Asian stocks were mixed after the Fed, with Japan’s Nikkei giving up early gains to close down 0.26% while Hong Kong’s Hang Seng was flat, South Korea’s Kospi edged 0.17% higher and Australia rose 0.74%.
Futures are pointing to a flat to slightly higher open on European stock markets.
Introduction: Lloyds, Shell post big losses
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, and business.
The US Federal Reserve maintained its super-easy stance last night, vowing to keep interest rates at the 0-0.25% level “until it is confident that the economy has weathered recent events and is on track to achieve our maximum-employment and price-stability goals”.
It also announced that it would be extending its emergency lending programmes. The dollar weakened further on this, falling to a new two-year low against the euro, while gold prices set a new record close.
As expected, the Fed made no changes to policy but seemed to place more emphasis on fiscal measures.
James Knightley, chief international economist at ING, notes:
The only major statement change is that at the beginning of the second paragraph it adds an explicit warning that “the path of the economy will depend significantly on the course of the virus”.
Fed chair Jerome Powell emphasised how “critical” fiscal support has been to the recovery so far in a plea for an agreement between the Republicans and Democrats on another fiscal package. Pretty obviously, interest rates are not going anywhere for a very long time and the bond markets and dollar are reflecting this.
It’s a big day for GDP data today, from Germany and the US. The German economy is set to have contracted by 9% in the second quarter while the US economy is forecast to have shrunk by 34.1%, which would be the worst decline since the Great Depression.
And there’s a slew of UK corporate news out this morning. Lloyds Banking Group has announced a much bigger-than-expected loss in the April to June quarter.
Lloyds Banking Group plunged to a second quarter loss after putting aside £2.4bn for bad debts, forcing the bank to acknowledge that supporting customers through the Covid-19 crisis would come at a cost, writes our banking correspondent Kalyeena Makortoff.
Britain’s biggest high street lender reported a loss of £676m for the three months to June, down from a £1.3bn profit during the same period last year. Analysts had been expecting a £31m loss.
Royal Dutch Shell has also reported a huge loss of $18.1bn for the second quarter, after a record writedown on the value of its oil and gas assets due to the collapse in global market prices triggered by the coronavirus, writes our energy correspondent Jillian Ambrose.
- 8:55BST: Germany unemployment for July (forecast: 6.5%)
- 9am BST: Germany GDP for second quarter (forecast: -9%)
- 9am BST: Italy unemployment for June (forecast: 8.6%)
- 1:30 BST: US GDP for second quarter (forecast: -34.1%)
- 1:30 BST: US Jobless claims for week to 25 July (forecast: 1.45m)