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Week Ahead: China, Centrica and central banks

Our preview of the main financial events of the coming week.

 

by Chris Marshall on Feb 14, 2014 at 15:32

Week Ahead: China, Centrica and central banks

The last ‘flash’ measure of China’s manufacturing output showed the first contraction in six months and was partly to blame for a rough fortnight in global markets. So, having had a week or two to cool off, investors will hope for a less disappointing update when February’s reading is published on Thursday.

Stock markets have recovered some of January’s losses so far in February. But data over the coming week will be closely scrutinised amid lingering concerns over the state of emerging markets, the gradual reduction of US stimulus and corporate health.

China’s PMI reading will be among the highlights, following from January’s decline to 49.6 (a reading below 50 signifies a contraction).

Elsewhere in Asia, GDP (gross domestic product) numbers for the fourth quarter of 2013 are due from Japan, Taiwan and Singapore.

Waiting for Carney & co

Economic data in Europe, the UK and US will be dissected by investors keen to predict central bankers’ next moves.

In Europe, the latest measures from the euro-area purchasing managers indices (PMIs) are due. These indications of business activity will feed into the European Central Bank’s decision next month whether to ease interest rate policy further. Improvements in German and French GDP in the fourth quarter of 2013, reported on Friday, were seen as making it less likely the ECB will act at its March policy meeting. Germany’s ZEW survey of economic sentiment will also influence that debate.

In the UK, employment figures on Wednesday could provide clues as to when the Bank of England will eventually raise interest rates.  The unemployment rate is expected to have remained unchanged at 7% in December.

Bank governor Mark Carney (who will appear on the BBC's Andrew Marr show on Sunday alongside George Clooney, the Hollywood star he has been likened to) has announced a change to his ‘forward guidance’ policy which will see a broader range of indicators used to decide when to cut interest rates, rather than giving primacy to the jobless rate.

The minutes of the Bank’s January policy meeting are published on Wednesday and may shed light on the discussions that led to the re-think over linking rate cuts to a 7% unemployment rate.

Of course the Bank’s main objective is to keep inflation under control. A report on Wednesday is forecast to show that CPI inflation remained bang on target at 2% in January.

In addition to these crucial updates, on Friday chancellor George Osborne will get his last public finance figures before the budget on 19 March.

Centrica (CNA.L), the British Gas owner that faces political threats of a break-up, is among FTSE companies providing updates to investors.

Monday: Hammerson earnings, DCC interim management statement (IMS), Fidessa earnings.

Tuesday: BHP earnings, Intercontinental Hotels earnings, John Wood earnings, Drax Group earnings, Essar Energy IMS, AZ Electronic Materials earnings.

Wednesday: Sports Direct IMS, Galliford Try earnings.

Thursday: BAE Systems earnings, Centrica earnings, Rexam earnings, Rathbones earnings, Go-Ahead earnings, Micro Focus International IMS, Petra Diamonds earnings, Playtech earnings, Essentra earnings.

Friday: Informa earnings, Millennium & Copthorne Hotels earnings.

Investors will also be offered a glimpse into the mind-set of US policymakers, with the minutes from the US Federal Reserve’s January policy meeting due on Wednesday. The Fed cut its quantitative easing (QE) stimulus scheme for a second time at that meeting, meaning it now spends $65 billion (£39 billion) a month on bond purchases.

Updates on inflation and the housing market are among the most important economic releases due from the US next week.

US stock markets are closed on Monday for Presidents’ Day

There are some major talking shops next week. Eurozone finance ministers meet on Monday and then next Saturday G20 finance ministers and central bank governors hold their first meeting of 2014 in Sydney where they’ll discuss financial regulation and stability.

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