TheChek News Flow

NEW YORK TIMES

• Front page story reports “Some companies are beginning to restore cuts they made to managers’ salaries and bonuses, a sign that some industries—and their white-collar workers—are benefiting from glimmers of a recovery while millions of others continue to endure job and income losses.”

• Billions of dollars in federal funds earmarked for boosting nationwide Covid-19 testing remain unspent months after Congress made the money available, according to the US Department of Health and Human Services.• The US economy picked up momentum this month as firms shook off the effects of the pandemic-induced downturn, though recoveries in other parts of the world slowed, according to new surveys of purchasing managers.

• The Trump administration and the European Union agreed Friday to a limited tariff rollback, providing relief to American lobster exports and to a range of European items, and providing a boost to strained US-EU trade relations.

• A Trump administration medical commission found that nursing homes need an aggressive federal approach to the Covid-19 crisis, including supplying personal protective gear, assisting with staffing shortages, and offering rapid coronavirus testing.

• Story says Democratic presidential candidate Joe Biden wants to cancel a substantial portion of Americans’ $1.5T in federal student debt—while maintaining the loose lending standards that contributed to its rapid growth.

• Investors in Israel and the United Arab Emirates are moving to strike deals in a business environment transformed by the recent diplomatic breakthrough between the two countries.

• A decades long effort to eke out more profit by keeping inventory low left many manufacturers of items such as paper towels unprepared when Covid-19 struck, and production is unlikely to ramp up significantly any time soon.

• The rapid adoption of remote work and automation could accelerate inequalities already in place for decades, and economists say the resulting ‘K’ shaped recovery will be good for professionals—and bad for everyone else.

• Natural gas prices have shot up 66 percent since late June, and speculators are betting they will keep climbing, but the companies that control the country’s spigots aren’t so sure, and some are holding back on moves to ramp up production.

• Keith Krach, the Trump administration’s undersecretary of state for economic growth, energy and the environment, encouraged university endowments to divest Chinese stocks and disclose Chinese assets held in their index funds.

• H.O.T.S.: “Shares of the leading online sports betting companies have skyrocketed as investors wager on the future of wagering”; Even before the global pandemic, UBER and LYFT shares were generating largely disappointing returns since going public, and their premium had already waned; Amid the excitement over STMP, the market is starting to see the greater potential of a century-old competitor usually associated with the US Postal Service.

• “The eurozone’s economic rebound from the pandemic is losing steam as a recent rise in Covid-19 cases across the bloc triggered local lockdowns and raised doubts over the strength of the recovery.”

• Russian opposition leader Alexei Navalny is set to travel to Germany for specialist medical treatment as the country’s most prominent critic of the Kremlin remains in a coma after a suspected poisoning led his relatives to claim his life was in danger should he remain in Russia.

• The coronavirus is spreading faster in Spain than in the rest of Europe, forcing the country to race against time to control the outbreak before people return to school and work after the summer holiday season.

• Turkish president Recep Tayyip Erodgan said the country has made a major natural gas discovery in the Black Sea, in what he said could be a means to help improve the country’s troubled economy and its energy security.

• Hong Kong will formally challenge a US demand that it change the way it labels exports as the city seeks to manage the international fallout from Beijing’s imposition of a stringent new national security law in the territory.

• Big Read piece on Huawei says “Washington’s latest sanctions have been likened to a ‘death sentence’ for the Chinese telecom group, removing its access to essential parts, but that judgment could be premature if Beijing decides to intervene.”

• Lex Column: Bayer often chooses to settle legal claims, but it will take robust action when it comes to weaker ones; “The problem for retailers is that doing customers’ shopping and delivering it to their door is mostly unprofitable”; As Beijing’s influence grows, expect its brokers to take a larger share of deals left on the table by foreign rivals.”

• Comment: “A banking crisis, while not inconceivable, does not feel imminent,” says John Plander. “The underlying problem in property may be seen as an extension of the corporate sector’s wider problem with excessive debt.”

• +/- AMZN: Executive Jeff Wilke, who has been with the company for 20 years and was once considered a possible successor to chief Jeff Bezos, will retire next year as he completes two final projects: rolling out the Amazon Go convenience stores and bringing the technology to Amazon’s Whole Foods subsidiary.

• Craft distilleries in the US expect to lose about 40 percent of their sales because the coronavirus has made it harder to pour drinks for visitors touring their facilities.

• Trump will speak each of the four nights of the Republican National Convention to deliver an uplifting message to the American people, a campaign adviser said on Sunday.

• Scientists say an asteroid 6.5 feet in diameter is on a direct collision course to Earth, projected to hit a day before the presidential elections in November.

• TikTok said that it has removed more than 380,000 videos in the US for violating its hate speech policy so far this year, and that it has a zero-tolerance policy on hate groups and on content that denies the Holocaust, slavery, and other tragedies.

Coronavirus accelerates implementation of plans to address years of underperformance

At beleaguered European banks, coronavirus is fast-tracking plans for fundamental restructuring after years of poor performance.

Many of the region’s most prominent lenders are tearing up old business models, cutting business lines or doubling down on domestic markets as they try to find a formula that works for them.

HSBC Holdings HSBC -0.37% PLC is returning to its Asian roots and calling time on weak returns in continental Europe and the U.S. with a plan to shed 15% of its workforce. The Netherlands’ ABN Amro Bank NV, once a top-15 global bank with deep roots across the world, is getting out of trade financing and cutting off corporate customers outside Europe. Switzerland’s Credit Suisse Group AG CS -0.72% and UBS Group AG are stripping out layers of administrative workers to free up money for investment in technology or new business.

Banks around the world have been squeezed by the pandemic. In the U.S., Wells Fargo & Co., for example, is slashing costs and cutting staff to try to ride out the crisis, moves that could hold clues for how other large U.S. banks may respond. Wells came into the crisis in worse shape than some U.S. rivals but in better shape than many European lenders, which have toiled for years as margins were squeezed by low interest rates in the wake of the last financial crisis. As a result, banks in Europe were among the most vulnerable institutions as the coronavirus pandemic sent already challenged economies into a tailspin and pushed loan-loss provisions to their highest level in a decade.

Finding and then sticking to the right business model now is seen as crucial to banks’ longer-term survival and to get buy-in from investors. “European banks face a profitability crisis,” said Citigroup Inc. banking analyst Ronit Ghose. “In response to decadelong low returns, European banks have been busy restructuring, but it is hard to shrink to greatness.”

Investors’ low expectations are reflected in the banks’ share prices. European banks trade at less than half their book value, while U.S. banks trade at more than four-fifths of book value. The Stoxx Europe 600 Banks Index is down 36% this year while the broader Stoxx Europe 600 Index has fallen 12%

France’s BNP Paribas SA and Société Générale SA are among national champions that are scaling back global ambitions to focus on their home economies.

In the U.K., Barclays PLC, for years styling itself as a mini JPMorgan Chase & Co. spanning retail and investment banking, is under pressure from an activist investor to slash its trading business.

Some of Europe’s banks, including HSBC, ABN and Credit Suisse, have new CEOs this year who have seized on the pandemic as a catalyst to make changes to their banks’ business models.

HSBC Chief Executive Noel Quinn hit pause on planned job cuts at the lender when the coronavirus hit but said those have to accelerate now to pull out costs. Around 35,000 of the bank’s 235,000-strong workforce will go—by exiting much of continental Europe and shutting U.S. branches—as part of a continuing global retreat to refocus on its more profitable Asian heartland.

In an interview, Mr. Quinn said he plans to invest in technology to cut costs. He hired John Hinshaw, a former chief information officer at Verizon Wireless and Boeing Co., late last year to help the bank become more digital. Country lockdowns led more customers to online banking and phone apps, and that trend is likely to accelerate, according to bankers and analysts.

“Banking is still banking but technology has an increasingly important role to play in it,” Mr. Quinn said.

ABN Amro is returning to its roots, too, with the ambition of new CEO Robert Swaak to be “the best Dutch bank” with a focus on northwest Europe. He said earlier this month that ABN will exit corporate banking in the U.S., Asia, Australia and Brazil, and a trade-finance business that traces back to colonial times.

Geographical diversification used to be seen as a way to offset weakness when one market cooled, said John Ahern, a partner at Covington who advises banks on regulation. “In coronavirus, you have a global economy almost in shutdown. You’re not leveraging an advantage and can be exposed to too many challenging markets,” he said.

Barclays Chief Executive Jes Staley for years has argued that geographic and business-line diversity makes banks more resilient in a crisis, after helping steer JPMorgan through the last financial crisis. He crafted Barclays to emulate his former employer, with a large U.K. bank serving businesses and households, an international credit-card arm and investment banking in London and New York.

Mr. Staley claimed victory for his strategy in the second quarter as profit from Barclays’s corporate and investment bank rose 16% to £694 million ($908 million) while its U.K. unit swung to a £123 million loss.

Activist investor Edward Bramson didn’t agree. He argues that Barclays’s trading revenues are volatile and poor quality because the bank doesn’t have the large corporate-client or wealth-management businesses that drive trading flows at bigger rivals like JPMorgan.

Mr. Bramson’s firm, Sherborne Investors, says it is the largest Barclays shareholder with a 5.9% stake. He renewed calls this month for the bank to follow the example of Deutsche Bank AG and downsize its trading arm. Deutsche Bank shares have risen 13% this year, while Barclays shares have slumped 40%.

Mr. Bramson said Deutsche Bank had shown that trading businesses can be pared down without fatal effects, and described Deutsche Bank’s investment bank as “a more viable business than before.” Barclays declined to comment.

The wave of restructuring could be the precursor to long-talked-of consolidation, bankers and lawyers say. The European Central Bank has said it would ease the way for future mergers, and gave its blessing to a takeover by Intesa Sanpaolo SpA of local Italian rival UBI Banca SpA.

Meanwhile, banks that went through lengthy restructurings before are finding ways to be leaner through the pandemic.

Thomas Gottstein, CEO at Credit Suisse since February, said the pandemic was the trigger for making further changes to lower costs and free up money for investment after an earlier restructuring under predecessor Tidjane Thiam. Credit Suisse and rival UBS so far have fared better in the pandemic than most other European banks because of their historically low-loss Swiss loan books and focus on banking for the world’s rich.

Credit Suisse is combining several market-trading businesses and integrating its risk and compliance functions to invest in growth, Mr. Gottstein said.

Advanced economies no longer benefit from rapid economic and population growth of postwar period

As countries world-wide boost spending to battle the new coronavirus, government debt has soared to levels not seen since World War II.

Among advanced economies, debt rose to 128% of global gross domestic product as of July, according to the International Monetary Fund. In 1946, it came to 124%.

For now, governments shouldn’t worry about mounting debt and instead focus on bringing the virus under control, said Glenn Hubbard, chairman of the Council of Economic Advisers under President George W. Bush.

“The war analogy is exactly the right one,” said Mr. Hubbard, dean emeritus of Columbia University’s Graduate School of Business. “We were and are fighting a war. It’s a virus, not a foreign power, but the level of spending isn’t the problem.”

After World War II, advanced economies brought down debt quickly, thanks in large part to rapid economic growth. The ratio of debt to GDP fell by more than half, to less than 50%, by 1959. It is likely to be harder this time, for reasons involving demographics, technology and slower growth.

In the optimistic era after the war, birthrates boomed, leading to gains in household formation and growing workforces. Circumstances were ripe to reap the benefits of electrification, suburbanization and improved medicine.

Through the late 1950s, economies soared. Growth averaged around 5% a year in France and Canada, almost 6% in Italy and more than 8% in Germany and Japan. The U.S. economy grew almost 4% a year.

“We’d be lucky to have half that over the next decade,” said Nathan Sheets, a former undersecretary of the Treasury for international affairs and now chief economist at PGIM Fixed Income, the investment-management business of Prudential Financial Inc.

In recent years, the U.S., U.K. and Germany have grown about 2% a year. In Japan and France, it has been closer to 1%. Italy has barely grown at all.

Though vanquishing the virus could bring a surge of optimism, the post-World War II boom would be difficult to re-create. Population growth has slowed in advanced economies, the workforce is shrinking as societies age and productivity is slowing.

By the early 1960s, the Group of Seven advanced economies all had population growth of nearly 1% a year or more. Today, no G-7 country has population growth of 1%, and Japan and Italy are shrinking.

Rapid economic growth and lower military spending in the postwar years made it easy to reduce debt. In the U.S., federal outlays fell by more than half between 1945 and 1947, not accounting for the effects of growth or inflation.

The end of the various pandemic-era programs, such as extended unemployment benefits and direct payments to households would reduce spending, but not by as much as the end of World War II.

“Can we avoid letting the exploding spending during the war, not turn into massive expanded social spending going forward?” asked Mr. Hubbard.

Today’s high levels of debt didn’t start with the pandemic. Since the 1980s, even outside of recessions, debt has grown in the U.S., Europe and Japan, driven largely by spending on health care and pensions.

After the war, as advanced economies reduced wage and price controls, a burst of inflation helped lower the debt. Today, there is no inflation in sight, despite massive stimulus spending.

Low interest rates are a common feature of both periods. After World War II, the Federal Reserve kept borrowing costs low to reduce the government’s interest costs.

Today, there is no formal collaboration between the Treasury and the Fed. But with a backdrop of low growth, a damaged labor market and low inflation, most central bankers view an extended period of ultra low rates as appropriate.

By default, if not by design, advanced economies might end up accepting a world of much higher government debt.

Central banks have bought huge quantities of government debt to bring down long-term interest rates and shore up growth in periods of weakness. That has reduced the amount of government securities held by the public, and the interest paid on this debt is largely remitted back to the government.

Over $4 trillion of the $26 trillion in U.S. debt is held by the Fed. Japan’s central bank owns over $4 trillion worth of its government liabilities, an even larger share of the country’s roughly $11 trillion in outstanding debt.

The example of Japan has shown that debts can rise for a long time, well above 200% of GDP, without sparking a fiscal crisis.

By having central banks own so much debt, some of the risks and challenges of debt management are shifted from the Treasury or finance ministry to central banks, economists say.

“My expectation is central banks will be successful, but it does pose challenges,” said Mr. Sheets, who formerly headed the Fed’s international-finance division. “Whenever you’re in such unfamiliar terrain, there’s always the risk of something possibly going wrong. It is a generational question that we’ll struggle with for some time to come.”

The S&P’s latest record has reignited a longstanding debate about how much attention investors should pay to valuations

The record close that the S&P 500 hit last Tuesday, its first since February, has reignited the longstanding debate over whether high valuations are setting stocks up for a fall.

The index is now up more than 50% from its low this spring, erasing all the losses it suffered during the coronavirus pandemic. Despite a bruising recession, many investors appear to be betting the worst of the economic pain is past and that corporate earnings, the most reliable driver of stock prices, will begin climbing again next year.

That said, many on Wall Street question how long the market can continue rising at a time when unemployment is the highest in a decade and politics appear as unsettled as they have in years. On top of that, there is the simple matter that recent price gains come as earnings have been under tremendous pressure, leaving valuations stretched and many traders expecting increasing volatility.

“The only way to go higher on valuation is to duplicate the last few years of the 1920s or the 1990s,” said Barry Bannister, head of institutional equity strategy at Stifel, referring to periods when the economy was booming.

The price/earnings ratio on the S&P 500, measured against the past 12 months of earnings, stands at 25.26, according to FactSet. That is the highest level since 2002. The forward P/E, measured against earnings expectations for the next year, is at 25.98—a mark last hit in September 2000.

And the valuation of the median stock in the S&P 500, measured by forward P/E, is now in the 100th percentile of historical levels, according to Goldman Sachs Group Inc., going back four decades—the highest level possible. The index itself is trading at the 98th percentile.

Another valuation measure, called the CAPE ratio, or Shiller P/E, is even higher. That metric looks at the past 10 years of earnings and adjusts for inflation. The benefit, according to economist Robert Shiller who popularized it, is that it provides a longer-term look at valuation.

The CAPE ratio has risen as high as 30.63 as of Aug. 11, a level that has rarely been exceeded over the past century. In December 1999, it peaked at 44.20. In 1929, it rose as high as 32.56.

Not only is the stock market running ahead of the economy right now; it has been for years. The “Buffett Indicator,” named for legendary investor Warren Buffett, compares the total market capitalization of publicly traded stocks to gross domestic product. The Berkshire Hathaway chief executive has said that when the market cap of public companies is higher than GDP, the market is overvalued.

In that case, the market has been overvalued for more than a decade. The last time that GDP was higher than the equities market’s total capitalization, adjusting both for inflation, was in 2009, when the stock market’s total capitalization was only about 93% of GDP.

Since then, the market value of U.S. companies has at times approached double GDP. Their collective market cap currently stands at $35.7 trillion, according to the World Federation of Exchanges, down from $37.5 trillion at the end of 2019. GDP in the second quarter ran at a seasonally adjusted annualized rate of $19.4 trillion.

Many investors appear to be pinning their hopes on a coronavirus vaccine and extensions of jobless benefits and other stimulus from Congress. Any hiccups on those fronts could stall the market’s recent rally. At the same time, volatility is expected to remain elevated through the beginning of next year due to the coming presidential election, which is likely to be contentious.

Stocks might look expensive against those concerns, but some market watchers say it is difficult to reliably predict when valuations are too rich for investors’ taste.

“Market rules are not written in stone,” said Robert Colby of Robert W. Colby Asset Management, which has $20 million in assets under management. “Sometimes there’s just no logic to market behavior.”

Surge in precious-metals prices this year comes alongside rising exchange-traded-fund purchases and increased volatility

The 2020 gold rush in markets is starting to unnerve even some longtime fans of precious metals.

Gold futures are near records and up about 28% for the year, while silver has more than doubled since hitting a multiyear low in March. The moves aren’t entirely surprising, given the scale of the coronavirus-driven economic shock and the countervailing global stimulus led by governments and central banks. Many investors fear economic stagnation, an outbreak of inflation or some combination of the two—a recipe for rising demand for metals viewed as a store of value in trying times.

But with the rush into gold has come an increase in volatility that many traders don’t welcome. Both metals have dropped about 6% or more from peaks hit this month and are recording bigger daily swings than normal, suggesting that gold and silver have joined U.S. tech stocks among the most crowded trades in markets—creating the risk that months of outperformance could vanish in a day or two of frenzied selling should market or economic conditions turn.

“Almost everybody is talking about gold.…That is a warning signal in a way,” said Luca Paolini, chief strategist at Pictet Asset Management, which is holding more gold than its market benchmark but may sell some if volatility continues. “At least until the election in the U.S., this volatility will persist.”

Some traders blame the increasing popularity of exchange-traded funds that afford both retail and institutional investors cheaper, easier access to commodities such as gold, silver and other metals. They say that while ETFs such as the SPDR Gold Shares Trust marketed by State Street Global Advisors have been part of the market landscape for more than a decade, the surge in ETF buying of gold and silver stands to accentuate price swings, potentially intensifying the boom-bust cycle often seen in these and other commodities.

“Because of the very high interest in ETFs by retail investors, you might see swings that you haven’t in the past,” said Ellen Hazen, a portfolio manager at F.L.Putnam Investment Management, which bought gold through an ETF in March. Still, she believes the metal offers an effective long-term hedge against inflation.

ETFs backed by gold are growing at the fastest rate on record and have raked in nearly $50 billion this year, well above the previous record for annual inflows, according to the World Gold Council. Assets managed by the SPDR Gold Shares and iShares Gold Trust have risen 60% this year, while smaller ETFs such the GraniteShares Gold Trust are growing at an even quicker pace.

Investors tend to put money in metals when they are nervous about the economy and believe inflation will rise faster than interest rates. Climbing inflation reduces the dollar’s purchasing power, meaning it takes more dollars to buy the same amount of metal. Low interest rates make the metals, which don’t offer holders any regular payouts, more appealing relative to income-generating assets such as safe bonds.

Low inflation-adjusted interest rates also have lifted stocks by making bonds less attractive, pushing many investors to take on more risk in equities. The trend explains how gold and stocks rallied in tandem for months, with the S&P 500 hitting new records last week.

Gold has averaged a daily move of 1.2% over the past five weeks, nearly double the typical swing since the start of last year. Silver is moving nearly 4% a day on average, roughly triple its normal daily change.

The metals also have fallen sharply on certain days, without obvious explanation—a sign in the view of many market participants that speculators are becoming a larger proportion of the market. On Aug. 11, gold slid about 4.5%, while silver fell 11%. And last Wednesday, both metals dropped roughly 2%.

Many precious-metals ETFs are backed by physical gold and silver, but many traders say inflows and outflows also affect the futures markets because the ETFs have gotten so large that they represent a large chunk of investor demand.

ETFs backed by physical gold held about 3,620 metric tons at the end of June, World Gold Council figures show, more than any country other than the U.S. Silver ETFs also represent a sizable portion of investor demand. With physical demand for jewelry and bars and coins falling, ETFs represented about 40% of global gold demand in the second quarter, up from 6% in the same period a year earlier.

When individuals buy shares of an ETF that is backed by physical gold or silver, they are buying a stake in a trust. The asset held by that trust is metal.

One of the ways traders make a market in the ETF—typically banks and other traders such as Virtu Financial Inc. —is to buy physical metal from traders on the open market, typically from banks, such as JPMorgan Chase & Co. and HSBC Holdings PLC, that commonly trade precious metals.

As a result, large inflows signal that the metals are in high demand from global investors, a trend that then helps dictate sentiment in the futures market. The traders selling to the ETF traders might also seek to hedge against a price increase by purchasing futures contracts, creating another link between ETFs and metals prices.

The trend can work the opposite way when money flows out of the ETFs. When precious metals tumbled alongside stocks back in March, traders said the fall was generally due to investors pulling money out of haven metals to raise cash, and outflows from ETFs helped make the declines in gold even more severe.

“I really believe this is pure speculation,” said Campbell Harvey, a Duke University finance professor who has argued widespread use of gold ETFs can cause prices to overshoot market fundamentals. “There are some people playing the momentum trade…If there is a turning point, they’re going to be crushed.”

Firefighters haven’t yet contained the two massive blazes, as hundreds sparked by lightning strikes burn in Northern California

Two clusters of wildfires ringing the San Francisco Bay Area exploded in size Friday night to become the second and third largest in recorded state history, as firefighters struggled to contain them.

One complex of fires east of San Jose and another north of San Francisco have each spread to around 300,000 acres, fire officials said.

Across the state, a blitz of about 12,000 lightning strikes since Aug. 15 have sparked nearly two dozen major fires, scorching 915,000 acres—a territory about the size of Rhode Island.

The Trump administration on Saturday approved California’s request for a major disaster declaration, Gov. Gavin Newsom said, enabling federal assistance to state and local governments funding emergency response and recovery efforts. Mr. Newsom has already declared a statewide emergency.

More than 13,700 firefighters drawn from state, local and federal agencies are battling the blazes, which have caused at least five deaths and forced more than 115,000 people to evacuate their homes, according to state fire officials. They said at least 700 homes and other structures have been destroyed and an additional 90,000 are threatened.

Government forecasts call for warm and dry weather through the weekend in California. Remnants of Hurricane Genevieve could bring thunderstorms as early as Sunday and continue until Tuesday, according to Cal Fire spokesperson Sean McFadden, with winds of up to 65 mph that could ignite more fire activity.

The largest mass of fires are burning in Napa, Sonoma and Lake counties, a region rich in wine vineyards that has been hit with numerous wildfires in the past few years. Only 15% of the LNU Lightning Complex, as it’s called, has been contained.

The SCU Lightning Complex—another major hot spot comprising three big fires raging throughout the counties of Santa Clara, Alameda, Contra Costa, San Joaquin and Stanislaus—had torched 291,968 acres in three days as of Saturday morning. Fire officials said 10% of the complex has been contained.

The largest group of fires in California history was 2018’s Mendocino Complex, an inferno combining two blazes that burned more than 450,000 acres north of Napa County’s wine-growing region.

On Friday evening, the Sonoma County Sheriff’s Office staged a nighttime helicopter rescue operation to save two firefighters trapped on a ridgeline near the coastline in Marin County, less than 100 yards from the head of the advancing blaze. Both firefighters were flown to safety using a 100-foot-long line, according to the sheriff’s office.

House Passes Bill Bolstering U.S. Postal Service With $25 Billion

Senate majority leader won’t bring up measure that would prevent cutbacks through at least January 2021

The Democratic-led House on Saturday passed legislation preventing U.S. Postal Service cutbacks at least through January and providing it with $25 billion in additional funding, reflecting Democrats’ concerns that delivery delays affecting basic mail service would spill over into an election being held during the coronavirus pandemic.

In a rare Saturday session held during August recess, the bill passed 257-150, with the support of 231 Democrats and 26 Republicans. It was opposed by 149 Republicans and one Independent. House Speaker Nancy Pelosi (D., Calif.) brought the measure to the floor over the objections of House Republican leaders. They say she is promoting conspiracy theories that Postmaster General Louis DeJoy, a major Trump donor appointed to the position in May, is cutting costs at the financially struggling service to hinder voting by mail, which President Trump has criticized.

Republicans say it is routine to decommission mail-sorting equipment and remove mail drop-boxes that the Postal Service deems underused. They also say the Postal Service has the money and capacity to handle the heavy volume of mail-in ballots expected. They note that Mr. DeJoy has agreed to suspend operational changes until after the general election, which is less than three months away.

The House bill faces opposition as a stand-alone bill in the GOP-controlled Senate. Congressional leaders had been discussing funding for the Postal Service as part of a broader coronavirus relief package, but those negotiations collapsed earlier this month. Mrs. Pelosi said she brought the postal funding bill up separately to address the public alarm over changes implemented by Mr. DeJoy.

“It makes absolutely no sense to implement these dramatic changes in the middle of a pandemic less than three months before the November elections,” House Oversight Committee Chairwoman Carolyn Maloney (D., N.Y.), the bill’s lead sponsor, said on the House floor Saturday. “The American people do not want anyone messing with the post office. They certainly do not want it to be politicized. They just want their mail.”

Complaints about delays have spilled over into concerns about the election, in which mail-in voting is expected to hit historic highs because of the coronavirus pandemic.

“Representatives of the Post Office have repeatedly stated that they DO NOT NEED MONEY, and will not make changes,” Mr. Trump said Saturday on Twitter. “This is all another HOAX by the Democrats to give 25 Billion unneeded dollars for political purposes, without talking about the Universal Mail-In Ballot Scam that they are trying to pull off in violation of everything that our Country stands for.”

Mr. DeJoy has declined to reverse some changes he has made since becoming the top postal official, including removing mail drop-boxes and taking mail-sorting machines out of service—cuts that Democrats would reverse in their legislation and ban into next year. The House bill also would require all election mail to be treated as first-class mail.

Senate Majority Leader Mitch McConnell (R., Ky.) said Saturday he would not bring up a separate Postal Service funding bill without a broader deal on coronavirus relief.

“Senate Republicans are committed to making sure the Postal Service remains well equipped to fulfill its important duties. But the President has already made it clear he will not sign the Speaker’s partisan stunt into law,” Mr. McConnell said in a statement Saturday. “The Senate will absolutely not pass stand-alone legislation for the Postal Service while American families continue to go without more relief.”

Many of the Republicans who voted for the bill on Saturday face competitive re-elections and want to show support for the Postal Service.

“As the Congress, we need to do everything we can to ensure prompt, reliable and efficient postal services during the Covid-19 health emergency and block actions that would impede those efforts,” said Rep. Fred Upton (R., Mich.), who voted for the bill. Even if the Senate doesn’t take it up, “I do think it sends a signal that this legislation should be part of any bipartisan future Covid-19 relief package.”

The bill’s passage was a unifying exercise for the House Democratic caucus. Democrats are torn over Mrs. Pelosi’s strategy for enacting a large new coronavirus-aid package, which has become more urgent for jobless Americans after a $600-a-week federal unemployment supplement expired last month. Senate Republicans and the White House balked at extending it at that level.

The House speaker this week rejected calls by a group of more than 100 Democrats to also vote Saturday on a separate measure to automatically provide a federal unemployment subsidy when the jobless rate is high, arguing that it was tactically unsound to separate that aspect from her efforts to secure a broader aid package.

White House chief of staff Mark Meadows, who was on Capitol Hill talking to lawmakers Saturday, also urged Mrs. Pelosi to take up some Covid-relief items where the two parties are closer together.

“If we want to do something on postal, we ought to do something on other small businesses and enhanced unemployment—at least pick the things that we think we can agree upon and put that bill on the floor,” Mr. Meadows told reporters.

Mrs. Pelosi said Saturday she didn’t want to vote on a narrower package of coronavirus relief, a strategy that could leave behind some issues where Democrats and Republicans remain far apart, including funding for state and local governments.

“I’m not for splitting it up, except this is an emergency,” Mrs. Pelosi said of the Postal Service bill, noting that Mr. Meadows had omitted other Democratic priorities, including additional funding for health, education or food stamps.

House Democrats have been willing to give Mrs. Pelosi wide latitude in conducting negotiations because she has steered her caucus to political and policy wins during the Trump presidency, lawmakers and aides said.

“One of the great things about Nancy Pelosi is she is not going to do stupid things out of desperation. She just doesn’t operate like that,” said Rep. Andy Levin, a freshman Democrat from Michigan.

But some Democrats, especially those from districts that Mr. Trump won or that were previously held by a Republican, are growing anxious about an impasse that has stretched out for at least a month.

“Personally, I feel frustrated; I know there’s a lot of frustration among the freshmen class, a lot of us would like to see something done,“ said Rep. Susan Wild (D., Pa.), a freshman who flipped a GOP-held seat. ”The timing is awful because of course we’re heading into full-blown election season. There’s probably less of a tendency to get things done in an election year.”

Hoping to push their leaders to revive talks with White House officials, some Democrats have begun floating ideas to shave down the cost of the $3.5 trillion relief bill passed by the House in May, such as by trimming some of the state and local aid and other provisions. Democratic negotiators have already proposed cutting $1 trillion from the House package, largely by reducing the duration of aid.

“I’d be all for putting a bill on the table that demonstrates our ability to reach that compromise,” said Rep. Tom Malinowski (D., N.J.), who is from a district that was previously held by a Republican.

Economists and manufacturers worry the honeymoon phase for factories will run out of steam

European manufacturing’s bounceback from its pandemic-induced crash this spring is slowing — and in Germany, the region’s industrial heartland, executives worry that the recovery could soon run out of steam, leaving them with years of painful rebuilding ahead.

Manufacturing activity and output in the eurozone continued to rise in August, according to the IHS Markit flash purchasing managers’ eurozone manufacturing index published on Friday, but at a slower rate than in previous months.

While German manufacturing activity continued to increase, there was a surprise contraction in France and some economists expect to see a softening in Italy and Spain when their sentiment data is published next week.

This suggests that although eurozone factory production, orders and exports data all rebounded sharply in June, they are likely to have lost some momentum over the course of the summer.

High-frequency data such as heavy goods traffic on German toll roads — which are more up-to-date than official economic indicators but are experimental and the extent to which they reflect subsequent trends in official data is variable — have returned close to pre-crisis levels.

However, industrialists and economists worry that the rebound may soon fade.

“We have seen some figures recently that surprised on the upside, but it is not the moment to get carried away,” said Katharina Utermöhl, economist at Allianz. “May to July [was] the honeymoon phase of the recovery. On the industry side it is being driven mostly by pent-up demand.” 

Henrik Follmann, chief executive of family-owned German chemicals maker Follmann Chemie, said that “the trend is going in the right direction but the confidence is missing”.

“Big orders are not coming and the clients are not building up their inventories,” he said.

Follmann Chemie, which supplies adhesives, inks and coatings to the packaging, construction and industry sectors from its base near Hanover, is enjoying a jump in pricing that its boss says is “an indicator that demand is getting back closer to supply”. 

Yet Mr Follmann added that sales were still heavily down and many clients were struggling. “The furniture industry is picking up but the car industry is still difficult,” he said. “We need confidence. People have to start buying cars or kitchens again. This is still not happening. Watching the figures on coronavirus infections going back up again — that doesn’t help.”

The 22.5 per cent rise in industrial production across the eurozone in May and June only clawed back part of the record 28 per cent drop in output suffered in the first two months of the pandemic, when many factories cut back production or closed during lockdown. By June, industrial output was still 12 per cent down on the same time last year.

Germany’s central bank said last week that, despite the recent rebound, eurozone manufacturers were only operating at 72 per cent of their total capacity in July — well below their long-term average of above 80 per cent.

One of the hardest hit sectors has been the carmaking industry, which directly employs 830,000 people and supports a further 2m jobs while accounting for about 5 per cent of Germany’s total economic added value.

IHS Markit forecasts that global car sales will fall from 88m last year to 69m this year. Markus Duesmann, head of Audi, has predicted that pre-crisis levels of car production will “not be reached before 2022 or 2023”.

Elmar Degenhart, chief executive of German car parts maker Continental, is even more pessimistic. “There will not be a fast recovery, neither in Europe nor in North America,” he said. “The number of cars being produced around the world is increasing, but slowly. We will not achieve the level of 2017 until after 2025 at the earliest.”

ElringKlinger, a maker of gaskets and plastic panels for cars based near Stuttgart in south-west Germany, suffered a more than 50 per cent drop in sales in the weeks after the pandemic hit. 

Stefan Wolf, ElringKlinger’s chief executive, said that in recent weeks there were signs of a bounceback, particularly in sales to China and the US. “We clearly see a recovery in June and also in July,” he said. “There is also a pretty good situation in August, based on the daily reports I get.”

However, the European car market remained in the doldrums, he added. “People here in Germany or other European countries are in short-time work and they don’t really know if they will still have a job in six months’ time, so there is no real recovery here in Europe and it is really wait-and-see.”

Mr Wolf, who is also head of the metal and electrical industry employers’ association for south-west Germany, worries about the wider outlook for the country’s many machinery makers, which are being hit by sharp cuts to companies’ investment budgets.

“Most machinery companies are having trouble because a lot of investment projects have been cancelled or delayed,” he said, adding that ElringKlinger had cut its investment budget from more than €160m in 2018 to about €30m this year. “Most investment budgets will be even lower in 2021 — they are going to be cut really hard again — so this is not going away.”

The woes of the export-reliant manufacturing sector have been worsened by the recent appreciation of the euro, which is up about 4 per cent against a trade-weighted basket of currencies since May. 

Exports from the eurozone rose almost a third between May and June, although they remain 10 per cent below the level of a year ago. “The strong euro is a disadvantage for exports, as are trade difficulties and tariffs,” said Mr Wolf. 

An additional setback is the impact of coronavirus on international travel, which makes agreeing big contracts harder, according to Mr Follmann.

“Our travel spending is down 90 per cent — that’s a very negative sign — because you need to be there,” he said. “We are working with one hand behind our back. You learn to do more with the other hand, but it is still not ideal.”

BioNTech and Pfizer’s Covid-19 Vaccine Could Lead the Pack, New Data Suggest

“The data and our discussions with physicians, support our view that PFE and BNTX could have the first-in-class, as well as best-in-class, vaccine to treat COVID-19,” Cantor Fitzgerald analyst Louise Chen wrote in a note out late Thursday.

While the BioNTech (ticker: BNTX) and Pfizer (PFE) paper was posted on a so-called preprint server on Thursday morning, the companies did not issue their press releases announcing the data until after the market closed Thursday. Shares of BioNTech were up 1% Thursday, and another 8% Friday morning, while shares of Pfizer climbed 1.2% on Thursday and 0.8% on Friday morning.

In addition to announcing the new data, Pfizer and BioNTech said Thursday evening that their Phase 2/3 worldwide study has enrolled over 11,000 people since it began in July. The study aims to enroll up to 30,000 people, and the companies reiterated that they will seek regulatory review of the vaccine “as early as October 2020.”

Shares of Pfizer are up 12.8% this year, while shares of BioNTech are up 95.6%. Pfizer trades at 14.2 times earnings expected over the next 12 months, just over its 5-year average of 13.4 times earnings. Of the 16 analysts who cover the stock tracked by FactSet, eight rate it a Buy, while eight rate it a Hold.

The new vaccine data released Thursday relates to BNT162b2, the version of their Covid-19 vaccine being tested in the Phase 2/3 trials. Earlier Phase 1 data released by the companies was on a similar but slightly different vaccine, called BNT162b1. The new paper reports that, while immune response was similar between the two vaccines, BNT162b2 appeared safer.

“The data set presented here guided our decision to advance BNT162b2... into the Phase 2/3,” the paper reads. “The primary consideration driving this decision was the milder systemic reactogenicity profile of BNT162b2, particularly in older adults, in the context of comparable antibody responses elicited by both candidate vaccines.”

Fewer than 20% of participants reported mild to moderate fever after taking BNT162b2, according to the companies.

In a note out Friday, SVB Leerink analyst Geoffrey Porges noted that the new data also includes one of the first reports on a Covid-19 vaccine in elderly populations, which are particularly vulnerable to the virus. “The results show that the vaccine was safe and does elicit an antibody response superior to that seen in convalescent sera cohort in subjects 65 and over, although magnitude of response is less pronounced than in the younger population,” Porges wrote.

Cantor Fitzgerald’s Chen wrote that her estimation that the Pfizer and BioNTech vaccine could be the best of the bunch was based on the immunogenicity data, the data on T cell responses, and the safety profile of BNT162b2.