Headlines

Industrial production in France fell sharply in June, undermining hopes that the eurozone’s manufacturing sector might have seen the worst of this year’s slowdown, the Financial Times reported. Industrial production dropped by 2.3 per cent month-on-month according to French statistical body Insee. Manufacturing, the largest component of industrial output, fell 2.2 per cent in June from the previous month, and was down 0.3 per cent in the second quarter compared to the first, driven largely by a marked drop in the making of transport equipment.

A fresh bout of political instability in Italy is testing investors’ faith in a bond rally that has sent Rome’s borrowing costs tumbling this year, but bondholders are reluctant to head for the exit. Italian debt came under pressure on Friday after the far-right League tabled a vote of no confidence in Prime Minister Giuseppe Conte, as party leader Matteo Salvini pulled the plug on Italy’s governing coalition, the Financial Times reported. The 10-year Italian bond yield rose by 0.23 percentage points to 1.76 per cent, extending the previous day’s rise.

Boris Johnson arrived in Downing Street last month intent on putting “rocket boosters” under the economy, the Financial Times reported. But after the dismal growth figures released on Friday, the prime minister may count himself lucky if the UK manages to avoid falling into a recession by October 31, when he insists the UK will leave the EU.

Investment banks and hedge funds are betting on the downfall of UK shopping centres, turning their attention to corporate bonds issued by one of the country’s largest retail landlords, the Financial Times reported. Bricks-and-mortar retailing in the UK is in crisis because of higher costs and consumers moving purchases online — trends that have forced a series of big retailers to enter insolvency arrangements, shutting thousands of stores.

Tata Steel’s UK division sank deeper into the red over the past financial year, as output fell at the country’s largest producer because of repair work on a furnace. The manufacturer registered a 1 per cent increase in annual sales to £2.41bn in the period ended 31 March because of higher global steel prices, according to its annual report, the Financial Times reported. But its operating loss before one-off items widened to £157m, from £48m last year, because of lower liquid steel production and sales volumes, the company said.

China’s legions of regional banks are feeling the strain. The country’s two-year crackdown on risky financing and the trade war with the U.S. have slowed economic growth, triggering debt defaults that are exposing them as the weakest link in the credit chain, Bloomberg News reported. Several lenders have fallen into deep trouble this year, with others -- perhaps many -- expected to follow. What’s different is that China seems to have thrown out the old playbook of injecting state funds into struggling lenders to keep them alive.

Investors have flocked to fixed income mutual funds at the fastest rate since the financial crisis, piling in almost $500bn in the first half of 2019 during trade war tensions, recessionary fears and market volatility, the Financial Times reported. About $487bn flowed into fixed income funds this year, up from $148bn in the first half of 2018, according to figures from Morningstar, the data provider. It is the highest level of first-half net inflows into bond mutual funds for at least a decade.

India’s Supreme Court upheld the ability of homebuyers to drag property developers into bankruptcy proceedings as several real estate firms are going bust in Asia’s third-largest economy, Bloomberg News reported. Once a homebuyer establishes default before a bankruptcy court, the onus is on builders’ to prove that the consumer does not wish to take possession of their house to avoid proceedings, a three-judge bench headed by Justice Rohinton F Nariman said on Friday. The court ruled homebuyers’ rights will remain at par with lenders.

Dewan Housing Finance Corp Ltd (DHFL), one of India’s so-called shadow banks, on Thursday said it might not be able to fulfil its debt obligations due in the near future while banks review its restructuring plan, Reuters reported. DHFL, one of the largest housing finance companies in India, has roughly 1 trillion rupees of debt and is in the process of seeking lender approval on a restructuring plan designed to help it to ride out a liquidity crunch and restart its lending business.

New bank lending in China likely slowed in July, a Reuters poll showed, reinforcing expectations that policymakers will need to announce more support measures in coming months to stabilize the cooling economy as U.S. trade pressure builds, Reuters reported. The rapidly worsening trade dispute, rising borrowing costs, and this week’s sudden drop in the yuan have fanned worries that the world’s second-largest economy could face a sharper slowdown. But policymakers are also increasingly worried about rising debt and financial risks, particularly in the property market.