Trump’s prognosis, PMI data, Johnson seeks party unity

Revelations that coronavirus was spreading among Donald Trump’s inner circle and confusion over the president’s prognosis has introduced further uncertainty to the outlook for the US presidential election on November 3.

Expectations of market volatility have risen and investors are already rethinking their long-term bearish bets on the US dollar, which ticked higher on Friday as US stocks slipped.

Investors had previously been spooked by Mr Trump’s refusal just over a week ago to commit to a peaceful transfer of power.

The increasing uncertainty in the US comes as Europe grapples with sharp rises in the number of coronavirus infections, and administrations in some countries, for example in Spain, face local opposition to the reimposition of stronger measures to control the spread of the virus. In the UK, complete lockdowns imposed on students on some university campuses have also drawn criticism.

Monday brings a chance to test sentiment across many of the world’s big economies with the release of purchasing managers’ indices. Observers will be keeping a close eye not only on the JPMorgan Global PMI, but also on the release of data from the eurozone, Germany, France, Italy and Spain that might provide clues to the impact of the surge of infections across the EU.

Investors are also looking to central banks for more guidance and clarity. In the spotlight this week there are the US Federal Reserve’s Federal Open Market Committee minutes on Wednesday and interest rate decisions in Australia on Tuesday.

Food delivery groups and supermarket chains appear to be on the winning side of the pandemic. Just Eat is about to finalise its GrubHub deal with a shareholder vote and Tesco is looking to take advantage of the boost in online sales.

Conservative conference

UK prime minister Boris Johnson will have a chance to stabilise his premiership at the Conservative annual conference, which will be a virtual event due to the ban on social gatherings.

Mr Johnson has been trying to deal with a backlash from his own backbench relating to the latest Covid-19 restrictions and the chaotic publication of new virus rules to control the spread of the virus.

The prime minister is scheduled to conclude the four-day conference on Tuesday. Observers will be closely watching whether the party will show a common front under Mr Johnson’s leadership.

Chancellor Rishi Sunak, who has recently announced the end of the furlough scheme, is expected to set out a winter economic plan in his speech on Monday.

Other hot topics to be discussed at the conference include the future of the NHS, the move to a low-carbon economy, the Whitehall reform, UK trade post-Brexit and the jobs market.

Further reading

In other news in the US . . . 

  • Vice-president Mike Pence will face Democratic nominee Kamala Harris in a debate on Wednesday. The event will have a different structure after last week’s presidential debate attracted widespread criticism after an ugly evening.

  • Secretary of state Mike Pompeo is scheduled to visit Japan on Tuesday, curtailing plans to also visit South Korea and Mongolia after Mr Trump was hospitalised.

  • The Supreme Court starts a new term on Monday but the quick confirmation of Mr Trump’s nominee, Judge Amy Coney Barrett, hangs in the balance as the virus spreads among Republican senators.

Companies news and earnings

Apple is expected to launch the iPhone 12 in October with updated cameras and highly anticipated 5G connectivity components. The launch has been postponed from its scheduled release in September following coronavirus-related supply chain disruption.

Just Eat shareholders will vote on the proposed acquisition of GrubHub on Wednesday. The $7.3bn strategic bid signals the start of a new phase in JET’s fight for the global domination of the food delivery sector against rivals such as Uber and Amazon.

The US Supreme Court hearing on Google’s appeal in Oracle’s copyright case is also set for Wednesday. The multibillion lawsuit, which has run since 2010, accuses Google of having illegally copied code from Oracle-owned Java to create its Android mobile operating system.

Disney’s shareholders will be updated at an investor day on Wednesday regarding the company’s strategy to tackle the coronavirus-induced crisis. The entertainment company has already anticipated that it will lay off 28,000 theme park employees in Florida and California.

An increase in online sales during the pandemic is likely to boost Tesco’s interim earnings on Wednesday. The British retailer announced last week that it would create 16,000 jobs to bolster its online business.

Others reporting this week include Delta Air Lines, Japanese convenience store group Seven & I Holdings Co and Indian company Tata Consultancy Services.

Central banks

Investors will be expecting some clarity from the minutes of the Federal Reserve’s mid-September meeting on monetary policy, which will be published on Wednesday.

Jay Powell, chairman of the US central bank, has previously said that the Fed would tolerate higher rates of inflation. But investors are hungry for details regarding the bank’s future approach to interest rates and its bond-buying programme.

The Reserve Bank of Australia is broadly expected to keep its rates on hold at 0.25 per cent at its meeting on Tuesday.

On the same day, the Australian government will announce its annual budget in which it is widely expected to unveil stimulus measures to address a wave of virus cases that resulted in harsh lockdowns.

Analysts also forecast that Peru will keep its rate steady at 0.25 per cent on Wednesday. Peru’s economy contracted by 27 per cent in the second quarter.

Further reading

Economic data

Purchasing managers’ index data for France, Germany, the eurozone, the UK and the US are due to be released on Monday, together with figures from Japan.

The closely watched measures of the prevailing direction of economic trends in manufacturing will be scoured for information that might help gauge whether previous signals of an increase in demand for goods will result in a boost in production.

Germany’s industrial production data release on Wednesday will provide a glimpse into the strength of the country’s recovery during August as international orders started coming in.

UK gross domestic product, trade and industrial product details are due on Friday with analysts forecasting a boost to GDP from the country’s Eat Out to Help Out scheme.

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