Weekly Market Outlook
With the start of the new week, it is good to know what key data figures and events warrant our attention. UK jobless claims are due to be released on Tuesday. The next day brings an entire string of important data: UK GDP and manufacturing production precede Cisco’s Q4 earnings report. Thursday draws the interest with the US weekly jobless claims. We close the business week on Friday with the Chinese retail sales and industrial production figures and US retail sales.
UK July Unemployment and Jobless Claims (Tuesday)
Lately, it is becoming obvious that unemployment data released by the ILO do not reflect the true figures either about the current jobless numbers, or about the estimates for the coming months. Workers on furlough have not been included for the last pandemic stricken three months until May, and such workers are not on the lookout for new jobs.
With restrictions being lifted, the June data, which showed a 0.5% decrease in unemployment figures, are more realistic. Further improvement is expected for July, as eateries and other service outlets reopen. On the other hand, a host of large companies have been declaring job losses in the past month, so that is bound to impact the numbers too. To have a clearer picture of the market, look at the 660,000 drop of employed people prior the universal lockdown in March, against which further comparisons will continue to be made.
Cisco Systems Q4 Results (Wednesday)
A global leader in IT, networking and cybersecurity solutions, Cisco was among the few companies that reported in May. At that point, revenue and profit figures were better than expected for Q3. The company has been consistently earning incomes for its investors, with one of the few drags being the China business. The latter can be attributed to the US-China trade tensions. As for Q4, following the steady last quarter for Cisco, the estimates are for a 10% decline in revenue, with profit at $0.70 per share.
UK Q2 GDP and June Industrial and Manufacturing Production (Wednesday)
The second quarter has brought large output drops in European countries like Spain (-18.5%) and Germany (-10.1%). Expectations are somewhat similar for the UK Q2 GDP, with expectations varying greatly in the -15% to -25% range. Compared to the -2.2% drop in the first quarter, this is massive. In the current state, market participants are more focused on the speed of the UK economic recovery, which has luckily started to pick up.
With the country heavily relying on services, it is tough to imagine that a quick V-shaped recovery is still on the table. May figures brought some mild optimism, showing manufacturing rebounding by 8.4% and industrial production by 6%. We are thus likely to see a further bounce for June, in view of the recovery of these sectors after lockdown measures eased.
US Weekly Jobless Claims (Thursday)
The recent rise in coronavirus cases around the US is anticipated to impact both jobless claims and continuing claims, which are to rise accordingly. In fact, that already started, before the surprising drop of weekly jobless claims to 1.18m last week. As for continuing claims, they slumped to 16.1m, which is the lowest level since 10 April. As the unemployment benefits ($600 per week) expire on July 31, and new recent lockdowns reverse hiring rates, jobless claims are expected to climb up again. Another prerequisite for this trend could be the failure of US lawmakers to agree on the passing of a policy to offset the July 31 plummeting.
China July Retail Sales and Industrial Production (Friday)
There is some hope for a pickup in Chinese business activity. The second quarter GDP gave some grounds for that, at least for parts of the economy. In the PMI data, the services sector has shown some improvement compared to the March lows (-15.8%), albeit retail sales have yet to indicate that. Then, for the period from April to June, the declines have been -7.5%, -2.8%, and -1.8%, respectively.
The rise for July is expected to be meagre, around 0.2%. That comes as a surprise, on the background of relatively good results reported by large companies like Apple and Daimler for their Chinese markets. The earnings of companies like Tencent and Alibaba are to reveal more about the patterns of Chinese consumer spending. As for manufacturing, it has rebounded to its best level in almost ten years in diverse official and private sector PMIs. July is anticipated to see a rise of 5% in industrial production.
US July Retail Sales (Friday)
Consumer spending has considerably improved in the past two months, boosting the retail sector. March witnessed a -8.7% decline, and April brought an even sharper, record slump of -14.7%. The improvement in consumer spending has been boosted by fiscal support on part of the US government, and by the May economic reopening. That latter brought about a record 18.2% rebound in May, followed by a smaller but still substantial rise in June (7.5%).
Hopes for a V-shaped recovery have been strong recently. However, the situation in the past few weeks changed dramatically with coronavirus cases and death toll soaring again. This quickly led to a number of local lockdowns. As a result, July brought a steep decline in US consumer confidence. July retail sales data are expected to come out positive at 1.4%, although some analysts believe that this forecast is a bit too optimistic.