The final week of January is shaping up to be a busy one with investors watching for updates on the coronavirus, the Trump impeachment trial, a heavy slate of US earnings, central bank meetings and crucial economic data.
Here’s what to watch in coming days.
Markets were weighed down last week as investors fretted about the impact of the coronavirus — the Sars-like virus — on economic growth. The virus has already killed 26 people in China and infected a further 887, and Chinese authorities have extended a public transport shutdown to cities in an effort to contain the virus. Any developments on the coronavirus will be closely monitored next week.
“SARS peaked around 3-4 months after the initial outbreak was reported, but major travel over the Chinese new year holidays could exacerbate the spread this time,” said strategists at TD Securities. “We find that the market impact is likely to be shortlived, with the fear factor worse than reality.”
Trump impeachment trial
Donald Trump’s impeachment trial will continue next week with the president’s legal team mounting their defence over the weekend. The House impeachment managers spent much of last week detailing the pressure campaign against Ukraine they say Mr Trump ran to solicit interference in the US 2020 election.
The Federal Reserve holds its first meeting of the year next week and the monetary policy setting Federal Open Market Committee is widely expected to leave interest rates unchanged when it delivers its statement on Wednesday.
“We expect to see very little changes to the broad economic assessment in the upcoming FOMC statement and expect Chair Powell to continue to push a strong ‘on hold’ bias with regards to broad interest rate policy in his press conference,” said strategists at RBC Capital Markets. “This is a good opportunity for Powell to provide some additional clarity on IOER tweaks and balance sheet adjustments.” The IOER, or Interest Rate on Excess Reserves, is the interest rate the Fed has paid on excess reserves deposited by banks.
Next week is set to be one of the busiest of this earnings season with 145 companies in the S&P 500 slated to report results and the bulk of them crossing on Wednesday and Thursday. Technology companies come into focus with updates expected from Apple and Microsoft, tech giants whose market capitalisations have exceeded $1tn.
Boeing, which recently ceded its crown as the world’s biggest plane maker to rival Airbus amid the fallout from its troubled 737 Max jet, is also set to update investors next week.
Amazon, an erstwhile member of the $1tn club, Pfizer, McDonald’s, Tesla, General Electric, Facebook and ExxonMobil are among the other big names reporting next week.
Bank of England
Next week’s monetary policy meeting will be the last before governor Mark Carney’s departure in March. Mr Carney said earlier this month that the BoE could delay any interest rate increases until inflation is well above target as a way of boosting the economy. Despite the outgoing governor’s remarks, strategists at RBC Capital Markets think this is still a “live meeting”.
They said: “The January PMI survey is the crucial pre-meeting release. Should the PMI survey improve in line with our expectations then it should reinforce the message from the other post-election data and encourage the majority of the MPC to wait and see how the economy responds to the outcome of December’s election.”
Economists expect GDP expanded at an annualised 2.1 per cent in the fourth quarter, weighed down by softer consumer spending and restrained business activity. Economists at Oxford economics expect more than half the real GDP advance to be driven by a “near-double-digit drop in imports”, and partially offset by a decline in inventories.
Other key data during the week include the durable goods report that could reflect the impact of Boeing’s crisis, a fresh snapshot on the housing market, which has regained some momentum, and updates on the health of the US consumer.
The UK is set to leave the European Union on Friday more than three years after the Brexit referendum. The EU withdrawal bill cleared its final parliamentary hurdle, received royal assent from Queen Elizabeth II last week and now awaits approval by the EU Parliament. The departure next week heralds the start of an 11-month standstill transition that will keep current trading and security relationships unchanged.