Negotiations on a virus relief package for the US ended Thursday night with the White House and Democrats making no headway on resolving their biggest difference, bringing the talks to the brink of collapse. It was unclear whether the two sides will resume negotiations today. The number of Americans seeking jobless benefits for the first time fell last week but a staggering 31.3 million people still received unemployment checks in mid-July, suggesting a resurgence in COVID-19 cases is hampering hiring. US non-farm payrolls data later today is expected to show an increase of 1.58 million in July, compared to 4.8 million in June.
Export demand, especially from China, helped Germany’s manufacturers recover from the shock of the coronavirus lockdown for the second month running in June, though output was still well below the level of a year ago. China, the first country to be struck by the pandemic, bought 15.4% more from Europe’s top exporter than in June 2019. On the other hand, demand from the United States shrank 20.7%. Trade relations with pre-Brexit Britain were also hit with EURGBP changing hands above 92 pence. Industrial output from Europe’s largest economy grew 8.9% on the month, fuelled in part by a 14.9% increase in exports - the largest month-on-month increase in almost 30 years. Germany’s automotive industry recorded a 54.7% increase in output over the previous month, though volumes were still 20% lower than in February, the last month before the pandemic struck.
European shares slipped after their Asian peers were hit by yet another escalation in US-China tensions, but an upbeat earnings season and hopes of more stimulus kept most regional indexes still on course for weekly gains. The US meanwhile moved to ban transactions with popular Chinese apps WeChat and Tiktok, knocking 1% off Asia Pacific shares but also affecting Hong Kong, US and EU-listed investors in those stocks. The pan-European STOXX 50 index inched lower this morning with banks, automakers and oil and gas firms leading declines. Hong Kong’s Hang Seng fell 1.8% and Chinese CN50 lost almost 2%. Nevertheless, China’s trade data showed exports surged 7.2% in July from a year earlier, way above forecasts of a 0.2% fall. The S&P 500 gained 0.64% and Nasdaq added 1%, marking the fourth straight day of record peaks.
The US dollar rebounded whilst other major currencies weakened after the US went ahead with a transaction ban of two popular Chinese apps. The euro retreated from its highs and last traded down 0.3% at $1.1828, while the British pound also fell 0.2% to $1.3104. The Japanese yen was the only outlier, last trading flat at 105.59. The Australian dollar was last down 0.3% at 0.7215. Gold hit a record high of $2,075.2 per ounce before succumbing to profit-taking to slip to $2,060. Silver dropped 1.7% to $28.393 per ounce following its ballistic rise to a seven-year high of $29.838. The Chinese yuan eased 0.2% to 6.9607 per dollar.