This week is big on macro data, small on company earnings. The Brexit debate continues to ramp up with the OECD and the American Bankers Association making their cases on the upcoming referendum.
Fund Strategy looks at some key events shaping the week and what to expect.
Tuesday 31 May
- India, Italy and Canada all release their Q1 GDP figures
Wednesday 1 June
- The OECD publishes its latest economic outlook
The OECD will focus on the link between the decline in productivity growth and inequality in its latest economic outlook.
It will be released on day two of its annual forum in Paris, which starts the previous day and will cover the potential impact of the UK leaving the European Union among other economic topics.
- Wolseley announces its Q3 interim results
“In the past four or five quarters sales growth has slowed down dramatically. About two-thirds of sales come from the US and 15 per cent from the UK and they’ve seen a slow down in both,” says Russ Mould, investment director at AJ Bell.
As a plumbing business the company is economically sensitive and is closely tied into the US housing cycle, says Mould. “The good news is that the US new home sales and building permit numbers for April were actually all quite good, after a sticky period in January and February.”
The results are also the last from chief executive Ian Meakins, who will step down in August. “He will probably want to go out on as higher note as he can,” says Mould.
- Brazil releases its GDP figures Q1
“If you’re looking at Brazil overall it’s hard to see how things could get an awful lot worse,” says Mould. “Commodity prices have collapsed, the president’s been impeached, the currency’s been volatile, inflation’s been sticky, the economy’s in recession, they’ve jacked up interest rates. It’s quite a litany of woe.
“Admittedly the iron ore price has started going down, which they probably won’t want to see, but oil has been giving at least some relief there. I don’t think the numbers are going to be very pretty and I think it will be confirmation of what we know already that it’s been very, very tough,” Mould adds.
“People will be waiting to see whether [Dilma Rouseff’s successor] Michel Temer offers some reformist plan like that outlined in Argentina by Mauricio Macri when he took over as president late last year because that’s been very warmly received.”
- Purchasing Managers Index figures released in the UK and US
On Wednesday the UK manufacturing PMI is released, followed by construction on Thursday and on services on Friday. “All three of those went down in April, which was a bit of an unwelcome hat trick,” says Mould. Manufacturing dipped below 50, the threshold that divides recession from growth, to 49.2, the lowest it’s been in four years.
“If those numbers deteriorate again or if manufacturing doesn’t rise back up again above 50 people will start to wonder if the UK economy has hit a nasty soft patch,” Mould says. “Whether that’s something Brexit-related or something deeper remains to be seen.”
Across the Atlantic, the Institute for Supply Management in the US is releasing equivalent figures for manufacturing on Wednesday and for non-manufacturing on Friday.
Thursday 2 June
- ECB policy meeting
The odds are on the ECB sitting tight on rates as it takes a wait-and-see approach to its comprehensive package of stimulus measures introduced in March, says IHS Global Insight chief UK and European economist Howard Archer.
Some measures, such as the Targeted Long-Term Refinancing Operations and the corporate bond-buying programme haven’t even kicked in yet.
“We believe if the ECB did eventually undertake further stimulative measures, it would most likely be through extending non-conventional measures rather than taking interest rates any lower,” Archer says.
“While the ECB has indicated that interest rates could possibly go lower, there is clearly heightened concern over the impact that negative/low interest rates are having on Eurozone banks.”
- Auto parts Johnson Matthey publishes annual results
“This is going to be an interesting one because they’re very much of the edge of the Volkswagen emissions scandal,” says Danny Cox, head of communications at Hargreaves Lansdown. “There’s been an impact on sales at Volkswagen, does that impact their own sales.”
Russ Mould adds that the company is likely to be hit by swings in platinum price.
Friday 3 June
- American Bankers Association weighs in on Brexit
The American Bankers Association’s economic advisory committee will discuss a possible impact of a UK exit from the European Union, as well as present their monetary policy predictions and consensus economic forecast.
“Shock horror, they will probably say Brexit is a bad thing,” quips Cox.