Another busy week, and the one where the UK is finally due to leave the EU.
Coronavirus continues to spread — the deadly virus from China has shaken global equity markets and could hit even harder this week if the death toll continues to mount and the contagion’s effects keep spreading across and beyond Asia.
Elsewhere US president Donald Trump’s impeachment trial rolls on, nearly 140 countries are due to try to agree a framework for overhaul of international tax rules at a meeting in Paris, and Holocaust Memorial Day will be marked around the world.
Mark Carney is poised to oversee a close decision during his final meeting as governor of the Bank of England — the market is split down the middle on whether rates will be cut. The Fed also meets this week, but rates are set to stay on hold, with investors focused instead on any clues for what lies ahead.
Next week is set to be one of the busiest of this earnings season, with 145 companies in the S&P 500 scheduled to report results and the bulk of them crossing on Wednesday and Thursday. Technology companies come into focus with updates expected from Apple and Microsoft, tech giants whose market capitalisations have exceeded $1tn.
Boeing also reports and there are a host of UK and European companies updating as well. The US and Eurozone are among the many country’s with growth figures out this week and India sets its budget on Saturday.
Britain formally leaves the EU on Friday after a turbulent past year in which the British parliament repeatedly refused to approve a withdrawal agreement negotiated by former prime minister Theresa May. Boris Johnson’s resounding election victory — driven by his promise to get Brexit done — ended the bitter impasse and he pledged to implement Brexit by the end of January.
As part of the UK prime minister’s withdrawal agreement with Brussels, all current trading arrangements remain the same until the end of December 2020. The UK will be out of the EU’s political institutions and will no longer have a seat at the table in Brussels, but for companies and individuals living and working in the UK, things will stay the same. The focus will now switch to the difficult trade talks to come.
● Sajid Javid seeks to placate business over post-Brexit rules
Trump impeachment trial
When Democrats push to call witnesses in the Senate impeachment trial of the US president in the coming days, the top target will be John Bolton, the former national security adviser who compared part of the Ukraine scandal to a “drug deal”.
Mr Bolton has been uncharacteristically reticent since he departed the White House in September after, according to Mr Trump, being fired by the president.
Democrats are keen to hear from Mr Bolton because he has first-hand knowledge of some of the key meetings on Ukraine, but also because he left the White House following a rift with the president. This suggests that he has less incentive to protect Mr Trump than some of the other officials they want to call, particularly Mick Mulvaney, White House chief of staff, who has refused to testify.
● Democrats dream of Bolton bombshell in impeachment trial
President Trump’s former national security adviser Michael Flynn is due to be sentenced on Tuesday for lying to the FBI about his contacts with Russia. Prosecutors have urged the judge to consider a harsher sentence after Mr Flynn stopped co-operating with them.
This year’s Holocaust Memorial Day on Monday marks 75 years since the liberation of Auschwitz concentration camp. A delegation of Auschwitz and Holocaust survivors from the US, Canada, Israel, Australia, and several European countries, together with officials including German president Frank-Walter Steinmeier and Israeli president Reuven Rivlin, will gather at the site in Poland.
● Simon Schama on Auschwitz and the new anti-Semitism
Global tax rules
Nearly 140 countries are due to meet at the OECD, the international organisation that oversees global co-ordination of taxes, to try to agree on the broad outline for an overhaul of decades-old international tax rules increasingly rendered outdated by the rise of big tech. Several European countries have made moves to impose a digital services tax, which has angered US officials and caused Washington to threaten tariffs on EU products.
● OECD proposes global minimum corporate tax rate
Bank of England
Mark Carney’s final meeting as Bank of England governor on Thursday is poised to be among the most compelling of his time at the helm. Investors are equally divided about the outcome, with swaps markets pricing a 50 per cent chance of a cut in rates to 0.5 per cent.
Mr Carney and some of his colleagues on the Monetary Policy Committee talked up the case for lower rates in early January. A flurry of weak economic data showed the economy took a turn for the worse at the end of 2019 as the uncertainty surrounding the general election held back activity.
But signs of a post-election rebound have muddied the picture. Last Friday’s purchasing managers data showed unexpectedly strong growth in business activity in January, meaning it’s pretty much wait and see time.
It is much clearer what to expect from this Wednesday’s decision following the Fed meeting. Chairman Jay Powell made it clear the central bank was firmly on pause when it last met.
This will leave investors to seek out any clues from this meeting as to what may compel the Fed to change its stance and when.
Markets Questions has more on the BoE and Fed meetings
Turkey’s central bank holds an inflation report meeting on Thursday, when a policy target could be set after it cut its benchmark interest rate for the fifth consecutive time in an effort to encourage more lending and boost economic growth, despite a recent acceleration in inflation.
Ukraine is forecast to cut its benchmark rate when its monetary policymakers meet on Thursday. Kenya, Hungary, Chile, Colombia and Ghana are all expected to keep policy rates unchanged this week.
Apple leads the way for the tech groups on Tuesday. The company’s shares have soared almost a third since the iPhone maker’s last earnings, sending the company’s valuation to a record $1.4tn for a US company.
The rally leaves expectations high for first-quarter results, with analysts projecting that slightly lower sales for the iPhone, iPad, Mac and MacBook will be offset by faster growth in services and wearables.
The holiday period is Apple’s most important quarter by far. Apple is expected to report revenues up almost 5 per cent to $88.1bn, just shy of its record high two years ago. Meanwhile, profits are forecast to edge up to $20.1bn.
Facebook is expected to show progress in making money from new areas such as Instagram stories and commerce on Wednesday.
Investors will also focus on its latest monetisation plans for WhatsApp, its digital currency project Libra, and how it will fend off competition from Amazon in advertising and from tiny video app TikTok among younger audiences.
Also on Wednesday Boeing’s new chief executive, David Calhoun, is expected to announce several billion dollars in extra charges for the 737 Max grounding and for compensation for airlines.
Diageo, the world’s largest spirits maker, is expected to beat expectations on Thursday, benefiting from a consumer shift towards premium gin and whisky.
Investors will also look for any affects from the US tariffs on scotch whisky and champagne, which went into effect in October.
Consumer goods group Unilever reported in December that its sales growth would fall short of its target, due to a slowdown in India and west Africa. On Thursday investors will be on the watch for any new long-term targets.
Alibaba, Pfizer, McDonald’s, Microsoft, Tesla, General Electric, ExxonMobil Shell, Unilever, BT, Hargreaves Lansdown, Deutsche Bank and Santander are among the other big names reporting this week.
In the US gross domestic product figures on Thursday are expected to show the economy expanded at an annualised 2.1 per cent in the fourth quarter, weighed down by softer consumer spending and restrained business activity.
Other key US data during the week include the durable goods report that could reflect the impact of Boeing’s crisis, a fresh snapshot on the housing market, which has regained some momentum, and updates on the health of the US consumer.
There are plenty of other growth figures this week. In the Americas Mexico releases GDP figures on Thursday and Canada on Friday.
Eurozone GDP figures on Friday are forecast to show another quarter of growth, which will be buoyed slightly by Germany’s expected quarterly growth of 0.2 per cent. There are also GDP figures from Italy, France, Spain, Austria and Belgium.
● Gavyn Davies: Signs of a global recovery in manufacturing are starting to show
China is due to release a PMI report for January on Friday.
To round the week off, India will present its budget for the next financial year amid deepening economic gloom. GDP growth has been falling steadily and was just 4.5 per cent of GDP in the third quarter of 2019.
New Delhi is likely to overshoot this year’s fiscal deficit target, raising doubts about how much space it has for additional stimulus.