With the prospect of low interest rates for longer and further central bank stimulus measures, along with a little more stability in the oil market ahead of a forthcoming Opec meeting, stock markets moved higher once more. Banks were also in demand as the post-Brexit blues wore off and a UK competition inquiry was less arduous for the sector than it had feared. Even signs of a slowdown in the UK economy from the latest NIESR report did not dampen the enthusiasm. Tony Cross, market analyst at Trustnet Direct, said:

The FTSE-100 continues to forge its way higher as an upbeat start to the session on Wall Street gives those traders who are still at their desks something else to cheer. The fact that oil prices have staged something of a turn around is certainly helping bolster sentiment, although it’s probably worth adding that if we see this rally for crude being sustained then it starts to up the chances of a September rate hike by the Fed – and that has the potential to take the shine off gains on a global basis.

The final scores showed:

• The FTSE 100 finished up 42.17 points or 0.62% at 6851.30
• Germany’s Dax rose 2.5% to 10,692.90, its highest level this year
• France’s Cac closed 1.19% higher at 4468.07
• Italy’s FTSE MIB edged up 0.31% to 16,796.14
• Spain’s Ibex ended 1.2% better at 8665.4
• In Greece, the Athens market added 0.36% to 562.4

On Wall Street the Dow Jones Industrial Average is currently up 16 points or 0.09%, well off its earlier highs.

Meanwhile the pound continued to slip amid talk of further easing by the Bank of England, down 0.3% at $1.2999 and 0.4% lower at €1.1707.

On that note, it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow.

The Bank of England has suffered a setback in the bond markets in its first attempt to buy long-dated debt under its new QE programme. Reuters reports:

The Bank of England failed to get enough offers for its planned purchase of £1.17bn of government bonds with maturities longer than 15 years, sending gilt yields to new record lows across a range of maturities.

The BoE said it received offers worth £1.118bn, resulting in an uncovered reverse auction in its first attempt to buy long-dated debt since it restarted its quantitative easing asset purchase programme after nearly four years.

The central bank said it would announce its response to the shortfall on Wednesday at 0800 GMT.

Twenty-year gilt yields hit a record low of 1.212 percent and were last down 5 basis points at 1.22 percent. Thirty-year yields hit a record low of 1.374 percent, and were last down 4.9 basis points at 1.385 percent.

Yields on five- and 10-year gilts also hit all-time lows.

The Bank of England was not immediately available for further comment.

The UK economy slowed down by more than expected in July in the wake of the Brexit vote, according to the latest monthly GDP estimates from the National Institute of Economic and Social Research, and could foreshadow a recession by the end of 2017.

NIESR said output grew by 0.3% in the three months ending in July, following growth of 0.6% in the three months to June and expectations of a figure of 0.4%.

The thinktank said the estimates suggested that monthly output declined by 0.2% in July, although it warned that monthly data were volatile.

But it added that the estimate was in line with its latest quarterly forecast, which predicted a contraction of 0.2% in the third quarter. James Warren, research fellow at NIESR said:

We estimate that in the three months to July the UK economy grew by 0.3 per cent, a marked economic slowdown. The month on month profile suggests that the third quarter has got off to a weak start, with output declining in July. Our estimates suggest that there is around an evens chance of a technical recession by the end of 2017.

US markets are following the trend elsewhere in early trading, heading higher as oil prices remain steady at around $45 a barrel.

The Dow Jones Industrial Index is currently up 39 points or 0.2% while the S&P 500 and Nasdaq both opened marginally ahead.

Worrying news from America.... US productivity shrank by 0.5% in the second quarter of the year, following a 0.6% decline in the first three months.

Economists has expected productivity to snap back in Q2, and forecasts a rise of 0.5%.

That will fuel concerns about the underlying health of the US economy, as productivity is measured by the output per hour of work.

So, while more Americans are getting jobs - and pay rises - it doesn’t seem to be translating into higher productivity.

The pound is heading towards its weakest levels since the June referendum, as traders digest this morning’s news.

Sterling is still below $1.30 against the US dollar (down 0.5% at $1.298 right now).

And against the euro, the pound has lost 0.4% to around €1.17. That means one euro is worth 85.4p, close to the 85.7p hit at the end of June.

That’s bad news for Brits heading to the continent this summer (unless you bought your euros before June 23rd).

A weak pound should help tackle Britain’s trade deficit, though -- but only if there is actual demand for UK goods in Europe. If Brexit causes Europe’s economy to stumble, then exporters might not get a currency bounce.

City economists agree that June’s trade figures are pretty dire, although it can’t all be blamed on the EU referendum.

Ben Gutteridge, Head of Fund Research at Brewin Dolphin, hopes that the weak pound will help in future:

“The deficit in the UK Trade Balance deepened in June and by an amount more than had been expected. The period over which the data has been collected is broadly pre-Brexit but still helps to confirm the widely acknowledged view that the UK is a bigger importer of goods than it is an exporter. Indeed that the UK commands such an important share of European export, it is considered to be an excellent platform from which to negotiate a favourable separation from the European Union. Of course, the politics of extending a favourable deal to non-members does, in some way, defeat the purposes of having a club, so the outcome of such negotiations remain highly uncertain.

“As for trade figures going forward the drop in sterling will have significantly improved the competiveness of our goods and services globally. Over the medium term, therefore, the UK economy can expect to enjoy a genuine boost to activity, allowing the trade balance to narrow; all else equal.

But a weak pound will hit people in the pocket, points out the Resolution’s Group’s Duncan Weldon:

Sky News’s Ed Conway fears any improvement will take a while....

Economist Rupert Seggins shows that Britain’s been running a trade deficit for over a decade:

Former Bank of England policymaker Andrew Sentance says today’s data has limited use when assessing life after Brexit:

Britain’s trade deficit has worsened after imports hit a new alltime high.

The UK’s deficit on trade in goods and services jumped to £5.1bn on in June 2016, up from £4.2bn in May, according to the Office for National Statistics.

Exports increased by £1.0bn and imports increased by £1.9bn. Imports reached a record high of £48.9bn.

The deficit on trade in goods (which strips out the service sector) rose by £900m to £12.4bn in June 2016, the ONS adds.

The report also shows that Britain’s trade deficit with the rest of the European Union has widened by £400m over the last three months. That’s because the UK continued to import more than it exported back to its EU neighbours.

The ONS says:

Between Quarter 1 2016 and Quarter 2 2016, exports of goods to EU countries increased by £1.8 billion due to exports of cars, increasing by £0.4 billion to a record quarterly high of £3.2 billion; oil increased by £0.3 billion and both machinery and chemicals increased by £0.2 billion each.

For the same period, imports from the EU increased by £2.2 billion to a record quarterly high of £59.4 billion. This increase reflected a £0.8 billion increase in food, beverages and tobacco; a £0.4 billion increase in machinery; a £0.3 billion increase in oil; and a £0.1 billion increase in aircraft to a record high of £0.9 billion. These increases were offset by a decrease in works of art of £0.2 billion.

So, not a great picture for a country facing the uncertainty of Brexit. Reaction to follow!

Here we go!

First... UK industrial output rose by 0.1% during June, meaning output was 1.6% higher than in June 2015.

But the narrower manufacturing output measure shrank by 0.3% during the month, worst than the 0.2% decline expected.

There’s not much immediate sign of a Brexit hit. Indeed, industrial output over the last three months grew at the fastest quarterly rate sine 1999 - after a knockout April. Transport manufacturing drove the sector forwards.

Britain’s EU referendum is already causing angst in the property market.

CBRE, the real estate advisor, says that office values fell by 3.3% across the UK in July, with steeper falls in the capital:

The fall in capital values was widely expected and pulled year-on-year growth down to 0.4%. Heightened economic uncertainty, especially for financial services firms, hit offices in the City of London, shrinking capital values by -6.1%.

And Savills, the estate agent, has reported that profit at its UK commercial property division more than halved in the first six months of this year. It now hopes, though, that things are back to normal now the vote is out of the wa

One of the Bank of England’s policymakers has also undermined the pound, by predicting further interest rate cuts soon.

Writing in The Times, Ian McCafferty says:

“If the economy proves to have turned down in line with the initial survey signals, I believe that more easing is likely to be required, but that can easily be delivered in coming months.”

McCafferty voted in favour of last week’s rate cut to 0.25%, but opposed the Bank’s new £60bn quantitative easing scheme. That makes him a relatively hawkish member of the committee.

Oh wow, Britain’s borrowing costs have just hit a new record low.

10-year UK gilts are changing hands at a yield of just 0.592%, down from 0.609% last night.

This makes it an excellent time to boost government borrowing to fund infrastructure projects....

The pound is falling like one of Britain’s fantastic synchronised divers this morning.

Traders are selling sterling, as traders wait for this morning’s trade balance and manufacturing report.

The pound dropped by half a cent against the US dollar, to $1.298. This is a near one-month low; the pound hasn’t been below $1.30 since mid July.

This fall is being driven by expectations that the Bank of England will keep easing monetary policy in the months ahead, as part of its Brexit plans.

Lukman Otunuga, research analyst at FXTM, says:

Sentiment remains bearish towards the UK economy and speculations may heighten over the Bank of England taking further action if economic data continues to follow this negative path.