It'll be a reasonably busy week ahead, DB's Jim Reid writes (hot in pursuit of a new office desk) with the US jobs report on Friday the highlight, while also of interest will be the ECB's latest decision on Thursday and whether they'll announce more policy action, along with the release of PMIs (Monday - manufacturing and Weds/Thurs - services) from around the world. Finally, Brexit will return to the headlines as another negotiating round between the UK and the EU takes place. The most violent US riots in decades may also continue indefinitely.
Looking ahead to the key market moving events this week, for payrolls the consensus on Bloomberg is currently expecting -8000k job losses and the unemployment rate to rise to 19.6%, the highest level since the Great Depression in the 1930s, and up from the 14.7% reading in April. Within this it'll be worth looking at the sectoral breakdowns for an idea of which industries are being hit the hardest. For example, in April the level of employment in leisure and hospitality fell by 47%. Meanwhile young people are being hit especially hard, and the teenage unemployment rate (for 16 to 19 year olds) rose to an astonishing 31.9% in April. Elsewhere PMIs (and the ISMs) will be important but the diffusion nature makes it incredibly difficult to calibrate to growth at extreme turning points. For the Fed, they meet next week so we're now in blackout period so don't expect to hear much from the committee members.
On the ECB meeting on Thursday DB expects large downward economic revisions to the staff forecasts more towards our house view. This supports calls for a doubling of the PEPP to €1.5tn and an extension to mid-2021 (this may be problematic to achieve if the Bundesbank ends up being constitutionally barred from participating in the ECB's QE). The risk is a soft commitment to increase but no firm numbers until the next meeting on July 16th. There is also a clash between the PEPP being temporary policy and for it to be permanent enough to allow reinvestment. However, a lengthening of the "crisis" period means reinvestment until at least the end of 2022 would be appropriate to avoid a premature tightening of financial conditions. Expect all to be announced on Thursday. Also expect lots of press conference questions on the German Constitutional Court hearing.
Over in the political sphere, Brexit negotiations between the EU and the UK on their future partnership will continue via videoconference from tomorrow to Friday. This is the fourth round now, and thus far there hasn't been a great deal of progress. Indeed, at the end of the third round in May, the UK's chief negotiator, David Frost, said that "we made very little progress towards agreement on the most significant outstanding issues between us". This is the last negotiating round before a high level meeting in June where the two sides will be taking stock of progress. It's also important as if the two sides want to extend the transition period that concludes at the end of 2020, they only have until the end of June to agree.