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Latest news

  • Florida reported more than 250 coronavirus deaths, setting a state record for the fourth day in a row

  • BT warned of a sharp drop in revenue and earnings for the year due to the impact of coronavirus as it reported a 13 per cent fall in quarterly profit

  • ExxonMobil and Chevron both reported deep quarterly losses as they revealed the hit to their businesses from the worst oil price crash in decades

Joyless July for pandemic-stricken economies

It was a miserable end to the month for millions of American workers as the political stalemate over a stimulus package for the country’s struggling economy left them facing the withdrawal of emergency jobless benefits.

The gravity of the situation was underlined by second-quarter GDP figures yesterday showing the US’s sharpest contraction in postwar history, while a small increase in weekly job claims suggests that the recovery may have stalled, a theme echoed by the Federal Reserve earlier this week. “We’ve got to hope for the best and plan for the worst,” said Fed chief Jay Powell.

Fears for the recovery and a resurgence in coronavirus infections — together with uncertainty over the looming presidential election — have led to a “relentless” sell-off of the dollar and its worst month in a decade.

US national editor Edward Luce, writing in today’s Swamp Notes newsletter, puts the blame firmly on the government: “We are witnessing the biggest governance failure in modern US history,” he says.

July ended on a downbeat note for Europe too as GDP data highlighted the scale of the pandemic shock with France, Italy and Spain all reporting double-digit quarter-on-quarter falls in output while Germany — the eurozone’s largest economy — yesterday recorded a contraction of more than 10 per cent. The bloc as a whole fell a record 12.1 per cent drop.

Line chart of Real gross domestic product (rebased, 2007 = 100) showing Eurozone countries suffer historic economic contraction

Spain was the worst hit, with preliminary numbers showing an 18.5 per cent GDP decline. It is also bracing for a deep hit to its tourist industry — which accounts for 12 per cent of the country’s GDP — following the imposition of new travel restrictions, including from the UK. Brits last year accounted for 18.1m of Spain’s 83.7m foreign tourism.

As the FT Editorial Board says today, this is a dangerous moment for the world economy. A vaccine or other medical breakthroughs will be necessary before economies can fully recover. “Until then, governments will face pressure to fund the incomes of those who isolate and help companies that have seen revenues collapse through no fault of their own. The fight against coronavirus is debilitating but it is far from over.”

Keep up to speed on developments with our free-to-read global economic recovery tracker.

Markets

One of the most interesting signs of the times was this week’s 1,500 per cent leap in the shares of Kodak, the former photography giant. The US government’s offer of a financial lifeline in the form of permission to make ingredients for coronavirus drugs led to frenzied trading, driving the company’s valuation from $92m to $1.5bn.

Despite the collapse in profits revealed during earnings season, US companies it seems cannot kick their habit of buying back shares. Some critics say repurchase programmes “sterilise” excessive executive pay. The practice has been attacked by US president Donald Trump and Democratic presidential contender Joe Biden.

Line chart of Quarterly S&P 500 totals ($bn)* showing Companies favour buybacks over dividends

The cocoa market has melted during the crisis with global “grindings” — the amount processed by the industry — experiencing the biggest quarterly fall since 2014. Although lockdown has been good for comfort food in general, upmarket chocolate has been hit by disrupted sales at airports and speciality stores.

Line chart of New York cocoa price ($ per tonne) showing Cocoa price melts

Business

British Airways owner IAG launched a €2.75bn emergency fundraising as it revealed a first-half loss of more than €4bn due to the collapse of passenger demand. IAG, which also owns Iberia, Aer Lingus and Vueling, has already said it will cut 12,000 jobs and retire its Boeing 747 jumbo jets. Dutch airline KLM said it would cut a further 1,500 jobs. Boeing warned earlier this week that the passenger aviation market would not recover for three years.

UK car production has fallen 42 per cent to its lowest level since 1954 thanks to the industry-wide shutdown in March and April, and weak demand since. Meanwhile, Volkswagen reported a quarterly loss, as did Ford, Fiat Chrysler and Jaguar Land Rover.

More banks revealed provisions for loan losses, including NatWest (where these doubled from the last quarter), Lloyds and Standard Chartered. New digital bank Monzo said the pandemic threatened its ability to continue trading.

Global economy

Our UK business correspondent Daniel Thomas writes our Big Read on the problems facing small businesses — the key drivers of UK economic growth — with dwindling cash reserves and huge amounts of debt. The FT Editorial Board called for changes to help beleaguered high street retailers with a rethink of how they are taxed. The looming ending of the government’s furlough scheme is sparking fears of mass unemployment.

Charts shows the contribution of different sized businesses to the UK economy

Mexico is on track to be the emerging economy worst affected by coronavirus as GDP fell more than 17 per cent from the previous quarter. The labour market has been hit badly, with more than 12m Mexicans — largely in the informal sector — losing their jobs and incomes since Covid-19 struck.

During the pandemic we have experienced food stockpiling, disrupted supply chains, small farmers in trouble and unsafe conditions exposed in meatpacking plants. But it has also brought us the opportunity to reimagine the world’s food systems, argues US agricultural specialist Donna Kilpatrick, inspired by traditional farming methods but informed by modern science and systems.

Readers respond

Occasionally Lucid comments on Tory MPs push businesses to reopen offices

My employer has a crisis group that is continually assessing how we get back to normal, but to give a few examples of the issues: a) with applicable precautions how are staff meant to get there given current transport capacity is a fraction of the usual crush loading? b) once in, large size lifts are now unusable to shift people across 30 floors. I understand it would currently take 3 hours to safely process all staff from entry to their desks; and c) desk space needs to be completely rearranged.

Now of course you look at phased returns and different groups, but it is not as simple as saying ‘call your staff in’. As per usual with so many of our politicians, a hollow slogan is pushed out without much thought having occurred prior to the mouth opening.

Get in touch

How is your workplace dealing with the pandemic? And what do you think business and markets — and our daily lives — will look like after lockdown? Please tell us by emailing covid@ft.com. We may publish your contribution in an upcoming newsletter. Thanks

The essentials

Surge in Latin America means global daily death toll on the rise once again. Streamgraph and stacked column charts, showing regional daily deaths of patients diagnosed with coronavirus

The UK delayed further lifting of coronavirus restrictions as infections crept back up. Restrictions were reimposed on parts of northern England late on Thursday night.

Weekend news editor David Firn shares his tips on looking after that new bike, from locks and bike racks to the new wave of wall hangers.

FT Money’s digital and communities editor Lucy Warwick-Ching reports on how the “motherhood penalty” facing many women as they scramble to juggle childcare with careers has worsened during the pandemic.

Final thought

As the world retreated inside, many of the previously overlooked tiny details of our lives became unexpected sources of joy. Back in May, How to Spend It magazine asked for your photos on what “home” meant to you. PHmuseum, a curated platform promoting photographers, had a similar idea. Here’s a selection of the winners, chosen by HTSI.

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