The most astonishing story of the morning is that international investors have apparently bought bonds backed by the crime proceeds of Italy’s most powerful mafia.

The Financial Times has discovered that securities which were partly backed by assets owned by organised crime gangs have been created. They were then sold to legitimate investors such as banks, pension funds and hedge funds.

The trick was to combine these assets with others, including unpaid invoices to Italian public health bodies (which yield a chunky penalty rate), in what the FT delicately calls an ‘exotic debt instrument’.

It looks like an astonishing failure of money-laundering rules, and raises questions about how much scrutiny investors are actually carrying out.

The FT says:

In one case, the bonds — backed in part by front companies charged with working for the Calabrian ’Ndrangheta mafia group — were purchased by one of Europe’s largest private banks, Banca Generali, in a transaction where consulting services were provided by accountancy group EY.

About €1bn of these private bonds were sold to international investors between 2015 and 2019, according to market participants. Some of the bonds were linked to assets later revealed to be created by front companies for the ’Ndrangheta.

The ’Ndrangheta is less well-known outside Italy than the Sicilian mafia but has risen over the past two decades to become one of the wealthiest and most feared criminal groups in the western world, engaging in crimes ranging from industrial-scale cocaine trafficking to money laundering, extortion and arms smuggling.

Boom! Gold has hit an eight-year high as investors try to protect themselves from a market downturn or a spike in inflation.

An ounce of gold just touched $1,800, its highest level since autumn 2011. It’s now gained around 18% so far this year (it was worth $1,515 per ounce in January), making it one of the best-performing assets .

Carlo Alberto De Casa, chief analyst at ActivTrades,says gold is in demand in case equities drop back towards the lows seen in March.

He adds:

It is worth pointing out that in March there wasn’t an immediate panic selling of gold but in the very short-term bullion was sold as investors were looking for easy cash in order to avoid margin calls from other losing positions.

This could happen again temporarily if there was a violent correction on indices but the long-term direction is clearly positive.

Gold’s traditional status as a safe haven against market turbulence, or currency devaluation, is also coming into play. Some goldbugs argue that precious metals are a safe investment, as governments may be forced to inflate away the huge debts built up under the Covid-19 pandemic.

France’s statistics body has struck an upbeat tone this morning, predicting that the French economy will rebound strongly in the next few months.

INSEE forecast that GDP would surge by 19% in the third quarter of 2020, followed by 3% growth in Q4, as the economy reopened. It also predicts GDP shrank by 17% in the last quarter, after a 5% plunge in Q1.

Overall, that means a 9% contraction in 2020 -- the worst recession since modern records began after WW2. Yesterday, the EC forecast France would shrink by over 10% - but obviously there’s a lot of confusion and uncertainty.

Neil Wilson of Markets.com points out that policymakers and investors are struggling to analyse the economic data:

A huge part of the problem facing investors in this market is figuring out what the data is telling us. As noted many times in recent weeks, the economic data is noisy and difficult to interpret because the speed and magnitude of the collapse was like nothing we have ever seen.

For example, France’s statistics body, Insee, says the French economy will rebound 19% in Q3, but still be down 9% in 2020. This points to the difficulty in reading too much into the easy part of the recovery process as lockdowns end. The longer-term recovery to activity levels comparable with 2019 will take a lot longer.

The online fashion retailer Boohoo has announced it will launch an independent review of its UK supply chain.

The move follows recent allegations that some factories in Leicester that sell clothes to Boohoo pay workers below the minimum wage and failed to protect them from coronavirus.

Boohoo, which owns brands including Pretty Little Thing and Nasty Gal, said the review will be led by Alison Levitt QC, and said it would initially invest £10m towards “eradicating malpractice” in its supply chain.

The company said in a statement that the board was “shocked and appalled by the recent allegations” and was committed to working to rebuild the reputation of textile manufacturing in Leicester.

It says:

We take extremely seriously all allegations of malpractice, poor working conditions, and underpayment of workers.

The Group will not tolerate any incidence of non-compliance with its Code of Conduct or any mistreatment of workers, and will not hesitate to terminate relationships with any supplier who does not comply.

Shares in Boohoo have fallen 9%in early trading, their third day of heavy falls in a row.

Shares in transport operator First Group have plunged 10% after it warned that there is a “material uncertainty” over its ability to continue as a going concern.

First Group told the City that the coronavirus pandemic has had a serious impact on its services, and that social distancing measures will significantly hit its service capacity and financial performance.

The company is one of the UK’s largest bus and rail operators. In America, its the largest school bus operator and also runs Greyhound buses.

Travel volumes have “reduced very substantially” since the crisis started, it says. And while governments and customers are providing support, First Group has made a loss of nearly £300m in the year to March 2020, compared to a £97.9m loss the previous year.

The company isn’t releasing any forecasts for the current year, saying:

There are material uncertainties as to how rapidly demand will increase, the rate at which fiscal support tapers and the duration of social distancing rules, as well as the timing of North American schools reopening. Therefore it is currently not possible to provide guidance for the financial year to 31 March 2021.

First Group adds that it has “adequate resources” to keep operating for the next year, but its long-term future depends on several factors - including whether passenger numbers recover and whether governments keep providing support.

Nearly every sector fell on the Australian stock market today, led by industrial stocks, consumer goods makers and tech firms.

The six-week lockdown in Melbourne, and the closing of the Victorian border with New South Wales, send the benchmark ASX/S&P index down 92 points to 5,920 (-1.5%).

Jeffrey Halley, senior market analyst for Asia Pacific at OANDA, says these measures have punctured some of the optimism in the markets:

Covid-19 worries are genuine. But the fact that investors are finally acknowledging this fact is more due to the overbought nature of the short-term market, and not a structural turn in sentiment.

That will likely require an escalation in lockdowns across the US Sun Belt states.

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

Anxiety over the ongoing Covid-19 pandemic is weighing on the markets today as some US states are forced to roll back their efforts to reopen their economies.

With cases rising in around 40 US states, central bankers are now worried that the recovery is faltering as some bars, cinemas, restaurants and gyms are forced to shut again.

Overnight, Cleveland Federal Reserve President Loretta Mester warned that more help will be needed to protect economies from the downturn, telling CNBC that:

“We saw a reopening in May and activity starting to come back pretty well.

Over the past week or so, there’s been some leveling off, and I think it’s probably due to the increase in cases not only in Ohio but across the country.”

With the global case load nearing 12 million worldwide (including Brazilian president Jair Bolsonaro), the pandemic’s grip on the world economy is tightening.

These concerns ended Wall Street’s latest rally last night, with the Dow Jones industrial average falling by almost 400 points or 1.5%.

Australia’s market has followed with a 1.5% tumble today, as the authorities imposed a hard border between Victoria into South Australia. That follows the surge in cases in Melbourne, which has highlighted just how hard it will be to stamp the virus out.

In London, the FTSE 100 has shed 42 points at the start of trading, or 0.7%, on top of Tuesday’s 96 point dive. European markets have also shed 0.6% (more details shortly)....

Fiona Cincotta of City Index says:

The mood in the market remains depressed on Wednesday as coronavirus concerns coupled with geopolitical tensions drag on risk sentiment. Equities across the board are out of favour whilst safe haven gold is consolidating just shy of $1800 after jumping 1% so far this week and hitting $1797, its highest level since 2012.

New daily US coronavirus cases dipped slightly at the start of the week. However, Tuesday’s figures have shown its premature to say that numbers are falling. COVID-19 concerns were further fuelled by warnings from several Federal Reserve officials that rising coronavirus numbers in the US could jeopardize the economic recovery. The timing here of the rising numbers in the sunbelt is extremely important given that some stimulus programmes are due to expire soon.

Also coming up today

The City will look to Westminster at lunchtime as chancellor Rishi Sunak announces a new swathe of measures to support the economy.

We’re expecting a £2bn temporary job creation scheme to encourage workers to hire young staff, a stamp duty holiday, a £3bn green investment drive, and perhaps a temporary cut to VAT.

The agenda

• 9.45am BST: ECB vice-president Luis de Guindos speaks about the Covid-19 pandemic
• 12.30pm BST: Chancellor Rishi Sunak’s Summer economic update
• 3.30pm BST: US weekly oil inventory figures