China new home prices fall at fastest rate in nearly 10 years; French political uncertainty weighs on markets – as it happened

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Dan Milmo

The value of risky debt issued by French lenders has fallen further today, Reuters has spotted, as investors fret about political uncertainty.

An AT1 bonds issued by Societe Generale dropped to its lowest price since December, Tradeweb data showed, while equivalent debt from BNP Paribas also weakened.

These AT1 bonds, also known as “contingent convertibles” or “CoCo” bonds – can be converted into equity if a bank hits trouble.

Effectively, they are shock absorbers if a bank’s capital levels fall below a certain threshold.

Empire State manufacturing index falls again

Citi downgrades Europe stocks amid political turmoil

London remains the most productive region of the UK, according to new data from the Office for National Statistics, but the gap is narrowing.

The ONS reports that the capital had the highest productivity level of any UK region in 2022, with an output per hour 26.2% higher than the UK average.

The South East was also ahead of the national average, by 10.8%, but the rest of the country lagged on an output per hour basis.

However, London made the largest negative contribution to UK growth in output per hour by region, compared with 2019.

The ONS explains:

UK output per hour worked has grown at a cumulative average annual rate of 0.8% from 2019 to 2022.

The North West experienced growth of 2.6% annually, which is the largest of any region, and London the largest fall of any region, at 0.9%.

China’s decision to launch a probe into pork anti-dumping isn’t a shock, says Jens Eskelund, president of the European Union Chamber of Commerce in China.

“It will not be the first time that a probe announced in one jurisdiction is responded to in kind, so in view of the EU electric vehicles probe, this is not a surprise.”

“Free and open markets rely on rules-based trade practices,”

A spokesperson for the European Commission said the bloc was not worried about China opening its investigation and told reporters the EU would intervene appropriately to ensure the investigation complied with all relevant World Trade Organisation rules.

The copper price has slipped to an eight-week low, following this morning’s generally weak economic data from China.

China is a major consumer of copper, so the slowdown in industrial production last month (growth slowed to 5.6% in May, from 6.7% in April) could hint at weaker demand.

The ongoing slump in China’s housing market could also be a factor hitting copper, which fell around 1% on the London Metal Exchange to $9,631 a metric ton, the lowest since April 23.

That early rally in European stock markets didn’t last.

The pan-European Stoxx 600 index has now dropped by 0.3% today, hitting its lowest level in six weeks.

Spain’s IBEX share index is leading the selloff, down 0.7%, while Italy’s FTSE MIB has lost 0.2% and the French CAC 40 is down 0.1%.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, says:

Some of the risk-off sentiment which spread sparked by worries about the far-right gaining legislative power in France has eased off.

Although the European Central Bank does not look like it’ll be easily propelled into buying French government debt, hopes have risen slightly that spending pledged by the National Rally party would in practice be curtailed in a hung parliament scenario.

The pound has dipped this morning, as traders await the Bank of England’s interest rates decision on Thursday.

The BoE is widely expected to leave interest rates on hold at 5.25%, and the City will be looking for any signals as to when it might start to lower borrowing costs.

Steve Matthews, investment directo for liquidity at Canada Life Asset Management, predicts the BoE coud cut rates in August, saying:

“Looking ahead to Thursday’s Bank of England interest rate decision, we expect a 7-2 vote in favour of no cut. Despite recent data supporting a cut – such as the unemployment rate rising to 4.4% and expectations that the CPI will hit 2% on Wednesday – concerns about upcoming wage data and services inflation persist.

“While the European Central Bank made a move last week, the Federal Reserve is taking a more cautious approach. This gives the Bank of England additional opportunity to make a well-timed decision.

“Although there is light at the end of the tunnel, we are still firmly in the tunnel. We maintain our view that a first cut of 25bps in August is still the most likely scenario.”

The pound has lost 0.15% against the US dollar this morning, to $1.266, and to €1.1822 against the euro.

Official campaigning for the French elections began at midnight today, ahead of the first round of voting on 30 June.

A frenetic fortnight of activity is expected, after the deadline for candidates to register for the 577 seats in the lower house expired yesterday evening.

Kylian Mbappé, captain of the men’s French football team, has urged young people to vote in the election, and to resist extremism.

Mbappé said:

“This is a never-seen-before event.

And that is why I want to talk to the whole of the French people, but also the youth. We are a generation that can make a difference. We see the extremes are knocking on the door of power and we have the opportunity to shape our country’s future.”