Inflation

Chinese factory gate prices fall

workers
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One factor which could weighing on markets is the data from China earlier showing that the August producer price index fell at the fastest pace since August 2016.

The producer price index fell 0.8% from a year earlier, that's more than the 0.3% fall in July.

'The world is upside down' for investors

Today Programme

BBC Radio 4

Euro coins and the Dax index
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If you needed proof that investors are living in strange times, look no further than Germany's fund raising efforts on Wednesday.

Germany sold a 30-year bond at 0% interest.

What's more, institutions were so eager they ended up paying Germany more than the face value of the bonds. Why?

"The world is upside down," says Alberto Gallo, fund manager at Algebris Investments.

"Investors are essentially going to lose money over a 30-year period because they are going to get back a bit less than they paid. But actually now every government is borrowing below inflation"

He says: "The reason why this is happening when investors buy bonds instead of stocks, is because they're worried about inflation. So we have been in a 10-year recovery after the financial crisis, where central banks lowered interest rates, trying to spur growth, and also bought assets - the so-called quantitative easing...but this hasn't really worked.

"It's been a bit like central banks pushing the accelerator and governments pulling the handbrake at the same time. Governments are worrying about a lot of political issues including Brexit, but they're not really pushing for growth."

Eurozone inflation slows further below target

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Eurozone inflation slowed to 1% in July, according to the Eurostat agency, falling below the European Central Bank's (ECB) 2% target.

Inflation decelerated from 1.3% in June and 2.2% in July last year.

The ECB may go ahead with new stimulus measures to try to shore up stubbornly low inflation when it meets in September.

What is inflation and what impact does it have?

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Inflation is the rate at which the prices for goods and services increase.

It's one of the key measures of financial wellbeing because it affects what consumers can buy for their money. If there is inflation, money doesn't go as far.

It's expressed as a percentage increase or decrease in prices over time. For example, if the inflation rate for the cost of a litre of petrol is 2% a year, motorists need to spend 2% more at the pump than 12 months earlier.

And if wages don't keep up with inflation, purchasing power and the standard of living falls.

Read more here.

Pound lifted by inflation figures

Pound notes and coins
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The unexpected rise in inflation this morning has boosted the pound.

Sterling is now up 0.2% against the dollar at $1.2084, and edging up 0.08% on the euro at €1.0804.

'It's important a decision is made'

Houses in West London
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Commenting on the latest inflation figures, Tomer Aboody, director of property lender MT Finance, says that house sales volumes are unlikely to change until a decision is made about what kind of Brexit the UK will have. Once there is a decision, the "pent-up" demand will be released.

"Whether it is hard, soft, or no Brexit, the important thing is that a decision is made so people can get on with things," he said.

He said that although on average, prices have fallen only slightly in London, if you look at the bigger picture, house prices at the top end of the market have come off by between 10-15%.

"If we have a hard Brexit and the pound is badly affected, foreign buyers will come back into the market as they will be buying 20 or 30% off market value with a much stronger euro, dollar or yen against the pound. This is likely to push volumes and values up."