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Week Ahead: has anyone seen my bazooka?
The coming days and weeks will provide more clues about the state of the world economy – and maybe some answers to the eurozone crisis.
Stop the random, misdirected gunfire and bring out the big bazooka. That’s what David Cameron wants. And we may just learn over the coming days and weeks whether his fellow policymakers are willing to open the armoury doors and unleash the full might of their shared arsenal.
Eurozone: finally some answers?
Finance ministers and central bankers from the 20 biggest economies met in Paris on Friday, where it was hoped the ground would be laid for the main event, the European Union Summit on 23 October. The summit offers the hope of some convincing measures to fix the eurozone crisis. These might include a bank-recapitalisation programme, approval of the next loan tranche for Greece, and moves to at least start renegotiating changes to the EU Treaty.
Urgency is growing after a week in which Spain’s credit rating was cut to AA- by Standard & Poor’s, and the Slovakian parliament looked close to throwing eurozone rescue efforts off track. In the event, Slovakia became the last of the bloc’s 17 member states to agree to extend the European Financial Stability Facility (EFSF) bailout fund.
In the meantime, over the next week policymakers in the US, Japan and UK – all of whom are struggling to contain their own crises – may provide us with more details about their intentions.
Ben Bernanke, the US Federal Reserve chairman, will get things started, with a speech in Boston on Tuesday. ‘Bernanke’s speech on Tuesday may provide further insights into whether the Fed will follow up "Operation Twist" with more aggressive actions, as was recommended by two of the FOMC [Federal Open Market Committee]’s 10 members at the last meeting,’ predict economists at Markit.
Then, on Wednesday, the Bank of England is due to publish the minutes from the Monetary Policy Committee’s October meeting, which was when we learnt of the launch of ‘QE2’, the trigger for another £75 billion of quantitative easing to boost the UK’s ailing economy. Economists will pore over these words for indications of the committee’s future intentions.
It's Japan’s turn on Thursday, when the country’s central bank governor is expected to speak on the risks facing the economy, which is still counting the cost of the March earthquake. The outlook is murky, and like elsewhere in Asia reliant on a quick resolution to the eurozone’s crisis.
We will also get more of an idea over the coming week of what these policymakers are dealing with, as a slew of reports giving indications of economic health is published around the world.
In the UK, inflation data is expected to show a rise in CPI. Howard Archer of IHS Global Insight said: ‘While consumer price inflation could have well have hit 5% in September, this could be close to the peak’, after which it will fall back. Data on retail sales and public finances will provide more clues about the fate of the UK economy and the sustainability of the coalition government’s austerity measures.
More significant for the wider market will be US data on inflation, industrial production and housing starts. The big US banks also have the potential to rock markets next week, when Goldman Sachs, Citigroup, Bank of America and others publish their third-quarter earnings.
Amid signs of a slowdown in Asia, a raft of data on the health of China’s economy on Tuesday, including a third-quarter GDP figure, will provide an indication of whether one eye should be looking east, rather than giving fumbling European politicians our undivided attention.
UK companies reporting next week include: British Sky Broadcasting (BSY.L); engineering company and Citywire Top Stock GKN (GKN.L); miners Anglo American (AAL.L) and Xstrata (XTA.L) (also a Top Stock); and Premier Inn hotels and Costa Coffee owner Whitbread (WTB.L), which this week got a boost after being upgraded by Barclays (BARC.L).
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- British Sky Broadcasting Group PLC (BSY.L)
- GKN PLC (GKN.L)
- Anglo American PLC (AAL.L)
- Xstrata PLC (XTA.L)
- Whitbread PLC (WTB.L)
- Aggreko PLC (AGGK.L)
- SABMiller PLC (SAB.L)
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- Cairn Energy PLC (CNE.L)
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- Barclays PLC (BARC.L)
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