European markets moved lower on Wednesday amid warnings that Britain is on the brink of recession despite the eurozone growing faster in the first quarter than previously estimated.
The Organisation for Economic Co-operation and Development (OECD) said recent rises in income and business taxes will prove "contractionary" and contribute to a slowdown in the UK.
This will see GDP stagnate in 2023 due to "depressed demand" amid the global supply bottlenecks and energy market turmoil.
It came along separate data from Eurostat, the EU’s statistical office, which showed the eurozone expanded 0.6% between January and March rather than the expected 0.3%. This is up from 0.2% growth in the fourth quarter last year.
Within the EU, Ireland recorded the highest increase of GDP of 10.8%, compared to the previous quarter, followed by Romania at 5.2% and Latvia with 3.6%.
Declines were observed in Sweden, which fell 0.8%, France which was down 0.2%, and Denmark which was 0.1% lower. Germany, the biggest European economy, grew by 0.2%.
Meanwhile, UK rail union bosses have launched strikes to coincide with by-elections and Glastonbury festival as they pile pressure on the government.
The Rail, Maritime and Transport (RMT) union announced on Tuesday that nationwide strikes are set to take place on 21, 23 and 25 June in "the biggest dispute on the network since 1989”.
As many as 50,000 railway workers expected to strike over pay freezes and proposed job cuts, with London Underground to also be affected.
"We have a cost of living crisis, and it is unacceptable for railway workers to either lose their jobs or face another year of a pay freeze,” Mick Lynch, RMT general secretary said.
“Our union will now embark on a sustained campaign of industrial action which will shut down the railway system.”
Rail union RMT launch 3 days of national strike action across the railway network:
Over 50,000 railway workers will walkout as part of 3 days of national strike action later this month, in the biggest dispute on the network since 1989. https://t.co/CEaTfIQaOa pic.twitter.com/rhl0gLtCNw
— RMT (@RMTunion) June 7, 2022
Sajid Javid, secretary of state for health and social care, said: “Let’s remember during the pandemic I think the government put in some extra £16bn to support the rail industry, that is almost something like £600 per household. These are huge amounts of money and that kind of thing can’t continue.
“What I would urge the industry to do and the unions to do is to basically get round the table and keep talking. That is the best way. Just talk like civilised adults and find a way through.”
AJ Bell investment director Russ Mould said: "The FTSE 100 was heading nowhere fast on Wednesday. The UK market appears to have stalled, just as many rail travellers will if the nationwide strike planned for later this month goes ahead."
Wall Street started Tuesday on the back foot, however, as US 10-year yields fell back below 3%, stocks began to recover, finishing the session higher for the second day in a row.
Michael Hewson of CMC Markets said: “Yesterday’s soft session was primarily driven by weakness in retail stocks after a surprise profit warning from US retailer Target (TGT), however despite the concerns over tighter margins and lower profits, share prices finished the day well off the lows of the day.”
“In amongst all of this, much depends on the US consumer, who has up until now looked resilient, while at the same time lacking in confidence.”
Traders are also currently sensitive to the forecast from the World Bank that the pain of stagflation is going to persist for several years, even if a global recession is averted. Meanwhile, investors are also nervously bracing for US inflation figures due on Friday.
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In Tokyo, the Nikkei (^N225) climbed 1% on the day as Japan’s economy shrunk slightly less than initially reported in the first quarter. This was thanks to private consumption remaining resilient.
Revised data released by the cabinet office showed GDP fell by an annualised rate of 0.5% between January and March, and dipped by 0.1% on the quarter.