Last week was a calmer week in turns of economic data. Whilst economic readings remains to the downside, the market has been prepared to weather very weak near-term economic data, with the hope that the second half of the year bounces back as lockdown restrictions ease.
GDP data from both the US and Eurozone were released with both regions producing negative readings (-4.8% and -3.8% respectively). However, as the lockdown effectively came late in the quarter, the market had already turned focused to the reading for Q2.
The data focus for the week was once again on the US weekly jobless claims ahead of this week’s government labour data. The headline figure showed that 3.8m Americans filed new claims for unemployment benefits last week, bringing the six-week total since the start of the lockdowns to more than 30m.
In the meantime, the market continues to focus on economic readings from China as they emerge from lockdown. The April data was mixed as manufacturing PMI fell, and non-manufacturing rose, however both readings were in expansionary territory.
The ECB meeting also took place last week, where they added to its previous measures by launching another lending scheme and lowering the interest rate on one of its existing schemes. More importantly for the markets is the promise from the central banks that policy will continue to be very loose for a long period of time.
Looking to the week ahead, the UK has a shortened week ahead of VE Day, but the focus will be on the Government’s plans for the next phase of lockdown and what the easing of restrictions will look like. Meanwhile, in terms of economic data, after weeks of hemorrhaging jobs, the market will be awaiting US labour job data on Friday.
- EZ manufacturing
- US factory orders
The final readings for April Eurozone manufacturing PMIs are expected to be unchanged from their initial estimates which showed big drops in activity during the month. Across the pond, US factory orders are expected to show a sharp decline in new business, reflecting the impact of lower durable goods orders.
- UK PMI services
- US ISM non-manufacturing
Data is expected to remain weak as the UK final reading for the April services PMI is expected to be revised down slightly from the initial estimate to a record low. US ISM non-manufacturing is expected to echo the same tone dropping sharply and entering territory where output is shrinking. This reading will provide a further reminder of the unprecedented scale of the downturn.
- ADP Employment
The ADP employment report will give the market an early indication of how Friday’s job numbers could look. The ADP is expected to show job losses of 20m. The market tends to ignores the reading due to the inconsistency seen historically to the more keenly watched Non-Farm payrolls due out on Friday.
- UK BoE interest rate decision
- US weekly jobless claims
The Bank of England’s Monetary Policy Committee will give a policy update. It is expected that policy will remain the same for now. There is talk that it may make some adjustments to its asset purchase programme, however given the stability of current condition and that the UK is awaiting news on the next phase of lockdown, it is likely to hold this back.
- US Non-Farm Payrolls
The market is expecting a horrid figure but will be keen to articulate the extent of the job losses. US labour market report is predicted to show a monthly fall in employment of over 20 million for April. This is likely to push the unemployment rate to a multi-year high above 16% (compared to a peak rate during the last recession of only 10%). There is an additional underlying theme as the Presidential Election is due to take place in November.