UK government debt rallies on rising Bank of England rate cut odds; Italy’s economy struggles to transcend long-run stagnation


• UK debt rallied on Monday, leading the 10-year gilt yield to the lowest level since the 2016 Brexit vote amid mounting expectations for a rate cut this year by the Bank of England.
• The gloomy start to the week pervaded the money markets, with expectations rising that the BoE will be forced to cut rates over the next few months. The implied probability of a rate cut by the end of this year hit 55 per cent, up 4 percentage points from the end of last week and 33 points from the final day of June.
• The growing sense of pessimism comes just days before this week’s BoE meeting. Policymakers harbour the view that rates will keep on hold given the downward trend on currencies may push up inflation too much.


• When ArcelorMittal temporarily laid off about 1,400 Italian workers at its Taranto plant last month, it was just the latest sign that the eurozone’s economic weakness was feeding into the labour market in the bloc’s third-largest economy.
• Global trade tensions have hit the eurozone’s industrial sector hard, the export-dependent economy is particularly adversely affected due to its dependency on foreign demand, dived into its third recession in a decade since the start of the year.
• Italy’s latest growth figures are due to be published on Wednesday and are expected to expand only marginally in the second quarter with a quarter-on-quarter growth rate of roughly 0.1 per cent.
• The weakness is concentrated in Italy’s manufacturing sector. The Markit survey of sentiment among purchasing managers was well below the levels of 2017 or the first half of 2018 throughout the second quarter, pointing to a stagnation in output…