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Dow Jones Facing Positive Open Thanks To JP Morgan, FTSE Reduces Losses

Published 14/07/2020, 12:37
Updated 21/10/2020, 09:15

The FTSE’s losses eased quite significantly as Tuesday progressed, despite the OBR hammering home how slim – to non-existent – the chances are of a V-shaped recovery.

The Office for Budget Responsibility has said the UK is facing the worst slowdown for 300 years, a statistic that is so mindboggling it almost becomes meaningless. More tangible was the fact that, in the ‘downside scenario’, the country may not return to its pre-pandemic performance until Q3 2024. Even the ‘central scenario’ has the UK’s recovery taking until the end of 2022.

The current and impending unemployment crisis is one of the most alarming aspects of the recession, with the jobless rate heading for a peak of 12% by the end of 2020, triple where it sat at the start of the year. And that’s the mid-level scenario – at its worst, the unemployment rate could hit 13.2% by the beginning of 2021.

And yet, the FTSE managed to more than halve its initial decline, to 0.5%, compared to the DAX’s 1.4% slump.

One of the reasons for this turnaround is that the pound is taking a fair amount of the heat from the morning’s GDP disappointment. Cable slipped 0.4% to a one-week low of $1.2523, while against the euro sterling fell half a percent to a July nadir of €1.1015.

The other factor helping to ease the FTSE’s – and, indeed, the Eurozone’s – losses is the prospect of a positive open from the Dow Jones. The US index is heading for a 110 point increase after the bell, pushing it back above 26200.

This as JP Morgan (NYSE:JPM) followed in the footsteps of PepsiCo (NASDAQ:PEP) by smashing its Q2 forecasts. Trading revenue surged 79% thanks to a pandemic-led increase in volatility and the related Fed interventions, sending total adjusted revenue to $33.82 billion against the $30.4 billion expected.

Earnings, meanwhile, came in at $4.69 billion or $1.38 per share – down from last year’s $2.82 per share, but well ahead of analysts’ $1.05 estimates.

And though JP Morgan did warn of ‘much uncertainty’ going forwards, setting aside $8.9 billion in credit reserves for the quarter, that didn’t stop its futures shooting higher in the aftermath of the release.

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