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This is an audio transcript of the FT News Briefing podcast episode: Is the US in a recession?

Joanna Kao
Good morning from the Financial Times. Today is Friday, July 29th, and this is your FT News Briefing.

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The US economy shrank for two consecutive quarters. Energy companies are making record profits, so why is the major French utilities struggling? Plus, tech earnings this week were all over the place and so were the market’s reactions to them. I’m Joanna Kao, in for Marc Filippino, and here’s the news you need to start your day.

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One commonly used definition of a recession is two consecutive quarters of shrinking GDP. That’s exactly what happened in the US in the first half of the year, according to figures released yesterday. But the US says don’t call it a recession. The FT’s Kate Duguid explains.

Kate Duguid
So the US recession is determined by a group of researchers at the National Bureau of Economic Research, and they include a whole host of things, not just GDP, but also the labour market, among other sort of economic factors. And we won’t know for a long time whether or not the NBER classifies this as a recession. They’re not expected to, though, because the labour market in the United States remains extremely strong. Unemployment is at 3.6 per cent, which is just like a hair over where it was before the pandemic. So although this fits one widely used criteria of a recession, it does not meet the standards of a recession in the United States.

Joanna Kao
How did markets respond to the news?

Kate Duguid
So we saw a big reaction in the Treasury market with investors betting on a slightly more dovish Fed on maybe a less aggressive pace of rate hikes. We also saw expectations of growth come down as expressed in the Treasury market. That said, we did see a little bit of a rally in stocks. That’s a continuation of what it started after Jay Powell had signalled that a 75 basis point increase in interest rates at their September meeting was not guaranteed.

Joanna Kao
That’s the FT’s US capital markets correspondent Kate Duguid.

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Major energy companies like Shell are raking in record profits right now. This is in part due to Russia’s invasion of Ukraine, which has caused oil and gas prices to skyrocket. But there’s one company that just announced a record loss. That’s the French energy group EDF. The utility produces nuclear power and is largely owned by the state. EDF said yesterday that it lost more than €5bn in the first half of the year. The FT’s Paris correspondent Sarah White explains what happened.

Sarah White
One of the problems they’ve had is they’ve had an unexpected corrosion problem at some of the nuclear reactors so that the regulators have asked them to stop those reactors while they investigate, carry out safety checks. And that’s added to a whole host of kind of maintenance operations they have on the nuclear park, which means that there’s many outages right now that production at their sites is down sort of three decades lows. So actually what’s happened is that EDF, rather than being able to supply the French market and the rest of Europe, is having to buy electricity. And it’s had other, you know, various issues as well. The French government made it foot the bill earlier this year for its price caps on electricity bills. So all these different things are coming together. And so rather than being able to profit from what’s going on right now, they’re actually completely exposed to all these market swings.

Joanna Kao
So the French government is preparing to fully take over the company. Why does it think that will help? What is the government planning to do to address these issues?

Sarah White
It’s not entirely clear yet because actually until this point, EDF was 84 per cent owned by the government. So when they announced nationalisation, a lot of people said, OK, well, you know, what are you going to do differently if you have 100 per cent of this company? What it does do is it removes EDF from the kind of glare of the markets right now. I mean, this is becoming completely untenable. They’ve just reported this record loss. So it’s only going to get worse. The government argues that if it has full control, it can go a little bit faster on some decision making. And it’s not clear that we have the answer yet on what is the government actually going to do, you know, to get EDF into a position where it can actually address those problems.

Joanna Kao
Nuclear energy has been a great hope for cutting emissions. Does this undermine that case?

Sarah White
I mean, it doesn’t undermine the fundamentals around nuclear energy as a technology. But what it does do is it highlights some of the big, big difficulties about getting these projects done. All the problems you’ve had around building new reactors in the last few years have been linked to the fact that a lot of companies don’t know how to do this anymore. We don’t have, we’ve not done them for so many years that, you know, all the expert engineers that built these in the ‘80s and ‘90s kind of disappeared. They’ve gone into other industries. So they’ve really struggled with the actual industrial side of building these plants in the last few years. That’s partly related to its financial problems now. And it does, it just sort of shows the scale of the challenge ahead.

Joanna Kao
Sarah White is the FT’s Paris correspondent.

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Big US tech companies reported earnings this week. The results were mixed. Meta saw a decline in revenue for the first time. Google’s parent company, Alphabet, reported that its revenue growth fell to its slowest pace in two years. But on the other hand, Spotify’s revenue increased and it got 6mn new subscribers. The market reaction to all this was surprising. The FT’s Katie Martin is here to break this down in our weekly markets chat. Hey, Katie.

Katie Martin
Hey, how you doing?

Joanna Kao
I’m doing well. So how did investors respond to tech earnings?

Katie Martin
We’re in a very weird situation where you can’t necessarily tell, if a company puts out good numbers or puts out bad numbers, you can’t tell whether the market reaction will be positive or negative. Because we’re seeing quite a lot of situations where a company will put out, you know, bad numbers, for example, and the market will say, hm, could have been worse, and will reward them with, you know, a really nice rise in the share price. And also, you’re seeing the opposite. Partly that’s because tech stocks are just caught up in the broader tide, if you like, in markets. And that is just a huge mess at the moment.

Joanna Kao
Share prices going up after a bad earnings report seems totally counterintuitive. What’s going on here?

Katie Martin
Investors have got themselves into quite the tizz. They got really quite miserable. And, you know, all the kind of surveys of fund managers say that sentiment was just dire. You know, people are expecting horrible recessions and horrible earnings, and they’re expecting everything to be just horrible. And so you get to the point where the market starts to think, OK, we’re down like 20 per cent or something this year. How much worse could it get? And so people are looking for good news. And the weird thing is that good news can take several forms. It can be out and out good news. It can be news that is less awful than perhaps investors thought it would be. Or it can be out and out bad news, which is so bad that perhaps it might turn the Federal Reserve into going a bit easy on interest rate rises. So because people have got themselves so miserable, they’re looking for anything that can kind of turn the tide. And that’s why you’re seeing some of these quite weird market movements.

Joanna Kao
That’s the FT’s markets editor Katie Martin. Thanks, Katie.

Katie Martin
You’re welcome.

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Joanna Kao
You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back next week for the latest business news. The FT News Briefing is produced by Sonja Hutson, Fiona Symon and Marc Filippino. Our editor is Jess Smith. We had help this week from Michael Lello, David da Silva, Peter Barber and Gavin Kallmann. Our executive producer is Topher Forhecz. Cheryl Brumley is the FT’s global head of audio, and our theme song is by Metaphor Music.

This transcript has been automatically generated. If by any chance there is an error please send the details for a correction to: typo@ft.com. We will do our best to make the amendment as soon as possible.


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