Weekly Market Outlook
This week’s economic calendar will present some high-priority data figures. The flash PMI-s tomorrow will give market participants a glimpse into the most recent developments in the services sector activity in the UK and Europe. On Wednesday, the Munich-based IFO institute will report its closely watched figure for the business climate in the country. On Thursday, stock investors’ eyes will be on Nike, as the sports apparel giant reports its Q4 results. On the same day, the US will release its Q1 final GDP figure for which markets’ expectations are firmly anchored in a confirmation of the 5% contraction. Finally, on Friday, the key US personal spending figure is to be released.
European and UK June Flash PMI-s (Tuesday)
The economic recovery has gained traction lately, and this has been confirmed by the rebound in the purchasing manager indices for May. The 16.2 and 10.2 April figures in the services sector of Germany and France respectively jumped to 31.4 and 29.4 in the next month. The June numbers are expected to show further improvement, with estimates in the mid 40s.
Economic activity in the UK, with only non-essential shops having reopened on 15 June, will certainly lag behind the more optimistic developments we see in Europe, where a lot of retail businesses have already resumed their operations. As a result of this lag, analysts only see the services flash PMI to only improve to 37.5 from 29. Despite being a lot more resilient, manufacturing too is still anticipated to remain in contraction territory, with forecasts pointing toward the low 40s.
Germany June IFO Business Climate (Wednesday)
Following the shutdown in March and April, business optimism has been improving with the reopening of the German economy. The record 74.2 low in April was followed by a modest uptick to 79.5 in May. This is likely to rise further in June, as economic activity continues gaining steam. Transport services, restaurants, bars and sports clubs have largely reopened, and the German government has announced a number of fiscal stimulus measures.
Nike Q4 Results (Thursday)
The Q3 earnings report clearly showed that while online sales were quite resilient, the shutdown of the Chinese economy in February posed a heavy blow to Nike’s operations there. Just as the stores in China reopened in March, the company was hit by shutdowns in the US and Europe, which will adversely affect the company’s fourth quarter numbers. In this context, the management did not offer any guidance for the quarter. A bright spot in the sector came from Nike’s rival, Adidas, which reported a return to growth in its Chinese markets at the beginning of June.
The lack of guidance from the company makes forecasting the Q4 figures much more difficult. Analysts see revenue falling about $2 billion, to $8 billion, compared to the same period of last year, with profit of $0.17 per share. The full-year estimate is for $39 billion and profit of $2.18 per share.
US Q1 Final GDP and Continuing Jobless Claims (Thursday)
No surprises are expected on this front, with a 5% contraction in the first quarter highly likely confirmed by the final GDP number. Slightly worse compared to the initial -4.8% reading several weeks ago, this piece of data clearly shows the current state of the US economy. A little bright spot is provided by the weekly jobless claims in the last few weeks, which have gradually started to decrease lately, but still come out at levels in excess of 1 million per week. Continuing jobless claims have clearly peaked out at a level just above 25 million in the beginning of May. This makes analysts hope that these will soon drop below the 20 million threshold.
US May Personal Spending (Friday)
Personal spending plunged to -7.5% in March, even before the US economy went into a full lockdown. The situation deteriorated even further with the country’s economy grinding to a halt in the next month, which resulted in a fresh record low reading of -13.6% in April. The economic reopening that followed in May led to a surprise rebound in the job numbers. This in turn fueled expectations about a recovery in personal spending, with estimates pointing toward a 5.1% rise.