It’s poised to be a big week for investors, with eyes on the UK as the final round of Brexit talks start on Monday and the full scale of the coronavirus crisis on the economy is laid bare in the final Q2 gross domestic product (GDP) results.
Over in America, the first US presidential debate is on the slate for Tuesday, with president Donald Trump and Democrat challenger Joe Biden facing off.
The monthly US non-farm payrolls report will be released on Friday, with investors keen to judge how the jobs market in the world’s biggest economy is doing.
Global manufacturing PMIs for September will also be released this week, with expectations that the rebound in France and Germany is losing impetus.
Other weekend developments markets will also digest:
UK: Brexit negotiations, final Q2 GDP and a host of company results
This week will see the twin big issues of Brexit and COVID-19 thrust into the limelight.
The time is ticking as the October deadline for a Brexit deal nears, with recent volatility of the pound doing little to dash fears of a collapse in talks between the UK and the EU over the future of their relationship. Nevertheless, they are back at the table as negotiations are due to restart on Monday.
MPs are due to vote on the renewal of emergency powers in the Coronavirus Act — emergency legislation fast-tracked into law in March — while going over the detail of the controversial Internal Market Bill.
The Coronavirus Act contains a wide range of powers, such as allowing courts to use live links, re-registering retired medical staff and managing large numbers of dead bodies.
Renewal or non-renewal would not affect matters like face coverings, requirements to self-isolate and dispersing large gatherings as civil liberties measures come under the 1984 Public Health Act.
Meanwhile, EU has said it will not budge on its decision to renegotiate the Brexit deal after Britain said it plans to override parts of the Withdrawal deal on Northern Ireland. The EU in turn accused the UK of breaking international law, and has said it will take legal action if UK goes ahead with its plans.
The bill proposes no new checks on goods moving from Northern Ireland to Great Britain, giving MPs powers to alter or "disapply" rules relating to the movement of goods that will come into force from 1 January, if the two fail to strike a trade deal.
Wednesday will see the full scale of the economic damage wrought in the second quarter, when Britain entered its deepest recession, laid bare, with the final Q2 GDP iteration of the impact the lockdown had on UK economic activity during April, May and June. The last reading revealed a contraction of -20.4%, with April the low point in terms of the economic shock.
On Tuesday, the Bank of England (BOE) will release its money and credit report for August.
Company results to watch for:
Ferguson (FERG.L) — finals (Tuesday)
Greggs (GRG.L) — trading update (Tuesday)
Boohoo Group (BOO.L) — interims (Wednesday)
Other key events: On Monday, Pizza Hut creditors will vote on its company voluntary arrangement (CVA) restructuring plan. BOE chief economist Andy Haldane is due to give the keynote speech at the Cheshire and Warrington LEP Economic Summit and AGM on Wednesday.
US: Presidential debate, jobs claims
As US president Donald Trump and Democratic challenger Joe Biden get ready for their face off ahead of the November elections, Reuters says the first of three debates could spark stock volatility.
It is yet to be seen how Biden will fare, as much has been made of his previous missteps when speaking, meanwhile Trump’s trade war with Beijing is also an area for concern as tensions ramp up.
Biden’s policies favour imposing higher corporate taxes as well as closing a number of loopholes, which allow businesses to minimise their tax liability. In comparison Trump prefers deregulation.
In recent weeks, the S&P 500 (^GSPC) dropped 10% from record highs, as the prolonged impact of the coronavirus pandemic and the uncertainty over the November election vote, worry investors.
Trump earlier this week refused to say whether he would commit to a peaceful transfer of power if he loses to opponent Biden.
“We’re going to have to see what happens, you know that. I’ve been complaining very strongly about the ballots, and the ballots are a disaster,” Trump told a reporter during a White House press briefing.
August saw a slow recovery in the US jobs market, with unemployment rate falling to 8.4%, its lowest level since the post lockdown spike to 14.7% in April.
Employment plunged by 22.16 million between February and April, but the re-opening of the economy from May has seen more than 10.6 million of those jobs recouped.
Analysts at ING said that they expect 865,000 new jobs to be added, with the unemployment rate expected to fall further to 8.2%.
At his most recent press conference Federal Reserve chairman Jerome Powell said that the US central bank is not sure how high the real unemployment figure is. Powell also called for a fiscal stimulus, after telling lawmakers that it could be the difference between a continued recovery and a slower economic drag.
EU: Flash CPIs
Inflation data is due to be released for the Eurozone on Wednesday, but the lack of inflation in the area — which turned negative last month — is not a new issue for the European Central Bank (ECB).
Recently the rise of the euro added to a deflationary drag on the ECB’s attempts to try and hit its 2% inflation target.
In August annualised inflation slipped to -0.2%, a four-year low, the outlook for September does not look too promising with expectations that prices will fall even further, although staying above the record low of -0.6% hit in 2015.
“We don't expect September data to show a turnaround, and it could well be that inflation remains negative for some time to come. Also important is the unemployment rate, which has been creeping up over recent months as furlough schemes have kept mass layoffs in check. We expect moderate increases to continue in the months ahead,” analysts at ING said.
Elsewhere: Global manufacturing PMIs for September will be released, to gauge whether the rebound in France and Germany is running out of steam, as highlighted in last week’s flash PMI numbers, with services a particular point of worry.
There was a mixed view in the most recent August PMI, which showed a slowdown in the German economy, with services in particular dropping to 52.5, after a strong July performance. A similar picture was painted for France’s services, slowing to 51.5 from 57.3, as rising infection rates prompted local lockdowns and COVID-19 measures being imposed across the country.
With rising coronavirus cases across the globe, winter on the horizon, and the World Health Organisation warning of a serious situation in Europe, its to be seen how Europe’s biggest economies fare.