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European Economy Shrinks by Historic Margin

The national debt topped $22 trillion in March. Cratering tax revenues and surging expenditures have driven record levels of red ink for the federal government in recent months.Credit…Gabby Jones for The New York TimesThe credit rating firm Fitch left the United States’ AAA rating untouched, but downgraded its outlook on what is effectively the national credit score, suggesting the country’s status as one of the world’s most trustworthy borrowers could be put at risk by the enormous deficits the federal government is running to combat the fallout from the pandemic.“The outlook has been revised to negative to reflect the ongoing deterioration in the U.S. public finances and the absence of a credible fiscal consolidation plan,” Fitch analysts wrote on Friday in a report announcing the decision.Cratering tax revenues and surging expenditures have driven record levels of red ink for the federal government in recent months. The United States’ budget deficit hit a record $864 billion in June as the government continued pumping money into the economy to support workers and businesses slammed by the pandemic. Some analysts expect monthly deficits to soon top $1 trillion.Ballooning deficits have led to an explosion of new borrowing. Fitch noted that the Treasury Department borrowed just under $3 trillion dollars from the end of February to the end of June.Much of the supply of new government bonds was, essentially, purchased by the Federal Reserve, which has bought $2.6 trillion in financial assets since the middle of March, Fitch noted.The presence of the Federal Reserve, which can essentially create whatever money it wants and use it to buy assets, such as U.S. government debt, has depressed yields on government bonds even as debts and deficits rise sharply.On Friday, the yield on the 10-year note fell to 0.53 percent, one of the lowest levels in recorded history, suggesting there is virtually no concern among investors about the country’s ability to service its growing debts.The current Kodak chief executive, Jim Continenza, left, in 2014 with Antonio Perez, the former chief. Credit…Richard Drew/Associated PressEarlier this week, The Times reported on the well-timed stock bets that have generated big profits for senior executives and board members at companies developing vaccines and treatments. Jesse Drucker and Ellen Gabler have the latest example:At the beginning of this week, the Eastman Kodak Company handed Jim Continenza, its chief executive, 1.75 million stock options.It was the type of compensation decision that generally wouldn’t attract much notice, except for one thing: The day after the stock options were granted, the White House announced that the company would receive a $765 million federal loan to produce ingredients to make pharmaceuticals in the United States.The news of the deal caused Kodak’s shares to soar more than 1,000 percent. Within 48 hours of the options grants, their value had ballooned, at least on paper, to about $50 million.A Kodak spokeswoman declined to comment on the timing of the stock-options grants and emphasized that the value of the options could change before Mr. Continenza uses them to buy Kodak shares.Starting in May, Kodak began talks with the Trump administration about manufacturing the ingredients for pharmaceuticals, Mr. Continenza said in a television interview this week.The deal was announced on Tuesday. President Trump said the federal loan from the U.S. International Development Finance Corporation would help reduce the United States’ reliance on other countries, in particular China and India, for the vast majority of ingredients used to make generic drugs. Mr. Trump called the Kodak deal “a breakthrough in bringing pharmaceutical manufacturing back to the United States.”Stocks rallied to end Friday as investors looked past gnawing concerns about the economic toll of the pandemic and instead were cheered by a surge in profits reported by America’s largest tech companies.The S&P 500 rose more than three-quarters of a percent, and ended July with a gain of more than 5 percent. The index has climbed for four consecutive months — rising more than 26 percent since the end of February.A big factor behind that rally has been the success of big technology companies, which were well positioned to benefit from a shift to remote work and limits on public activity.On Thursday, investors heard just how much they benefited. Amazon, Apple and Facebook reported surging profits. The blockbuster earnings seemed to briefly put aside the uncertainty and pessimism surrounding the economic impact of the pandemic, but also perhaps underscored the concerns of lawmakers, expressed on Wednesday, that American’s tech giants have gotten too big.Apple gained nearly 10.5 percent on Friday, reaching a record, as the company announced a four-for-one stock split, and shares of Amazon and Facebook also rose. Alphabet, the parent company of Google, which reported its first-ever decline in quarterly revenue on Thursday, ended Friday down more than 3 percent.Microsoft also climbed late in the day, erasing its earlier losses after reports that it is in talks to buy TikTok, the popular video sharing app. The gains helped lift the Nasdaq composite by about 1.5 percent.But the virus continues spreading, and its damage is mounting. On Thursday, the United States reported that its economy fell 9.5 percent in the second quarter, compared with the previous quarter, the most on record. On Friday, the authorities reported that the eurozone contracted 12.1 percent in the second quarter. Both the United States and Europe are in deep recessions caused by shutdowns in economic activity to curb the spread of the disease.Many people are still flying for essential business, to visit friends and family or to return home. Some of the shorter international flights United is adding will serve limited demand for leisure travel.Credit…Joe Burbank/Orlando Sentinel, via Associated PressUnited Airlines plans to add more than 25 international routes to its September schedule, a sign of limited optimism in a battered industry at a time when coronavirus cases continue to rise across the country.Many of the new routes include destinations in Europe and Asia, where
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