Record Economic Growth Expected, but Problems Remain: Live Updates

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The last major releases of U.S. economic data before the election are coming Thursday. They are expected to show that the economy has made significant gains since the spring’s pandemic-induced shutdowns, but that the recovery remains incomplete.

The Commerce Department will release its preliminary estimate of economic growth in the third quarter. Economists surveyed by FactSet expect the report to show that gross domestic product grew 7 percent, the equivalent of 30.9 percent on an annualized basis. That would represent by far the fastest growth since quarterly statistics began after World War II.

But the economy is still in a deep hole. If forecasts prove accurate, G.D.P. remains 3 to 4 percent smaller than before the pandemic. By comparison, G.D.P. shrank 4 percent over the entire year and a half of the Great Recession a decade ago.

Moreover, monthly data indicates that progress slowed over the course of the third quarter, a slowdown most economists expect to worsen in the final three months of the year as virus cases rise and federal aid to households and businesses fades.

“We’re having a record recovery, but it comes after an even more record collapse, and it looks like economic momentum is fading in the fourth quarter,” said Jim O’Sullivan, chief U.S. macro strategist for TD Securities.

Also coming on Thursday is the weekly data from the Labor Department showing new claims for unemployment benefits. Economists expect that report to show that applications for state benefits changed relatively little last week at nearly 800,000 — vastly lower than the peak of more than six million in April, but still high by historical standards.

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For a month, beginning in November, United Airlines will test passengers over the age of 2 for the coronavirus on select flights from Newark Liberty International Airport to Heathrow Airport in London, in a trial intended to help convince government officials that testing could be a crucial part of reopening international travel.

United will administer the rapid molecular Abbott ID Now Covid-19 test to people flying between Nov. 11 and Dec. 11 on Flight 14, departing at 7:15 p.m. on Mondays, Wednesdays and Fridays from Newark. Everyone hoping to be on those flights will have to test negative for the coronavirus to board the plane. Those who test positive will be isolated and asked to get in touch with their health care provider, and the airline will help them book a flight for a later date. People who do not want to take the test will be moved to another flight.

“We believe the ability to provide fast, same-day Covid-19 testing will play a vital role in safely reopening travel around the world and navigating quarantines and travel restrictions, particularly to key international destinations like London,” said Toby Enqvist, chief customer officer for United. In September, international air arrivals to New York’s five regional airports were down 82 percent compared with September 2019, according to data from the Port Authority of New York and New Jersey.

People on the flights will have to make appointments to get tested, and the airline is advising them to plan to arrive at least three hours before a flight. The testing site at Newark will be in the United Club near Gate C93.

The pilot program is intended to make passengers feel comfortable traveling again, but it won’t replace practices like mask wearing, social distancing and protocols for boarding and deplaning that have become mandatory in recent months. Passengers will still have to follow quarantine rules when they arrive in London.

The test comes on the heels of United and other airlines offering coronavirus testing to people traveling from mainland states to Hawaii, where those with a negative test can skip the state’s 14-day quarantine. Travel industry experts believe that testing will make it possible for people to bypass quarantines and make it easier for international travel to begin again, and United’s leadership team hopes that the trial will lead to more testing at airports.

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Airbus suffered a consolidated operating loss of 636 million euros, or $745 million, in the third quarter, but the European aerospace giant managed to stop bleeding cash and expected continued stability after adjusting its business in response to the coronavirus crisis, the company said Thursday.

Airbus’s chief executive, Guillaume Faury, sounded a cautiously optimistic note about the company’s future at a news briefing, a day after its rival Boeing announced plans to slash another 7,000 jobs through the end of next year, building on a much larger cut announced this spring. Boeing expects to end 2021 with about 130,000 employees, nearly 19 percent fewer than at the start of this year.

“After nine months of 2020, we now see the progress made on adapting our business to the new Covid-19 market environment,” Mr. Faury said. “Despite the slower air travel recovery than anticipated, we converged commercial aircraft production and deliveries in the third quarter and we stopped cash consumption in line with our ambition.”

Airbus earlier this year moved to curb airplane production and slash 15,000 jobs by the summer of 2021 to rein in costs as the slump in air travel from the pandemic took its toll. This week, the World Tourism Organization reported that international tourist arrivals plunged 70 percent during the first eight months of 2020, and probably would not recover for at least another year.

Airbus reported positive cash flow of €600 million in the three months to September. Its ability to maintain that trajectory would hinge on whether there was any further deterioration of the world economy and air traffic, the company said.

Mr. Faury said he expected Airbus to keep generating cash, despite new lockdowns to curb the virus announced Thursday in France and Germany, where Airbus has production operations.

The coronavirus crisis nonetheless weighed heavily on the company’s results. The plane maker took a third-quarter restructuring charge of €1.2 billion, reflecting the cost of planned job cuts.

Over the nine months of the fiscal year, Airbus had a consolidated operating loss of €2.1 billion. Third-quarter revenue fell 27 percent to €11.2 billion, reflecting a 33 percent drop in the main commercial aviation division. Airbus’s net loss from July to September was €767 million, compared with a profit of €989 million a year earlier.

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Royal Dutch Shell, Europe’s largest oil company, said on Thursday that it would raise its dividend for the third quarter by about 4 percent to 16.65 cents and keep increasing it by a similar amount annually in an effort to win back investors.

Investors have pummeled Shell’s shares since the company cut its dividend earlier this year for the first time since World War II. The share price was up about 2 percent in trading on Thursday.

Ben van Beurden, the company’s chief executive, said that Shell would be able to afford both increasing payouts to shareholders and the large investments needed to put in place his plans to shift Shell away from emissions generating oil and natural gas to cleaner energy like wind, solar and hydrogen. The idea is to make Shell “ a compelling investment case,” Mr. van Beurden said in a statement.

Shell’s adjusted earnings of $955 million for the third quarter were 80 percent lower than in the period the previous year as the company struggles with lower oil and natural gas prices stemming from the coronavirus pandemic.

Mr. van Beurden said during a news conference that Shell would sharply increase investment in what he labeled Shell’s future businesses to roughly 25 percent of the annual total of capital spending of around $20 billion, from 11 percent. Those businesses including retailing, renewable energy and electric power. Mr. van Beurden said that 2019 was probably Shell’s “high point” for oil production.

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Tiffany & Company said on Thursday that it has agreed to cut the price of its sale to the French conglomerate LVMH Moët Hennessy Louis Vuitton. The settlement would end a dispute between the companies and seal one of the luxury world’s largest deals.

Tiffany and LVMH agreed to a revised price of $131.50 a share, down from $135. That would bring the sale to just under $16 billion, or about $400 million less than before. They also agreed to settle dueling lawsuits in a Delaware court.

Directors of Tiffany met late on Wednesday to vote on the proposal.

LVMH agreed to buy Tiffany in November 2019, intent on adding the company’s diamond rings and robin’s egg blue boxes to a stable of brands that includes Louis Vuitton, Dior and Givenchy. The acquisition would give LVMH a bigger foothold in the United States, executives said at the time, as well as expose Tiffany to more shoppers in Europe and China. The move also promised to cement the status of Bernard Arnault, the LVMH chairman and chief executive, as the top deal maker in the luxury business.

But the French luxury giant grew increasingly nervous about the transaction, its biggest ever, as the pandemic devastated the retail industry. Tiffany’s sales fell by nearly 40 percent in the six months to July, and it recorded a loss of more than $30 million. The company’s shares fell far below the deal price, as investors doubted LVMH’s resolve in going through with the takeover.

A deadline to complete the deal in August was delayed by three months and then, in September, LVMH threatened to abandon the takeover altogether, accusing Tiffany of poor financial performance and breaches of the acquisition agreement. Also, and unusually, LVMH said that the French government had asked it to pause the takeover because of the United States’s trade battle with France.

Tiffany sued LVMH in a Delaware court to compel the company to complete the deal. After more legal wrangling about the timing of the trial, it was scheduled for early January. Now, that might not be needed.

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  • U.S. stock futures rose on Thursday as traders awaited an update on the health of the U.S. economy. The S&P 500 index had its worst day in months on Wednesday and a measure of volatility climbed to its highest level since June after new lockdowns in France and Germany exposed the fragility of the economic recoveries from the pandemic. European stocks tentatively reversed some of their losses on Thursday morning.

  • The Stoxx Europe 600 index rose 0.3 percent, after tumbling nearly 3 percent on Wednesday. In Germany, the DAX index climbed 0.4 percent and both the CAC index in France and the FTSE 100 index in Britain gained 0.3 percent. In Japan, the Nikkei 225 index closed 0.4 percent lower and the yen was 0.2 percent stronger against the U.S. dollar after the Bank of Japan kept policy the same but cut its forecasts for economic growth and inflation.

  • A report on U.S. gross domestic product data for the third quarter, to be released Thursday, is expected to show the fastest quarterly increase on record but reveal an incomplete recovery, with the economy still several percentage points smaller than before the pandemic. Investors were also watching for separate data on new claims for state unemployment benefits in the past week.

  • The European Central Bank will announce its latest policy decision later on Thursday. The resurgence of the pandemic in the eurozone has led governments in its largest economies to reinstate widespread lockdowns, shuttering hospitality and leisure businesses and asking people to stay at home through November. This could add pressure on policymakers to increase monetary stimulus.

  • Shares in Lloyds Banking Group rose 3 percent after the lender reported a pretax profit of more than 1 billion pounds ($1.3 billion) for the third quarter amid a surge in demand for mortgages and said it expected to record fewer losses on its loans. Shares in Royal Dutch Shell climbed 2 percent after the oil and gas company returned to profit in the third quarter and said it would increase dividends to shareholders.

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France was bracing for a fresh blow to its beleaguered economy as President Emmanuel Macron reimposed a nationwide lockdown through December to prevent an alarming surge of coronavirus cases from spiraling out of control.

In a televised address on Wednesday, Mr. Macron said the virus had rapidly resurfaced “everywhere” in France, and that requiring businesses to close and people to shelter at home was the only solution to curbing the pandemic. He pledged substantial financial support to prevent a wave of bankruptcies and layoffs from rippling through the eurozone’s second-largest economy.

“You can’t have a prosperous economy when you have the virus circulating throughout the country,” he said.

The new lockdown, which will begin Thursday night, would still allow essential sectors to keep operating, and it won’t be as severe as the country’s two-month nationwide quarantine earlier this year, when the entire country was shut in, Mr. Macron said.

Still, he acknowledged it would have a severe impact on businesses that have already grown cash poor because of previous restrictions to curb the virus.

France is expected to report on Friday a jump in growth during the third quarter, when summer vacations helped fuel a temporary economic revival.

But those figures will likely be eclipsed by the new lockdown, economists warned. The government has calculated that 60 billion euros is lopped off economic activity for every month in which a total lockdown is active.

“Macron did not want to be here,” Mujtaba Rahman, the managing director for Europe at London-based Eurasia Group, said in a note to clients ahead of the announcement. “He had hoped by now to be celebrating an economic recovery from the first lockdown.”

Vulnerable sectors are likely to sink further, including retail, aviation, tourism and hospitality, which make up over 10 percent of economic activity. In Paris alone, for example, the hotel occupancy rate had already plunged to 26 percent in September, when a new curfew was put into effect, according to MKG, a French consulting firm. That figure is likely to worsen.

Bars, restaurants and nonessential businesses will close, although students will continue to go to school. Factories, farms and construction sites will stay open, along with some public services, to limit potentially wider economic damage. Earlier Wednesday, Germany announced the closure of restaurants and bars, starting Monday.

French lawmakers last week approved a fresh 100 billion euro package to bolster the country’s economy, on top of nearly 500 billion in financial aid announced during the previous lockdown. Businesses hardest hit by the new confinement will get 10,000 euros per month, and their payrolls will effectively be nationalized so that employees who cannot work may keep their jobs.

Firms that can’t pay rent will be able to obtain waivers, while small- and medium-sized businesses would get additional financial help, Mr. Macron said. Remote work will be “the go-to solution” for all companies, Mr. Macron said.

“The economy must not come to a halt,” he said.

  • Ford Motor reported a big jump in profit in the third quarter after a yearslong restructuring and a rebound in sales after the pandemic shut down dealerships and factories for about two months this spring. The automaker earned $2.4 billion in the three months ended in September, up from $425 million for the same period a year earlier. It lost money overseas, but the company’s North American operations and its division that offers credit did well.

  • The online lender Social Finance, better known as SoFi, received tentative approval on Wednesday for a national banking charter, which would let the company hold deposits and offer consumers a broader range of financial services. The Office of the Comptroller of the Currency granted SoFi preliminary approval for a charter, subject to SoFi’s compliance with additional regulatory requirements. In particular, SoFi must apply for Federal Reserve membership and obtain deposit insurance from the Federal Deposit Insurance Corporation. Those next steps will take several months, at the least; the earliest SoFi could actually start running a bank would be some time next year.

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