Key events in developed markets next week

For the eurozone, next week will be all about June surveys. Consumer confidence on Monday will provide a good sense of how quickly sentiment is recovering as economies gradually reopen. This will be key for a recovery in domestic demand. PMIs will also be important. The May readings, while better than in April, were still well below the key 50 level, signalling contraction in both manufacturing and services.

The UK PMIs look set to rebound next week, although we suspect they'll remain in deep contractionary territory. It's worth remembering though that the PMI is only a diffusion index, so while it might point to more firms saying things are getting better, it's a) off a low base and b) it doesn't tell us by how much things are improving.

In other words, we could feasibly see a sizable rebound in the PMIs, but we should be careful in interpreting this as a sign of a V-shaped recovery. Looking at other data, including Google's mobility index, the economy still appears to be operating well below its pre-virus level. And amid growing concerns about the job market outlook, we suspect the economy will struggle to regain the lost ground until 2022 at the earliest.

It is a fairly quiet week in the US with the data flow mainly focused on housing reports and durable goods orders. Mortgage applications continue to surge thanks to low borrowing costs and ample credit availability, and this offers a positive outlook for the housing market. It is already translating into rising housing starts and home builder confidence. However, given the length of time it takes to conclude a home purchase we are not expecting much from this week’s transaction data for May. June and July housing figures should be incredibly strong.

As for durable goods orders, we should see a rebound of sorts, but it is unlikely to be as vigorous as in the consumer sector. Manufacturing remains weak as supply bottlenecks and subdued final demand squeeze the sector. This means new orders are likely to remain well down on pre-Covid-19 levels, which in turn implies lacklustre investment spending and the risk of further job losses over coming months.