Coronavirus, dire data, geopolitical unrest: Markets brace for turbulence

Lianna Brinded
Head of Yahoo Finance UK
Photo: Getty

Financial markets are bracing themselves for a turbulent week ahead. With the coronavirus pandemic continuing to claim over 350,000 lives globally, alongside the slew of forthcoming data, which will detail the economic impact COVID-19 has had on industry released over the next week — it’s likely traders will be in for a rocky ride.

Meanwhile, a raft of geopolitical developments and economic releases over the weekend will undoubtedly throw the markets into a twist:

Britain: Economic data, Brexit, lockdown easing concerns

Photo: Getty

From 1 June, it’ll be a busy week in Britain.

Private sector PMI: Finalised numbers for May are due out on Monday and Wednesday (3 June). If the data is dire, since this will be a full month without the lockdown meaningfully easing, then the pound could slip.

Construction PMI: Numbers, also for May, will be out 4 June.

Lockdown lift concerns: Over the last week or so, the UK government has been putting set dates on when it plans to start unlocking the economy, such as opening non-essential shops, pubs, cinemas, as well as sending children back to school and letting crowds of people meet again. This is despite scientists saying that lockdown easing measures should be dictated by infection rates, not by set deadlines.

Foreign secretary Dominic Raab has had to go on TV and defend the government’s lockdown easing measures, but there is a concern that these steps towards unlocking the economy could risk a second peak of COVID-19 and therefore have a longer term impact on the nation.

All discussions over the lockdown will be crucial for investors to understand because it will signify when industries are truly back in business and where some firms may be under pressure for survival.

For example, UK car showrooms are set to open. The coronavirus pandemic devastated new car registrations in the UK last month, according to data from the Society for Motor Manufacturers and Traders (SMMT)— the slowest month for sales since the year after World War II ended. However, by opening showrooms, some surveys indicate that it could be a boom time for sales, albeit temporarily.

The Office for National Statistics (ONS) said on Thursday that a survey of over 5,000 UK businesses, taken between 4 and 17 May, found 46% were unsure of when they would reopen.

Brexit talks: Any developments on Brexit talks will be have an impact on sterling, which has become somewhat a barometer for negotiation sentiment. It’s easy to forget that Brexit is happening and the transition period will end by 31 December this year amid the coronavirus pandemic. But if negotiations are not finalised, there will be a black hole for legislation.

US-UK trade summit: Investors are also awaiting president Donald Trump and UK prime minister Boris Johnson to give a date on when talks will truly begin.

Europe: Stimulus packages, more data, and ECB

A European union or EU flag against a dark and powerful sky. Photo: Getty

Private sector PMIs for May:

  • French, German, and Eurozone sector PMIs will likely see revisions.

  • Service sector activity in Spain and Italy likely to show marked slowdown.

Germany: Europe’s largest economy will unveil employment figures for May. It is also working on a stimulus package worth €75bn-€80bn (£67.2bn-£72.1bn) to support economic recovery after the coronavirus pandemic. Further details are likely to be unveiled during the week.

ECB monetary policy decision: On 4 June, the press conference will likely have the greatest impact on markets — unless there’s a surprise move.

US: Unemployment, PMIs, nationwide unrest

WASHINGTON, DC - MAY 31: Police hold a perimeter near the White House as demonstrators gather to protest the killing of George Floyd in the morning hours on May 31, 2020 in Washington, DC. Photo: Alex Wong/Getty Images

Geopolitical developments are likely to dominant headlines over the next week and the government’s handling of the unrest sweeping the nation over the death of George Floyd. A flurry of data is also going to drive markets.

Jobless figures: On 3 June, ADP nonfarm employment change figures for May. In the second half of the week, the weekly jobless claims and nonfarm payroll figures will be in focus. There is a continued surge in jobless claims, with the number now exceeding 40 million.

May’s ISM Manufacturing and Non-Manufacturing PMIs: The data will dominate the first half of the week with Non-Manufacturing PMI to have a greater impact. In the US, there have been a range of measures to ease lockdown which may have had an impact on the services sector and consumption.