Aurelia Butler

Hello and welcome to the working week.July 2022 has become a month for unexpected plebiscites. First there is the mind-boggling: the UK’s ruling Conservative party allowing a vote of confidence in itself on Monday. This “sideshow” as the FT’s parliamentary team labelled it last week, certain to be won by the ruling party, is best seen as an effort to instil unity among Tory MPs after the tumultuous implosion of Boris Johnson’s premiership.Which brings us on to “Super Monday”, a clutch of hustings and another vote to further whittle down the pack of Tory MP hopefuls seeking to be the new leader — and hence prime minister — after this weekend’s television debates. You can keep track of events via this FT page. Once they get to the final pair, expected on Wednesday before the summer parliamentary recess, the party’s national membership will get the final vote, enabling a new leader to be in place by September 5. Prepare for a summer of glad handing and media appearances, and no doubt some leaks and smear stories, from the two rival camps in what has already been a highly competitive contest.In Sri Lanka, parliamentarians will on Wednesday elect a new president to replace Gotabaya Rajapaksa, who fled the country after protesters stormed his palace before resigning last week. Whether this will quell the anger over food shortages and rampant inflation is yet to be seen.There is one election that was expected this week. India’s parliament will decide the country’s new president. The winner — due to be announced on Wednesday — is expected to be veteran politician Draupadi Murmu since she enjoys the backing of prime minister Narendra Modi’s Bharatiya Janata party. But maybe this will be an another unexpected election story.Back in the UK, and back to the regular diary of July events, Nadhim Zahawi will be addressing City dignitaries with the annual chancellor’s Mansion House speech. Zahawi has only been chancellor for a matter of days and might not long be in his role once his party’s new leader is decided, but he is expected to make headlines by unveiling a loosening of City regulations to make it easier and faster for companies to raise money in the Square Mile.Talking of things expected, the British summer of discontent hangs in the air like the country’s sweltering temperatures. Barristers, postal managers and brewery workers are all planning walkouts this week.Finally, there will be the return of an event that has not happened “in person” since the 2020 pandemic lockdowns: the Farnborough Airshow. Unusually, for an international gathering of aerospace executives, organisers decided to advertise the event’s return on the side of a bus. Hopefully, this does not mean that the air displays will instead be that very British of transport solutions, the replacement bus service.Thanks again for your comments and suggestions. Please keep them coming to [email protected] or hit reply to this email.Economic dataThe two i’s — inflation and interest rates — will be back in the public eye, with attention focused on the meeting of the European Central Bank’s monetary policy committee.The week will end with another setting of international comparators with the purchasing managers’ index data reports.CompaniesWe are in the thick of the current earnings season with the rest of the big US banking pack reporting plus a smorgasbord of tech, media, automotive and healthcare companies.Also, on Monday, shares in Haleon are scheduled to start trading on the London Stock Exchange, completing the consumer healthcare companies demerger from GSK, with the parent company’s blessing. Haleon, whose brands will include Sensodyne toothpaste and Advil and Panadol painkillers, is expected to seek a valuation of as much as £45bn.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayItaly, May trade balance figuresLondon-based tech start-up Nothing launches its smartphone, Phone (1)Spain, May trade balance figuresUK, Rightmove monthly house price index, plus Michael Saunders, external member of the Bank of England’s monetary policy committee, to speak at the Resolution Foundation.US, housing market indexResults: Bank of America Q2, Charles Schwab Q2, Goldman Sachs Q2, IBM Q2, Nordea Bank H1 TuesdayEU, final June inflation figures plus European Central Bank publishes its Q2 eurozone bank lending surveyUK, June labour market statisticsResults: BHP Billiton operational review, Halliburton Q2, Hasbro Q2, Johnson & Johnson Q2, Lockheed Martin Q2, Netflix Q2, Novartis H1, Swedbank Q2, Telenor Q2, Volvo Cars Q2WednesdayCanada, June consumer price index (CPI) dataChina, central bank’s policy rate decisionEU, flash consumer confidence figuresGermany, June producer price index (PPI) dataUK, June CPI and PPI dataResults: Akzo Nobel Q2, Alcoa Q2, ASML Q2, Kone H1, Tesla Q2ThursdayEU, ECB monetary policy committee makes interest rate decisionJapan, monetary policy committee decision on interest rates and trade balance figuresSouth Africa, monetary policy committee meeting to decide repo rateUK, June public sector finances data, plus Bank of England chief economist Huw Pill gives introductory remarks at the joint Bank of England, King’s College London and the European Central Bank conference ‘Advanced analytics: new methods and applications for macroeconomic policy’.Results: ABB Q2, American Airlines Q2, Anglo American Q2 production report, AT&T Q2, Capital One Q2, Close Brothers Q4 trading update, Electrolux Q2, Getlink H1, Mattel Q2, Nokia Q2, Ocado H1, Philip Morris Q2, Publicis Groupe H1, Qinetiq Q1 trading update, SAP H1, Skanska H1, Snap Q1, Union Pacific Q2FridayCanada, monthly retail trade figuresEU, ECB quarterly survey of economic forecastersEurozone, France, Germany, Japan, UK, US: IHS Markit/S&P Global flash composite purchasing managers’ index (PMI) data Japan, June CPI dataRussia, Bank of Russia rate review meetingUK, June retail sales figures and GfK consumer confidence surveyResults: American Express Q2, Beazley H1, Danske Bank Q2, Moneysupermarket H1, Schindler Group H1, Schlumberger Q2, Verizon Q2World eventsFinally, here is a rundown of other events and milestones this week. MondayAustria, the Salzburg Festival beginsIndia, indirect election of the president by elected members of both houses of parliament, the elected members of the 29 states and the elected members of the Union Territories of Delhi and PuducherryUK, widespread industrial action over pay continues. Criminal barristers in England and Wales will strike for a fifth week in a row over legal aid funding. Hundreds of members of the Unite union employed as bus drivers and engineers based at Stagecoach’s Gillmoss depot will also walk out. Separately, 2,400 Unite members within Royal Mail’s management will hold two rounds of industrial action in a dispute over job cuts and pay, working to rule today and tomorrow, followed by strike action Wednesday to Friday.UK, the Farnborough Airshow, the annual gathering for the global aerospace sector, returning to the UK for the first time in four yearsUK, Swan Upping, the annual census of this aquatic bird population on certain stretches of the river Thames.UK, the long-running legal battle between Venezuelan president Nicolás Maduro and opposition leader Juan Guaidó over control of more than $1.9bn of gold held by the Bank of England will resume at the High Court in London. The hearing will centre around whether the court will recognise judgments of Venezuela’s Supreme Tribunal of Justice.UK, chancellor Nadhim Zahawi and Bank of England governor Andrew Bailey speak at the Mansion House City Banquet for financial and professional services executives. Also, the results of a ballot of Communication Workers Union workers at the Royal Mail over pay are to be announced and hundreds of employees at the Budweiser Brewing Group’s Lancashire site walk out for a second time in four days with a 12-hour stoppage.WednesdayColombia, national holiday to celebrate independenceSri Lanka, election of a new president after Gotabaya Rajapaksa agreed to step down, along with prime minister Ranil Wickremesinghe, after protesters angry about price rises and food shortages stormed the residences of both men last week.UK, final round of voting is expected for the Conservative party leadership electionUS, Space Exploration Day commemorates the date that astronauts Neil Armstrong and Buzz Aldrin landed on the moon in 1969. It comes a day before the 11th anniversary of Nasa’s final successful space shuttle mission STS-135, when Atlantis landed at Kennedy Space Center after 30 years of space shuttle flights.ThursdayBelgium, National Day public holidayFridayNetherlands, the World Court is set to rule on whether it has jurisdiction to hear a complaint brought by The Gambia against Myanmar for alleged genocide against its Rohingya Muslim minority.SaturdayEgypt, National Day public holidayUS, annual World Boardgaming Championships begins at the Seven Springs Mountain Resort, PennsylvaniaSundayBrazil, president Jair Bolsonaro launches his presidential candidacy for the Liberal Party ahead of October electionsCanada, Pope Francis begins visit to the countryFrance, the Tour de France finishes on the Champs-Élysées in ParisSpain, the Feast of Saint James the Apostle in Santiago de Compostela More

Will the ECB shed light on its ‘anti-fragmentation’ tool?The European Central Bank has widely signalled its plans to raise interest rates this month for the first time in more than a decade, as it battles record eurozone inflation that has triggered a worsening cost of living crisis.Economists are expecting a 0.25 percentage point increase in eurozone borrowing costs at the conclusion of Thursday’s monetary policy meeting, taking the ECB’s main deposit rate to minus 0.25 per cent. The central bank has also indicated that a larger rise may be necessary in September, unless the inflation picture drastically improves. Eurozone consumer price growth hit 8.6 per cent in the year to June. But rate setters elsewhere have moved more aggressively in recent weeks, with the US Federal Reserve, the world’s most influential central bank, lifting borrowing costs by an extra large 0.75 percentage points in June, the most since 1994.A more vigorous stance from the Fed has also lent support to the dollar, pushing the euro down to parity with the US currency this month for the first time in two decades. The challenge for the ECB is to turn the policy screws in the eurozone without squeezing its more heavily indebted economies such as Italy and Greece.Analysts at Goldman Sachs say that a quarter-point increase remains more likely than a half-point move — not only because the ECB governing council has strongly guided to that decision, but also because “the growth outlook has weakened and the ECB has historically not delivered hikes that were less than 70 per cent discounted”.For now, market participants will be watching closely for further clues about the ECB’s mooted “anti-fragmentation” tool, aimed at limiting divergence in borrowing costs between the bloc’s strongest and weakest countries.Frederik Ducrozet, global macro strategist at Swiss wealth manager Pictet Wealth Management, said he expected the tool to be “bold, flexible, and credible enough to prevent a sustained widening in peripheral bond spreads over the medium term”.The gap between Italian and German benchmark 10-year bond yields on Friday yawned to its widest in a month, indicating that investors were demanding a higher premium to hold riskier eurozone debt. Harriet ClarfeltHas UK inflation picked up pace?Economists expect no respite for UK inflation when June data are released on Wednesday.The headline consumer price index is forecast to have climbed to 9.3 per cent, from a 40-year high of 9.1 per cent in May, according to a Reuters poll.Rising fuel prices were a driving factor behind that further acceleration, said Ellie Henderson, economist at Investec, reflecting a further surge at the pump in June. She added that flight tickets were likely to have increased due to those higher fuel costs and strong demand after two years of restricted travel. A weak pound and the war in Ukraine were also expected to have resulted in continued price pressure on food.While the inflation outlook is dominated by energy prices, political events add uncertainty to the domestic picture as many of the frontrunners to replace current UK prime minister Boris Johnson — former chancellor Rishi Sunak aside — have promised sweeping tax cuts as part of their leadership campaign. “Such tax cuts may help stimulate the economy, but also risk creating more entrenched underlying inflation,” said Henderson.High inflation and a tight labour market may add to expectations that the Bank of England will raise interest rates by 0.5 percentage points at its next meeting on August 4. Markets are pricing in a 79 per cent probability of such an increase, marking a step up from the 0.25 percentage point increases at the BoE’s previous five meetings. Valentina RomeiWill the BoJ tighten policy at its meeting this week?Japanese consumer price index inflation has slowly crept higher to 2.5 per cent from the negative rates seen last year. But it remains well below the levels experienced elsewhere in the world.That gives the Bank of Japan ample room to maintain its ultra-loose overnight interest rate of -0.1 per cent at its two-day policy meeting on Wednesday and Thursday. And while the yen has set a series of fresh 24-year lows in recent weeks, as investors move money into markets offering higher interest rates, and now trades at close to ¥139 a dollar, the BoJ has shown little appetite for changing tack. Analysts also roundly expect the central bank to stick with its 0.25 per cent yield target for its 10-year government bond, which came under pressure recently as traders sought to test the BoJ’s commitment to its accommodative policy stance.“The BoJ will not adjust policy due to market pressure,” analysts from UBS, the Swiss bank, wrote in a note, adding that pressure on the bonds had eased as US yields had fallen. In their base scenario, analysts at Morgan Stanley MUFG do not anticipate any change to the BoJ’s yield control policy until well into next year. They do not expect the short-term policy rate to increase in 2023. William Langley More

ROME (Reuters) – Italy’s mayors, business organisations and union leaders urged Prime Minister Mario Draghi at the weekend to rethink his decision to resign, warning that the stability of the debt-laden country was at risk.Draghi tendered his resignation last week after one of the parties in his broad coalition, the 5-Star Movement, refused to back the government in a parliamentary confidence vote.President Sergio Mattarella rejected his resignation and asked him to address parliament this coming week, hoping he would find a consensus to stave off early elections at a time of international tumult and economic tension.Draghi comfortably won the confidence vote on a package of measures aimed at alleviating the high cost of living for families and firms. But he said without the full backing of all his partners, his national unity government could not continue.The populist 5-Star, riven by internal splits, says it has not withdrawn from the coalition, but has called on Draghi to give the group guarantees that he will enact its policy priorities, such as a minimum wage.”We cannot share the responsibility of government if there is no certainty over the issues that we have underlined,” 5-Star leader Giuseppe Conte said on Facebook (NASDAQ:META) late Saturday.A source in the prime minister’s office said Draghi would not bow to any “ultimatums” and remained determined to resign.But he faced pressure to change his mind amidst warnings that Italy risked losing billions of euros in European Union post-pandemic recovery funds and would struggle to contain climbing energy costs without a fully functioning government.The mayors of 110 Italian cities, including the top 10 metropolitan areas, said in an open letter they were following the turmoil with “incredulity and concern” and called for all sides to show responsibility.”We mayors, who are called upon every day to manage and resolve the problems that afflict our citizens, ask Mario Draghi to go ahead and explain to parliament the good reasons why the government must continue,” they wrote.An array of industry, farming and trade associations also released statements urging the government to carry on while the head of Italy’s largest union said stability was essential.”I am not taking any sides, but I will say that we have a government that has not lost any confidence vote,” Maurizio Landini, leader of the CGIL group, told La Repubblica daily.However overcoming growing rancour in government ranks and ploughing on regardless looked increasingly difficult, making national elections in September or October a likely prospect.Draghi took office in early 2021 tasked with guiding Italy through the COVID emergency. The legislature is due to end in early 2023 and opinion polls suggest a bloc of conservative parties will win a clear majority.Two of these parties, the League and Forza Italia, are in the coalition and the prospect of victory in an autumn ballot gives them good reason to welcome the collapse of the coalition.Both groups say they are willing to stay in a Draghi cabinet but only on condition the 5-Star is no longer in the government — a demand that Draghi has already ruled out. More