Markets are in for a busy week as Europe’s largest economies, Germany and France, are set to release second quarter (Q2) gross domestic product (GDP) data as well as the highly-regarded German Ifo Business Climate index.
The United States and Canada are also releasing Q2 GDP figures, with the latter expected to report a slow economic rebound, beyond the lockdown-era data.
All eyes will be on the Federal Reserve on Thursday when Jerome Powell kicks-off the Jackson Hole Conference to discuss the central bank’s monetary policy framework review.
As ever, investors will closely watch how countries are tackling the spread of COVID-19 cases as global second coronavirus spikes continue to hammer the aviation, hospitality and restaurant industries.
Markets will also digest these developments:
UK: Focus is on BOE speeches with Britons keeping an eye out for house price gains
Bank of England (BOE) governor Andrew Bailey and chief economist Andy Haldane are due to speak as the negative rates debate rages on and the Job Retention Scheme (JRS) is unwound.
There is growing pressure on policymakers in the UK to increase support for workers, as unemployment numbers are expected to keep rising over the remainder of the year as Rishi Sunak’s furlough scheme is due to end on 31 October.
Whether BOE sticks to its preferred avenue and adds a stimulus to help bridge the fallout if the JRS isn’t extended and whether it will move to a negative rate on the Bank’s targeted lending schemes, while keeping Bank rate at or above zero, is yet to be seen.
Brits are again expecting house price gains, with the Nationwide House Price Index on the slate for 28 August. Earlier this month, the Halifax House Price Index revealed a coronavirus-related bump in prices, as house prices reached an all-time high in July.
Key company results to watch out for:
Clipper Logistics — full-year (Monday)
Rolls-Royce, WPP — interims (Thursday)
Hays — finals (Thursday)
Essentra — interims (Friday)
Other key data: CBI releases its quarterly retail sales survey on 25 August.
EU: Germany results, European Commission’s economic sentiment indicator on the slate
A host of data is out for Europe, with economic powerhouses Germany and France set to release final Q2 GDP estimates on Thursday and Friday respectively — markets will be watching how both countries gauged the pandemic spread and how steep a mountain they each need to climb.
Limping on in the background, Sweden, Switzerland and Norway will release their first estimates over the coming days, which will help paint a more complete picture of COVID-19’s impact on European economies.
But, the economic outlook for the bloc looks grim, with hopes of a recovery in EU countries dashed as many countries reintroduce stricter lockdown measures amid a second rise in coronavirus infections. On Saturday (22 August) Italy reported 1,071 new COVID-19 cases in 24 hours, for the first time since 12 May.
Meanwhile, the monthly Ifo Business Climate Index is due for Germany, the closely followed indicator of economic activity in the country shows German companies’ sentiment based on a survey of manufacturers, builders, wholesalers and retailers.
The European commission is also releasing result for its economic sentiments indicator for full business and consumer surveys, which compare among different countries’ business cycles to monitor the evolution of the EU and the euro area economies.
US: Economic policy symposium, Q2 GDP and a raft of key data
As many states scale back their reopening strategies amid the second spike in coronavirus cases, the spotlight will be on Jerome Powell as he takes a virtual centre stage to discuss the Fed’s monetary policy framework review, it has been undertaking for nearly two years on the opening day of the Kansas City Fed’s annual symposium on Thursday.
Investors will closely watch how US central banks will tackle the long-term recovery from the coronavirus pandemic, with the key challenge being how to spur inflation.
The review explores how to revamp the Federal Reserves’ tools to guide the economy. Minutes from the Fed’s July meeting, indicate that one tool to keep borrowing costs low — yield curve control — is likely off the table for now.
Also on the agenda, Q2 GDP data for the US, the last set of GDP numbers showed an annual decline of -32.9% with the results for the second quarter expected to get a modest upward revision of -32.6%.
Other releases: Pending home sales are due on 27 August as well US weekly job claims and personal income and spending numbers are on the slate for 28 August.
Canada: North of the border, Canada is reporting its Q2 GDP figures on Friday, to get an idea of how big a hit the economy took from COVID-19. In May, the country’s GDP rebounded by 4.5% month-on-month, with expectations that it recovered further in June, but for the quarter as a whole, a record pace retraction.
Elsewhere: Chinese banks will reveal the impact of the coronavirus crisis, with earnings season kicking off on 28 August. The country’s five main state banks, including Industrial and Commercial Bank of China, China Construction Bank, and Bank of China, are due to report their half-year results.
Belarus: The political crisis over the alleged vote-rigging in President Alexander Lukashenko’s “landslide” election win is set to rage on with more protests in Minsk, dragging the EU and US into a proxy standoff with Russia, the country’s main economic ally. Russia and the EU sell Belarus oil at below-market value, with the country acting as a strategic buffer against NATO for Moscow.