Key events in developed markets next week

In the US, the main focus will remain on the initial claims data, which are proving to be stickier than hoped. With the reopening of the economy gathering pace we are hopeful that we can at least get down to 2.5 million, but even this is a truly horrible figure and points to more social and economic pain for the country. We will also have a significant amount of April housing data, which we know will be bad given the plunge in mortgage applications for home purchase through March and the fact that collapsing equity markets will have seen many buyers’ deposits evaporate in front of their eyes, leading to people pulling out of purchases. However, equity markets have since stabilised and moved higher while mortgage applications have recovered as Federal Reserve support for the credit system and sharply lower mortgage interest rates have helped to turn sentiment.

Usually one of the least relevant measures now bears particular importance: consumer confidence. With lockdowns coming from absolute lows in April, the question is whether consumers are seeing confidence boosted by the careful first steps of easing in restrictions. This will be important for retail to actually recover as consumers need to be confident enough to go out and spend again, which is uncertain because of both health concerns and economic concerns. Also look out for the PMI on Friday, which seems set to bounce back from record lows as more businesses have reopened and therefore will be doing better than last month, but the question really is by how much it can recover as many restrictions are still in place.

Expect a packed schedule for UK data next week. On Tuesday, we’ll get an initial glimpse at the jobs market situation in March, although the jury is out whether it is too early for the Covid-19 impact to heavily weigh on the figures. Faster, payroll-based data from the ONS suggests only a slight hit back then, given the lockdown didn’t start formally until late into the month. Either way it’s a bit academic – we know since then that over two million people have applied for unemployment benefits, while around a quarter of UK employees have been. The growing concern now is that many of the jobs currently being supported via the government’s retention scheme may at some point become redundant as firms begin to adjust to the current, socially distanced operating environment.

We’ll also get retail sales data for April, which could show at least a 15% decline in spending. While online will have received a boost during lockdown, physical retail still typically makes up the lion's share of purchases. With shops unlikely to fully reopen until June, and consumers clearly reluctant to return to the high street given the virus risk, the outlook for retailers remains bleak.

Separately, UK inflation will plunge on the back of falling oil prices, but also a decline in regulated water costs. Expect headline CPI to head towards zero in the next couple of months.