Economies contract at record pace, dollar dominance is in question, and Big Tech stocks shine: This Week in Finance

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U.S. economy shrinks at record pace

The U.S. economy shrank at an unprecedented annualized rate of 32.9% in the second quarter as businesses shut down amid the coronavirus pandemic. The Commerce Department said gross domestic product contracted 9.5% from April through June — a rate extrapolated to almost 33% for the full year — the fastest pace on record and comparable in severity only to events such as the demobilization following World War II. Consumer spending increased for a second consecutive month in June, even as personal incomes continued to fade. Americans filing initial unemployment-benefits claims reached 1.43 million last week, marking the 19th week in which the claims exceeded 1 million. ?? Here's what people are saying.

Eurozone reports record contraction

The eurozone saw gross domestic product fall by a record 12.1% in the second quarter. Spain was the euro area’s worst performer, with an 18.5% contraction from April to June, pushing the country into its deepest recession in modern times. Germany suffered its deepest quarterly decline on record as GDP dropped 10.1%. France’s economy shrank 13.8% but showed a gradual recovery in May and June. Italy’s economy performed better than analysts had expected but still took a 12.4% hit. Facing huge economic hurdles brought on by the pandemic, the EU last week unveiled a €1.85 trillion spending package. ?? Here's what people are saying.

• Will EU rebound faster than U.S.?: America's failure to get a grip on the pandemic may be a rare opening for Europe's economic recovery to outpace the U.S. comeback.

Fed holds down rates, vows support

The U.S. Federal Reserve, leaving interest rates unchanged near zero, repeated its pledge to keep borrowing costs low until confident “the economy has weathered recent events.” The pandemic “will weigh heavily on economic activity” in the near term and poses considerable risks over the medium term, the central bank said. The Fed has been buying bonds and set up nine emergency lending programs amid business shutdowns this year due to the virus — programs it said this week would be extended through the end of the year. ?? Here's what people are saying.

• Americans lose extra jobless benefits: The $600-a-week supplemental unemployment benefits program expired Friday, putting more than 30 million Americans at risk of an immediate 50% to 75% income cut.

Dollar dominance in danger?

The U.S. dollar is in danger of losing its status as the world's reserve currency as the government continues printing money, the Federal Reserve holds down interest rates, and investors pile further into gold, according to Goldman Sachs. "The resulting expanded balance sheets and vast money creation spurs debasement fears," the bank's strategists warned, adding that there are "real concerns around the longevity of the U.S. dollar as a reserve currency." The dollar is used in 88% of all currency trades, and governments around the world hold it as the ready means to pay debts and drive commerce — functions that it couldn't perform if it lost significant value. ?? Here's what people are saying.

UK challenger bank's future in doubt

The impact of the coronavirus crisis has “cast significant doubt” on challenger bank Monzo’s ability to continue as a going concern, according to the lender’s annual report. The digital bank’s losses doubled to ￡114 million amid a significant drop in transactions, particularly due to the decline in overseas travel. Several major UK banks also reported losses this week, including Lloyds and NatWest Group, with warnings that economic uncertainty could result in loan defaults and further credit losses. ?? Here's what people are saying.

Banks switch to online internships

Major banks such as Deutsche Bank, HSBC, Standard Chartered, and UBS have started recruiting students and graduates for virtual internships for the first time. The online training programs offer courses in e-learning, problem-solving, and networking that aim to prepare interns for a digital work environment, CNBC reported. Standard Chartered, for example, has recruited 300 interns in 15 markets for its global program. For 60% of interns, the entire program will take place online, with the remainder participating in a combination of virtual and in-person events. The bank says it has created 500 roles that will primarily be filled by its 2020 interns. ?? Here's what people are saying.

Big Tech stocks shine

After Wednesday's grilling of its CEOs by Congress, Big Tech quickly had reason again to celebrate. The stocks of Apple, Amazon, Facebook, and Google parent Alphabet jumped Thursday after reporting earnings that exceeded Wall Street's expectations. Apple announced a 4-for-1 stock split and posted historic quarterly revenue. Amazon reported profit of $5.2 billion — a quarterly record — and a 40% jump in sales from a year earlier. Facebook shattered analyst expectations for revenue growth, despite being its slowest on record. And while Alphabet reported its first-ever revenue decline as its ad business was disrupted, the results still beat analyst estimates. ?? Here's what people are saying.

Pandemic decimates Big Oil

The pandemic is slamming Big Oil, with Exxon Mobil posting its worst loss ever in the second quarter and Chevron recording its worst loss in decades. “Oil has become the darkest corner of U.S. equity markets as an unprecedented confluence of economic, political, and structural threats coalesce to imperil the very foundations of the petroleum industry,” reported Bloomberg. Royal Dutch Shell this week posted similarly crushing results and warned of a continuous uncertain outlook for the industry. Global oil demand dropped by a third at the start of lockdowns, according to the International Energy Agency. ?? Here's what people are saying.

?? Editors' Picks: Must-read articles ??

Each week, editors at LinkedIn select thought-provoking articles that are sparking discussion among financial services professionals on the platform. Join the conversation by reading and commenting on them here.

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With Cate Chapman, Pieter Cranenbroek, Jake Perez, Siobhan Morrin, Alexander Besant, Jessica Hartogs, Dipti Jain, and Caroline Fairchild.

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