European bourses are pointing to a mildly higher start as investors continue digesting data and earnings from the previous session. The US Dollar is on track for its worst monthly performance in a decade.

US economic growth plunges and recovery is looking shaky

The US economy contracted by -9.5% qoq in the second quarter or 32.9% on an annualized basis, the deepest decline since at least the Great Depression as lockdown measures saw consumer demand and business investment evaporate.
However, what is perhaps more concerning is that more recent data, as a 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 labor market is stalling. This, in addition to Trump's suggestion of delaying the Presidential elections has sent the dollar to fresh 2-year lows.

Big tech crushes forecasts

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.

China’s manufacturing recovery gains momentum

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!

2nd wave fears see localized UK lockdowns

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 reports larger bad loan provision than expected

NatWest reported H1 results, tumbling into a loss after setting aside £2.1 billion for bad loan provisions, more than the £1.7 billion forecasts. 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.

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