Beijing setback, Royal Mail results, flash PMIs

Senior officials from the US and Russia meet in Vienna on Monday for a new round of arms-control talks. The Trump administration wanted Moscow to persuade China to join the negotiations, but Beijing is not interested and Russia has previously said it would not try to change its mind.

Also on Monday, lawyers acting on behalf of a father and son accused by Japan of helping former Nissan boss Carlos Ghosn flee the country are due to appear before a federal judge in Boston to challenge their arrest by US authorities at the request of Japan, which wants to extradite them.

A last-gasp attempt by the US justice department to prevent Tuesday’s publication of a tell-all book by former White House national security adviser John Bolton looks unlikely to succeed as extracts from The Room Where It Happened have already appeared in the media. President Donald Trump says the book is made up of “fake stories”.

Further headaches are in store for the justice department on Wednesday, when the Democratic-led House of Representatives committee examines allegations it has become politicised under the president and his chief law enforcement officer, attorney-general William Barr.

In Europe meanwhile, EU Commission president Ursula von der Leyen and her budget chief Johannes Hahn will present the bloc’s draft general budget for next year and report on the EU’s performance in 2019. On the same day, Brexit negotiator Michel Barnier will give his views on the current state of EU-UK negotiations.

Having abandoned its attempt to defy the coronavirus pandemic and hold presidential elections in early May, Poland will go to the polls on Sunday. Andrzej Duda, the incumbent president and candidate of the ruling Law and Justice party, is favourite to win.

Coronavirus this week

• On Monday, the World Health Organization holds a briefing on the latest global developments, with worldwide deaths expected to top 500,000 this week and confirmed cases to exceed 9m, according to Reuters.

• Despite this bleak prediction, lockdown restrictions continue to ease in many countries. On Monday, French children up to the age of 15 can return to school, while on Thursday, the Eiffel Tower reopens after a three-month hiatus.

• Beijing had gone 50 days without a new case, but this month’s outbreak in the capital that has led to neighbourhood lockdowns, closed schools and cancelled flights has prompted fears of a second wave derailing China’s stuttering economy. “The economic recovery will be much more uneven compared to what we thought a few weeks ago,” said Hao Zhou, an economist at Commerzbank in Singapore.

• The High Court in London is due to hear arguments on Monday as to which of Venezuela’s duelling politicians should be recognised as president before ruling on a request from Nicolás Maduro, the incumbent, for the Bank of England to hand over $1bn of gold held in its vaults so it can fund the South American country’s pandemic fight.

• Moscow will ease its lockdown further on Tuesday, allowing cafés, gyms and swimming pools to reopen as Russia’s official tally of cases climbs past 570,000.

• The Bank of England is back in the news on Thursday when its financial policy summary highlights how the UK’s finance sector is coping with Covid-19’s impact on the economy and its preparedness for the country’s Brexit transition. On the same day, the bank publishes how much commercial paper it has bought — over the past week and in total — from companies under its Covid Corporate Financing Facility, designed to support liquidity among larger businesses.

• Also on Thursday, the UK’s Office for National Statistics publishes its weekly report on the impact of coronavirus on company turnover and staffing plans.

Central banks

The week begins with the interest rate decision by the People’s Bank of China. The one-year loan prime rate looks set to remain unchanged at 3.85 per cent as the country recoils from fresh coronavirus outbreaks in Beijing and the economy struggles to recover from a first-quarter drop of 6.8 per cent year on year. But credit supply is strong as the impact of policy changes has spread, which should give the PBoC room to stay on hold for now. 

With the eurozone economy heading for a record postwar recession while teetering on the brink of deflation, Thursday’s monetary policy meeting of the ECB will be keenly watched. Particular attention will focus on whether the bank’s president Christine Lagarde provides more clarity on the timing and flexibility of the Pandemic Emergency Purchase Programme.

Elsewhere, the Central Bank of Turkey is likely to cut rates for a 10th consecutive time on Thursday. The country has experienced a worrying jump in Covid-19 cases in the past few days after easing lockdown measures but President Recep Tayyip Erdogan may wield his influence over the bank to press policymakers to lower rates again in a bid to stimulate recovery. 

Companies

Nike might be looking flat-footed when the sports apparel group reports its fourth-quarter earnings on Thursday. Investment bank Cowen says the impact on its retail outlets and wholesale business could result in revenues falling $3.5bn.

Internet car group Auto Trader posts its full-year results on Thursday, when it should see the fruits of a payment holiday it introduced in April. The FTSE 100 group made advertising to car retailers free, forfeiting about 80 per cent of its sales for that month, but ensuring its website was fully stocked while buyers were at home potentially browsing for a new vehicle.

Thursday is unlikely to be a red-letter day for the Royal Mail. Britain’s postal service is expected to report lower profits for a year blighted by deteriorating labour relations, a slump in its share price and the sudden departure last month of its chief executive.

Premier Foods will post annual profits at the top end of market expectations after Britons stocked up on food at the start of the coronavirus lockdown.

Others to watch this week are homebuilder Crest Nicholson Holdings, which will post lower first-half profits after lockdown put a stop to viewings and sales. Annual profits will be down too at Fuller, Smith & Turner as its pubs and hotels were forced shut. Pub operator Marston’s will publish sobering half-year results for the same reason. On the upside, however, UK outsourcer Mitie will report a rise in annual profit as it cuts costs to offset flattening revenue growth because of slower public sector activity.

Economic data

The main events this week are the flash PMIs from various countries. These surveys of purchasing managers offer a near-instantaneous snapshot into how activity has fared in the past month and, over time, also tend to mirror GDP. 

This month’s PMIs are particularly significant as they will indicate how economies have performed in June as countries ease their lockdown measures. May’s figures were an improvement on April’s rock-bottom low, though they were still below the 50 mark that separates expansion from contraction. Investors will be keen to see whether June’s PMIs have become expansionary once more.

Tuesday

• France is first to publish its PMIs. Its partial reopening of bars and restaurants should reflect well in the services sector but manufacturing is still likely to look sluggish.

• Germany will show a similar pattern, rebounding from April’s record lows to near expansion, with a consensus forecast of 42.5 for its manufacturing PMI and 40 for services.

• Later in the morning, PMI surveys from the eurozone should also show an improvement, particularly in Italy, given that non-essential productive activities went back to work in early May, though nowhere is likely to be above the 50 mark.

• The UK’s PMIs will also look healthier as restrictions were eased in June, particularly for services, with a consensus forecast of 40 (up from 29) and 45.5 for manufacturing.

Wednesday

• Germany’s influential Ifo business climate index rose from 74.2 in April to 79.5 in May, though many companies are still pessimistic about the speed of their recovery.

• Any optimism may be dashed, however, when the IMF updates its economic forecasts. In a blog post last week, its chief economist Gita Gopinath said the update “is likely to show negative growth rates even worse than previously estimated”.

Thursday

• The initial jobless claims from the US will be a barometer of how well the world’s largest economy is faring. The number of Americans applying for first-time unemployment benefits has edged lower recently, though the decline has slowed.

• The US GDP price index out Thursday will offer a good indicator of inflationary pressure that may lead the Federal Reserve to increase interest rates.

Friday

• The week ends on what is almost certainly a low note when the UK car industry releases its monthly production data. Several large plants opened in May, including Nissan’s Sunderland factory, but the sector will take time to recover from its spectacular nadir in April when just 197 cars were made.