By Noreen Burke
Investing.com - The main economic indicator in focus for investors this week will be the rising U.S. coronavirus case count, while the International Monetary Fund is set to slash its global growth forecasts. It’s going to be a quiet week on the economic calendar, with updates on the housing sector, durable goods orders, and of course weekly jobless claims in the U.S. In the euro zone and UK PMI’s are likely to remain in deep contractionary territory. Meanwhile the FTSE Russell is set to reconstitute its stock indexes on Friday, an annual event that historically creates one of the biggest trading volume days of the year. Here’s what you need to know to start your week.
- Coronavirus infections spike in several states
Spikes in coronavirus infection rates in several U.S. states, mainly in the South and West look set to add to market jitters over a resurgence in COVID-19 cases.
U.S. President Donald Trump on Saturday said he had asked U.S. officials to slow down testing, calling it a "double-edged sword" that led to more cases being discovered.
Health experts say expanded diagnostic testing accounts for some, but not all, of the growth in cases. Over 119,600 Americans have died from the virus to date, according to Reuters’ data.
On Friday, Federal Reserve officials warned that the lack of containment could lead to a need for more prolonged shut-downs and added that the recent positive trend on job gains could soon be reversed.
- IMF to say global economic outlook is even worse than before
In its updated global economic forecast due out on Wednesday the IMF is expected to say the 2020 global recession will be even worse than it estimated in its previous forecast in April.
Back then the IMF said the global economy would suffer the worst financial crisis since the Great Depression of the 1930s as it forecast a contraction of 3%. Now the fund is due to warn that the decline could be even worse.
“For the first time since the Great Depression, both advanced and emerging market economies will be in recession in 2020. The forthcoming June World Economic Outlook Update is likely to show negative growth rates even worse than previously estimated,” Gita Gopinath, the IMF’s chief economist, said in a blog post last Tuesday.
Gopinath also said the current crisis is “unlike anything the world has seen before.”
- Housing data, durable goods and jobless claims in focus
It’s set to be a quiet week on the U.S. economic calendar with investors focusing on new and existing home sales for May along with durable goods orders which are expected to rebound but remain below pre-virus levels.
Thursday’s closely watched report on initial jobless claims will be the main event, as it provides the timeliest data on the economy’s health.
Last Thursday’s report showed that while the number of initial jobless claims fell the pace of the decline stalled, underlining the view that the economy faces a long and difficult recovery from the COVID-19 recession.
The U.S. is also set to release its third estimate on first quarter GDP on Thursday, which will be largely of historical interest.
- Euro zone, UK PMI data
In the euro zone, a report on consumer confidence on Monday will provide a snapshot of how quickly sentiment is recovering as economies gradually reopen. Tuesday’s PMI data for June will also be closely watched. PMI data for May, while better than April showed that the manufacturing and service sectors were still deep in contraction territory.
The UK is also to release PMI data this week and while a sizable rebound is forecast in both the manufacturing and service sectors both readings are expected to remain well below the key 50 level which separates growth from contraction.
- FTSE Russell reshuffle
The FTSE Russell reshuffles its stock indexes late Friday. The annual rebalancing becomes final on the fourth Friday every June, after markets close.
The resulting surge in trading volume crests right before the market close. The New York Stock Exchange and Nasdaq, because of the scale of the revamp, reinforces the rules for trades on the close and contingency plans in the event of unusual market conditions.
Stocks are added or deleted from Russell's family of indexes, including the Russell 1000 large cap and Russell 2000 small cap, prompting fund managers to adjust portfolios to reflect new weightings and components.
Bank of America analysts predict big changes this year, with a greater skew towards mega-cap tech stocks. Those "moving up" may include names such as Zoom Video Communications Inc (NASDAQ:ZM), Slack (NYSE:WORK) and Crowdstrike (NASDAQ:CRWD) which have risen in price amid the shift to remote working.
--Reuters contributed to his report