European stocks slip ahead of U.S. jobless claims data as stimulus doubts mount


European stocks failed to get off the ground on Thursday but the U.S. decision not to raise tariffs on EU products, including Airbus aircraft, may have prevented a selloff.


pascal rossignol/Reuters

European stocks edged lower on Thursday, as trade disputes were thrown back into the spotlight and investors awaited U.S. jobless claims data.

The pan-European Stoxx 600
SXXP,
-0.24%

slipped 0.3% in early trading, while the German DAX
DAX,
-0.07%

was 0.1% lower and the French CAC
PX1,
-0.11%

was 0.2% down.

The FTSE 100
UKX,
-0.93%
,
which surged 2% on Wednesday despite the U.K. economy’s record plunge in the second quarter, was 1% down. U.S. stock futures
YM00,
-0.03%

ES00,
-0.04%

NQ00,
-0.03%

also pointed lower after yesterday’s Wall Street rally.

Read: Why the S&P 500 is knocking on the door of its first record close in 6 months

After solid gains in yesterday’s session, markets were seemingly taking a pause ahead of the U.S. jobless claims data set to be released later on Thursday. The deadlock over another round of U.S. stimulus also weighed on sentiment, as President Donald Trump said a deal is “not going to happen.”

With the U.S.-China tensions bubbling in the background and officials from both countries due to meet on Saturday to review their trade deal, the U.S. turned its attention to Europe.

The Office of the U.S. Trade Representative said tariffs on European Union products, including whiskey and Airbus
AIR,
-1.44%

aircraft, will remain unchanged, despite efforts by the plane maker to comply with a World Trade Organization decision over state aid.

The U.S. raised tariffs on €7.5 billion of EU products last year as retaliation for subsidies provided to Airbus. American officials had also threatened to raise tariffs or add new products this summer. Spreadex analyst Connor Campbell said the fact it “failed to escalate the situation with fresh tariffs on vodka, gin and beer” prevented a market selloff.

Stocks in focus

Tui
TUI,
-4.35%

shares fell 4%, after the travel operator swung to a €1.4 billion loss in the third quarter as the coronavirus pandemic continued to hit the company. The hotel, airline and cruise operator said dividend payments and share buybacks will be restricted to the term of the €1.2 billion stabilization package announced on Wednesday with the German government.

Carlsberg
CARL.A,
-1.43%

stock slipped 4.8%, as the Danish brewer said it expected operating profit to fall 10% to 15% this year. It also warned demand would remain under pressure in China in the second half and that European sales wouldn’t return to normal this year.



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European stocks rise after Trump unilaterally extends jobless benefits


US President Donald Trump signs executive orders extending coronavirus economic relief, during a news conference in Bedminster, New Jersey, on August 8, 2020.


jim watson/Agence France-Presse/Getty Images

European stocks rose on Monday, buoyed by a move from U.S. President Donald Trump to unilaterally extend jobless benefits in the world’s top economy.

After a 2% gain last week, the Stoxx Europe 600
SXXP,
-0.11%

rose 0.5%.

Oil giants BP
BP,
+2.17%
,
Royal Dutch Shell
RDSA,
+1.35%

and Total
FP,
+0.68%

were among the early gainers.

The U.K. FTSE 100,
UKX,
+0.12%

French CAC 40
PX1,
-0.07%

and German DAX
DAX,
-0.41%

advanced.

U.S. stock futures
ES00,
+0.02%

also rose.

The moves came as President Donald Trump signed four executive orders over the weekend, including one that extends federal unemployment benefits at a rate of $400 per week from the expired level of $600 per week and another that temporarily cuts payroll taxes. It’s not clear whether the executive orders will withstand legal challenges and the benefits funding, achieved through tapping an emergency program, is set to last five weeks.

“Risk assets are signaling a considerable drop in Congress’ ‘cliff-edge’ premium; nevertheless, if U.S. lawmakers underdeliver, it could pleat economic growth expectations into year-end,” said Stephen Innes, global chief markets strategist at AxiCorp.

The latest report on U.S. job openings comes at 10 a.m. Eastern.

Carnival
CCL,
+2.39%

shares rose 5% as its Aida division extended its pause of its cruise season until Sept. 30, except for early September trips from Kiel and Hamburg.

Alstom
ALO,
-1.98%

shares fell 1.5% as the company said it still plans on buying Bombardier’s rail unit despite what it calls “unexpected and negative developments.” Alstom suggested it might try to renegotiate the roughly €6 billion deal, saying it “will take into account the consequences of these operating and financial developments in forthcoming discussions with Bombardier Inc, and will update the market as required.”



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Job trouble? Wave of rehiring after economy reopened to fade in July after viral spiral


The engine of the U.S. economy may have gotten clogged again — no thanks to the recent acceleration in coronavirus cases. That’s bad news for Americans hoping to return to their old jobs.

Just how much damage has been done will become more evident this week, especially from the U.S. employment report for July due next Friday. The number of jobs regained last month is unlikely to match the huge increases in May and June that totaled a combined 7.5 million.

Wall Street
DJIA,
+0.43%

economists predict the U.S. added about 1.5 million jobs in July.

Even that estimate may be inflated though by seasonal changes in educational employment at the state and local level, Morgan Stanley contends. Private-sector jobs could increase by less than one million, the investment bank calculated.

See: MarketWatch Economic Calendar

Whatever the case, a much smaller increase in hiring or rehiring in July would bode ill for the U.S. recovery from the coronavirus pandemic. The government last week reported that gross domestic product sank a whopping 32.9% in the second quarter on an annualized basis, the biggest decline since World War Two.

Read: Economy suffers titanic 32.9% plunge in 2nd quarter, points to drawn-out recovery

Also:‘A massive welfare economy’ – federal aid prevents even steeper GDP collapse

“The big question hovering over next week’s employment report is whether the two-month surge in job gains stopped in July,” says David Donabedian, chief investment officer of CIBC Private Wealth Management. He thinks that’s exactly what happened.

It will be hard for the economy to make up a lot of lost ground in the third quarter unless hiring snaps back even faster.

See:MarketWatch Coronavirus Recovery Tracker

The U.S. lost a record 22 million jobs in March and April, according to Labor Department data. So far the economy has recovered less than one-third of those jobs.

The weekly tally of jobless claims, meanwhile, showed an even higher 30 million unemployed people were collecting benefits as of mid-July, representing about one in five Americans who said they were working before the pandemic, according to a Labor Department survey of households.

Robert Frick, corporate economist at Navy Federal Credit Union, said many people who expect to return to work are going to find they have no jobs or businesses to which they can return, a “grim reminder” of how much long-term damage the pandemic has caused.

“In the long run we are going to see a sobering slowdown in job growth,” he said.

The still-high level of unemployment, the viral spiral, and the uncertainty over whether Washington will provide more financial aid has understandably made Americans feel less confidence. On Friday Congressional lawmakers were still at odds on the next relief package with many benefits set to expire at the end of July.

A variety of measures that monitor consumer attitudes show a clear deterioration in July that’s likely to bleed over into August. That will make a recovery even harder.

Read:Consumer confidence wanes in July and points to rockier economic recovery

And:Consumer sentiment falls as coronavirus cases rise and federal aid set to expire

The news might not all be negative next week, however.

Manufacturers — auto makers in particular — have shown more resilience than the service side of the economy. The closely followed ISM manufacturing survey could show improvement for the third straight month.

The housing industry has also snapped back faster than expected amid a surge in home sales. Prospective buyers with secure jobs are taking advantage of record-low interest rates to buy new homes, a trend that may have been fueled by people fleeing the closed spaces of cities with a high number of coronavirus cases.

Even that potential bit of good news, however, has been overshadowed by the broader damage to the economy from the latest spike in coronavirus cases in many American states.

A full recovery can’t take root and blossom, economists say, until the disease is brought under control.

See: Pandemic will continue for some time, experts tell Congress as U.S. case tally nears 4.5 million



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Stocks under pressure after jobless claims rise, with all eyes on Washington stimulus efforts


U.S. stocks opened lower after an increase in weekly new claims for jobless benefits, even as Senate Republicans and the White House announced progress toward an agreement on a new package of funds to help businesses and households stricken by the COVID-19 pandemic.

Investors were also upbeat on earnings from the likes of Tesla, with a heavy slate of quarterly results on deck Thursday.

How are benchmarks performing?

The Dow Jones Industrial Average
US:DJIA
traded lower by 165 points, 0.6%, near 26,841 , while the S&P 500 index
US:SPX
was off 12 points or 0.4%, trading near 3,264. The Nasdaq Composite Index
US:COMP
was about 51 points or 0.5% lower, near 10,655.

On Wednesday, the Dow jumped 165.44 points, or 0.6%, to end at 27,005.84, its highest close since June 9, according to Dow Jones Market Data. The S&P 500 gained 18.72 points, or 0.6%, to close at 3,276.02. The Nasdaq Composite Index added 25.76 points, or 0.2%, finishing at 10,706.13.

What’s driving the market?

Wall Street opened with modest losses on Thursday, despite a number of narratives that could embolden bullish investors to take on more risk.

Senate Republicans and the White House struck an agreement on a $1 trillion coronavirus relief package, as a $600 weekly supplement to unemployment benefits is set to expire at the end of this month. The proposal sets the stage for further talks between the Senate Republicans and Democrats, who have coalesced around a $3.5 trillion bill that was passed in the House in May, but analysts think negotiations will remain tense.

Meanwhile, investors parsed a release of weekly employment-benefit claims from the Labor Department, which showed 1.42 million Americans filed for first-time benefits, a rise of 109,000 and the first rise since late March.

The report has become one of the key measures of the state of the COVID-19 pandemic that has been resurgent in many states recently, forcing the reimposition of restrictions to curtail the spread of the deadly illness.

Market participants are parsing a barrage of earnings, include a trio of components from the Dow, including Intel
US:INTC
, Travelers Cos.
US:TRV
, and Dow Inc.
US:DOW

Those reports come after electric-vehicle maker Tesla produced upbeat results, which featured its fourth consecutive profit thanks to more than $400 million in electric-vehicle tax credits, paving the way for the popular company to join the S&P 500.

Thus far, investors have shrugged off escalating tensions between the U.S. and China, with Beijing vowing to close the U.S. consulate in the southwestern city of Chengdu, according to the South China Morning Post. The move comes after the U.S. ordered the closure of a Chinese consulate in Houston, citing fraud and espionage, highlighting rising tensions between the global superpowers.

In coronavirus news, the U.S. now has 3.9 million cases and 143,000 deaths, according to data aggregated by Johns Hopkins University.

A “trifecta” of factors — fiscal stimulus, encouraging news on the prospect of a vaccine against COVID-19, and better-than-expected economic news — helped lubricate the markets earlier in the pandemic period, said Michael Stritch, chief investment officer at BMO Wealth Management.

But more recently, Stritch said in an interview, “the virus has reasserted itself. Our view had always been that we’d have a wavy kind of recovery. And yes, we do need more on the fiscal side now. From the market’s perspective, it’s a push and pull where bad economic data may light a bit of a fire under Congress to act more quickly.”

Like many other observers, Stritch sees markets likely to remain “aggressively flat” for the foreseeable future, until there’s more clarity on a treatment.

A report on leading U.S. economic indicators, released at 10 a.m. Eastern, rose in June but signalled the economy was likely to remain in recession territory.

See:The stock market no longer thinks it needs the economy if it has the Fed,’ David Rosenberg says

Which stocks are in focus?
How are other markets trading?

In Europe, the Stoxx 600 Europe index
XX:SXXP
was up 0.2%, while the U.K.’s FTSE
UK:UKX
powered 0.4% higher.

Gold futures
US:GCQ20
rose 0.8% to $1,879.40 an ounce Thursday on the New York Mercantile Exchange, on track for a fresh record high. September futures for the U.S. crude benchmark
US:CLU20
were down 0.8% to $41.58 a barrel on concerns about rising inventories.

The 10-year Treasury note yield
BX:TMUBMUSD10Y
fell two basis points to 0.576% after the jobless claims report was released. Yields move in the opposite direction of prices.

In currency markets, the dollar fell 0.1% against its six major rivals, according to the ICE U.S. dollar index
US:DXY
.

In Asia, the Nikkei
JP:NIK
closed 0.6% lower, at 22,751.61, while China’s CSI 300 gauge
XX:000300
was virtually unchanged at 4,712.44. Hong Kong’s Hang Seng index
HK:HSI
rose 0.8% to close at 25,263.

Read:The cyclical rotation is here, Jefferies analysts say. For real this time.



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No stopgap to preserve $600 jobless benefit add-on, White House’s Meadows says


White House chief of staff Mark Meadows leaves a Republican policy luncheon on Capitol Hill on Tuesday.


AFP via Getty Images

A senior White House official said Wednesday that a temporary extension of the extra $600 beneficiaries of unemployment insurance now receive weekly is not in the cards, as Republicans continued to work on a new COVID-19 aid bill.

“We’re really looking at trying to make sure that we have a comprehensive bill that that deals with the issues. Any short-term extensions would defy the history of Congress, which would indicate that it would just be met with another short-term extension,” Mark Meadows, the White House chief of staff, told reporters after leaving a late-day meeting with Senate Republican appropriators at the U.S. Capitol.

The $600 add-on, paid weekly on top of a state’s regular unemployment benefits, has provided much-needed support for poorer workers without jobs and boosted consumption, according to some economists. Many congressional Republicans, though, have said it encourages idleness because the amount can outweigh the wages earned in the old job.

While this week is the last for which the jobless are eligible for the payment, next week will be the final time it is disbursed. But labor experts say the inability of state departments to reprogram their systems quickly means even a small lapse, if it is not renewed by Friday, will result in a two- to four-week gap for recipients.

Mindful of the coming cliff, some Republican senators said Wednesday there had been discussion of a short-term extension of the unemployment insurance add-on. An extension raised concerns on both sides of the aisle, though, as Rep. Steny Hoyer, the second-ranking Democrat in the House, on Tuesday said it would be the “least advisable” option.

Meadows and Treasury Secretary Steven Mnuchin were on the Hill on Wednesday to help Senate Republicans come up with a bill as a counteroffer to the House’s $3.4 trillion coronavirus aid bill passed in May. A significant step was achieved Wednesday when top Senate Republican appropriators said they’d reached agreement with the White House on the part of the bill dealing with congressional spending.

“We’ll have a package tomorrow,” said Sen. Richard Shelby, the chairman of the Senate Appropriations Committee.

Sen. Roy Blunt, a Missouri Republican, said he hoped to see other parts of the GOP coronavirus bill come together Thursday as well. “The goal is tomorrow to get all of those bills out there. So we’ll have one aappropriating bill. We’ll have several authorizing bills that explain in more detail how that appropriated money would be spent,” he said.

Blunt said agreement between Senate Republicans and the White House had been reached on money for elementary and secondary schools dealing with coronavirus. He said the total amount would be $70 billion, evenly split between money paid out to schools on a per capita basis and money paid to schools that reopen with in-person classes, which Blunt said would require more money to operate.



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