Bank of England governor Andrew Bailey said there was a “major shift going on in the US” which the Bank would have to “take very seriously”, as he was quizzed by MPs on the Treasury select committee about the impact of changes to trade policy and new tariffs.
“The risks to the UK economy and the world economy are substantial,” he stressed.
European financial markets have rallied sharply and German borrowing costs soared after the country’s prospective leaders announced a historic deal to loosen its “debt brake” rule to boost spending on defence.
The yield – in effect the interest rate – on 30-year German government bonds rose by 16 basis points, after having earlier jumped by as much as 25 basis points to 3.07% in its biggest increase since October 1998.
The Dax 30 index, which tracks the largest German companies, rose by almost 4%, powered by industrial stocks. Share prices also leapt in London, Paris and Milan amid investor hopes that a massive boost in European spending on defence and infrastructure would kickstart the region’s ailing economy.
Defence stocks have gained sharply in recent weeks as world leaders scramble to piece together the funding for a vast increase in military expenditure amid mounting concern over Donald Trump’s commitment to European security.
The euro jumped by 1.4% against the dollar, while sterling was 0.6% higher against the US currency. The dollar slid by 1.1% against a basket of major currencies.
