Two emergencies loom over the financial markets at the start of a week that promises to be complicated. The most feared comes from the Xinfandi fish market in Beijing, where new outbreaks of coronavirus infection were discovered on Saturday, prompting the authorities to restore the strictest measures to contain the epidemic. A dozen cities have banned travel to the capital. There are at least 80 confirmed cases.
Meanwhile, another outbreak of racial anger explodes in the US. On Friday evening in Atlanta, the police shot a black man in the back: according to the investigators, it was murder without the extenuating circumstance of self-defense. In this climate, Donald Trump is preparing to resume his pre-election rally: departure from Tulsa, already the scene of a massacre in the XNUMXs.
But then – third thorn – there is also the hard Brexit which is fast approaching.
IN CHINA THE INDUSTRY STARTS AGAIN SLOWLY. THE BOJ GATHERS
Epidemic and political protest thus mark the uphill start to the financial week. Chinese lists closed in the red: Shanghai -0,6%, much worse Hong Kong (-2,7%). Down also the Korean Kospi and Mumbai (-1,8%). In Tokyo, the Nikkei index drops 2,7% after the increase in cases of contagion.
The Bank of Japan is meeting today and tomorrow to take stock of the state of the economy. Markets don't expect Governor Kuroda to cut rates, but the central bank could increase purchases of long-term bonds, at 25 and 30 years, to put pressure on the yield curve.
The macro data arriving this morning from China contributes to the negative climate. The recovery of industrial production (+4,4% in May) was more timid than expected, while the decline in consumption continues (-2,8%).
Even oil confirms its downward trend after -8% last week. Brent trades at 37,84 dollars a barrel (-2,3%).
THE WHITE HOUSE SEE THE RECOVERY, NEW PROTESTS IN THE USA
Spotlight on US markets after Thursday's crash and weekend reaction. The data on industrial production in the North East will be released tomorrow. But attention will be focused on Jerome Powell. The Fed chairman will present his mid-year report on monetary policy guidelines to the Senate Banking Committee tomorrow (and in the House on Wednesday).
The White House insists on optimism. Last night, the chief of economic advisers to the White House, Larry Kudlow, told CNBC that the new outbreaks are of little consequence and there can be no question of a second wave coming, so we will continue with the reopening of activities. Kudlow anticipated the arrival of booming data on consumption, to be published tomorrow in the early afternoon: the consensus expects an increase of 8% month on month. But calls for caution are coming from the Dallas Federal Reserve.
COMPARISON ON THE RECOVERY PLAN IN ITALY AND IN EUROPE
Numerous issues on the European front while numerous countries, including Italy, are moving towards normality after the long lockdown. At the center of attention, the preparation of Friday's European Council meeting dedicated to the 750 billion euro Recovery Fund. In view of the meeting, the differences between the supporters of the Recovery Plan and the penalty takers from the north, to which the Visegrad group has joined, do not seem to have resolved. Three European commissioners – the Danish Vestager, the Swedish Johansson and the Finnish Urpilainen – have written to their countries to urge them to support the Next Generation Eu plan.
Tensions also on the opposite front. The prospect of the Italian adoption of the Mes is making its way, perhaps simultaneously with the analogous choice of Madrid and Lisbon. But the split in the Five Star Movement weighs on the decision.
RATINGS: MADRID REMAINS IN SERIE A
Positive news over the weekend for the Eurozone bond markets: on Friday evening the Fitch agency confirmed Spain's rating at “A-” with a stable outlook. Fitch expects Spanish GDP to contract by 9,6% in 2020, with a recovery of +4,4% the following year. The deficit is expected to jump from 2,8% of GDP in 2019 to 11,1% this year.
Tomorrow the German Zew index for June will be published.
EASIER LIQUIDITY, AN EU PLAN FOR THE VACCINE
The measures adopted by the ECB to make credit institutions' access to central bank liquidity more flexible will enter into force on Wednesday. A measure that will remain active until September 2021 to facilitate credit for households and businesses. Also on June 17, the EU Commission will present its plan for the development of a vaccine against Covid-19. Meanwhile, on Wednesday, Ursula Von der Leyen will ask to commit a large part of the 2,7 billion euros allocated by Brussels for research to be developed in agreement with Big Pharma.
The ECB calendar also provides for the communication by the ECB of the amount of the weekly purchases of covered bonds, ABS and public and private sector securities. Lastly, on Thursday there is the diffusion of the Economic Bulletin.
TOWARDS THE HARD BREXIT, THE BOE PREPARES ITS QE
The meeting between Boris Johnson and the EU leaders will be held today by videoconference. The British premier has already made it known that London will not accept any extension beyond December 31 due to the looming hard Brexit. The Bank of England summit will be held on Wednesday which should not intervene on rates but will launch a robust series of purchases on the City market: the bazooka should have 150 billion pounds.
FCA/PSA UNDER ANTITRUST EXAMINATION
The General states with Vittorio Colao's report on the report drawn up by his task force and then Prime Minister Giuseppe Conte and the ministers will begin talks with the social partners.
Piazza Affari's attention is concentrated on the car. The pronouncement of the EU Antitrust on the FCA-Peugeot merger is expected on Wednesday. On the same day, Acea's data on May sales in Europe will arrive.
Spain will present today a 3,7 billion euro aid plan for the sector. The agenda of Piazza Affari provides for the detachment of the coupon of Diasorin (0,95 euro), Datalogic (0,3) and Coima Res (0,2).
