Aurelia Butler

Hello and welcome to the working week.There is likely to be much uncertainty over the next seven days as European foreign ministers line up for meetings with Moscow to try to find a solution to the Russia-Ukraine stand-off. A look back is useful to understand today’s issues. And this week is rich with commemorations.It begins with the anniversary of the Maastricht treaty, signed 30 years ago on Monday by the 12 member states of what had been the European Community. It established the EU and laid the foundations for monetary union as well as fuelling concerns among those opposed to further political union, arguably sowing the seeds of Brexit. Expect some (further) soul-searching this week.A different type of political change occurred in Iran this week in 1979, when the Islamic revolution ended the monarchy of the shah and ushered in rule by the clerics. The country’s leaders will no doubt look back on its significance, but the more pressing challenge for Tehran is economic recovery in the face of US sanctions, although progress is being made.Two other anniversaries provide some perspective on how far technology has developed.This week in 1964, The Beatles made their US television debut on The Ed Sullivan Show, setting a then-record for viewing figures still talked about today in the US media. It is also the anniversary of IBM supercomputer Deep Blue defeating Garry Kasparov at chess in 1996. Computing technology and TV have both evolved and converged in the intervening quarter of a century in ways that neither the fab four or chess grandmasters could have imagined. Will we be looking back with equal amazement at today’s developments, such as DeepMind’s AI tool, AlphaCode — and perhaps wonder what Big Tech companies such as Meta were thinking?Your answers — and other comments about The Week Ahead — to the usual address, [email protected] moving on to the economic and corporate news, here is a quick plug for an FT competition to encourage young minds with potential answers to the climate change crisis. The FT is seeking examples of how pupils, teachers and schools around the world are tackling climate change, to be featured in a Climate Change for Schools special report in March 2022. Submit your entry here by February 14.Economic dataThere has been much debate on the UK government’s claims about the strength of the pandemic recovery. FT economics editor Chris Giles penned a clear explanation, and much attention will be paid to the country’s quarterly and monthly GDP estimates, published on Friday.Elsewhere, there will be key data on US inflation and Germany’s production and trade figures. Plus rate rises are expected in Mexico and Russia, and the EU will update its economic forecasts.CompaniesWe are deep into earnings season. This week it is the turn of consumer goods companies, drugmakers and motor manufacturers.Unilever’s full-year results on Thursday will face close scrutiny after the unpopular attempt to buy GlaxoSmithKline’s consumer health division and news that activist fund Trian Partners — co-founded by Nelson Peltz — has acquired a stake. As the Hellmann’s mayonnaise maker plans a reorganisation that will scoop ice cream from the rest of its food arm, investors will want to know if it will sell either or both food divisions and how it plans to boost performance in the rest of the portfolio — as well as whether the company’s chief executive, chief financial officer and chair can all survive the current GSK debacle.Results from Coca-Cola and PepsiCo will reveal whether a resurgence in Covid-19 cases around the world knocked soda demand in the December quarter. New lockdown measures in China plagued restaurant chains McDonald’s and Starbucks, their earnings showed, while supply chain costs, including delays from Canada, continued to mount. Still, analysts expect Coca-Cola and PepsiCo to report stronger revenues compared with the same quarter in 2020.Japanese carmakers Nissan and Honda will be revealing their P&Ls this week. But investors will be watching to see whether Toyota, the world’s top car seller in 2021, can shrug off the impact of chip shortages in the coming months after its announcement in January that a supply glitch would force it to cut output for February — this Lex note provides an explanation of the consequences. In output terms, it means Toyota is unlikely to reach its production target of 9mn vehicles for the fiscal year to March.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayAsia region IHS Markit purchasing managers’ index (PMI) dataChina, Caixin composite and services PMI dataEU, European Central Bank president Christine Lagarde speaks in a hearing to the European parliament’s committee on economic and monetary affairsGermany, monthly industrial production figuresIndonesia, Q4 GDPJapan, December trade balance figuresUK, Halifax house price indexUS, monthly consumer credit figuresResults: Aurubis Q1, BB Seguridade Participacoes Q4, Hasbro Q4, Principal Financial Q4TuesdayBellway trading updateFrance, December trade balance figuresItaly, retail sales dataPoland, National Bank of Poland’s monetary policy committee meetingUK, BRC-Barclaycard monthly retail sales monitor reportUS, monthly trade balance figuresResults: BNP Paribas FY, BP FY, CNH Industrial FY, Harley-Davidson Q4, Iveco FY, Lyft Q4, Nissan Motor Q3, Ocado FY, Pfizer Q4, Securitas FY, SoftBank Q3, Thomson Reuters Q4, Tui Travel Q1WednesdayGermany, December trade balance figuresItaly, industrial output figuresJapan, producer price index (PPI) figuresRussia, consumer price index (CPI) figuresSweden, Riksbank holds its monetary policy meeting in StockholmUK, BoE chief economist Huw Pill speech at the Society of Professional Economists annual conference: “UK Monetary Policy outlook”.Results: ABN Amro Q4, Adyen H2, Aegon Q4, Akzo Nobel Q4, Barratt Developments H1, Dunelm H1, Equinor Q4, GlaxoSmithKline Q4, Handelsbanken FY, Honda Q3, L’Oréal FY, Maersk Group Q4, Mediobanca H1, Smurfit Kappa FY, Toyota Q3, Uber Technologies Q4, Walt Disney Company Q1, Yum Brands Q4ThursdayOrganisation of Petroleum Exporting Countries monthly oil market reportEU, European Commission publishes eurozone economic forecastsUK, Royal Institution of Chartered Surveyors monthly residential market survey plus Recruitment & Employment Confederation-KPMG monthly jobs report. Also, BoE governor Andrew Bailey gives a speech at TheCityUK Annual Dinner.US, January CPI data Results: ArcelorMittal Q4, Ashmore Group H1, AstraZeneca FY, Beazley FY, Bombardier FY, Coca-Cola Company Q4, Crédit Agricole FY, Credit Suisse FY, Deutsche Börse Q4, Kellogg Company Q4, Linde Q4, Mazda Motor Q4, PepsiCo Q4, Pernod Ricard H1, Philip Morris FY, Relx FY, Siemens Q1, Société Générale FY, Thyssenkrupp Q1, Total Q4, Twitter Q4, Unilever FY, VeriSign Q4, Western Union Q4, Zurich Insurance FYFridayBritish American Tobacco FY preliminary statementGermany, final CPI dataIndia, monthly industrial production figuresRussia, key interest rate decisionUK, Q4 and December GDP estimates plus trade balance and December industrial production dataWorld eventsFinally, here is a rundown of other events and milestones this week. MondayEU, 30th anniversary of the signing of the Maastricht treaty, the foundation of the EUUS, German chancellor Olaf Scholz is scheduled to meet the US president Joe Biden at the White HouseTuesdayUK, Church of England General Synod gathers in London. Debates likely to include the church’s attitude to same-sex relationships and challenging slavery.US, nominations for the 94th Academy Awards, the OscarsWednesdayAnniversary of The Beatles’ first appearance on The Ed Sullivan Show on this day in 1964, setting a record for US television audiencesThursdayIBM supercomputer Deep Blue defeated Garry Kasparov at chess for the first time on this date in 1996Germany, 72nd Berlin International Film Festival beginsFridayIran, Revolution Day held on the anniversary of the 1979 Islamic uprisingUK, Covid tests scrapped for double-vaccinated travellers arriving in EnglandUS, New York Fashion Week beginsSaturdayHungary, Prime Minister Viktor Orban gives annual state of the nation speechMyanmar, Union Day to mark the country gaining full independence in 1947US, former president Abraham Lincoln was born on this date in 1809SundayGermany, a special Federal Convention (Bundesversammlung), whose membership is equally split between Bundestag members selected by the 16 federal state parliaments, votes to decide the country’s next presidentUS, 56th Super Bowl, the climax of the American football season, will be played at the SoFi Stadium in Inglewood, California More

Klaas Knot has become the first member of the European Central Bank governing council to say publicly it should raise interest rates this year, warning that eurozone inflation will stay at 4 per cent for most of this year.The Dutch central bank governor called for the ECB to end its net bond purchases “as soon as possible” in preparation for raising interest rates in the fourth quarter, which would be the first time it has done so in over a decade. His comments, in an interview with Dutch television programme Buitenhof, came only days after ECB president Christine Lagarde refused to rule out raising interest rates this year, signalling that next month it could accelerate plans to end net bond purchases.Until last week, the ECB had dismissed the chances of a rate rise this year as “highly unlikely”.In response to Lagarde’s comments, markets last week shifted to pricing in half a percentage point of rate increases by the end of this year, Bloomberg data on trading in money markets show. Such moves would lift the central bank’s deposit rate to zero for the first time since 2014. “Personally I expect our first rate increase to take place around the fourth quarter of this year,” Knot said. “Normally we would raise rates by a quarter percentage point, I have no reason to expect we would take a different step.”

The Dutch central bank governor, one of the more conservative “hawks” among the 25 ECB governing council members, said he thought a second rate rise would follow early next year.“At the moment we still have our foot on the accelerator,” said Knot, referring to the ECB’s bond-buying which has amassed €2.2tn of assets since the pandemic hit almost two year ago. “We have to end that as soon as possible. That’s just adding fuel to the fire.”In December, the ECB agreed a “step-by-step” reduction of its asset purchases down to €20bn a month from October but did not set an end date.Since then, eurozone inflation has defied expectations that it would fade this year by climbing to a fresh record of 5.1 per cent in January.In response, Lagarde said there had been “unanimous concern around the governing council table about the impact of inflation”. Higher than expected inflation has also led the US Federal Reserve and the Bank of England to shift to more “hawkish” policy stances. The BoE raised its main policy rate to 0.5 per cent on Thursday, less than two months after increasing it to 0.25 per cent, while investors are pricing in five rate rises by the Fed this year.Lagarde said last week the ECB would stick to the “sequence” it had already agreed of only raising rates after it stopped net bond purchases, adding that the council would be “gradual in whatever we do” and “not be rushed into anything”. Knot seemed to agree, saying: “Before you step on the brake pedal, you must first take your foot off the accelerator.”Since last week’s ECB meeting signalled a likely “hawkish” shift in policy, analysts have brought forward the timing of when they expect it to start raising rates, with many predicting one or two such moves by December. More

AMSTERDAM (Reuters) – Klaas Knot, the Dutch central bank president and a member of the European Central Bank’s Governing Council, said on Sunday he expects the ECB to raise interest rates in the fourth quarter of this year.In an interview on Dutch television programme Buitenhof, Knot, known as one of the more hawkish members of the ECB’s board, said he supported winding down the euro zone central bank’s asset purchasing programme as quickly as possible.”Personally I expect our first rate increase to take place around the fourth quarter of this year…. Normally we would raise rates by a quarter percentage point, I have no reason to expect we would take a different step.” He added that he thought a second hike would likely follow in early 2023.Knot’s remarks come after ECB President Christine Lagarde https://www.reuters.com/business/ecb-seen-hold-may-acknowledge-inflation-risks-2022-02-02 on Thursday opened the door to an interest rate increase in 2022 but said it was “unlikely”.The bank must first end its asset purchasing programmes, currently set to be wound down in steps to 20 billion euros ($22.89 billion) per month by the fourth quarter. However, since Thursday bond markets have begun pricing in around 40 basis points of rate hikes by December.”The first two rate increases will follow each other quite quickly, as they will take us out of negative territory,” Knot said.”After that, if we don’t see a wage-price spiral and inflation expectations remain anchored around our 2% target there is not much reason for us to increase rates significantly and quickly.”Knot said that inflation in the euro zone, at 5.1% in January, was too high, and will probably last into 2023 before receding – assuming there is no further unexpected increase in energy prices.($1 = 0.8736 euros) More

President Volodymyr Zelenskiy said a week ago Ukraine was not a sinking Titanic and accused Washington and media of fuelling panic that weighed on the economy when there were “no tanks in the streets”.”Today, Ukraine has a strong army, unprecedented international support and Ukrainians’ faith in their country,” Kuleba said in a tweet.”The enemy should be afraid of us, not us of them.”A day earlier two U.S. officials said that Russia may be ready for a full-scale invasion of Ukraine by mid-February as it had in place about 70% of the combat power it believed it would need and was sending more battalion tactical groups to the border.White House national security adviser Jake Sullivan said on Sunday Russia could take military action “any day now” but could still opt for diplomacy.”Different capitals have different scenarios, but Ukraine is ready for any development,” Kuleba said.EU Economic Commissioner Paolo Gentiloni said on Sunday the focus should be on diplomacy.”We must help the NATO countries bordering Russia and strengthen them also from a military point of view,” he said on Italian national broadcaster RAI.”We must also be prepared for economic reactions and sanctions if there is a deterioration.”Russia has massed more than 100,000 troops near the Ukrainian borders, sparkling fears of a planned assault. Moscow has said it is not planning an invasion but could take unspecified military action if its security demands are not met.Those include a promise that NATO will never admit Ukraine, a demand Washington and NATO have said is unacceptable. More

JERUSALEM (Reuters) – Israel’s central bank should be prepared to raise interest rates and taper foreign exchange intervention if inflation pressures intensify further, the International Monetary Fund said on Sunday.In a statement following its annual visit, the IMF said there was room for Israel’s government to raise taxes while also advising more efficiency in state spending.Israel’s inflation rate was 2.8% in 2021, within an official 1-3% target and well below rates seen in many Western peers, but the IMF said rising services prices, a high rate of capacity utilization, and wage gains in some sectors “show incipient signs of underlying inflationary pressures”.”If underlying upward pressures become more salient, the Bank of Israel should be ready to tighten monetary policy,” the IMF said. Iva Krasteva Petrova, IMF mission chief for Israel, told reporters that since inflation is within target there is no need for monetary tightening now but that the central bank should remain vigilant. She also expressed concern over high housing prices.At the same time, the IMF said “foreign exchange purchases should taper off, allowing the shekel to be determined by market forces, without precluding future purchases should (shekel) appreciation pressures threaten to move inflation or inflation expectations below the target band”.The central bank has said it is not worried about an inflation outbreak, and that allows it patience in conducting monetary policy.The IMF praised the government’s management of the COVID-19 pandemic and its aim of lowering Israel’s debt burden over the medium term.But it warned the planned consolidation relies on spending reductions that may prove challenging given already low civil spending. “Conducting a review of public spending efficiency would be useful,” it saidThe government has scope to increase tax revenues, the IMF said, adding: “The tax system could be made more progressive and the tax base could be broadened, including by reducing pension tax exemptions and personal and corporate tax incentives for selected groups.”After 6.5% growth in 2021, the IMF expects solid economic growth in Israel in 2022, supported by consumer spending, investment and exports.It said that new COVID variants could be a threat to economic growth, while tightening of global financial conditions could jolt stock markets, lower government revenue and raise the cost of capital. More

NEW YORK (Reuters) -Wild swings in stocks and a sharp run-up in government bond yields are putting the spotlight on next week’s U.S. inflation data, as investors brace for more volatility across assets.A turbulent week in markets ended with a surge in Treasury yields to their highest level in more than two years after surprisingly strong U.S. jobs data stoked expectations of a more hawkish Federal Reserve.Robust data on inflation – which hit its highest annual level in nearly four decades in December – could further bolster the case for a more aggressive Fed and extend the climb in yields, dulling the allure of an equity market struggling to rebound from last month’s tumble.Due out on Thursday, the U.S. consumer price index for January is expected to have risen 0.5%, culminating in an annual rise of 7.3%, which would be the largest such increase since 1982, according to a Reuters poll. “We could potentially get a very difficult number to digest next week on the inflation front and that has the potential to cut the markets off at the knees,” said Jack Ablin, chief investment officer at Cresset Capital Management.The yield on the benchmark 10-year U.S. Treasury note, which moves inversely to prices, has climbed about 40 basis points in 2022 to over 1.9% as investors factor in at least five rate increases from the Fed this year. The climb has weighed on equities overall while contributing to steep declines in the shares of many tech and growth stocks, whose valuations rely on future profits that are discounted more steeply as bond yields rise. The benchmark S&P 500 is down about 5.6% so far to start the year, with the tech-heavy Nasdaq logging a nearly 10% drop.“The reason why people are hitting the reset button … is because valuations were pulled forward a lot,” said King Lip, chief strategist at Baker Avenue Asset Management. “With rising rates, the valuations just can’t be justified. So whenever there is a little bit of a miss (on earnings) is when these stocks get punished quite a bit.”The forward price-to-earnings ratio for the S&P 500 has fallen to 19.5 times from 21.7 times at the end of 2021, while the forward P/E for the S&P 500 tech sector has dropped to 24.4 from 28.5, according to Refinitiv Datastream.Some investors believe stocks have further to fall before they become attractive. Analysts at Morgan Stanley (NYSE:MS) on Friday urged clients to sell into equity rallies as “a tightening Fed historically brings lower returns and great uncertainty for equities” and wrote that the S&P 500’s fair value is closer to 4,000. The benchmark index on Friday rose around 0.5% to 4,500.Others are questioning whether the growth stocks that have led the markets higher for years are ceding leadership to so-called value stocks, comparatively cheap stocks that are expected to do better in a rising rate or inflationary environment.The S&P 500 value index, replete with shares of energy firms, financial companies and other economically sensitive names, had declined 1.4% so far this year as of Thursday, versus a 10.2% drop for its S&P 500 growth counterpart. That disparity would be close to value’s biggest annual outperformance over growth in two decades.”You are seeing gradually higher market interest rates that is causing investors to reassess and to look at near-term profitability and the value and cyclical trade,” said John Lynch, chief investment officer for Comerica (NYSE:CMA) Wealth Management.The market was also digesting a topsy-turvy week of high-profile earnings. Shares of Google parent Alphabet (NASDAQ:GOOGL) Inc and Amazon.com Inc (NASDAQ:AMZN) soared after their respective quarterly reports while megacap peer Meta Platforms Inc tumbled after the Facebook (NASDAQ:FB) owner’s dour forecast.Next week, reports are due from Walt Disney (NYSE:DIS) Co, Coca-Cola (NYSE:KO) and Twitter Inc (NYSE:TWTR), with Nvidia (NASDAQ:NVDA) Corp set to report the following week.As with Meta Platforms, any disappointments in reports – especially from companies whose valuations remain expensive – could result in severe market fallout, investors said. “It’s been a volatile start to the year with investors swinging between concerns over Federal Reserve tightening and confidence in the economic recovery,” Art Hogan, chief market strategist at National Securities, said in a research note. “Meta aside, a solid earnings outlook is helping to ease the uncertainty, at least for the moment.” More