Spanish official says outbreaks are the 'new normal' as cases rise in Europe

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London (CNN Business)As Covid-19 cases spiked across the Sun Belt in the United States this summer, American investors looked wistfully abroad, where governments had been more effective in containing the virus and countries seemed set for a stronger economic comeback.

But another surge of infections in Europe is now hitting recovery efforts on the continent, indicating how quickly fortunes can change during a pandemic.
What’s happening: The eurozone experienced weaker growth across the private sector in August, per the latest reading of IHS Markit’s Purchasing Managers’ Index, which is an important gauge of economic health. The loss of momentum was a direct result of lower spending, as manufacturing production picked up.

    Spain, France, Greece and Germany are among the countries that have seen worrying increases in new Covid-19 cases in recent weeks, prompting new mask rules and fears of fresh lockdowns.
    The recovery isn’t just stuttering in Europe. In Australia —which reimposed a quarantine covering Melbourne, its second largest city, in July — business activity fell back into decline this month, per IHS Markit.

    And in Japan, business activity continued to contract. The country has recorded at least 23,600 fresh Covid-19 cases in August.
    “Demand continued to be adversely affected by subdued trade flows and social distancing measures,” said Bernard Aw, principal economist at IHS Markit.
    What it means: Projections for the global economy to strengthen in the second half of 2020 and 2021 are at the mercy of the virus and efforts to control it. Investors betting on stronger recoveries in some areas should be prepared to make some quick changes to their portfolios should case loads start to rise.
    The euro, which has strengthened more than 6% against the US dollar since the beginning of June, fell back 0.5% on Friday to $1.18. That’s helping the US dollar, which has been under serious strain, regain some footing.
    “There will be plenty of noisy dollar bulls around the place this afternoon if the US data continue to improve even as Europe’s correct,” Societe Generale strategist Kit Juckes told clients Friday.

    Uber and Lyft won’t shut down in California — for now

    Uber (UBER) and Lyft (LYFT) narrowly avoided shutting down their ride-hailing services in California after an appellate court granted the companies a temporary reprieve, delaying an order that would have forced them to reclassify drivers in the state by Friday.
    Uber and Lyft get reprieve from court, won't shut down in California for now
    That said: While the legal decision buys the companies more time, Uber and Lyft’s high-profile regulatory fight in the state isn’t over, my CNN Business colleague Sara Ashley O’Brien reports.
    “While we won’t have to suspend operations tonight, we do need to continue fighting for independence plus benefits for drivers,” said Lyft spokesperson Julie Wood in a statement Thursday.
    With hours to go before the original deadline, the companies were bracing for a shutdown. Uber and Lyft said they would suspend service in the state by the end of the day if an appeals court didn’t grant requests for a delay.
    The backstory: The fight stems from an ongoing lawsuit over California’s AB-5. Under the law, which took effect in January, it became more difficult for Uber and Lyft to classify its workers as independent contractors, posing a direct threat to their business model.
    The companies have been fighting it aggressively, even pushing a referendum in November that would exempt them from the law.
    Next up: Uber and Lyft aren’t off the hook. Their CEOs must submit sworn statements by September 4 detailing how they will comply with AB-5 if necessary.
    Investor insight: Uber’s shares rallied nearly 7% on Thursday, while Lyft’s stock gained almost 6%. Decreased ridership has weighed on shares of both startups this year, though Uber has fared much better due to food delivery.

    Unpacking the ‘summer of bonds’

    Moody’s, one of the world’s top credit agencies, is worried that the pandemic will hang over the corporate credit universe for years to come — even as investors continue to pile in.
    The pandemic is turning into a super-expensive business quagmire
    In a new report, the agency noted that companies have to invest heavily in safety measures, in many cases shaking up supply chains or changing the way they operate, my CNN Business colleague Anneken Tappe reports. That leaves less money to invest in growth and pay down debts.
    “Like the fear of terrorism 20 years ago, fear of contagion post-COVID will drive changes in how corporations function as customers, employees and regulators demand new safety protocols,” Moody’s analysts said.
    Unsurprisingly, Moody’s is especially worried about the travel and tourism sector, though it also pointed to retail — which faces new costs associated with a focus on online shopping — and the oil and gas industry.
    Big picture: Amped up by faith in unprecedented central bank intervention, this outlook isn’t worrying investors. The SPDR Bloomberg Barclays High Yield Bond ETF, which tracks riskier corporate credit, is up 24% from its March low. In a note to clients Friday on investment flows, Bank of America proclaimed this the “summer of bonds.”
    Companies are taking advantage of that enthusiasm. Fitch says that high-yield issuance this year could approach the record total achieved in 2012.

    Up next

    Deere (DE), Foot Locker (FL) and Pinduoduo (PDD) report results before US markets open.
    Also today:

      • US existing home sales for July post at 10 a.m. ET.
      • The flash reading of the Purchasing Managers’ Index for the United States posts at 9:45 a.m. ET.

      Coming next week: The annual gathering of central bankers usually held in Jackson Hole will be conducted virtually this year.
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