By Noreen Burke
Investing.com - The debate in the U.S. Congress over a new coronavirus-aid bill will gather pace this week and could be a main driver of market sentiment amid fears over an economic downturn once current benefits expire at the end of the month. Earnings will swing into high gear, with investors hoping that some big names could offer better news in what has been a dismal season so far. Thursday’s jobless claims report will likely show that the number of people filing for benefits barely declined once again, with millions still out of work. In the euro zone, leaders are still trying to hammer out a deal on a possible recovery fund worth 750 billion euro, while PMI data on Friday will give more insight into the speed of the post lockdown economic bounceback. Here’s what you need to know to start your week.
- Stimulus battle looms in Washington
Lawmakers in the U.S. Senate will resume contentious talks on a new coronavirus-aid bill this week as the U.S. economy approaches a critical stage in the recovery from the pandemic.
Extended unemployment benefits for the approximately 32 million Americans out of work are due to end on July 31. The expiration of the Federal program will leave millions of gig workers and the self employed among others, who do not qualify for regular state unemployment insurance, without an income.
On Thursday, Senate Democratic leader Chuck Schumer unveiled a $350 billion investment plan, but Republicans have said they hope the final package will not cost more than $1 trillion.
With the two sides still far apart on several issues, analysts fear that a less generous package of aid measures will mean that the already fragile economic rebound will lose momentum in the coming months.
- Tesla, Intel and Microsoft are the big names to watch in earnings
The second quarter earnings season is on course to see the largest drop in profits since the fourth quarter of 2008 according to data from S&P Dow Jones Indices, but investors are hoping that results from Tesla Inc (NASDAQ:TSLA), Intel (NASDAQ:INTC) and Microsoft (NASDAQ:MSFT) could offer some cheer this week.
Tesla, which has seen a strong rally this year, is due to report its latest quarterly earnings on Wednesday. If it posts a profit it would mark its first cumulative four-quarter profit, paving the way for its addition to the S&P 500.
Tech giant Microsoft reports results Wednesday, followed by Intel on Thursday, with both seen likely to have benefited from remote working trends during the pandemic.
Other big names reporting this week include United Airlines (NASDAQ:UAL), Southwest Airlines (NYSE:LUV), Twitter (NYSE:TWTR), Snap (NYSE:SNAP), AT&T (NYSE:T), Verizon (NYSE:VZ) and Chipotle Mexican Grill (NYSE:CMG).
- U.S. jobless claims in focus as unemployment remains high
With renewed economic shutdowns in California, Florida and Texas market watchers will be paying close attention to Thursday’s data on initial jobless claims.
Economists say unemployment remains uncomfortably high because of a second wave of layoffs, which could intensify as the resurgence of the virus depresses demand and increases bankruptcies, especially in the retail sector.
"The data are likely underestimating the true state of the labor market," said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania. "Firms are starting to warn there could be major layoffs in the months to come."
- EU recovery fund hangs in the balance
German Chancellor Angela Merkel warned that European Union leaders may not reach a deal on a coronavirus stimulus plan on Sunday as marathon negotiations ran into a third day and tensions mounted over the demands of wealthy but more frugal member states.
Germany and France, the EU's powerbrokers, are seeking a deal on a 1.8 trillion euro ($2.06 trillion) economic recovery package to rescue the bloc's economies that are facing their worst recession since World War Two.
Failure to come together amid an unprecedented health and economic crisis would raise serious questions about the continued viability of the bloc, officials and experts say.
While it's possible that a deal could reached this week it’s more likely that at least one more summit will be needed before an agreement is struck.
- Euro zone, UK PMIs
PMI figures from Germany, France, the euro zone and the UK on Friday will provide more insight on the strength of the post lockdown economic rebound in July.
But the PMI data does not measure the extent to which economic activity has recovered compared to the pre-virus level and, while it signals how broad-based the recovery is, it cannot give information on the rate of the recovery.
Meanwhile, UK retail sales figures, also due out on Friday are expected to show a further rebound, but with more consumers shopping online an increasing number of retailers are likely to begin making redundancies over coming weeks.
--Reuters contributed to this report