Top stories

1. Slowing UK economy raises prospect of a rate cut

2. Global bond market boosted Christine Lagarde's ECB nomination

3. Contactless Greater Manchester

Stat of the day

50.2

The IHS Markit Services purchasing managers? index for June. A figure below 50 indicates a contraction (Financial Times, online only)

Slowing UK economy raises prospect of a rate cut

The UK economy is set for its first quarterly contraction in seven years, according to the latest monthly figures from IHS Markit (The Guardian, online only). The figures indicate that the economy contracted by about 0.2 per cent in the three months to June, driven by a slowdown in the dominant services sector. The fall in business activity has been linked to ongoing uncertainty over Brexit, as firms hold back on investment despite employment being at a record high and household incomes continuing to grow (Financial Times, p3, £).

The Times (p35, £) reports that this declining performance may encourage the Bank of England (BoE) to cut interest rates this year to shore up economic growth. BoE governor Mark Carney said in a speech yesterday that there has been a 'sea change? in financial market expectations for global economic performance since the start of the year, and that this would be considered in the Bank's August inflation report.

It comes as the ratings agency Moody's warns that leaving the EU without a deal would likely spark a recession in the UK, with a rise in inflation causing a squeeze on real wages and consumer spending (The Independent, online only). Brexit Secretary Stephen Barclay this morning admitted that he cannot rule out a recession in the UK in the event of no-deal, but said the government was speeding up preparations and planning a campaign in the autumn to raise awareness amongst small businesses. Earlier this year, UK Finance launched its Let's Talk Business campaign, which provides guidance to help small businesses prepare for Brexit and consider any financing needs.

Global bond market boosted Christine Lagarde's ECB nomination

The global bond market was boosted yesterday following Christine Lagarde's nomination to be the next president of the European Central Bank (ECB), amid speculation she will adopt a loose approach to monetary policy in the eurozone (Financial Times, p1, £). Lagarde is expected to continue with plans by outgoing president Mario Draghi for interest rate cuts and an expansion of the ECB's bond-buying quantitative easing programme (The Times, p36, £). This is in contrast with the more hawkish stance taken by rival candidate for the role Jens Weidmann, who is currently the president of Germany's Bundesbank.

It comes amid reports in The Times (p1, £) that former chancellor George Osborne is preparing a campaign to replace Christine Lagarde as the next head of the International Monetary Fund. Supporters of Mr Osborne have reportedly said that he could win backing from both President Trump and President Xi, although they concede that Brexit will make it harder to persuade major European countries to support a British candidate. The new head must be confirmed by November.

Contactless Greater Manchester

Greater Manchester's tram network is to start rolling out contactless payments system from 15 July, the region's mayor Andy Burnham has announced (BBC News, online only). Travellers will now be able to quickly tap in and out of stations rather than using ticket machines. The scheme will feature a payments cap, which will be automatically calculated based on which of the four Metrolink zones people travel to and is expected to be later adopted on buses and trains, aping London's Oyster card system (Oldham Chronicle, online only).

The launch of contactless ticketing on Metrolink represents the first aggregated Pay As You Go implementation on light rail outside of London, following the Contactless Transit Framework developed by UK Finance, and features in the Contactless Transit Report published last week.

Responding to the new scheme, Eric Leenders, Managing Director, Personal Finance UK Finance, said:

?Digital payments are transforming the way we pay for goods and services in the UK, and transport is no exception.  Research by UK Finance shows 69 per cent of adults in the UK are now using contactless payments, as consumers choose to opt for the speed and convenience of paying with their contactless cards. We are delighted to see TfGM's launch of contactless ticketing on Metrolink, following several years of work between the finance and transport industries.?

Latest from UK Finance

Sonia Caverzan, Head of Stress Testing, and Ben Clark, Head of IRB, Jaywing, blog on overcoming the challenges of stress testing under IFRS 9.

News in brief

The Financial Conduct Authority (FCA) has set out plans to ban derivatives on cryptocurrencies for retailer investors, warning it is ?impossible? to value them reliably (Financial Times, p25, £).

Women hold just over a third of positions on the boards of the largest banks and financial services companies in Europe, ahead of firms in the US and Asia, according to a study by Corporate Women Directors International (Financial Times, £, online only).

The National Trust has announced it will sell off the shares it holds in fossil fuel companies, and that it wants to invest instead in green start-ups and portfolios that benefit nature and the environment (BBC News, online only).

The Competition and Markets Authority (CMA) has said it is considering a number of measures to increase consumer protection in the technology sector, including preventing large digital platforms from sharing data between different parts of their business. (Financial Times, p2, £)

What the commentators say

Simon Nixon, chief leader writer of The Times (£, p39), argues that the real impact of a ?no-deal? Brexit is becoming clear, but it may be too late. Mr Nixon believes that politicians have not been straight with the public and have downplayed the negative consequences, but the reality is starting to show that there is no economic upside to leaving the EU in this way. Nixon concludes that a ?no-deal? scenario is looking increasingly likely and will result in even more economic uncertainty for businesses.

Economics correspondent Richard Partington writes in The Guardian (p35) on the key issues that Christine Lagarde will have to address if confirmed as president of the European Central Bank. These could include rebooting growth in the eurozone through unconventional policies such as expanding quantitative easing - the buying of government bonds from banks. Partington remarks that Lagarde will also need to keep an eye on Italy, where economic growth is weak and government debt high.