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Will Fed Unveil Fresh Ammo Before May Ends?

Published 21/05/2020, 06:35

What has the final week of May got in store for the markets?

In a recent interview with 60 Minutes, Jerome Powell claimed that the Federal Reserve had plenty left in the tank, stating that ‘there’s a lot more we can do...we’re not out of ammunition by a long shot. No, there’s really no limit to what we can do with these lending programs that we have’.

Well, investors are maybe after a further example of what the central bank has in its arsenal. The Fed’s various lending programs for medium-sized businesses and state and local governments – announced across March and April – are all meant to be up and running by the end of May. Will Powell and co. reveal anything new to go alongside the previously announced measures?

Another potentially major market mover could be any news regarding vaccines. We’ve seen time and again investors get giddy at misleading headline regarding a cure, only to have their optimism punctured by reality.

Last week was no different. Boston-based firm Moderna Inc (NASDAQ:MRNA) reported its experimental covid-19 vaccine mRNA-1273 had seen positive results from its first human trial, causing sky-high gains, especially for the Dow Jones. And then the Boston Globe cast doubts on the whole affair, highlighting that the trial only covered 8 people, and that Moderna failed to publish any data to back up its claims.

You can almost guarantee that, despite all this, the markets will hungrily eat up any new vaccine headlines, though it is hard to anticipate when and in what form such news will arrive.

As for the US-China situation, Trump hasn’t really let up in his attacks, accusing the World Health Organisation of a pro-China bias and an ‘alarming lack of independence’ from Beijing, going so far as to threaten to revoke the USA’s membership. He then went on another tweet-tirade, stating it was the 'incompetence of China' that caused the virus to spread. Exactly the kind of attitude needed during a global pandemic.

Beyond those big picture issues, the week sees the CB consumer confidence data on Tuesday and the Richmond manufacturing index on Wednesday, before a second look at the Q1 GDP reading is joined by the durable goods orders figures and the weekly jobless claims on Thursday. Friday then sees the Fed-favourite core PCE price index reading, personal spending, Chicago PMI, and revised UoM consumer sentiment numbers.

In an excessively quiet week post-Bank Holiday, the UK economic calendar is almost empty, baring the CBI realised sales reading on Tuesday and the Gfk consumer confidence number on Friday.

That’ll likely leave the FTSE at the mercy of the wider market sentiment, especially that emanating from the US, unless there is something unforeseen, like an announcement from Rishi Sunak.

In terms of the corporate calendar, Britvic (LON:BVIC) and Provident Financial (LON:PFG) update on Wednesday, with Daily Mail General Trust and IWG on Thursday.

There’s a solid stream of Eurozone data this week, including German retail sales on Tuesday, the ECB financial stability review on Wednesday, the German and Spanish inflation figures on Thursday and the German import prices, French GDP and region-wide inflation readings on Friday.

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