Europe Points Higher After US Big Tech Surges NatWest Tumbles Into Loss
The US economy contracted by -9.5% qoq in the second quarter or 32.9% on an annualised basis, the deepest decline since at least the Great Depression as lock down measures saw consumer demand and business investment evaporate.
However, what is perhaps more concerning is that more recent data, as highlight by Federal Reserve Chair Jerome Powell, has shown that the pace of the recovery is slowing. Rising coronavirus infections are curbing consumption sending the economy downhill. Consumer confidence is fading, and Initial jobless claims showed that the recovery in the US labour market is stalling. This, in addition to Trumps suggestion of delaying the Presidential elections has sent the dollar to fresh 2-year lows.
Whilst the Dow and the S&P closed lower the Nasdaq rallied after blowout results from the Faangs. Apple, Amazon, Facebook and Alphabet (Netflix reported earlier in the month) reported earnings or revenue that crushed analysts’ forecasts. The numbers confirm what investors had been thinking that not only are these stocks weathering the coronavirus pandemic, they are positively thriving in it.
Upbeat data from China is also helping the mood. PMI data showed that manufacturing activity grew for a 5th straight month, expanding at a faster pace than forecast, indicating that the recovery in the world’s second largest economy is gaining momentum, some well needed good news!
Fears are growing of a second wave in Europe. UK Health Secretary Matt Hancock has rolled back reopening measures in parts of Manchester, Lancaster and Yorkshire owing to an increased transmission rate. 4.5 million people will see lockdown conditions tightened. For now, the markets are managing to shrug this off. However, this is definitely something to monitors. The Pound is trading at fresh 4.5 months highs versus the USD on Dollar weakness. However, sterling is slipping lower versus the Euro.
NatWest reported H1 results, tumbling into a loss after setting aside £2.1 billion for bad loan provisions, more than the £1.7 billion forecast. NatWest has thousands of small companies as customers, making the bank particularly vulnerable to souring loans as the coronavirus crisis continues The bank reported £770 million pre-tax loss compared to £2.7 billion profit the previous year.
Eurozone GDP in focus
After German GDP laid bare the impact of the coronavirus lockdown in Q2, the Eurozone is set to do so today. Expectations are for a -12% qoq contraction. However, with the recovery in the Eurozone appearing to be on track, the data may be shrugged off.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
For further details see our full non-independent research disclaimer and quarterly summary.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.
City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.
City Index is a trademark of StoneX Financial Ltd.
The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.
© City Index 2024