Economist Thomas Costerg has spotted an interesting angle in the US consumer confidence report: younger people are much, much more anxious than older generations:

Two European leaders have been celebrating birthdays today, and what finer venue than a tricky EU summit, eh?

At least they got some nice presents, as my colleague Jennifer Rankin reports:

Angela Merkel, the EU’s longest-serving leader, who is seen as a crucial broker in the talks, said she expected “very, very difficult negotiations”. But before getting down to business, gifts were exchanged. It was Merkel’s 66th birthday, and she was presented by Macron with a bottle of fine white bourgogne. Borisov gave her a traditional silver flask containing Bulgarian rose oil.

Merkel posed for a photo with Portugal’s prime minister, António Costa, also marking his birthday. She gave him a copy of a 17th-century map of Goa, a former Portuguese colony where Costa has family ties.

Michel, the European council president, wished the pair a happy birthday and offered congratulations to the Danish prime minister, Mette Frederiksen, who got married on Wednesday. She had had to change plans three times when a general election, coronavirus and then this weekend’s summit got in the way.

It’s going to be one of those summits, I fear....

Netflix shares have tumbled almost 7% to $491 in early Wall Street trading, despite posting strong results last night.

The streaming service smashed forecasts by reporting it gained 10.09 million new paid subscribers in the last quarter, more than the 8 million expected. That helped to swell revenues by almost 25% year-on-year.

But Netflix took the shine off these results, by predicting that the next few months would be tougher - as the lockdown means it has ‘pulled forward’ so many new customers already.

It warned:

We live in uncertain times with restrictions on what we can do socially and many people are turning to entertainment for relaxation, connection, comfort and stimulation.

In Q1 and Q2, we saw significant pull-forward of our underlying adoption leading to huge growth in the first half of this year (26 million paid net adds vs. prior year of 12 million). As a result, we expect less growth for the second half of 2020 compared to the prior year.

The US stock market has opened a little higher, as investors juggle optimism about a Covid-19 vaccine against the alarming jump in virus cases.

The S&P 500 index has risen by 0.2%, or 6.37 points, to 3,221.

Traders seem to be relaxed about the pandemic, perhaps betting that policymakers will deliver further stimulus measures to protect the economy from fresh lockdowns.

The tech-focused Nasdaq index has also gained 0.2%, up 24.5 points to 10,498.

Lloyds Banking Group has pledged to increase the number of black staff in senior roles from only 0.6% to at least 3% over the next four years, as part of a “race action plan” rolled out weeks after Black Lives Matter protests began in the UK.

The commitment, announced to staff on Thursday, will mean recruiting about 168 more black colleagues into senior roles by 2024.

Britain’s biggest high street lender will also publish its first ethnicity pay gap report later this year and include at least one candidate from a black, Asian or minority ethnic (BAME) background on every executive director shortlist.

It will help ensure there is more diverse pool of candidates to replace the outgoing chief executive, António Horta-Osório, who will step down next year after a decade at the helm.

More here:

A diminutive spectre is stalking the UK’s shops -- the spectre of shrinkflation.

Snack maker Mondelez is in the spotlight, after announcing that it is cutting the size of Cadbury chocolate bars sold in multipacks to lower their calorie count.

The move means Crunchie, Twirl and Wispa bars will contain no more than 200 calories each when sold in a four-pack, the BBC reports.

Cutting the nation’s intake of sugary snacks shouldn’t be knocked... but Mondelez isn’t cutting its own intake of cash, as prices will stay the same.

It’s part of a broader move in recent years -- I’m sure that Christmas sweetie tins were rather chunkier in my distant youth, for example.

Mark Jones, food & drink supply chain expert at law firm Gordons, reckons we’ll see more shrinkflation as the economy struggles.

“This is a sign of the times. You may remember in July 2017, the ONS confirmed that 2,529 products shrank in size between January 2012 and June 2017 but their price remained the same. The vast majority of the affected products were food and drink.

“Whilst that process has slowed in recent years, we can expect a new wave of shrinking products. The phenomenon was embraced by the market as a consequence of the last recession. No food producers wanted to increase the on-the-shelf price but, at the same time, they needed to cover the cost of rising overheads and limited volume growth in the packaged food market. The solution was to modestly reduce the size as consumers, generally, don’t notice.

“Now we are on the brink of another recession, shrinkflation will probably increase again. Only this time, when the producers are caught, they are likely to point to the obesity epidemic as their motivation rather than their margins.”

In China, investors are reeling from the worst week’s losses in four months.

Despite rising 0.6% today, the CSI 300 index has slumped by 4.3% this week - the biggest drop since 16-20 March.

It was quite a week. Stocks hit a five-year high on Monday, then slid on Tuesday and Wednesday, before a hefty selloff on Thursday.

Yesterday’s tumble came after Chinese retail sales shrank unexpectedly in June, while the wider economy returned to growth in Q2. That raised fears that consumption was weak.

At the start of last week, State media were encouraging investors to take part in the “healthy bull market”. But the tone did change, urging traders to be cautious...

Economists at ING have drawn up a handy graphic laying out the possible scenarios from the EU summit - and how it might move the markets.

Their base case is that we see “some progress towards a compromise, but no final agreement” this weekend.

That would give the euro a small nudge upwards, they reckon, while an actual deal would give it more strength.

Statistics body Eurostat have confirmed that annual inflation across the eurozone was just 0.3% in June.

That’s up from 0.1% in May, but well below the ECB’s target of nearly 2%.

Energy prices were 9.3% lower than a year ago, but food, alcohol and tobacco prices were up 3.2% - including a 6% spike in unprocessed food.

[The usual disclaimer applies -- in a lockdown, it’s hard to assess exactly how prices are moving. And the usual basket of goods and services isn’t as appropriate.]

With handshakes out, EU leaders have been elbow-bumping:

Our Jennifer Rankin is covering the Summit arrivals:

French president Emmanuel Macron was hedging his bets too, telling reporters in Brussels that he was confident but cautious.

“We will do everything we can to find an agreement”.

An agreement on the EU Recovery Fund would be historic -- as it would mean European leaders crossing the Rubicon of shared debt liabilities, moving closer to full fiscal union.

And that’s why reaching a full deal will be tough. Europe’s classic faultline - how much should the richer north help the poorer south - will be tested.

Neil Wilson of Markets.com sums up the problem:

We may get an agreement in principle on the fund that will be made up of a mix of grants and loans, with details on the total money value and attached reform requirements to be finessed. Even that might be a stretch though – Merkel warned this week that it could take until the end of the summer to achieve a deal and today said talks would be tough. Dutch PM Rutte said this morning he’s ‘not optimistic’ ahead of the talks. Indeed, I would not expect much more than a political declaration affirming member states commitment to achieving some kind of a deal.

This not an ordinary summit – what’s being talked about is mutual debt issuance for the first time. A deal would be a major breakthrough for the EU and show that the bloc has the ability to respond to an era-defining crisis with one voice. Merkel is throwing all her political capital behind the European Recovery Fund, so there more than just EU solidarity riding on it. The Frugal Four of Sweden, Austria, Denmark and the Netherlands remain the main barrier to achieving a deal as they are still to be convinced on why they should be sharing the burden of weaker states, but most countries will be out to fight their corner too. At least they are all back in a room and can talk through the night to trade horses and get something done – not so easy on Zoom, albeit it’s an absolute hangar of a room.

German Chancellor Angela Merkel has warned that negotiations will be ‘very tough’, which might dampen the mood in the markets.

She told reporters in Brussels that:

“We are all going into the talks with a lot of vigour but I must say that the differences are still very, very big and so I can’t yet say whether we will get a solution this time already.”

“I expect very, very difficult negotiations.”

EU leaders arriving for today’s Brussels summit have been diligently wearing their masks - although some then removed them to speak to the assembled press.

Bettel has been urging his fellow leaders to show solidarity, warning a summit failure would be bad for Europe and the markets

Airline group IAG is the top faller on the FTSE 100, down nearly 4% after announcing the early retirement of its Boeing 747-400 fleet.

The decision to put the plane out to grass three years early highlights the slump in air travel demand under the pandemic.

In the City, home improvements and emergency repairs firm Homeserve is the top FTSE 100 riser (+3.9%) after predicting a solid performance in the current financial year.

Demand for its Home Experts service, which matches local trades people with customers, has soared, it told shareholders.

In Home Experts, consumer demand for home improvements has recovered strongly across all businesses. Call traffic is at record highs at eLocal, while Checkatrade had its largest ever number of consumer web visits in June at 2.76m (June 2019: 1.74m).

That suggests people are taking advantage of the lockdown to improve their homes or fix nagging problems [or make them worse, in my experience].

European stock markets have nudged higher in early trading, with the Stoxx 600 up 0.1%.

That shows some caution about today’s summit, with Mohit Kumar of Jefferies predicting another meeting will be needed later this summer:

We are optimistic that an agreement can be reached before end August but it would take an additional one or two meetings to reach a compromise on the three sticking points 1) grants vs loans 2) conditionality and 3) re-distribution of funds

Italy’s economy minister has vowed to fight any efforts to water down the proposed €750bn recovery fund.

Economy minister Roberto Gualtieri told the Italian newspaper Corriere della Sera that he wouldn’t accept a smaller package, or a cut to the balance between grants and loans.

Gualtieri said:

“It is crucial to close EU negotiations over the recovery fund as soon as possible, if possible already in this European council.

“We will fight hard not to modify these elements.

There are also some critical points in that proposal on which we will be very determined.”

(thanks to Reuters for the quote).

But the Frugal Four are also talking tough, with Dutch PM Mark Rutte insisting last week he’s ‘not made of marzipan’ (so won’t melt when the heat is on).

The FT is also striking a cautious note, writing:

Some warn that it will be a tall order for leaders to seal a deal this weekend, with some delegations preparing for a possible return to Brussels before the end of the month.

“We are not there yet,” said an EU diplomat. “There are still bridges that need to be built”.

Handshaking, back slapping and air kisses will all firmly discouraged at today’s EU summit, our Brussels correspondent Jennifer Rankin reports:

Any pre-summit bonhomie smoothing the way to a deal will be limited by social distancing. Leaders are being asked to wear masks on arrival and to avoid shaking hands – advice that appears to preclude the air kisses and backslapping that usually accompany the opening of summit talks.

Gathering in the Europa headquarters of the European council, nicknamed the space egg, leaders will meet in a fifth-floor room designed to seat 330 people. This will ensure distancing for 30 leaders (27 national ones plus three from the EU institutions) and three or four senior EU officials.

As well as a change to ventilation settings to eschew cheaper and more environmentally friendly recycled air, rooms will be cleaned during every break. Security, catering and cleaning staff and photographers will have to wear masks at all times.

Special levers will be attached to toilet door handles to ease opening with an elbow. Each leader will get a sealed box of specially cleaned headphones to hear the interpreters. A doctor will be on site in case anyone starts to feel any coronavirus symptoms.

She also predicts a tough meeting:

Privately, some EU sources are downbeat, with the “frugal four” deemed to have taken major concessions offered by [EU council president] Charles Michel, such as the preservation of their budget rebates, while moving little in return. Some officials expect the summit to run into Sunday, while others have already pencilled in a return date in late July.