Week ahead: Biden inauguration, UK public finances and retail sales, ECB rate meeting

Suban Abdulla
·6 min read
US President-elect Joe Biden and Vice President-elect Kamala Harris arrive to deliver remarks in Wilmington, Delaware, on November 7, 2020, after being declared the winners of the presidential election. (Photo by Andrew Harnik / POOL / AFP) (Photo by ANDREW HARNIK/POOL/AFP via Getty Images)
US President-elect Joe Biden and Vice President-elect Kamala Harris arrive to deliver remarks in Wilmington, Delaware, on November 7, 2020, after being declared the winners of the presidential election. Photo: Andrew Harnik / POOL / AFP via Getty Images

All eyes in the coming week will be on the inauguration of Joe Biden, who is due to become the 46th president of the United States.

It is also a loaded week in terms of economic data, with back-to-back releases from the UK. Monthly figures for public sector borrowing, consumer confidence, retail sales and factory activity are all due on Friday.

While investors will watch for the progress of global vaccination programmes, they will also closely follow the latest COVID-19 outbreaks in China.

More than 28 million people are under lockdown in the country, according to Reuters. On Friday China reported the highest number of new COVID-19 cases in more than 10 months.

Meanwhile, European Union leaders are due to discuss their strategy for rolling out vaccines and other restrictions to contain COVID-19 infections, especially any new variants, at a summit on Friday.

Weekend developments that will interest investors:

WATCH: What does a Joe Biden presidency in the US mean for the global economy?

US: Presidential inauguration, Trump impeachment, flash PMIs

The spotlight will, once more, shift to Capitol Hill on Wednesday 20 January.

President-elect Joe Biden will be sworn in as the 46th president of the United States and Kamala Harris will become the first female, Black and South Asian vice president.

There have been some rumours of looming violence at the presidential inauguration, with outgoing president Donald Trump — who said he will not be attending — calling for a “calm transfer of power.”

In a first order of business, progress on impeachment proceedings against Trump could pre-occupy the Senate at a time when the country’s economy looks like it needs more support.

Last week, Biden outlined a new fiscal aid programme worth $1.9tn (£1.4tn). Support will be spread across various areas, $350bn will be spent on state aid, an increase in the minimum wage, and a further $1,400 in stimulus payments to American employees.

Janet Yellen’s Senate confirmation hearing as US treasury secretary is set for Tuesday.

Data wise, the Federal Reserve Bank of Philadelphia’s regional manufacturing sector index for January is due out, which could show continued resilience in factory activity in that part of the country.

Investors will also keep a close eye on the latest weekly jobless claims data, figures are trending higher and could top a million this week.

America’s housing market could remain the bright spot of the economy but both housing starts and existing home sales may show some seasonal weakness.

UK: December CPI data, retail sales, public finances, BOE governor speech

LONDON, UNITED KINGDOM - 2020/12/27: A man walks past a Closed Debenhams Store in Oxford Street. Under tier four restrictions, pubs and restaurants will close, as well as non-essential retail. (Photo by Pietro Recchia/SOPA Images/LightRocket via Getty Images)
Since the start of the first national lockdown, retail sales have seen six consecutive months of growth. Photo: Pietro Recchia/SOPA Images/LightRocket via Getty Images

It is a busy week for Britain, with plenty of data on the slate with speeches from the Bank of England (BOE) governor Andrew Bailey and BOE’s chief economic Andy Haldane on the slate.

Bailey recently hinted that negative rates are being discussed but not on the horizon, but could have little effect as markets already adjusted to the probability of negative rates.

Friday is a jam packed day filled with a host of economic releases.

Public finances: Britain’s public debt has been a hot topic over the last couple of months due to the emergency measures taken by the government amid the coronavirus pandemic.

Chancellor Rishi Sunak has been criticised for the huge amount of money that has been spent on a monthly basis. In November the UK government borrowed £30.8bn ($41.9bn), taking the total amount borrowed for this fiscal year to £245bn.

But, experts predict that the total sum could rise well above the £300bn mark and reach as high as £400bn by the end of the year.

Retail sales: Retail sales have seen six consecutive months of growth since the start of the first national lockdown, but gains screeched to a halt in November when the second lockdown was introduced in England. Figures declined by -3.8%.

PMIs: The latest flash PMI’s for services and manufacturing, which are expected to weaken slightly to at 53 and 45 respectively are also due on Friday.

It comes as, experts warned that the UK was on the brink of its first “double-dip” recession, despite official figures showing that the economy fared better than expected in November.

The Office for National Statistic figures showed that gross domestic product (GDP) declined by an estimated -2.6%, with economist expecting a -5.7% dip.

Key company results:

  • Kier (KIE.L) — Q2 (Tuesday)

  • Burberry (BRBY.L), Dixons Carphone (DC.L), JD Wetherspoon (JDW.L), Q3 (Wednesday)

  • WH Smith (SMWH.L) — Christmas trading update (Wednesday)

EU: ECB meeting, EU summit, France and Germany flash PMIs

European Central Bank (ECB) President Christine Lagarde speaks during the 16th Congress of Regions (Congres des Regions) in Saint-Ouen, north of Paris on October 19, 2020. (Photo by GEOFFROY VAN DER HASSELT / AFP) (Photo by GEOFFROY VAN DER HASSELT/AFP via Getty Images)
ECB President Christine Lagarde. The ECB is due to meet on Thursday to decide on interest rates for the eurozone. Photo: Geoffroy Van Der Hasselt / AFP via Getty Images

Things are slowly picking up in the region, in a week that will see the European Central Bank (ECB) rate meeting, EU summit and services and manufacturing PMIs out for Germany and France.

On Wednesday, EU leaders will focus on the co-ordination of the coronavirus vaccination roll-out and also the implementation of the EU Recovery Fund, at the EU summit.

The region faces stricter lockdowns as COVID-19 continues to rapidly spread across many countries, with mutations spreading in other nations, including the UK.

The ECB is due to meet on Thursday to decide on interest rates for the eurozone.

Experts at ING expect ECB president Christine Lagarde to say that the central bank is “monitoring the exchange rate carefully, wary of the euro’s impact on an already subdued inflation rate.”

Friday will see manufacturing and services sector data released for the EU’s two largest economies, Germany and France.

In Germany, the numbers have painted a mixed picture with services staying into contraction territory at 47 — a slight improvement from 46 in November. Manufacturing remained resilient rising to 58.3, from 57.8.

Numbers could decline further, especially after chancellor Angela Merkel imposed stricter measures and lockdown rules, after the coronavirus death toll rose to over 1,000 a day.

The services sector in France fared a little better, improving to 49.1 in December from a dip to 38.8 in November. But, with restaurants and bars in France set to remain closed until next year, a recovery could be hard to imagine. The sector could see its fifth consecutive contraction in January as a result.

Over the weekend it was announced that Armin Laschet has been elected leader of chancellor Angela Merkel’s Christian Democratic Union (CDU) party, which means he could succeed as Merkel as chancellor once the vote has been confirmed.

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