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Five Things - Europe
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Good morning. Germany is more optimistic on the economy, the dollar is weakening and Apple is revving up iPhone plans. Here's what's moving markets.

German Economy

The German government expects the economic fallout this year from the coronavirus will be smaller than previously predicted, according to a person familiar with updated forecasts to be presented today. Chancellor Angela Merkel's ruling coalition predicted in April that the economy would contract by 6.3% in 2020, its worst recession since the nation began a recovery after World War II, before rebounding with growth of 5.2% next year. Economy Minister Peter Altmaier is due to present the new forecasts at 11 a.m. in Berlin.

Dollar Decline

Stocks are mostly drifting today, with the real action in the markets again happening in the dollar. The U.S. currency extended losses at the start of the new month to trade at its lowest since May 2018. The euro led the charge against the beleaguered greenback and approached the closely watched $1.20 level. As Cormac Mullen explains below, the euro's strength is contributing to the relative underperformance of European stocks. While European equities had their biggest August gain since 2009, they're lagging behind other developed markets

Apple Demand

Apple Inc. has asked suppliers to build at least 75 million 5G iPhones for later this year, roughly in line with last year's launch, in a sign that demand for the company's most important product is holding up in the midst of the global pandemic. The technology giant anticipates shipments of these next-generation iPhones may reach as high as 80 million units in 2020, according to people familiar with the situation. Apple plans to launch four new models in October with fifth-generation wireless speeds, a different design and a wider choice of screen sizes, said the people.

Vaccine Test

AstraZeneca Plc has begun a large-scale human trial of its coronavirus vaccine in the U.S., with plans to enroll as many as 30,000 adults. The shot, invented by researchers at the University of Oxford, is one of the farthest along of numerous Covid-19 vaccines in development. In addition to the U.S. trial, a final-stage test of the inoculation is under way in the U.K. and could yield preliminary results as soon as next month. India, meanwhile, is fast becoming the world's new virus epicenter after a record jump in cases, with experts predicting it soon will pass Brazil -- and, ultimately, the U.S. -- as home to the worst outbreak globally.  . 

Coming Up…

Economists forecast that euro-area inflation statistics due today will show a tepid rate of just 0.2% in August, while the unemployment rate in July probably ticked up to 8%. Inflation stats from several countries, out yesterday, showed prices are sliding in the wake of the coronavirus lockdowns, with Germany, Italy and Spain all reporting negative inflation rates in August.

What We've Been Reading

This is what's caught our eye over the past 24 hours. 

And finally, here's what Cormac Mullen is interested in this morning

It looks like the triumphant euro is finally weighing on the European stock rally. Continuing gains in the common currency made what would normally be a solid August for the Stoxx 600 -- up almost 3% -- pale in comparison to the more than 6% gain in the MSCI AC World ex-Europe Index. That has dragged the relative performance of the European benchmark back to a record low against its rest-of-world peers, in data compiled by Bloomberg going back to 1987. While recent positive sentiment toward Europe's game-changing rescue plan seemed to encompass all asset classes, the stock underperformance suggests the currency strength has been too much and is helping pull down the region's export-heavy equity market on a relative basis. With hedge funds having pushed their bullish euro positions to a record high for the fourth time in the last five weeks, Europe stock bulls will be hoping their currency counterparts' fervor is close to a peak.

Cormac Mullen is a cross-asset reporter and editor for Bloomberg News in Tokyo.

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