As May turns into June, will the US-China situation erase optimism over the easing of lockdown measures around the globe?
US: Increasing tensions with China
There is, if we are being honest, plenty of reason for the US markets to feel edgy at the moment. The American coronavirus death toll sits the wrong side of 100,000. There’s evidence that countries like South Korea are seeing covid-19 cases start to once again increase post-lockdown-easing. And, most pressingly, the situation between the US and China is getting ugly.
Beijing is attempting to tighten its grip on Hong Kong, with new national security laws and a bill banning mockery of the Chinese national anthem. This has been greeted with pro-democracy protests in Hong Kong, a flood of armed police on the streets, and the displeasure of Donald Trump, who has promised to take action against China.
It is another issue for the two superpowers to be at war over, joining their precarious trade relationship, and the President’s repeated attacks on China relating to the covid-19 pandemic.
As for the week’s economic calendar, the Chinese Caixin and US Markit and ISM manufacturing PMIs arrive on Monday, with American services PMIs and factory orders on Wednesday, and usual jobless claims on Thursday.
This all builds to the big one: Friday’s nonfarm jobs report. The most recent figures, covering the month of April, saw 20.5 million jobs lost, causing a spike in wage growth to 4.7% due to the kind of jobs that were lost. The unemployment rate, meanwhile, was a tad better than forecast, though it still shot up from 4.4% to 14.7% month-on-month.
Any sign of improvement in May, however small (and, maybe, however unlikely), could be incredibly important for how the US markets finish the first week of June.
UK: A new phase as lockdown eases
It’s a notable week for the UK – from June 1st outdoor markets and car showrooms can get back to trading, ahead of a wider retail restart from June 15th. More controversially, schools are also reopening from Monday, a landmark that may or may not prove to be premature.
With the UK entering a new phase of eased-lockdown, investors may start to gradually pay more attention to the number of new coronavirus cases each day and week – after it, it will give the markets an idea of what is feasible going forwards.
In terms of UK data, the final manufacturing PMI is on Monday, with the net lending to individuals number on Tuesday, the final services PMI on Wednesday and the construction PMI on Thursday.
Eurozone: Further monetary stimulus?
As more and more Eurozone countries are announcing lockdown-easing measures, the economic focus for the region this week is Thursday’s ECB meeting.
Already the EU has announced a €750 billion recovery fund alongside a €1.1 trillion budget – will Christine Lagarde and co. announce any further stimulus to sit alongside this fiscal injection?
Beyond that, following Monday’s round of bank holidays, there are the final manufacturing PMIs on Tuesday, the region-wide unemployment rate on Wednesday, and the final services PMIs on Thursday.
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