Eurozone GDP slumps by record 12.1% amid coronavirus pandemic chaos– as it happened

Rolling live coverage of business, economics and financial markets as European economy suffers its worst recession since at least 1995

With the easing of the UK’s lockdown being slowed and the economic data showing record recessions in major economies, it looks like the rest of the summer will be difficult.

Eurozone data this morning confirmed that the economy contracted at a record rate of 12.1% as the pandemic took its toll.

Related: Eurozone economy shrinks by record 12.1% due to coronavirus

The talks began in recent months after Nvidia approached SoftBank, which has been pursuing a series of other asset sales, about a potential acquisition. There is no guarantee that the discussions will result in a sale, the people cautioned, adding there were a number of issues pertaining to a deal that would need to be resolved.

Buying Arm would further consolidate Nvidia’s position at the centre of the semiconductor industry, at just the moment when the British chip designer’s technology is finding broader applications beyond mobile devices, in data centres and personal computers including Apple’s Macs.

Checking in on the FTSE 100, it feels like a very sleepy day on the London Stock Exchange: the main index has sagged by 0.22%.

British Airways owner IAG is the biggest faller, down by 7.4%, after announcing £2.5bn in fundraising plans. BT shares have lost 4.4%.

Another big loss for an oil supermajor, ExxonMobil, if not quite on the scale of Shell’s $18bn stonker from yesterday.

Exxon on Friday said it had lost $1.1bn (£840m) in the second quarter, compared to $3.1bn in 2019.

Jaguar Land Rover, Britain’s largest carmaker by volume, lost £413m between April and June as the pandemic caused a slump in sales and cost it £1.1bn in plant shutdowns.

Jaguar Land Rover has reacted with resilience and agility to the extraordinary challenges faced in the first three months of the new fiscal year, adapting rapidly to the
widespread macro-economic disruption and uncertainty facing our industry.

As the lockdowns ease, we will emerge from the pandemic with our most advanced product line-up yet, and with the financial and operating measures in place to return to long-term sustainable profit.

Boris Johnson has announced that the UK will slow down its efforts to reopen the economy, saying we should squeeze the brake pedal.

That could have an impact on hopes for a “V-shaped “ economic recovery for the UK.

For the UK, one of the big news stories of the past 24 hours is last night’s reimposition of some lockdown measures on parts of northern England, including Manchester.

Boris Johnson is due to make new lockdown announcements. You can follow here:

Related: UK coronavirus live: Boris Johnson and Chris Whitty make new announcement on lockdown rules

An interesting bit of news from the UK’s banking conduct regulator, the Financial Conduct Authority, which has said that banks might have to offer “sustainable forebearance” for customers struggling because of the pandemic.

Forebearance means customers being allowed longer to pay off their loans without interest charges mounting up.

Britain’s banks may need to consider introducing “sustainable forbearance” for customers who continue to face difficulties with loan repayments after Covid-19 relief measures end in the autumn, the Financial Conduct Authority (FCA) said on Friday.

The watchdog launched a “call for input” to determine what further measures may be needed when repayment holidays introduced after the pandemic lockdown for home loans and credit cards come to an end on Oct. 31.

The government’s official statistics body has acknowledged that the UK’s train system has effectively been nationalised after the emergency bailouts at the start of the coronavirus pandemic.

After reviewing their classification against international statistical guidelines, the Office for National Statistics (ONS) has concluded that those train operating companies (TOCs) that have entered into emergency measures agreements (EMAs) with the UK and Scottish governments should be classified to the public sector for statistical purposes.

Could the eurozone and US data have a bearing on the UK economy?

Andrew Sentance, a former member of the Bank of England’s monetary policy committee and a senior adviser to Cambridge Econometrics, wonders if the Treasury’s independent forecaster, the Office for Budget Responsibility, may have been too pessimistic in its forecasts.

Euro area reports 12.1 percent #GDP drop in Q2 – a sharper fall than in the US (9.5pc) but not as negative as the @OBR_UK projection of a UK contraction of around 20pc. May be that the #OBR is being too pessimistic – it will depend on how far economic activity rebounds in June.

The fall in eurozone GDP is so big that it is difficult to put it into historical context.

Some records are never to be beaten. Think of Alan Shearer’s Premier League goals, Wilt Chamberlain’s 100 point basketball game, Eddy Merckx’s victories in cycling. The second quarter eurozone GDP figure should probably go on that list as well; it would be great if it were never to be beaten.

The -12.1% quarter-on-quarter growth rate is the worst ever recorded and a pretty difficult one to interpret. It is a shocking drop, but completely understandable as the economy was shut for a considerable period during the quarter. It, therefore, doesn’t tell us all that much about the general state of the economy, which is usually why one would look at GDP figures in the first place. Still, the deeper the lockdown, the higher the chance of more significant lasting damage to the economy and therefore the extent of the decline is still relevant.

There are few silver linings in the data published today, which confirm that euro-zone GDP slumped just as much as feared in the second quarter and that inflation remained well below target. While parts of the economy have sprung back to life over the past couple of months, the damage already done combined with the current and potential future impact of the virus mean that the recovery will be painfully slow.

Given the rebound since April, our best guess is that economic activity is now some 5-10% below its pre-virus level in the euro-zone as a whole – it is hard to be more precise than that. Moreover, high frequency data suggest that the recovery in household consumption is petering out, while business investment is sure to remain extremely subdued in the circumstances. Even without a resurgence of the pandemic, which may now be underway in parts of the currency union, the outlook is very poor.

The current recession in the European economy far outweighs the scale of the global financial crisis in 2008, when the contraction did not break the -6% mark.

Euro area #GDP -12.1% in Q2 2020, -15.0% compared with Q2 2019: preliminary flash estimate from #Eurostat https://t.co/AiFPmOGdPX pic.twitter.com/Rp2R9ogX7T

Euro area GDP contracted by 12.1% q/q in Q2 – biggest drop on record pic.twitter.com/doDdPSz93R

The eurozone economy shrank by 12.1% as the coronavirus pandemic took its toll, a record fall since the bloc was founded.

Economists had expected a contraction of 12% quarter-on-quarter.

There are some more notes of caution on the house price rise from economists.

It is easy to see why some expect prices to drop again, given the unemployment surge expected by many. Here is a measure of house price affordability for UK workers: the drop during the financial crisis is evident, but so far there is little sign of a much deeper recession.

Falling employment also will weigh on prices; the number of people on employers’ payrolls was 2.2% lower in June than in March, and job losses will accumulate further as the Coronavirus Job Retention Scheme is wound down between August and October.

Meanwhile, the supply of homes coming on to the market likely will increase in the winter, once mortgage payment holidays of up to six months for struggling households come to an end, pushing some into forced sales.

Some striking data on UK house prices this morning: British house prices jumped the highest in 11 years this month, according to Nationwide’s house price index.

The end of lockdown appears to have unleashed some pent-up demand, and stamp duty cuts are expected to add further support in the coming months.

The bounce back in prices reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions. The rebound in activity reflects a number of factors. Pent up demand is coming through, where decisions taken to move before lockdown are progressing.

Behavioural shifts may be boosting activity, as people reassess their housing needs and preferences as a result of life in lockdown. Moreover, social distancing does not appear to be having as much of a chilling effect as we might have feared, at least at this stage.

However, there is a risk this proves to be something of a false dawn. Most forecasters expect labour market conditions to weaken significantly in the quarters ahead as a result of the aftereffects of the pandemic and as government support schemes wind down. If this comes to pass, it would likely dampen housing activity once again in the quarters ahead.

The FTSE 100 is trundling along, as might be expected in late July (even if we do have a fair few dramatic company results to contend with).

But while a 0.5% gain makes for a relatively relaxed Friday, it has not been a good month for investors in Britain’s biggest public companies, which are on course for a monthly decline.

The FTSE 100 did its best to fight back on Friday, climbing 0.5% to 6,022, yet that still puts the index down 2.4% on the month and 7.1% below the 5 June high following the market crash earlier this year.

Tobacco, banks and media have been the worst performing FTSE 350 sectors in July.

Here are the full stories for two of the big issues this morning: NatWest’s massive loan impairment and British Airways owner IAG’s even bigger fundraising effort.

Related: NatWest pushed to £1.3bn loss by coronavirus crisis

Related: British Airways owner IAG to raise €2.75bn after record loss

Another eurozone GDP reading: Italy was already in recession, but now it is officially the worst since at least the second world war.

Italian output contracted by 12.4% in the second quarter compared to the previous three months, but again, as with the French data, it was better than the 15% fall expected.

Some interesting snippets coming through from BT, which has also been updating investors on its progress. Revenues and earnings were both down 7% for April to June.

Via Reuters:

Chief Executive Philip Jansen said BT delivered a strong operating performance in the quarter, when millions relied on its networks for home working and schooling, and produced “relatively resilient” financial results.

He said the company, which pulled its dividend in May to help weather the unfolding health crisis, had enough visibility to provide guidance for the year.

Another thing to add to the eurozone GDP pot that we missed from earlier: we have already had French growth (or should that be contraction?) figures this morning – but there is a silver lining.

The contraction of 13.8% in the French economy in the second quarter was a post-war record, but it was less than economists had feared – a straw at which we will clutch while we can.

Not too bad! French #GDP came out at –13.8 % after –5.9 % in Q1. Consumption (–11%), Investissement (–17.8 %), contracted massively but also public expenditures(–8%) and trade contributed -2.3 overall with exports plummeting. We were expecting -16% but deconfinement saved the day

Losses at digital bank Monzo ballooned to £114m, as the bank warned that the financial strain of the Covid-19 crisis had put the company’s future at risk.

This increases the risk that the group will not be able to execute its business plan, which could adversely impact its ability to generate a profit or raise sufficient capital to meet future regulatory capital requirements.

Due to these obstacles, the directors recognise there are material uncertainties that cast significant doubt upon the group’s ability to continue as a going concern.

British Airways owners IAG has said it plans to raise €2.75bn (£2.5bn) from shareholders as it tries to shore up its finances amid longer-than-expected disruption.

Our industry is facing an unprecedented crisis and the outlook remains uncertain. However, we strongly believe that now is the time to look to the future and strengthen IAG’s financial and strategic position.

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. The industry will recover from this crisis, though we do not expect this to be before 2023, and there will be opportunities for IAG to capitalise on its strength and leadership positions.

Aside from the GDP data, today marks another installment of the company earnings bonanza we have seen this week. We will run through some of those now.

First up, NatWest, the artist formerly known as Royal Bank of Scotland, has matched its peers by putting aside billions of pounds to cover coronavirus loan losses, tipping it to a loss for the second quarter.

NatWest tumbled into the red by £1.3bn in the second quarter, as it stashed away another £2.1bn to cover bad debts caused by the coronavirus crisis.

Preparations for a further downturn wiped out profits at the taxpayer-owned lender, which reported a £1.7bn profit during the same period last year.

The first of today’s eurozone GDP readings is through this morning, and it is not pretty: Spanish GDP fell by 18.5% quarter-on-quarter in the second quarter, worse than the 16.6% expected by economists.

Coupled with a 5.2% fall in the previous quarter, that spells an enormous recession in the eurozone’s fourth-largest economy.

European stock markets have gained at the opening bell.

The FTSE 100 in London is up by less than 0.05% – perhaps not surprising for a scorching day at the end of July – at about 5,986 points.

Good morning, and welcome to our live coverage of business, economics, the eurozone and financial markets on a fine summer’s day across much of the UK.

Economists are not the only ones who could tell you that economic activity has stalled in most major economies because of the coronavirus pandemic, but today they will give a first view of exactly how bad the picture is for the eurozone economy, with the first estimate of GDP growth for the second quarter.

Related: Tech giants’ shares soar as companies benefit from Covid-19 pandemic

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