Again there’s only one issue for global markets and government this week and that’s the COVID-19 pandemic and whether the rays of light seen in parts of the US, Italy, Spain, the UK, and Australia are becoming any brighter.
Investors will remain focused on whether there is more evidence that the number of new COVID-19 cases is slowing amid increasing talk of an easing in lockdowns.
Donald Trump is fanning pressure in Democratic-controlled states for an easing (but not Republican); Germany looks like it will see some easing and case numbers and death totals seem to be slowing in many other hotspots such as Italy and Spain.
Economic releases will continue to show the increasing impact of coronavirus shutdowns with the April business conditions surveys to be released Thursday leading the way.
The surveys will be for the US, Europe, Japan, and Australia all of which are likely to remain weak or fall further from the levels of around 30 to 40 seen in March.
The March surveys showed record rates of collapse in the UK and Eurozone with Japan contracting at the fastest rate in a decade and the US suffering the steepest downturn since the global financial crisis.
Australia though showed a rise thanks to increased output of grocery items such as toilet rolls due to panic buying by consumers.
With business closures and social distancing measures having expanded up in many countries in April, it is widely expected that the surveys will have deteriorated further as we head into the second quarter.
“If the shutdowns ease in May then April should prove to be the low point,” the AMP’s Chief Economist, Dr. Shane Oliver wrote at the weekend.
In terms of other data, in the US expect to see sharp falls in existing and new home sales (due Tuesday and Thursday) and in durable goods orders (Friday) and jobless claims (Thursday) are likely to show another sharp rise.
The flow of March quarter earnings reports steps up this week with a number of leading airlines reporting what will be blobs of red ink while streaming video giant, Netflix is expected to confirm why it is one of the best performing shares globally with a strong March quarter performance.
Japanese core inflation (Friday) is likely to have fallen further in March to around 0.5% year on year. Headline inflation will likely be negative because of the fall in oil prices. Japan’s COVID-19 situation is worsening, so the full impact on the economy is yet to come.
Later today we will find out if China’s central bank has decided to cut its Prime Loan Rate – a cut of 0.20% is forecast after the bank last week cut the other indicator lending rate last week, the medium lending facility by 0.20% to 2.95%.
The prime loan rate remains at 4.05%, the highest among major economies and way out of line with the strained economic conditions in the country.
In Australia, the minutes from the last RBA board meeting are out tomorrow and are unlikely to say anything new, but a speech by RBA Governor Lowe also on Tuesday may shed more light on how the RBA is seeing the impact of the shutdown and whether it sees the need to do more.
The AMP’s Dr. Oliver says “One area where the RBA could do more is to extend its bond-buying to corporate bonds to get the corporate bond market working again.”
On the data front, new ABS publications to track the economic impact of coronavirus on the economy will shed light on the impact on households (today) and weekly payrolls and wages (tomorrow) and preliminary retail sales data for March (Wednesday) are likely to show a sharp decline.
Skilled vacancies for March (also on Wednesday) will likely show a sharp fall.
