Virtual UK parliament, jobs figures, flash PMIs

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Digital is the name of the game this week as Brexit talks between the EU and Britain restart while the UK parliament begins its first “virtual” session. 

The Brexit talks beginning Monday will be the first of three virtual negotiating rounds between now and early June. Earlier talks were hobbled by the outbreak of coronavirus. 

Downing Street has said there were no circumstances in which the UK would delay its departure from the standstill relationship with the bloc beyond December 31, despite the disruption to the negotiations.

The House of Commons will sit virtually for the first time on Tuesday when it starts after the Easter recess. There will be a “hybrid” arrangement, which will see 120 MPs participate in proceedings using video conference service Zoom, while up to 50 remain in the chamber under social distancing rules.

The European Council holds a special meeting on Thursday on the immediate rescue package worth €500bn agreed by finance ministers of eurozone countries.

The recovery fund still requires more detail, which will be discussed at this virtual gathering where a deal should, in principle, be ratified.

G20 agriculture ministers also go virtual, with an extraordinary video meeting on Tuesday to discuss enhancing global co-operation during the coronavirus pandemic and ensuring the flow of critical agricultural products.

Economic data highlights this week include flash purchasing managers’ indices from the eurozone while UK labour figures and retail sales will be closely watched. 

Central banks in China and Turkey are among those setting rates this week.

Netflix will kick off the earnings season for media companies. The streaming service has become one of the rare businesses that are not only surviving, but thriving, in the stay-at-home era.

Central Banks

The People’s Bank of China meets on Monday as Beijing seeks to cushion the massive hit to the economy from the coronavirus pandemic.

Gross domestic product figures for the first quarter released last Friday revealed China’s economy plunged 6.8 per cent year on year as the era of uninterrupted growth dating back to the late 1970s came to an end. 

This has piled the pressure on the country’s leadership to provide further stimulus to avoid a second-quarter decline that would plunge China into a full-blown recession.

At this meeting analysts expect a 0.2 percentage point cut to the one-year loan prime rate, following on from the cut to a record low earlier last week of the medium-term lending facility rate.

Turkey’s central bank meets on Wednesday when it is expected to shake off inflation concerns to cut its key rate by another 50 basis points as part of Recep Tayyip Erdogan’s drive to stimulate economic activity.

Ukraine’s central bank is set to cut rates on Thursday as inflation and growth slows, and policymakers in Russia meet on Friday, following hints from central bank governor Elvira Nabiullina that there may be a bigger cut than usual.

Companies news and earnings

Amazon will seek to reopen warehouses in France this week after it was ordered to severely limit deliveries and shut sites following union complaints about the protections against Covid-19 in place for workers last week. A court appeal is pencilled in for Tuesday.

Netflix reports on Tuesday, giving investors the first comprehensive look at how the global pandemic has affected the entertainment business.

With many people confined to their homes online streaming has surged and the group’s shares reached record highs this week as its market capitalisation jumped to $192bn.

Netflix is likely to post a jump in quarterly revenue but looking ahead the company could suffer from growing unemployment and an expected recession that means subscribers will keep a close eye on monthly bills. 

Investors will also be keen to learn how subscriber forecasts for the second quarter are shaping up.

US telecoms and media group AT&T reports on Wednesday, when its own soon-to-be launched HBO Max streaming platform to rival Netflix will be in focus. The push into online streaming weighed on AT&T’s last results as entertainment business WarnerMedia took a $1.2bn hit.

AT&T is likely to suffer a revenue hit this time, hurt by store closures and a dip in spending. Investors will also look for detail on its 5G infrastructure investment.

IBM is another company set to benefit from the lockdown when it posts results on Monday, thanks to a surge in demand for cloud services as big organisations run their operations virtually.

On the downside of the global shutdown, Delta Air Lines reports on Wednesday and Southwest Airlines on Thursday, both to a backdrop of virtually zero demand thanks to coronavirus.

Other US companies reporting this week include Coca-ColaIntelEli Lilly and Verizon.

The UK line-up this week includes consumer goods group Unilever, Primark-owner AB Foods, stock market operator LSE, online fashion retailer Boohoo, Domino’s Pizza and housebuilder Taylor Wimpey.

Consumer goods group Unilever reports first-quarter results on Thursday. Demand for everyday essentials during lockdown should have kept sales buoyant but investors will watch to see if the South Asia slowdown has hit its businesses there.

There will also be interest in progress on the review of Unilever’s tea business, which is being considered for a sell-off, either in part or as a whole division.

Primark-owner AB Foods, which reports on Tuesday, said in March that its half-year results will be ahead of forecasts but that it could no longer provide earnings guidance for the rest of the year. 

Primark has taken a big hit from the coronavirus outbreak, but the family-controlled conglomerate said there had been no material impact in its sugar, grocery, ingredients and agriculture businesses and that the threat of supply disruption because of coronavirus in China had receded.

Investors will look for updates to see if this still holds true.

French luxury group Kering reports on Tuesday. Earlier this month the Gucci owner backtracked on its decision to put staff on an emergency government assistance scheme. 

The pace and scope of falling sales at LVMH, which was the first luxury group to report results since the pandemic began, do not bode well for the luxury sector, though LVMH and L’Oréal are upbeat about recovery prospects.

Economic data

UK labour figures

Tuesday’s release will attract a lot of attention as the claimant count relates to March, giving the first indication of how lockdown has hit employment.

Claims for universal credit are still running at up to three times their normal rate, suggesting that UK unemployment continues to rise after the initial wave of job losses following the start of social distancing measures to combat the coronavirus outbreak.

UK retail sales

The March data due on Thursday are likely to be dramatic. All non-essential shops were shutdown on March 23, meaning the start of the month will have been relatively normal followed by near collapse.

Supermarkets and food shops on the other hand are expected to have seen a massive surge as people stockpiled, with online sales expected to have risen sharply as well.

The UK also has inflation data out on Wednesday.

purchasing managers’ indices

Eurozone PMIs — a closely watched gauge of economic growth — crashed to an all-time low of 29.7 last month, far below the 50 mark that separates contraction from expansion. The UK equivalent fell to 36. 

April’s figures scheduled to be published on Thursday are forecast at 26 for the eurozone and 32 for the UK, signalling another sharp decline in activity.

Business confidence

Germany’s Zew business confidence survey is out on Tuesday. March’s survey reflected the situation before lockdown measures were introduced, meaning April’s current situation index is expected to fall drastically and could hit a 10-year low.

France’s business confidence data on Wednesday are expected to tell a similar story, with a collapse to well below the trough reached in the 2009 financial crisis.

US data

US initial jobless claims will again be closely watched on Thursday to gauge how America is coping with lockdown. A slightly better picture is expected this week with figures for the week ending April 13 forecast to drop to about 4m from 5.2m the week before.

US manufacturing PMIs are expected to fall from a reading of 48.5 last month to 37 for April, while the services reading is forecast to fall to 30 from 39.8 in March.

South Korea

Trade numbers on Tuesday and first-quarter GDP on Thursday will be watched as indicators of the slowing of global commerce.

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