Wednesday and Thursday in the US and Europe will see the shape of the looming economic slide becomes clearer with first GDP reports for the US and the eurozone to be released – the latter to be accompanied by GDP reports from the two countries in Europe most stricken by COVID-19 – Spain and Italy.
On top of this, the US Federal Reserve ends its two-day meeting on Wednesday with no change in monetary policy expected, while the European Central Bank meets Thursday and could tweak its already easy policy stance.
Both meetings will be held after the Bank of Japan meets on Tuesday, a day before key data releases on industrial production and inflation
US Federal Reserve releases its latest monetary policy decision on Wednesday and for the first time for a while, will have the most update to date GDP data to discuss – its released early Wednesday morning, US time. Fed chair Jay Powell will be able to speak to the GDP data and its ramifications at his media conference Wednesday afternoon.
Early forecasts suggest a contraction of between 3% and 4%, with a median figure of minus 3.3% – after growth of 2.3% through 2019. While substantial, it pales besides rough estimates for the current June quarter for a contraction of 25% or more.
“Even though the virus-related lockdowns didn’t begin in earnest until the final two weeks of the quarter, it appears that the impact was big enough to translate into a 3.5% annualized decline in GDP for the first quarter as a whole,” said Capital Economics US economist Andrew Hunter wrote last week.
This will mark the first output contraction in six years and “worse is to come in the second quarter,” added Hunter.
Thursday and Friday also sees car sales for April, manufacturing activity and consumer confidence – both for last month – all will show weak readings indicating a recession. The April figures for US manufacturing will be frightening in the size of the fall.
In the US Thursday is also the day when the latest first-time unemployment claims will be released. A figure of around 3 to 3.6 million is tipped, down on last week’s 4.4 million. But it could take to nearly 30 million, the number of people making unemployment claims.
Early on Wednesday Australia sees the release of the March quarter’s Consumer Price Index which is expected to around zero or perhaps a negative 0.1%.
Thursday sees the release of the first estimate of eurozone GDP for the March quarter. It will be a contraction – economists have no doubt and will be driven by huge falls in activity in Italy and Spain in particular, along with data from France.
Preliminary data on inflation (expected to be negative) and unemployment (a big rise) will raise tensions in markets and pressure for work on helping the zone’s worst affected economies.
The US and European March quarter earnings season peaks this week with well over 150 companies in the S&P 500 releasing reports. many will not be good. But reports from Amazon, Apple, Microsoft, and Facebook will be studied intently because they have proven to be among the leaders of the current market rebound from the March 23 lows.
But big losses are expected from the likes of energy giants Boeing, Exxon Mobil, Chevron, BP, Shell, and Total, and there is worse to come this quarter for these stricken giants (See separate report on US earnings).
Thursday and Friday also see the release of the final surveys of manufacturing around the world, starting with China on Thursday and Friday (and Australia’s final April reading).
China’s latest readings are expected to be reasonable, but no one will believe their accuracy. Faith in Chinese data is weak at the moment.
The readings for other economies will be important, especially the US.
