By Noreen Burke
Investing.com – Investors will look forward to the July US job report, which is expected to shed more light on the strength of the economic recovery. The forecast for the report is broad, but most analysts believe that the recruitment recovery has slowed significantly in the past month. Markets will also watch Congress, which is stuck in the next round of economic relief after a critical lifeline for millions of unemployed Americans has passed. After last week's impressive big tech results, it is halfway to the second-quarter earnings season, but fluctuating macroeconomic data and pandemic concerns weigh on government bond yields. In the meantime, the Bank of England is expected to maintain the course at its Thursday meeting. Investors are waiting for indications of a possible future direction of monetary policy. Here's what you need to know to start your week.
- US job data
The Department of Labor's Friday payroll report for July due on Friday is expected to show that new jobs have been created in the past month, slowing from 4.8 million in June. The report covers the period until mid-July before containment measures were reintroduced in some countries in the second half of the month.
ING analysts warned that while they expect employment to increase in the second half of June and the first half of July, they are more cautious than the market and expect a figure closer to 750,000 than the current consensus.
The job report is published one day after the weekly report. Last week's numbers showed a second consecutive weekly increase in initial jobless claims and the largest increase since May, which could indicate a negative number of non-farm workers in August.
- Congress in a dead end about new impulses
Investors will keep an eye on Washington, where Congress is still stuck in the next round of economic relief from a pandemic that has killed over 150,000 Americans and triggered the worst economic collapse since the Great Depression.
On Friday, tens of millions of Americans lost an unemployment benefit of $ 600 a week after the White House and Congress failed to agree on the extension of payments.
Congressional Democrats want weekly payments to be extended to next year as part of a larger package, but Republicans have said the $ 600 payments are an incentive to stay home instead of returning to work. Your proposal would provide for a much lower weekly payment of $ 200 until states create a system that provides layoffs with 70% wage replacement.
- Halfway through the second quarter result
It is half of the second quarter winning season and there have been more beats than misses so far. Of the more than 250 companies that have previously published figures in the United States and Europe, 80% of S&P 500 companies exceeded estimates compared to 65% of European companies. This is shown by the data from Refinitiv IBES.
While industry names like General Motors (NYSE 🙂 and Caterpillar (NYSE 🙂 delivered great positive surprises, the season also solidified the hegemony of US technology; Amazon (NASDAQ 🙂 reported the biggest profit ever, Facebook (NASDAQ 🙂 exceeded estimates, and Apple (NASDAQ 🙂 iPhone sales exceeded expectations.
Income may be less of a driver this week as most of the big tech names are in the rearview mirror, but there are still some big names, among them Disney (NYSE :), Berkshire Hathaway (NYSE :), Tyson Foods (NYSE :), Clorox (NYSE 🙂 and CVS (NYSE 🙂 to name a few.
- Falling government bond yields
Data from last Thursday shows that the US economy shrank in the second quarter with an annual record rate of 32.9% and brought yields to record lows for three, five and 20 years. The entire yield curve is close to 1%.
A new trigger for further declines could be the unemployment figures in July.
Last week the Federal Reserve linked the economic recovery to resolving the health crisis and said "the path of the economy will depend heavily on the course of the virus."
Fed policy makers reiterated their pledge to use their "full range of instruments" to support the economy and keep interest rates close to zero until the epidemic has recovered.
- Bank of England to keep rates on hold
The will will provide more insight into how quickly the economy will recover from the pandemic's financial damage on Thursday, but is unlikely to add to the £ 100 billion ($ 131 billion) incentive announced in June. contributes.
Governor Andrew Bailey is likely to be asked about the BoE's latest negative interest rate considerations – it is one of the central banks arguing against negative interest rates, and analysts believe they won't adjust their borrowing costs until late 2021.
The economic recovery is likely to continue, and the UK has yet to finalize an EU trade agreement before the Brexit transition period ends on December 31.
But the attitude of the BOE can be prudent. With the clock ticking on the Brexit deadline, the BoE may want to keep a few options in reserve.
–Reuters contributed to this report