Despite the Dow Jones rising on Wednesday night following the Fed’s commitment to maintain its current stimulus plan until the US economy has ‘weathered’ the covid-19 storm, the European markets opened heavily in the red this Thursday.
With US coronavirus deaths now above 150.000, it was always potentially going to be tough to get investors onside. But a pair of bleak updates from two of the FTSE's heaviest hitters, and a worse than forecast second quarter GDP reading out of Germany, set the scene for an even rougher session.
Shell (LON:RDSa) avoided the nasty fall that, on the surface, should’ve greeted Thursday’s update. Remarkable given the oil giant just posted an $18 billion net loss in the second quarter. It was saved, however, by an adjusted Q2 net income of $638 million – a huge 82% decline year-on-year, but still lightyears away from the $664 million loss forecast by analysts.
Lloyds (LON:LLOY), on the other hand, wasn’t so lucky. The banking stock plunged more than 9% after swinging from a HY profit of £2.9 billion to a loss of £602 million year-on-year. This as Lloyds was forced to set aside £2.4 billion to cover potential bad loans – over £1 billion more than analysts had predicted.
These stark warnings about the covid-era economy sent the FTSE 0.9% lower, taking it back to 6075 for the first time in close to 3-weeks.
Contracting 10.1%, the German economy came off notably worse in Q2 than analysts had been expecting, with the consensus looking for a 9% decline. Understandably the DAX was pretty upset, plunging 200 points to sink back below 12650.
And that’s not the only GDP reading investors can look forward to this Thursday. According to estimates the US economy is expected to have contracted a truly shocking 34.5% in the second quarter. No wonder the Dow Jones is currently heading for a 170 point decline.
One thing that could save the Dow, even if it isn’t until this evening’s post-market, is a major day of earnings, with appearances from the tech big boys: Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN).
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