Virtual Jackson Hole, Republican convention, GDP figures

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The US steals the show this week with the two biggest events — the yearly Jackson Hole gathering of central bankers, which is being held online owing to the coronavirus pandemic, and the four-day Republican national convention, when Donald Trump will accept his renomination from his party to run for a second term as president.

Across Europe there is growing alarm at the spike in Covid-19 cases, driven in part by the movement of people during the holiday season. The number of cases in Germany has returned to levels last seen in April, while in France, cases are back to where they were in May, when the country began to unwind its lockdown. The worst-hit country on the continent is Spain.

Mexico has surpassed its “catastrophic” worst-case scenario of 60,000 Covid-19 deaths and is shaping up as one of the worst health and economic casualties of the pandemic.

The US postal service remains in the news ahead of the presidential elections and postmaster general Louis DeJoy is set to appear at a hearing before the House oversight committee on Monday, where he is likely to face a hostile reception from the Democratic-controlled panel.

The US has a scattering of retailers reporting earnings and Bunzl, WPP and Rolls-Royce will be among the corporate names to watch in the UK this week. Virgin Atlantic also has a key vote on its £1.2bn rescue package coming up.

On the macro side, Canada is set to record a big contraction in growth, while Germany and the US have more detailed gross domestic product releases due. US initial jobless claims will be in focus again after jumping back to more than 1m last week.

Republican Convention

Donald Trump will be formally nominated as the Republican presidential candidate on the first day of the party’s national convention in Charlotte, North Carolina, and has said he will make his acceptance speech “live from the White House” on Thursday after criticising the taped speeches of the Democratic convention last week.

Vice-president Mike Pence will speak on Wednesday from Baltimore’s Fort McHenry.

The incumbent president, seeking a second four-year term, trails the Democratic candidate Joe Biden in many opinion polls both nationally and in many swing states, although Mr Trump insists he is making up ground.

The convention will also feature “everyday Americans” who are expected to cite ways that Mr Trump’s presidency has improved their lives.

These will include a St Louis couple who brandished their guns in front of Black Lives Matter protesters who marched through their gated community in July and a Montana coffee shop owner whose business was saved by a federal coronavirus loan.

Further reading

Central banks

Central bankers will gather online for the first virtual Jackson Hole symposium. The two-day event kicks off on Thursday when key speakers, including the Federal Reserve’s Jay Powell, the Bank of England’s Andrew Bailey and European Central Bank chief economist Philip Lane, will discuss the unprecedented economic circumstances they are facing.

Mr Powell’s keynote speech at the Kansas City Fed’s annual symposium will be closely followed by investors seeking more clarity on the tools the Fed is considering to not only limit the economic damage caused by the pandemic but also to address the issue of persistently low inflation.

Several Fed officials have already expressed a willingness to allow inflation to run at more than the central bank’s 2 per cent target to make up for prolonged periods of undershooting.

The minutes for the Fed’s July meeting, released last week, suggested caution about yield curve control and economists will be tuned in for any more detail on this. They will also be on the lookout for any signs as to what the Fed might do to support the global economy if Congress fails to agree a stimulus package.

The ECB’s Mr Lane is also due to speak about monetary policy and the outlook for the eurozone economy, with investors on the lookout for signs as to when the bank might increase its €1.35tn emergency bond-buying programme.

The Bank of England’s Andrew Bailey is also scheduled to take part, and economists will be keen to hear his thoughts on cutting interest rates below zero.

Mr Bailey said this month that negative rates were “part of our toolbox” but the central bank had no immediate plans to use them. Even so, markets continue to price in a significant chance of sub-zero rates next year.

Further reading

Otherwise there is little to watch out for this week. The Bank of Israel meets on Monday, with no changes expected, while The Bank of Korea is likely to keep rates at their record low on Thursday, the same day Mexico publishes the minutes from its last meeting.

Virgin Atlantic

The airline faces a crunch vote in London on Tuesday over the £1.2bn rescue package it has secured to keep it flying.

Virgin entered final talks with its creditors over the weekend, after warning that it could run out of money and enter administration if the creditors do not sign off on the deal that was agreed with shareholders and private investors in July.

Support at the vote would be the final piece in the puzzle of the airline’s complex rescue package. About 170 of Virgin Atlantic’s top suppliers, ranging from aircraft lessors to media-buying agencies, are being asked to accept a 20 per cent reduction on the money the airline owes them, and to receive the rest in staggered payments.

The airline said it “remains confident” that it will be able to win support from the creditors.


Results continue to be roughly divided by how well companies have ridden out the pandemic. Last week saw the DIY retailers in the US perform well as the lockdown home improvement boom drew in customers at Home Depot and Lowe’s.

This week online demand for home office set-ups is set to drive sales at electronics retailer Best Buy and the rise in remote working is likely to have boosted software group Both report on Tuesday.

Demand for affordable groceries and household essentials are forecast to push up sales at Dollar General and Dollar Tree when they report on Thursday. Higher sales of packaged foods during the pandemic should benefit food processor JM Smucker on Tuesday.

Beauty was once believed to be a bulletproof industry but the pandemic has challenged that. Coty reports on Thursday when it is likely to tell a similar story to Estée Lauder, where recent results underscored the unpleasant reality facing cosmetics groups.

Store closures during lockdowns and the subsequent fall in demand are likely to weigh on Old Navy-owner Gap and teen apparel retailer Abercrombie & Fitch when they report on Thursday.

In the UK Bunzl reports on Monday. The FTSE 100 distribution group has already benefited from strong trading in its grocery division and “significant sales volumes of Covid-19-related products” and investors will be hoping for more of the same, though results are expected to be a little more muted this time.

Like most of the marketing sector, advertising group WPP has been hit hard by the slump in spending during the pandemic, but investors will on Thursday be on the lookout for how cost-cutting measures are progressing. The group has already scrapped its dividend and introduced pay cuts.

Travel restrictions and the overall gloom in the aviation sector are unlikely to do Rolls-Royce any favours when it reports on Thursday.

Others reporting this week include doorstep lender Provident Financial, Paddy Power owner Flutter Entertainment, and recruiter Hays.

Economic data

With inflation a hot topic among central bankers, several data points will be closely watched this Friday.

The US core PCE price index is expected to have edged up to 0.5 per cent in July, compared with 0.2 per cent in June, while France’s flash CPI release for August is expected to ease significantly after a temporary spike in July.

Second-quarter growth data continues to roll in, helping economists to build a picture of how the pandemic is playing out around the globe.

Canada is set to announce second-quarter GDP figures on Friday, when economists expect to see its largest one-quarter contraction on record during the pandemic.

Norway and Switzerland have GDP readings out this week, with second releases due from the US, Germany, Mexico and Sweden.

Thursday’s US initial jobless claims will be back in the spotlight again after figures jumped back above the 1m mark last week, as the pace of lay-offs picked up again in a worrying sign for the recovery of the labour market. This week’s numbers are forecast to hover around the 1m mark.

The UK’s Nationwide house price index for August is out this week and investors will be on the lookout for signs of how long the pick-up in demand after the housing market lockdown is likely to last.

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