Last week, we continued to see the global cases of COVID-19 rise, however there are signs across several countries that the pace of increase is slowing. Several European countries including Austria, Denmark, Italy and Norway have already announced some easing, with Germany confirming that some ‘non-essential’ shops will re-open next week, and schools will start to open in early May.
As expected, the UK extended its lockdown by three weeks which takes us until at least 7th May, although several analysts have suggested the lockdown may be in place until June. In the US, President Trump said that 29 states could open “relatively soon” and outlined a three-stage guidance plan for Governors to follow in ending lockdowns. While these green shoots offer signs that we could see some normalisation, the pace of this could still be tepid as highlighted by Austria -who have stated that large events will remain banned until the end of August.
Economic data has been unsurprisingly bearish given the extent of the lockdown. The headline figure was the US weekly unemployment claims which rose by another 5.3 million in the week of 12th April taking the total laid-off since the COVID-19 lockdown began last month to over 22 million. Some economists think the unemployment rate will rise as high as 20%, soaring past the damage inflicted during the financial crisis just over a decade ago, to a level unmatched since the Great Depression of the 1930s.
The market was keeping a close eye on China’s economic data following their lifting of restrictions after 11 weeks of lockdown. Economic data was mixed with China’s GDP falling by 6.8% in Q1, and retail sales falling by 15.8% in March, whereas industrial production only dropped 1.1%. The market will continue to decipher data from the Far East for clues not only on the human impact of lifting restrictions but also economic path of recovery.
In the week ahead markets will continue to monitor economic data for clues about how the economies are performing and to try and analyse what type of recovery could be seen once lockdown is lifted globally. The focus in terms of economic data is likely to be on the weekly unemployment claims in the US. Meanwhile, the market continues to trade on sentiment, lockdown restrictions, COVID-19 treatments and governmental comments are likely to be the main drivers of this. The UK has a large range of economic data due for release which will be analysed to see what impact the governmental and central measures are having.
- UK labour data (average earning, unemployment rate and claims)
- GER ZEW sentiment
The UK labour market report covers the period up to February therefore revealing little about the impact of the pandemic. However, timelier unemployment claims data for March, will be closely monitored. In Germany, the ZEW sentiment figure will be watched for rising sentiment in the 6-month outlook.
- UK consumer price index
Following the drop-in oil prices and the lockdown, it is expected that inflation will drop further below target with a forecast of 1.5%. However, the central bank has already taken pre-emptive measures by cutting interest rates to record lows of 0.1%
- UK PMI services and manufacturing
- EZ PMI services and manufacturing
- US weekly jobless claims
Following the large job losses in the US and the mounting pressure due to cross governmental arguing surrounding lockdown measures, the weekly jobless claims will remain the focus of US economic data. Economists believe America’s unemployment rate could have already risen to 15%, with further layoffs likely in the coming weeks. In the last 4 weeks we have seen close to 22m jobs lost. Goldman Sachs analysts are expecting that US total unemployment claims could reach 37 million for the period between March and the end of May. Closer to home, economic activity in both the manufacturing and service sector will be monitored in the UK and Eurozone for clues on the future path of economic activity.
- UK retail sales
- German IFO
- US durable goods
UK retail sales will be monitored, with grocery sales and online sales expected to continue to hold strong, at the expensive of bigger ticket items as well as clothing. In Germany, we have another sentiment figure in the form of the IFO Survey which will be closely monitored a rise in sentiment, in the 6-month outlook. Lastly, the US durable goods (min 3-year life expectancy) orders are due for release. This contains bigger ticket items and is expected to show a slide in sales.
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