Coronavirus latest: Americans increase spending in June even as incomes slide

Coronavirus latest: Americans increase spending in June even as incomes slide

Nasdaq jumps after bumper earnings for Big Tech

Blowout quarterly results for tech giants propelled US stocks higher, even as much of the rest of the economy reports a deep blow from the pandemic.

The tech-heavy Nasdaq 100 index jumped 1.7 per cent at the opening bell after four of the largest US tech companies posted resilient quarterly results late on Thursday.

Facebook led the gains with a 7 per cent increase. Apple rose about 6 per cent, while Amazon climbed 5.7 per cent. Alphabet, the parent of Google, slipped 4 per cent after it disclosed the first decline in sales ever reported by the internet group.

The US benchmark S&P 500 stock index added 0.3 per cent. Chevron and ExxonMobil reported heavy quarterly losses on Friday, with shares in the oil majors slipping about 4 per cent and 0.4 per cent, respectively.

Americans increase spending in June

US consumers lifted spending in June, even as parts of the country dealt with a flare-up in coronavirus cases.

Personal consumption expenditures were up 5.6 per cent against the prior month, the Bureau of Economic Analysis said on Friday. That compared with an 8.5 per cent gain in May and economists’ forecast of 5.5 per cent growth. The data showed that spending on clothing and footwear, health care and food services picked up.

Incomes dropped 1.1 per cent, as the government’s direct payments delivered in response to the pandemic continued at a lower level versus May. The BEA said increased compensation related to the reopening of businesses partially offset the decrease in benefits. Personal income was down 4.4 per cent in May.

The core personal consumption expenditures (PCE) index – the Federal Reserve’s preferred measure of inflation – was up 0.9 per cent year on year, down from the 1 per cent rise in May.

Jaguar Land Rover to cut another £1bn as losses mount

Peter Campbell

Jaguar Land Rover has pledged to cut another £1bn from costs this year after booking a £413m loss in the three months to June and predicting it will remain in the red for the quarter to September.

In March, Britain’s largest carmaker announced 1,000 job losses as part of generating £1bn in cost savings. On Friday the group added another £1bn to its cutbacks, but declined to give details on any further job losses.

The group made a £413m pre-tax loss in the three months to June, after car sales fell 42 per cent to 74,096, and a 44 per cent drop in revenues to £2.9bn.

JLR lost £500m in the first three months of 2020 as coronavirus forced it to close showrooms and factories across the world.

Caterpillar profit slides as pandemic hits demand

Caterpillar’s quarterly earnings slumped and sales fell by almost one-third as a drop in business investment brought on by the pandemic’s economic fallout knocked the maker of bulldozers and backhoes.

Caterpillar, considered an economic bellwether and known for its large machinery, said on Friday weaker end-user demand and changes in dealer inventories weighed on sales volume during the June quarter. Dealers cut machine and engine inventories by $1.4bn, compared with a $500m increase in the year-ago period.

The company booked revenues of $10bn, down 31 per cent from $14.4bn in the second quarter of last year. Analysts were looking for a larger drop in sales to $9.38bn.

Caterpillar’s mining, construction and energy and transportation segments each posted a decline in machine retail sales for the three-month rolling period ended in June. Sales were down 23 per cent globally, led by a 40 per cent decrease in North America. Sales rose 7 per cent in Asia Pacific.

Second-quarter profit per share fell to 84 cents from $2.83 but eclipsed analysts’ forecast of 68 cents. The results included pre-tax remeasurement losses equal to 19 cents a share related to settlements of pension obligations.

Caterpillar, which withdrew its 2020 guidance in March, said its financial results for the remainder of the year will be impacted by economic uncertainty due to coronavirus. The company did not reinstate its outlook.

“We will adjust production as conditions warrant and are prepared to respond quickly to any positive or negative changes in customer demand,” said chairman and chief executive Jim Umpleby.

Caterpillar also said it has “continued to take actions to reduce costs and prioritise its spending to provide for investment in services and expanded offerings”.

Shares in Caterpillar rose 1.3 per cent in after-hours trading.

Exxon posts deep losses even as oil major slices costs

Myles McCormick

ExxonMobil fell to a $1.1bn loss in the second quarter as sweeping cost cuts failed to offset the effects of an oil price crash that has floored producers and sent revenues tumbling.

The loss compares with a profit of $3.1bn in the same quarter last year, underlining the extent of the damage inflicted on the biggest American oil company by the coronavirus pandemic and Saudi Russian price war, which sent US oil prices tumbling into negative territory in April. Total revenue slid 54 per cent to $33bn.

However, the loss was significantly better than the $2.5bn analysts had pencilled in after the company warned earlier this month that weaker oil and gas prices would hit its upstream business hard.

“The global pandemic and oversupply conditions significantly impacted our second quarter financial results with lower prices, margins, and sales volumes,” said Darren Woods, Exxon chief executive. “We responded decisively by reducing near-term spending and continuing work to improve efficiency by leveraging recent reorganisations.”

Like its rivals, Exxon has sought to dial back expenditure to cope with the downturn. It managed to cut capital and exploration expenditure by about $2bn compared with the first quarter.

“The company has identified significant potential for additional reductions and is undertaking a comprehensive evaluation across the businesses on a country-by-country basis,” Exxon said.

The loss per share in the first quarter amounted to 70 cents, compared with expectations on Wall Street for about 60 cents.

Fiat Chrysler slumps to €1bn loss as Covid-19 deals heavy blow to US

Peter Campbell

Fiat Chrysler fell to a €1bn loss in the second quarter after profits in its American heartland were all but wiped out, but said that profits and cash flows “significantly improved” during June.

Car sales for the Jeep and Alfa Romeo owner dropped 63 per cent to 424,000 vehicles, with revenues declining 56 per cent to €11.7bn.

In North America, the company’s only significant profit driver, earnings fell to just €39m, a decline of €1.5bn compared with the same quarter a year earlier. Sales in the region fell close to two-thirds to 225,000.

The fall in its US earnings was compounded by its struggling European and Latin American regions falling back into loss.

Maserati, the company’s luxury brand, slimmed its loss by €20m to €99m, while losses in Asia-Pacific deepened to €59m.

The company said the pandemic has “further underlined the compelling logic” for its €44bn merger with France’s PSA, which is being investigated by European competition authorities and is expected to close next year.

The group has suspended financial guidance for the year but increased its outlook for the North American market this year to 15m vehicles sales, up from 12.5m three months ago.

The FCA expects “recovering profitability and positive industrial free cash flows” in the second half, driven by a recovering North American market.

Store reopenings fail to soften steep fall in sales at Under Armour

Sara Germano in New York

Under Armour reported sharply lower sales despite the reopening of most stores where its athletic gear is sold, with the pandemic continuing to weigh on the company’s results.

Sales in its most recent period fell 41 per cent to $708m, driven by a steep downturn in North America, its largest market. Under Armour reported a loss of $183m for the three months ended in June.

Although revenues fell more steeply than expected, the company’s loss was in line with consensus of analysts polled by S&P Capital IQ. Shares of Under Armour rose 10 per cent in pre-market trading to $12.60.

Earlier this week, the company said in a filing that it received a notice from the US Securities and Exchange Commission that the regulator intends to pursue enforcement against Under Armour related to an ongoing investigation into its accounting and sales practices.

Chevron swings to loss on weak oil prices

Derek Brower

Chevron swung to a deep $8.3bn loss in the second quarter, down from more than $4bn of earnings a year earlier, as the collapse in oil prices triggered by the coronavirus pandemic and the market’s crash in the wake of the Saudi-Russian price war ripped through the supermajor’s balance sheet.

The company reported non-cash net charges of $5.2bn as it wrote off all its Venezuelan assets and a $1.8bn impairment associated with the lower oil prices.

The adjusted loss, after accounting for the charges, came in at $3bn, or a loss of $1.59 per share.

“The past few months have presented unique challenges,” said Mike Wirth, Chevron’s chief executive. “The economic impact of the response to Covid-19 significantly reduced demand for our products and lowered commodity prices.”

Quarterly revenue dropped from about $32bn in the first quarter to $16bn, 55 per per cent lower than a year earlier. The upstream segment of the business was hit hard, with Chevron reporting a loss of $6bn compared with a $3.4bn gain last year. Chevron said it received just $19 a barrel for its oil, compared with $52 a year earlier.

The earnings loss was far above market expectations for an adjusted loss of $1.6bn, and revenue was well beneath analysts’ forecast of $22bn. Shares slipped 2 per cent in pre-market trade.

Boris Johnson delays further reopening of England’s economy

Jim Pickard

Boris Johnson has put the handbrake on further reopening of the English economy by postponing plans to reopen bowling alleys, casinos and ice rinks this weekend for at least another fortnight.

The prime minister has also delayed pilot schemes to restart gigs and sporting events before the autumn amid a rise in Covid-19 cases across Europe. Nor will wedding receptions of up to 30 people be allowed, as had been planned.

Mr Johnson said it was his responsibility to look at national measures. “With those numbers creeping up our assessment is that we should squeeze that brake pedal in order to keep that virus under control.”

However, the government will proceed with plans to pause the “shielding” programme for the most vulnerable and will still encourage some workers to return to offices from next week.

The prime minister, making the announcement at a press conference in Downing St, said that the prevalence of Covid-19 outside of hospital and care home settings was increasing, according to new figures from the Office for National Statistics.

“Some of our European friends are struggling to keep it under control,” he said. “We can’t fool ourselves that we are exempt. We have to be willing to react to the first signs of trouble….We just can’t afford to ignore this evidence.”

Mr Johnson had announced the further easing of those restrictions on July 17 as part of a wider announcement.

But ministers have always warned that any relaxation of the lockdown would be subject to the trajectory of the coronavirus epidemic. New figures published on Thursday evening showed 846 new infections, the highest figure for 32 days.

Mr Johnson’s announcement came just hours after the government imposed new restrictions on swathes of north-west England where indoor meetings in homes are now banned for more than 4m people. The Scottish government has advised against travel to those parts of northern England.

Hong Kong cites coronavirus for election delay

Nicolle Liu in Hong Kong

Hong Kong chief executive Carrie Lam has postponed the territory’s elections for a year, citing coronavirus as the main reason.

The Chinese territory, which is meant to be semi-autonomous but has come increasingly under the grip of Beijing with a sweeping national security law that punishes crimes such as subversion and secession, had been due to elect members of its legislative council in September.

In a press conference, Ms Lam said delaying the elections until next year was “difficult” but “necessary” because of the pandemic, social distancing requirements and the fact voters currently in mainland China or overseas would not be able to return in time to vote.

Ms Lam’s administration and the pro-establishment camp are unpopular. A group of pro-democracy candidates, who oppose the concept of rule by Beijing, won a landslide victory in Hong Kong’s local elections last November.

But last Thursday, Hong Kong banned 12 pro-democracy figures, including current Legco members and Joshua Wong, the then-student who became the face of 2015’s Umbrella Revolution, from running in the election.

The total number of confirmed coronavirus cases in Hong Kong topped 3,200 this week and the pandemic has left 27 dead in the city.

At least 24 countries have decided to postpone national elections and referendums, however more than 30 have held national elections amid the coronavirus crisis, according to research by IDEA.

Prevalence of Covid-19 in England ticks up ‘slightly’

Sarah Neville

There has been a “slight rise” in the prevalence of Covid-19 in England, statisticians said on Friday, with about one in 1,500 of the population now infected compared with about one in 2,000 the week before.

An estimated 35,700 people had Covid-19 during the most recent week, from July 20 to 26, according to the ONS figures, which exclude cases in hospitals, care homes or other institutional settings. This compares with 27,700 between July 13 and 19.

The statisticians said there was “evidence to suggest a slight increase in the number of people in England testing positive on a nose and throat swab in recent weeks”.

However, there was “not enough evidence to say with confidence whether Covid-19 infection rates differ by region in England, nor whether infection rates have increased in different regions over the past six weeks”. The new figures equate to about 4,200 infections a day in the so-called community.

Japan orders 120m doses of Pfizer’s potential Covid-19 vaccine

By Kana Inagaki in Tokyo

Pfizer and Germany’s BioNTech will supply Japan with 120m doses of their experimental Covid-19 vaccine by the end of June 2021.

The procurement by the Japanese government of enough doses for 60m people comes as the nation wrestles with a new spike in coronavirus cases, which hit a daily record of 1,482 on Friday.

There is not yet any proven vaccine for Covid-19, although nation states are scrambling to get their hands on the front-runners among potential immunisation programmes.

Earlier this month, the Trump administration committed to spend $1.95bn on 100m doses of Pfizer and BioNTech’s vaccine, which will be distributed free of charge to American citizens, subject to regulatory approval.

Pfizer and BioNTech did not disclose the financial terms of the agreement with Japan.

France hands local authorities power to make masks required in public

David Keohane in Paris

France has given local authorities the power to make mask-wearing mandatory in public places in the fight to halt the spread of Covid-19, as Europe faces a resurgence of the virus.

“In order to limit the circulation of Covid-19, local governments will now be able by order to extend the obligation to wear a mask to open public places,” said French health minister Olivier Véran on Twitter on Friday.

“This decision can be made locally, depending on the evolution of the epidemic in each territory.”

The northern French town of Lille, near the Belgian border, has already moved to impose such an order with masks mandatory in parks and pedestrian areas from Monday.

France, where more than 30,000 people have died of the virus, is facing a resurgence in cases of Covid-19. Health authorities warned this week that “the circulation of the virus has been maintained with the number of daily cases increasing and exceeding 1,000”, bringing the rate of infection back to levels seen at the start of May and before the lockdown in France started to be eased.

That rise in cases has coincided with an increase in tests being performed — now approaching 500,000 a week according to Mr Véran — but authorities are increasingly urging vigilance as the numbers tick back up.

Taiwan’s economy shrinks unexpectedly in second quarter

Kathrin Hille in Taipei

Taiwan’s economy reversed into contraction in the second quarter as the forced stop to citizens’ international travel dealt a blow to private consumption.

The cabinet’s statistics office estimated that gross domestic product in the three months to June 30 decreased by 0.73 per cent compared with the same period last year, missing its May forecast by 1.2 percentage points.

Measured at a seasonally adjusted annualized rate, the economy contracted 8.8 per cent.

The surprise drop calls into question the expectation that Taiwan’s success in containing the pandemic, and thus avoiding hard lockdowns, can spare it from a recession. One of the key reasons for its successful containment of the pandemic was early and decisive border closures.

Taiwan’s contraction compares with a 32.9 per cent fall in US GDP over the same period, however, as well as a 9 per cent drop in Hong Kong and South Korea’s economy shrinking by 3.3 per cent.

In the first quarter, Taiwan had been one of the few economies to continue expanding with 1.59 per cent growth. The market consensus expectation for the second quarter had been flat growth according to Citi.

But the government said the virus-led forced stop to foreign travel dealt a severe blow to private consumption.

“The main reason was the impact of the Covid-19 pandemic, created by a 99.57 per cent drop in foreign arrivals and the dramatic drop in services exports,” the Directorate-General of Budget and Statistics said.

While domestic consumption continued to grow by just more than 1 per cent in the second quarter, services exports were down 96 per cent. That drop is even more drastic than in Hong Kong, a much more tourism-dependent economy, which said on Thursday that services exports fell 46 per cent in the second quarter.

Eurozone output drops 12.1% in record contraction

Delphine Strauss and Chelsea Bruce-Lockhart

The eurozone has plunged into its deepest recession on record as a result of the coronavirus pandemic, data released on Friday showed.

The bloc’s gross domestic product fell 12.1 per cent between the first and second quarters of 2020, the biggest decline in 25 years of economic records, Eurostat said on Friday.

The plunge in output came after GDP fell 3.6 per cent in the first quarter.
Spain, which now faces a steep rise in new virus cases, has been hardest hit, with GDP down 18.5 per cent in the second quarter. But Portugal, which saw a much lower rate of infection, was almost as badly hit, with GDP down by 14.1 per cent quarter on quarter.

There was less divergence between other major economies, with second quarter GDP falling by 10.1 per cent in Germany, 13.8 per cent in France and 12.4 per cent in Italy.

Across the EU, GDP fell 11.9 per cent quarter on quarter in the three months to June after a 3.2 per cent drop in the first quarter.

Eurozone inflation increased more than anticipated in July, as many countries emerged from government-imposed lockdowns, but the rate still remains far from the European Central Bank’s main target rate of just under 2 per cent.

Consumer prices rose 0.4 per cent in July compared with a year earlier, preliminary Eurostat figures revealed.

This was higher than the 0.2 per cent expected by economists polled by Reuters and more than the 0.3 per cent rise in prices recorded in June.

Virus sends Italian economy into steepest fall for decades

Federica Cocco in London

Italy’s economy experienced its steepest quarterly contraction for at least 25 years in the three months to June, as activity plunged due to a decline in tourism and a nationwide lockdown to try to curb coronavirus.

Italy’s gross domestic product fell 12.4 per cent in the second quarter compared with the previous quarter, according to data from Istat, the national statistics office.
That was better that the 15.3 per cent drop predicted by economists polled by Reuters. But it was still the largest contraction since records began in 1996 and far steeper than the 2.8 per cent contraction in the first quarter of 2009, at the height of the financial crisis.

The eurozone’s third-largest economy is experiencing its fourth recession in just more than a decade, and had already been shrinking before the pandemic hit.
On a year-on-year basis, GDP tumbled 17.3 per cent in the second quarter, Istat said.

Istat also revised down its reading for the first quarter of the year to a drop of 5.4 per cent.

Italy’s official forecast is for a full-year GDP contraction of 8 per cent in 2020. Economy Minister Roberto Gualtieri said this could be revised lower. The Bank of Italy has estimated a contraction of 9.5 per cent, while the European Commission has predicted the economy would shrink 11.2 per cent, the sharpest fall in the European Union.

Spain’s economy contracts to 18-year low

Chelsea Bruce-Lockhart

Spain’s economy contracted sharply in the second quarter of 2020, taking the country into recession and bringing output down to levels not seen for 18 years.

Gross domestic product decreased by 18.5 per cent in the three months to June compared with the previous quarter, according to preliminary estimates published by the National Statistics Institute on Friday. It follows a contraction of 5.2 per cent in the first quarter.

Economists had expected a decline of 16.6 per cent in the second quarter, according to a poll by Reuters.

The decline in output brought Spanish GDP back to levels last seen in 2002, wiping out the seven years of growth since the country’s last recession.

The pandemic has hit Spain hard, in part because of the impact on its tourism industry, which accounts for about one-seventh of GDP.

The country now faces a resurgence in cases that threatens to hold back its recovery in the second half of this year.

The pandemic’s impact on Spain’s economy was significantly worse than in the US and Germany, which both lost about a tenth of their economic output in the second quarter. French GDP contracted by almost 14 per cent.

French consumer prices rise to five-month high

Federica Cocco

French consumer prices grew by more than expected in July, pushing the rate to a five-month high in the latest sign that its economy has begun to rebound from the economic damage caused by coronavirus.

Consumer price inflation rose to an annual rate of 0.9 per cent in July, from 0.2 per cent the previous month, the French national statistics agency INSEE reported on Friday. Economists polled by Thomson Reuters had expected annual inflation to rise to 0.3 per cent.

Consumer prices rose 9 per cent compared with the previous month. INSEE said that the rise was driven by a rebound in manufactured products as summer sales that had been postponed during lockdown began to catch up. The stabilisation of energy prices also contributed.

Separate data published by INSEE on Friday showed that household consumption expenditure on goods returned to pre-pandemic levels in June, with a rise of 2.3 per cent on February.

France suffered a historic 13.8 per cent quarter-on-quarter contraction in gross domestic product in the three months to June, figures published earlier on Friday showed.

Airline KLM to cut further 1,500 jobs to weather the pandemic

Dutch airline KLM has said it will axe an additional 1,500 jobs, as uncertainty lingers over the recovery in global air travel which has been grounded by the coronavirus pandemic.

The carrier said that it plans to cut positions relating to the ground, cabin crew, cockpit and its subsidiaries, taking total reductions since the pandemic began to 5,000 jobs — 15 per cent of its 33,000 strong workforce before March. It said that it has only recovered to operating 30 per cent of its flights compared with pre-pandemic levels.

KLM warned that further reduction in staff numbers could come if it revises down its forecast on the pace of recovery in air travel for the next financial year.

“Expectations are that the road to recovery will be long and fraught with uncertainty,” the company said in a statement. “Demand is only expected to recover by 2023 or 2024 at the earliest.”

The company added that the recent moves to tighten travel restrictions, such as the UK imposing a quarantine on visitors coming from Spain, are making consumers more cautious to travel overseas.

BA parent IAG launches €2.75bn rights issue as losses swell

Naomi Rovnick

British Airways owner IAG has launched a €2.75bn emergency fundraising, supported by its biggest shareholder Qatar Airways, to see it through the Covid-19 pandemic that has thrust the industry into a historic crisis. 

The group confirmed the rights issue, which it said last week that it was considering, as it unveiled a first-half loss of more than €4bn after its passenger business collapsed.

IAG, which also owns Iberia, Aer Lingus and Vueling, has already announced plans to cut 12,000 jobs and said it will retire its entire fleet of Boeing 747 jumbo jets because of the travel downturn. 

The half-year operating loss included more than €2bn of exceptional costs related to impairment of IAG’s aircraft fleet, as well as costs relating to its fuel-hedging programme. It had posted a profit of €1.1bn in the first half of 2019.

The group said passenger traffic fell 98 per cent in the most recent quarter because it was “only able to operate a skeleton passenger schedule”.

Chief executive Willie Walsh said that the airline industry was “facing an unprecedented crisis”, while the outlook for the sector “remains uncertain”. 

 “While we have had to make tough decisions on both people and costs, these actions are the right ones to protect as many jobs and serve as many customers as feasible and put IAG in the strongest position possible”. 

He added that he did not expect the aviation industry to recover from the pandemic “before 2023”.

NatWest more than doubles loan loss provisions on gloomy UK outlook

Nicholas Megaw

Newly renamed NatWest Group became the latest in a string of British banks to report a sharp jump in provisions to deal with an expected surge in bad debts due to the worsening outlook for the UK economy.

The company, formerly known as Royal Bank of Scotland, reported a £2.1bn impairment charge for the second quarter, more than twice the size of its first quarter provision.

Government support measures since the start of the pandemic have so far kept the rate of loan defaults among consumers and businesses relatively low, but banks are preparing for a wave of difficulties in the coming months due to pessimistic growth and unemployment forecasts.

NatWest predicted that impairments would rise further in the second half of the year, albeit at a slightly slower rate. It predicted a full-year charge of between £3.5bn and £4.5bn, compared with a total of £2.9bn in the first half.

The impairment charge pushed NatWest to a £1.3bn pre-tax loss for the three months to June, compared with a £1.7bn profit in the same period last year. Revenues dropped from £4.1bn to £2.7bn, though the previous year’s numbers benefited from a series of one-off gains.

Glencore to reduce thermal coal output as Covid-19 hits demand

Neil Hume in London

Glencore has moved to address weakness in the thermal coal market, with plans to mothball a big mine in Colombia and reduce production from Australia.

Thermal coal, used to generate electricity in power stations, has been hit hard by Covid-19 as demand from key consumers such as India plunged because of lockdowns. Benchmark prices in Asia have dropped 25 per cent to below $50 a tonne this year.

Glencore, the world’s biggest producer of seaborne thermal coal, said on Friday it had applied for its 16m-tonne-a-year Prodeco mine to remain on care and maintenance due to “ongoing weakness” in the Atlantic market and it was targeting “volume reductions” in Australia.

As a result, the Swiss-based miner and commodity trader expects cut coal production guidance to 114m tonnes from 132m previously.

Glencore also said its marketing, or trading arm, was on course to deliver earnings before interest at the top end of a $2.2bn to $3.2bn range.

A big driver of that performance was oil, where its traders snapped up cheap barrels of crude during April’s price crash to sell in the future at higher prices.

UK house prices rebound in July

Chelsea Bruce-Lockhart

UK house prices made a surprising rebound in July, suggesting consumers were feeling more positive about the future of the economy after it was hit by the coronavirus pandemic.

After adjusting for seasonality, house prices increased 1.7 per cent in July from the previous month, according to a well-regarded survey by Nationwide, the British building society. Economists were expecting house prices to dip just slightly by 0.1 per cent, a poll by Reuters showed.

Property viewings and exchanges for prospective house buyers have been allowed since mid May, after being banned during the peak of the UK’s lockdown period. But the easing of restrictions did not initially give the market the boost it needed, with prices falling again in June by 1.6 per cent, after a month-on-month drop in May. There were hopes pent-up demand would have caused the prices to rebound.

But now this pent up demand is being felt, said Robert Gardner, Nationwide’s chief economist. “Behavioural shifts may be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown.” Mr Gardner added:

These trends look set to continue in the near term, further boosted by the recently announced stamp duty holiday, which will serve to bring some activity forward.

Compared with the same period of the previous year, house prices increased by 1.5 per cent in July.

France suffers historic 13.8% economic contraction in second quarter

Federica Cocco

The French economy suffered its largest postwar contraction in the three months to June, after the country imposed strict lockdown measures to halt the spread of coronavirus.

Gross domestic product shrank 13.8 per cent from the previous three months, marking the third consecutive quarter of contraction, according to the official statistics agency INSEE. A Reuters poll of economists had expected the drop to be deeper, at 15.3 per cent.

The decline was driven by a 25.5 per cent decline in exports and a 20 per cent drop in government investment. Household spending was down 11 per cent.

Figures published on Thursday showed that both the US and German economies lost about a tenth of their economic output in the same period.

Data for the eurozone and its two other largest economies, Spain and Italy, are due to be published later on Friday.

Insee also revised its figure for France’s first-quarter contraction down by 0.6 percentage points to a contraction of 5.9 per cent.

Vietnam reports largest one-day jump in coronavirus infections

Vietnam reported 45 new coronavirus infections in the tourist city of Da Nang as of Friday morning, the country’s biggest one-day tally since the pandemic began.

The coastal city’s outbreak, which was discovered last week, broke a months-long run of no local cases after the country effectively halted the spread of the virus within its borders.

The new cases in Da Nang take the number of infections since July 25 to 93, according to government figures.

Infections have been reported in other parts of the country and nearby Hoi An, a former trading port-turned-tourist town, has reintroduced social distancing measures with residents told to limit non-essential travel.

Travel bans bring fresh misery to Spain’s Costa del Sol resorts

Ian Mount on the Costa del Sol

Manuel Villafaina, owner of the Los Manueles beachfront restaurant in the Spanish resort of Torremolinos, has hosted his share of celebrities over the years. There was also the memorable occasion, he recalled, when Diana, Princess of Wales, and her entourage booked an entire floor for dinner, only to cancel an hour before they were due to arrive.

Yet Mr Villafaina now yearns for much less rarefied patrons — the crowds of European holidaymakers who each summer descend on this stretch of Spain’s south coast, known as the Costa del Sol, and who were expected to return this August. That was until a spate of travel curbs — including an abrupt UK decision to quarantine arrivals from Spain — threw an industry already battered by the coronavirus pandemic into fresh chaos.

Read more here

Outbreaks highlight disparities in UK test and trace regimes

Andy Bounds in Carlisle and Sarah Neville in London

Prime minister Boris Johnson promised a “world-beating” test and trace programme to stop the spread of coronavirus by June. Carlisle — and the rest of England — is still waiting.

Public health officials in the northern city have been fighting a rise in cases for four weeks. But efforts to manage the outbreak have been hampered by incomplete data, overstretched local officials and a lack of testing facilities.

There have been more than 20 localised outbreaks of coronavirus in England and Wales since the UK began emerging from lockdown in June.

But the two nations have different test and trace models, and their strengths — and weaknesses — can be seen in the different responses to upsurges in Carlisle and Merthyr Tydfil, a former mining community in South Wales.

In Wales the “test, trace, protect” service is run regionally while the English “test and trace” programme is centrally controlled under its chief executive, Dido Harding.

When an outbreak is discovered, local public health teams are brought in to manage the outbreak. But the latest figures show that England’s scheme only reaches four in every five people testing positive.

Read more here

Global stocks fall after US economy shrinks

Hudson Lockett in Hong Kong

Global stocks and the dollar were under pressure on Friday after the US recorded its largest gross domestic product contraction in postwar history, reinforcing fears that an economic recovery is losing momentum.

Japan’s benchmark Topix index fell 1.8 per cent in early trading in Asia-Pacific while Australia’s S&P/ASX 200 dropped 1.7 per cent. China’s CSI 300 index rose 0.1 per cent and Hong Kong’s Hang Seng fell 0.5 per cent.

Overnight, data showed that the US economy shrank at an annualised rate of almost 33 per cent in the second quarter due to the impact of the coronavirus lockdowns, which was slightly better than economists’ forecasts.

US jobless claims rose for the second week in a row, underscoring how the recovery in the world’s biggest economy could be bumpy.

The record fall for the US economy “does not change our expectations for a strong bounce-back” in the third quarter, said Veronica Clark, an economist at Citigroup Global Markets.

The S&P 500 closed 0.4 per cent lower, even as big tech companies including Amazon, Apple and Facebook posted blowout quarterly results.

Futures markets tipped the US benchmark to climb 0.3 per cent when trading begins later on Friday while the FTSE 100 was set to gain as much.

South Korean factory production rebounds in June

Edward White in Wellington

South Korean factory data rebounded in June, signalling the export-led economy might have moved through the worst of the economic downturn from the coronavirus pandemic.

Industrial production rose 4.2 per cent month on month last month, recovering from a contraction in May and rising 0.7 per cent on June 2019, according to Statistics Korea.

Manufacturing output surged 7.2 per cent from a month earlier, its steepest increase since the global financial crisis.

Investment in facilities and retail sales also improved from May.

The rosier industrial data mark an improvement from the past six months, during which the South Korean economy fell into a recession for the first time in almost two decades.

While Asia’s fourth-biggest economy has been somewhat protected by the avoidance of a nationwide lockdown and solid demand for computer chips, officials in Seoul hope unprecedented government stimulus measures will further buoy the domestic economy and support jobs in the second half.

Lockdown tightened in northern England at short notice

Andy Bounds in Huddersfield and Laura Hughes in London

People from different households have been banned from meeting indoors across a large area of northern England after a spike in coronavirus cases.

The area affected, including Greater Manchester and Bradford, has a population of almost 5m people. The government announced the measures at 9.16pm on Thursday night, less than three hours before they took effect.

Matt Hancock, the health secretary, tweeted that people had not been observing social distancing and therefore contributed to the spread of the virus. He needed “to take immediate action to keep people safe”.

Mr Hancock said: “We’re constantly looking at the latest data on the spread of coronavirus, and unfortunately we’ve seen an increasing rate of transmission in parts of northern England.

“The spread is largely due to households meeting and not abiding by social distancing. So from midnight tonight, people from different households will not be allowed to meet each other indoors in these areas.”

The ban includes private gardens. People can still go to pubs, restaurants and other public places but only with members of their own household or support “bubble”, a government official said.

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Japan unemployment rate edges down amid Covid-19 furloughs

Robin Harding in Tokyo

Japan’s unemployment rate dropped back to 2.8 per cent from 2.9 per cent a month earlier as employers kept millions of workers on a Covid-19 furlough rather than terminate their jobs.

However, the ratio of open jobs to applicants — regarded as a more sensitive measure of what is going on in the Japanese labour market — fell 0.09 points to 1.11, the lowest since October 2014.

That suggests the unemployment rate will rise in the months ahead, with the labour market gains from eight years of economic stimulus under prime minister Shinzo Abe getting wiped out by the coronavirus epidemic.

Industrial production began to bounce back from its coronavirus shutdown, rising by 2.7 per cent in June compared with the previous month, but it remained 17.7 per cent lower than the same month last year, highlighting the ongoing economic fallout from factory shutdowns and reduced export demand.

Xinjiang Covid-19 outbreak climbs above 500

China has reported 112 new Covid-19 cases in the western region of Xinjiang, taking the total over the past two weeks to more than 500.

The number of new Covid-19 cases in Xinjiang, which is home to the Uighur minority, has climbed sharply in recent days, despite efforts to limit the spread of the virus in the capital Urumqi.

More than 2m people have been tested for the virus. Officials said Urumqi had a comparatively high number of people who tested positive for the virus but showed no symptoms. Asymptomatic cases are not included in China’s official tally.

The region’s health authority said it had found a total of 108 asymptomatic cases as of Thursday.

China reported a total of 123 local infections nationwide on Thursday, the highest number since early March.

An outbreak in Dalian, a port city in the northern province of Liaoning, grew by 11 infections to reach 69 cases over the past week.

Almost 4.1m samples from Dalian residents have been collected for coronavirus testing, state media reported early on Friday. A second round of testing will be launched in high-risk districts.

An additional four imported cases took China’s overall number of Covid-19 cases to 84,292.

Gilead hopes to meet global remdesivir demand by October

Hannah Kuchler in New York

Gilead hopes to be able to fulfil global demand for remdesivir by October, as some US hospitals struggle to get hold of enough of the Covid-19 drug.

Daniel O’Day, chief executive of the California-based biotech company, said the US has the “vast majority” of supplies that will be available until the end of September, at 500m courses. The rest has been allocated to countries with significant rates of Covid-19 infections.

He said the US government process for allocating the antiviral had improved over time yet admitted there was still not enough supply to meet demand. One-third of pharmacists said they did not have enough to treat all Covid-19 patients who could benefit from remdesivir, according to a recent survey by the American Society of Health System pharmacists.

Johanna Mercier, Gilead’s chief commercial officer, said while the company was confident it would be able to ramp up manufacturing by the fourth quarter, the progress of the pandemic and the number of patients remained the big unknown.

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Facebook shares rose almost 8 per cent after its second-quarter revenue beat analyst expectations, though the social media group warned that the coronavirus pandemic, as well as a boycott of its advertising services, would hamper growth in the current quarter.

Google has suffered its first recorded revenue decline, as the coronavirus crisis caused an 8 per cent slide in advertising income in the latest quarter and depressed parent company Alphabet’s revenues by 2 per cent from the year before.

A single dose of Johnson & Johnson’s experimental coronavirus vaccine elicited “robust” protection against Covid-19 when tested on animals, with clinical human trials now under way in the US and Belgium.

Former Republican presidential candidate and pizza chain executive Hermain Cain has died more than a month after being hospitalised with coronavirus. He was 74.

International passengers travelling to Kenya will be required to undergo mandatory Covid-19 testing as the country lifts the suspension of overseas flights effective on Saturday, in a bid to open its tourism sector.

Asia-Pacific stocks dip following gloomy US GDP

Stocks in Asia Pacific slipped on Friday following falls on Wall Street after the US economy suffered its largest post-war contraction.

Japan’s Topix fell 0.8 per cent, the Kospi in Seoul was flat and Australia’s S&P/ASX 200 shed 0.6 per cent. S&P 500 futures point to a 0.5 per cent gain when US markets open on Friday.

Figures released on Thursday showed the US economy contracted by an annualised rate of 32.9 per cent following unprecedented shutdowns designed to halt the spread of coronavirus.

The S&P 500 ended the day down 0.4 per cent, while Germany’s Dax was Europe’s worst performer after the country’s economy contracted by a sharper than forecast 10.1 per cent in the second quarter.

Gold, which hit record highs this week amid concerns over the effects of the pandemic on the US economy was down 0.2 per cent at $1,956 an ounce. The dollar was hovering at a two-year low.

US Covid-19 deaths top 1,000 for fourth day

Peter Wells in New York

Daily deaths from Covid-19 in the US topped 1,000 for the fourth day in a row as several sunbelt states once again reported historic jumps in fatalities.

A further 1,291 people in the US died from coronavirus, according to Covid Tracking Project data, from 1,418 on Thursday.

The national death toll has increased by more than 1,000 fatalities a day nine times in the past 10 days, taking the overall tally to more than 144,000.

Florida (252) and Arizona (172), among the hard-hit sunbelt states, reported record daily jumps in fatalities. California (194) was just short of Wednesday’s record of 197.

The death toll in Texas rose by 84 from a day earlier to 6,274 as of Thursday, according to Financial Times analysis of Covid Tracking Project data.

The Lone Star state’s health department announced a series of changes this week to the way it counts deaths. Officials said today that as they shifted to using death certificate data, “an automation error caused approximately 225 fatalities to be included that did not have COVID-19 listed as a direct cause of death” and that they had to correct the cumulative fatalities for July 27, 28 and 29.

A further 69,917 people in the US tested positive for coronavirus over the past 24 hours, from 66,211 on Wednesday, according to Covid Tracking Project data.

California (10,197) reported more than 9,000 cases for the first time in five days, while Florida (9,956) and Texas (8,800) also had large increases
States that had record daily jumps in cases included: Missouri (1,781), Ohio (1,733), New Mexico (597) and Hawaii (108).

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