Is China Responsible For Pandemic? Which Events Impact The World’s Economy In The Middle Of The WeekIt’s a busy week for the markets as the U.S blames China for the pandemic once more. On the economic data front, employment figures also continue to alarm…
The first week of May has started, and, as accustomed on a first week of a month, monthly data should be released.
What can we expect this week?
We saw enough data through the 1st half of the week to know that the markets weren’t paying too much attention.
It will likely be a different story in the 2nd half of the week, however. We’ve got the monthly nonfarm payrolls in the wake of some quite dire weekly jobless claims figures.
So, ahead of Friday’s NFPs, we’ve got ADP numbers on Wednesday and then the jobless claims on Thursday.
We can expect plenty of attention to the weekly numbers, which could deliver more doom and gloom.
Wage growth figures will likely be brushed aside on Friday, with a record surge in nonfarm payrolls on the cards.
Elsewhere, the stats will likely have a muted impact, so expect some moves towards the end of the week. The weekly jobless claims are the most current for the markets to consider…
We are about to see how was employment been doing throughout April.
Meanwhile, what about monetary policy?
On the monetary policy front, the BoE is in action on Thursday. We’re not expecting any rate cuts for now, but we are expecting moves in the summer, particularly on the QE front.
The BoE will get some idea of what economic damage the coronavirus has had on the economy.
A v-shaped economic rebound is no longer likely, which suggests that the BoE will deliver more support.
The best-case scenario is for the BoE to talk of further support down the track and likely in the summer.
The stock index recovery already has a smaller angle than a V-shaped rebound. So, people could expect something similar in economic data.
In the meantime, how have geopolitics been developing recently?
Geopolitical risk didn’t disappear for too long. Over the weekend, we heard of China and the U.S playing the blame game.
There’s the threat of sanctions and tariffs on China and China’s unlikely to accept any more of that.
We talked about this a while ago. Trump is wanting to divert attention away from the administration’s shortcomings in handling the COVID-19 pandemic.
The nonchalant behavior in the early days has led to a sizeable number of deaths and infections. Trump is passing the buck. Whether U.S voters buy into this remains to be seen.
Expect more of this in the coming months, however, as election fever heats up.
You’ve also got Iran as another option. Another conflict in the Middle East? U.S voters like that, so these are 2 areas to certainly consider near-term.
We might see a return of the Trader Wars, during which stocks reached new high levels.
There are trade talks between other countries. How are the talks between the US and the UK doing?
Well, the markets have been waiting for this since the EU Referendum back in 2016. What a time for talks to begin though.
The COVID-19 pandemic, a global lockdown, EU – UK negotiations going nowhere, and Trump under the hammer going into the November elections.
All the negotiations currently underway could come to no avail should Trump lose the election.
It’s going to be a tough one, particularly with the way that the U.S negotiate. It’s also likely to be a one-sided agreement.
The UK has little choice but to take it, however, especially with the EU dragging its feet and an extension to the transition period likely.
So, while it is positive that talks have begun, is the UK going to get a fair agreement? The answer to that is likely to be no.
The devil will be in the details. Having seen how the U.S dragged it out with Mexico and Canada, imagine how it will be with the UK…
Trump could follow through with his support for Boris Johnson’s policies.
Let us move to one of the top topics of the prior weeks. How is oil doing?
What a week for oil prices… WTI was up by more than 20% going into Tuesday’s close.
We are nowhere near the $60 – $70 per barrel price that shale producers will be looking for.
Did the market slump hit shale producers?
Quite likely and that should give the Saudis some control over price stability. They could take some comfort in easing output, without worrying about shale producers cranking up output.
We do have the economic outlook to consider, however. If we don’t get the snapback in economic growth through the summer and 4th quarter, then oil prices will come under pressure.
Near-term, however, easing in lockdown measures is positive, a pullback in output is also positive and shale producers under pressure is also another positive.
All in all, a pretty decent for crude oil this week.