Hello and welcome to our continued coverage of the global economy, financial markets, the eurozone and business.
Markets were boosted by economic optimism last week as global bottlenecks 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 finished the week above the 6,000 level.
Asian markets are up today, with the Hong Kong Hang Seng increasing 3.5% and China's CSI 300 increasing 2.7%, despite widespread protests against police brutality and the murder of George Floyd in the United States. The FTSE 100 is called about 60 points above.
Tensions between the U.S. and China over Hong Kong escalated last week when Beijing approved plans for a new security law to tighten its grip on 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 first phase of the U.S. trade deal with China appears to be intact.
Chinese factories returned to growth last month thanks to the loosening of foreclosure measures. The Caixin index of manufacturing purchasing managers (PMI) for the month of May amounted to 50.7 in May against 49.4 in April, above the bar of 50 which separates the expansion from the contraction. However, surveys of China's trading partners in Asia have shown a sharp drop in factory production. Activity in Japanese factories fell at the fastest rate since 2009 in May, and South Korea also experienced the worst manufacturing recession in more than a decade.
Many European markets are closed for the Whit Monday holiday, but despite this, the final readings for the manufacturing PMI surveys compiled by IHS Markit will be published this morning, followed by the British PMI.
Instant readings showed that manufacturing sectors in the UK and the euro area continued to contract at a rapid pace in May and only recovered slightly after coronovirus lockouts immobilized economies in April . You can find our latest monthly analysis of the impact of the coronavirus crisis on the UK economic outlook. here.
Marc Ostwald, chief economist and global strategist for the investment firm ADM Investor Services International, said:
A new month begins with markets still on a wave of hope that easing the closure will lead to a "strong" recovery, an eternal hope of finding a vaccine and more "stimulus" measures (monetary and tax), especially from the European Central Bank this week.
The negatives remain far too visible – levels of job losses and very high levels of job insecurity, still little visibility on the economic outlook, a sharp increase in political tensions in the United States. United (and many others) with China, and an increase in social unrest, especially in the United States and Hong Kong.
Here, Brexit talks between the UK and the EU resume, and the Bank of England credit data for April is released this morning. Figures are expected to show a marked weakening in mortgage approvals and mortgages as the housing market stops in April, alongside another major consumer credit repayment, as households move further away from new ones loans.
Finally, the hurricane season in the Atlantic officially begins today (more details later), and the monsoon season in India also begins.
- 9:30 am BST: UK Bank of England household loans (April)
- 8:15 a.m. to 8:55 a.m. BST: Spain / Italy / France / Germany Final PMI manufacturing (May)
- 9:00 am BST: Manufacturing PMI of the final euro zone (May) (forecast: 39.5)
- 9:30 am BST: Final British manufacturing PMI (May) (forecast: 40.7)
- 2:45 p.m. BST: US Markit Manufacturing PMI Final (May) (forecast: 39.8)
- 3:00 p.m. BST: US ISM Manufacturing PMI (May) (forecast: 43)