Market movers today and over the weekend
The Eurozone preliminary GDP numbers for Q2 are due for release, where the market consensus forecasts a drop of 12% compared with the first quarter and 15% compared with the same quarter last year. The outcome is quite uncertain and the release will probably be a significant market mover if there is a significant deviation from consensus in either direction, as the economic headwinds in Q2 are already old news.
US retail sales will likely show a small setback in July, as the flare-up of virus cases and the upcoming expiry of unemployment benefits at the end of the month led consumers to adopt more cautious spending patterns. Consumer sentiment for August is also due for release and will show how much the lapse of special unemployment benefits has dented the mood, especially as COVID-19 cases remain high and yesterday’s weekly jobless claims showed that layoffs remain elevated.
In the US, financial markets will also look for signs of a breakthrough in the negotiations between the Trump administration and the Democrats in Congress.
In Denmark, we are looking forward to the Q2 GDP figures, which we expect fell by -4% q/q, as the economy came through Q2 in considerably better shape than much of the rest of Europe (see next page).
Tomorrow, senior US and Chinese officials will, via a video conference, review the implementation of their Phase-1 trade deal and discuss other issues or areas of conflict between the two countries. While the US administration has been sending positive signals about the trade deal this week, we can’t preclude negative headlines from the meeting given the tense relationship between the two countries amid approaching US elections.
Selected market news
Asian stocks were mixed overnight after the US session closed in negative territory. Part of the mixed sentiment came from somewhat disappointing Chinese data released overnight. Chinese industrial production and retail sales data for July suggested that China’s recovery continued, although not as fast as hoped by the market, as both indicators missed consensus forecasts slightly. While industrial production grew at a healthy speed of 4.8% compared with July last year, the recovery in retail sales was rather muted as sales were about 1% lower than last year. However, anecdotal evidence from Beijing suggests that activity has picked up speed substantially in August, which may suggest that retail sales will pick up speed in August, especially as China continues to have the coronavirus relatively well under control.
Another source of market concern is the lack of progress in reaching a deal on another fiscal stimulus package for the US economy. Yesterday, House speaker Nancy Pelosi rebuffed a notion from Treasury Secretary Mnuchin to resume negotiations, as the Trump administration appeared unwilling to raise the amount of the relief package, while aid for state and local government as well as the US postal service are sticking points.
Meanwhile, US initial jobless claims fell more than expected compared to last month, as less than a million Americans filed for initial unemployment benefits. Despite the lower number turning up as unemployed, more than 15 million Americans are still claiming unemployment benefits, underscoring the importance of further unemployment assistance programmes.
