Weekly Market Outlook

All Week: Coronavirus

The coronavirus-induced volatility on financial markets showed no signs of abating last week. Central banks across the globe took out their heavy ammunition, resorting to multiple rate cuts, large liquidity injections and other unconventional policy measures. Monetary stimulus alone, however, is not enough to support markets. People are now keenly awaiting to see if policymakers hold onto the promised fiscal commitments to support the economies of their respective countries. Any signs of backtracking would surely result in further steep declines on financial markets. Volatility is likely to remain pretty high, as investors see the coronavirus taking its toll across the Old continent, the UK and the US. 

24.03: Flash PMI Numbers

The purchasing managers’ index data released from China last week gave a clear indication of the devastating effect the lockdown had on the Chinese economy in February. Germany, France and the UK are reporting their PMIs on Tuesday. Although the figures are not expected to be as bad as the Chinese ones, they are still likely to indicate a substantial decrease in economic activity in the UK and Europe.

24.03: Nike Q3 Earnings Release

Nike, the world’s biggest athletic apparel company, is due to report its third quarter results on 24 March. The sport clothing giant has temporarily closed a number of its stores as a direct consequence of the coronavirus spread. The company, however, has taken serious steps to mitigate this damage: its new strategy is to increase the direct-to-consumer (DTC) sales, thus effectively bypassing regular channels of distribution. Not surprisingly, investors will be closely watching the DTC sales metric, as Nike reports its results on Tuesday.

The company’s sales in China will also come under close scrutiny as market participants evaluate the financial health of the business. Logically, it is largely expected this major market to be significantly affected by the COVID-19. A large number of analysts forecast a mixed quarter for Nike with earnings per share falling in spite of rising revenues. Sales in China are seen declining for the first time in more than three years.

26.03: US Weekly Jobless Claims

In the context of the prevailing panic stemming from the coronavirus pandemic, the weekly jobless claims in the world’s largest economy are of key importance. The chance of them coming out at a record high, possibly well above the 1 million threshold, is pretty big. In this sense, last week’s uptick to 281,000 already seems a largely irrelevant figure. Do not miss this crucial piece of economic data on Thursday, as it is going to provide an early sign of the brutal blow the US economy is about to receive.

26.03: Bank of England Meeting

After the Bank of England made two emergency rate cuts, bringing the main interest rate to an all-time low of 0.1%, it is unlikely that the institution will once again act in the same direction this Thursday. Market participants will be closely monitoring for a potential commitment of the central bank for additional measures to support the economy. Such a step has significantly low probability following the recently announced £200 billion worth of purchases of government and corporate bonds.

Even if governor Andrew Bailey decides to resort to further easing, it is doubtful that monetary policy alone can do much more in dealing with the imminent economic downturn caused by the rapid coronavirus spread. From this moment on, massive fiscal measures are needed to keep the UK economy afloat.