What’s happening: The first reading of US GDP between July and September was published on Thursday. Economists surveyed by Refinitiv expect GDP to grow at an annual, seasonally adjusted rate of 31%. Compared to the second quarter, the economy is expected to grow by about 7%. In both respects, this is the fastest expansion ever.
Don’t expect this to impress Wall Street. For traders who are always looking ahead, the third quarter is old news – and what’s on the horizon is starting to cause real concern.
Behind the drop: There are growing fears that coronavirus cases are once again spiraling out of control in North America and Europe.
The new guidelines in both countries are less stringent than the blockades imposed this spring that halted Germany and France. But they are significant enough to cause economic damage at a delicate time.
Economists at Berenberg Bank expect the new blockade of France to lead to a “significant”
Concerns are growing that the United States is not far behind Europe and that new blockades may become a necessity. The country recently reported a seven-day average of more than 74,000 new Covid-19 cases per day, a record high for all time.
Data from the third quarter of GDP will be useful to demonstrate that since the economy can operate without restrictions on social distancing, it is very resilient.
“[The third quarter] showed that economies can return quickly, ”Holger Schmiding and Florian Hense of Berenberg told customers.
But most investors are already reviewing the data and are concerned about what they see. The report is “fully caught up in the events,” said Keith Jukes, a strategist at Societe Generale.
More crust than a bite on the Capitol Hill technology grill
Senator Ted Cruz shouted. His Democratic colleague, Brian Shatz, called the hearing a “fraud.” Commission Chairman Roger Wicker could not say the last name of Google’s CEO.
Some MEPs called for more transparency, while others sought explanations for several specific cases in which content was removed or labeled from platforms. Although the hearing was to focus on an important law known as Section 230, which protects companies’ ability to moderate content as they see fit, senators deviated from the presentation and clashed with executive directors on antitrust, voting misinformation and interference in elections.
- Shatz and other Democratic senators denied the timing of the hearing, which took place less than a week before the US election. “This is harassment and it is for election purposes,” Shatz said.
- Cruz angrily harassed Twitter CEO Jack Dorsey, pushing him to the platform’s decision to limit content published by the New York Post. In conclusion, he shouted at Dorsey, “Who the hell chose you and put you at the forefront of what the media has a right to report?”
Much more important to investors are the earnings results that Facebook, Google and Twitter are expected to report on Thursday, along with Apple and Amazon. The growing growth in demand for online services amid the pandemic sent technology stocks to record highs this year. Third-quarter intelligence is crucial in determining whether frantic gains can continue.
Shareholder rewards can be returned
As the pandemic shattered companies in industries such as oil and gas and hospitality, corporate councils moved quickly to save money by cutting profitable shareholder rewards. Dividend payments were reduced or suspended altogether until the share buyback went out of fashion.
The companies are now announcing plans to increase dividend payments and buyouts after healthy recoveries in the third quarter.
“The board has reviewed Shell’s recent performance and plans to grow its business in the future, and we are confident that Shell can sustain its shareholder allocations as well as invest in growth,” Chairman Chad Holiday said in a statement.
Plans could be reversed if the new round of pandemic exclusions weighs more heavily on business than expected. For now, companies are sending a clear signal that they do not see that they anticipate an impending funding crisis.
Also today: The first look at U.S. GDP for the third quarter arrives at 8:30 a.m. ET, as well as data on initial claims for unemployment benefits last week. Economists polled by Reuters expect another 775,000 requests.
Expect tomorrow: Europe’s GDP data will look at third-quarter recovery – just as countries like France and Germany are introducing new blockages.