Three of the biggest central banks — the Federal Reserve, Bank of England and Bank of Japan — will be in action this week.
No changes in course are expected from any of them, but Brexit, the Fed’s new strategy on inflation and falling tech stocks will be on investors’ minds as they look for clues as to what to expect next.
Covid-19 infections continue to rise in some parts of the world, partially due to more testing, but also as a consequence of the gradual reopening of borders and economic activities. Several countries will introduce new restrictions, including England where there will be a ban on social gatherings of more than six people.
On the corporate side a bumper week of IPOs is expected, Japan’s SoftBank is expected to announce it will sell off the UK’s Arm Holdings to US chip company Nvidia for more than $40bn, while BP is due to unveil its plans to shift away from oil and gas on Monday and Apple’s September product launch will be closely watched on Tuesday.
Pay will be in focus at Ryanair’s annual general meeting and UK retailer New Look is set for another clash with its landlords on Tuesday.
Boris Johnson will be grilled on the UK government’s response to coronavirus when he appears before the House of Commons liaison committee on Wednesday.
Brexit remains in the news, with the UK’s internal market bill being debated in the House of Commons this week. Brussels has warned the bill has “seriously damaged trust between the EU and the UK” and the European Commission has threatened legal action unless controversial clauses are withdrawn.
Ursula von der Leyen, European Commission president, will give her first State of European Union address before the European Parliament on Tuesday.
European and Chinese leaders meet virtually on Monday to negotiate an investment treaty that has been six years in the making and has now reached a “critical stage”.
Japan’s ruling Liberal Democratic party will vote on Monday on who succeeds Shinzo Abe as leader, with the winner — widely expected to be chief cabinet secretary Yoshihide Suga — almost certain to become Japan’s next prime minister.
Belarus’s embattled president Alexander Lukashenko will meet his Russian counterpart Vladimir Putin on Monday to shore up Moscow’s support for his crackdown on protesters.
Central banks
The Federal Reserve’s two-day meeting — the first since the Fed announced it would change strategy and tolerate higher inflation — concludes on Wednesday.
Analysts have concerns that the past week’s stock market volatility — when the Nasdaq fell by as much as 10 per cent from its high and rocked other indices — could herald the start of a larger sell-off that will throw the market off its course after a six-month rally.
The market is already waiting on fiscal aid package and the US presidential election looms. As such, investors will look for signs of any extra steps the central bank will take to support growth, half a year since the economy locked down to contain the coronavirus. However policymakers are not expected to change their guidance on how long interest rates will stay near zero.
The Bank of England meets on Thursday, with Brexit back on the radar after the UK government revealed legislation that would override key parts of its EU exit agreement, risking the collapse of trade negotiations with Brussels.
Analysts don’t expect any immediate action from the Monetary Policy Committee to address the heightened Brexit risks, but investors will be watching carefully for clues on what policymakers will do next.
Brexit uncertainties have also brought forward the expected timing of a cut in interest rates from the current record low of 0.1 per cent.
A move to zero by February has now been fully priced into interest rate futures contracts, with a growing chance of a cut into negative territory later in 2021.
At last month’s meeting, BoE governor Andrew Bailey kept his cards close to his chest regarding a cut, only saying that negative rates remained in the central bank’s “toolbox”.
Further reading
The Bank of Japan is expected to keep rates on hold on Wednesday. A slightly more upbeat economic view is expected to emerge from the meeting, albeit with Covid risks remaining.
A rate cut is possible when South Africa meets on Thursday after the economy shrank more than expected in the second quarter.
Poland is expected to keep interest rates unchanged when its central bank meets on Tuesday and Russia may well end its easing cycle when policymakers meet on Friday.
Brazil is likely to end its easing cycle on Wednesday.
Companies news and earnings
It will be a busy week for companies, if not earnings results.
Two of the largest US software listings in history will lead the biggest week for initial public offerings since Uber’s flotation last year, as companies cash in on the market’s hunger for technology stocks.
A dozen IPOs are set to raise $6.8bn, with half of the proceeds coming from three California tech listings, according to Refinitiv, a data provider. Snowflake, the cloud software business, will raise $2.2bn, and Unity, a video game software company, will raise $950m.
Sumo Logic, another data software platform, will raise $281m. The projected totals are based on the shares’ pricing at the midpoint of the ranges marketed to investors.
Snowflake’s IPO will be the largest ever US software offering, eclipsing the 2007 listing of VMware and underlining the rising fortunes of enterprise software services, according to data provided by Renaissance Capital, a fund manager of IPO exchange traded funds. Unity would be the third-largest.
SoftBank is set to sell the UK’s Arm Holdings to US chip company Nvidia for more than $40bn, just four years after its founder Masayoshi Son bought the chip designer and said it would be the linchpin for the future of the Japanese technology group. The deal could be announced as soon as Monday.
BP holds a three-day virtual investor event where it will provide details on its plans to shift away from oil and gas to renewable energy and power markets.
Further reading
Apple’s flagship September event takes place on Tuesday and for the first time in almost a decade it will be missing the company’s most famous and profitable product, the iPhone. The launch of the much-anticipated 5G iPhone has been delayed to October due to coronavirus-related supply chain disruption.
Instead the “Time Flies” event will showcase Apple’s accessories business and other hardware, including the sixth iteration of the Apple Watch, a new iPad Air — and possibly over-the-ear headphones called AirPods Studio and a lost-items tracker reportedly called AirTags.
Ryanair is poised for a clash with investors over executive pay on Thursday at its annual general meeting. The low-cost airline has been criticised for paying a €450,000 bonus to chief executive Michael O’Leary, despite furloughing staff and taking government support for the damage caused by the pandemic to the travel industry.
New Look is set for another clash with its landlords on Tuesday as it prepares to ask for further big cuts in rents with a warning that it could go bust without them.
The fashion retailer, which has almost 500 stores and employs more than 12,000 people, is proposing its second company voluntary arrangement in as many years as it contends with a hit to sales from coronavirus.
But property owners are aggrieved at the terms of its proposal — which they say goes well beyond the normal remit of the controversial insolvency process — and fear it will set an unwelcome precedent.
For the earnings reports, parcel delivery company FedEx will have a first-quarter update on Tuesday.
Grocery-delivery service Ocado and fast-fashion retailer H&M issue trading updates on Tuesday, while retailers John Lewis & Partners and Next publish first-half year results on Thursday.
Economic data
The UK has labour market data out on Tuesday, when unemployment rates will be watched closely to see if they increase for the first time since the start of the pandemic.
Retail figures are due from China on Tuesday, the US on Wednesday and the UK and Canada on Friday.
The OECD will publish updated economic forecasts for the G20 countries on Wednesday.
The weekly US initial jobless claims data will closely watched as usual on Thursday.
China has industrial production, investment, retail and unemployment data out on Tuesday that is expected to show the supply-led recovery is maintaining momentum.
