LONDON: Following are five big themes likely to dominate thinking of investors and traders in the coming week.
1. INAUGURATION DAY
Donald Trump will be inaugurated as the 45th president of the US on Friday, and his first address to the nation as president will be scrutinized closely by financial markets around the world. Nobody expects him to announce specific policy details, but investors will want to hear the tone of his speech, see how he conducts himself and what clues he offers up about the direction of his presidency and administration. The evidence so far is mixed. He continues to slam his political opponents, sections of the media and even US intelligence agencies on Twitter and triggers sharp moves in stock prices of companies specifically mentioned in his tweets. His first news conference as president-elect was notable for its lack of policy content and singling out certain journalists for sharp criticism. Stock markets did not like what they saw, and many “Trump trades” fizzled — stocks wobbled, Treasury yields and the dollar fell.
2. NOT SO ECBEASY
A surprisingly strong growth spurt in the eurozone and rebounding inflation expectations, have raised one big question for investors ahead of Thursday’s European Central Bank (ECB) meeting: Does the bloc still need its trillions of euros of monetary stimulus? Minutes of the ECB’s meeting in December, at which the bank extended its bond-buying program until the end of 2017, showed discord among policymakers. German Chancellor Wolfgang Schaeuble has openly called for an unwinding of easing this year, saying 2017 forecasts for 3 percent inflation in Germany would exacerbate concerns about current low rates.
3. IN THROUGH THE OUT DOOR
British Prime Minister Theresa May will give a major speech on Tuesday outlining the government’s plans for the country’s departure from the EU. She has spoken a lot about getting the “best deal” for Britain, securing a “red, white and blue” Brexit and “Brexit means Brexit,” but that is wearing thin. The longer she goes without putting meat on these bones, the more markets are leaning toward the view it will be a “hard Brexit,” where immigration controls take precedence over access to the single market. Indeed, currency traders say May’s recent remarks suggest this is the direction of travel and are to blame for sterling slumping to its lowest level since October toward $1.20. The weaker currency has boosted UK stocks and the FTSE has risen a record 14 consecutive days, 12 of them record closing highs. Can May halt those trends on Tuesday?
4. EARNING THEIR KEEP
After a slew of British retail results beat forecasts, retail watch turns to Europe in the coming week, with Swedish fashion giant H&M and French supermarket chain Casino reporting sales on Monday, followed by an update from Dutch retailer Ahold Delhaize. Luxury brands Burberry and Remy Cointreau, which reports sales, will hope to replicate Richemont’s performance which saw its shares reach 18-month highs after its profits beat expectations. The weaker pound and euro, which tourists are flocking to take advantage of, should be good for European and British luxury brands, but Burberry remains one of the most shorted UK stocks. Results from retailers such as M&S show they continue to grapple with the combined pressures of maintaining bricks-and-mortar shops and developing an online presence and luxury is no exception to this.
5. CHILLING IN DAVOS
The event that politicians, CEOs and Hollywood actors wait for all year is almost here — the World Economic Forum, the four-day shindig for global elites held in the Swiss Alps town of Davos, will kick off on Jan. 17 amid debate over the looming Trump presidency and public anger with globalization. While this year’s WEF mantra is “Responsive and Responsible Leadership,” Germany’s Angela Merkel has opted to skip the event for the second year in a row. That will likely disappoint organizers as her reputation as a principled leader fits well with the conference theme. The star attraction will be China’s Xi Jinping, the first Chinese president to attend. He is to present Beijing’s position on steering “economic globalization toward greater inclusiveness.” That sounds apt given the surge in public hostility toward immigration and globalization alongside Trump’s trade threats against China and Mexico. Much discussion in Davos will be around these issues as well as how to tackle income inequality.
1. INAUGURATION DAY
Donald Trump will be inaugurated as the 45th president of the US on Friday, and his first address to the nation as president will be scrutinized closely by financial markets around the world. Nobody expects him to announce specific policy details, but investors will want to hear the tone of his speech, see how he conducts himself and what clues he offers up about the direction of his presidency and administration. The evidence so far is mixed. He continues to slam his political opponents, sections of the media and even US intelligence agencies on Twitter and triggers sharp moves in stock prices of companies specifically mentioned in his tweets. His first news conference as president-elect was notable for its lack of policy content and singling out certain journalists for sharp criticism. Stock markets did not like what they saw, and many “Trump trades” fizzled — stocks wobbled, Treasury yields and the dollar fell.
2. NOT SO ECBEASY
A surprisingly strong growth spurt in the eurozone and rebounding inflation expectations, have raised one big question for investors ahead of Thursday’s European Central Bank (ECB) meeting: Does the bloc still need its trillions of euros of monetary stimulus? Minutes of the ECB’s meeting in December, at which the bank extended its bond-buying program until the end of 2017, showed discord among policymakers. German Chancellor Wolfgang Schaeuble has openly called for an unwinding of easing this year, saying 2017 forecasts for 3 percent inflation in Germany would exacerbate concerns about current low rates.
3. IN THROUGH THE OUT DOOR
British Prime Minister Theresa May will give a major speech on Tuesday outlining the government’s plans for the country’s departure from the EU. She has spoken a lot about getting the “best deal” for Britain, securing a “red, white and blue” Brexit and “Brexit means Brexit,” but that is wearing thin. The longer she goes without putting meat on these bones, the more markets are leaning toward the view it will be a “hard Brexit,” where immigration controls take precedence over access to the single market. Indeed, currency traders say May’s recent remarks suggest this is the direction of travel and are to blame for sterling slumping to its lowest level since October toward $1.20. The weaker currency has boosted UK stocks and the FTSE has risen a record 14 consecutive days, 12 of them record closing highs. Can May halt those trends on Tuesday?
4. EARNING THEIR KEEP
After a slew of British retail results beat forecasts, retail watch turns to Europe in the coming week, with Swedish fashion giant H&M and French supermarket chain Casino reporting sales on Monday, followed by an update from Dutch retailer Ahold Delhaize. Luxury brands Burberry and Remy Cointreau, which reports sales, will hope to replicate Richemont’s performance which saw its shares reach 18-month highs after its profits beat expectations. The weaker pound and euro, which tourists are flocking to take advantage of, should be good for European and British luxury brands, but Burberry remains one of the most shorted UK stocks. Results from retailers such as M&S show they continue to grapple with the combined pressures of maintaining bricks-and-mortar shops and developing an online presence and luxury is no exception to this.
5. CHILLING IN DAVOS
The event that politicians, CEOs and Hollywood actors wait for all year is almost here — the World Economic Forum, the four-day shindig for global elites held in the Swiss Alps town of Davos, will kick off on Jan. 17 amid debate over the looming Trump presidency and public anger with globalization. While this year’s WEF mantra is “Responsive and Responsible Leadership,” Germany’s Angela Merkel has opted to skip the event for the second year in a row. That will likely disappoint organizers as her reputation as a principled leader fits well with the conference theme. The star attraction will be China’s Xi Jinping, the first Chinese president to attend. He is to present Beijing’s position on steering “economic globalization toward greater inclusiveness.” That sounds apt given the surge in public hostility toward immigration and globalization alongside Trump’s trade threats against China and Mexico. Much discussion in Davos will be around these issues as well as how to tackle income inequality.
