Sunak speech, Mexico-US visit, Brexit talks

Sunak speech, Mexico-US visit, Brexit talks

The week begins with Covid-19 cases again on the rise in the US as well as in Brazil and Mexico, two of Latin America’s biggest economies.

UK chancellor Rishi Sunak will outline his latest plans to steer the economy to safety, Brexit talks continue and the EU prepares for the following week’s summit.

On the corporate scene, investors will look to updates from Rolls-Royce and UK housebuilders, while economic data and central bank action will be relatively light this week.

Mexico’s president visits White House

Face-to-face meetings are back on the agenda this week. Donald Trump and Andrés Manuel López Obrador will buddy up to toast the new trade pact between the US, Mexico and Canada when the Mexican president visits the White House on Wednesday.

But while Mr López Obrador hopes the deal will bring investment and jobs, US trade representative Robert Lighthizer has already warned Mexico to brace for challenges, including over its enforcement of new labour rules, long a thorny issue in negotiations.

Canada’s president Justin Trudeau also seemed less keen to join the party when reporters asked last week if he would accept his invite to the gathering.

“We’re obviously concerned about the proposed issue of tariffs on aluminium and steel that the Americans have floated recently,” he said.

“We’re also concerned about the health situation and the coronavirus reality that is still hitting all three of our countries.”

Brexit talks

After weeks of virtual talks — not to mention stalemate — the UK and the EU resume face-to-face Brexit negotiations this week, though expecting them to see eye to eye might be asking a bit much just yet.

Speaking after four days of intensified talks in Brussels last week, Michel Barnier, the chief EU Brexit negotiator, said that “serious divergences remain” and that the EU needed its positions “to be better understood and respected” by Britain.

Further reading

Sunak

Staying in the UK, Rishi Sunak is set to announce his latest plans for steering the economy through the coronavirus crisis on Wednesday.

The chancellor is expected to put jobs at the heart of his set-piece economic statement as he tries to avert a post-coronavirus catastrophe, but he has told Tory MPs not to expect big tax cuts to boost the economy.

Mr Sunak’s statement is also likely to mark a shift in his coronavirus strategy from a support phase, where the government “wrapped its arms around the UK economy”, to a stimulus phase, where it encourages households and companies to spend as normally as possible.

Further reading

Top civil servant faces MPs

Mark Sedwill, Britain’s most senior civil servant who last week announced he would be stepping down following reports of a rift with Prime Minister Boris Johnson’s top political adviser, answers questions before a parliamentary committee.

EU matters

Ursula von der Leyen, president of the EU Commission; David Sassoli, president of the European Parliament; Angela Merkel, Germany’s chancellor; and Charles Michel, president of the European Council, meet on Wednesday to take stock of progress on EU budget negotiations and to prepare the next round of political negotiations ahead of an EU summit next week.

The commission will release its economic growth forecasts the same day, while on Thursday eurozone finance ministers, known as the eurogroup, meet to select their next head.

France Airbus protests

In France, unions representing Airbus staff plan a “day of action” in Toulouse against the planned axing of 5,000 jobs, including more than 3,000 in the south of France.

EU-Turkey visit

Josep Borrell, the EU’s high representative for foreign affairs, visits Turkey on Monday seeking to restore trust after a stand-off in March in which thousands of migrants attempted to force their way into EU member Greece from Turkish territory.

Africa forecasts

The African Development Bank is expected to make significant cuts to its growth forecasts when it releases a supplement to its January outlook on Tuesday. Ethiopia is the only one of sub-Saharan Africa’s five largest economies projected by the IMF to expand this year.

Singapore election

Singapore rounds off the working week with a general election, which is going ahead despite concerns about the spread of coronavirus

Earnings

Rolls-Royce has a first-half trading update on Thursday. Shares in the UK aero-engine maker fell more than 10 per cent last Friday, following a Bloomberg report that suggested it was considering its options to raise funds amid the downturn in the aerospace industry. 

Rolls-Royce has been hit hard by the coronavirus crisis. It scrapped its dividend in April and said it needed to cut 9,000 jobs in May as it looked to make annualised savings of about £1.3bn.

Premier Inn owner Whitbread updates on Tuesday after opening the doors to its hotels again over the weekend, but is unlikely to be able to offer investors any firm guidance on the outlook just yet.

The hotel operator has so far raised about £1bn in a rights issue, suspended its dividend and cut management pay to ride out the crisis.

Store closures in the UK, Europe and US are likely to mean Britain’s biggest sportswear retailer JD Sports will post lower profits when it reports its long-delayed full-year results on Tuesday.

UK housebuilders Barratt, Persimmon and Vistry will also be in the spotlight this week, with site closures due to Covid-19 likely to have weighed on completions, though many sites are now back in operation.

Investors will be on the lookout for any plans to follow rival Taylor Wimpey, which is tapping investors for £500m to spend on land, saying that coronavirus has pushed down prices.

Others reporting this week include UK recruiters PageGroup and Robert Walters, UK bus and rail operator FirstGroup and cycles and car parts retailer Halfords.

It will be in quiet in the US before we roll into earnings season again next week, with Levi Strauss and Delta Air Lines among the few reporting.

Central banks

Israel’s central bank sets policy on Monday and Australia on Tuesday, with no changes expected at either meeting.

Economic data

Monday

  • US: ISM non-manufacturing The index hit a low of 41.8 in April, before rising to 45.4 in May. It is expected to rise again in June, with the possibility it could break the 50 mark and return to positive territory

  • Germany: industrial orders A rebound is forecast for May following April’s sharp fall

Tuesday

Thursday

  • US: initial jobless claims Forecast to continue their downward trend for the week ending July 3

  • China: CPI Inflation is expected to have edged up to 2.5 per cent year on year in June

  • UK: RICS house price balance The index hit a nine-and-a-half-year low of minus 32 in May and is expected to slip down further for June

  • Canada: employment The number of people in work is forecast to further increase by 800,000 in June, but this will still leave total employment down by 1.9m compared with pre-pandemic February

  • France: industrial production A rebound is expected in May after a fall of 20.1 per cent in April