Back in the City of London, the FTSE 100 has closed 18 points higher at 6050.

Travel stocks, banks and retailers had a good day, with IAG jumping 8.6%, Rolls-Royce up 5%, JD Sports rising 3.8% and NatWest gaining 3.1%.

But tech stocks and pharmaceuticals lagged, with Hikma down 4% and Sage losing 2.6%.

Shares in McDonald’s have dipped slightly, down 0.25% to $204.11, as traders digest the lawsuit against Easterbrook.

That makes the fast food company the second-biggest faller out of the 30 major companies on the Dow Jones industrial average (Microsoft is the worst performer, down 2.3%, as tech stocks have a bad day).

But overall, the Dow is up 0.7% or 198 points at 27,631 -- on track to close at its highest level since February. It’s now recovered most of its pandemic losses, down just 3% for 2020.

The Financial Times reminds us that Steve Easterbrook made headlines more than a decade ago, when he criticised the cliché that working at the fast food chain was low-paid and unrewarding.

A cricket-playing Watford Grammar schoolboy credited with turning around McDonald’s business in Europe before getting the top job in 2015, Mr Easterbrook was known as a strident defender of the company.

In 2006, while running its UK operations, he asked the Oxford English Dictionary to change its definition of the phrase McJob from “an unstimulating, low-paid job”.

Here’s a video clip of CNBC outlining McDonald’s lawsuit, just after the news broke:

McDonald’s is hoping to recover ‘tens of millions of dollars’ from its former CEO, says Bloomberg:

McDonald’s Corp. sued ousted leader Steve Easterbrook, seeking to recover tens of millions of dollars in severance pay after discovering evidence he had sexual relationships with multiple employees, tried to cover it up and arranged for one worker to get a lucrative stock award.

His termination last fall over an improper relationship shouldn’t have included severance pay because he “concealed evidence and lied about his wrongdoing,” the company said in a filing.

More here: McDonald’s Sues Former CEO to Recover Severance Pay

Back on the economic beat, the number of US job opening has unexpectedly jumped.

There were 5.89m available positions in June, the Labor Department reports, up from 5.37m in May. That suggests America’s economy strengthened as its lockdown eased - as last Friday’s encouraging jobs report also showed.

Here’s the crux of McDonald’s case:

Had the Board known on November 1, 2019 what it learned in July 2020 regarding Easterbrook’s conduct as CEO, it would not have approved the Separation Agreement and would have instead terminated Easterbrook for cause.

And had Easterbrook not deleted evidence from his phone and lied to the Board and its investigators in October 2019, the Board would have known the full record of his conduct when it considered the terms of his separation.

As a result, the company is seeking ‘compensatory damages’, or for Steve Easterbook to return the cash and stock awards which he left with last year.

McDonalds also alleges that Steve Easterbrook approved a valuable package of stock to one of the employees, during their relationship:

The lawsuit states:

The date and time stamps of the photographs of Employee-2 also conclusively show that Easterbrook approved a special discretionary grant of restricted stock units—worth hundreds of thousands of dollars—to Employee-2 shortly after their first sexual encounter and within days of their second.

McDonald’s lawsuit explains that it received allegations about Steve Easterbrook’s conduct in July (eight months after he had been dismissed over a consensual relationship with an employee)

An investigation found evidence of sexual relationships with three other employees, including videos and photographs, the company alleges:

In July 2020, the Company received an anonymous report alleging that a McDonald’s employee (“Employee-2”) engaged in a sexual relationship with Easterbrook while he was CEO.

An internal investigation into this allegation discovered photographic evidence that, while he was CEO, Easterbrook had engaged in a physical sexual relationship not only with Employee-2, but also with two other Company employees in the year before his termination. That evidence consisted of dozens of nude, partially nude, or sexually explicit photographs and videos of various women, including photographs of these Company employees, that Easterbrook had sent as attachments to messages from his Company e-mail account to his personal e-mail account.

The date and time stamps on the photographs of the three Company employees show that the photographs were all taken in late 2018 or early 2019.

McDonald’s adds that Easterbrook had deleted these emails from his company phone - but that had not removed them from the company’s servers.

The US central bank has just announced how much more capital America’s largest banks should hold to absorb future losses.

Reuters has the details:

The U.S. Federal Reserve announced Monday how much each large bank that underwent its 2020 stress tests will have to hold in additional capital.

The results mark the first time the Fed has given out custom capital requirements for each bank under its new “stress capital buffer,” and takes effect on October 1.

Goldman Sachs and Morgan Stanley were ordered to hold the most capital of the 34 firms tested, with ratios of 13.7% and 13.4% respectively.

Here’s the announcement.

Shares in Italian football club Juventus have slumped today after the Old Lady crashed out of the Champions League.

Investors hit the sell button after France’s Lyon dumped Juventus out of the competition on away goals on Friday night.

This sent Juve’s shares down 6% today to €0.86, on disappointment that the club won’t at least make the quarter-finals. Winning the competition worth €19m.

Here’s our news story on the early success of the Eat Out to Help Out scheme:

After a quiet but choppy morning’s trade, European stock markets are all showing steady gains.

The jump in Chinese factory prices, and Saudi Aramco’s optimism for oil demand, helped to lift stocks - building on Friday’s gains after the strong US jobs report.

However, there are also concerns over US-China relations after Beijing slapped unspecificed sanctions on 11 Americans.

• FTSE 100: up 30 points or 0.5% at 6063
• German DAX: up 38 points or 0.3% at 12,713
• French CAC: up 27 points or 0.5% at 4,917

AJ Bell investment director Russ Mould warns that we could still see volatility this month:

The US jobs release reaffirmed its credentials as one of the most influential bits of economic data as Friday’s better than expected picture helped set the tone for the start of this week.

“The FTSE 100 was more than 1% higher and within touching distance of the 6,100 mark as investors brushed off mounting tensions between the US and China and fears of a second wave in the coronavirus pandemic.

“However, any gains feel fragile at the moment and amid the thinner trading volumes typically seen over the summer, it may be that there is more volatility on the way.

“Gold remained above $2,000 per ounce, reflecting the nervousness which continues to simmer away in the background.

Modular housing company Etopia Group says it has become the world’s first carbon neutral housebuilder, and has become a member of the United Nations climate neutral now initiative.

The firm, which is currently building 47 new homes in Corby, Northamptonshire, has calculated and published its current carbon footprint, including international air travel, and its plans to reduce it.

Etopia, which counts the billionaire Reuben brothers among its investors, directly offsets its current carbon emissions using UN certified emission reductions and voluntary emission reductions.

Ireland’s deputy prime minister has struck a cautious note, warning that the Irish economic recovery from its COVID-19 lockdown will take longer than hoped.

Leo Varadkar (who was PM at the start of the pandemic), told the Newstalk radio station that a strong recovery in 2021 isn’t guaranteed.

Varadkar warned:

“I think to be frank the economic impact is going to be a lot worse than you or I may have thought back in March or April or when the government was formed (in June).

Back in March or April I would have said this is going to be a three-month phenomenon, a single quarter severe hit to the economy and that we would be in a very strong recovery by next year. That now looks less certain.”

(thanks to Reuters for the quotes).

Here’s Diane Wehrle, Insights Director at Springboard, on the increase in visitors to the high street last week:

“The jury is still out regarding the benefit of the “Eat Out to Help Out” scheme which launched last week, although there were rises in footfall on each day between Monday and Wednesday from the week before. It is clear that it was the post 6pm period that yielded the greatest rise in footfall, and also that smaller towns benefited more than large city centres.

As the scheme continues throughout August and more Brits enjoy staycations across the UK, time will tell if the government scheme provides the boost that retail destinations across the country require for business survival.”

Grim news of the morning: a third of UK employers expect to cut jobs this autumn, even though the economy should be recovering from the coronavirus lockdown.

My colleague Jasper Jolly explains:

About 33% of more than 2,000 companies, charities and public sector bodies in the poll said they expected to make redundancies in the third quarter of 2020, according to figures from the Chartered Institute of Personnel and Development (CIPD) and Adecco Group, a staffing company.

The poll suggests the UK is likely to experience a wave of job losses across the economy as the government starts to withdraw the coronavirus job retention scheme.

Back in the UK, insurance group Royal London has paid out £8.5m in life insurance claims to the families of more than 1,200 customers whose deaths were attributed to Covid-19.

It is also setting aside £10m for future claims, having posted a loss of £181m for the last six months - due to falling asset values and weaker sales during the lockdown.

As feared, news of China’s retaliatory sanctions has knocked shares in Europe.

The Stoxx 600 index is now flat for the day, with falling tech stocks cancelling out the rally in banks, travel companies and oil majors.

Newsflash: China is imposing sanctions on a group of senior US politicians, in a move that could puncture today’s market optimism.

China’s foreign ministry says it will target 11 Americans, including Republican senators Ted Cruz and Marco Rubio.

Beijing is retaliating to US sanctions on 11 Hong Kong and Chinese officials, announced last Friday, over the abuse of Uighur Muslims.

The move was expected, and could heighten tensions between the two sides ahead of trade talks later this month.

UK fashion chain Superdry has shored up its finances with a new £70m lending facility from its banks to see it through the Covid-19 crisis.

The news has sent its share price up by nearly 14% this morning to 134.3p.

The retailer, known for its brightly coloured hoodies and T-shirts emblazoned with Japanese script, said the lending facility, agreed with HSBC and BNPP, would run until January 2023, replacing one that was due to expire the year before.

While sales at Superdry were down 24.1% year-on-year in the 13 weeks to 25 July, its first quarter, they were better than expected. Its stores have gradually begun to reopen following the Covid-19 lockdown. Online sales surged 93.2%.

Superdry was already struggling before the pandemic hit. Its co-founder Julian Dunkerton, who started out selling clothes on a Cheltenham market stall, returned to take the helm after leading a boardroom coup last year. The business had floundered in his absence, and he vowed to take the brand back to its design roots.

CEO Dunkerton said:

“The actions we have taken to date have greatly strengthened our cash position, which together with our new [lending] facility, give us the flexibility to execute our current plans and to secure our recovery.

“Together, we are making our way through this unprecedented period, and I’m confident we can reset the brand and deliver on our transformation plans.”

Oil producers, car makers, travel companies and financial stocks are all leading the rally in European markets this morning.

Those sectors are all sensitive to economic health, so are benefiting from optimism that the pick-up in Chinese producer prices and consumer inflation in July is signalling a recovery.

In London, airline group IAG is the top riser (+4%), with bank Natwest Group (+2%) and manufacturing group Melrose (+2.3%) close behind.

BP (+3%) and Royal Dutch Shell (+2.2%) are also positive, following the jump in the oil price this morning.

Florian Ielpo, head of macroeconomic research at Unigestion, says China’s improving industrial data is lifting the markets:

“China is so much in advance in this process of lockdowns and exiting lockdown, that any good signs for the Chinese economy is essential (for the world economy).”

The oil price has opened higher today.

Brent crude has gained nearly 1% to $44.80 per barrel, close to last week’s five-month highs.

Traders are citing upbeat comments from Saudi Aramco’s CEO Amin Nasser yesterday. He predicted a recovery in oil demand rebounding in Asia as economies gradually open up (a forecast bolstered by today’s recovery in Chinese factory gate prices).

Iraq has also lifted prices, by announcing it will cut its oil output by a further 400,000 barrels per day in August and September to compensate for its overproduction in the past three months.

Asia-Pacific stock markets have already posted gains this morning.

The pick-up in Chinese factory gate inflation, and Donald Trump’s move to unilaterally extend jobless benefits, both lifted shares in the region.

• China’s CSI 300: up 17 points or 0.36% at 4,724
• South Korea’s Kospi 200: up 1.3% at 316 points
• Australia’s S&P/ASX 200: up 105 points or 1.7% at 6,110

Lee Hardman of MUFG explains:

The main development over the weekend was the decision by President Trump to sign four executive orders to provide more fiscal support for the US economy after the Republicans and Democrats failed to reach a bipartisan agreement. The executive orders include extending enhanced unemployment benefits at $400 per week which is a reduction from recent support at $600 per week....

The fresh stimulus provided by President Trump through executive orders is better than none at all and provides a stop gap solution. Pressure remains though on both the Democrats and Republicans to reach a more substantial and durable compromise solution.