(A look at the day ahead from EMEA deputy markets editor Sujata Rao. The views expressed are her own.) Interactive graphic tracking the global spread, open tmsnrt.rs/3aIRuz7 in an external browser.
How quickly things change in markets. After the euphoria of April, world stocks are on track for their biggest weekly loss since mid-March, when the coronavirus-linked rout was in full swing. The dollar has gained half a percent this week against a basket of currencies, gold has risen 2% and Treasury yields are down six basis points.
But on the last day of the week, the mood has swung around again, with MSCI's global index up 0.3%. European markets are enjoying rises of 1% to 2%. Travel and leisure are up 3% and banks, which plumbed record lows yesterday, have bounced 1%.
Some of that impetus may be coming from oil, where prices are set for their third weekly gain, helped by a rise in Chinese refinery demand. Today's data showing China's industrial output surprising to the upside could also support the thesis that crude demand will rise as economies re-open. China-exposed miners and chipmakers are also up.
U.S. crude-oil inventories have slipped for the first time in 15 weeks and there is talk of more OPEC output cuts. That's boosted European oil shares 1% to 2%.
The backdrop isn't pretty, though. Renewed U.S.-China tensions risks strangling any nascent trade recovery. President Donald Trump has declared in reference to China's Xi Jinping "I don't want to speak to him", and suggested that cutting ties to Beijing could save the United States $500 billion.
The effects of that rhetoric rippled across Asia today, sending Japanese shares down for the fourth day in a row and the yuan to one-week lows.
The other issue is economic data, and company earnings have been worse than predicted. A Reuters poll of economists now forecasts a 35% annualised second-quarter contraction for the U.S. economy, from 30% previously. Yesterday, data showed almost 3 million Americans claimed unemployment benefits in the week through May 9 -- essentially, one in five workers has lost his job since mid-March.
In China, industrial production rose more than expected (3.9% year-on-year), but there was bad news from retail sales, which dropped 7.5%. Clearly, the loosening of lockdowns hasn't persuaded Chinese consumers to go out and spend.
We get advance readings of euro zone gross domestic product today, but attention is already focused on the second quarter, where polls suggest an 11.3% contraction. Economists have also slashed 2020 forecasts to minus 7.5%.
Then there is Brexit. The European Union and Britain wrap up the latest round of negotiations on their future relationship, but British Prime Minister Boris Johnson's spokesman has already said the EU had "asked far more from the UK". Before Michel Barnier's press conference, pressure has built on sterling while sterling-dollar volatility has risen above 10% for the first time since the end April.
Company news mostly consists of profit dives and dividend cuts. U.S. first-quarter earnings are seen falling by 12.1% from the year-ago quarter, versus the 6.3% growth expected on Jan. 1.
In Europe, there are some morsels of good news. Swiss drugmaker Roche will start selling a new digital diagnostics product to simplify and accelerate screening of patients during the COVID-19 pandemic. Finnish utility Fortum beat expectations and plans to stick to its dividend policy.
In M&A, the FT reported BT is in talks to sell a multi-billion pound stake in broadband network operator Openreach.
On the downside, Swiss luxury group Richemont expects "headwinds in the months ahead"; it reported annual profit down by two-thirds. Betting shop William Hill posted a 57% net revenue plunge for the weeks since lockdowns were imposed in Europe and North America. Eutelsat reported a 4.4% slump in third-quarter revenues, hit by postponed sport events and reduced travel.
Emerging-market stocks are seeing a second week of modest declines, but the Turkish lira is set for its best week since February. It's back below 7 per dollar after a Reuters exclusive that Turkey has reached out to a various countries for swap lines.
DIARY Germany flash GDP Q1 Italy CPI China industrial output, retail sales, urban investment April US retail sales April, industrial output, business inventories, University of Michigan Europe corp events: Richemont, Fortum (Editing by Larry King)