Bank stocks lead Wall Street higher
US stocks bounced back on Thursday, led higher by bank shares after regulators moved to ease curbs on financial institutions.
The S&P 500 closed near its session high, rising 1.1 per cent, on a 2.3 per cent rally in the financial sector. Shares in energy names also advanced in tandem with oil, which gained nearly 2 per cent following losses of more than 5 per cent on Wednesday.
The tech-heavy Nasdaq Composite also added 1.1 per cent. The Dow Jones Industrial Average climbed 1.2 per cent.
The KBW index, which tracks two dozen financial groups, was up more than 3 per cent after federal regulators approved rolling back restrictions that were part of the Volcker Rule.
The market’s gains came a day after Wall Street recorded its worst losses in nearly two weeks, as a rise in Covid-19 cases outside the northeast US sent jitters through the market. On Thursday, Texas followed North Carolina in pausing its phased reopening from coronavirus shutdowns, citing higher infections and hospitalisations.
California appeals to ‘citizen scientists’ to help with Covid-19 modelling
California will make public the same data used for modelling coronavirus that it provides to counties, tapping in to “citizen scientists” to analyse trends and help guide policy decisions in the face of a rise in Covid-19 cases around the state.
Governor Gavin Newsom said at his press briefing on Thursday that he hoped making the data open source would allow the likes of coders, analysts and mathematicians to support or challenge the numerous forecasting models that are being used to inform decision-making related to public health and safety during the crisis.
A further 5,349 people tested positive for Covid-19 over the past day, Mr Newsom said, down from a record 7,149 on June 24. The state’s positivity rate has averaged 5.6 per cent over the past seven days, or 5.1 per cent over the past 14.
Mexico’s finance minister tests positive for Covid-19
Jude Webber in Mexico City
Mexico’s finance minister, Arturo Herrera, has tested positive for Covid-19, becoming the highest-level public official in Latin America’s second-biggest economy to become infected.
The minister said on Twitter that he has “very minor symptoms” and would be self-quarantining and working from home.
However, earlier this week, he stood next to President Andrés Manuel López Obrador during an announcement about changes in the interior ministry. Neither he nor the president wore face masks; indeed the president insists Mexico has “tamed” coronavirus and that economic recovery is in sight.
Mexico has officially confirmed 196,847 cases and 24,324 deaths but with one of the world’s lowest levels of testing, the figures are widely expected to be serious underestimates.
Coronavirus a risk to economy until vaccine or treatment found, Fed’s George says
The US economic recovery could be held up by a resurgence in coronavirus outbreaks and could remain a threat until a vaccine or treatment is developed, Kansas City Federal Reserve president Esther George said on Thursday.
“A renewed upsurge in infections and resumed social distancing, either mandatory or voluntary, is likely to be a persistent risk, at least until a vaccine has been developed or treatment options sufficiently improve,” she said in remarks delivered virtually to the Economic Club of Kansas City.
Ms George’s remarks on Thursday came as governors in North Carolina and Texas, among the first to ease lockdown restrictions, paused their reopenings in response to new Covid-19 outbreaks.
The Fed governor noted that the pandemic could also affect the economy indirectly. “One risk is that consumers and businesses react to the new uncertainty introduced by the virus by pulling back on consumption and investment with the goal of building precautionary buffers against future disruptions.”
Foreign demand for US goods and services is also likely to remain soft as countries around the world contend with the economic fallout of the virus, cautioned Ms George, who is not a voting member of the monetary policy setting Federal Open Market Committee.
Finally, state and local governments, which are required to balance their budgets, may be left with difficult decisions on spending cuts as they work toward finalising their budgets for next year.
Ms George said a full recovery in the US is “still far off” and warned that determining the right policy response will be even more challenging than usual as she expects data to remain volatile.
While the Fed has signalled it will not raise interest rates until at least the end of 2022 and said it is committed to supporting the economy, Ms George said “it might be awhile before the dust settles and we gain insight on whether further accommodation is necessary or not”.
Mexico’s central bank makes another half-point cut to interest rates
Jude Webber in Mexico City
Mexico’s central bank chopped another 50 basis points off its key lending rate — its fourth consecutive cut of that size and ninth reduction in a row — bringing the level to 5 per cent in a widely-expected move intended to help the Covid-battered economy.
“This is not the last cut,” said Christian Lawrence, senior market strategist at Rabobank, although he ruled out dives to below one per cent, as in Chile and Peru.
At 5 per cent, rates are at their lowest since late 2016. But with Covid-19 still raging in Mexico and the economy widely expected to slump by at least 8 per cent this year, despite inflation being largely under control, “more action likely will be needed”, wrote Andrés Abadía at Pantheon Macroeconomics in a note to clients, stressing that lower rates would reduce the cost of working capital for businesses.
Mexico has officially confirmed close to 200,000 cases and more than 24,000 deaths, although very low testing means the numbers are underestimates.
Mr Abadía wrote: “Banxico, in our view, would be wise to get ahead of the current bleak scenario in which the disease continues to spread over the next few weeks, discretionary spending remains weak for the foreseeable future, and businesses continue to fail. Monetary policy can’t fix the current economic mess, but it can ameliorate some of the effects of the pandemic. Accordingly, we expect another 50bp rate cut in August, and we’re not ruling out Banxico rates as low as 4% by late Q3.”
Banxico’s latest rate cut was a unanimous move.
ING economist Gustavo Rangel noted Banxico’s policy stance “can hardly be justified by Mexico’s economic cycle prospects, given the grim outlook for economic activity and the relatively benign inflation trends”. He was now penciling in two more consecutive 50 basis point cuts, one possibly in an unscheduled meeting although the market consensus is for rates to end the year at 4.5 per cent.
Banxico’s next rate-setting meeting is on August 13.
Portugal brings back tougher confinement measures around Lisbon
Peter Wise in Lisbon
Portugal is to bring back tough lockdown measures in a large area on the outskirts of Lisbon where about 80 per cent of the country’s new coronavirus cases have been recorded in recent weeks.
António Costa, the prime minister, said on Thursday people living in 19 adjoining neighbourhoods around the capital would be required to stay at home except to travel to and from work or for essential services.
The tougher measures will come into force on Monday and are to be reviewed after two weeks. Gatherings in these areas will be limited to five people and policing will be increased to enforce the regulations.
Although the number of coronavirus fatalities in Portugal is relatively low, the daily number of new cases has not fallen over the past month as it has in many other European countries.
“We have seen a bigger increase in the number of new cases,” Mr Costa said. “But the rate of change remains predictable, manageable and stable.” He said the “only effective way to control the pandemic” was to “stay at home whenever possible, maintain physical distancing at all times” and follow hygiene recommendations.
Health officials on Thursday recorded 311 new coronavirus cases in the previous 24 hours, 240 of them in the Lisbon and neighbouring Tagus Valley regions. Six people died from Covid-19 in the same period, bringing the total number of coronavirus deaths in Portugal to 1,549.
The new measures mean three different lockdowns regimes will apply across different areas of Portugal. The 19 neighbourhoods around the capital will remain under a state of calamity, the rest of the greater Lisbon region under a state of contingency and the remainder of the country under a state of alert.
British Airways proposes to limit pay cuts for cabin crew
British Airways is proposing to limit pay cuts to 20 per cent of basic salary for cabin crew as part of its job consultation process.
In a letter sent to cabin crew on Thursday, seen by the Financial Times, Amy James, head of in-flight customer experience, said the airline was offering a pay protection proposal, which would safeguard basic pay for at least 80 per cent of staff’s current rate.
It comes after a group of MPs earlier this month branded BA a “national disgrace” over the airline’s move to cut up to 30 per cent of its workforce and change terms and conditions while staff are on the government’s furlough scheme.
Unite, one of BA’s main unions, last month launched a public campaign to highlight what it described as the “deplorable actions” taken by the airline, accusing it of effectively planning to sack its 42,000-strong workforce and then rehiring about 30,000 staff on worse terms. But Alex Cruz, BA’s chief executive, has also hit out at Unite and GMB for failing to attend any of its consultation meetings over the airline’s plans to cut jobs.
A person familiar with the matter said the new proposals would mean more than 40 per cent of BA’s cabin crew would actually see an increase in their basic salary.
A spokesman for BA said: “We are acting now to protect as many jobs possible. The airline industry is facing the deepest structural change in its history, as well as facing a severely weakened global economy. We call on Unite and GMB to consult with us on our proposals as our pilot union, BALPA, is doing. Working together we can protect more jobs as we prepare for a new future.”
New case counts in Arizona and Florida remain elevated
Arizona and Florida both reported near-record increases in new cases on Thursday, highlighting the continued spread of the disease through the west and south of the US.
A further 5,028 people in Florida tested positive for coronavirus over the past 24 hours, down from a record 5,472 the previous day, the state’s health department said in its provisional report on Thursday. Almost 60,000 tests were conducted, a single-day record.
A further 3,056 people in Arizona tested positive since Wednesday, according to its health department, up almost 1,300 from a day earlier, but close to the record 3,593 on June 23. More than 19,300 tests were conducted over the past day, a record.
North Carolina reported another 1,009 cases, down from a near-record increase of 1,721 yesterday. Roy Cooper, governor, on Wednesday paused plans to further ease lockdown restrictions owing to the recent rise in cases and hospitalisations in the state. He also ordered residents to wear face coverings.
Texas pauses reopening plan for state economy
Texas governor Greg Abbott has paused his state’s reopening plan and banned all elective surgeries in its biggest cities as it faces a jump in coronavirus cases and hospitalisations.
The US’s second-biggest state by population and gross domestic product will now pause any further phase to reopen, but businesses already permitted to open under previous phases can continue operating in line with designated occupancy levels and health protocols.
“The last thing we want to do as a state is go backwards and close down businesses. This temporary pause will help our state corral the spread until we can safely enter the next phase of opening our state for business,” Mr Abbott said in a statement on Thursday morning.
The announcement follows a similar move by North Carolina governor Roy Cooper who, on Wednesday, paused plans to ease lockdown restrictions and ordered residents to wear face coverings as the southern state also grapples with a rise in coronavirus cases. Oregon and Utah paused their reopenings earlier this month.
Texas reported a single-day record of 5,551 people who tested positive for coronavirus between Tuesday and Wednesday, according to data compiled by Covid Tracking Project. Almost 4,400 people are hospitalised there with the virus, the most at any point since the pandemic began.
Earlier today, Mr Abbott issued an executive order banning all elective surgeries and procedures in Texas’s biggest cities in an effort to ensure hospital bed availability. The order applies to San Antonio’s Bexar county, Houston’s Harris county, Austin’s Travis county and Dallas county.
“These four counties have experienced significant increases in people being hospitalized due to Covid-19 and today’s action is a precautionary step to help ensure that the hospitals in these counties continue to have ample supply of available beds to treat Covid-19 patients,” Mr Abbott said.
Antibody tests not reliable enough for people to alter behaviour, review finds
Academics have cautioned that coronavirus antibody tests are not sufficiently reliable for people to make decisions around whether they can travel or who they can visit, in the latest rebuke to the government’s roll-out to the wider public.
One in 10 tests provide unreliable results which could lead members of the public with false negative results to make harmful decisions, according to a review of available studies conducted by independent health group Cochrane.
“There is no decision [patients] should be making based on the results of a test,” said Jon Deeks, professor of biostatistics at University of Birmingham and lead author of the review. “We have to ask: is this doing more harm than good?” he added.
The government’s antibody programme should only be carried out for population-wide research purposes, known as seroprevalence studies, and not to inform individual decision-making, the researchers said, as scientists can adjust for limitations in the accuracy of tests when looking at large datasets.
The tests were much better at detecting Covid-19 in people two or more weeks after the onset of symptoms, the study also found.
The Cochrane review was conducted using 54 studies and over 11,000 patient records, and focused on 25 commercially available tests. The majority of studies were from China and were carried out on people who had been admitted to hospital.
In a letter to the British Medical Journal, 14 academics said on Thursday that antibody tests should not be used to tell people whether they have had the virus and offer “no benefit” to healthcare and other employers.
Czech Republic records biggest rise in new cases since April
James Shotter in Warsaw
The Czech Republic has reported its highest daily jump in coronavirus cases for two months.
According to statistics from the health ministry, 127 people tested positive for the virus on Wednesday, the most since April 21. The new cases bring the total number of infections in the central European nation to 10,780, while 344 people have died.
The Czech Republic was quick to close its borders and close down non-essential businesses to stem the spread of the virus, and has suffered far fewer cases than many other EU countries in both absolute and per-capita terms.
But the latest jump has drawn attention as it follows a smaller spike last week, and comes as most of the restrictions introduced to combat the pandemic have been removed.
EU endorses Gilead’s Covid-19 treatment remdesivir
The EU agency in charge of evaluating medicines has endorsed the use of Gilead’s remdesivir, the first drug the bloc has recommended for the treatment of Covid-19.
The committee at the European Medicines Agency favours granting a “conditional marketing authorisation” to the drug for the treatment of coronavirus in pneumonia patients over the age of 12 who need extra oxygen, it said on Thursday.
The EU follows decisions in the UK, US and Japan to give the drug emergency approval in the fight against the deadly virus. The US approved the use of the drug last month but its use has been hampered by a lack of guidance for doctors.
The EMA, whose headquarters moved from London to Amsterdam in March 2019 as part of the bloc’s Brexit preparations, said the data on remdesivir was assessed “in an exceptionally short timeframe”.
From April 30, EMA’s human medicines committee began assessing data on quality and manufacturing and other preliminary clinical details, submitting its application on June 5. Its recommendation is mainly based on a study sponsored by the US National Institute of Allergy and Infectious Diseases, which tested the effectiveness of a 10-day course of remdesivir in more than 1,000 hospitalised Covid-19 patients.
Such an authorisation from the EU seeks to facilitate early access to medicines that fulfil a particular need such as an emergency situation in response to a public health threat. The coronavirus pandemic falls under this category.
The final reports of the studies are due for submission to the EMA by December. The European Commission aims to grant a decision on the drug in the coming week, which will open the way for it to be marketed in the EU.
Wall Street slips as US coronavirus outbreak worsens
US stocks fell further on Thursday, extending a sharp drop on concerns over worsening coronavirus outbreaks in the world’s biggest economy.
The S&P 500 dropped 0.7 per cent in early dealings on Wall Street, while the tech-weighted Nasdaq Composite shed 0.8 per cent. In Europe, the benchmark Stoxx 600 reversed early losses to gain 0.3 per cent.
The US tallied a record number of new daily Covid-19 cases on Wednesday. Authorities registered 38,672 new cases, led by accelerating rates of infections in states in the south and west including Texas, Florida and California, which were among the earliest to ease lockdown restrictions.
World trade drops by most on record amid global economic downturn
World trade fell by a record margin in April as lockdowns brought economic activity to a standstill in many major economies.
The volume of global trade goods dropped 16.2 per cent in April compared to the same month last year, down from a revised down 5.4 per cent contraction in March, according to the Netherlands Bureau for Economic Policy Analysis (CPB).
Global trade fell 12.1 per cent in April compared to the already depressed March level, marking the largest monthly contraction since record began in 2000.
The decline was geographically widespread with all regions reporting a contraction. Western Europe was the hardest hit with trade volumes falling 28.5 per cent in April compared to the same month last year. Trade volumes in the US dropped 19 per cent, while trade in emerging Asia, which includes China and India, fell 6.9 per cent
“After years of steady growth, 2020 will see a precipitous drop of almost $3tn in global goods trade,” said Suki Basi, managing director of the business consultancy Russell Group.
US durable goods orders rise by most since 2014
US durable goods orders rebounded by the most in almost six years in May and an underlying measure of business investment also recovered last month as coronavirus lockdowns eased.
Orders for long lasting goods jumped 15.8 per cent in May, the Commerce Department said on Thursday, rising for the first time in three months.
That compared with economists’ expectations for a 10.9 per cent rise and was the biggest increase since July 2014. However, it also followed a 17.2 per cent drop in April.
Meanwhile, new orders for non-defence capital goods excluding aircraft, considered a proxy for business investment, rose 2.3 per cent. That marked the biggest one-month increase since June 2016 and was ahead of economists’ expectations for a 1 per cent increase.
“The more moderate 2.3 per cent rise in core capital goods orders reflects a still-tepid pace of investment as businesses navigate a highly uncertain environment with caution,” said Gregory Daco, economist at Oxford Economics. He added:
Looking past the partial snap-back phase, factory activity will be constrained by weak global and domestic demand, ongoing supply chain disruptions, subdued oil prices, somewhat tighter financial conditions, and extremely highly levels of uncertainty. The deteriorating health situation in many US states – including where factory activity is concentrated – is a risk for the nascent recovery.
Macy’s to cut 3,900 corporate and management jobs in restructuring
US department store chain Macy’s will cut about 3,900 jobs in a restructuring, as the ailing retail sector struggles to cope with the hit from store closures due to coronavirus.
The actions to cut corporate and management roles are expected to save the company $630m on an annualised basis after all of its stores were forced to close in March and have begun gradually reopening since early May.
“Covid-19 has significantly impacted our business,” said Jeff Gennette, chief executive of Macy’s. “While the reopening of our stores is going well, we do anticipate a gradual recovery of business and we are taking action to align our cost base with our anticipated lower sales.”
It follows the company’s plan announced in February to shut 125 stores and slash 2,000 corporate jobs to save $1.5bn in annual expenses by the end of 2022. At the end of last year, the company employed 125,000 people.
The impact of the pandemic has been particularly hard on retailers with rivals JCPenney and Neiman Marcus filing for bankruptcy and Macy’s falling to a $630m loss in the first quarter of the year.
Pace of US jobless claims continues to slow
Matthew Rocco in New York
The pace of new applications for US unemployment benefits continued to ease last week, falling to 1.48m as businesses emerged from coronavirus shutdowns.
Jobless claims were down from 1.54m in the previous week, according to seasonally adjusted figures released on Thursday by the US labour department. Economists anticipated a bigger drop to 1.3m.
While jobless claims have slowed in each of the past 12 weeks, the number of unemployed workers has remained near 20m. Continuing claims — the number of people actively collecting benefits — edged down again to 19.5m in the week to June 13, equivalent to 13.4 per cent of the workforce. The so-called insured unemployment rate, which was 13.9 per cent the week before, is considered an alternative measure of joblessness to the federal government’s monthly survey.
The new data comes as several southern and western states are grappling with record increases in new coronavirus cases, which threaten to slow or even reverse the reopening of their economies.
Continuing claims have only gradually receded in recent weeks, from a tally of 20.6m at the end of May and 20.5m after the first week in June.
Weekly first-time jobless claims have fallen from a peak of 6.9m in late March, far exceeding previous highs after the sudden shutdown of businesses due to the pandemic. More than 47m Americans have sought unemployment benefits since the beginning of the crisis.
ECB seeks to defuse row with German court over bond-buying programme
The European Central Bank has sought to resolve its stand-off with Germany’s highest court by publishing details of how its governing council debated the question of whether its bond buying impinged on economic and financial policy.
Laying out how council members debated the pros and cons of its monetary policy, the ECB said there was “broad agreement” that the “negative side effects had so far been clearly outweighed by the positive effects of asset purchases on the economy in the pursuit of price stability”.
But it said that “it could not be ruled out that unintended effects could increase over time and outweigh the overall positive effects,” adding that it was “important to continuously assess the effectiveness and efficiency of the monetary policy measures, their transmission channels and their benefits and costs”.
The ECB has for years published an official account of its council’s discussion three weeks after every monetary policy meeting. But this one was special because the council spent a significant chunk of the meeting discussing the benefits and pitfalls of its policies.
The move is designed to defuse the legal impasse with Germany’s constitutional court, which shocked much of Europe by ruling last month that Berlin officials and the EU’s top judges had not done enough to properly scrutinise the eurozone’s flagship bond-buying programme.
The court ordered the German government and parliament to ensure that the ECB provided a “proportionality assessment” of its bond buying and said that if it failed to comply within three months, the Bundesbank must stop buying bonds and plan to sell the more than €500bn it holds.
Euro accelerates slide after ECB unveils plans to widen currency access
The euro extended its drop for a second day, marking its biggest back-to-back decline in three weeks against the dollar, after the European Central Bank unveiled plans to create a window to widen access to the single currency.
Europe’s single currency had a bigger swing against the pound, down 0.6 per cent to suffer its biggest one-day percentage fall since June 5 when it shed 1 per cent. That makes €1 worth 90.1p. The high for the year against sterling was on March 19 when it struck 95p.
Brussels on Wednesday signalled a compromise with Britain on a “credible and operational” framework for so-called “level playing field” commitments. This indicates how positions are shifting before the EU and the UK sit down next week to talks on their future relationship.
The euro was recently trading at $1.1208, down 0.4 per cent against its US counterpart. That trims its gains for the past four weeks to 2.8 per cent.
The ECB plans to set up a facility that will provide euro liquidity to central banks beyond the eurozone, responding to demand during the coronavirus pandemic for access to the currency. The facility is due to be launched in the next couple of weeks and last until June next year, the bank said on Thursday.
Wall Street set to edge lower as US coronavirus outbreak worsens
US stocks are set to fall further, a day after dropping sharply on concerns over worsening virus outbreaks in the world’s biggest economy.
Futures markets tipped the S&P 500 to slip 0.7 per cent on Thursday when Wall Street opens. In Europe, the benchmark Stoxx 600 reversed early losses to trade flat, while London’s FTSE 100 edged 0.4 per cent lower.
The US tallied a record number of new daily Covid-19 cases on Wednesday. Authorities registered 38,672 new cases, led by accelerating rates of infections in states in the south and west including Texas, Florida and California, which were among the earliest to ease lockdown restrictions.
Mark Andersen, co-head of asset allocation at UBS, said that while the US outbreaks were weighing on investors’ minds, there was no reason to panic.
“All the evidence suggests that they are rather localised,” he said. They were “very unlikely to mean a risk of capacity constraints when it comes to hospitals and equally very unlikely to cause another lockdown to the extent we saw in the first wave”, he added.
Turkey unexpectedly holds rates steady on rising inflation concerns
Laura Pitel in Ankara
Turkey’s central bank has paused an almost year-long easing cycle as it kept its benchmark interest rate on hold after nine successive cuts.
The bank’s monetary policy committee said on Thursday the one-week repo rate would be kept on hold at 8.25 per cent. Most analysts had expected the bank to cut rates again for a 10th time.
The bank cited concerns about inflation as a key reason for the decision not to cut rates further. The country’s headline inflation rate reached 11.4 per cent last month. The bank’s year-end inflation target is 7.4 per cent.
UK retailers expect falling sales in July
Valentina Romei in London
UK retailers doubt that reopening non-essential shops will be sufficient to revive demand and prevent sale volumes from falling in July.
More than two in three retailers expect sales to be lower than the same month in 2019, the CBI monthly retail sector survey showed on Thursday. The share is largely unchanged since last month and is up from one in four retailers in March.
The labour market and businesses’ turnover remained depressed, separate figures from the Office for National Statistics showed, while online job adverts in catering and hospitality rose from 20 per cent from its 2019 level on June 12 to 27 per cent on June 19.
“Despite retailers working flat out to make sure they are safe and ready to open their doors, outside the grocery sector most retailers expect sales to be far below where they were this time last year,” said Rain Newton-Smith, chief economist at the employers’ organisation.
The survey, conducted between May 27 and June 12 which comes at a time when the government relaxed some of its coronavirus restrictions, revealed that the overall level of sales in July is expected to be poor.
Retailers have struggled from a lack of demand, with 62 per cent of respondents saying that’s a key challenge, plus growing piles of stocks. Expectations for low demand and sales led to fewer orders for suppliers: two in three said they were lower compared with last year, a proportion largely unchanged when looking at expectations for July.
Online sales however have performed above the long-term average and retailers expect them to increase at a faster clip in July. About two in five retailers reported level of stocks above the adequate levels, a proportion that increases marginally when asked about expectations for July.
Online sales made up less than a fifth of total retail sales before the pandemic, according to the ONS, but the proportion has since risen to 33 per cent.
This chart, from the ONS, shows how online shopping has soared in Britain during the pandemic.
ECB creates window to widen access to euro
Martin Arnold in Frankfurt
The European Central Bank said it would establish a facility to provide euro liquidity to other central banks outside the eurozone in response to growing demand for access to the currency since the pandemic has rocked financial markets.
Central banks beyond the single-currency bloc can apply to access the facility, which is expected to be launched in the next couple of weeks and last until June 2021. The move is not a response to any specific market shift, but is a precautionary step to pre-empt stress in currency markets caused by the pandemic, according to a person briefed on the matter.
There is a queue of applications from central banks wanting more access to euro liquidity, but only those that are approved by the ECB governing council will join the facility, the ECB said.
The euro recently recovered the ground it lost against the US dollar since the coronavirus struck much of Europe in March, rising to a 12-week-high of above $1.12 after the ECB this month increased the size of its emergency bond-buying programme.
The liquidity facility would “allow a broad set of central banks to borrow euros against euro-denominated debt issued by euro area central governments and supranational institutions”, said the ECB.
Eiffel Tower to open with visitors initially walking up
The Eiffel Tower will be open from 10am local time to visitors willing to walk up one of its pillars, as France eases its coronavirus lockdown to make the most of its peak summer period in a year when the economy has been hit by coronavirus.
For the first week visitors will have to use the stairs. Lifts are due to open from July 1, taking a limited number to the second floor, and opening hours will then be extended to the evening. Online booking opened on June 18. The tourist attraction has been closed for about three months as part of France’s coronavirus lockdown,
“Visitors will go up from the East pillar stairs access and down by the West pillar stairs access, so that they don’t cross each other,” the tower’s website said. Masks will be compulsory for visitors from 11 years old.
“The top floor will open later during the summer, depending on how the situation evolves,” the website said.
Paris’s symbolic iron beacon, which celebrates its 130th anniversary this year, relayed evening messages of support, thanks and encouragement to citizens and key workers during March and May when the Covid-19 outbreak was at its peak in France.
European stocks fall further as US coronavirus cases surge
European stocks have come under renewed selling pressure as rising US coronavirus cases prompted concern that new lockdowns could be needed.
London’s FTSE 100 declined 1.2 per cent and the regional Europe Stoxx 600 fell 0.8 per cent in early morning trading. Futures tipped Wall Street’s S&P 500 to drop 1.2 per cent. The falls come a day after global stocks dropped sharply on rising concern about the worsening outbreak of the virus in the world’s biggest economy.
The US tallied a record number of new daily Covid-19 cases on Wednesday. It recorded 38,672 new cases, led by accelerating outbreaks in states in the south and west including Texas, Florida and California, which were among the earliest to lift lockdown restrictions.
The rapid spread of the virus in those states has led governors of New York, New Jersey and Connecticut to announce that incoming travellers from those regions must quarantine for 14 days.
It comes as fears mount that localised lockdowns will be necessary to contain the virus going forward until a vaccine is found, something that could undermine early signs of an economic recovery.
France to extend unemployment scheme for 2 years
Victor Mallet in Paris
France has announced plans to extend for up to two years its “partial unemployment” measures designed to stave off business bankruptcies and mass unemployment following the coronavirus pandemic.
An outline of the measures, which are modelled partly on Germany’s Kurzarbeit system, was announced following negotiations between the government of President Emmanuel Macron, employers and trade unions.
At the height of the pandemic in France, about 10m employees – half the private sector workforce – were being paid through a partial employment scheme under which the state has financed salaries of those such as restaurant workers unable to do their jobs because of the Covid-19 lockdown and economic recession.
“Discussions between the state and the social partners [employers and unions] in France and Germany should allow the systems of the two countries to converge,” according to a working document released by the Elysée palace.
The French scheme will now be split into two parts. To benefit from the long-term scheme, under which the state from July 1 will subsidise up to 85 per cent of salaries for up to two years, employers and employees will have to reach agreement at the company or workplace level on how many hours are worked.
For the short term, the current system remains in place until October 1, when the state will reduce its contribution but still pay for 60 per cent of salaries for up to six months.
Academics say antibody tests offer ‘no benefit’
Coronavirus antibody tests should not be used to tell people whether they have had the virus and offer “no benefit” to healthcare and other employers, a group of academics has claimed.
The tests, whose supporters including the UK government hope will show people they have built up immunity to Covid-19 and can resume normal life, could place an unnecessary burden on the NHS, 14 senior academics have written in a letter to the British Medical Journal. They also argued that the effectiveness of such tests has not yet been established, while “a positive result does not indicate immunity.”
The academics, a group of senior doctors and scientists specialising in public health, virology and immunology, said:
NHS England and NHS Improvement wrote to NHS trusts and pathology networks on 25 May 2020, asking them to offer antibody testing at short notice and ramp up capacity to thousands of samples a day
This was a waste of health service resources, they wrote, because:
NHS England requires the result to be available in 24 hours. Given that routine testing of patients is neither clinically urgent nor meets a clear public health need, this push to introduce a non-evidence based test for uncertain gains risks inefficient use of scarce resources. Its introduction also has opportunity costs for urgent patient care and limited laboratory resources and time.
On the popular idea of positive antibody tests giving people a “passport” to socialise and work as normal, they said:
The concept of “immune passports,” allowing healthcare workers or others to work, has not been established. Those with a positive antibody test should still consider themselves at risk and follow infection control policies designed to prevent nosocomial spread and risk of infection. There is, therefore, no benefit to healthcare organisations or to others in knowing the status of employees at present.
Read more FT coverage on antibody testing here.
Royal Mail to cut 2,000 management jobs
Michael Pooler in London
Royal Mail will axe 2,000 management jobs as it looks to trim £130m from its wage bill, after profits slumped and the company decided not to pay a dividend next year.
The UK postal service said it was undertaking a three-step plan to address the impact of coronavirus that would also involve slashing £300m in capital expenditure and speeding up a modernisation drive.
At the same time, it is working with regulators and the government on a review of the universal service obligation, under which it has to deliver mail throughout the country at uniform price six days a week.
“In recent years, our UK business has not adapted quickly enough to the changes in our marketplace of more parcels and fewer letters. Covid-19 has accelerated those trends, presenting additional challenges,” said chairman Keith Williams, who took on an interim executive role following the abrupt exit of chief executive Rico Back last month after less than two years in the job.
The departure capped a turbulent period marked by a trade union dispute and weak financial performance, which had dragged the share price down to its lowest level since the company’s stock market flotation in 2013.
The FTSE 250 group’s pre-tax profit fell by a quarter to £180m in the year ended
March 29, weighed on by its core UK operation that will be “materially lossmaking” this year.
BAE warns profits to fall 15% as Savills pulls earnings guidance
Defence, aerospace and security contractor BAE systems has warned its half-year profits will be about 15 per cent lower than the same time last year after Covid-19 hit its aviation business.
In a trading update, the group said:
As expected, the pandemic has impacted the business in the second quarter, with sites in the Air and Maritime sectors and our US commercial avionics business being most affected.
Within our UK-based Air and Maritime sectors, second quarter disruptions have particularly impacted cost recoveries and sales volumes.
Upmarket estate agent Savills has declared itself unable to give investors their usual dose of guidance about their future earnings, blaming uncertainty caused by the coronavirus pandemic.
Savills, which sells homes and leases offices worldwide, said that because Covid-19 has had a “significant impact on global real estate market volumes”, its full-year financial performance would be “will be highly dependent upon extent to which regional transactional markets recover in H2”.
On its outlook, the group said:
Given the wide range of potential outcomes at this stage, it is not currently possible to provide meaningful guidance for the year.
A similar message has come from Auto Trader, which revealed alongside reporting annual results that its operating profits in June were likely to be 45 per cent below the same time last year. The online car sales platform said a higher than average number of customers were exercising a 30-day notice period to leave, while it also could not provide any short-term guidance.
China expands coal plant capacity to boost post-virus economy
Thomas Hale in Hong Kong and Leslie Hook in London
China is approving plans for new coal power plant capacity at the fastest rate since 2015, in a sign that pressure to stimulate the economy is undermining a transition towards cleaner energy sources.
New coal plant projects proposed this year in China would add more than 40GW to the country’s power supply, according to new data — comparable to the entire existing fleet of South Africa.
The news will fuel concerns that urgent efforts to stimulate economies devastated by virus lockdowns will push global emissions to levels higher than those recorded before Covid-19.
Survey data from the Global Energy Monitor and the Centre for Research on Energy and Clean Air also show that China approved the construction of more coal power plant capacity in the period to mid-June than in all of 2018 and 2019 combined.
China is already the world’s biggest emitter of greenhouse gases and pollution levels there have quickly rebounded after lockdown. “It is very concerning if China goes ahead and builds this degree or quantity of coal fired power,” said Sam Geall at the University of Sussex and editor of China and the Environment. “It could lead to a disaster in terms of the climate.”
Read more here
Hong Kong airport reports 30% fall in profit
Hong Kong’s airport-reported profit fell by almost a third as visitor numbers to the city dropped amid political unrest in the city and the pandemic.
The Airport Authority reported net profit fell 29.7 per cent year on year in the 12 months to the end of March to HK$5.9bn ($761m) and revenue was down 12.1 per cent.
The airport was a target of anti-government protests last year causing flight cancellations and disruption while visitor numbers to Hong Kong fell as tourists avoided travel to the city during mass street demonstrations.
Flights have also been drastically scaled back since the outbreak of Covid-19, as countries placed restrictions on visitors and Hong Kong introduced strict quarantine measures.
The number of passengers that travelled through the Asian hub fell by 18.9 per cent to 60.9m in the 12 months to the end of March and the number of flights was down 12 per cent at 377,420.
Passenger numbers plunged by 99.5 per cent year on year in April when access to Hong Kong was limited to residents and transit was suspended.
Fred Lam, chief executive of the Airport Authority said it was “still difficult to tell” when passenger demand would recover and as a result of a shortfall in revenue, it would “soon need to raise funds from the financial markets to strengthen our financial capacity”.
On Tuesday, the Airport Authority said it had signed five-year HK$35bn ($4.5bn) loan facilities with 21 international and local banks.
The airport is continuing with its expansion plans, which include a third runway built on reclaimed land, to meet future demand.
South Korea unveils plan to tax wealthy retail investors
Song Jung-a in Seoul
South Korea has proposed levying capital gains taxes on retail investors who make the most from their investments, while cutting transaction taxes for general stock trading, in a measure that it says will help to reduce inequality.
Taxes of up to 25 per cent will be imposed on annual capital gains of more than Won20m ($16,627) for retail investors from 2023, the finance ministry said on Thursday. This would affect the top 5 per cent of all stock investors or about 300,000 people in the country.
The move would mark a significant departure from current requirements for only large shareholders with stakes above 1 per cent or Won1bn ($831,373) of listed stocks to pay capital gains taxes.
The government said the revision was not aimed at increasing taxes but acknowledged that it faced a growing need to fill the national coffers after huge public spending this year to boost Asia’s fourth-largest economy battered by the coronavirus.
Analysts said the revision would benefit foreign investors who are not subject to capital gains taxes and are only required to pay transaction levies, while it was bad news for profit-making domestic retail investors. Foreign investors hold about a third of South Korean shares.
Under the new proposals. stock transactions taxes will also be lowered gradually from the current 0.25 per cent rate to 0.15 per cent by 2023.
The government will finalise this plan in late July to submit a bill to parliament in early September. The revision is subject to parliamentary approval.
South Korea’s benchmark Kospi Composite index was 1.7 per cent lower in Thursday morning trade. The index has rebounded almost 50 per cent from a trough in March after the country brought its severe coronavirus outbreak under control with aggressive testing, contact tracing and isolation.
Global stocks fall as rising US coronavirus cases stoke recovery fears
Hudson Lockett in Hong Kong
Global stocks fell on Thursday as rising US coronavirus cases stoked fears that a resurgence of the pandemic could slow economic recovery.
In morning trading in Asia-Pacific, Japan’s Topix index fell 1.3 per cent while Australia’s S&P/ASX 200 and South Korea’s Kospi each dropped 1.9 per cent. Markets in Hong Kong and China were closed for a public holiday.
On Wall Street, the S&P 500 finished 2.6 per cent lower after the governors of New York, New Jersey and Connecticut announced that travellers coming in from states that have a high infection rate must quarantine for 14 days.
Those states include Texas, Florida and California, which all reported record increases on Wednesday. They were also among the quickest to reopen their economies last month, which prompted public health experts to warn that many jurisdictions were moving too quickly.
Traders are keeping close tabs on the latest coronavirus figures as the global case count tally rises above 9m and more than 450,000 deaths have been reported.
Futures tipped Wall Street’s S&P 500 to drop another 0.5 per cent when trading begins later in the day. The FTSE 100 was set to shed 0.4 per cent following a 3.1 per cent drop on Wednesday.
Colombia reports record 3,541 new coronavirus cases
Gideon Long in Bogotá
Colombia has recorded its highest number of new coronavirus cases in a single day as the pandemic continues to spread across the Andean region.
The government registered 3,541 new cases on Wednesday, 12 per cent higher than the previous record for a 24-hour period, recorded last week.
Over 77,000 people have tested positive for the disease in Latin America’s third most populous nation and 2,491 have died.
Numbers are rising elsewhere in the region too. On Monday, Bolivia recorded its highest daily tally so far with 1,105 cases. More than 26,000 people have tested positive in what is one of the region’s poorest countries, and over 800 have died.
Ecuador passed the 50,000-cases mark this week while Peru and Chile have over 250,000 cases each, making them the sixth and seventh worst-hit countries in the world in terms of confirmed cases.
Measured by deaths per capita, Peru, Brazil, Chile and Ecuador are the worst hit nations in Latin America, with about 250 fatalities per million people in each country.
Asia-Pacific makes a tentative return to international travel
Robin Harding in Tokyo, John Reed in Bangkok and Jamie Smyth in Sydney
Asia will embark on an ultra-cautious return to international travel when about 440 Japanese businesspeople will take “exceptional” flights to Vietnam over the next three days.
According to officials involved in the negotiations, countries such as Thailand, Vietnam, Japan, Australia and New Zealand are struggling to agree on broader rules for travel as they try to protect the advances they made in controlling coronavirus.
Asia’s caution is in sharp contrast to Europe, where Covid-19 infection levels are much higher. European governments are seeking to restart not just business but also tourist travel before the summer holiday season.
The divergent approaches could ultimately make it hard to open travel between Europe and Asia and leave the world divided into regions where the virus is prevalent and those where it is not.
Read more here
Mexico death toll to soar to 88,000 by October, US researchers say
Jude Webber in Mexico City
Mexico’s death rate will not peak until mid-August and its total number of fatalities from Covid-19 will soar to more than 88,000 by October, according to the University of Washington’s Institute for Health Metrics and Evaluation.
In an updated forecast for the Covid-19 pandemic in Mexico, the institute said that the daily death rate would not peak until at least mid-August and would result in the total number of fatalities reaching 88,160 by October 1 if the country continues with its current level of restrictions. Mexico has a traffic light system and social distancing requirements differ depending on the severity of the outbreak in different areas. It has only limited requirements for mask wearing and social distancing.
The institute forecasts far worse outcomes if Mexico were to lift all restrictions.
Mexico has so far confirmed 24,324 deaths but low levels of testing means the true figures are sure to be higher, experts say. Mexico has recorded 196,847 confirmed cases to date.
Under its current projection, Mexico’s daily death rate should, however, start falling in mid-August. But if restrictions were lifted, that would rocket to almost 2,600 by October, the institute said.
The institute forecasts that on its current trajectory Mexico would overtake total deaths per 100,000 in the US in mid-August and would be closing the gap on Brazil by October.
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Greek hoteliers have voiced concern over a government plan for temporary coronavirus “isolation units” to be set up in resort hotels for tourists who test positive for the virus but do not require hospital care.
North Carolina governor Roy Cooper paused his state’s phased reopening and has ordered residents to wear face coverings in an effort to control a surge in coronavirus cases there.
California reported more than 7,000 new cases of coronavirus, a record one-day increase that further signalled the spread of the virus through the west of the US.
Goldman Sachs chief David Solomon has become the latest bank boss to sound the alarm bell on overvalued markets, telling a virtual conference that equity investors were underestimating the difficulty of living with Covid-19.
US economic growth will be bridled by regional outbreaks and will not return to pre-pandmic levels until 2022, Chicago Federal Reserve president Charles Evans said.
Many countries are facing difficulties obtaining life-saving oxygen concentrators to treat Covid-19 patients, the WHO said on Wednesday.The Democratic Republic of Congo, Guinea, Peru, India and Bangladesh are among the countries experiencing critical shortages of oxygen.
The UK’s largest provider of student accommodation, Unite Students, is raising £300m to spend on new developments, a signal of confidence that students will return en masse despite the coronavirus outbreak.
New York and its neighbouring states plan to impose a two-week quarantine for people travelling from states with elevated Covid-19 infection rates.
China reports 13 new coronavirus cases in Beijing
Health authorities in China reported 13 new coronavirus cases in Beijing to the end of Wednesday, taking the tally for the outbreak in the country’s capital to 269.
Beijing launched mass testing and reimposed restrictions on parts of the city to limit the spread of the virus after cases were discovered two weeks ago at a wholesale food market following almost two months of no new cases.
One case was reported in Hebei province, which surrounds Beijing, and 19 people returning to the country from overseas also tested positive for the virus.
Beijing health authorities said that 22 people who had tested positive for the virus since June 11 but showed no symptoms were under observation. China does not include asymptomatic cases in its official tally.
The new cases on Wednesday bring China’s total reported number of Covid-19 cases to 83,449.
Asia-Pacific shares fall as rising US coronavirus cases knock sentiment
Shares in Asia-Pacific fell on Thursday following sharp falls on Wall Street as states hit by record Covid-19 case numbers slowed plans to reopen their economies.
The Topix in Japan fell 1 per cent, the Kospi in Seoul shed 1.4 per cent and Australia’s S&P/ASX 200 was down 0.8 per cent. Hong Kong and mainland Chinese markets are closed for a public holiday.
On Wall Street overnight, the S&P 500 fell 2.6 per cent and the Nasdaq Composite shed 2.2 per cent as rising coronavirus cases in some US states and US-Europe trade friction unsettled investors.
Seven states in the south and west of the country reported record one-day case counts on Wednesday and North Carolina paused plans to reopen the state. New York, New Jersey and Connecticut introduced quarantine requirements for people arriving from states with high infection rates.
Qantas to slash 6,000 jobs and ground 100 aircraft for a year
Jamie Smyth in Sydney
Qantas Airways is slashing 6,000 jobs, grounding 100 aircraft for a year or more and raising A$1.9bn ($1.3bn) in fresh equity as part of a three-year post Covid-19 recovery plan, the airline said on Thursday.
As well as making more than a fifth of its workforce redundant, Qantas will continue to furlough up to 15,000 employees as it seeks to conserve cash amid what it expects to be a prolonged period of weak demand due to the pandemic.
The recovery plan targets savings of A$15bn over three years through reduced flying activity and reduced fuel consumption, as well as A$1bn in ongoing annual cost savings from 2023 due to fewer staff and retirement of aircraft.
Alan Joyce, Qantas chief executive said the aviation industry had never experienced a shock of the magnitude of Covid-19 and airlines were facing the biggest crisis in their history and needed to take extreme actions just to survive.
“We have to position ourselves for several years where revenue will be much lower. And that means becoming a smaller airline in the short term,” he said.
Qantas is raising A$1.9bn by issuing fresh equity, of which A$1.4bn is fully underwritten by institutions, at a share price of A$3.65. Qantas shares closed at A$4.19 on Wednesday.
The airline said it would take a A$1.25bn-A$1.5bn asset impairment charge in its 2020 financial results, mainly as a result of the write down on the value of its 12 A380 long haul aircraft, which it expects to lie idle for the foreseeable future.
Qantas said it expected to break even in 2020 and report a small underlying profit before tax. This follows a A$771m underlying profit reported for the first half of 2020.
Democrats scale down plan for August national convention in Milwaukee
Peter Spiegel in New York
The Democratic party said it would ask delegates to stay at home instead of travelling to Milwaukee for its national convention in August, opting for a drastically scaled-down gathering to formally nominate Joe Biden as its candidate to take on President Donald Trump.
The downsizing of the four-day event, which will be moved from the city’s National Basketball Association arena to the smaller convention centre, was part of an effort to minimise social interaction to avoid spreading coronavirus.
“Leadership means being able to adapt to any situation,” said Tom Perez, chairman of the Democratic National Committee. “That’s exactly what we’ve done with our convention. Unlike this president, Joe Biden and Democrats are committed to protecting the health and safety of the American people.”
The party said its 5,000 delegates, which normally make up the bulk of the audience on the convention floor, would be able to cast their votes for Mr Biden and other party business remotely. It will also eliminate “auxiliary events” such as welcome events for media and volunteers, which are traditionally attended by thousands of participants.
Wall Street slides amid worries over outbreaks
Matthew Rocco in New York
US stocks recorded their worst declines in almost two weeks on Wednesday, as a rise in coronavirus cases and the prospect of new tariffs on European goods unnerved markets.
The S&P 500 fell 2.6 per cent in a broad sell-off led by the energy, financial and industrial sectors. Shares in energy groups followed oil lower, with crude prices sliding more than 5 per cent amid demand worries and a rise in US inventories.
The tech-heavy Nasdaq Composite was down 2.2 per cent. The Dow Jones Industrial Average lost 2.7 per cent.
Wall Street’s sell-off came after some states outside the northeast registered their highest daily count of Covid-19 infections since the start of the pandemic. The governor of North Carolina said the state would pause its gradual reopening as a result of an uptick in cases. Meanwhile, New York – the hardest-hit state – and its neighbours New Jersey and Connecticut – which have also tallied a high number of cases – announced plans to impose a 14-day quarantine for travellers coming from hotspots.
Stocks also felt pressure from trade tensions between the US and Europe. Washington launched a consultation on new tariffs on $3.1bn of European goods amid a fight over aircraft subsidies.
The yield on the 10-year US Treasury note fell 0.03 percentage points to 0.684 per cent, as investors moved into the debt.
US has record one-day increase in coronavirus cases
Peter Wells in New York
The US had its biggest increase in new coronavirus cases since the pandemic began as seven states — including California, Florida and Texas — reported record one-day increases.
A record 38,672 people tested positive for coronavirus over the past 24 hours, according to data compiled by Covid Tracking Project, up from almost 33,000 yesterday. California (7,149), Texas (5,551) and Florida (5,511) had their biggest one day increases, but with the latter two conducting only about one-third of the near-96,000 tests since Tuesday in California.
Georgia (1,703), South Carolina (1,284), Missouri (725), Washington (516) and Oklahoma (482) were the other states to post record one-day increases in new cases. Arizona (1,795) and North Carolina (1,721) rounded out the group of seven states to report more than 1,000 new cases over the past day.
A number of public officials today moved to address the rising number of cases in the west and south. North Carolina governor Roy Cooper paused the state’s plan to more quickly ease lockdown restrictions and also ordered residents to wear face coverings in an effort to limit the spread of the virus there. The governors of New York, New Jersey and Connecticut jointly decided to impose a two-week quarantine on visitors from states with elevated infection rates.
A further 722 people in the US died from coronavirus over the past day, according to Covid Tracking Project, the biggest daily in a week.