The Weekly Wrap – Geopolitics, Economic Data, and COVID-19 Weighed on Riskier AssetsIt was another action-packed week, with geopolitics, dire economic data, and central bank chatter weighing on riskier assets.
It was a particularly busy week on the economic calendar, in the week ending 15th May.
A total of 61 stats were monitored, following the 57 stats from the week prior.
Of the 61 stats, 22 came in ahead forecasts, with 32 economic indicators coming up short of forecast. 7 stats were in line with forecasts in the week.
Looking at the numbers, just 18 of the stats reflected an upward trend from previous figures. Of the remaining 43, 39 stats reflected a deterioration from previous.
For the Greenback, it was a 2nd consecutive week in the green. The U.S Dollar Spot Index rose by 0.67% to end the week at 100.402, following a 0.66% gain from the previous week.
It was a 4th weekly gain in the last 5 weeks.
Economic data, COVID-19 news, geopolitics, and central bank chatter were in focus throughout the week.
Looking at the latest coronavirus numbers.
The total number of coronavirus cases stood at 4,617,740, which was up from last Friday’s 4,000,975. Monday to Friday, the total number of cases increased by 616,865, on a global basis. This was higher than the previous week’s rise of 608,257 in new cases.
In the U.S, the total rose by 163,330 to 1,481,834. In the week prior, the total number of new cases had risen by 189,444.
Across France, Germany, Italy, and Spain combined, the total number of new cases increased by 29,514 to bring total infections to 853,384. In the previous week, the total number of new cases had risen by 42,031.
Out of the U.S
It was a busy week on the economic calendar, with the economic data skewed to the negative.
Ahead of a particularly busy Friday, it was a relatively quiet week on the economic calendar, however.
Key stats included April inflation figures and the weekly jobless claims.
The markets had anticipated a marked easing in inflationary pressures at the start of the 2nd quarter.
It was worse than forecasted, however, with the core annual rate of inflation easing back from 2.1% to 1.4%. Economists had forecast a core annual rate of inflation of 1.7%. Wholesale inflationary pressures also eased in April.
Of greater influence, however, was another marked increase in the weekly jobless claims. In the week ending 8th May, initial jobless claims surged by 2.981m.
At the end of the week, key stats included April retail sales, manufacturing data, and industrial production figures.
May’s NY Empire State manufacturing and consumer sentiment figures delivered mixed results.
In April, core retail sales and retail sales slumped by 17.2% and by 16.4% respectively. For those looking at the record books, the 16.4% tumble was the largest in history…
A slower pace of contraction across NY State manufacturing was of little consolation. Industrial production figures for April were aligned with the sharp decline in manufacturing sector activity in April.
Wrapping up the week were consumer sentiment figures for May, which failed to point to a material shift in sentiment. Consumer sentiment improved marginally in May.
Away from the economic calendar, FED Chair Powell weighed on market risk appetite on Wednesday. The U.S administration added to the market angst as Capitol Hill continued to target China.
In the equity markets, the Dow fell by 2.65%, with the NASDAQ and S&P500 declining by 1.17% and 2.36% respectively.
Out of the UK
It was a busier week on the economic calendar. A data deluge on Wednesday delivered better than anticipated numbers. While better than forecasts, however, the numbers reflected dire economic conditions.
The UK economy contracted by 1.6% in the 1st quarter, year-on-year, and shrank by 5.8% in March. Quarter-on-quarter, the economy contracted by 2%, after having expanded by 0.5% in the 4th quarter.
Industrial and manufacturing production figures for March were also quite dire. Manufacturing production slid by 4.6%, with industrial production falling by 4.2%.
Of less influence on the day were trade figures, with the UK’s trade deficit widening at the end of the 1st quarter.
Outside of the numbers, the likelihood of an extended lockdown and negative updates on Brexit also weighed.
In the week, the Pound fell by 2.37% to $1.2116. The FTSE100 ended the week down by 2.29%, partially reversing a 3.0% gain from the previous week.
Out of the Eurozone
It was a relatively busy week economic data front, with the stats skewed to the negative yet again.
After a quiet start to the week, Eurozone industrial production figures for March delivered more grim news. Production slumped by 11.3%, following a 0.1% decline in February.
The markets then had to wait for 1st quarter GDP numbers for Germany and the Eurozone on Friday.
According to 1st estimate figures, Germany’s economy contracted by 2.2%, quarter-on-quarter, and by 1.9%, year-on-year. Economists had forecast a contraction of 1.6% year-on-year and a quarter-on-quarter contraction of 2.2%.
The very fact that Germany’s contraction was nowhere near as severe as France was a positive…
According to 2nd estimate numbers, the Eurozone economy contracted by 3.8%, quarter-on-quarter, which was in line with 1st estimates. Year-on-year, the 2nd estimate was revised up from 3.3% to 3.2%.
Other stats in the week included finalized member state April inflation figures and March trade data for the Eurozone that failed to move the dial.
From the ECB, the economic bulletin delivered more bad news, with the ECB delivering dire economic outlook.
For the week, the EUR fell by 0.18% to $1.08200, partially reversing a 1.29% gain from the previous week.
For the European major indexes, it was a bearish week. The EuroStoxx600 and DAX30 fell by 3.76% and by 4.03% respectively, while the CAC30 slid by 5.98%.
It was a bearish week for the Aussie Dollar and the Kiwi Dollar, with only a Thursday rise limiting the downside.
In the week ending 15th May, the Aussie Dollar slid by 1.82% to $0.6413, with the Kiwi Dollar down by 3.28% to $0.5935.
For the Aussie Dollar
It was another relatively busy week for the Aussie Dollar on the economic data front.
Key stats included business and consumer confidence figures on Tuesday and Wednesday ahead of employment numbers on Thursday.
It was a mixed bag for the Aussie. While consumer confidence bounced back in May, business confidence continued to disappoint in April.
Employment numbers on Thursday also delivered the markets with a dose of reality, with employment tumbling by 594,300. More significantly, full-time employment slumped by 220,500 in the month.
From elsewhere, better than expected industrial production figures out of China failed to provide support on Friday.
Negative sentiment towards the global economic outlook and rising tensions between the U.S and China weighed in the week.
For the Kiwi Dollar
It was a busy week on the economic calendar.
Key stats included April electronic credit card retail sales and Business PMI figures.
The numbers were quite dire. Electronic card retail sales tumbled by 46.8% in April, with the Business PMI sliding to a record low 26.1.
Outside of the numbers, the RBNZ added further pressure on the Kiwi Dollar with a particularly dovish outlook.
There had been the hope that the RBNZ could avoid negative rates down the road. The minutes suggested otherwise…
The NZ government also delivered its 2020 annual budget on Thursday that failed to reverse losses from earlier in the week.
For the Loonie
It was a quiet week on the economic calendar. Economic data was limited to March manufacturing sales and foreign securities purchases.
The stats failed to provide the Loonie with direction, with the focus being on crude oil and sentiment towards demand.
In spite of rising crude oil prices, the Loonie failed to end the week in the green, however. Geopolitics and concerns over the economic outlook overshadowed the pickup in crude oil prices in the week.
The Loonie fell by 1.31% to end the week at C$1.4109.
For the Japanese Yen
It was a particularly quiet week on the data front, with stats limited to March’s current account figures.
A lack of stats left the Yen in limbo through the week. News of the Japanese government lifting of the state of emergency failed to provide support.
As far as the safe havens go, the Greenback continued to be the market choice.
The Japanese Yen fell by 0.38% to end the week at ¥107.06. In the week prior, the Yen had risen by 0.24% against the U.S Dollar.
Out of China
It was another relatively busy week on the economic data front.
Key stats included April inflation figures on Tuesday and industrial production numbers on Friday.
It was a mixed bag for the Yuan. Inflationary pressures eased in April, while industrial production bounced back.
Fixed asset investment slumped by 10.3%, however, following a 16.1% tumble in March.
On the face of it, the numbers were skewed to the red, with the lack of business investment an issue…
If the Chinese government was looking for domestic consumption to fuel economic recovery, retail sales will have also raised concerns. Sales slid by 7.5% in April, following a 15.8% slump in March.
Away from the numbers, the threat of sanctions by the U.S continued to be an issue, weighing on risk appetite. At the end of the week, Huawei was under siege once more. The news hit the wires on Friday of the U.S administration looking to cut Huawei off from global chop suppliers. China didn’t hesitate to respond, threatening to target U.S firms with bans of their own.
In the week ending 15th May, the Yuan fell by 0.39% to CNY7.1019 against the Greenback.
The CSI300 and Hang Seng ending the week down by 1.28% and by 1.79% respectively.