Week ahead: UK borrowing figures, EU economic sentiment, Biden's budget

·4 min read
LONDON, ENGLAND - MARCH 20: Light trails left by traffic near Liverpool Street station on March 20, 2021 in London, England. A year since the British government issued its first stay-at-home order in response to the Covid-19 pandemic, on March 23, 2020, the City of London is still a ghost town of shuttered shops and restaurants, scarcely populated offices, and negligible tourist traffic. Even as the UK prepares to ease the current lockdown measures, a sense of normality in  the city's historic financial district feels a long way off. (Photo by Dan Kitwood/Getty Images)
Even as the UK prepares to ease the current lockdown measures, a sense of normality in the city's historic financial district feels a long way off. Photo: Dan Kitwood/Getty Images

Traders can expect a relatively quiet week, with the tail-end of earnings season capping off a period of recent volatility. 

Inflation will be at the back of investors minds in the US, while government borrowing figures in the UK will give a read on the state of play of public finances.

More is happening on the continent, with EU business confidence and economic sentiment readings on the slate, alongside GDP readings from some of its biggest economies. 

Crypto traders will be on guard this week, following a choppy week for a number of tokens. Regulation fears have sent a number of popular currencies deep into the red in the last week. 

On Sunday, bitcoin (BTC-USD), the most popular cryptocurrency, was trading at about $34,000, while just a month earlier it had been hitting heights of above $60,000. Ethereum (ETH-USD) had also taken a knock. 

Companies reporting this week

  • SSE (SSE.L), full-year results — Wednesday

  • British Land (BLND.L), full-year results — Wednesday

  • Best Buy (BBY), full-year results — Thursday

  • Costco (COST), full-year results — Thursday

  • FirstGroup (FGP.L), full-year results — Friday

UK: Monthly government borrowing reading

Britain's Chancellor of the Exchequer Rishi Sunak (R), reacts during a local by-election campaign visit to the Northern School of Art in Hartlepool, north east England on, April 30, 2021. (Photo by LEE SMITH / POOL / AFP) (Photo by LEE SMITH/POOL/AFP via Getty Images)
Rishi Sunak's spending will be front and centre next week. Photo: LEE SMITH / POOL / AFP via Getty Images

In a light week for data in the UK, the focus will turn to the monthly government borrowing figures out on Tuesday. 

April's figures showed that the government borrowed a peacetime record of £303bn ($429bn) in the fight against COVID-19 in the first full year of the crisis. That total was lower than originally predicted, official figures showed. 

The Office For National Statistics (ONS) said last month that the deficit for the 2020-21 year was £24bn less than what had been pencilled in at the time of the budget. 

New readings will show whether the slow reopening of the economy has supported the public purse, and whether optimism is still on the cards. 

EU: Business confidence and economic sentiment

German Chancellor Angela Merkel attends a press conference in the Chancellery in Berlin, Germany, on May 21, 2021 following the virtual 'Global Health Summit'. (Photo by Michael Sohn / POOL / AFP) (Photo by MICHAEL SOHN/POOL/AFP via Getty Images)
German Chancellor Angela Merkel. Photo: Michael Sohn / POOL / AFP via Getty Images

Outlook and economic sentiment will be put to the test in the EU next week, with Germany's Ifo business confidence survey and key economic sentiment data to be released for the region on Friday.

Analysts at ING say the data will likely confirm continued optimism among businesses and consumers as reopenings are rolled out alongside vaccination programmes, which are gathering pace. 

"Real-time data already shows quite a surge in activity over recent months. That warrants improving sentiment, which will likely result in quite a positive GDP figure for the second quarter as the rebound gets going."

The Ifo reading will give a temperature check on how Europe's largest economy is performing amid continued lockdowns and setbacks.

A raft of GDP readings are also expected from the bloc. France will give a measure of how Q1 has gone on Friday alongside consumer spending data fro April. A German GDP reading is also expected for Q1 on Tuesday. 

US: Fiscal budget proposals, Biden's budget

President Joe Biden speaks about a cease-fire between Israel and Hamas, in the Cross Hall of the White House, Thursday, May 20, 2021, in Washington. (AP Photo/Evan Vucci)
President Joe Biden speaks about a cease-fire between Israel and Hamas, in the Cross Hall of the White House, Thursday, May 20, 2021, in Washington. (AP Photo/Evan Vucci)

The bugbear in US markets this week is still likely to be inflation, with investors' minds trained on the fallout of the Federal Reserve's last policy decision meeting and a lacklustre employment report. 

US Case-Shiller house price index and US new homes starts data will give a read on likely future policy paths. 

There is also a consumer confidence reading on the slate. Analysts predict that Q1 GDP growth numbers may be revised up on the back of this and consumer spending data. 

President Joe Biden is also releasing his fiscal 2022 budget proposal on May 28 — a set of policies which will give investors food for thought on the ongoing economic recovery. 

The Biden administration released a lite version of the budget back in April. It proposed $769bn in non-defence discretionary funding in 2022, a 16% increase over 2021, and $753bn (£532bn) for national defence programmes — a 1.7% increase.

Elsewhere

  • Interest rate decision from the Reserve Bank of New Zealand

  • Japanese CPIs 

  • Market Holiday in Germany, Switzerland, and Norway for Pentecost. Market Holiday in Canada for Victoria Day

Watch: What is inflation and why does it matter?

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