Overview:
Buoyed, among other things, by yesterday’s extra stimulus from the ECB, stocks resumed their uptrend in Asian time, with the region’s major bourses ending the week firmly on the front foot.

Overlooking some further weak domestic economic data (detail below), Japan’s Topix closed up 0.7% on the day to be up 4.5% over the week as a whole. Elsewhere, led by HSBC, the Hang Seng is currently up a little less than 1.0% to be up more than 7.0% from a week ago. US futures are up too, while European equities have opened higher too, similarly ignoring some terrible German factory orders figures and news that the Bundesbank now expects its national GDP to drop more than 7% this year.

Meanwhile, with reports that Saudi Arabia and Russia have reached a tentative deal with Iraq on oil production cuts, oil prices are firmer (Brent crude back above $40bbl). And with the exception of BTPs, major sovereign bonds are weaker. For example, JGB yields rose 1-2bps across the curve despite increased BoJ purchases of 5-10Y bonds at its latest scheduled operation. Yields on 10Y USTs are up a further 2½bps to close to 0.85% ahead of the day’s main event, the release of the US labour market report for May.

Japan:
With many shops having closed or reduced operating hours in the face of Japan’s national state of emergency in April, the spending figures for that month published overnight were predictably weak. In particular, household spending fell for the fifth month out of the past seven and by more than 6%M/M. This left spending down a whopping 18% compared with the pre-consumption tax hike peak in September and down more than 11% compared with a year earlier. The weakness was driven by clothing sales (-41½%M/M) and recreational-related spending (-13%M/M), while expenditure on transportation and food also fell further.

This tallied with the downbeat message from the BoJ’s consumption activity index, which showed that expenditure on this measure fell 9½%M/M – the most since the series began in 2003 – to leave it down 19.4%Y/Y. Perhaps inevitably given the continued closure of tourist attractions and other recreational facilities, expenditure on services fell sharply for the second successive month (11.7%M/M). But spending on durable and non-durable goods also declined by a substantial amount (10.1%M/M and 6.2%M/M respectively).

While the state of emergency was lifted around the middle of last month, if the latest vehicle sales figures are anything to go by – down a record 40.2%Y/Y – spending on big-ticket items remained extremely weak in May. And given the heightened economic uncertainty, falling consumer confidence and a deterioration in labour market prospects, underlying consumption seems bound to remain very subdued for the foreseeable future despite the government’s extra fiscal support measures

Certainly, the Cabinet Office’s composite indicator of business conditions – which provides a helpful guide to GDP growth – deteriorated substantially at the start of Q2. For example, the coincident index fell an unprecedented 7.3pts in April, to 81.5, the lowest level since the global financial crisis. And the drop in the leading index was steeper still, down 8.9pts to 76.2, the weakest for more than eleven years, with both indices signalling a marked pace of contraction in activity during the second quarter.

Euro area:
German new factory orders fell a record 25.8%M/M in April following a drop of 15.0%M/M in March to be down by more than one third from a year earlier (-36.6%Y/Y). Wherever the orders came from, the picture was pretty much the same. Domestic orders fell 22.3%M/M while foreign orders fell 28.1%M/M, with new orders from the euro area down 30.6%M/M, and new orders from beyond the euro area down 26.7%M/M.

By type of good, however, capital goods orders fell most, dropping 30.6%M/M, with orders of transport goods (including cars) down almost 50%M/M. Orders of intermediate goods fell 22.7%M/M while those of consumer goods were least affected, falling “just” 11.4%M/M.

Meanwhile, giving an indication of what to expect from Germany’s IP data due on Monday, manufacturing turnover fell 22.8%M/M in April. Similarly, other data published this morning showed that Spanish industrial production in April fell 21.8%M/M – more than double the median forecast on the BBG survey – to be down by more than one third from a year earlier.

UK:
According to GfK, contrary to expectations, UK consumer confidence deteriorated further last month, with the relevant survey headline indicator down 2pts to -36, just a couple of pts above the trough during the global financial crisis. The detail of the survey reported a deterioration in assessments of the outlook for the economy and personal financial situation, even if there was a slight improvement in perceptions of the climate for making major purchases.

US:
The most notable economic data release today comes from the US in the shape of the May employment report. While the ADP figure released earlier in the week suggested a more moderate deterioration, this is expected to show another notable drop in nonfarm payrolls of close to 7.5mn, from the decline of more than 20mn in April. As such, the unemployment rate is expected to jump close to 20%. Consumer credit figures for April are also due.