As June progresses, investors’ attention will remain on the potential for a post-COVID-19 rebound and what that could mean for measures like inflation.
The optimism was palpable amid relaxed restrictions, and maintaining that momentum despite the specter of the COVID variants will be key to fully recovering economies.
In addition, important policy decisions are in the focus of the ECB, which has to make decisions about how to handle both funding conditions and growth forecasts.
As in most of the years in 2021, Cryptocurrencies will also be in focus. Bitcoin and other major cryptocurrencies continued to decline over the weekend after reports from Chinese social media site Weibo suspended Key Opinion Leaders (KOL), rekindling fears of further action in the country.
Financial releases to watch this week
Intermediate Capital’s annual results (ICP.L)
Paragon Banking half-year results (PAG.L)
British American Tobacco Trade Statement (BATS.L)
Annual results of the GB group (GBG.L)
In the US, quarterly results are reported by Chewy (CHWY)
Naked Wines annual results (WEIN.L)
Great Britain: monthly GDP values
It will come as no surprise that the UK reopening will have accelerated recent GDP readings.
The combination of non-essential retail and hospitality that opens alongside a sunny holiday will get the economy going again. This has also increased consumer and business confidence.
According to analysts at ING, social spending had already exceeded last summer’s levels before the indoor hospitality reopened in May, while the number of job advertisements in the hospitality sector is above pre-virus levels.
However, this trust is said to come under pressure due to the delta COVID variant. While there is evidence that vaccines protect against it, it could be about 50% more transmissible than the previously dominant strain.
Amid the chaos surrounding travel policy in the UK this week, there is talk for the next week about whether or not concerns about the option of a reopening scheduled for Sept.
In a relatively easy week for UK data, it will be keeping an eye on Friday’s monthly GDP readings, not least because of the boost they could give general confidence.
EU: Updates from the European Central Bank, German factory orders
In Europe, the monetary policy of the European Central Bank (ECB) with new forecasts and an assessment of the financing conditions is on the agenda for investors.
March’s numbers were weaker than expected, meaning analysts predict that growth projections for 2021 and 2022 will remain relatively unchanged.
The hot topic of inflation is also being discussed, although the forecasts may be revised upwards.
The bloc will also review funding terms, a move that is not yet set in stone but is some kind of target.
Continue reading: Labor demand has grown fastest in more than 23 years
ING analysts say the ECB will provide the first quarterly assessment of funding conditions, and official comments that rising yields at turning points in the recovery were a natural development already indicate a possible line of communication preventing the ECB from getting on its own Logic gets caught a few months ago.
The week will also feature German factory orders and industrial production, shedding light on the health of the manufacturing sector in Europe’s largest economy.
France and Italy’s industrial production figures for April are also being scrutinized.
USA: Business optimism and more fear of inflation
Thursday will bring the latest US inflation data, a move that has got investors and central bankers hot under the collar in recent months.
Just like China, the U.S. inflation rate was higher than expected in April, as the consumer price index rose 4.2% year-over-year, the fastest increase in more than a decade, and producer prices rose 6.2%.
If the inflation problem persists, history suggests that real assets – specifically gold and commodities and real estate, or at least paper claims on these by miners – are an option to consider while bonds and cash would struggle, as well Companies that have no pricing power.
Even if the surge in inflation can only be traced back to a backlog of demand in the wake of the pandemic and deflationary debt pressures proving to be too strong, cash and bonds as well as “growth” stocks could once again maintain their long-established dominance of the last decade, say analysts at AJ Bell.
Inflationary pressures could cause central banks to tighten monetary policy, making it difficult for stocks to take full advantage of the economic recovery.
Rest of the world: An inflationary reading is also expected in China on Tuesday. Those numbers fueled the stock market flames last month when they exceeded expectations, not in a positive way.
The Bank of Canada will also present its policy plans with a roadmap to reduce stimulus spending.
New Zealand will also publish its manufacturing PMI figures.