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What to watch: China avoids recession, RBS name change, and Ladbrokes woes

Oscar Williams-Grut, Edmund Heaphy and Tom Belger
·6-min read
A resident wearing a mask to curb the spread of the coronavirus walks past smiley faces outside a mall in Beijing Thursday, July 16, 2020. China's economy rebounded from a painful contraction to grow by 3.2% over a year earlier in the latest quarter as anti-virus lockdowns were lifted and factories and stores reopened (AP Photo/Ng Han Guan)
A resident wearing a mask to curb the spread of the coronavirus walks past smiley faces outside a mall in Beijing, China. Photo: Ng Han Guan/AP

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

China avoids recession

China has avoided recession after posting better-than-expected second quarter GDP growth.

GDP grew by 11.5% month-on-month in June, compared to expectations of a 9.6% rise. The bounce back erased the 10% fall in GDP reported in the first quarter of 2020 as China grappled with the COVID-19 pandemic.

Chinese markets sold-off sharply despite the numbers. China’s Shanghai Composite dropped (000001.SS) 4.5% and the Shenzen Component (399001.SZ) fell 5.3%. Retail sales fell 1.8% in June, against a forecast of 0.3% growth.

Analysts suggested the fall could be linked to worse-than-expected retail sales numbers and scepticism around the accuracy of China’s data.

“If you had any doubts about the accuracy of China’s GDP numbers before this morning’s announcement, these figures only serve to reinforce that scepticism, as they appear to completely diverge from most of the data that has come out of China since April,” said Michael Hewson, chief market analyst at CMC Markets.

“In terms of the trade data, both imports and exports have been weak, while retail sales have also struggled.”

ECB in focus

The European Central Bank (ECB) will announce its latest policy decision at 12.45pm UK time on Thursday.

The central bank is expected to leave the headline interest rate unchanged at 0% and Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said the announcement was likely to be a “snoozer.

“The ECB will do more, but not today,” he told clients in a note.

Deutsche Bank strategist Jim Reid wrote in an early morning note to clients: “Though recent comments from ECB officials have shown signs of an emerging optimism, our economists don’t believe these signal a change in the policy stance, and expect the commitment to ‘substantial monetary policy stimulus’ to be repeated.”

The euro was flat against the dollar (EURUSD=X) and up 0.2% against the pound (EURGBP=X) in early trade.

Stocks pause ahead of rates decision

European stock markets opened lower on Thursday, ahead of the latest monetary policy decision from the European Central Bank (ECB) later today.

The FTSE 100 (^FTSE) slipped 0.4%, the CAC 40 (^FCHI) dropped 0.8%, and the DAX (^GDAXI) fell 0.7% shortly after the open.

US futures were trading lower. S&P 500 futures (ES=F) were down 0.5%, Dow Jones Industrial Average futures (YM=F) were down 0.5%, and Nasdaq futures (NQ=F) were 0.8% lower.

Weekly jobless claims numbers will be published in the US later on Thursday, with economists expecting 1.2 million new claimants over the last week and 17.6 million continuing claims. Retail sales are also due, with expectations of a 5% rise in spending in June.

Unemployment better-than-expected

UK employers have shed almost 650,000 jobs since March, as the coronavirus has hammered Britain’s labour market.

Office for National Statistics (ONS) figures on Thursday showed the number of employees on UK payrolls in June continuing to drop as the economy buckles under the weight of the pandemic.

The official unemployment rate remained near record lows at 3.9% in May, despite the crisis.

“In the face of the sharpest downturn in recorded economic history, the damage to the labour market is remarkably limited,” said Andrew Wishart, UK economist at Capital Economics.

RBS name change

Royal Bank of Scotland (RBS.L) will officially change its corporate name to Natwest Group on 22 July.

The banking group first announced plans to change its name in February. The company has been gradually moving away from the RBS brand since the financial crisis, which tarnished RBS’ reputation badly.

The name change is a corporate move and RBS customers will not see any immediate changes.

Ladbrokes woes

Ladbrokes owner GVC (GVC.L) said on Thursday that veteran chief executive Kenneth Alexander will retire this week as part of long-term succession arrangements, the same day the company reported a coronavirus-related collapse in gaming revenue.

GVC chief operating officer Shay Segev will take over from Alexander, who has been in the top job since 2007, shepherding it from a small betting firm into a global giant listed on London’s FTSE 100 index (^FTSE).

Under his watch, GVC acquired Sportingbet and the Ladbrokes Coral Group, as well as several gaming brands such as Partypoker and Cashcade.

His departure comes at a difficult moment for the company, which on Thursday said gaming revenue had plummeted by 22% in its most recent quarter.

Companies have taken on £35bn of unsustainable debt

A quarter of a million companies are at risk of collapsing under £35bn ($44bn) of unsustainable debt taken on during the COVID-19 pandemic, according to a new report, putting up to three million UK jobs at risk.

Banking lobby group TheCityUK and consultants EY on Thursday published a 144-page report analysing the financial challenges facing British businesses in the wake of the COVID-19 pandemic.

The report, titled “Recapitalising Businesses post COVID-19,” warns that around 780,000 businesses, most outside of London, have taken on a combined £35bn of debt that is unsustainable, meaning businesses will be unlikely to keep up repayments at the currently agreed level.

The analysis suggests many of these firms could collapse without a coordinated response, putting three million jobs at risk.

Corporate collapse on this scale would incur billions of pounds in costs to the taxpayer, as the government has provided partial or total state guarantees on the private sector loans.

Top court rules against key EU-US privacy agreement in Facebook case

The European Union’s top court on Thursday found that a key framework used to transfer user data by technology giants to the US was invalid, ruling that it does not provide adequate privacy protection to EU citizens.

The European Court of Justice nevertheless sided with Facebook (FB) by ruling in favour of key contracts used to transfer the data of the bloc’s citizens to other countries, even as it potentially opened up the social media giant to further challenges.

The invalidation of the framework, known as the Privacy Shield, is a blow for the EU, which hoped that the framework would afford EU citizens the protections outlined within the bloc’s charter of fundamental rights while still allowing data transfers to firms in the US.