There are shifts in some European countries towards getting back to work this week, while data continues to roll in that underlines how badly the global economy has been hit during the Covid-19 outbreak.
First-quarter growth figures for the US and eurozone are due, with both expected to show significant falls while economists fear far worse is to come in the second quarter.
Banks feature heavily this week, with three of the main central banks, the US Federal Reserve, the European Central Bank and the Bank of Japan, meeting to set policy, as well as earnings reports from some of the big UK and European lenders.
US tech, oil majors, big pharma all feature on the corporate calendar, with Berkshire Hathaway rounding things off with its annual meeting, virtual of course, and first-quarter results this coming Saturday.
Coronavirus
The French and Spanish governments will on Tuesday outline detailed plans to ease their lockdowns, as more European countries seek to map out an exit route from the economically damaging measures brought in to contain the virus.
Leaders across the region are grappling with how to balance reopening the economy with keeping the coronavirus epidemic under control.
Germany, which has had more success in containing the outbreak than some of its neighbours, began reopening shops last week, and plans to open schools early next month, while German carmaker Volkswagen will restart production at its Wolfsburg headquarters on Monday.
Switzerland will ease some restrictions this week, with doctors, hairdressers and cosmetics parlours due to reopen.
In the US some politicians are calling for a return to normality. Georgia’s governor has opened nail salons and tattoo parlours, and the mayor of Las Vegas says she wants the city to become the “control group” to see what happens when there is no social distancing.
Central Banks
The Fed concludes its two-day meeting on Wednesday. It said at its last meeting that it would maintain the federal funds target range at 0.00-0.25 per cent until it was “confident that the economy has weathered recent events”, so it is fair to say rates are unlikely to change this time.
Fed Chair Jay Powell also said projections for the economy or policy rates “didn’t seem to be useful” given the intense uncertainties related to Covid-19 and there is nothing to suggest there will be forecasts at this meeting.
Instead investors will look for guidance as to where the Fed still sees signs of strain, even as trading conditions broadly stabilise. Some are eager for the Fed to intervene more aggressively in the $4tn municipal bond market, where states and cities raise cash. Others see a need for more support to credit markets, specifically for high-yield borrowers.
The ECB meets on Thursday after having ramped up its quantitative easing programme last month with an announcement of a further €750bn of bond-buying, and has also loosened many of the restrictions previously governing such purchases.
Last week it eased restrictions on the collateral banks can put up in exchange for liquidity, meaning it will now accept the bonds of “fallen angels” — companies that have lost their top-quality credit ratings.
Nevertheless, many economists expect the ECB to increase the scale of its bond-buying further and investors can also expect renewed calls by the ECB for eurozone governments to spend more to kick-start their economies.
The Bank of Japan meets on Monday and concludes the same day, earlier than usual to lessen the risks of spreading coronavirus.
The bank is likely to leave its short-term policy rate unchanged at -0.10 per cent but economists expect it to ramp up asset buying for the second month to ease corporate funding strains.
Further reading
Sweden’s Riksbank meets on Tuesday with rates expected to remain at zero for some time.
Colombia’s central bank is likely to cut interest rates for the second month in a row on Thursday.
Earnings
Some of the tech-big hitters will grab Wall Street’s attention this week. A slowdown in digital ad spending is set to take its toll on earnings at Google-parent Alphabet on Tuesday and Facebook on Wednesday.
The coronavirus outbreak has led to reduced ad sales at both, even as users spend more time online due to lockdowns.
Apple reports on Thursday with a fall in sales expected after the pandemic brought disruption to its manufacturing facilities, supply chains and shut retail stores globally.
Amazon, which also updates on Thursday, is set to report a rise in quarterly revenue due to a surge in demand for online orders as Covid-19 kept shoppers indoors.
Microsoft, Qualcomm and Spotify are all up on Wednesday and Twitter reports on Thursday.
Further reading
UK banks report this week, with HSBC on Tuesday, Barclays and Standard Chartered on Wednesday, Lloyds on Thursday and Royal Bank of Scotland on Friday, to an undeniably bleak backdrop.
Share prices had already got off to a bad start for the year, and matters only got worse for investors after the Bank of England forced the banks to suspend dividends, taking away one of the few reasons left to invest in the sector.
On top of this the coronavirus pandemic poses the first serious test of business banking rules introduced after the financial crisis.
As such the focus will fall on how the banks income and loan books are holding up during the pandemic.
Barclays’ investors will hope the bank’s trading arm has benefited from the extra market activity, while over at RBS shareholders will watch for updates on the progress new chief executive Alison Rose is making on to downsizing the lossmaking investment bank.
HSBC and StanChart conduct a high level of business in Asia, and this will be of even more interest than usual as investors try gauge how the region is recovering from coronavirus.
On the continent, Deutsche Bank, which is undergoing a major restructuring, updates on Wednesday, with the pandemic casting doubts over its ability to meet targets this year.
UBS, the world’s biggest wealth manager, reports on Tuesday.
If the banks thought things were bad, maybe they could spare a thought for the oil majors, where the dramatic drop in demand for energy and collapsing oil prices due to coronavirus is set to dominate this week’s results.
Investors will be watching out for further production curtailments and updates on operations.
BP reports on Tuesday, Royal Dutch Shell and ConocoPhillips, the largest independent oil producer, update on Thursday and top US oil producers ExxonMobil and Chevron report on Friday.
The drugmakers have their work cut out in a different way as they seek to develop treatments for Covid-19.
Investors will also focus on guidance and the financial hit from the virus, which could easily last for months.
Developing a reliable antibody test has also become a key area of research for the pharmas.
Swiss drugmaker Novartis and US group Merck report on Tuesday, GlaxoSmithKline, which has also launched a two-year plan to split into two, and AstraZeneca report on Wednesday.
Investors will seek updates on Pfizer’s deal with Mylan on Thursday, while AbbVie’s acquisition of Allergan, which is nearing completion, will be in focus on Friday.
In the UK Sainsbury’s full-year results on Thursday will focus on the impact of coronavirus on trading. Food demand has risen sharply at supermarkets, but clothing, general goods and fuel sales have suffered while operating costs have risen.
Berkshire Hathaway releases first-quarter results on Saturday, when chairman Warren Buffett will preside at the company’s annual meeting — to be broadcast on Yahoo Finance. Topics are sure to cover the group’s outlook and strategy on coronavirus.
Among the many others reporting this week are PepsiCo, Caterpillar, Starbucks, Mondelez, Next, Yum Brands, Hasbro, Reckitt Benckiser, G4S, Kraft Heinz, Mcdonald’s, Samsung. Tesla, Visa and Mastercard.
Economic data
US first-quarter gross domestic product figures are out on Wednesday with the economy forecast to have contracted by about 4 per cent on an annualised basis. Much worse is expected for the second quarter, with some economists forecasting an annualised fall in output as high as 40 per cent.
Eurozone first-quarter GDP is out the following day. March saw an unprecedented fall in activity due to the Covid-19 pandemic and consensus forecasts point to a 3.2 per cent fall on the quarter or 2.7 per cent on the year. Again far worse is expected next quarter.
Other figures to watch out for this week include:
Chinese manufacturing sector surveys for April, due on Thursday
German retail sales figures for March and unemployment data covering April, both Thursday.
US initial weekly jobless claims on Thursday when a further decline is expected — down to 3.6m from 4.4m — for the week ending 25 April
Eurozone unemployment and Germany labour market numbers, both Thursday.
Source: Economy - ft.com
