1) ECB rate meeting – 16/07 – this week’s ECB rate meeting isn’t expected to yield too much in the way of surprises. At its last meeting the European Central Bank hiked its pandemic emergency purchase program by another €600bn to €1.35trn, with the time horizon pushed into the middle of June 2021. The bank also downgraded its growth and inflation forecasts, while it also appeared unconstrained by the recent German constitutional court challenge to the legitimacy of its old bond buying program. The ECB still needs to formally respond to the challenge of the German court irrespective of its insistence it is covered under the jurisdiction of the European Court. Even where Germany is concerned optics are important, particularly if the ECB wants to be seen as a responsible arbiter of the economy across all of Europe. The bank could also indicate if it has any plans to start buying the bonds of so called “fallen angels”. These are the bonds of companies that were investment grade, but have fallen into “junk” status as a result of the pandemic.

2) EU Summit – Pandemic recovery fund – 17/07 – the stakesfor Europe couldn’t be higher as we look towards this week’s EU Summit, and as Germany takes the reins of the six-month rotating presidency of the EU. Earlier this month German Chancellor Angela Merkel urged EU leaders to come together this week in a crisis that could well determine Europe’s future, and agree a package immediately, saying that the EU was in the most difficult situation in its history. Her tone suggested that she hopes by raising the prospect of an EU breakup she can railroad any agreement through. This seems unlikely even without the populist mood already rippling across Europe. In May EU Commission President Ursula von der Leyen proposed a €750bn recovery fund, financed by up to €500bn of grants and €250bn of loans. The proposal has generated a significant amount of pushback from the likes of the Netherlands, Austria, Sweden and Denmark, unhappy at the lack of conditionality when it comes to the grants, let along the loans, as well as the much higher contributions which taxpayers are likely to have to stand behind. With some of the weaker European economies like Greece, Spain and Italy already facing rising debt levels and a tourism season that is unlikely to recover in the short term, the stakes could not be higher. Unfortunately, while time may be of the essence to them, it is highly unlikely that we will see any progress at this week’s meeting, unless one side decides to fold, and that seems unlikely particularly since Netherlands PM Mark Rutte hopes to get re-elected next March.

3) China Trade (June) – 14/07 – recent data from June appears to suggest that the Chinese economy may well be starting to gain traction after a slow rebound from its February lockdown. Over the past three months we’ve seen modest improvements on a month on month basis, albeit from a very low base. With both the US and European economies slowly re-opening in May and June there is an expectation that trade flows will also improve as well. So far progress has been a little slow in this regard, with the numbers in May disappointing. Over the last three months imports have shown big falls compared to a year ago as the economy recovers from the hefty blow, not only to economic activity but consumer confidence as well. Imports are expected to show a decline of -8.7%, an improvement on the -16.7% decline in May. Exports should do better now that we’ve seen economic activity continue to improve throughout the world, however even here the improvement is likely to be modest. Exports have been one area that has held up fairly well, largely as a result of the export of PPE and other medical-related products, with a decline of -1.3% expected.

4) China Q2 GDP – 16/07 – the Chinese economy saw a quarterly contraction of -9.8% in Q1 of this year, pushing the annualised growth number sharply into negative territory of -6.8%. Since then retail sales data has not even got close to moving back into positive territory, while import data has shown that internal demand has remained weak. Exports only really improved as a result of PPE and other medical exports, yet forecasts for Q2 expect to see a V-Shaped rebound in Q2 of 9.6%. This seems barely credible at a time when retail sales have been negative in April and May and are also expected to decline in June. Industrial production has been a little better, but it’s still well below the long-term average.

5) China Industrial Production/retail sales (June) - 16/07 - it’s been a slow grind back for the Chinese consumer after the lockdown of February. Since then retail sales have seen declines of -20.6%, -15.8%, -7.5%, and -2.8% and while we are going in the right direction the clear takeaway remains one of weak demand and a cautious consumer. This month we could well see a move into positive territory year on year, which when you consider China retail sales were trending at 8% is a harsh adjustment. With summer now getting into full swing in the Northern Hemisphere, we could well see a positive surprise. Industrial production has been doing better with expectations of a 4.8% rise following on from the 4.4% gain seen in May.

6) UK Monthly GDP (May) – 14/07 – in April the UK economy showed a monthly contraction of -20.4%. There was no surprise in this given that most people were at home and the main arterial roads into UK cities resembled the backdrop of a tumbleweed-strewn spaghetti western, with reports in some quarters of animals coming into some rural towns due to the lack of traffic. We can safely say now that is probably as bad as it can get, and that the number in May is likely to be much better as lockdown restrictions slowly get eased. 

7) UK Unemployment/Jobless Claims – 16/07 – there is a significant discrepancy between the ILO measure of UK unemployment, which is currently understating the potential shock to the UK labour market at 3.9%, and the monthly jobless claims numbers, which are slightly more current. The last two months have seen the claims numbers rise by 1.5m people and there could well be another 0.5m added to the numbers in June as well. There is no doubt that the governments furlough scheme is cushioning the pace at which these job losses are likely to come through in the coming months, but as we’ve seen and heard in the last few weeks these numbers look set to rise further as we head into year end. In May the claimant count rose to 7.8% and a 20 year high, a rise of 1.5% from April and it looks set to rise further this week to levels close to 9%.

8) Ocado H1 20 Jun) – 14/07 – has had a number of problems over the years, but its share price has proved to be resilient despite the business not yet having posted a profit. Ocado’s strength lies in its unique technology which has received a significant boost as a result of the coronavirus pandemic. Fires at distribution warehouses put constraints on capacity, as well as costing the company more than £100m. However, the deal with Marks & Spencer is likely to see revenues increase: at the end of February the company said it expected to grow retail revenue for the upcoming year by 10% to 15%. Since then Ocado has had to close down its website in order to deal with increased demand from online traffic, while in June the company raised another £1bn in the form of a share and convertible bond placing to make speedier infrastructure upgrades. This will see the company increase capacity, not just in the UK, but also at its partners in the US, France and Canada.

9) Dunelm Group Q4 – 15/07 – has been one of the few success stories in UK retail in recent years,last year the company saw strong operating profits and paid a special dividend.We are unlikely to see anything like that this year. The company closed all of its stores on the 24th March, furloughing employees under the governments job retention scheme. In April the company reopened its on line business and drew down its existing financing facilities of £175m. At the time it said it had enough capital to withstand store closures of up to six months. Fortunately, that hasn’t come to pass, and all of its stores have now re-opened, with one-way systems and strict social distancing guidelines in place. The in store coffee shops haven’t re-opened, while the share price has managed to recover all of its losses for this year, though it’s still below the highs seen in February. 

10) Burberry Q1 21 – 15/07 – Luxury fashion retailer Burberry has had to contend with a number of challenges over the last 12 months, from the disruption of its Hong Kong business as well as the fallout from weaker Chinese demand and the spread of coronavirus. In May the company reported full-year numbers that saw operating profits slide 57% to £189m. Total revenues came in at £2.63bn, with the costs of the disruptions in Hong Kong as well as the closure of various stores due to coronavirus pushing impairments up to £245m. With the recovery likely to remain weak, we have seen stores across the business slowly start to reopen. Management said in May they expected Q1 to be severely disrupted with 50% of its store network closed, though since then we’ve seen further reopening’s start to take place across its store real estate. There are silver linings: sales in mainland China and Korea were looking good, so the hope is that this will have continued in the last few weeks, as Europe, the UK and the US economies continue their respective paths towards reopening.

11) US Banks - JPMorgan Chase/Citigroup/Wells Fargo, Goldman, BOA Q2 20 – 14, 15 and 16/07 – it’s set to be another big week for US banks as they report their latest Q2 numbers in the wake of the shutdown of the US economy back in April. The recent Federal Reserve stress tests conducted three different scenarios, from a v-shaped recession, a w shaped one and a longer U-shaped recession and recovery. In terms of who did the worst under the most arduous scenario Goldman Sachs came the closest to the 5% cut off, while Bank of New York Mellon performed the best. In response to the tests the Fed capped the amount of the dividend that could be paid by any one bank, while also suspending any plans to buy back shares. At the last set of quarterly numbers, it was notable that collectively the US banks set aside almost $25bn in terms of provision for non-performing loans. It will be interesting to note whether any US banks decide to set aside additional funds in respect of this after the events of the last three months.

12) Netflix Q2 – 16/07 – There were lofty expectations when Netflix reported its Q1 numbers back in April, due to the very high bar management set in January with respect to new subscribers of 7m. After a brief sell-off at the end of February and beginning of March, shares have gone from strength-to-strength, rising from a low of $290 to record high levels of $500. The Q1 numbers did not disappoint with new subscribers surging to182.8m, a gain of 15.8m. Some of this may well be a result of a pull forward from Q2, but they are still nonetheless pretty good. Revenues also improved coming in at $5.77bn, as the company posted its best ever numbers. Slightly more concerning is that profits fell slightly short of expectations, which suggests that costs went up significantly in the past three months. However, the strength of the US dollar may well have played a part in that. Netflix’s biggest problem now is how many of these subscribers stick around once the lockdown is lifted. There are also concerns about their content pipeline, which is suspended due to the lockdown restrictions. This shouldn’t be a problem in the short term, as a lot of newly released shows were put into the can a while ago, and this issue isn’t unique to them. Expectations for Q2 are for 7m new subscribers, taking the global total to 190m, with these numbers expected to act as a bellwether for the wider streaming market. Profits are expected to come in at $1.814c a share.

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