The Week Ahead for April 27, 2020

April 27, 2020

Last week witnessed a string of negative data with preliminary PMIs (Purchasing Managers Index) last Thursday showing worse than expected contraction, and where the services sector was more hard-hit than manufacturing. US unemployment claims showed another sizeable increase of 4.4m that took the total of the past five readings to over 26m, while durables for the month of March contracted by 14.4% (its core which excludes transportation suffered an insignificant 0.2% drop). And while there were some items on the central bank front including the ECB’s (European Central Bank) acceptance of junk bonds as collateral and on the political front with the EU summit disappointing, what really took the attention was oil’s Monday rollover mayhem in the May futures contract that took the energy commodity’s price into negative territory as those obligated to purchase attempted to dump at any price to avoid physical delivery. That kept oil prices volatile throughout the week with the June contract plummeting on Tuesday, and later in the week recovering and reducing the difference between it and the July contract.

While there are plenty of central bank announcements this week, given most of the key central banks are either at, near, or below 0% and have pledged massive (if not infinite) quantitative easing, there’s less room to maneuver on the monetary policy front at this stage due to the lack of ammunition. The Bank of Japan (BoJ) kept rates at -0.1% this morning and announced unlimited bond-buying, Wednesday the US Federal Reserve (Fed) where investors will be tuning into what its Chairman Powell will have to add in terms of details on a string of programs already announced, while on Thursday focus will shift towards the ECB following the announcement last week that it would accept junk bonds as collateral from banks to avoid a credit squeeze in the euro zone. Final manufacturing PMIs will be released towards the end of the week and from multiple sources including CFLP for China, and both Markit and ISM for the US. There will also be the usual closely-watched unemployment claims out of the US on Thursday in what has become the weekly gauge for how the coronavirus has been affecting employment in the world’s largest economy. And then there’s earnings, from European banks to Oil Majors to US tech giants in what is expected to be a busy week for equities.