We have a steady economic calendar this week as well as Brexit talks and the US Democratic National Convention.
The Federal Reserve and European Central Bank will release the details of their July meetings.
Retail results round off the second-quarter earnings season in the US, with Walmart among the top names to follow. Some big hitters in Europe too this week — Norway’s $1tn oil fund reports, while the world’s largest container shipping line, Maersk, and the world’s biggest miner, BHP, also have results out.
Britain and Japan have some key data points out through the week and flash purchasing managers’ index data from the UK and Europe will be in focus on Friday.
Brexit talks between Britain and the EU are set to resume in Brussels this week, but no one close to the talks is expecting dramatic moves until September, when UK negotiator David Frost has said “an agreement can be reached . . . and we will work to achieve this if we can.”
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The UK also begins the week with fewer Covid-19 restrictions — bowling alleys, skating rinks and casinos will be allowed to open, while beauty salons, spas and barbers will be able to offer all “close-contact services and treatment”.
In a significant boost to the arts sector, indoor theatres, music and performance venues in England will be able to reopen with socially distanced audiences, after a successful series of pilots.
Meanwhile, the piloting of a small number of sporting events to test the safe return of spectators also began over the weekend, with a view to reopening sports venues to fans from October 1.
In the US, the Democrats hold their 2020 national convention — pushed back from July owing to pandemic concerns — where they will formally nominate Joe Biden as their nominee to face Donald Trump in the November 3 presidential election.
It will be a chance for voters to see Mr Biden in action with running mate Kamala Harris, who has fired up enthusiasm among Democrats and already brought in a record $36m in donations, including contributions from 150,000 new donors.
Speakers will include former president Bill Clinton, Alexandria Ocasio-Cortez, a leader of the party’s progressive wing, as well as 2004 presidential nominee John Kerry. There is also expected to be a show of unity from 13 of Mr Biden’s former 2020 challengers who will be keen to show they can work together in the election campaign.
Mr Trump’s re-election campaign is spending millions of dollars on digital advertisements to run alongside his rival’s convention.
Staying with the election theme, the US Postal Service is likely to be in the news this week as the internal watchdog investigates cost-cutting that has slowed delivery ahead of the election, when up to half of US voters could cast ballots by mail.
US House Speaker Nancy Pelosi is also considering recalling lawmakers from a summer recess to address the changes at the postal service.
Further reading
Earnings
US retailers report this week, when some companies will benefit from a rise in online sales as shoppers ordered from home during lockdowns, while other operations are likely to suffer after outlets were forced to close their doors. Investors will also be keen to hear how companies plan to deal with the expected second-half shocks when sales are likely to falter as hard times bite.
Walmart is forecast to post a rise in same-store sales on Tuesday. Investors will also be looking for any detail on the launch of Walmart Plus, a subscription service that the retailer hopes will rival Amazon Prime.
Others reporting this week include Target Corp, ecommerce giant Alibaba, Home Depot, department store Kohl’s, Estée Lauder — set to post a loss after weak demand for cosmetics during the pandemic — and off-price retailer TJX.
UK retail watchers will focus on delayed full-year results from Mike Ashley’s Frasers Group on Thursday as a gauge of trading levels since stores reopened after lockdown.
Back in the US chipset maker Nvidia is set to benefit from the rise in homeworking and demand for video games when it reports on Wednesday and tractor maker Deere & Co is expected to report lower profit and revenue on Friday due to disruption caused by the pandemic.
The world’s biggest miner, BHP, is expected to report roughly flat full-year profit on Tuesday. Like rival Rio Tinto, which reported in July, BHP is expected to flag sustained Chinese demand for iron ore but weakness in other markets, highlighting the uneven global recovery from coronavirus.
Fellow miner Antofagasta reports on Thursday, when the situation in Chile will be in focus after a warning in May that coronavirus could hit production. Hochschild Mining reports on Wednesday.
Profits at UK housebuilder Persimmon are expected to be down on Tuesday, when investors will look for any signs the property market has picked up after chancellor Rishi Sunak slashed stamp duty.
Coronavirus shutdowns and contract losses are likely to weigh on UK outsourcing group Capita when it reports on Tuesday.
In Europe this week, Norway’s oil fund will be hoping the stock market rebound will help the $1tn sovereign wealth fund to put its worst quarterly loss behind it when it reports second-quarter results on Tuesday.
The world’s largest container shipping line AP Moller-Maersk reports the same day. Falling oil prices and stable freight rates helped the Danish group to increase first-quarter profits and investors will hope this has continued — some analysts have even pointed to Maersk bettering last year’s second-quarter performance.
Central banks
The minutes from the US Federal Reserve’s July meeting are out on Wednesday. Fed chair Jay Powell sent a very clear signal after the meeting that the Fed would not waver from its plans to support the nascent economic recovery that has progressed haltingly since May.
Still, investors were left wondering at the time what policies in particular the Fed is considering in the near term and they will look to these minutes for more clarity. Any signs that the Fed is willing to make adjustments on the contours of its bond-buying programme will be of interest too.
Further reading
Bank Indonesia meets on Wednesday, with rates unlikely to change after easing last month.
On Thursday the European Central Bank account will be scrutinised for any further detail on how policymakers intend to steer through the pandemic.
Thursday will be a busy day for meetings proper too, when the People’s Bank of China is expected to keep the one-year loan prime rate on hold at 3.85 per cent.
The consensus among analysts is that Sri Lanka will cut rates by a further 25 basis points on the same day, but there is an outside chance it will keep them on hold, believing last month’s 100bp cut was enough.
No changes are expected when Turkey meets but investors will watch for any comments on the risks from the recent depreciation of the lira.
Norway’s Norges Bank is expected to keep rates on hold, having already cut them to zero in response to Covid-19. The Philippines is also forecast to stay put.
Economic data
UK consumer price index data for July are due on Wednesday, when investors anticipate inflation will edge up to 0.6 per cent. However, some analysts warn this upward trend will be shortlived with the UK in danger of soon entering a brief period of deflation for the first time in five years.
The UK also has retail sales for July out on Friday. May and June’s figures were strong following the collapse in April, but this time around non-fuel sales could well taper off.
The eurozone, France, Germany and the UK all have flash PMI surveys on Friday, when the figures are expected to continue to improve, but worries about an increase in Covid-19 cases and companies laying off more workers are likely to weigh on sentiment.
On Thursday, the US releases initial claims for state unemployment benefits for the week ended August 15. Last week claims fell below 1m for the first time since mid-March.
Japan has a flurry of data releases this week, which should add clarity to how the country has fared in the two months since unofficial lockdown ended and parts of its retail and leisure sectors attempted a return to normal.
Things are unlikely to get off to a good start on Monday, when Japan is set to announce its worst economic contraction in more than six decades, amid warnings that recovery will be slow with coronavirus cases on the rise again.
Trade figures on Wednesday are forecast to show export figures down again while Friday’s national consumer price index data for July is likely to remain at about zero.
Further reading
Source: Economy - ft.com
