Sterling and shares are sliding as the City reacts to rising panic in Westminster over next week’s referendum
Latest: FTSE 100 tumbles through 6,000 point mark
Bank of England pumps liquidity into the City
Pound is getting thumped again
German 10-year yields turn negative
12.10pm BST
Britain’s borrowing costs are also hitting fresh all-time lows today.
The yield on UK 10-year gilts has slid to just 1.15% – which is the lowest borrowing rate on record.
Bond markets looking good. Lot of international investors happy to buy UK gilts ahead of Brexit
Markets are in a strange state. Gilt yields are lower than any time since records began in 1729 and companies are issuing huge amounts of corporate debt in order to take advantage of low interest rates. Short term traders and long term investors are on the sidelines waiting for the referendum result.
Referendum uncertainty is damaging confidence and there is evidence of a slowdown in economic activity. Markets and social media amplify the daily headlines created by the politicians.
11.38am BST
London’s stock market is plumbing new lows as traders continue to quake in the shadow of the EU vote.
The FTSE 100 has shed 77 points, or 1.3%, to 5967 – falling through the 6,000 point mark for the first time since late February.
“Equity indices are extending their losses, fearful of a now heightened prospect that the UK votes to leave the European Union, worsening an already fragile global growth situation by delivering an economic and political blow to a struggling Eurozone.
Panic appears to be gripping markets as the headlines fill up with references to a possible Brexit, with the Sun’s declaration for Brexit emblematic of the worry that the Remain campaign has lost a crucial segment of the population....
The move in the polls has been matched by a noticeable shift in the IG Brexit binary, with clients now thinking that the chance of the UK voting to leave has now hit 40.5%, up from the low 30s yesterday.
What is interesting is, despite the sharp selloff in sterling in recent days, the pound is still holding on above $1.41.. Either this is a symptom of limited volumes as traders abandon the field, or a sign that the market still thinks the status quo will win out in the end.
4 new polls suggest Britain will back #Brexit. Here's how the first 100 days would look https://t.co/p0QIyU6t5l pic.twitter.com/5btVpEGcD7
10.56am BST
Breaking: The Bank of England had allocated almost £2.5bn of cash to City firms to help them handle any Brexit-related panic.
This is the result of the first special liquidity operation run by the BoE, ahead of next week’s EU referendum.
The @bankofengland just did first of its #EURef related liquidity operations. Pumped £2.5bn into market. Bit lower than previous repos
Bank of England allotted £2.5bn of 6 month repo to UK Banks this morning....Brexit related liquidity push kicking in.
10.32am BST
The inflation report didn’t have much impact on the pound, which is still down around 1% against the US dollar.
Joshua Raymond of City broker XTB.com says next week’s EU referendum is still dominating the markets.
May’s inflation reading is unlikely to have any impact at the Bank of England, who remain expected to keep interest rates on hold for the remainder of the year.
As such, the reaction to this data in the pound was minimal, and the main driver for pound buyers or sellers right now continues to be the uncertainty over a potential Brexit, with the latest polls showing a strengthening in popularity for the leave camp.
10.16am BST
With inflation this low, there’s no chance that the Bank of England will raise interest rates when policymakers meet on Thursday.
Ian Stewart, chief economist at Deloitte, reckons borrowing costs will remain extremely low for many months:
“Inflation is up from its all-time lows but is still way too low.
The fight against low inflation continues. The era of ultra-low interest rates has much further to run.
10.11am BST
Maike Currie, investment director for personal investing at Fidelity International, has summed up today’s inflation data:
“After falling to 0.3% in April, inflation remains unchanged in May, below the 15-month peak of 0.5% recorded in March this year. Rising oil prices pushing up the cost of filling up your petrol tank coupled with eating out at restaurants and the price of smartphone services were the main upward drivers.
This was offset by falls in clothing and food prices. Since the beginning of the year, the pound has been markedly weaker, which is also likely to have pushed up prices.
10.01am BST
UK house price inflation has also slowed down, perhaps reflecting economic uncertainty ahead of the EU referendum.
The ONS reports that the cost of average house rose by 8.2% annually in April, down from 8.5% in March.
Annual house price inflation hits 27.3% in the City of London. And -11.1% in Merthyr Tydfil. @ONS: pic.twitter.com/JNATVa11Qd
9.55am BST
The inflation report also shows that UK consumers have been hit by the recent recovery in the oil price.
Transport costs climbed 0.9% in May, partly due to a 3p rise in a litre of diesel. Rising sea fares also had an upward impact, picking up slightly in 2016 after falling a year ago.
9.42am BST
Clothing and footwear prices fell by 0.2% between April and May this year, helping to keep the cost of living low.
The downward contribution came from a variety of clothing but particularly children’s outerwear.
The downward contribution came from a variety of food product groups, most notably vegetables and confectionery.
The downward contribution came mainly from games, toys and hobbies (particularly computer games) with prices falling between April and May 2016 compared with a rise last year.
9.37am BST
At just 0.3%, Britain’s inflation rate remains stubbornly low below the Bank of England’s 2% target.
Just in case you were getting your hopes up that we might see a bit more of it. UK inflation unchanged at 0.3%. pic.twitter.com/gNLAJ3rinz
9.33am BST
Breaking: The UK inflation rate remained at 0.3% in May, below the 0.4% expected by the City.
That matches April’s reading for the consumer prices index.
9.29am BST
The deputy chief of the International Monetary Fund has warned that Brexit would damage trade and hurt the global economy.
David Lipton, first deputy managing director of the IMF, told a press conference in Beijing that the referendum comes at a difficult time for the world economy.
“It’s very hard to anticipate what those effects [of Brexit] may be, that uncertainty would be a negative factor and come at a time when the global recovery remains slow and somewhat weak.
That kind of uncertainty would be unhelpful.”
9.05am BST
Ouch. The FTSE 100 has now tumbled below the 6,000 mark for the first time since February 25.
The index has shed 50 points this morning, or 0.8%, to 5994 points.
#FTSE back below 6000 for the first time since February. 'Brexit' polls leaving investors with a lot of anxiety before 23rd. #EUvote JG
FTSE falling, bond yields falling, VIX up
9 days to the referendum...
8.56am BST
FXTM chief market strategist Hussein Sayed confirms that investors are racing to safe-haven assets:
Markets anxiety was clearly reflected in CBOE’s volatility index “VIX”, which climbed above 20 for the first time since late February, indicating that investors are now taking the vote more seriously than in the past couple of weeks, and accordingly are adjusting their portfolios.
8.43am BST
European stock markets have hit their lowest levels since last February, as Brexit fears stalk the trading floors.
Britain’s FTSE 100 has shed 34 points in early trading, down 0.5% at 6010. And there are deeper losses in other markets; the French CAC has lost 1.2% and the German DAX is down 0.9%.
The latest Guardian/ICM survey has the Leave campaign with a 6 point advantage, with polls from the ORB/Telegraph and YouGov/Times suggesting similar leads for Boris Johnson and co.
Perhaps most damning is the fact that The Sun this morning came out in favour of a Brexit with a flashy and trashy editorial on the reason why Britain should quit the EU.
8.26am BST
Boom! Germany’s 10-year bond yield has just turned negative as investors scramble to buy debt issued by Europe’s largest member.
This means they are effectively paying to lend to Berlin for a decade, in another sign that fear is gripping the markets today.
HERE WE ARE: The German 10-year yield just turned negative. For first time ever. pic.twitter.com/dOtbkZ5ISy
8.23am BST
In another sign of market angst, the interest rates on Britain’s government debt has hit a record low.
The price of a UK 10-year gilt has hit record highs this morning, as money pours into government debt. And that has driven down the interest rates (or yield) on the debt to just 1.187%.
Flight to safety...UK gilts rally, borrowing costs fall. Japan & Oz also hit fresh record low yields today pic.twitter.com/33x40UcQcK
8.13am BST
The Bank of England is preparing to pump billions of pounds into the UK financial sector today.
Related: Bank of England in preparations for potential Brexit
8.01am BST
Sterling is starting the morning on the back foot, as traders digest reports of rising panic inside Downing Street about the EU referendum.
The pound has dropped by over one cent against the US dollar, to $1.4149. That’s close to the two-month low hit yesterday morning (before sterling curiously bounced back).
And there it is. Pound falls to 2013-low against the Japanese Yen... where does this go? #FibonacciTuesdays #Brexit pic.twitter.com/EUzLFCB1q2
Bad day for FTSE and sterling me thinks. pic.twitter.com/J3cvvlDui8
7.37am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It’s Inflation Tuesday, the time when we find out how the cost of living changed in the UK in the last month.
Our latest #EUref polling averages:
Remain: 44.5%
Leave: 46.7%
Excluding undecideds:
Remain: 48.8%
Leave: 51.2% pic.twitter.com/961tlV0sWA
Related: Sterling seesaws as Brexit fears grip investors
Risk is off, yen is up, UK opinion polls make ugly reading & the pound is down. UK CPI, US retail sales today. FOMC tomorrow, BOJ Thurs
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