Friday, May 24, 2024

Stocks sink after US, Germany report record economic drops

by Associated Press

NEW YORK (AP) — Stocks are falling in early trading on Wall Street Thursday after the U.S. and Germany reported record contractions in their economies in the second quarter as the coronavirus pandemic led to widespread shutdowns. Markets sank further after President Donald Trump suggested that he might seek to delay the presidential election, although the election date is set by Congress. The S&P 500 fell 1%, and European markets posted larger losses. The U.S. economy shrank at a 32.9% annual rate in the April-June period, its worst quarter in history by far. Also, another 1.4 million laid-off Americans applied for unemployment benefits last week.

THIS IS A BREAKING NEWS UPDATE. AP’s earlier story appears below.

Global markets and U.S. stock futures fell Thursday after the Federal Reserve warned the coronavirus pandemic might threaten the modest economic recovery and kept interest rates near zero.

The drop in stocks accelerated in Europe after Germany said its economy shrank by 10% in the second quarter from the previous three-month period. U.S. GDP data is due later Thursday, while the Europe-wide figures will be released Friday.

Lower interest rates and investor optimism about a possible coronavirus vaccine have helped global markets recover most of this year’s losses. But analysts say it might be too early to bet the recovery will persist, given the rising infection numbers in the United States, Brazil and other countries.

On Wednesday, Fed Chairman Jerome Powell warned that rising U.S. cases, which have led some state governments to reimpose anti-disease measures, threaten the modest recovery from the pandemic.

The Fed said it would keep buying $120 billion of Treasury and mortgage bonds every month to encourage borrowing and spending, but Powell said Congress needs to take action. Legislators have yet to agree on aid after $600 in weekly unemployment benefits for millions of Americans run out this week.

“The current situation is all about money in consumer pockets, which is precisely why fiscal policy is so much more important,” Stephen Innes of AxiTrader Corp. said in a report.

In Europe, Frankfurt’s DAX retreated 2.4% to 12,511 after the GDP figures came in below expectations. Economists note that the second quarter was the economic low point and recent data has shown a relatively strong bounce back since then. Still, the second quarter drop was the sharpest on record for Germany, Europe’s largest economy, and suggests the eurozone figures due Friday could also be worse than predicted.

The CAC 40 stock index in France declined 1.2% to 4,900, and the FTSE 100 in London lost 1.6% to 6,036.

On Wall Street, futures for the benchmark S&P 500 index and the Dow Jones Industrial Average were both 0.8% lower.

In Asia, the Shanghai Composite Index lost 0.2% to 3,286.82 and the Nikkei 225 in Tokyo gave up 0.3% to 22,339.23.

The Hang Seng in Hong Kong tumbled .07% to 24,710.59 after data Wednesday showed the territory’s economy shrank by 9% in the quarter ending in June.

The Kospi in Seoul advanced 0.2% to 2,267.01 and Sydney’s S&P-ASX 200 added 0.7% to 6,051.10. India’s Sensex shed 0.6% to 37,847.47.

Also Thursday, Japan reported retail sales rose by a better-than-forecast 13.1% in June over the previous month.

That means retail sales in one of the world’s biggest markets were only 0.9% lower than in February before the crisis hit, Tom Learmouth of Capital Economics said in a report.

In the United States, some companies are reporting quarterly results that exceed forecasts, though they still are well below pre-virus levels.

On Wednesday, Advanced Micro Devices rose 12.5% after it reported stronger profit than Wall Street expected. Starbucks gained 3.7% after it reported a loss that wasn’t as bad as analysts were expecting. In Europe, Airbus shares were up after it said it had acted aggressively to support cash flow.

Eastman Kodak surged 318.1%, gaining for a second day after the company won a $765 million government loan to launch a new business unit making pharmaceutical components. Shares rose to $33.20 from $2.62 on Monday.

Gold dropped to $1,944.20 per ounce from Wednesday’s $1,953.40.

Benchmark U.S. crude lost 62 cents to $40.65 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained 23 cents on Wednesday to $41.27. Brent crude, used to price international oils, shed 53 cents to $43.56 per barrel in London.

The dollar rose to 105.07 yen from 104.90 yen on Wednesday. The euro fell to $1.1753 from $1.1789.

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