On Wall Street, stocks are tumbling after Donald Trump suggested in a tweet that the November election should be delayed. The Dow Jones fell more than 300 points at the open to 26,215, a 1.2% drop, while the S&P 500 shed 35 points, or 1%, to 3,223 and the Nasdaq lost nearly 100 points, or 0.9%, to 10,446.

US GDP: Hopes for a V-shaped recovery are misplaced, says James Knightley, chief international economist at ING.

So we now know how deep the deepest ever contraction in US economic activity was, but this is old news given financial markets are priced for a very vigorous recovery. However, Covid-19 is far from beaten and while there is optimism about a vaccine, the timing and its efficacy are still unknown.

Meanwhile, a renewed spike in cases is forcing state governors to backtrack on reopening plans, which is closing businesses, with workers losing their jobs. At the same time, the $600 a week unemployment benefit boost to 30 million plus claimants has effectively ended and will likely be replaced with something much smaller in size.

With virus fears on the rise, jobs being lost and incomes squeezed, we feel the recovery could be much bumpier than markets seemingly do, and think we are in for some data disappointment over the next couple of months – starting with next week’s payrolls number.

Costas Milas, professor of finance the University of Liverpool, reckons it’s the worst drop in US GDP since 1889. He argues:

Historical (annual) US real GNP data (series A3; Appendix 3 available here) suggests that today US annual GDP contraction of 32.9% is the worst one one since complete records began in 1889 (followed by an annual GNP contraction of 17.2% in 1932).

Separate figures showed another 1.43 million Americans filed for unemployment benefits last week, a second week of rises after a four-month decline.

My colleague Dominic Rushe in New York writes:

The annualized figure [of 32.9%] is the largest drop in quarterly gross domestic product (GDP) – the broadest measure of the economy – since records began in 1945. Economists expect the rate to improve sharply later this year but the outlook has been clouded by the recent rise in infections across the US.

During the last financial crisis GDP shrank 8.4% in the worst quarter of 2008, according to Credit Suisse. The previous record came in 1958 when economic growth fell 10% during the Eisenhower recession.

The fall came as large parts of the US economy shutdown in March in an attempt to halt the spread of the coronavirus across the US. The closures led to a historic number of layoffs and sent unemployment soaring to levels unseen since the 1930s Great Depression.

Donald Trump tried to distract away from the numbers, which he hasn’t mentioned yet.

An interesting chart...

Here is our full story:

Here in Britain, roughly one in three furloughed workers returned to work in the first two weeks of July, when pubs, bars, restaurants and hotels reopened, official data from the Office for National Statistics showed today.

Businesses surveyed between 29 June and 12 July said 7% of their staff had returned from furlough within the past fortnight, while 17% remained on leave. The government-funded job retention scheme pays 80% of their salaries and covers more than 9 million people at the moment, about a third of the private-sector workforce. But it will be scaled back from Saturday and come to an end on 31 October.

Some 18% of hotel and food service workers returned to work in those two weeks. The data showed that more than 90% of staff were working in sectors such as water treatment and information technology, but only around half in hotels, restaurants and entertainment venues.

The arts, entertainment and recreation industry had the highest proportion of the workforce remaining on furlough, at 47%, followed by accommodation and food services at 43%, according to the Business Impact of Coronavirus Survey (BICS). You can read more here.

Here is our full story on Airbus. The Toulouse-based planemaker has been hit hard by the collapse in air travel, and received only eight new orders between April and June, compared with 290 in the first quarter.

In Germany, Volkswagen cut its dividend after it moved into the red in the April to June quarter, when car and lorry deliveries dropped by almost a third because of the Covid-19 pandemic.

The world’s biggest carmaker posted pre-tax loss of €1.4bn for the second quarter, compared with a profit of €9.6bn a year earlier. After reopening some of its factories following the Covid-19 shutdowns in March, VW had to close some lines again because demand was weaker than expected. It still expects to make a profit this year, although “severely lower” than last year.

Other carmakers have also suffered but France’s PSA Group, which owns the Peugeot, Citroën, Opel and Vauxhall brands, delivered a second-quarter profit yesterday. It has aggressively restructured its business, including job cuts, reduced the variety of vehicles it offers and pulled out of some markets.

The UK car dealership Pendragon plans to cut 1,800 jobs, in the latest sign of the turmoil hitting the automotive industry because of the coronavirus pandemic, writes my colleague Jasper Jolly.

Pendragon said 15 of its stores would be closed as a result of a review of its operations, which started before the pandemic, with 400 job losses. A further 1,400 redundancies will be made across its dealers and its head office.

The announcement came after new figures from the Society of Motor Manufacturers and Traders (SMMT), which showed 381,357 cars rolled off British production lines from January to June, 42.8% lower than last year.

That’s the lowest number of vehicles since 1954, when second world war rationing ended, as the coronavirus pandemic forced factory closures and prompted at least 11,000 automotive job losses.

In other corporate news, Argos is to stop printing its catalogue after almost 50 years as the buying bible once found in three-quarters of British homes is claimed by the inexorable move to online shopping, my colleague Mark Sweney reports.

DekaBank economsit Andreas Scheuerle said about Germany’s record economic decline, which wiped out nearly 10 years of economic growth:

Now it’s official, it’s the recession of a century. What has so far been impossible to achieve with stock market crashes or oil price shocks was achieved by a 160 nonometre tiny creature named Corona.

Trade, household spending and business investment in equipment all collapsed between April and June, while government spending increased.

Germany is the first of the major economies to report GDP figures for the second quarter, a flash estimate. The US will follow suit at lunchtime (1:30pm BST). We are expecting an annualised decline of 34.1%, which would be the worst since government records began in 1947.

The drop in GDP would be more than triple the previous all-time decline of 10% in the second quarter of 1958, according to Reuters. The US economy contracted 5% in the first quarter.

Economists at Danske Bank caution that the record drop in German GDP is “old news” and that the economy is now recovering. It’s also worth noting that unemployment actually fell in July, rather than worsening, as reported earlier.

Nonetheless, the second-quarter slump shows the scale of the challenge Europe’s largest economy faces in rebuilding itself from the Covid-19 crisis.

The bigger-than-expected slump in German GDP in the April to June quarter, the biggest since records began in 1970, has accelerated losses on the German stock market.

The Dax in Frankfurt has tumbled 1.5% to 12,633.

The German statistics office says about the 10.1% plunge in second-quarter GDP:

This was the largest decline since the beginning of quarterly GDP calculations for Germany in 1970. It was much larger than during the financial market and economic crisis (-4.7% in first quarter of 2009).

...a massive slump was recorded for exports and imports of goods and services as well as for household final consumption expenditure and capital formation in machinery and equipment. General government, however, raised its final consumption expenditure during the crisis.

The big loss and bad debt provisions reported by Lloyds are worrying because it is Britain’s biggest highstreet bank and is seen as a barometer of the UK economy.

Richard Hunter, head of markets at the investment platform interactive investor, said:

Since its last update, Lloyds estimates that the economic outlook has deteriorated further, partly because of the immediate impact of the pandemic in its second quarter, but also due to the likelihood of significantly higher defaults on loans in the next few months as various government support schemes subside. As such, its additional impairment charge takes the half-yearly figure to £3.8bn, with the bank guiding that the full-year number will total somewhere between £4.5bn and £5.5bn.

The wider challenges are exacerbated given the bank’s perceived status as a barometer of the UK economy. With GDP growth remaining under pressure and the unemployment rate potentially yet to peak, the uncertainty around Brexit negotiations takes on additional significance given an already faltering economy.

Meanwhile, historically low interest rates are set to hold firm for some considerable time to come, putting pressure on the traditionally lucrative Net Interest Margin, as evidenced by a decline from 2.9% to 2.6% in the period. In addition, the consumer has where possible been paying down loans and reducing spending on credit, both of which are normally steady income lines for the banks, with the result that there has been an increase in retail deposits as any spare cash is put to one side.

The Toulouse-based aircraft maker Airbus has announced new production cuts to its A350 jet, after it slumped to a bigger-than-expected loss for the second quarter.

Like its US rival Boeing, the company has been hit hard by the collapse in air travel caused by the Covid-19 pandemic. The crisis has hit demand for wide-body long-haul jets in particular, prompting Airbus to cut its wide-body A350 production to five jets a month, after slashing it from 9.5 to six in April. Boeing also announced further cuts in the production of its 787 and 777 jets yesterday.

Airbus doesn’t expect demand to return to normal levels until 2023 at the earliest. Chief executive Guillaume Faury told reporters:

We believe it is going to be a long and slow recovery.

The company is laying off up to 15,000 workers, equivalent to 11% of its workforce. It posted an operating loss of €1.6bn for the April to June quarter as revenues plunged 55% to €8.1bn. The loss includes a €900m writedown and Airbus warned there could be further provisions of €1.2bn to €1.6bn.

AstraZeneca, the UK’s biggest pharmaceutical company, has reported better than expected results for the April to June quarter and stuck to its 2020 forecasts, helped by strong sales during Covid-19 lockdowns and the success of new medicines. Total revenues rose 11% to $6.3bn and core earnings grew 31% to 96 cents a share. AstraZeneca shares were one of the biggest risers on the FTSE 100 in early trading, up 2.5%.

This contrasts with GSK yesterday, which missed profit forecasts after a fall in vaccine sales – because fewer people went to the doctor’s for fear of catching Covid-19 – and as stockpiling of painkillers and respiratory drugs tailed off.

However, there will be more interest in AstraZeneca’s partnership with the University of Oxford to develop a Covid-19 vaccine. Late-stage trials are currently underway in the UK, Brazil and South Africa and are due to start in the US. These trials will determine how well the vaccine will protect from the Covid-19 disease and measure safety and immune responses in different age ranges, at various doses, AstraZeneca said.

No doubt we’ll hear more about this when AstraZeneca’s chief executive Pasal Soriot holds a media call at 9am BST.

And we’re off! European shares have mostly opened lower.

• UK’s FTSE 100 flat at 6,135
• Germany’s Dax down 0.5%
• France’s CAC down 0.2%
• Spain’s Ibex down 0.3%

Asian stocks were mixed after the Fed, with Japan’s Nikkei giving up early gains to close down 0.26% while Hong Kong’s Hang Seng was flat, South Korea’s Kospi edged 0.17% higher and Australia rose 0.74%.

Futures are pointing to a flat to slightly higher open on European stock markets.