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the IHS Markit Services purchasing managers? index for June. A figure below 50 indicates a contraction (Financial Times, online only)
Following several days of negotiations, the European Council yesterday agreed its nominations for the top jobs in the EU institutions. Ursula von der Leyen, Germany's minister of defence, has been nominated to succeed Jean-Claude Juncker as president of the European Commission, while Belgian prime minister Charles Michel was nominated for the post of president of the European Council (Politico, online only). Christine Lagarde, former French finance minster and current head of the International Monetary Fund, emerged as EU leaders? choice to succeed Mario Draghi as president of the European Central Bank (Financial Times, £, p1). All nominees will need to be approved by the European Parliament, which is currently holding the first plenary session of the 2019-2024 sitting (BBC News, online only).
Meanwhile, chancellor Philip Hammond told the House of Commons yesterday that a ?no-deal? EU withdrawal would put a £90 billion dent in the public finances and signalled that he would oppose any attempt by a new prime minister to leave the EU without a withdrawal agreement (The Times, £, p8). The chancellor also said that he would leave the decision of whether to hold a comprehensive spending review to his successor at the Treasury (Financial Times, £, p2).
Reuters (online only) reports that EU banks face a collective shortfall of 135? billion to meet the capital requirements set out in the Basel III accord, which is due to be fully implemented by 2027.
The European Banking Authority (EBA), which is responsible for legislating for the accord at the EU level, said it now estimates the required capital increase at 24.4 per cent, when accounting for non-core ?add on? capital requirements and the ending of EU capital exemptions. The Basel Committee's own figures, released in March, estimate the impact of Basel III on large European banks as being a 17.4 per cent increase in minimum capital, whereas the impact on banks in the United States could see capital fall.
Meanwhile, the Financial Conduct Authority's Executive Director of Strategy and Competition Chris Woolard yesterday warned Facebook and other prospective issuers of digital currencies that there is little scope for error in the rollout of such currencies, and that they must ?get it right the first time round? (Reuters, online only; Guardian, p38). Woolard's cautionary note comes as the Democratic chair of the US House of Representatives? financial services committee wrote to Facebook, calling for the technology firm to suspend its plans for its digital currency, Libra, ?immediately?, to allow congress and regulators time to examine the risks potentially posed to consumers and financial stability (Financial Times, £, online only).
The Guardian (p37) reports that June was the worst month for the construction industry, including housebuilders, for more than ten years. The IHS Markit/CIPS construction purchasing managers? index fell to 43.1, the lowest reading since April 2009. An index figure below 50 shows the sector to have contracted. House prices were also sluggish in June, growing at a mere 0.5 per cent according to the Nationwide House Price Index (Financial Times, £, online only).
Separately, growth in activity in the UK services sector nearly stagnated in June, according to the latest IHS Markit survey of industry executives (Financial Times, online only).
Sonia Caverzan, Head of Stress Testing, and Ben Clark, Head of IRB, Jaywing, blog on overcoming the challenges of stress testing under IFRS 9.
The Daily Telegraph (£, B1) reports on comments by Bank of England governor Mark Carney, that a brewing trade war between the United States and China could 'shipwreck? the global economy.
Business activity in the euro zone picked up somewhat in June but remained weak, as a slight upturn in the services industry offset a sustained downturn in manufacturing output, according to an IHS Markit survey (Reuters, online only).
The Ministry of Housing, Communities and Local Government has launched a High Streets Task Force, intended to support local leaders to revitalise high streets and town centres (Talking Retail, online only).
In The Times (£, p41), David Smith, economics editor of the Sunday edition, notes UK Finance's projection that cash will account for only nine per cent of all payments by 2028, down from 28 per cent in 2018 and 60 per cent in 2008. He argues nevertheless that cash should not be altogether abandoned, and that there may be a role for the state in ensuring the maintenance of the infrastructure for its distribution.
Bloomberg's (online only) Mohamed El-Erian labels Christine Lagarde an ?inspired choice? to succeed Mario Draghi as president of European Central Bank. El-Erian argues that although she is not an economist by training, Lagarde's skills as a communicator, and her significant experience accumulated as French finance minister and head of the IMF will serve her - and the euro zone economy - in good stead.
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