Weekly Market Outlook

The highlights for this week start Tuesday, when Nike is scheduled to report its results for Q1. On Wednesday, Germany and France will release their manufacturing and services PMI-s. Thursday promises to be the day with the busiest agenda. During the European session, the German IFO business climate survey for September and the EU summit will firmly anchor investors’ attention. Later on, in the day, the US jobless claims figure will give clues about the current state of the American labor market.

Nike Q1 Results (Tuesday)

Nike’s third quarter data showed a resilience in the company’s online sales. A much different situation was pictured by the operations figures from China. The reason was clear: February brought a massive shutdown of the Chinese economy. When Chinese stores were able to reopen in March, Nike suffered identical shutdowns in Europe and in the US. The closures resulted in a loss of $790 million, or $0.51 per share, for Q4, with a revenue of $6.31 billion.

Despite the difficult situation, Nike’s share continued to perform well, and early this month it even hit an all-time high. The boost is certainly caused by the soaring in digital sales by 75%. However, higher costs continued to burden the margins with the reopening of Nike’s retail stores. In spite of that, estimates suggest that Nike has made a profit of $0.41 per share in Q1.

Germany and France September Manufacturing/Services PMIs (Wednesday)

The rebound in manufacturing and services of the two European economic front runners is nearing a plateau, and evidence for that has been increasingly prominent. The August PMIs for Germany yielded data of mixed nature, with a pronounced slowdown in services to 52.5. The same can be observed in France: the PMI dropped from 57.3 to 51.5, due to local lockdowns and restrictions observed throughout the country, as coronavirus rates rose again. In September, we can expect PMIs to deteriorate further, thus making the sustainable rate of economic recovery in the two countries highly questionable.

Germany September IFO Business Climate (Thursday)

Germany’s business climate is continuing to improve. August brought a figure of 92.6, an impressive improvement compared to April’s 74.3. The expectation of a second coronavirus wave is casting a shadow on German businesses too. For this reason, the road to last year’s levels may be difficult to pass, and so may be the striving to get to the mid to high 90s, attained in the start of this year. The German government has promised its support to the labour market with its fiscal plans. At this point, however, German businesses may be reluctant to undertake large-scale investments in their long-term prospects.

EU Summit (Thursday)

The event will take place in Brussels on Thursday, with the agenda focused on the EU market, on industrial policy and on digital transformation. The Union’s external relations, specifically those with Turkey and China, will also be discussed. One more area of interest to be considered is how the Covid-19 pandemic has impacted the situation. Last but certainly not the least in importance, the summit participants will engage in Brexit talks, albeit EU leaders are against that. The issues to be discussed will certainly attract vast attention.

US Weekly Jobless Claims (Thursday)

The continuing reduction in weekly jobless claims, which reached 850,000, is an indication of a sustained US economic recovery. Last week’s retail sales data showed a slump in consumer expenditure, as a direct consequence of the falling disposable income. So, in this environment, and in the run-up to the US presidential election, weekly jobless claims have room to plunge further before starting to climb again.