It is likely to be another week dominated by Brexit headlines. However, Brexit aside, the highlight will be Central Bank meetings with both the US Federal Reserve (Fed) and the Bank of England (BoE) holding monetary policy meetings this week.
Kicking off with politics in the US – Donald Trump is due to present his 2020 budget on Monday where he is expected to spark another battle with the Democrats by asking Congress to provide $8.6 billion for his border wall. Of more importance to us, however, is the economic data that is to be released this week.
The focus of the market’s attention this week is likely to be the European Central Bank (ECB) meeting this Thursday. No change in monetary policy is expected but we will get a chance to see an update of the staff forecasts. These are likely to downgrade economic growth in the Eurozone. In December their growth forecasts were for 1.7% in 2019/20 and 1.5% in 2021, in contrast to the European Commission’s growth forecasts which are lower, at 1.3% and 1.6% in 2019 and 2020 respectively. We wouldn’t be surprised if the ECB moved closer in line with the Commission’s estimates by the end of this week. The overall tone in the post-meeting press conference is likely to be cautious, it is clear that economic conditions have been deteriorating more recently however the ECB still have negative deposit rates in place which limits their ability to stimulate the economy.
It will be the usual culprits of US-China trade negotiations and Brexit that will dominate headlines and investor sentiment this week. Politics aside, it’s also a busy week on the macroeconomic front with the highlight set to be the release of manufacturing PMI confidence readings from across the globe and US economic growth (as measured by GDP) figures for the fourth quarter of 2018.
Considering the theme for economic data has been one of recurring disappointment, plenty of our attention will be on the first look at February PMIs for Europe and the US, providing the latest insight into the health of their manufacturing and service sectors. The Eurozone is of particular concern with their Composite PMI falling nearer to contractionary territory (i.e. below 50).
Out with the old, in with the new…Chinese year. Although it may feel a little bit like groundhog day as US-China trade negotiations resume this week with senior officials from the US travelling to China in order to find some sort of compromise. News reports suggest that it is unlikely US President Donald Trump and Chinese President Xi Jinping are to meet prior to March 1st when the next set of tariffs are due to be implemented following the 90-day truce set by the two leaders. In any case expect any soundbites to come out of the current set of discussions to be highly market sensitive.
In what is a relatively quiet week in terms of economic data, arguably the highlight will be the Bank of England (BoE) meeting on Thursday, updating us on their first interest rate decision of 2019.
It's an action packed week in financial markets, with investors set to be entertained by a busy corporate, economic and political calendar.
The great and the good of the business world convene in Davos this week for their annual get-together in Switzerland. The theme for this year is the very pithy title of, “Globalisation 4.0: Shaping a New Architecture in the Age of the Fourth Industrial Revolution”. Some high-profile attendees have been forced to cancel given domestic political pressures on their home front. Donald Trump is contending with another week of the US government shutdown while Theresa May prepares for (another) week of high stakes in the soap opera that we call Brexit.
Equity markets have started the year like most New Year’s resolutions - in a positive and resolute fashion. Markets have been boosted by the promising start to US-China trade negotiations and a US Federal Reserve (Fed) that looks increasingly likely to slow down their approach to interest rate rises. That cheery mood is likely to be tested this week by the start of the fourth quarter earnings season in the US and a busy political calendar.