A steady stream of reopenings and eased lockdowns are due this week as countries around the globe continue their tentative steps back towards normality.
At the end of the week focus will fall on China when the ruling Communist party finally holds its national congress, and at a time when US tensions with the country are again escalating.
The accounts of the recent European Central Bank and Federal Reserve meetings should help to shed light on the future direction of policy during the coronavirus crisis.
May’s flash purchasing managers’ indices from the eurozone, France and Germany will be closely watched on Thursday, the same day as the US weekly unemployment figures will be scrutinised for further falls.
Among several retailers reporting earnings this week, Walmart in the US and Marks and Spencer in the UK will be of particular interest to investors.
Coronavirus this week
The World Health Organization begins a virtual two-day meeting of health ministers from its 194 member states on Monday, when the debate will be dominated by coronavirus. The EU plans to present a resolution on Covid-19 and is seeking support for its adoption by consensus.
The UK government has recruited 17,000 contact tracers to try to contain the spread of Covid-19 as lockdown curbs are relaxed. The tracers are due to start work on Monday
Shops and bars will reopen in Italy under strict social-distancing rules
Restrictions will be loosened in more Spanish regions, such as Valencia, which now joins the other half of Spain in phase one of a four-phase de-escalation plan. Some islands will enter phase two
Archaeological sites in Greece, including the Acropolis, will reopen
Portugal reopens schools for some group years as it launches the second phase of a sector-by-sector plan to relaunch the economy on Monday. Restaurants, museums and coffee shops will also relaunch at reduced capacity
Team training for sports, including football, should be allowed for the first time in months in Italy. The English Premier League could also give the go-ahead for clubs to begin training at a meeting on Monday. Teams in Spanish football’s top two divisions can begin training in small groups from Monday
China’s National People’s Congress
The coronavirus crisis and renewed trade tensions with the US have placed unprecedented attention on China’s economic policy measures. This week investors will get their clearest insight yet into its intentions as the nation’s elite convenes on Friday in Beijing for the long-delayed National People’s Congress.
The annual conclave of the ruling Chinese Communist party had been scheduled for early March but was postponed in February as Covid-19 tore across China. As recently as two weeks ago, it still did not have a firm start date.
President Xi Jinping’s politburo has already announced an array of priorities for protection including employment and supply chains. Analysts increasingly expect at least some type of large-scale support programme after the People’s Bank of China did not repeat its time-honoured vow to refrain from “flood-like” stimulus to support growth in its monetary policy statement last week.
UK public finances
The UK Office for Budget Responsibility has warned the UK economy faces a 35 per cent plunge in output in the second quarter of 2020 if a lockdown to fight the spread of coronavirus remains in place for three months.
The country’s fiscal watchdog said that in this scenario government borrowing would rise by £218bn to £273bn in 2020-21, taking the deficit to 14 per cent of gross domestic product — the highest since the second world war and well above the financial crisis peak of 10 per cent.
As such, UK public sector borrowing is expected to come in at around the £20bn mark on Friday, with expectations of considerable upward revisions to come in the future for both March and April’s debt.
Further reading
Argentina debt
Argentina and its bondholders face a Friday deadline to agree on a $65bn restructuring. If no deal is reached or the government fails to make a hefty interest payment, Argentina will default for the ninth time in 200 years.
EasyJet vote
The low-cost airline’s battle with its founder and largest shareholder, Stelios Haji-Ioannou, will come to a head at a meeting on Friday when the result of an investor vote on a resolution to remove four of the company’s directors is announced. Mr Haji-Ioannou put forward the resolution as part of a long-running campaign to make the company reduce its fleet and cancel its Airbus contract.
Earnings
Retailers lead this week’s earnings round. Walmart has first-quarter results on Tuesday, with the world’s largest retailer poised to post its best quarterly same-store sales in more than a year, thanks to customer stockpiling during virus lockdowns. Asda, the UK supermarket arm of Walmart, also reports.
Also in the US, department store chain Kohl’s and Home Depot report on Tuesday, Target is up on Wednesday and Best Buy on Thursday.
Background reading
Chinese ecommerce giant Alibaba has full-year results on Friday, the first to take in the financial impact of coronavirus.
UK high-street favourite Marks and Spencer reports full-year results on Wednesday. The retailer has said it would save £210m by withholding another year’s dividend. The coronavirus crisis has also forced it to accelerate plans to overhaul its business.
M&S has said clothing and homeware are likely to be “severely constrained” during lockdown and “materially subdued” for the rest of the year. Its food business has also been hit due to the closure of cafés and a drop in travel.
Pets at Home reports on Thursday and luxury brand Burberry on Friday.
Ryanair reports full-year results on Monday. It expects annual profit to come in at the lower end of its earlier outlook due to coronavirus, which has also made forecasts for the rest of the year impossible.
Japanese group SoftBank also reports on Monday, having warned of a $12.5bn annual operating loss — its biggest ever — after its $100bn investment fund sustained a heavy hit from the market turmoil sparked by the virus.
Others to watch this week include online travel agent Expedia, US tractor maker Deere & Co, UK tobacco group Imperial Brands, the world’s largest caterer Compass Group, China’s dominant search engine Baidu and UK water group Severn Trent.
Central banks
The week begins with Federal Reserve chair Jay Powell and Treasury Secretary Steven Mnuchin testifying online before the Senate banking committee.
Bank of England governor Andrew Bailey will be quizzed by MPs on Wednesday about the impact of the coronavirus outbreak on the UK economy.
The Fed minutes of its April meeting are released on Wednesday. The FOMC kept its main interest rate close to zero and pledged readiness for further action, but stopped short of any big new monetary policy action or guidance.
The minutes will be scrutinised for any clues on the Fed’s future path, with the balance sheet and discussion about the rollout of new emergency tools of particular interest.
Background reading
The ECB account of its April meeting is out on Friday, when analysts will try to get inside the thinking that led the central bank to hold back on increasing its asset purchase programme and instead roll out a new series of non-targeted pandemic emergency longer-term refinancing operations in May to provide “an effective liquidity backstop”.
The People’s Bank of China is expected to keep its powder dry for now and leave its one-year loan prime rate at 3.85 per cent on Wednesday, but policymakers are thought likely to increase stimulus next month.
Turkey is set to reduce rates by a further 0.75 per cent on Thursday. South Africa announces its rate decision the same day, when a 0.5 per cent cut is expected.
Economic data
Monday
Japan: First-quarter GDP The economy is forecast to suffer a quarterly contraction of 1.1 per cent, with exports hard hit by global uncertainty and supply-chain disruptions, and a steep fall in tourism
Tuesday
UK: Labour market The job retention scheme should help to keep the unemployment figures in a better place than they could have been, but a sharp rise is still likely, with about 400,000 to 500,000 job losses forecast for March
Germany: Zew survey The economic sentiment indicator is likely to show another rise in the expectations reading as lockdown eases, but this will do nothing to counter the current situation reading, which is set to remain dire
US: Housing starts April is set to follow the previous two months with further falls
Wednesday
Thursday
US: Initial jobless claims Claims for the week ending May 9 fell to 3m, down from 3.2m the week before. The trend is set to continue, with the forecast for the week ending May 16 down to 2.6m
UK: PMIs Lockdown restrictions have only eased slightly, so while May’s readings are set to improve, they will remain very low
Eurozone: PMIs The services index should rise, reflecting the return to work, though activity levels are likely to remain subdued for a long time. Manufacturing held up relatively well in April, so a smaller rebound is expected for May as factories reopen. France and Germany also have flash PMI readings
US PMIs Both the manufacturing and services flash readings are expected to increase slightly on last month
Friday
UK: Retail sales March’s fall was the fastest since records began as the pandemic forced people to stay at home and non-essential shops to shut. Supermarket shopping may have picked up a little in April, but this will not offset the disastrous decline expected
Source: Economy - ft.com
