Elections across the European Union will enter the spotlight after a week dominated by renewed trade tensions between the US and China — an issue that is sure to continue weighing on the minds of investors ahead of the G20 summit in June.
Next week’s line-up also packs a long list of Federal Reserve speakers and US retail earnings from industry heavyweights including Target, Best Buy and Home Depot. Here’s what to watch in the coming days:
The EU will hold elections beginning May 23. Voters will head to the polls to determine the balance of power of the next European Parliament.
The elections come amid a delayed departure for the UK, which confirmed earlier this month it would hold EU elections after failing to finalise a withdrawal agreement. In polls, Nigel Farage’s Brexit Party is leading Prime Minister Theresa May’s Conservatives and the opposition Labour party.
Marchel Alexandrovich, senior European economist at Jefferies, said “the upcoming elections are being awaited with a higher than usual sense of unease”.
“Fast-forward from the initial analysis of results, and the next stage is for the political groups in Parliament to be ironed-out and then to agree on who gets appointed to the EU’s top jobs,” including the heads of the European Commission and European Central Bank, Mr Alexandrovich wrote in a note to clients.
Investors will get a look into deliberations by the Fed’s policy-setting committee when the central bank releases minutes of its May meeting on Wednesday.
Members of the Federal Open Market Committee voted to hold rates steady, as expected, in response to muted inflation and economic uncertainty. The Fed has adopted a wait-and-see approach to interest rates, and some officials have suggested they could lower rates if inflation growth does not pick up. Fed chair Jay Powell said during a news conference after the meeting he did not see a strong case to move rates in either direction.
“[Mr] Powell was asked about inflation countless times and at virtually every turn he slipped in the idea that ‘transitory’ factors were likely to blame for the recent deceleration,” economists at RBC Capital Markets said. “This is an important admission and seemingly raises the hurdle for a rate cut based on below-target inflation alone.”
Mr Powell, Fed vice-chairman Richard Clarida, New York Fed president John Williams, and St Louis Fed president James Bullard are among the numerous central bank officials scheduled to speak next week.
The Fed speakers “are likely to take a slightly more downbeat line given the trade backdrop and mixed economic data flow”, ING economists wrote.
Retailers will headline another round of corporate earnings next week. Big-box chain Target, electronics retailer Best Buy and home-improvement stores Home Depot and Lowe’s are due to report quarterly financial results. JC Penney, Nordstrom, Ross, Kohl’s and TJX will also have earnings updates.
Outside of the retail world, there will be earnings reports from HP, Toll Brothers, Royal Mail, Ryanair and Tata Motors.
With more than 90 per cent of S&P 500 companies reporting earnings so far, 76 per cent have delivered stronger profits than expected, according to FactSet. Earnings have topped estimates by 5.4 per cent, better than an average of 4.8 per cent over the past five years. However, 80 per cent have issued negative earnings guidance for the second quarter, worse than the five-year average of 70 per cent.
Investors will parse the weekly dose of key economic reports at a time when the market is closely monitoring the outlook for US growth and the impact of tariffs.
There will be fresh data on US durable goods orders and sales of both new and existing homes. ING economists cautioned that durable goods data will be negatively affected by a sharp drop in Boeing aircraft orders.
“The trade story will remain the key driver of market moves next week, with the ratcheting up of tensions intensifying market concerns about the outlook for the global economy. We see little reason for optimism in the near-term, as the market is likely to be looking towards the G20 summit in June when President Trump is expected to sit down with President Xi to discuss the situation,” ING said.
Other economic reports coming next week include Canadian retail sales, UK inflation and the OECD’s economic outlook.