Euro dips further as French central bank chief warns the country risks being ‘strangled by interest rates’ – business live

Key events 46s ago German factory orders slump in August 19m ago Introduction: Euro dips further as French central bank chief warns the country risks being ‘strangled by interest rates’ German factory orders slump in August In Germany, manufacturing orders slumped in August, falling more than expected. Factory orders tumbled 10.6% from the previous month, according to the federal statistics office , but were up 2.7% compared with August last year. The main reason behind the monthly drop was a sharp decline in the “manufacture of other transport equipment” sector – aircraft, ships, trains, military vehicles, where new orders plummeted 61.5% after more than doubling in July due to an exceptionally high volume of large-scale orders in the manufacture of ships, railway rolling stock and aircraft.

In the three months to August, new orders rose 1.3% compared with the previous three months. Introduction: Euro dips further as French central bank chief warns the country risks being ‘strangled by interest rates’ Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy. The euro remains under pressure amid French debt fears and political uncertainty across Europe, trading near a 17-month low against the dollar, down 0.13% to $1.1206.

The single currency has extended its 1.2% drop last week, and is down more than 4% this year, as investors worry that France’s high debt burden could threaten the stability of the wider eurozone. The head of the French central bank has warned that the country risks being “strangled by interest rates” if it does not get to grips with its deficit. Emmanuel Moulin , the governor of the Banque de France, told the Financial Times that the eurozone’s second-largest economy could win back investor confidence despite the “serious and worrying” moves on sovereign debt markets in recent days. double quotation mark France is not Greece during the eurozone crisis.

If it can pass a budget this year to reduce spending and narrow the deficit as the government has proposed, then markets will be reassured by this concrete step of fiscal consolidation. But, he went on to say: double quotation mark If we don’t act, there is indeed a risk of being gradually strangled by rising interest rates. We have to remain masters of our own destiny.

The French government is battling to control its stretched public finances in the run-up to next year’s presidential election, with teachers, students nurses and civil servants protesting against budget cuts. A sell-off in French bonds, sending their yields soaring last week, eased on Monday. The interest rate that France pays to borrow over safer German debt on benchmark 10-year bonds, called the spread, widened, but then tightened again.

Mohit Kumar , chief European economist at Jefferies, said: double quotation mark French [bond] spreads have tightened in the last two sessions, falling from an intra day high of over 150 basis points to 136bp currently. We don’t think that we are in a sovereign crisis. Our fear is that as spreads move above 150bp, we could see some contagion risks not just to other French names, but also onto European peripherals.

We have highlighted a number of times that deficit concerns should be a greater risk for investors than near term inflation. Market is going after the weakest link in the deficit picture which is France and the UK. Asian stock markets rose, after a rally in technology stocks lifted the Nasdaq on Wall Street to a record close ; supported by weaker-than-expected US jobs growth which dampened expectations of an interest hike from the Federal Reserve this month.

Oil prices also retreated. However, US 10-year and 30-year Treasury bond yields hit fresh 24-year highs overnight. AI heavyweight Nvidia gained 2.1% to a record closing high, lifting its market value to $5.76tn.

MSCI’s broadest index of Asia-Pacific shares excluding Japan climbed 1.2%. Japan’s Nikkei added 1.1%. The Agenda 8.30am BST: Eurozone S&P Global Construction survey for September 9.30am BST: UK S&P Global Construction PMI for September 10am BST: Eurozone retail sales for August UK chancellor meets with bank bosses 11am BST: Financial Conduct Authority annual meeting in Edinburgh 1.15pm BST: US ADP employment change weekly data 1.30pm BST: US trade for August

Source: The Guardian