Health News at Your Fingertips

Here are the full stories for two of the big issues this morning: NatWest’s massive loan impairment and British Airways owner IAG’s even bigger fundraising effort.

Another eurozone GDP reading: Italy was already in recession, but now it is officially the worst since at least the second world war.

Italian output contracted by 12.4% in the second quarter compared to the previous three months, but again, as with the French data, it was better than the 15% fall expected.

But the quarterly slump in the eurozone’s third-largest economy was still “unprecedented”, national statistics bureau ISTAT said.

Some interesting snippets coming through from BT, which has also been updating investors on its progress. Revenues and earnings were both down 7% for April to June.

Via Reuters:

Chief Executive Philip Jansen said BT delivered a strong operating performance in the quarter, when millions relied on its networks for home working and schooling, and produced “relatively resilient” financial results.

He said the company, which pulled its dividend in May to help weather the unfolding health crisis, had enough visibility to provide guidance for the year.

“Despite our strong operational performance in the first three months of the year, it is clear that Covid-19 will continue to impact our business as the full economic consequences unfold,” he said.

And more details from Jansen’s call with media:

• There are no new job cut plans because of the pandemic.
• Daytime data usage levels are up by 20% – almost certainly a sign of the work-from-home boom.
• The UK’s plan on removing Huawei technology (which the government says is an espionage risk)from network infrastructure is “sensible” and BT can execute it.

Another thing to add to the eurozone GDP pot that we missed from earlier: we have already had French growth (or should that be contraction?) figures this morning – but there is a silver lining.

The contraction of 13.8% in the French economy in the second quarter was a post-war record, but it was less than economists had feared – a straw at which we will clutch while we can.

Consumer spending rose to pre-pandemic levels to ease some of the pain for the quarter.

British Airways owners IAG has said it plans to raise €2.75bn (£2.5bn) from shareholders as it tries to shore up its finances amid longer-than-expected disruption.

IAG’s passenger capacity operated in the second quarter was down 95.3% on 2019 and for the six months down 56.2 per cent on 2019.

The group said on Friday that it had made a second quarter loss of €2bn, compared to a 2019 profit of €806m.

Willie Walsh, still IAG’s chief executive after delaying his retirement, said:

Our industry is facing an unprecedented crisis and the outlook remains uncertain. However, we strongly believe that now is the time to look to the future and strengthen IAG’s financial and strategic position.

While we have had to make tough decisions on both people and costs, these actions are the right ones to protect as many jobs and serve as many customers as feasible and put IAG in the strongest position possible. The industry will recover from this crisis, though we do not expect this to be before 2023, and there will be opportunities for IAG to capitalise on its strength and leadership positions.

Aside from the GDP data, today marks another installment of the company earnings bonanza we have seen this week. We will run through some of those now.

First up, NatWest, the artist formerly known as Royal Bank of Scotland, has matched its peers by putting aside billions of pounds to cover coronavirus loan losses, tipping it to a loss for the second quarter.

The Guardian’s banking reporter, Kalyeena Makortoff, writes:

NatWest tumbled into the red by £1.3bn in the second quarter, as it stashed away another £2.1bn to cover bad debts caused by the coronavirus crisis.

Preparations for a further downturn wiped out profits at the taxpayer-owned lender, which reported a £1.7bn profit during the same period last year.

Its earnings were stung by a £2.1bn loan loss provision to cover a jump in defaults in the coming months, as businesses and households struggle to repay their debts because of the economic slump triggered by the coronavirus outbreak. Analysts had expected a second-quarter charge of £943m.

NatWest said the impairment charge – which brings total provisions so far this year to £2.9bn – “reflected the deterioration of the economic outlook”. Full-year loan loss charges are expected to total £3.5bn-£4.5bn.

The first of today’s eurozone GDP readings is through this morning, and it is not pretty: Spanish GDP fell by 18.5% quarter-on-quarter in the second quarter, worse than the 16.6% expected by economists.

Coupled with a 5.2% fall in the previous quarter, that spells an enormous recession in the eurozone’s fourth-largest economy.

European stock markets have gained at the opening bell.

The FTSE 100 in London is up by less than 0.05% – perhaps not surprising for a scorching day at the end of July – at about 5,986 points.

However, France’s Cac 40 has gained 0.5%, and Spain’s Ibex is up by 0.6%. That helped the Euro Stoxx index of blue-chip countries across Europe gain 0.5%.

Good morning, and welcome to our live coverage of business, economics, the eurozone and financial markets on a fine summer’s day across much of the UK.

Economists are not the only ones who could tell you that economic activity has stalled in most major economies because of the coronavirus pandemic, but today they will give a first view of exactly how bad the picture is for the eurozone economy, with the first estimate of GDP growth for the second quarter.

Estimates collected by Refinitiv range from -8% quarter-on-quarter to -18.5%, so barring a real surprise it will almost certainly be the deepest recession since the bloc was established (and likely since the second world war).

US tech companies on Thursday evening revealed phenomenal financial results (a day after receiving blows from members of US Congress over antitrust concerns). Futures for Wall Street’s main stock market indices point to a positive open after Apple, Amazon, Facebook and Google-owner Alphabet all benefited from the work-from-home orders to beat earnings estimates.

Yet it was clear from data published on Thursday that they were the exception, not the rule, after US GDP fell by 32.9% at an annualised rate in the second quarter, a record decline.

Concerns over economic momentum held back Asian stock markets on Friday. Japan’s Topix index closed at a two-month low after posting its biggest daily loss in four months. Shares in Shanghai and Hong Kong gained 0.5% and less than 0.1% respectively.

Depending on movements over the course of today the US dollar could also record its worst month in a decade. Investors bought the greenback in droves early in the crisis, but they have since sold it off as the realisation has seeped through that the Federal Reserve will not be in a mood to tighten monetary policy (boosting the relative value fo the dollar) any time soon.

The agenda

• 8am BST: Spain GDP growth rate (Q2 quarter-on-quarter – previous -5.2%; consensus -16.6%)
• 9am BST: Italy GDP growth rate (Q2 qoq – prev. -5.3%; cons. -15%)
• 10am BST: Eurozone GDP growth rate (Q2 qoq – prev. -3.6%; cons. -12%)
• 10am BST: Eurozone annual inflation rate (July annualised – prev. 0.3%; cons. 0.2%)
• 1:30pm BST: US personal income (June month-on-month – prev. -4.2%; cons. -0.5%)
• 1:30pm BST: US personal spending (June mom – prev. 8.2%; cons. 5.5%)