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Coronavirus milestones, Brexit talks, US jobs

Coronavirus continues to reverberate in the news this week. Even as countries lift lockdown restrictions, policymakers are reckoning with the economic fallout.

Minutes from the Federal Reserve’s last monetary policy meeting, job numbers from the US and Germany, and business surveys from China and Japan promise to throw further light on the challenges facing the global economy.

Questions of trade will also be to the fore, as the successor agreement to Nafta comes into force, and a new round of talks about post-Brexit arrangements begins for the EU and UK.

Elsewhere, familiar tensions continue to play out, with Taiwan reaching out to Hong Kong residents who are anxious about Beijing’s intentions, and Israeli prime minister Benjamin Netanyahu pondering his next move in the West Bank.

Coronavirus this week

Two milestones this week will bring home the speed and severity of the pandemic.

On Tuesday, it will be exactly six months since the World Health Organization was first alerted to a “pneumonia of unknown etiology” in Wuhan, China. Chinese authorities reported a cluster of cases to the WHO’s country office on December 31.

Since then the disease, now known as Covid-19, has claimed nearly half a million lives worldwide. The WHO expects that this week the total number of cases will reach 10m.

Its impact continues to be felt around the world:

  • On Monday, Beijing’s municipal government will brief the press about the coronavirus outbreak in China’s capital, where the number of cases is edging towards 300.

  • In the US, where states including California, Texas and Florida have recently reported a surge in infections, the government’s response will come under scrutiny at two hearings on Tuesday: Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases, will testify before the Senate health, education, labour and pensions committee, while Federal Reserve chairman Jay Powell and Treasury secretary Steven Mnuchin will testify before the House of Representatives’ financial services committee.

  • The pandemic will also affect celebrations for Independence Day, July 4, with many parades and firework displays cancelled due to concerns about social distancing. Some beaches, notably in Miami, will be closed too from Friday July 3, which is a public holiday.

  • On Tuesday, the International Labour Organization will issue its fifth assessment of coronavirus’s impact on labour markets. The previous report, late last month, estimated that the reduction in working hours was equivalent to the loss of 305m full-time jobs worldwide.

  • Wednesday, the first day of July, will bring an easing of lockdown measures in several countries. In Australia, New South Wales — whose capital is Sydney — will abandon its 50-person limit for venues including bars, restaurants and places of worship. Greece, Egypt and Lebanon will lift restrictions on international flights; schools will reopen in Thailand; visitors will be able to return to Tokyo Disneyland; Spain and Portugal will reopen their border; and, in the UK, country-house opera lovers will be able to visit Glyndebourne again — though only to admire the gardens for now.

  • On Saturday, England’s pubs, hotels, restaurants, hairdressers, cinemas and galleries will be allowed to reopen, and the two-metre social-distancing rule will be relaxed to “one-metre-plus”. Meanwhile, in Spain, Barcelona’s Sagrada Familia basilica will begin a phased reopening after being shut for more than three months.

Chauvin hearing

On Monday, Derek Chauvin, the police officer accused of the murder of George Floyd, will face his second court hearing in Minneapolis. The killing last month of Floyd, who was black, by Chauvin, a white police officer, sparked antiracism demonstrations worldwide. The court will also hear the cases of the three police officers accused of aiding and abetting Chauvin.

Brexit talks

“Intensified” talks between the EU and UK over their post-Brexit relationship will start on Monday, with an in-person meeting in Brussels between Michel Barnier, the EU’s chief negotiator, and David Frost, his UK counterpart. Both sides have signalled their willingness to reach a deal, but time is short: the UK’s post-Brexit transition period ends on December 31, and the deadline for requesting an extension — which Boris Johnson, UK prime minister, has insisted he will not do — lapses on Wednesday.

Taiwan and Hong Kong

On Wednesday, Taiwan will open an office dedicated to helping Hong Kong residents and businesses relocate to the island. The new service — a response to China’s tightening grip on Hong Kong, which includes a controversial plan to impose national security laws on the formerly UK-administered city — will not be welcomed by Beijing: it regards Taiwan as its own territory, and has already criticised President Tsai Ing-wen’s government for sheltering pro-democracy activists from Hong Kong.

Taiwan’s move will coincide with the 23rd anniversary of the UK’s handover of Hong Kong to China. Since 2003, the date has been marked with sizeable pro-democracy demonstrations, and similar protests are planned for this year.

Russian referendum

Russia’s week-long referendum on constitutional reform, postponed from April because of coronavirus, ends on Wednesday. The amendments, which would permit Vladimir Putin, whose presidency is due to end in 2024, to stand again for office, have already been passed by Russia’s constitutional court and both houses of parliament, and the public vote appears unlikely to deliver a different verdict.

West Bank discussions

Israel’s cabinet will begin discussions on Wednesday about prime minister Benjamin Netanyahu’s plan to annex territory on the West Bank. Under US President Donald Trump’s “Peace to Prosperity” blueprint, endorsed by Mr Netanyahu, Israel can claim sovereignty over 30 per cent of the West Bank, much of it already containing Israeli settlements, with the remainder going to a Palestinian state — a proposal that the Palestinians have rejected. Whether Mr Netanyahu will press to acquire that much territory immediately or a smaller portion is currently unclear.

After Nafta

The US-Mexico-Canada Agreement, Donald Trump’s replacement for the Nafta trade deal, comes into effect on Wednesday. The US president criticised the earlier agreement, which came into force in 1994, for harming US jobs; its successor includes a digital chapter, and provisions to favour sourcing from North America, to protect high-wage jobs in the car sector, and to increase US farmers’ access to the Canadian market.

Asteroid Day

Tuesday is Asteroid Day, a UN-supported effort to build global awareness of asteroids and of the dangers an impact poses to the Earth. If this seems a fanciful prospect, the date provides a riposte: June 30 1908 was the date of the so-called Tunguska event, when a small asteroid exploded in the air above Siberia, flattening more than 2,000 sq km of forest.

Central banks

The minutes of the Federal Reserve’s most recent monetary policy meeting, on June 9-10, will be released on Wednesday. At the press conference that followed the meeting, Fed chairman Jay Powell gave a bleak assessment of coronavirus’s economic effects, and made clear that there would be no increase in interest rates. The minutes should deliver further detail, including the committee’s view of the prospects for a full recovery, and the measures it is considering to stave off further damage.

Whether those measures are needed may become clearer the following day, when the US jobs report for June is released. May’s report brought the shock news that employment had increased by 2.5m jobs, “probably . . . the greatest comeback in American history”, according to Mr Trump. Meanwhile, new claims for unemployment benefit have continued to grow, albeit at a slowing rate; the next set of figures is due on Thursday as well.

Details of the Bank of England’s perspective on coronavirus should emerge on Tuesday, when chief economist Andy Haldane delivers a speech on the pandemic’s economic effects, the implications for monetary policy, and the outlook for the rest of the year. UK first-quarter GDP is due to be announced on the same day, with a consensus forecast of a 2 per cent quarter-on-quarter fall, or a 1.6 per cent decline year on year.

Earnings

Naspers, the South African ecommerce company, will announce full-year results on Monday. Chief Bob van Dijk told the FT in April that it was well placed to weather the pandemic, with access to $8bn in cash and debt, plus substantial investments in food delivery businesses. Prosus, its Amsterdam-listed investment vehicle, which has a large stake in Chinese internet giant Tencent, will also announce its full-year results on the same day.

J Sainsbury, the UK supermarket, will release a first-quarter trading statement on Wednesday — the first under new chief Simon Roberts, who took over from Mike Coupe on June 1. Food sales have been strong during the coronavirus lockdown, though other lines, such as clothes, are likely to have suffered.

The following day Associated British Foods — owner of clothing chain Primark — will issue a trading update. In April, Primark, which has no ecommerce offering, took a £284m writedown on unsold stock because of the coronavirus lockdown, though the food business reported stronger-than-usual sales of some of its brands.

Other earnings reports this week include: first-quarter results from Cineplex, the Canadian media and entertainment company, on Monday; fourth-quarter earnings from FedEx, the US shipping giant, on Tuesday; and fourth-quarter earnings from US foodmaker General Mills on Wednesday.

Economic data

Monday

  • UK consumer credit and mortgage approvals, May. Both had record falls in April, owing to the coronavirus lockdown; the consensus for May is of a further small fall in consumer credit, but an increase in mortgage approvals as the property market makes up for lost time.

  • Japan, industrial production, May. Consensus estimates suggest a 22.7 per cent fall, year on year.

Tuesday

  • China, manufacturing purchasing managers’ index, June. The figure is expected to hold steady at 50.6, which will be welcome news for President Xi Jinping: anything below 50 signals contraction.

Wednesday

  • Japan, Tankan business sentiment survey, second quarter. Consensus estimates for this Bank of Japan survey point to a fall of 31 per cent for large manufacturing companies.

  • Germany, unemployment (June), retail sales (May). Unemployment rose to 6.3 per cent in May, its highest level since 2016, yet there is also recent evidence of recovering consumer sentiment, according to research institute GfK. (For more on this, see the FT’s Market Questions column.)

Thursday

  • Eurozone, unemployment, May. The consensus forecast is of a small rise, to 7.6 per cent.

Friday

  • China, services purchasing managers’ index, June. Consensus estimates suggest a small fall, from 55 to 53.3.


Source: Economy - ft.com

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