Please find this week’s edition of Weekly Digest.
Last week saw the release of the latest US Employment report, which came in better than forecast. Non-farm payrolls (employment data) rose by 1.76 million in July (compared to the 1.5 million forecast) and the unemployment rate fell by 0.9% to 10.2%. For additional context, almost ten million jobs have been added in the US in past three months, but employment remains 8.4% below its February level. Gold continued to be the all-weather asset of choice, closing the week just off its record high at $2035/oz. The publication of GDP reports for Q2 showed Eurozone GDP shrank by 12.1%, compared to the US, which shrank by 9.5%. The latest report from the Bank of England’s Monetary Policy Committee was relatively upbeat. The 21% estimated decline in UK GDP in Q2 is in line with our forecast, but the Bank of England is then assuming, as a central case, that GDP rises by around 18% in Q3, a figure above what real-time indicators are suggesting. The Financial Stability Report made somewhat different reading, with its focus on ensuring the financial sector remains part of the solution and on the substantial cash-flow deficit facing the corporate sector.
Global COVID cases now stand at 19.8 million and daily case growth in the US has continued to slow. Paris has mandated masks outdoors in the busiest streets starting today, while Germany’s transmission rate (Rt) rose to 1.16 on Friday, the highest level in ten days. Italy also reported 463 new infections yesterday, the second-highest number in two months after reaching 552 on Friday. In the UK, it is reported that the government will start to report weekly mortality rather than daily.
This week in Washington, Congress will continue to thrash out the details of the next fiscal package. The two sticking points seem to be the extension of Unemployment Insurance benefits and the extension of support to state and local governments. Senate Republicans have indicated that they would like to cap additional spending at $1 trillion, while House Democrats have called for roughly $3.4 trillion. Over the weekend, Donald Trump signed four executive orders to extend unemployment payment protection (at $400, v the $600 payment that has now lapsed), a temporary payroll tax deferral, an extension of eviction protection and student loan relief. The legality of these orders will be challenged and they do not represent a permanent solution.
Officials from US and China are due to meet this weekend to review compliance with the trade accord, while today a senior US official is visiting Taiwan for the first time in decades. This comes after the US imposed sanctions on Hong Kong’s Chief Executive Carrie Lam on Friday, along with a number of other officials in response to the enactment of China’s security law. Under this new law, Jimmy Lai, prominent pro-democracy newspaper owner, was arrested in Hong Kong over the weekend.
Turning to the week ahead, we have UK employment data coming out on Tuesday followed by the Q2 GDP report on Wednesday. Friday sees the release of July retail sales data for China and the US, as well as US consumer confidence data. In terms of corporate news, Zalando, Prudential and Cisco are all scheduled to report.