Weekly Market Outlook

The week ahead will offer markets some important economic data releases and events. On Monday, we kick off with a big number of countries releasing their May purchasing manager indices. On the next day, the RBA holds its monthly interest rate meeting. Right in the middle of the week, a long string of PMI readings will give an indication of how the services sector did last month. The Bank of England’s Thursday meeting will be Andrew Bailey’s first in the hot seat. Eventually, we get to Friday when the long-awaited US employment report will be released to give information about the payrolls change and the unemployment rate in the biggest economy in the world. 

Global May Manufacturing PMIs (Monday)

European manufacturing activity is expected to remain weak due to the fact that most countries on the Old Continent have been in lockdown last month. China saw some rebound in March, and analysts expect that the situation on this front is going to be even better in April.

Reserve Bank of Australia Interest Rate Decision (Tuesday)

In his most recent comments, governor Philip Lowe expressed concerns that the economy was expected to shrink with 10% in the first six months of the year. If forecasts proved correct, this would be the first recession for Australia in the last 30 years. The central bank also anticipates unemployment reaching 10% by June, with consumers cutting their spending in the context of the prevailing economic uncertainty and the gloomy employment outlook. In this situation, it will be rather important to see whether the RBA resorts to further easing measures, or at least confirms readiness to do so in the close future.

Global May Services PMIs (Wednesday)

Judging by the flash readings seen two weeks ago, expectations for the purchasing manager indices on a global scale are already set pretty low. The markedly negative readings for the three major European economies: Germany, France and Italy, were indicative of the painful economic contractions caused by the corona-induced shutdowns. Despite the fact that we are currently in a period of some relaxation of the measures, it is pretty unlikely we will witness some more substantial rebound in business activity in the next few months.

Bank of England Interest Rate Decision (Thursday)

The Bank of England’s meeting this week coincides with the first appearance of Andrew Bailey, the new governor of the central bank. The institution has already given its promise to do whatever it takes, working closely with the UK government and with the Treasury, to help the economy go through the current crisis. With the base rate already at a record low of 0.1%, it is widely unexpected that the BOE will cut any further for now. What the markets would be looking carefully for is whether the central bank will widen the scope of assets it plans to purchase.

US April Unemployment Report (Friday)

The US Unemployment Report for the month of April is by far the most widely awaited economic report this week! The dramatic rise in weekly jobless claims observed over the past few weeks gives a clear indication as to how bad Friday’s report would be. Analyst forecasts vary from 20 million to 22 million jobs lost in April, compared to the 701,000 figure logged for March. Unemployment is also anticipated to surge to above 15%, compared to the 4.4% in March.