Market Update

Global equity markets experienced significant volatility throughout the week. Despite a prevailing sense of pessimism, markets ended the week on a more positive note, driven by the anticipation of countries reopening and improved consumer sentiment in the US.
This week, both Anthony Fauci, a prominent infectious disease official in the US, and Jay Powell, the Fed Chair, expressed caution. Fauci warned of increased coronavirus cases if the US reopens prematurely, while Powell predicted the US unemployment rate won't peak for another month or two. While much of the week's data confirmed the severe global economic contraction, attention shifted to what happens once lockdown restrictions are lifted.
US retail sales data for April was dismal, falling by 16.4%. However, this data was expected due to the lockdown measures, and it's seen as a baseline, indicating that there's room for improvement as restrictions ease. More encouraging was the University of Michigan Sentiment, which showed consumer confidence for May at 73.7, higher than estimates and a sign of growing consumer confidence as lockdowns ease.
Looking ahead, the focus will be on the weekly US jobless claims data on Thursday (21 May 2020) for indications of re-employment trends. Additionally, the market will scrutinize minutes from the Fed's last meeting, US housing starts, Eurozone consumer confidence, UK employment data, UK retail sales, and various economic indicators including PMI data from the US, UK, and Eurozone, as well as CPI data from the UK and Eurozone.
Despite ongoing uncertainties, global markets started this week on a positive note, bolstered by improving US consumer sentiment data. Fed Chair Jay Powell's optimistic statement on Sunday (17 May 2020) about the US economy's recovery in the second half of the year further lifted market sentiment. Additionally, signs of pent-up demand, evident in people flocking to beaches and parks over the weekend, indicate potential economic recovery once lockdown restrictions are fully lifted. Over the weekend, the Bank of England's Chief Economist, Andy Haldane, mentioned the possibility of negative interest rates, sparking discussions about unconventional monetary policy. Although negative rates would be unprecedented for the UK, they are already in use in several other countries. This prospect weakened the pound in Monday morning trading.