World economy to suffer weakest growth since 1960s

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The world economy will grow at its slowest pace since the 1960s during this decade, the World Bank has warned, amid Donald Trump's upheaval of global trade.
The Washington-based lender slashed its growth forecast for this year by 0.4 percentage points to 2.3pc, which would be the worst year since the global financial crisis in 2008, outside global recession years.
The World Bank said that by 2027, global growth will have averaged just 2.5pc in the 2020s.
This would be the worst of any decade since in the 1960s, when the United States and the USSR were in the grip of the Cold War and the Space Race.
It warned that global growth is slowing 'due to a substantial rise in trade barriers and the pervasive effects of an uncertain global policy environment'.
Chief economist Indermit Gill said: 'The world economy today is once more running into turbulence. Without a swift course correction, the harm to living standards could be deep.
'International discord — about trade, in particular — has upended many of the policy certainties that helped shrink extreme poverty and expand prosperity after the end of World War II.'
It comes as officials from the US and China meet in London today for a second day of talks aimed at easing trade tensions.
The FTSE 100 was on track to close at a record high amid renewed hopes about the prospects of the world's two largest economies.
The UK's flagship stock index climbed as much as 0.6pc to 8,883.40, which was above the record close it achieved in March.
US commerce secretary Howard Lutnick said the talks with his Chinese counterparts were 'going well' and were expected to last the whole day.
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Lancaster House talks between China and the US will continue into the evening, according to a report.
A source told Fox Business that the talks now involved 'ironing out technical details'.
Wall Street's main indexes are edging up in choppy trading as investors await a breakthrough in the ongoing US-China trade talks.
'Markets are taking a more upbeat tone on hints that we are starting to see some signs of progress,' said Laura Cooper, an investment strategist at Nuveen.
'This is just going to underpin more choppy price action because there's a lack of clarity on what an actual deal could be.'
The S&P 500 is up 0.3pc, the Nasdaq is up 0.4pc and the Dow Jones is up 0.2pc.
The FTSE 100 finished 0.2pc higher, while the mid-cap FTSE 250 added 0.5pc.
Housebuilders were among the biggest risers after dismal figures for the jobs market increased market bets on interest rate cuts, which would benefit the construction industry.
Danni Hewson, of AJ Bell, said: ''It was no shock to see UK housebuilders storming away as expectation that mortgage rates could become more affordable fuelled investor appetites.
'A strong update from Bellway provided some additional tailwind with special attention being paid to the robust order book, which suggests that the spring rush is somewhat sustainable despite changes to stamp duty.
'Housebuilders won't build if there's no customer waiting at the end of the ladder, and if mortgage rates fall people can afford to stretch that little bit more to cover house prices which Bellway also see rising.'
Indian and US negotiators have made progress in their latest round of talks in New Delhi on trade deal, Indian government sources said.
One said: 'The negotiations held with the US side were productive and helped in making progress towards crafting a mutually beneficial and balanced agreement including through achievement of early wins.'
US president Donald Trump and Indian prime minister Narendra Modi had agreed in February to conclude a bilateral trade agreement by the autumn and to more than double trade between the two countries by 2030.
The two sides are expected to sign an interim agreement by the end of the month, before the expiry of Trump's 90-day pause on reciprocal tariffs on major trading partners, including a 26pc tariff on India.
Markets are mixed today as traders mull the likely outcome of trade talks between America and China.
Wall Street is rising, but European markets are going in both directions
The S&P 500 and Nasdaq are both up more than 0.2pc, while the Dow Jones is up 0.1pc.
The FTSE 100 is up 0.3pc, while Germany's Dax is down 0.7pc and France's Cac 40 is up 0.1pc, as is the pan-European benchmark, the Stoxx 600.
In Asia, Japan's Nikkei 225 rose 0.3pc, but Shanghai's SSE fell 0.4pc and Hong Kong's Hang Seng fell 0.1pc.
A US Treasury spokesman has confirmed that the trade talks between the US and China are continuing after an official reportedly said talks had concluded.
China has extended a high-profile investigation into imported pork from the European Union by six months, as negotiators from Brussels and Beijing negotiate a deal over the EU's electric vehicle tariffs.
Launched in June last year, the probe is widely seen as retaliation for EU tariffs on Chinese electric vehicle exports and has hit over $2bn (£1.5bn) in pork exports, concentrated in major producers such as Spain, the Netherlands, and Denmark.
China, the world's largest pork consumer, has decided to extend the investigation period to Dec 16 due to the 'complexity' of the case, the country's commerce ministry said.
The decision to delay comes as China and the EU close in on a deal over the EV tariffs. Beijing has already extended its anti-dumping investigation into EU brandy and offered to speed up rare earth magnet export licences for European firms.
The prolonging of the probe 'means six more months of waiting, which means the cloud hanging over us will remain, but we remain confident and calm', said Giuseppe Aloisio, director general of Spain's meat industry association ANICE.
UK bonds are still an attractive investment, even though interest rates are set to come down, a market analyst has said.
The yield (the effective interest rate) on 10-year UK gilts is 4.561pc this afternoon, compared with 2.535pc for German equivalents and 4.476pc for US bonds.
Stephen Innes, of SPI Asset Management, said: 'Sterling's place in the high-yield club is facing a stress test after a brutal UK jobs report. A 109,000 drop in payrolled employment in May - the worst monthly figure outside Covid - has traders pencilling in August and November cuts from the Bank of England.
'And yet sterling hasn't broken. Why? Because its yield remains one of the most attractive in the G10, and until that changes, GBP remains a carry story [an investment for the income rather than an increase in the value of the asset] that hasn't yet hit the exit alarm. But the cracks are there.'
The pound is down 0.26pc against the dollar and 0.25pc against the euro.
US stock markets have been rising this afternoon amid hopes of a better trade relationship between the US and China.
Both sides are engaged in the second day of talks in London.
Marc Chandler, chief market strategist at Bannockburn Forex in New York, said that key to a breakthrough will be an agreement on export controls of US chips and Chinese rare earth minerals.
'China can replace the chips that the US exports easier than we can replace their magnets and processed earths,' he said.
The S&P 500 and Nasdaq are both up 0.3pc, while the Dow Jones is up 0.1pc.
The World Bank urged Donald Trump to end his tariff onslaught as it slashed its predictions for global growth.
The lender said global growth would be 0.2 percentage points stronger over the next two years if tariff levels were halved relative to their levels in late May.
President Trump stunned the world with his onslaught of import taxes on trading partners announced on his so-called 'liberation day' on April 2.
He has since suspended most of these levies and his administration is holding talks with Chinese officials in London aimed at making fresh breakthroughs in relations.
World Bank chief economist Indermit Gill said the first measure that would help to revive growth in developing economies would be to 'rebuild trade relations'.
He also urged developing economies to lower tariffs if they wanted to improve growth.
'The evidence is clear: economic cooperation is better than any of the alternatives—for all parties,' he said.
'Most developing economies today tend to have far higher tariffs than high-income economies.
'If their goal is to accelerate growth, their best course of action will be to lower tariffs with respect to all trading partners.'
The world economy will grow at its slowest pace since the 1960s during this decade, the World Bank has warned, amid Donald Trump's upheaval of global trade.
The Washington-based lender slashed its growth forecast for this year by 0.4 percentage points to 2.3pc, which would be the worst year since the global financial crisis in 2008, outside global recession years.
The World Bank said that by 2027, global growth will have averaged just 2.5pc in the 2020s, the worst of any decade since the first missions to the Moon.
Chief economist Indermit Gill said: 'The world economy today is once more running into turbulence. Without a swift course correction, the harm to living standards could be deep.
'International discord — about trade, in particular — has upended many of the policy certainties that helped shrink extreme poverty and expand prosperity after the end of World War II.'
US stock indexes opened higher amid hopes that a deal can be agreed in trade talks between the US and China in London.
The Dow Jones Industrial Average rose 0.1pc to 42,798.06 at the opening bell.
The benchmark S&P 500 gained 0.2pc to 6,014.80 while the tech-heavy Nasdaq Composite rose 0.1pc to 19,601.56.
China's vice premier He Lifeng has arrived back at Lancaster House to continue trade talks with the US after a break for lunch.
The FTSE 100 remains on track to close above its record high after US officials sounded positive about trade talks with China.
The blue-chip index was last up 0.6pc to 8,881.85 after US commerce secretary Howard Lutnick said the talks were 'going well'.
The index was also lifted by official figures showing a slowdown in pay growth and rising unemployment rose to its highest in nearly four years in the three months to April.
This has led money markets to fully price in two cuts to interest rates by the Bank of England by the end of the year.
Elizabeth Martins, senior UK economist at HSBC Global Research, said policymakers 'sounded less sure of a cut in May, opening up the prospect of a pause in August but today's data may tip the balance in favour of an August cut'.
Housebuilders were the best performers on the FTSE 100 and FTSE 250, rising as much as 4.5pc amid the prospect of lower borrowing costs for buyers.
Persimmon was the biggest gainer on the FTSE 100, up 4.9pc, with Barratt Redrow gaining 4pc and Taylor Wimpey up 3.5pc.
Marks & Spencer climbed 4pc after it began taking online orders for the first time in more than six weeks following a cyber attack.
Precious metal miners were the worst performers, with Hochschild Mining plunging nearly 22pc to hit the bottom of the FTSE 250 after issuing a six-week shutdown at its Mara Rosa mine in Brazil, following lower-than-expected gold output.
The stock is set for its steepest one-day fall since November 2021.
Traders now fully expect the Bank of England to cut interest rates twice before the end of the year after a surge in unemployment.
Money markets have priced-in two more reductions in borrowing costs in 2025 following official figures showing the unemployment rate hit 4.6pc in the three months to April.
The weakening jobs market prompted traders to ramp up bets that policymakers will cut interest rates twice this year, by September and December at the latest.
An August rate cut is given a likelihood of 82pc.
It has helped send the cost of government borrowing sharply lower, with the yield on 10-year UK gilts down nearly 10 basis points to a one-month low of 4.53pc.
The yield on two-year gilts – which impacts the cost of servicing the national debt in the shorter term – dropped nine basis points to a one-month low of 3.9pc.
Chinese officials have been pictured leaving Lancaster House in London following trade talks with the US.
The negotiations have been suspended for lunch, according to Bloomberg.
The dollar was steady as talks between Beijing and Washington continued for a second day.
The dollar index, which measures the US currency against six others, was less than 0.1pc higher at 98.989, and remained close to a six-week low of 98.351 it touched last week.
However, the pound was down sharply against the dollar after unemployment hit a new four-year high, raising concerns about the jobs market.
Danske Bank analyst Kirstine Kundby-Nielsen said the labour market data 'was definitely on the weak side'.
'This puts a question mark on the hawkish bias that we've seen from the Bank of England.'
The Bank of England is due to meet next week and is expected to keep the interest rate unchanged.
However, money market traders give a 81pc chance of an August rate cut and are pricing in a reduction by September following the jobs data.
The cost of government borrowing has fallen sharply in Britain has traders ramped up bets on the Bank of England cutting interest rates.
The yield on 10-year UK gilts – a benchmark for the cost of servicing the national debt – has fallen nearly eight basis points today to 4.55pc.
The fall far outstrips the pace of declines across peers in Europe, where yields are declining amid hopes that the US and China will reach a deal that could help boost global economic growth.
The drop in borrowing costs has been driven by official figures showing UK unemployment rose to a nearly four-year high of 4.6pc in the three months to April.
It has raised concerns of a slowdown in the jobs market, which could force the Bank of England to cut interest rates more quickly than previously thought to boost the economy.
Deutsche Bank economist Sanjay Raja said he expects to see unemployment 'rising further' in the near term, meaning interest rates would settle at 3.5pc by the end of the year, 'dropping to a terminal rate of 3.25pc' in the first quarter of 2026.
The price of oil ticked up for a fourth day in a row amid hopes that the US and China can make an agreement to improve trade ties.
Brent crude, the global benchmark, was up 0.4pc to more than $67 a barrel, while US-produced West Texas Intermediate rose 0.3pc towards $66.
US commerce secretary Howard Lutnick said the talks were 'going well' and were expected to last the whole day.
Vandana Hari, founder of Vanda Insights, said: 'Crude has pre-emptively priced in a degree of success in the US-China trade talks.
'We may not know the outcome for another day, and I expect prices to go into a holding pattern until then.'
US stock indexes were subdued in premarket trading as investors awaited the outcome of a second day of trade talks between the United States and China.
Investors are hoping for an improvement in ties after the world's two largest economies accused each other of breaking the terms of a preliminary deal agreed in Geneva last month.
Washington accused Beijing of blocking exports that are critical to sectors including cars, aerospace, semiconductors and defence.
White House economic adviser Kevin Hassett said on Monday the US was likely to agree to lift export controls on some semiconductors in return for China speeding up the delivery of rare earths.
In premarket trading, the Dow Jones Industrial Average was little changed, while the S&P 500 and the Nasdaq 100 were up 0.1pc.
US commerce secretary Howard Lutnick and his Chinese counterpart Wang Wentao have arrived at Lancaster House in London for the second day of their talks aimed at easing trading relations between the world's two largest economies.
Donald Trump's top trade official said the US-China talks were 'going well' and were expected to last all day.
US commerce secretary Howard Lutnick spoke as the negotiations at Lancaster House in London got under way for a second day.
The first round of talks on Monday lasted around seven hours.
The value of the pound has come under pressure amid the prospect of a US-China trade deal as official figures showed a weakening in the UK jobs market.
Sterling slipped 0.5pc against the dollar below $1.35 amid after warm words from President Trump and his delegation raised hopes for a deal.
An improvement in trade tensions could boost the dollar, which has slumped more than 7pc against the pound so far this year.
Sterling was also hit by official figures showing unemployment hit its highest level in nearly four years.
Wage growth also slowed by more than expected in April, according to the Office for National Statistics, prompting traders to ramp up bets on interest rate cuts.
Money markets indicate there is now an 81pc chance of a reduction in borrowing costs in August, compared to 68pc before the latest ONS figures.
Jordan Rochester of Mizuho said the Bank of England would be free to cut interest rates at a faster pace from 4.25pc now to 3.5pc by November.
Matthew Ryan of Ebury added: 'We think that a summer cut is back in play, with a good chance we now see a couple more rate reductions before the year is out.'
China's struggling stock markets will not see a huge turnaround this year even if trade talks with the US in London are a success, economists have said.
The Hang Seng and China's equity markets were hit hard after Donald Trump unleashed his 'liberation day' tariffs, although both are now above their levels on April 2.
However, Thomas Mathews of Capital Economics said he 'wouldn't bank on a big turnaround thanks to any potential trade breakthroughs'.
He said: 'Despite their recent performance, the tariff shock to China's equities hasn't actually been especially large, with other factors such as domestic policy more important.
'And, we doubt that the US will back off completely. That's likely to restrain any relief rally.
'Even if there isn't a broader rally, though, it's possible that any easing of access to high-end semiconductors – apparently up for debate – could give China's 'tech' stocks a boost.
'But we wouldn't expect too much there, either. It's true that the 2018 trade war seems to have been the catalyst for a fall in their valuations relative to their global peers.
'But, by far the bigger plunge happened during the subsequent 'crackdowns' by China's authorities, beginning around late-2020.'
Officials from both Washington and Beijing are expected to issue updates later after the US-China trade talks resume at 10am UK time.
The two sides met for nearly seven hours on Monday at Lancaster House in London.
The US delegation featured treasury secretary Scott Bessent, commerce secretary Howard Lutnick and trade representative Jamieson Greer.
The Chinese contingent was helmed by vice premier He Lifeng.
The FTSE 100 has been powered close to record highs by a surge in defence stocks as Donald Trump resets the global world order.
Defense contractors Babcock and BAE Systems are among the biggest gainers on the index this year, as well as precious metals miner Fresnillo.
It follows pressure from Donald Trump for European nations to increase their defence spending, while a surge in gold prices has boosted miners.
However, the index remains 0.4pc below its record intra-day high of 8,908.82 and its latest jump comes a day after a series of high-profile takeovers of companies on the London markets.
Georges Debbas of BNP Paribas said: 'UK stocks are among the cheapest in Europe.
'The country is also the most friendly to the US, as it's the only one to have a firm trade agreement in place. That allows you to have a more constructive view on the market.'
The FTSE 100 is on track to close at a record high today amid renewed hopes about the prospects of trade talks between the US and China.
The UK's flagship stock index climbed as much as 0.4pc to 8871,41, which was above the record close it achieved in March.
Stock markets plunged around the world following Donald Trump's 'liberation day' tariffs in April but equities have staged a dramatic recovery as the US president walked back on the most-severe of his measures.
The S&P 500 on Wall Street remains just 2.3pc short of its record high in February, while the Nasdaq Composite is 2.9pc away from its peak set in December.
European stocks were more cautious than those in Britain as investors stayed on edge awaiting fresh signals from the second day of tense US-China trade negotiations.
The continent-wide Stoxx 600 was flat at 553, with the Cac 40 in Paris little changed at 7,793.37 and the Dax in Frankfurt edging down 0.2pc to 24,137.25.
In London, the FTSE 100 was up 0.4pc and the FTSE 250 gained 0.2pc.
The spotlight remains on the talks in London between the world's two biggest economies, as investors eagerly watch for any signs of progress or a thaw in relations.
Gains in carmakers, which rose 1pc, were offset by financial services and industrial shares, which fell 0.8pc and 0.4pc, respectively.
Among stocks, Novo Nordisk gained nearly 2pc after a report said activist hedge fund Parvus Asset Management is building a stake in the drugmaker.
In Britain, Bellway gained 4.3pc after the British homebuilder raised its forecast for full-year volume production.
Shares of Aberdeen gained 5.2pc to lead the FTSE 250 after JP Morgan upgraded the fund manager's stock to 'overweight' from 'neutral'.
The FTSE 100 opened higher amid optimism there will be a fresh trade truce between the US and China as talks in London enter a second day.
The UK's blue-chip stock index rose 0.3pc at the open to 8,862.40 while the mid-cap FTSE 250 gained 0.1pc to 21,310.57.
Stock markets in China turned lower as investors worried the trade talks between Washington and Beijing officials did not go well.
The Hang Seng in Hong Kong was up as much as 0.5pc in early trading after US officials said the talks had been 'fruitful' and President Trump indicated he had received good reports.
However, by the afternoon the index was down as much as 0.8pc, with the Shanghai Composite also turning gains of 0.2pc into losses of as much as 1pc.
Meanwhile, gold turned losses of as much as 1pc into a decline of just 0.2pc.
'People seem to be speculating that the talks didn't go well,' said Fu Shifeng, investment director at Cheng Zhou Investment told Bloomberg.
'The rally in gold prices as well as rare-earth stocks seems to suggest that.'
Thanks for joining me. Donald Trump warned it was 'not easy' to hold negotiations with China as trade talks in London entered a second day.
The US president insisted he was only getting 'good reports' about progress between the teams of officials from Washington and Beijing.
'We are doing well with China. China's not easy,' President Trump told reporters at the White House on Monday. 'I'm only getting good reports.'
US treasury secretary Scott Bessent said it had been a 'good meeting' on Monday, while Mr Trump's commerce secretary Howard Lutnick said the negotiations had been 'fruitful'.
Stocks rose in Asia overnight, with European markets expected to open higher amid hopes that the negotiations will ease trade tensions between the world's two largest economies.
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Asian shares were mixed on Tuesday as investors kept an eye on the China-US trade talks that might help stave off a recession.
A second day of talks was planned after US and Chinese officials met in London for negotiations over various issues. The hope is that they can eventually reach a deal to reduce painfully high tariffs against each other.
Most of the tariff hikes imposed since Donald Trump escalated his trade war are paused to allow trade in everything from tiny tech gadgets to enormous machinery to continue.
In Asian trading, Tokyo's Nikkei 225 gained 0.2pc to 38,177.71, while the Kospi in South Korea jumped 0.3pc to 2,865.24.
Hong Kong's Hang Seng fell 0.2pc to 24,127.30 and the Shanghai Composite index was down 0.5pc to 3,384.47. In Taiwan, the Taiex surged 2.1pc to 22,242.14.
Australia's S&P/ASX 200 advanced 0.8pc to 8,587.20.
On Wall Street, the Dow Jones Industrial Average was flat, at 42,761.76, the S&P 500 rose 0.1pc, to 6,005.88. and the Nasdaq rose 0.3pc, to 19,591.24.
In the bond market, the yield on benchmark 10-year US Treasury notes fell to 4.478pc from 4.494pc late on Sunday.