Back on Wall Street, stocks are slowly drifting higher.

This has pushed the S&P 500 index up to 3,385.12 point, a gain of 4.7 points (+0.14%) today, and closer to February’s record highs

[the record closing high is 3,386.15, while the intraday high is above 3,393.5]

Here’s our energy correspondent Jillian Ambrose on the IEA’s downgraded oil demand forecasts:

The world’s demand for oil will fall further than expected through this year and in 2021 following a surge in new coronavirus cases, according to the International Energy Agency (IEA).

The oil watchdog wiped almost a quarter of a million barrels of oil a day (bpd) from its forecasts for next year after warning that the rising number of Covid-19 cases could mean a slower recovery for the global aviation industry and lower demand for transport fuels.

In its latest monthly report, the IEA cut its global oil demand forecasts, for the first time since the start of the pandemic, by 140,000 barrels of oil to 91.9m bpd in 2020. The forecast is more than 8m bpd lower than the global demand for oil last year.

The IEA also downgraded its expectations for 2021, cutting 240,000 bpd from its previous forecasts to an average of 97.1m bpd next year as the global aviation industry struggles to return to normal.

While millions of people are struggling during the pandemic, the rich are splashing out on expensive new watches.

At least, that’s the message from Watches of Switzerland, which has reported that sales jumped 7.4% year-on-year in July as its shops reopened after the lockdown.

Increased domestic demand is offsetting the impact of lower tourism, said the company, which is the UK’s largest retailer for Rolex, Cartier, OMEGA, TAG Heuer and Breitling watches.

It also posted a 4.8% jump in revenues for the 12 months to April, having opened five new stores and refurbished another nine last year.

CEO Brian Duffy explains:

The UK has been driven by continued strong ecommerce sales and domestic demand in regional stores, partly offsetting greater declines in London (due to reduced tourism) and our airport stores.

Here’s the FT’s take:

With global travel still frozen and high-end leisure spending in the doldrums, rich consumers are spending their money on luxury watches, boosting the retailer Watches of Switzerland.

Shares in the group jumped 18 per cent on Thursday after it reported that increased demand from well-heeled UK consumers had partly offset a lack of tourists.

Group sales rose 4.8 per cent in the year to April 26, despite many stores in the UK and US being closed for the final portion of that year. Since shops reopened, the company said trading had beaten management’s expectations in the UK and the US.

More here: Brits splashing out on Rolexes boosts Watches of Switzerland

Back in London, shares in engineering group Renishaw are down 10% after it posted a 97% drop in profits due to the pandemic.

Renishaw, which makes coordinate-measuring machines and machine tool products, posted earnings of just £3.2m compared with £109.9m last year.

Here’s Bloomberg on the Wall Street open:

Technology shares rose while the broader U.S. equity market was mostly lower as investors mulled the stalemate in stimulus negotiations and signs of an economic recovery.

The Nasdaq Composite gained and the S&P 500 opened in the red a day after briefly surpassing the record closing high reached before the coronavirus pandemic. Adding to optimism was a report showing that weekly jobless claims dropped below 1 million for the first time since March.

The drop in US unemployment claims hasn’t cheered Wall Street too much.

The Dow Jones industrial average and the S&P 500 have both opened in the red, while the Nasdaq has pushed higher as investors move into tech stocks again.

• S&P 500: down 7.7 points or 0.23% at 3,372.65 −7.70 (0.23%)
• Dow: down 94 points or 0.3% at 27,882
• Nasdaq: up 26 points or 0.24% at 11,039

Counter-intuitively, the drop in jobless claims could be bad for stocks...if it reduces the pressure on Congress to agree a new stimulus deal.

The US labor market may have strengthened slightly, but as Steve Liesman of CNBC tweets, there’s plenty of work to do:

Daniel Zhao, senior economist at jobs search site Glassdoor, warns that the US recovery is still unsteady, despite the drop in new unemployment benefit claims:

“Seeing initial claims dip below 1 million is a positive sign that layoffs are easing, but we’re far from celebrating a steady recovery. Tens of millions of people are still collecting unemployment benefits at a level far above the worst points of the Great Recession.

We’ve not yet seen the light at the end of the tunnel for millions of workers. With no sign yet of a new relief package, the question is whether sheer momentum can keep pushing the economic recovery forward in this historically deep crisis.”

Despite falling last week, more Americans are losing their jobs each week than at any time in the last recession.

During the 2008 crisis, the initial claims total jumped to 665,000 in a single week as companies laid off staff after the collapse of Lehman Brothers.

So at 963k, jobless claims are still signalling a lot of pain in the economy:

The US jobless claims total is lower if you don’t include seasonal adjustments.

Unadjusted, the initial claims figure is 831,856 - further below the one million mark.

But as strategist Marco Mazzocco tweets, that’s still an awful lot of people signing on for help.

The US Department of Labor says:

In the week ending August 8, the advance figure for seasonally adjusted initial claims was 963,000, a decrease of 228,000 from the previous week’s revised level.

The previous week’s level was revised up by 5,000 from 1,186,000 to 1,191,000. The 4-week moving average was 1,252,750, a decrease of 86,250 from the previous week’s revised average. The previous week’s average was revised up by 1,250 from 1,337,750 to 1,339,000.

The advance seasonally adjusted insured unemployment rate was 10.6 percent for the week ending August 1, a decrease of 0.4 percentage point from the previous week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending August 1 was 15,486,000, a decrease of 604,000 from the previous week’s revised level.

The Labour party is worried that Washington’s intransigence on some tariffs will cost jobs in Britain.

Here’s Emily Thornberry MP, Shadow Secretary of State for International Trade:

“We welcome the withdrawal of tariffs on shortbread as well as the temporary reprieve for exports of gin, salmon and blended whisky, but that good news makes it all the more disappointing that punitive tariffs are being maintained on single malt whisky, knitwear, cheese and other key exports.

“Coming on the back of this week’s disastrous growth figures, the maintenance of those tariffs represents a double blow for hundreds of vital British businesses, especially in Scotland, and the tens of thousands of workers they employ.

“Whatever the rights and wrongs of the EU-US dispute, it has nothing to do with the distilleries, farmers, food producers and clothes makers affected by these tariffs, and – at this time of all times – it is an act of economic vandalism for Donald Trump to continue targeting their livelihoods in this way.

“The government must provide urgent support to all the firms and workers affected, and redouble its efforts to get these tariffs removed. British exporters can’t afford to wait months for a fully-fledged UK-US free trade deal to come to fruition; they need action against the tariffs that are damaging their business today.”

Here’s our Scotland editor, Severin Carrell, on America’s refusal to drop tariffs on single malts:

The Scotch whisky industry has attacked the UK government for its “inexplicably slow” action against hefty tariffs imposed on whisky imports by the US government.

In an unusually critical statement, the Scotch Whisky Association accused UK ministers of prioritising post-Brexit trade talks with the US rather than fight against the 25% tariffs imposed on Scotch whisky and other goods by the US last October, in a dispute over European subsidies for the planemaker Airbus.

Late on Wednesday night it emerged the US had lifted tariffs on shortbread and other products, after intense lobbying by Liz Truss, the UK’s international trade secretary, during the latest round of bilateral talks on a new trade deal. The US also dropped plans to put a tariff on blended whisky and British gin, 70% of which is made in Scottish distilleries.

But the SWA was furious that the 25% tariff has been retained on malt whisky and Scotch whisky liqueurs such as Drambuie. The US is one of the industry’s largest markets, worth nearly £1.1bn last year, with malt whisky making up about a third of that.

The summer lull has certainly arrived in the markets (I just poked my Reuters terminal to make sure it was still on!).

Europe’s main bourses are still slightly lower, with the FTSE 100 still down around 1%.

Across the Stoxx 600, telecoms and consumer cyclicals are rallying, while energy and basic materials are the weakest sectors (dampened by the IEA’s warning of poor oil demand).

Wall Street is heading for a subdued start too, ahead of the weekly jobless figures in 30 minutes.

Over in the US, former Treasury secretary Jack Lew is warning that America’s recovery will falter unless a new stimulus package is agreed, fast:

The pound has nudged back over $1.31 today, after Britain’s Brexit negotiator tweeted that a deal on the UK-EU future relationship could be reached next month.

Sterling has gained three quarters of a cent today, to $1.311, back towards the five-month highs seen earlier in August:

TUI’s travails appear to support the IEA’s forecast that jet fuel demand will remain weak while the pandemic continues.

Julie Palmer, partner at Begbies Traynor, fears that the holiday firm will be forced to cut jobs to survive the downturn:

“The latest trading update from TUI highlights the extent of the damage that Covid-19 has had on the business, and as countries across the globe continue to restrict people’s movement, it will be a difficult path to recovery for the company and the sector as a whole.

“The travel giant has been forced to put its hand out for a bailout from the German government to help stay afloat, but it will need to address the concerns that consumers will have when travelling again, while trying to offer a unique experience amidst social distancing measures if it’s going to stand any chance of recovery. Costs reductions must be a focus for the board over the next few months if the business is to have any chance of survival, which will likely add to the growing number of redundancies being made by UK firms.”

The pandemic has also driven holiday firm TUI into a steep loss, as my colleague Joanna Partridge explains:

Tui, Europe’s biggest holiday company, made a loss of €1.1bn (£994m) between April and June after the pandemic put a stop to travel and triggered a 98% fall in revenues.

The group, which began to take people on holiday again in mid-June, said the revival in demand was “encouraging” but that summer bookings were 80% lower than last year and that it did not expect demand return to normal until 2022.

The German company has reopened more than half of its hotels worldwide, including in Europe, Mexico, Egypt and the Caribbean, although they only have an average occupancy rate of 23% to allow for social distancing.

This chart shows how the IEA have lowered their forecasts for oil demand for the rest of the year:

Transport group National Express has also warned that the pandemic is hurting demand.

National Express, which runs urban and long haul bus routes and more than 20,000 school buses in North America, has reported that passenger numbers plunged by 80% during the lockdown.

This dragged the company into a pre-tax loss of £61m for the first half of this year.

It tells the City:

The year started extremely well with outstanding results in January and February. Covid-19 then had an immediate and unprecedented impact on all of our businesses from March onwards.

National Express also warned that activity remains at “much suppressed levels”, although there are “encouraging early signs of demand returning” as restrictions are eased.

Shares have plunged 13% this morning, to the bottom of the FTSE 250.

The International Energy Agency has also cut its oil demand forecast for 2021, as the FT’s David Sheppard explains:

The IEA’s 2021 demand forecast was lowered by 240,000 b/d to 97.1m b/d, a level still some 3m b/d below the pre-crisis peak.

The IEA said it was “the first downgrade in several months, reflecting the stalling of mobility as the number of Covid-19 cases remains high, and weakness in the aviation sector”, in its monthly report.

The IEA is now predicting that oil demand will plunge 8% this year, due to the pandemic.

Its new forecasts show that 91.9 million barrels will be needed every day in 2020, a fall of 8.1m bpd compared with 2019.

Although today’s downgrade is only small, at 140 kb/d, it does show pessimism about growth prospects as Covid-19 cases have kept rising. A month ago, the IEA hiked its forecast to 92.1m barrels per day, saying demand had fallen less sharply than feared.

Here’s Bloomberg’s Javier Blas on the IEA’s new, lowe, oil demand forecasts:

European stock markets have made an underwhelming start, with the Airbus tariff row lingering.

In London, the FTSE 100 is down around 1%, handing back half of yesterday’s gains. That’s partly because several stocks have gone ‘ex-dividend’ (meaning new shareholders are too late for the next payout).

The other major markets are becalmed....

Although America hasn’t cut the tariffs on European goods, it has adjusted the goods affected.

And that means French and German jam makers face new levies when selling to the US, while tariffs on Greek cheese and UK sweet biscuits are lifted.

Paul Donovan of UBS explains:

The US has shuffled some of the trade taxes around. Thus, users of German meat mincing knives are to be taxed, as are consumers of French jams. US consumers of French jams may be unaware of the looming taxation, owing to their habit of calling jam “jelly”.

Neil Wilson of Market.com fears we could see fresh trade war tensions in the coming weeks, between Washington and both Brussels and Beijing.

US-China tensions are rearing their head again. Officials meet this Saturday to review progress of the phase one deal. White House economic adviser Larry Kudlow the deal was ‘fine right now’.

Sticking with trade, the US is maintaining 15% tariffs on Airbus aircraft and 25% tariffs on an array of European goods, including food and wine, despite moves by the EU to end the trade dispute.

Crucially it did not follow through with a threat to hike tariffs, however it still leaves the risk of further escalation when the EU is likely to win WTO approval to strike back with its own tariffs.

The UK government is vowing to step up demands for the United States to drop tariffs on goods such as single malt Scotch whisky

British Trade Secretary Liz Truss has welcomed Washington’s decision to resist new tariffs, but is disappointed that the existing levies haven’t been ditched.

Truss, who met her U.S. counterpart Robert Lighthizer last week, says:

“These tariffs damage industry and livelihoods on both sides of the Atlantic and are in nobody’s interests.

“I am therefore stepping up talks with the U.S. to remove them as soon as possible.”

Shares in Airbus have fallen 3% at the start of trading in Paris, on disappointment that the US hasn’t lifted its 15% tariff on its planes.

The BBC’s Douglas Fraser points out that the US have lifted one tariff, on sweet biscuits - a boost for Scotland’s shortbread producers.

Karen Betts, chief executive of the Scotch Whisky Association, is urging the UK government to take a more active role in the dispute.

Betts says exports of single malts to the US have slumped by a third (blended whiskys aren’t affected by the tariffs), which puts jobs at risk:

“It’s deeply disappointing to see that the 25% tariff on Single Malt Scotch Whisky exports to the US has been retained by the US government.

The tariff is inflicting huge damage on the Scotch Whisky sector, with exports to the US down 30% since the tariff came into effect and the industry grappling with losses now totalling around £300 million. These losses relate only to tariffs – the impact of Covid-19 has been serious and has compounded what is now a very serious situation for Scotch Whisky, with some brands forced out of the market and jobs in the industry and our supply chain now at risk.

“The UK government must accelerate negotiations to bring an end to tariffs between the UK and US before preparations for November’s Presidential election bring talks to a halt. It has taken the UK government a full six months after the UK left the EU to start to tackle tariffs directly with the US government, which seems to us inexplicably slow.

France’s wine and spirit federation, FEVS, is also disappointed.

FEVS President Cesar Giron says:

“We regret this decision which will continue to heavily penalise French exporters.

Figures released back in February showed that US imports of French wine have plummeted by over 40% since President Donald Trump imposed 25% tariffs.

Airbus is understandably disappointed that its planes still face tariffs at the US border, after it took steps to end the subsidy row.

It is urging European politicians to take a hard line with America, with spokesman Clay McConnell saying.

“Airbus profoundly regrets that, despite Europe’s recent actions to achieve full compliance, USTR has decided to maintain tariffs on Airbus aircraft — especially at a time when aviation and other sectors are going through an unprecedented crisis.

Airbus trusts that Europe will respond appropriately to defend its interests and the interests of all the European companies and sectors, including Airbus, targeted by these tariffs.”