Week ahead: UK and global PMIs, Fed minutes, OPEC+ meeting
Markets ring in the New Year with a bang, with a host of economic data, oil production figures and the Federal Reserve’s (Fed) minutes on the slate.
Kicking things off on Monday, members of the Organisation of the Petroleum Exporting Countries and their partners (OPEC+) are meeting via videoconference to decide on production levels for February, in efforts to turn the tide on a difficult year.
Oil consumption tanked in 2020 due to the coronavirus pandemic and a price war between Saudi Arabia and Russia.
Also on Monday, global manufacturing and services data is out. Apart from some good numbers in China and the US previously, the services sector has struggled worldwide over the past few months due to COVID-19 restrictions, with expectation that it could continue for a while.
In America, the Georgia State runoff election will determine which party controls the US Senate as president-elect Joe Biden is due to take office on 20 January.
Despite the vaccines, the coronavirus pandemic remains in the spotlight as cases continue to soar across the globe.
Several countries, including the UK have lockdowns and tighter restrictions in place. Global travel bans on British tourists are also still in place, although France has reopened its border, easing the trucks backlog.
On Saturday, batches of the newly approved COVID-19 vaccine from Oxford University and AstraZeneca (AZN.L) arrived at hospitals ahead of the jab's rollout in Britain on Monday.
German startup, BioNTech (BNTX) — which has been at the forefront of the vaccine race — warned that there would be gaps in the supply of its vaccines until others are rolled out, as it continues to work with partner Pfizer (PFE) to boost production.
Developments over the weekend that will interest investors:
Italy gives UK finance firms six months post-Brexit operating extension
Firms exhale as UK and EU agree grace period on Brexit paperwork
UK: December manufacturing and services PMIs, COVID-19 and Brexit hangover
UK’s economy faces a tough start to 2021, not just with leftover Brexit affairs but also due to COVID-19 which has lead to unprecedented declines in gross domestic product (GDP) and a recession in the second quarter of 2020.
Coronavirus
More regions across the UK have been placed in Tier 4 restrictions amid rising coronavirus cases.
Cases rose to 55,892 on New Year’s Eve — the highest since mass testing began in May. A further 964 deaths within 28 days of a positive test were also announced on 31 December.
On Saturday, batches of the newly approved COVID-19 vaccine from Oxford University and AstraZeneca (AZN.L) arrived at hospitals ahead of the jab's rollout in Britain on Monday. It comes almost a month after the roll out of the Pfizer (PFE) and BioNTech (BNTX) vaccine.
While one million Brits have received their first vaccination, health bosses have called on doctors to back a new decision to give first jabs a priority. This will delay a follow up vaccination for others.
Meanwhile, Canada's ban on flights from the UK is scheduled to expire on Wednesday 6 January.
Brexit
Although Britain and the European Union agreed a last-minute Brexit deal, which will see tariff-free and quota-free trading between the pair, it is not yet a done deal.
UK officially departed from the EU’s Single Market and customs union at 11pm on Thursday 31 December, more than four years following the referendum of June 2016.
In some good news, firms exporting goods between Britain and the EU will be given a 12-month grace period on some supporting Brexit-related paperwork in efforts to ease into the new regime.
Companies will not have to produce paperwork from their suppliers proving that their goods are locally made and eligible for zero-tariff access to the EU until 2022.
This eases the burden faced by car manufacturers and aerospace firms which import large numbers of parts from many countries.
The trading agreement between the pair includes a one year waiver on declarations on “rules of origin” conditions, which state how much of an item needs to be locally made in order to avoid tariffs. Under the terms, tariffs will be charged on goods that do not meet rules of origin requirements.
Manufacturing and services PMIs
Figures across both sectors are expected to recover strongly but any gains will be more than offset by more of England entering Tier 4 lockdowns.
Data released in the middle of December was upbeat, with manufacturing rising to 57.3, which could have been fuelled by some pre-Brexit stockpiling.
Services, the UK’s biggest sector, also managed to rebound a little to 49.9, despite the tighter restrictions after England’s second lockdown in November.
“If the planned social mixing over the Christmas period had been allowed, these numbers might have remained fairly resilient, however the government’s U-turn and rapidly-enforced Tier 4 restrictions could limit the extent of any economic rebound in the new year,” Michael Hewson, chief market analysts at CMC Markets said.
Key company results:
Morrisons (MRW.L) — Q3 (Tuesday)
Next (NXT.L) — finals (Tuesday)
Marks & Spencer (MKS.L) — Q3 (Friday)
US: Fed minutes, jobless claims, Georgia state runoff races
Fed: Minutes from the Fed’s last meeting in December will also be closely watched for clues around the next policy move.
The meeting was fairly muted as it occurred amid a backdrop of back and forth bickering on Capitol Hill about a stimulus bill.
But the central bank signalled a more optimistic outlook on the US economy, as it upgraded GDP forecasts for 2020 and 2021. The minutes will show
Senate
The US Senate is currently controlled by the Republicans, but that could change if the two Senate seats from the state of Georgia fall into Democratic hands this coming week.
Since neither of the candidates received a majority of the vote in the November election, the state holds runoff elections on Tuesday.
If the Democrats manage to win both seats, then the Senate would be tied at 50-50, giving vice president-elect Kamala Harris the tiebreaker vote.
Jobs
The latest US employment report will show how the recovery is going.
The December non-farm payroll report, could show and impact from the winter wave of COVID-19 in America, with a chance that it could tip in the negative.
The slowdown in the jobs growth in the country over the last few months has been quite stark.
Since August, nearly 1.5m jobs were added and 672,000 jobs added in September, 610,000 in October, before the November figures dropped to 245,000, but expectations were for 480,000 jobs to be added.
Eurozone: Services PMIs across the region
The zone is back in full swing and will start the New Year with the release of manufacturing and services PMI’s on Monday and Wednesday.
Both sectors have been surprisingly resilient in the face of a resurgent coronavirus infections. Expectation are for both manufacturing and especially services to show improvements.
Watch: What’s at stake in the Georgia Senate runoffs?
