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Asian markets

Asian markets rise, though Nikkei sinks after Japan’s record contraction – MarketWatch

Associated Press

Japan’s economy shrank 27.8% from a year earlier in Q2

Newly manufactured cars await export at a port in Yokohama, Japan.


Reuters

Japanese stocks sank while other Asian markets gained Monday after Japan reported a record economic contraction as the coronavirus pandemic weighed on retailing, investment and exports.

Investors in Asia looked ahead to central bank meetings this week in China, Indonesia and the Philippines, with few other market-moving events in sight.

The Nikkei 225 in Tokyo
NIK,
-0.82%

fell 0.8% after the data showed the world’s third-largest economy shrank 27.8% from a year earlier in the three months ending in June. That was bigger than the country’s deepest decline during 2008-09 financial crisis.

The quarterly decline was 7.8%, not quite as sharp as the 9.5% drop for the U.S. economy for the last quarter. But Japan’s economy was already growing very slowly when it fell into recession late last year. And the current slowdown came without any full shutdowns to control the pandemic.

“The road ahead looks choppy as a resurgence in Covid cases will weigh on domestic and overseas spending,” said Stefan Angrick of Oxford Economics in a report.

The Shanghai Composite Index
SHCOMP,
+2.34%

rose 2.3% and Hong Kong’s Hang Seng
HSI,
+0.65%

gained 1.3%. South Korean markets were closed for a holiday.

Sydney’s S&P/ASX 200
XJO,
-0.81%

shed 0.8%. New Zealand
NZ50GR,
+1.92%

, Taiwan
Y9999,
+1.25%

and Singapore
STI,
-0.41%

advanced.

Wall Street ended last week little-changed.

The benchmark S&P 500 index
SPX,
-0.01%

declined less than 0.1% to 3,372.85, near its record high. The Dow Jones Industrial Average
DJIA,
+0.12%

gained 0.1% to 27,931.02. The Nasdaq composite
COMP,
-0.21%

dipped 0.2% to 11,019.30.

Economists say consumer spending could be under more pressure after government aid including additional $600 weekly unemployment benefits expired. Investors are counting on Washington for another economic lifeline, but legislators are far apart on a possible package.

In energy markets, benchmark U.S. crude
CLU20,
+0.54%

gained 36 cents to $42.37 per barrel in electronic trading on the New York Mercantile Exchange. The contract slipped 23 cents on Friday to settle at $42.01. Brent crude
BRNV20,
+0.46%

, the standard for international oil prices, added 30 cents to $45.10 per barrel in London. It 16 cents the previous session to $44.80.

The dollar
USDJPY,
-0.10%

declined to 106.55 yen from Friday’s 106.59 yen.

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markets Stock

Stock Markets Fall Sharply Thursday Morning as Weak Earnings Hit Bed Bath & Beyond, Walgreens Hard – Motley Fool

A steep descent came after more bad news on the employment front.

The stock market has done well lately, but Thursday morning brought a quick reversal to its recent gains. New data showed that first-time claims for unemployment benefits remained at elevated levels, with this week’s 1.31 million number extending a streak of more than 1 million claims every single week since mid-March. Just after 11 a.m. EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) was down 409 points to 25,658. The S&P 500 (SNPINDEX:^SPX) had fallen 39 points to 3,131, and the Nasdaq Composite (NASDAQINDEX:^COMP) had dropped 69 points to 10,424.

Earnings season is just about to ramp up again, and a couple of companies got an early start on telling investors how they’re faring. Unfortunately, both Bed Bath & Beyond (NASDAQ:BBBY) and Walgreens Boots Alliance (NASDAQ:WBA) weren’t able to satisfy their shareholders. That could set a negative tone that could dampen hopes for a summer stock market rally.

Bad beyond expectations

Bed Bath & Beyond’s shares plunged 23% Thursday morning as investors reacted to its release of fiscal first-quarter results late Wednesday night. It wasn’t surprising to see the home goods retailer’s numbers come in weak, but the extent of that weakness shocked many who follow the stock.

Top of storefront showing Bed Bath & Beyond logo.

Image source: Bed Bath & Beyond.

Bed Bath & Beyond’s sales plunged by nearly half during the quarter, with temporary store closures being the primary reason for the drop. Even an 82% rise in sales from the retailer’s digital channels wasn’t enough to ease the damage. The company lost more than $300 million, which was worse than most had expected.

It’s always a bad sign when a company leads its press release with a statement on its liquidity, and that’s what Bed Bath & Beyond did. The retailer assured investors that cash and short-term investments of $1.2 billion and a new $850 million asset-backed credit facility should help it weather the pandemic’s financial impacts. But investors are more worried that the problems that existed long before the coronavirus appeared could end up being insurmountable under current circumstances.

CEO Mark Tritton tried to focus on improved performance in June after the end of the fiscal quarter. However, Bed Bath & Beyond didn’t provide an outlook for the remainder of the year, and that signals continued uncertainty about how well the retailer will be able to recover.

Walgreens doesn’t look as healthy as hoped

For Walgreens Boots Alliance, today’s 10% drop is also related to COVID-19’s impacts. Fiscal third-quarter results showed signs of weakness, and Walgreens was careful to warn that there could be further damage from the pandemic in the rest of 2020.

COVID-19 cost Walgreens between $700 million and $750 million during the quarter, with most of the pain coming from non-U.S. operations. Just about all of that reduced revenue fell down to the operating income line, costing the company about $0.61 to $0.65 per share in prospective earnings. As a result, revenue inched higher by just 0.1%, and adjusted earnings per share plunged 44% from year-ago levels.

Interestingly, Walgreens’ domestic business held up reasonably well. U.S. retail pharmacy sales were higher on increased consumer spending on brand-name drugs and specialty prescriptions. However, the U.K. market remains extremely weak, and Walgreens warned that it could prove to be a headwind to results in the fiscal fourth quarter as well.

Investors are still weighing what net impact the coronavirus pandemic will have on drugstore retail chains like Walgreens. For now, though, they’re adopting a conservative view, and the stock price is adjusting lower as a result.


Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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European markets

European markets climb despite virus fears; Wirecard down 40% – CNBC

European markets advanced on Friday morning despite surging coronavirus cases in the U.S. and further warnings about a second market meltdown from the International Monetary Fund (IMF).

The pan-European Stoxx 600 climbed 0.7% by mid-morning with industrials adding 1.6% to lead gains as all sectors and major bourses traded in positive territory.

The global market rebound could be tested by a long-feared escalation of coronavirus infections in the U.S., with Texas pausing the reopening of its economy after another record daily rise in new cases and hospitalizations. 

As of Friday morning, the U.S. has more than 2.4 million confirmed cases and more than 124,000 deaths, according to data compiled by Johns Hopkins University. However, the U.S. Centers for Disease Control and Prevention (CDC) said on Thursday that the true number of infections could be 10 times higher than the official count.

Localized restrictions have also been reimposed in parts of the Portuguese capital Lisbon, western Germany, Beijing and Victoria state in Australia.

The IMF on Thursday warned that stocks could suffer a second meltdown in the event of another global spike in infections, the reintroduction of lockdown measures or an escalation in trade tensions.

It has been a big week for corporate news in Europe. Wirecard filed for insolvency on Thursday, unable to account for a $2.1 billion black hole in its balance sheet and owing $4 billion to creditors. The German payment company’s stock tumbled another 48% early in Friday’s session to trade at just 1.83 euros per share ($2.06 per share).

Lufthansa shareholders on Thursday backed a $10 billion German government bailout package to rescue the embattled carrier after major shareholder Heinz Hermann Thiele dropped his opposition to the plan.

Meanwhile Reuters reported Thursday night that the Dutch government has agreed a 3.4 billion euro rescue deal with France for Air France-KLM, as airlines continue to reel from months of worldwide travel restrictions.

British industrial manufacturer Rotork was the biggest gainer in early trade, adding 6.2%.

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Categories
Global markets

Global markets recoil as Trump threatens US-China trade war – The Guardian

Donald Trump’s threats to reignite the US-China trade war over coronavirus has triggered another sell-off in global financial markets, as the economic costs of the pandemic continue to mount.

Against a backdrop of rising tension between the world’s two economic superpowers, share prices resumed a downward slide on Friday with the FTSE 100 falling by 144 points, or 2.5%, in London.

Selling pressure resumed on Wall Street after recording gradual gains in recent weeks amid rising hopes a turning point had been reached for the coronavirus crisis. As fears over the economic costs from the disease mount and as the White House ramped up the threat of a renewed trade conflict with Beijing, the Dow Jones industrial average fell by more than 2% in afternoon trading in New York.

Stock prices fell sharply in Japan, with the Nikkei index of leading Japanese company shares sliding by more than 500 points, or 2.8%. Markets in China, Hong Kong and South Korea were closed for public holidays.

Despite world leaders starting to outline plans to lift lockdown measures more than a month on from the depths of the crisis, the economic fallout from tight controls on social and business activity during the Covid-19 outbreak are now becoming increasingly clear.

Faced with a deep recession in an election year, Trump escalated his attack on Beijing by claiming he had seen evidence showing the virus originated in a Chinese laboratory. The US president is increasingly making China’s handling of the pandemic a major issue as his ratings sag ahead of his November re-election campaign.

Reports suggested the White House is crafting renewed import tariffs that would be applied to Chinese imports in retaliation, in a major escalation of the trade standoff.

The US and China had signed the first phase of a trade deal earlier this year to de-escalate trade tensions between Washington and Beijing that had damaged global growth last year and sapped business investment around the world.

However, progress has been derailed at the onset of a blame game over Covid-19 as the number of infections around the world climbs, with the US recording the highest official death toll of any country so far.

Analysts warned a renewed US-China trade conflict, as the world heads for the worst recession since the Great Depression in the 1930s, could inflict additional damage for jobs and growth.

Brad Bechtel, of the US bank Jefferies, said: “It seems that as we start to unwind lockdown measures and head back into election season the Trump administration will amp up the blame-game rhetoric, further alienating China.”

Joshua Mahony, senior market analyst at the financial trading platform IG, said a trade war was the “last thing markets want right now”.

As the economic costs from the coronavirus mount, unemployment in the US has surged by more than 30 million in the past six weeks. US growth figures this week showed that the American economy contracted by 4.8% in the first three months of the year, the sharpest decline since 2008.

Major companies issued a barrage of negative updates on Friday as businesses around the world count the financial costs of lockdown. Against a backdrop of plunging oil prices as demand for crude evaporates with economic activity in developed countries close to a standstill, the US oil company ExxonMobil reported a loss after $3bn was wiped off the value of its oil reserves.

In the UK, Royal Bank of Scotland took an £800m profit hit because of the pandemic’s economic effects, while Ryanair said it was planning to cut 3,000 jobs and reduce staff pay by up to a fifth in response to the crisis.

Chris Iggo, of the investment management firm Axa, said recovery momentum in financial markets over recent weeks was fading amid the growing realisation that exiting lockdown measures would be difficult.

“There is lots to ponder about how we emerge from lockdown … Social distancing and a high level of focus on health will remain features of our lives for some time to come.”

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