And finally, European stock markets have ended the day down around 1% - as economic worries and rising Covid-19 cases weigh on stocks.

The Stoxx 600 shed 3.77 points to 355.76, its lowest close since mid-June. It’s now lost more than 3% this month, as the pandemic has hit countries across Europe,

London stocks did much of the damage, with the FTSE 100 closing at 5,822 points, down 76 points or 1.3% today. Engineering companies Rolls-Royce and Smiths Group were the top fallers (losing 7.5% each), with IAG close behind (-5.3%).

Airlines had a bad day generally, with Air France losing 7% [although Ryanair, whose CEO warned of job cuts without more government help, gained 0.3%].

Morgan Stanley analysts predict that the weakening European economy will force the European central Bank to launch more stimulus measures before Christmas:

Covid-19 cases in Europe have increased sharply recently, and are now running at record highs in several countries, including France, Spain and the Netherlands.

However, so far, even in France - perhaps the most impacted country in this wave - hospitalisations and fatalities are running at around 10% of the peak levels seen in the spring. Taken together with the higher levels of testing and lower positivity rates, this suggests that the current actual level of COVID-19 infections might be well below the levels experienced in the spring. Nonetheless, the rapid spread of the virus is a concern.

The unwelcome rise in US unemployment claims didn’t help the mood either.

That’s all for today. Here are some of our main stories:

Goodnight. GW

America’s housing market continues to shrug off the Covid-19 crisis, and high unemployment.

Sales of new single-family homes in August have hit their highest level in 14 years, new data shows.

Sales of new builds homes hit an annual rate of 1.011m in August, the first time it’s exceeded 1m since 2006.

That’s 4.8% higher than in July, and 43% faster than a year ago.

The New York stock market has opened lower, amid gloom over the rise in new jobless claims last week.

The S&P 500 index of US stocks has dropped by 22 points or 0.7% to 3,214 points in early trading. That’s the lowest since the start of August, as the September rout continues to hit shares.

The Dow Jones industrial average is in the red too, down 165 points, or 0.6%, to 26,597 points, the lowest since early August.

Tech stocks are among the big fallers, pushing the Nasdaq down by almost 1% to 10,537 points. That puts it deeper into correction territory (more than 10% off its alltime high earlier this month).

Neil Wilson of Markets.com says investors are getting gloomy:

Sentiment appears very weak with the downside bias in favour. With economic indicators failing to deliver lift-off and stimulus apparently off the table before the election, there needs to be a positive catalyst to get the bulls back in the game.

Otherwise with election risks and a worsening outlook for the recovery, we need to consider further losses as we approach the election.

European markets are still falling too, close to their lowest levels in three months.

In London, the FTSE 100 is now down 85 points or 1.4% at 5,815, near to a three-week low. Covid-19 woes are weighing on the market, with Rolls-Royce (-5.8%) and IAG (-5%) still among the top fallers.

In a worrying development, the number of Americans filing new claims for unemployment benefits unexpectedly increased last week.

The initial claims total has jumped to 870,000 for last week, up from 866,000 a week earlier. Economists had expected it would fall, to around 840,000

This indicates the recovery may be cooling - in the face of rising Covid-19 cases and political tensions.

Here’s more details and early reaction:

After a slow start, the pound is now pushing higher against the US dollar and the euro as traders prepare for Rishi Sunak to outline his Winter Economy Plan.

Sterling has gained almost half a eurocent to €1.096, and a third of a cent to $1.276.

Giles Coghlan, chief currency analyst at HYCM says the City likes the prospect of a new multi-billion plan to save jobs. At least for the moment...

“The financial markets have largely welcomed Chancellor Sunak’s speech, sparking a short surge in trading activity. However, this will likely be short lived, and I anticipate a general retreat to safe haven assets and cash savings as investors look to hedge against market uncertainty.

In the coming weeks, I expect to see a weakening pound on ongoing Brexit risks and rising demand for gold once the recent bout of US dollar strength subsides.

“Today’s announcement also shows the government is in a precarious position. Rather than focus on the long-term, it is clearly fire-fighting the immediate dangers of the crisis. Importantly there is no telling what else will be required to bring about a post-pandemic recovery if COVID cases do not drop. Just how deep are the treasury’s coffers? Can any more relief be offered? Will an effective vaccine be released before the end of the year? Only time will tell.

We’ll be tracking Rishi Sunak’s announcement here:

Just in: UK retail sales growth has hit a 18-month high, according to the CBI’s latest distributive trades survey.

Grocers drove the expansion, with the overwhelming majority reporting rising sales volumes. But clothing and department store sales remained notably weak.

The report shows that:

• Retail sales volumes grew at the fastest rate on the year since April 2019 (balance of +11% from -6%). Sales are expected to remain flat in October (0%).
  
  
• Annual internet sales growth slowed to below the long-run average (balance of +35%, from +46%). Growth is expected to ease a little further next month (+31%).

The survey took place between 27 August and 15 September, by which time UK Covid-19 cases had begun to rise again. And it appears that people have been improving their homes, by buying new furniture, rather than refreshing what’s inside the wardrobe:

The CBI explains:

The survey – of 123 companies, including 56 retailers – also revealed that, on average, retail sales were seen as 8% lower than would have been expected in ‘normal’ conditions without a pandemic.

But beneath that number, there was a huge diversity of experience. For example, sales of household furniture were 39% higher than normal, DIY & hardware sales were up 20% and groceries were up 10%, while sales of clothing were down 40% and department store sales were down 23%.

The Office for National Statistics has reported that more than 10% of the UK workforce are on partial or full furlough leave, highlighting the need for more wage support from Rishi Sunak today.

It’s latest survey of the economic impacts of the coronavirus found that:

12% of the workforce were on partial or full furlough leave.

Many of those people are in the accommodation, food, and entertainment sector, as this chart shows:

The ONS has also revised down its estimate of the number of UK businesses currently trading to 84%, from the 97% estimated last week.

That’s quite a downgrade, showing that the UK economy is still badly hurting.

The ONS explaining:

The survey data has now been weighted to be representative of all businesses in the UK, including smaller businesses, which are less likely to have been trading than larger businesses

The latest data, covering 24th August to 6th September, shows also shows that:

• There were four industries where more than half of their businesses experienced a decrease in turnover compared with what is normally expected for this time of year.
• 63% of businesses not permanently stopped trading in the accommodation and food service activities industry used the Eat Out to Help Out scheme.
  

Credit rating agency S&P has slashed its economic growth forecasts for Britain on Thursday, and warned that a no-deal Brexit would be particularly ‘detrimental’.

It now expects GDP to contract by almost 10%, followed by a near-8% recovery in 2021.

Reuters has the details:

The firm said it expected UK GDP to now drop 9.7% compared to its previous forecast of an 8.1% fall in June, while next year’s rebound would be 7.9% versus 6.5% previously.

It added however that “a hard Brexit leading to new import and export tariffs, as well as non-tariff trade barriers” would add another layer of challenge for European companies, and be “especially detrimental for the UK economy”.

The boss of Ryanair has warned that hundreds of thousands of jobs will be lost across the aviation industry, unless the UK government provides more employment support and changes its flight restrictions.

Michael O’Leary told Sky News that forward bookings for November and December are ‘terrible’, with just 10% of capacity sold.

He is urging the UK government to improve testing at airports, and to sign up to the new EU travel plan. It allows European travellers to move freely between nations, with only certain regions being unavailable, rather than the UK’s blanket quarantine rules on certain countries.

Accusing Boris Johnson’s government of “flip-flopping” and “political mismanagement”, O’Leary warns of dire job losses unless the UK announces new wage support and joins the EU travel plan:

Inevitably for my airline and most other airlines flying to and from the UK it would mean literally hundreds of thousands of job loses this winter.

There is no way of keeping “well-paid professionals in jobs” if the industry is only flying at 30% or 40% capacity this winter (as O’Leary thinks likely). He says he can’t rule out job losses, but says Ryanair is “desperately working to prevent them”.

“We want to keep our pilots and cabin crew employed and paid and we are going to have to have huge government assistance for that, otherwise I’m afraid they’re all going to go on unpaid leave for the winter,”

O’Leary is also scathing about the government’s handling of the crisis, saying:

Boris Johnson promised us a world-leading test and tracing system. It’s a shambles, like many of the other promises he and his government have offered us.

And he doubts that the new NHS contact-tracing app, launched today, will improve matters

They’re always launching an app, some other useless initiative....

European stock markets have hit their lowest level since mid-June.

The Stoxx 600, which track Europe’s largest six hundred companies, has fallen 1.2% in early trading to 355 points - a three-month low.

Covid-19 fears are hitting travel companies, with Airbus falling 3.7%.

Fiona Cincotta of City Index explains why:

The deep sell off on Wall Street is spreading over into Europe, wiping out gains from the previous session. European bourses are a sea of red as risk off dominates amid rising concerns over resurging coronavirus infections and its potential to derail the fragile economic recovery.

Wall Street experienced a sharp decline after a series of warnings from the US Federal Reserve. Federal Chair Jerome Powell reiterated that the US economy still had a long way to go before recovery weighed on sentiment. His comments were supported by Fed Vice Chair Richard Clarida who considers the US economy to be in a “deep hole”.

The Fed sees a strong case for additional fiscal support. However, another rescue package for the world’s largest economy before the November elections is starting to look very unlikely.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Anxiety over the health of the global economy is weighing on markets today, as Covid-19 restrictions threaten to derail the fragile recovery.

Stock markets across the Asia-Pacific have dropped back overnight, and we’re expecting a weaker start in Europe with the FTSE 100 heading back to Monday’s two-week lows.

Investors are fretting about the risks of a double-dip recession, after PMI surveys yesterday showed growth is slowing in the UK and US, and pretty much fizzled out in the eurozone.

UK chancellor Rishi Sunak will unveil his new plans to fight a surge in unemployment in the coming months, at lunchtime today.

He’s torn up plans for an autumn budget, in favour of a package of employment support and an extended business loan schemes, to help firms and workers.

So with some governments announcing more travel restrictions, and others restricting the hospitality sector, it could be a pretty gloomy winter in Europe.

Jim Reid of Deutsche Bank says:

On the virus it’s beginning to feel a bit like March-lite. In France, it was announced by Health Minister Veran last night that the country would be divided into “zones” by alert level and they would empower local authorities to tighten restrictions before a state of emergency would be declared within them. Marseille, the second largest city in the country and the Carribbean Island of Guadeloupe are the only “maximum” level zones today. The minster also announced that bars and restaurants in the Paris region as well as other major cities will close at 10pm, similar to the rules recently laid out in the UK. Attendance at large public events will be cut down to 1,000 from 5,000, while small gatherings over 10 people are banned in those “maximum” level areas.

Meanwhile in Germany, the foreign minister Heiko Maas went into quarantine as a result of one of his security detail having the virus, even though an initial test on Maas came up negative. Germany also issued travel warnings to more parts of France. Elsewhere, China will ease restrictions on entry of some foreign nationals as the country said foreigners holding residence permits for work, personal matters and reunions will be allowed to enter China starting September 28.

Stocks fell sharply on Wall Street last night, after the head of the US Federal Reserve warned that America’s economy needs more government support.

Jerome Powell told Congress that “direct fiscal support may be needed.” to help some struggling businesses.

“We need to stay with it... The recovery will go faster if there is support coming both from Congress and the Fed.”

But investors fear that Congress will not push through a new stimulus package soon, with the presidential election just six weeks away. The tech-focused Nasdaq index fell 3%, back into correction territory.

Worries over the race to the White House will have risen overnight, after Donald Trump declined to promise a ‘peaceful’ transfer of power if he loses in November:

The agenda

• 7.45am BST: French business confidence for September
• 9am BST: European Central Bank releases its economic bulletin
• 9am BST: German IFO survey of business confidence
• 11am BST: CBI survey of UK retail sales (distributive sales)
• 12.30pm BST: UK chancellor Rishi Sunak announces Winter Economy Plan
• 1.30pm BST: US weekly jobless statistics