1. UK economy unlikely to recover until 2024 — Monday

In its latest forecast, EY Item Club stated it does not expect the UK economy to return to its 2019 level until late-2024 as hopes of V-shaped recovery diminish. They have also forecasted that UK GDP will contract 11.5% in 2020, a downgrade from the 8.0% it predicted in June and from the 6.8% in April.

However, growth prospects for 2021 have been raised slightly, with the economy now forecast to grow 6.5% over the year, up from the 5.6% predicted in June’s forecast. Howard Archer, chief economic advisor to the EY ITEM Club stated, “Even though lockdown restrictions are easing, consumer caution has been much more pronounced than expected. We believe that consumer confidence is one of the key factors likely to weigh on the UK economy over the rest of the year, alongside the impact of rising unemployment and low levels of business investment.”

They have also predicted that the unemployment rate will rise to around 9.0% in late-2020 and early-2021, up from 3.9% in the months to May which will lead to subdued levels of consumer spending. In addition to this, they expect business investment to fall 22.3% over 2020 and net trade to make a negative contribution of 1.1% to GDP this year.

2. Business optimism in Germany sees a rise in July — Monday

The IFO’s Business Climate Index for Germany climbed to 90.5 in July (a five- month high), from 86.3 in June as Europe’s largest economy continues to recover from the pandemic. Confidence has recovered from an all-time low reached in April and July’s figure beat market expectations 89.3.

Sentiment also improved among manufacturers (-12.0 vs -22.7), service providers (2.0 vs -6.0) and traders (-5.2 vs -14.2). Companies in the construction sector were also happier with their current situation in July, and less pessimistic about the future. The continuation of this optimism depends on Germany avoiding a second wave of infections, as they recorded its highest daily new-case tallies since mid-May on Friday and Saturday of last week.

3. Fed extends emergency lending support programme — Tuesday

The Federal Reserve has extended most of its emergency lending programs (set to expire in September) by three months through December 31 to aid the US economy’s recovery. The Fed stated, “The three-month extension will facilitate planning by potential facility participants and provide certainty that the facilities will continue to be available to help the economy recover from the Covid-19 pandemic.”

The extension applies to seven programmes including the Main Street Lending Programme (which provides lending to small and medium sized businesses) and the Paycheck Protection Programme. The programmes serve two main functions. A few play a lender-of-last-resort function, allowing the Fed to flood short-term funding markets with loans. Those programs have seen sustained declines in demand over the past two months, reflecting how severe funding strains have been tamed for now. The second category of programmes are designed to support lending for an array of credit markets, including debts of large, investment-grade corporations and short-term borrowing for more than 250 state and municipal governments.

4. ECB recommends Eurozone banks not to pay dividends until January 2021 — Tuesday

The European Central Bank (ECB) has extended its recommendation to banks to not pay dividends and not buy back shares until 1 January 2021. The recommendation is aimed at preserving banks’ capacity to absorb losses and support the economy in an environment of exceptional uncertainty. Moreover, ECB also issued a letter to banks asking them to be extremely moderate with variable remuneration payments, for example by reducing the overall amount of variable pay. Where this is not possible, the ECB recommended banks should defer a larger part of the variable remuneration and consider payments in instruments, e.g. own shares. Andrea Enria, chair of the ECB’s supervisory board, said he accepted the delay to dividends would upset bank shareholders but added the measures were “exceptional and temporary”.

At the Bank of England’s urging, HSBC Holdings Plc, Barclays Plc and Lloyds Banking Group Plc, among other large firms, suspended payouts earlier this year. Both central banks had told lenders in March to conserve capital as lockdowns to combat the pandemic brought the economy to a standstill.

5. Gold hits record high as coronavirus fears heighten — Wednesday

Gold hit a record high on Wednesday and came close to hitting $2,000 for the first time. The spot gold price increased as much as 2% to $1,980.57 a troy ounce in Asia before falling back in the London session to $1,955, according to the Financial Times. Gold prices have risen 28% since the start of the year. Silver also rose as much as 6.4% to $26.19 an ounce in Asia before tumbling to $24.34. This volatility reflected investor uncertainty ahead of the Federal Reserve’s next policy pronouncements which were due to happen the same day.

The metal is serving as an attractive hedge as US Treasury yields that strip out the effects of inflation fall below zero. Moreover, with a global dovish monetary policy and the central bank stimulus at full pace, investors hope that the gold price will continue its rally upwards.

6. US economy suffers worst quarterly contraction on record — Thursday

The US has suffered its worst economic decline on record as its GDP fell at an annual rate of 32.9% in the second quarter between April and June. The fall came as large parts of the US economy shut down in March in an attempt to halt the spread of the virus across the country. The closures led to a historic number of layoffs and sent unemployment soaring to levels unseen since the 1930s Great Depression. The GDP estimate showed huge drops in both personal consumption, down 34.6% and private domestic investment, down 49%.

Unemployment claims also saw their first increase in nearly four months. Claims began declining from a high of 6.9 million in March but jumped back up to 1.43 million on Thursday again, suggesting a slowdown in the pace of the labour market recovery in the US.

This led to US stocks declining following day — the S&P 500 was down 1.5% at around 10am eastern time on Friday, while the Dow Jones was down 1.9% and the Nasdaq lost 1.1%.

The most likely scenario depicted by economists now is that a significant bounce back does arrive in the third quarter given the depth of the drop in the second. However, even if this does occur, the unemployment rate could stagnate or even rise again as fresh lockdowns cause more businesses to lay off workers and widespread uncertainty over the future may keep business investment low.

7. Bank stocks tumble after earning reports are released — Thursday

Bank stocks fell on Thursday as Lloyds Bank announced higher than expected loss provisions and Standard Chartered and BBVA reported a decline in profits which sparked a sector-wide sell-off.

Lloyds bank, Britain’s largest retail bank announced it was setting aside another £2.4bn to deal with future bad loans. The bank’s shares tumbled more than 7% on Thursday to their lowest level in eight years after the annoucement. The bank also reported a pre-tax loss of £676m in the second quarter, compared with a pre-tax profit of £1.3bn a year ago. Standard Chartered delivered better-than-expected results but still saw profits fall by 40% in the first half of the year. In Madrid, BBVA fell 8.8% after it said its second quarter profit had halved. Performance was dragged down by a €644m charge to cover COVID-19 loan losses. This came a day after Barclays missed its half-year results expectations and Santander announced the biggest loss in its 163-year history.

The Euro Stoxx Bank index which tracks Europe’s biggest banks, fell over 3%. The MSCI European Banks index which includes British as well as European lenders, fell 2.6%. Falling financial stocks and broader concerns about Europe’s economy, dragged major stock markets lower. The FTSE 100 was down 2% by midday on Thursday, while the German Dax had lost almost 3%. Spain’s IBEX 35 had also fallen 2.7%.

8. French and German economy see big contractions in their second quarter— Friday

The French economy contracted by 13.8% in the second quarter of 2020, as household consumption, company investment and trade all collapsed under a nationwide lockdown imposed to contain the coronavirus pandemic. The decline in Q2 was much worse than in Q1 when French GDP shrank by 5.9% as the pandemic began to take hold. However, the contraction was lower than the 17% predicted earlier this month by national statistics office INSEE and the 15.3% by analysts polled by Reuters.

Germany also suffered from a record-breaking economic contraction in the second quarter of 2020 due to lockdown measures. Germany’s GDP fell 10.1% when compared with the previous quarter, which represents the largest decline since records began in 1970. The GDP fall is roughly double the contraction that the country’s economy experienced during the global financial crisis in 2008, according to the federal statistics agency . However, they are still expected to recover faster than other major European economies.

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