Squawk Box Europe Express

U.S. markets close higher, shrugging off dismal ADP jobs numbers as Democrats continue their opposition to proposals in a fresh virus stimulus package. U.S. airlines shares respond to the upside following GOP Senators’ backing of a $25bn aid package for the industry. Bosses of the largest carriers warn that demand will take years to rebound. Siemens makes changes to its managing board as it beats Q3 forecasts, but the German industrial giant expects the pandemic to weigh on profits in the fourth quarter. And in London, the BoE prepares to issue its latest decision. There is speculation that policy makers will dash hopes of a V-shaped recovery for the UK.   

A massive chemical explosion in Beirut leaves more than a hundred dead and thousands wounded. President Trump suggests the blast may have been intentional. Chinese service sector growth retreats from a decade-high, as new localised lockdowns blunt the country’s post-pandemic recovery. In media news, shares in Disney rally despite a poor Q2, as investors pin hopes on a new streaming strategy potentially offsetting theme park losses of 85 per cent on the year. And Virgin Atlantic files for bankruptcy protection in the U.S. as it scrambles to secure a rescue plan to ward off creditors.

A 3-way deal? President Trump says the U.S. Treasury should receive a significant cut of Microsoft’s bid for Chinese social media app TikTok, as he says the companies have until 15 September to reach an agreement. U.S. major averages start August in the green with the Nasdaq hitting another record high. Google parent Alphabet issues a record $10bn in corporate debt at a rock-bottom coupon price. And in Europe, German lender Commerzbank goes against the advice of its second-largest shareholder, private equity group Cerberus to appoint Hans-Jorg Vetter as chairman.

Provisions eat into profit at HSBC after first half earnings miss forecasts, falling 65 percent as the bank sets aside more capital and warns of ongoing risks for the year ahead. French bank SocGen reports a €1.2 billion loss in the second quarter as the lender takes an impairment charge on its global markets business. President Trump reportedly gives China’s ByteDance 45 days to sell TikTok to Microsoft after the White House threatens the ban the short video app over security concerns. And: an historic moment for space travel as NASA astronauts successfully return from their mission to take the Crew Dragon to the International Space Station in the first mission from US soil in almost a decade.

Technology giants lead the way on Wall Street with Apple, Alphabet, Facebook and Amazon adding $200bn to their combined value in after-hours trading. Apple posts the biggest quarterly revenue jump in its history. Facebook records its slowest-ever sales growth but still beats forecasts through double-digit advertising revenues, shrugging off a recent corporate boycott. Lockdowns around the world have helped Amazon mark its best quarterly profit as well as create 175,000 new jobs. And, despite suffering its first sales slump in 16 years and weak cloud performance, Alphabet is buoyed by a robust ad recovery for Google.   

Credit Suisse leads a slew of European earnings, reporting a 24 per cent increase in second quarter profit as CEO Thomas Gottstein announces a merger of the global markets and investment banking divisions. Standard Chartered reports a 25 per cent drop in first-half profits and warns it is bracing for a fresh wave of Covid-19 challenges. Revenues at Airbus fall 55 per cent as losses total €1.6bn for the French aerospace firm so far this year. And in energy news, Total unveils an $8bn writedown after taking a hit on its Canadian assets. 

Deutsche Bank posts a second quarter loss of €77m despite investment bank revenues rising 46 per cent, as cost-cutting measures weighed on the bottom line. Santander reports a record second-quarter loss of €11bn amid a slew of write-downs. French luxury group Kering sees sales fall by 44 per cent in Q2 and abandons its guidance, saying it does not predict a rebound in the second-half. However, there is more optimistic news for Starbucks which sees lower-than-expected declines in sales worldwide, boosting shares in after-hours trading. The coffee giant expects to be profitable again this coming quarter.

Republican lawmakers announce they have agreed on a $1tn virus stimulus bill with Senate majority leader Mitch McConnell saying the U.S. “has one foot in the pandemic, one foot in the recovery”. Market uncertainty keeps gold at record highs but just shy of the $2,000/oz. price. Spanish Prime Minister Pedro Sanchez slams the UK government’s blanket quarantine decision as ‘not justified’. London has extended the measures to include the Canary Islands and Balearics, prompting sweeping flight and package cancellations from travel operators. And in retail news, there are disappointing H2 earnings from Moncler as well as luxury giant LVMH which posted a near-70 per cent slump in operating profit.

Second wave caution… The UK sparks travel chaos with an overnight decision to reinstate quarantine measures against travellers from Spain. Madrid, airlines and travel operators hit out at the move. Gold hits a record high on the back of heightened U.S.-China tensions as authorities take over Washington’s consulate in the south-western city of Chengdu. In the U.S., Republican lawmakers reportedly agree on the next Coronavirus relief bill which would commit to direct cash payments as well as 70 per cent furlough measures. And in corporate news, German software giant SAP is planning to float consumer monitor firm Qualtrics, just two years after purchasing it for $8bn.

Intel shares nosedive in after-hours trading as the U.S. chip maker issues disappointing Q3 guidance and postpones the launch of its next generation product. The S&P 500 breaks a four-day winning streak as big tech stocks sell off. Apple shares weigh particularly heavily as the Iphone maker faces an investigation into potential breaches of consumer protection laws. In Washington, the virus stimulus bill has been delayed until next week. Wrangling over unemployment insurance and direct cash payments have forced the stalemate between the Senate and the White House. Chinese assets are in the red as Beijing retaliates against the U.S. closure of its Houston mission by shutting down its counterpart in Chengdu. U.S. Secretary of State Mike Pompeo has slammed the Chinese Communist Party over alleged spying. He said the West’s tolerance of Chinese interference had created ‘a Frankenstein’.

Big tech dominates overnight trade…Microsoft shares tumble in after-hours trading as investors ignore the forecast-beating Q2 numbers and focus on the slowing growth of the software giant’s Azure unit, as the cloud business sees revenue growth dip below 50 per cent. Tesla posts a profit for the fourth consecutive quarter, countering factory shutdowns during lockdown with strong orders and cost cuts. The full year of profitability means the electric carmaker is now eligible to be listed on the S&P 500. Earnings are also front and centre in Europe. Swiss pharma group Roche sees profits and sales fall in the first half, but says a turnaround has already begun. German car giant Daimler’s sales plunge in the second quarter, amid a severe downturn in the autos market due to the pandemic. A potential Covid-19 vaccine deal and progress in virus stimulus bill talks in Congress push the Dow Jones above the 27,000-point level for the first time since June. However, Asian markets are down on news that

A change in tone…President Trump warns that the Coronavirus outbreak will get worse before getting better as the U.S. logs more than 1,000 daily deaths for the first time in more than a month. U.S. stocks dip on the warning, taking down the Nasdaq as well after it hit another record high while precious metals rally with gold reaching a peak not seen since 2011. On a visit to the UK, U.S. Secretary of State Mike Pompeo urges the world to stand up to China over its response to the Covid-19 pandemic as the DoJ says that Chinese hackers have attempted to steal vaccine research. And Snap shares tumble in after-hours trading as user growth slows and losses deepen.

Breakthrough in Brussels …EU leaders finally agree on a €750bn record virus recovery plan and a budget for the bloc after marathon five-day negotiations. The so-called ‘Frugal Four’ were swayed by increased rebates and a lowered €390bn in grants for the hardest-hit countries. Swiss lender UBS posts a higher-than-expected Q2 net profit, despite taking a hit in corporate and consumer lending. The bank expects credit loss expenses to be lower in the third quarter as market activity picks up. US indices are buoyed by a return from Big Tech stocks which add $290bn in market value. Amazon has its best day in two years, pushing the Nasdaq up by 2 per cent. And IBM shares also rally after the computer giant beats estimates for the second quarter on strong cloud performance.  

Deadlock in Brussels…EU leaders fail to agree on the bloc’s virus recovery fund following three days of negotiations. The so-called ‘Frugal Four’ nations are insisting that grants handed to the worst affected countries should be reduced. The lack of resolve tempers broader Asian gains but the Shanghai Composite manages to move 2 per cent higher, as the Chinese central bank keeps its lending rate steady. A sharp drop in Japanese exports also weighs on broader sentiment in Asia. The WHO reports a record single-day increase in global virus cases with Florida logging a fifth day of more than 10,000 infections.

The Last Dance for growth… Netflix shares dive in extended trade despite the streaming giant adding more than 10m new subscribers in Q2. However, it warned growth would slow down to its weakest level in years as lockdown restrictions are eased. Moscow rejects U.S., UK and Canadian claims that a Russian hacker group has launched a comprehensive cyber-attack in an attempt to steal Covid-19 vaccine research. EU leaders attend their first physical summit in Brussels since the virus outbreak, hoping to approve the bloc’s €750bn recovery fund. And in auto news, Daimler is forced to suspend production of its saloon cars in the U.S. and Mexico as its speeds up cost-cutting and suffers a €1.7bn operating loss in the second quarter.  

Bouncing back…Chinese GDP rises by 3.2 per cent from the first quarter, topping expectations. However, Asian equities remain in the red. Dozens of high-profile Twitter users’ accounts are hacked in a digital currency scam causing the platform’s shares to sink more than 3 per cent in extended trades. In energy news, Opec + agrees to unwind its record output cuts in supply. Resulting declines are tempered by the news that U.S. inventories are beginning to draw down. And shares in China’s SMIC chip maker soar by 240 per cent during its debut trade listing on the Shanghai STAR market.

Vaccine hopes. US. futures rally after a study shows Moderna’s COVID drug produces antibodies, with the biotech company saying all 45 participating people showed a “robust immune response” in the latest trial. The overnight market gains come after underperforming cyclicals and oil stocks lead U.S. averages higher, while big tech lags for a change. The biggest U.S. banks report earnings for the second quarter. Trading revenues surge, helping JP Morgan outperform, but ballooning loan-loss provisions weigh on results, dragging Wells Fargo to its first quarterly loss since the financial crisis. JPMorgan CEO Jamie Dimon warns the future path remains “murky.” Chinese markets trade in the red after President Trump signs an executive order suspending Hong Kong’s preferential status due to Beijing’s passing of a controversial security law.

Wild swings on Wall Street… The Nasdaq closes sharply lower despite earlier positivity around approval of Pfizer and Biontech's 'fast-track' vaccine candidate. JPMorgan, Citi and Wells Fargo kick off earnings season amid concerns that banks will have to set aside more money to weather the virus crisis. In China, June imports and exports surprise to the upside with the economy reaping the benefits of both domestic and international lockdowns being lifted. However, Hong Kong rolls back on easing restrictions following a spike in cases across the territory. 

Risk-on appetite continues despite another record increase in global Coronavirus infections. U.S. case numbers alone rise to 3.3mn. The White House announces it will levy 25 per cent tariffs on French cosmetics and accessories if it fails to back down on its digital tax plan, but gives Paris 180 days to change its stance. In energy news, oil prices are under pressure on news that Opec+ could reverse their agreed record output cuts following an improvement in demand. And U.S. automaker Tesla decides to slash the cost of its recently released Model Y by $3,000 – this, despite the SUV earning the company its first profit in 17 years.  

Wall street divergence... The Nasdaq hits another record high as investors continue to bet on big tech stocks. The Dow and the S&P 500, however, slip into the red following a volatile session. The U.S. government sanctions top-ranking Chinese officials over allegations of human rights abuses against Uighur Muslims sending Chinese stocks lower, while Chinese banks brace for more restrictions from Washington following the introduction of Beijing’s controversial security law on Hong Kong. U.S. Treasury Secretary Steven Mnuchin tells CNBC that the White House and Congress are working to pass a new COVID-19 relief package by the end of this month, but warns it will not be as far reaching as earlier bills. And elections make headlines in Europe and Asia, with Singapore holding its general election amid a looming recession in the city- state while the Eurogroup chooses a new president to replace Mario Centeno.