It is a busy week for data. The Federal Reserve’s two-day monetary policy meeting will highlight a busy week for economic news, which includes interest rates. With interest rates at or close to zero, and the current Fed Chair having forsworn negative rates, it's unlikely the rates will change. Also, on tap is the first look at the second-quarter gross domestic product in the U.S. and Europe.
One of the key economic data set for release this week will be the government’s first print on US gross domestic product (GDP) for the second quarter. Thursday’s GDP report will give us a clear picture of the US consumer, which up until the pandemic had been the growth engine of the US economy. Personal consumption comprises about two-thirds of domestic economic activity and is expected to have plummeted 34.5% in the second quarter. Indicators like consumer confidence, personal income, and pending house sales will be announced later this week.
Investors are hoping that with current fiscal and monetary policy measures, things begin to smooth out a little more than anticipated. However, the continuous surge in the US coronavirus cases has kept all the recovery hopes in check.
Tensions between the U.S. and China are escalating drastically with the Trump administration's closure of the Chinese consulate in Houston to protect “American intellectual property and private information”. The rising tension between the two countries is supporting the commodity market, especially gold. Gold is hitting an all-time high record, breaking the resistance of $1,900/100z and now analysts are forecasting that it will reach and break the $2,000/100z boundary.
Oil prices edged lower on Monday as rising coronavirus cases and tensions between the United States and China pushed investors toward safe-haven assets. The fall in oil mirrored moves in broader financial markets in Asia. Global coronavirus cases, meanwhile, exceeded 16 million.
Europe has its shares of news, where the European unemployment rate is to be announced on Thursday. However, during the week countries like Germany, Italy and Spain will announce their own unemployment rates. These are important indicators because they will reflect the impact of coronavirus and will give a better image of how things will be in Q3 and Q4. The euro is up 4% against the dollar this month in the aftermath of the historic agreement on a rescue package after the four days summit. However, renewed coronavirus outbreaks in countries like Germany and Spain fuelled uncertainty about the economic outlook.
China will reveal its Purchasing Managing Index (PMI) on Thursday, which will reflect the path of recovery that Chinese government has taken to combat the coronavirus pandemic. China is still showing a continued improvement with returns at industrial firms growing in the second month in a row.
Quarterly earnings season charges ahead this week with several companies across industries reporting results, with these reports reflecting what analysts expect will likely be the worst of the corporate impact from the coronavirus pandemic.
Companies like Facebook, Amazon, Apple, and Alphabet (Google) will release their earnings this week. These companies are four of the top 5 largest companies in the S&P 500 with a combined market cap of more than $4.7 trillion dollars, so their earnings will likely do quite a bit to affect the benchmark index.