Weekly Market Outlook

This week we kick off on Wednesday with the long-awaited US Fed meeting minutes, which will be scrutinized from investors keen to learn about the prospective additional easing measures of the Federal Reserve. On Thursday, the UK is delivering its May Flash PMI data, which will provide important insight into the state of economic activity in the country. On the corporate front, Nvidia is scheduled to report its earnings on Thursday. Investors will have the chance to see the flash PMIs of Germany and France on Friday morning. Finally, we will close the week with the UK back in the spotlight, with the release of its key retail sales data.

US Fed Minutes (Wednesday)

At the last meeting, Jerome Powell expressed readiness to implement new credit facilities in a bid to aid the US economy go through the crisis and avoid a potential deflationary shock. The Fed promised to keep interest rates low until business activity was back on track. The minutes this week would likely give some clarity about the institution’s plans to resort to further easing measures.

There have been recent rumors about negative rates, which drove some segments of the Fed funds market into negative territory on a few occasions. This made central bankers intervene verbally and clarify that the institution was not leaning in this direction. Markets will certainly scrutinize the meeting minutes on Wednesday to see if policymakers completely rule out the prospect of negative interest rates.

UK May Flash Manufacturing and Services PMIs (Thursday)

Expectations are already set pretty low following the disastrous April figures, which clearly demonstrated what the widespread lockdowns did to economic activity. As some businesses begin to restart operations, it is widely expected that activity in the services sector will show some signs of life, thus beating the record low of 13.4 last month. Manufacturing is likely to show only marginal increase (if any) compared to April’s 32.6 reading.

Nvidia Q1 Earnings Report (Thursday)

Nvidia Corporation is reporting its earnings for the fiscal quarter ending April 2020 after market close on Thursday. The consensus Earnings per Share forecast, according to analysts’ estimates, is $1.36, compared to $0.67 for the same quarter of last year.

Chipmakers have been one of the few bright spots lately, with Nvidia even touching an all-time high this month. Despite the fact that the company is most widely known for its premium quality graphic chips, Nvidia has other segments that have been doing pretty well too. One of them is the gaming arm, which could possibly see some slowdown, as it would take time until consumer confidence and spending recover. And even if demand for video games increases with most people staying home, gaming console purchases might fall, provided their much higher prices.

European May Flash Manufacturing and Services Flash PMIs (Friday)

With German and French PMI numbers for April coming out at record lows of 16.2 and 10.2, respectively, it is difficult to expect worse readings for May. In the current situation, however, expectations should not be set too high, as lockdown measures have been only slightly eased. In this sense, estimates are for just a small increase from last month’s levels. Manufacturing has proved to be more resilient, but numbers are still anticipated to come out at the mid-30s.

UK April Retail Sales (Friday)

The March retail sales slid to a record low of 5.1%, although the actual lockdown of the country took place late into the month. With everyone staying home and the economy virtually grinding to a halt, the April figure is likely to be even worse. Online sales and groceries might be among the few outperformers, yet they would be clearly insufficient to make up for the really low consumption last month.