It will be a busy week in US politics. The starting gun on the 2020 race for the White House is fired on Monday with the Iowa caucuses, the first big voting event of the Democratic presidential primary process.
For the Republicans, President Donald Trump cleared a decisive hurdle on the road to acquittal in his impeachment trial last Friday as Senate Republicans blocked the testimony of key witnesses, setting the stage for Mr Trump to be formally acquitted in a final vote this Wednesday, lifting the cloud that has hung over his presidency.
This is likely to make the president’s State of the Union address on Tuesday a very upbeat affair, where he is expected, among many other things, to celebrate the strengths of the US economy while denouncing the Democrats’ attempt to remove him from office.
It will also be a historic week for the UK, the first in 47 years that it has not been part of the EU. The prime minister Boris Johnson is expected to set out his vision for future relations with the EU on Monday.
Ireland, which became so central to the UK’s negotiations to leave the bloc, goes to the polls on Saturday, when Leo Varadkar battles to secure another term as prime minister.
The coronavirus will continue to be felt around the globe, reaching into politics, central bank decisions, corporate earnings and the week’s economic data.
Apple shut all 42 of its retail stores in China over the weekend and similar disruption is taking place across the country, freezing parts of the tech supply chain and generating uncertainty. Apple also issued “wider-than-usual” revenue guidance for global sales to account for “uncertainty related to the recently unfolding public health situation in China”.
Australia’s China-dependent economy, and its mining stocks in particular, have felt the pressure, and will form part of the backdrop when the country’s central bank sets rates on Tuesday.
The outbreak will also feature in the week’s corporate earnings reports from Japan, including Honda, as well as carmakers General Motors, Ford and Fiat Chrysler.
For the tech sector, fourth-quarter results from Google parent Alphabet on Monday are expected to reveal that last year’s shorter US holiday shopping period and foreign currency headwinds did little damage to growth.
The US bookends the working week with some key data points. It has manufacturing numbers out on Monday and non-farm payrolls on Friday. Hong Kong’s fourth-quarter growth figures will also be of interest after months of protests.
The Catalan independence question will feature again in Spain. On Monday a Belgian court will decide whether former Catalan leader Carles Puigdemont should be sent to Spain to face trial over his role in Catalonia’s 2017 failed independence bid.
Then on Thursday Pedro Sánchez, Spain’s prime minister, is due to meet Quim Torra, Catalan’s separatist leader, in Barcelona.
In South Africa, the long-delayed trial of former president Jacob Zuma is due to start in Pietermaritzburg on Tuesday. South Africa’s high court has rejected several attempts by Mr Zuma to prevent his prosecution on corruption charges over a $2bn arms deal.
Scotland’s finance secretary Derek Mackay will publish the devolved government’s budget on Thursday. Mr Mackay accused UK chancellor Sajid Javid of showing “complete disrespect” by delaying the UK Budget to March 11, a date he said would put unprecedented strain on Scottish fiscal planning.
Iowa caucuses
Iowans will meet in schools and elsewhere to register their preferred candidates for president, while satellite caucuses are being held to boost engagement.
The caucus system — in which voters realign if their top-choice candidate does not get more than 15 per cent of the vote in a given precinct — benefits candidates with high favourability ratings who can pick up support in later voting rounds. It begins a months-long process that culminates in a vote for a presidential candidate at each party’s national convention.
Bernie Sanders is surging in the polls. In addition to leading Joe Biden in some national polls, he is running ahead of the former vice-president in both Iowa and New Hampshire, the next state in the primary calendar.
Republican primaries also start on Monday, though some states have cancelled primaries to dissuade challengers to Mr Trump.
Background reading
State of the Union
Mr Trump will have a chance to talk up the strong state of the US economy and his progress on key issues such as immigration in a nationally televised speech that is expected to serve as the unofficial start of his 2020 re-election bid. Mr Trump is also expected to address the impeachment effort as he speaks directly to the lawmakers who tried to remove him from office.
The setting promises to be slightly awkward as Mr Trump will deliver his speech with House speaker Nancy Pelosi seated behind him, having impeached the president in the House in December.
Brexit
Michel Barnier, the European Commission’s chief negotiator, gives a news conference on Monday on the draft negotiating directives for the future relationship with the UK.
UK prime minister Boris Johnson is expected to deliver a significant speech on the same day that will set out his vision for future relations with the EU. But his hard-headed approach is likely to clash with the mandate set out by the bloc.
The UK now enters a twilight period during which it will continue to apply and be bound by all EU laws but will be ejected from the EU’s political institutions: no more MEPs, no more British seat at the EU leaders’ table, no more UK voice on the boards of the union’s myriad technical agencies.
Sterling’s performance will also be under scrutiny this week, having spent the past three and a half years being buffeted by the politics of the UK’s departure from the EU. Some investors expect the currency to gain as greater certainty boosts confidence and economic growth. Market Questions has more on this.
Background reading
Ireland election
As Ireland heads to the polls on Saturday, Leo Varadkar is battling to secure another term as prime minister.
Early polls suggest Micheál Martin’s centrist Fianna Fáil has edged into a modest lead over Mr Varadkar.
A lack of affordable housing and hospital overcrowding have piled pressure on Mr Varadkar’s centre-right Fine Gael party, even though he won plaudits for a Brexit deal that will keep the land border with Northern Ireland open.
Either of the two biggest parties will probably need support from smaller groups to form a government but each has ruled out working with Sinn Féin, the third-largest party.
Earnings
Plenty of earnings action to come this week. In Japan, reports from Panasonic, Sony and Toyota will be closely watched to see how companies are preparing for the various risk scenarios arising from the spread of coronavirus.
Honda, which also reports this week, has extended a lunar new year holiday shutdown at two motorcycle factories in China. It remains unclear when it will be able to resume operations at its three other plants in Wuhan.
Investors will also be on the lookout for coronavirus strategies when General Motors, Ford and Fiat Chrysler report this week.
Google’s parent Alphabet, which joined the $1tn club this year, reports on Monday when Sundar Pichai will oversee his first Alphabet report since taking over as chief executive. Wall Street expects revenue to hit $38.4bn, up 20.5 per cent from the year before and only a percentage point lower than the preceding quarter. The newer cloud computing, hardware and Play store businesses are forecast to contribute revenue of $8.5bn.
BP reports full-year results on Tuesday, Bob Dudley’s last day as chief executive after a 10-year tenure. Investor hopes are unlikely to be high, especially after rival Shell reported a 50 per cent drop in fourth-quarter profits last week. Bernard Looney, a polished oilman, takes over with an ambitious plan to reshape the company as it faces growing pressure over climate change.
Ralph Lauren, Twitter, Qualcomm, Estée Lauder and News Corp are among the others scheduled to provide quarterly updates in the US, while ones to watch in the UK include GlaxoSmithKline, Vodafone, Barratt and Royal Mail.
Central Banks
The Reserve Bank of Australia meets on Tuesday to decide whether a cut in interest rates is warranted. The country’s markets are under pressure from the coronavirus, while the nation continues to be shaken by bushfires of unprecedented severity that have squeezed insurance, dairy and travel stocks.
The economy is, however, in decent shape, with the jobless rate dipping to a nine-month low of 5.1 per cent in December. Analysts are therefore not convinced that the central bank will take any action.
Brazil’s central bank meets on Wednesday, when it is forecast to cut the key Selic rate by 25 basis points, taking it to a record low of 4.25 per cent.
India, which released its budget over the weekend, is expected to keep its repurchase rate on hold when it meets on Thursday, while it will be a close call on whether or not Russia cuts rates again on Friday.
Rates are also likely to stay the same following central bank meetings in Thailand, Poland, the Czech Republic and Romania.
Economic data
Two US data points on Friday will help investors gauge the health of the world’s largest economy. The non-farm payroll numbers are expected to show 150,000 jobs were created in January, an increase from the 145,000 added in December, and the unemployment rate is set to hold firm at 3.5 per cent, according to a Bloomberg poll of economists.
Earlier in the week investors will have had their first glimpse at the health of US manufacturing this year after a widely watched measure for the sector dipped in December to its lowest level since June 2009.
The Institute for Supply Management will on Monday release its January data showing manufacturing purchasing behaviour. Economists surveyed by Bloomberg expect the index to hit 48.5 points, a modest increase from December’s figure of 47.2, but below the 50-point level that separates contraction from expansion.
Hong Kong’s fourth-quarter gross domestic product figures on Monday are likely to show a slowdown. Tourism, retail sales, business confidence and trade flows have all felt the knock from months of protests.
Moody’s has also cut Hong Kong’s credit rating, saying the government’s “slow” and ineffective response to months of protests has prompted it to reassess the territory’s institutional strengths and governance.
Industrial production numbers are also expected from Germany and France, two of the EU’s biggest economies.
Background reading
Turkey has inflation data out on Monday that are expected to show a slight rise in the annual rate.
Source: Economy - ft.com
