chartered, is no exception.

Bill Winters told journalists this morning that Labour appeared to be a “serious government” that was supportive of business and ready to tackle fiscal challenges that have dogged the UK economy.

He said:

The new Labour Government is a serious government and they’ve set out a series of serious statements and platforms, including what the chancellor said yesterday in terms of addressing some of the fiscal challenges that we know are very present in the country.

The rhetoric during the election period and in the early days of the government has been supportive of business. I think it’s been tempered by realism about the economic challenges and the fiscal challenges that the UK faces.

But I have every confidence that the Chancellor and the rest of the government will pursue their policies in a very thoughtful, open and transparent way. And that’s as much as we could ask.

Winters added that he was “happy” to be headquartered in the UK, which he described as having a robust regulatory environment, a “very stable political environment” and “extraordinarily good rule of law” and corporate governance, adding:

“So there’s certainly nothing that has changed in terms of our views on the attractiveness of the Labour government”.

His comments came as the bank raised its earnings outlook, and announced its largest-ever share buyback worth $1.5bn.

It sent Standard Chartered’s FTSE 100-listed shares up 5.3% at the start of trading.

Newsflash: Spain’s economy has also grown faster than expected in the last quarter.

Spanish GDP expanded by a pacy 0.8% in Q2, the National Statistics Institute reports, comfortably beating forecasts of 0.5% growth.

That matches Spain’s growth in January-March.

On an annual basis, Spain’s economy grew 2.9% over the last year.

Campaign groups are angered by BP’s latest multi-billion dollar profits.

Global Witness has calculated that BP had paid “a staggering” £11.7bn to shareholders since June 2023 – when the world began a 12-month stint of temperatures 1.5C above the pre-fossil fuel era.

After BP reported an underlying profit of $2.76bn this morning, Alice Harrison, head of Fossil Fuel Campaigns at Global Witness, says:

“As the world faces record-breaking heat, most of us are desperate to see urgent action on the climate crisis. Unfortunately, it’s clear that BP couldn’t care less. While millions of us struggle with high temperatures and high bills, BP are raking in billions of profits, paying out massive dividends, and doubling down on dirty new oil and gas projects.

Big oil companies like BP know their fossil fuel products are behind more deadly heatwaves, storms, and wildfires around the world, but instead of investing in clean energy, they are continuing to profit from people’s misery.

Fossil fuel companies like BP are turning a blind eye to climate breakdown, so now governments must act. Rather than propping up the climate-wrecking fossil fuel industry, we need them to make polluters pay for the damage they have already caused, and steer us towards a cleaner, greener future.”

Warm This Winter spokesperson Fiona Waters points out that BP has recently rowed back on some of its green energy plans:

“BP’s obscene profits today and the fact they have made £38.4bn since the start of the energy crisis shows they’re not interested in turning off their oil and gas cash cow. They have rolled-back on their green pledges that would mean lower bills, an end to energy price shocks and would also help save the planet.”

Chiara Liguori, Oxfam GB’s Senior Climate Justice Policy Advisor, says low-income countries desperately need help to handle the impact of the climate crisis:

“It is inexcusable that BP, one of the world’s most polluting and profitable fossil fuel companies, continues to rake in billions of pounds while low-income countries are in urgent need of funds to tackle the devastating impacts of the climate crisis despite doing the least to cause it.

“The world can no longer afford fossil fuel companies putting short-term profits above people and planet. The costs of inaction are already here with deadly heat waves, wildfires, flooding and drought but it is people living in poverty who are left paying the highest price.

Philip Jansen, the former chief executive of BT, has been appointed as the new chairman of advertising giant WPP.

Jansen, who stood down as chief executive of BT in February after almost five years in the role, will join the board of the FTSE-listed WPP in September and formally take over as chair from January.

“Philip brings a valuable blend of experience, from leading technology and consumer goods companies to transforming large, complex organisations and creating significant value for shareholders,” said Angela Ahrendts, senior independent director at WPP.

Jansen, who began his career at Gillette to Ariel maker Procter and Gamble before moving into marketing director roles at Dunlop Slazenger and Telewest, led a BT turnaround strategy that included cutting 55,000 jobs by 2030 and investing £15bn in the nationwide roll out of full fibre broadband and 5G mobile networks.

Earlier this month, Jansen, who took home a bumper £3.7m in pay and bonuses in his lat year at the telecoms company, was linked with a private equity backed takeover bid of British pest control firm Rentokil.

“Technology is changing the face of commerce, media and communications, and I am very excited to join a company at the forefront of this change,” said Jansen.

In the energy sector, BP has lifted its dividend after beating profit forecasts for the last quarter.

BP has reported an underlying profit of $2.756bn for the second quarter of the financial year, up from $2.589bn in the same quarter in 2023, and slightly higher than the $2.723bn it earned in Q1.

That beat analyst expectations of $2.6bn.

BP said the profit was due to “an average” performance in gas marketing and trading, lower refining margins, stronger fuels margins and “lower taxation”.

It adds:

The underlying effective tax rate (ETR)* in the quarter was 33% which reflects the impact of the reassessment of the recognition of deferred tax assets.

BP is raising its dividend to eight cents per share, up from 7.27/share.

The oil giant has also announced another share buyback, worth $1.75bn, for the last quarter, as it continues to use spare cash to buy back equity.

Kate Thomson, BP’s chief financial officer, says:

We generated strong operating cash flow in the quarter, which helped reduce net debt to $22.6 billion.

Our decision to increase our dividend by 10%, and extend our buyback programme commitment to 4Q 2024, reflects the confidence we have in our performance and outlook for cash generation.

We are maintaining a disciplined financial frame and remain committed to growing value and returns for bp.

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

It’s eurozone GDP day, when we learn how the countries which share the single currency are faring economically.

And the early news is that France’s economic growth was stronger than expected in the second quarter of this year.

French GDP expanded by 0.3% in the April-June quarter, new data from statistics body INSEE shows, beating expectations for 0.2% growth.

That matches the 0.3% growth recorded across the eurozone’s second-largest economy in the first quarter of the year.

It suggests France’s economy was stronger than expected this spring – before Emmanuel Macron stunned Europe by calling snap parliamentary elections last month.

INSEE reports that domestic demand “picked up slightly”, and added to growth. There was also a “slight rebound” in investment (or gross fixed capital formation).

Household consumption was stable in the quarter, while foreign trade also made a positive contribution to growth.

Exports grew by 0.6%, driven by a rise in transport equipment – which INSEE attributes to the “delivery of a new ship”.

INSEE has previously predicted that the Olympic Games’ will lift France’s economic growth in the third quarter of this year

Economists predict that the wider eurozone also grew in the last quarter, by an estimated 0.2%. We’ll find out if they’re right at 10am, after getting growth figures from Italy, Spain and Germany too.

The agenda

• 8am BST: Spain’s Q2 2024 GDP report

• 9am BST: Germany’s Q2 2024 GDP report

• 9am BST: Italy’s Q2 2024 GDP report

• 10am BST: Eurozone GDP report for Q2 2024

• 1pm BST: Germany’s inflation rate for July

• 2pm BST: US house price index for May

• 3pm BST: US consumer confidence index for July