Good morning and welcome to our rolling coverage of the world economy, the financial markets, eurozone and business.
Markets were buoyed by economic optimism last week as lockdowns around the world were eased, despite fears of a potential second wave of Covid-19 infections. On Wall Street, the S&P 500 is now back above 3,000, and the FTSE 100 index in London ended the week above the 6,000 level.
Asian markets are up today, with Hong Kong’s Hang Seng rising 3.5% and China’s CSI 300 advancing 2.7%, despite widespread protests against police brutality and the killing of George Floyd in the US. The FTSE 100 is being called about 60 points higher.
Tensions between the US and China over Hong Kong rose last week as Beijing approved plans for a new security law to tighten its grip on the semi-autonomous territory. Donald Trump responded by announcing that he would end preferential treatment for Hong Kong in trade and travel, but traders are relieved that the phase one of the US trade deal with China appears to be intact.
China’s factories returned to growth last month as lockdown measures were eased. The Caixin manufacturing purchasing managers’ index (PMI) for May rose to 50.7 in May from April’s 49.4, above the 50 mark that separates expansion from contraction. However, surveys for China’s trading partners in Asia showed sharp declines in factory output. Japan’s factory activity shrank at the fastest pace since 2009 in May and South Korea also saw the worst manufacturing slump in more than a decade.
Many European markets are closed for the Whit Monday holiday, but even so the final readings for the manufacturing PMI surveys compiled by IHS Markit will be released this morning, followed by the UK’s PMI.
Flash readings showed that the UK and eurozone manufacturing sectors continued to shrink at a fast pace in May and recovered only slightly after the coronovirus lockdown measures brought economies to an effective standstill in April. You can find our latest monthly analysis of how the coronavirus crisis has hit the UK’s economic outlook here.
Marc Ostwald, chief economist and global strategist at investment firm ADM Investor Services International, says:
A new month begins with markets still riding on a wave of hope that lockdown easing will lead to a ‘strong’ recovery, an eternal hope of a vaccine being found, and more ‘stimulus’ (monetary & fiscal) measures, specifically from the European Central Bank this week.
The negatives remain all too visible – dire levels of job losses and very high levels of job insecurity, still little visibility on the economic outlook, a sharp rise in US (and many others) political tensions with China, and rising levels of social unrest, above all in the US and Hong Kong.
Over here, Brexit talks between the UK and the EU resume, and the Bank of England’s credit data for April are out this morning. The numbers are expected to show a sharp weakening in mortgage approvals and mortgage lending as the housing market ground to a halt in April, alongside another large repayment in consumer credit as households shifted further away from new borrowing.
Finally, the Atlantic hurricane season officially starts today (more on this later), and India’s monsoon season also gets under way.
- 9:30am BST: UK Bank of England household lending (April)
- 8:15am-8:55am BST: Spain/Italy/France/Germany Manufacturing PMI Final (May)
- 9:00am BST: Eurozone Manufacturing PMI Final (May) (Forecast: 39.5)
- 9:30am BST: UK Manufacturing PMI final (May) (Forecast: 40.7)
- 2:45pm BST: US Markit Manufacturing PMI Final (May) (Forecast: 39.8)
- 3pm BST: US ISM Manufacturing PMI (May) (Forecast: 43)