Time for a recap.

World stock markets have recorded their strongest quarter since the financial crisis, despite worrying signs that the Covid-19 pandemic is not under control in the US.

Britain’s FTSE 100 posted a 9% rally for April-June, although this lagged behind rivals such as Germany’s DAX which managed a sizzling 24%.

The MSCI All Country World Index gained 18%, partly thanks to Wall Street which has seen its best quarter since 1998.

Bank of England chief economist Andy Haldane had cheerful news - he thinks the UK is in the early stages of a V-shaped recovery. But, Haldane also warned that we could suffer a repeat of the unemployment woes of the 1980s.

The airline industry is reeling from two job cut blows tonight. Airbus is slashing 15,000 positions, while easyJet is cutting around 4,500 jobs and closing its bases at Stansted, Southend and Newcastle airports.

Britain’s retailers also had a rough day, with furniture chain Harveys and shirt maker TM Lewin both calling in administrators. That has cost 800 jobs, with another 1,300 at risk.

There was some encouraging economic news, with US consumer confidence jumping and Chinese factories posting another month of growth.

But we also learned that the UK economy shrank even more sharply than previously thought in January-March. GDP contracted by 2.2% during the quarter, as the Covid-19 pandemic struck, which is the joint-worst performance since 1979.

Goodnight. GW

A late newsflash: Aerospace firm Airbus has announced it is cutting 15,000 jobs worldwide, including 1,700 in the UK.

Airbus says the cuts are necessary to address the Covid-19 pandemic, which has hammered demand for new jets by around 40%.

In a statement, Airbus says it doesn’t expect demand to fully recover for perhaps five years.

The commercial aircraft business activity has dropped by close to 40% in recent months as the industry faces an unprecedented crisis. Commercial aircraft production rates have been adapted accordingly. Airbus is grateful for the government support that has enabled the Company to limit these necessary adaptation measures.

However with air traffic not expected to recover to pre-COVID levels before 2023 and potentially as late as 2025, Airbus now needs to take additional measures to reflect the post COVID-19 industry outlook.

It is planning to cut 5,100 positions in Germany, 5,000 in France, 900 in Spain and 1,300 at other sites, on top of 1,700 in the UK.

Airbus has two major sites in Britain: Broughton, in North Wales, and Filton, near Bristol. In total it employs around 13,000 people in the UK.

For much of this year, the markets have been as volatile, dramatic and occasionally scary as many of us can remember.

The financial cost is insignificant compared to the human toll of Covid-19, but it’s cler that a lot of money was wiped off pensions plans and ISAs in Q1, and quite a bit was wiped back on in Q2.

So what might the rest of the year hold? David Folkerts-Landau, Deutsche Bank’s chief economist, predicts a lot more drama - especially in America, as states struggle to handle the pandemic.

Folkerts-Landau warns:

June has seen a renewed wave of the virus in some US states and it is starting to weigh on economic activity. The US is in the midst of two crises, a health crisis and a political crisis. The intense polarisation of US political life and the outbreak of racial strife is making the implementation of a consistent and comprehensive health care policy difficult. We believe that it will take relatively longer for the US to fight its way through the health crisis than it will for Europe.

He also sees political drama on both sides of the Atlantic:

In the coming months political developments will also return to the fore. EU leaders will shortly meet once again to discuss proposals for a recovery fund featuring joint debt issuance. We believe that the EU has always emerged strengthened from its various crises, be they foreign exchange or debt based. Each crisis has led to institutional improvement and the current one will extend this trend. The Recovery Program of the EU Commission, to be financed by borrowing in global markets, and serviced by funds raised through centralised taxation is a historic step forward. A step that will strengthen the EU and help it meet future challenges.

Meanwhile for the rest of the year, trade negotiations between the EU and the UK continue in earnest, ahead of a year-end deadline when the transition period concludes. And in November, the US presidential and congressional elections could lead to sizeable shifts in both economic and foreign policy, as former Vice President Biden seeks to win the White House from President Trump.

It’s unlikely that H2 will be as eventful as H1 but we’re pretty confident it won’t be dull.

Newsflash: Britain’s stock market has just recorded its best quarterly gains in a decade.

The FTSE 100 has rallied by 9% since the start of April, bringing some relief to investors after the crash which began in late February, and ran until mid March.

Stocks surged strongly in April, and in May, on hopes that the UK economy would recover from the worst recession in generations.

It’s notable that shares rebounded even as the death toll from Covid-19 grew steadily in the UK, and around the globe.

The huge money-printing programmes launched in the UK, US and the eurozone helped to support asset prices, while new low-cost loans for struggling companies calmed fears of widespread defaults. Fiscal programmes, such as the UK’s furlough scheme, also helped companies keep running.

That is the blue-chip index’s fifth best quarter in the last 20 years, and trims its losses for 2020 to “only” 18%.

The index ended June with a whimper, though, losing 56 points or almost 1% to 6,169.

Newsflash: European equities have posted their best quarter since 2015.

The Stoxx 600, which contains Europe’s biggest 600 listed companies, has just closed 0.3% higher tonight, the last day of June. That means it has surged by 12.64% during the last quarter.

However, the Stoxx 600 is still down by 13% for this year.

Germany’s DAX had a particularly strong quarter, surging by 24% since the start of April.

German stocks rebounded strongly in recent weeks as Berlin agreed massive stimulus measures to fight the Covid-19 downturn, and as German shops and offices reopened for business in May.

That means the DAX is only down 7% this year, the best performance of any major European exchange.

France’s CAC jumped by around 12.5% in Q2, leaving French equities down almost 18% for the year.

Italy’s FTSE MIB has gained 13.9% in the last three months, but is still down 17.4% for this year after a horrendous plunge in February and March when the pandemic struck.

Here’s our news story on Andy Haldane’s cautious optimism for the UK’s economic recovery:

The Bank of England’s chief economist has said the UK economy is on track for a V-shaped recovery from the Covid-19 crisis, but warned that a surge in unemployment could nudge the country off course.

Andy Haldane said economic activity had steadily recovered since hitting a trough in April, when the UK was a month into strict lockdown measures that forced mostbusinesses to close.

Speaking during a webinar on Tuesday, Haldane said: “There is a debate about which letter of the alphabet will best describe the path of the economy, with some scepticism about the V-shaped scenario path in the Bank’s May monetary policy report.

“It is early days, but my reading of the evidence is so far, so V.”

The Canadian economy has suffered its biggest ever monthly contraction.

Canadian GDP shrank by 11.6% in April alone, the most on record, as the Covid-19 lockdown had an all-too predictable impact on the economy.

That’s better than feared, and an improvement on the UK’s 20% slump during the same month. It follows a 7.5% contraction in March, as non-essential Canadian businesses shuttered.

And while the worst may be over, the road to recover will be long and bumpy. Statistics Canada says its initial flash estimate for May points to growth of 3.0 per cent, so not the V-shaped recovery policymakers are hoping for.

You can read Andy Haldane’s speech yourself, here. Haldane-watchers will be disappointed that there are no references to cricket, or dogs chasing frisbees.

Here’s some early reaction, first from economist John Hawksworth:

Sam Tombs of Pantheon Economics agrees that there are plenty of risk ahead, which could force the Bank to act again.

Here’s Andy Bruce of Reuters:

And Andy Verity of the BBC:

The Bank of England’s chief economist has warned that Britain must avoid a return to the mass unemployment that scarred the country during the Thatcher government.

In a webinar this morning, Andy Haldane argues that the UK economy is now recovering from the deep economic shock caused by Covid-19.

Both the UK and the global economies are already well into the “second quarter” – the recovery phase. The UK’s recovery is more than two months old, while the global economy is perhaps three months into its recovery, in both cases from an exceptionally low starting point.

Haldane cites various ‘fast-track’ indicators, such as payment data, energy demand, traffic flow, high street footfall, and consumer spending:

He also points to the monthly Purchasing Manager Index surveys which show a pick-up in growth in China (as we saw this morning).

This, Haldane argues, suggests we actually are experiencing a V-shaped recovery, after the worst four-month slump on record from January-April:

There is a debate about which letter of the alphabet will best describe the path of the economy, with some scepticism about the V-shaped scenario path in the Bank’s May Monetary Policy Report (MPR). It is early days, but my reading of the evidence is so far, so V.

But he also cites the risk of a surge in unemployment, if firms decide to lay staff off when the government’s furlough scheme ends.

Haldane (the only Bank policymaker not to vote to extend its stimulus programme this month) says:

Looking ahead, risks to the economy remain considerable and two-sided. Although these risks are in my view slightly more evenly balanced than in May, they remain skewed to the downside. Of these risks, the most important to avoid is a repeat of the high and long-duration unemployment rates of the 1980s, especially among young people.

Like the rest of the MPC, I stand ready to adjust monetary policy, at speed, if needed to support the economy and return inflation to its target on a sustainable basis.

He also points out that 9 million workers are currently furloughed, 2.5m self-employed people are receiving support, and eight million are working fewer hours than usual.

Taken together, this means that perhaps as much as half the UK workforce is currently either unemployed or underemployed. This, too, has no historical precedent.

The recovery in the stock market is partly thanks to stimulus measures such as the UK government’s Job Retention Scheme - without which many firms would have slashed their workforces.

New figures show that this scheme is now supporting 9.3m workers, who are currently furloughed on 80% of their wages (up to £2,500 per month). That’s an increase of around 100,000 in the last week, suggesting that some firms are still struggling even as the economy reopens.

The total cost of the furlough scheme has now reached £25.5bn. It runs until the end of October, but today is the last day to add new workers to the list. The scheme is also being ‘tapered’ from August, with employees picking up more of the wage bill.

Air cargo demand remained extremely weak in May, according to the latest data from industry body IATA.

IATA reports that cargo tonne-kilometres (a measures of how much stuff was flown around the world) slumped by 20.3% last month compared to the previous year.

Global capacity contracted by 34.7% during the month, as many aeroplanes remained grounded during the pandemic.

IATA says that activity appears to be picking up from Aprils lows, as some economies eased out of their lockdowns. However, it’s still hard to predict the length, or severity, of the recession.

The last six months have been pretty grim for savers.

The emergency cut in UK interest rates, to just 0.1%, has prompted banks and building societies to slash their own rates - meaning income on savings is extremely thin.

Comparison site Moneyfacts.co.uk has calculated that variable rate savings accounts have dropped by the largest amount seen over the first six months of any year since 2009.

Rachel Springall, finance expert at Moneyfacts, says savers will feel “frustrated and disappointed”, as their incomes are hit by the Coronavirus pandemic and base rate cuts.

These rate cuts should be more than enough reason to give savers a push to switch their deal if they are getting a poor return on their hard-earned cash. Indeed, on an easy access account, savers could be earning as little as 0.01%, such as with NatWest, but the best rate on the market pays 1.15% from National Savings and Investments (NS&I) – on a £20,000 deposit, that is a difference in interest over 12 months of £228. If savers were looking to lock their cash away over the next 18 months, then the best deal comes from Bank of London and The Middle East (BLME), paying 1.15% as an expected profit rate, which is 0.44% more than the average rate today.

“If savers are looking for a decent return but do not wish to lock their money away for a year or more, then a notice account could be a good bridge between fixed and easy access accounts. One example of a deal with a short notice term is ICICI Bank UK’s 45-day notice account, which pays 1.24% gross monthly and is available through Raisin UK.

UK housebuilder Redrow has sent a shiver through the property sector this morning, as it warned that profits will be badly hit by the coronavirus outbreak.

Redrow told shareholders that it is scaling back its operations in London. Following the lockdown, there is more demand for houses with space to work inside, and nice places to visit nearby.

So, the company is focusing more on regional development, and less in the capital.

It says:

Recent studies have highlighted that the Covid-19 pandemic has shifted home movers’ priorities. In particular, there is a desire for more inside and outside space, wanting to live closer to green spaces and having better home workspace. Redrow’s reputation for placemaking and its award winning Heritage product ideally position the business to meet these changing customer priorities.

Following a review of our divisional businesses, we have decided to scale-back our operations in London to focus on the Colindale Gardens development [in North West London] and continue to target the Group’s future growth on the higher returning regional businesses and the Heritage product.

The costs and related significant impairments associated with scaling-back the London business will be provided for in the June 2020 accounts. As a consequence of the impact of Covid-19 and making these provisions the profit for 2020 will be substantially below 2019.

Redrow has also found that the new social-distancing rules mean it takes longer to build houses, and also longer to hand them over to customers. This has lengthened its build times, and will continue to drag on its output.

Shares in Redrow have dropped 4% this morning, towards the bottom of the FTSE 250 leaderboard.

The coronavirus slump has forced energy giant Royal Dutch Shell to slash up to $22bn off the value of its assets.

Shell told the City this morning that it has lowered its long-term outlook on oil and gas prices. As a result it will record a post-tax, non-cash impairment charges of between $15bn to $22bn in the second quarter.

The company

Given the impact of COVID-19 and the ongoing challenging commodity price environment, Shell continues to adapt to ensure the business remains resilient.

Brent crude is currently changing hands at around $40 per barrel, down from around $65 back in January.

The astonishing 18% surge in global stock prices since March may show that investors have got ahead of themselves.

Many companies have scrapped their earnings guidance, as they simply don’t know how many goods or services they’ll sell this year. It all depends on the progress in combating Covid-19, which is still accelerating worldwide.

Neil Wilson of Markets.com thinks we could see a “short, sharp pullback” soon:

Valuations still look too high and based on a far-too-optimistic view of an earnings rebound in 2021 and does not account for permanent productivity and demand destruction. Of course stimulus is making a big difference here, but risk assets are exposed if we see the pandemic get worse from here. World Health Organisation boss Tedros said the worst is yet to come. Cases across states like Arizona, Texas and Florida continue to surge and look to be completely out of control. A short, sharp pullback is a very real possibility.

Nevertheless, it’s been a solid month and an exceptionally strong quarter. US equities have enjoyed their best quarter in 20 years, whilst stocks in Europe have fared pretty well too as investors participated in the rebound off the March lows. It’s mirrored elsewhere in risk assets – copper is up a fifth, but is slightly weaker for the year. For instance, the S&P 500 is up 18% QTD, but down 5% YTD. The FTSE 100 is up almost 10% QTD, but down over 17% YTD.

UK household spending slumped at a record pace in January-March, the ONS adds:

Households’ consumption spending decreased by £9.5 billion (negative 2.7%) in Quarter 1 2020, the largest quarterly fall in nominal household spending of this type ever recorded; there were large falls in expenditure on motor vehicles, restaurants and hotels, and clothing and footwear.

Britain’s economy suffered an even more bruising blow from Covid-19 than previously thought.

UK GDP shrank by 2.2% in the first quarter of 2020, according to updated figures from The Office for National Statistics. That’s down from a previous estimate of a 2% decline -- and is the joint-worst quarter since Margaret Thatcher was settling into Downing Street.

The ONS says:

• UK gross domestic product (GDP) in volume terms fell by 2.2% in Quarter 1 (Jan to Mar) 2020, revised downwards by 0.2 percentage points from the first quarterly estimate; this is now the joint largest fall in UK GDP since Quarter 3 (July to Sept) 1979.
• When compared with the same quarter a year ago, UK GDP decreased by 1.7% in Quarter 1 2020, a downward revision of 0.1 percentage points from the previous estimate.
• This release captures the first direct effects of the coronavirus (COVID-19) pandemic, and the government measures taken to reduce transmission of the virus.
• The services, production and construction sectors provided a negative contribution to growth in the output approach to GDP in Quarter 1 2020; with services output falling by a record 2.3% in the latest quarter.

Global stock markets have enjoyed a sizzling quarter, even as the death toll from Covid-19 has marched higher and economies have fallen deep into recession.

World equities have surged by 18% between the start of April and the end of June, according to MSCI’s All Country World Index. That’s its biggest advance in 11 years, and the second best quarter in at least two decades.

It means stocks have recovered some, but not all, of the heavy losses suffered during the crash in the first quarter of the year.

The financial markets have clearly already priced in a recovery, helped by huge stimulus packages, record low interest rates, and a generous flurry of money-printing by the world’s central banks.

As Bloomberg puts it:

Investors are weighing better economic figures against a continued increase in virus cases. Following a stronger-than-forecast U.S. pending home sales figures Monday, China Tuesday reported improving purchasing-manager indexes for both manufacturing and services.

The MSCI All Country World Index is up about 18% this quarter, the biggest advance in 11 years -- on the heels of the worst quarter since 2008. The rebound comes even as deaths from the virus surpass 500,000 and confirmed cases exceed 10 million, with the World Health Organization warning the worst is yet to come.

“It’s not clear what trajectory coronavirus is heading,” Tom Lee, co-founder and head of research at Fundstrat Global Advisors, said on Bloomberg TV. “But I also think because we’re into quarter-end, there’s been some re-balancing. So I’m kind of in the camp that any weakness is short-lived. I would think July is going to be a strong month for stocks.”

Economists and traders are cheered by the news that China’s factories posted growth this month, despite the ongoing pandemic.

Iris Pang of ING says today’s manufacturing and non-manufacturing PMIs both send a positive signal for the economy. Can it be sustained?

Demand for materials and products for the development of advanced technology, the real estate market and infrastructure projects support growing manufacturing activity.

The foreign orders PMI at 42.6 in June confirms that external demand remains weak. We believe that the ongoing Covid-19 situation in the US and Europe will keep the pressure on export orders in the coming months. External demand weakness is putting pressure on some manufacturers, especially small factories, of which the sub-index PMI fell to 48.9 in June from 50.8 a month ago. This confirms our view that small manufacturers continue to struggle to get export orders.

Here’s Stephen Innes of Axicorp:

The better-than-expected China PMI lends further weight to the argument that a global cyclical recovery is well underway.

And Jim Reid of Deutsche Bank:

Encouragingly, there was a broad improvement in the details for the manufacturing PMI with output, new orders and new export orders all rising from last month.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Some upbeat economic news from China is cheering investors on the final day of June, boosting optimism that the world economy is turning the corner.

China’s factories grew at a slightly faster pace this month, according to China’s National Bureau of Statistics. Its Purchasing Manager’s Index has risen to 50.9 from 50.4 in May (anything over 50 indicates growth).

It’s the fourth month of (modest) growth in a row, as China emerged from the lockdown imposed to curb the spread of Covid-19 in January and February.

Chinese manufacturers reported that supply and demand are starting to pick up, leading to more new orders. However, new export orders are still down, meaning factories are still shedding jobs.

In a statement, NBS official Zhao Qinghe said there was still much uncertainty about the economic outlook, with small Chinese companies finding conditions particularly tough.

Services companies also strengthened, with the official non-manufacturing PMI rising to 54.4 in June from 53.6 in May. That’s the best reading of the year.

Julian Evans-Pritchard, senior China economist at Capital Economics, explain:

“The latest survey data suggest that economic growth accelerated in June thanks to a faster recovery in manufacturing and services, alongside continued strength in construction activity,

The recovery should remain robust in the coming months as strong infrastructure spending offsets external weakness.”

Following an unexpected surge in US home sales on Monday, this may bolster hopes that the world economy may be gingerly emerging from the coronavirus slump.

European stock markets are expected to rise a little this morning, at the end of one of the strongest quarters in decades.

By my reckoning, the FTSE 100 has gained almost 10% since the start of April - its best quarter since 2010. Europe’s Stoxx 600 has rallied by over 12% during the quarter - the best since 2015, while Wall Street has enjoyed its strongest gains since 1998.

Astonishing, really, given the world is still gripped by the Covid-19 pandemic. Clearly the unprecedented stimulus from central banks has reassured investors, even though a V-shaped recovery looks rather unlikely.

And most markets are still deep in the red for the year, due to the crash in February and March.

The agenda

• 10am BST: Eurozone core inflation for June - expected to remain at 0.8%
• 11am BST: Bank of England chief economist Andy Haldane speaks about the economic impact of Covid-19
• 1.30pm BST: Canadian GDP for April - expected to shrink by 13%
• 2pm BST: S&P/Case-Shiller index of US home prices
• 5.30pm BST: US treasury secretary Steven Mnuchin and Fed chair Jay Powell appear before Congressional committee on financial services