A busy week for earnings, headlines from Davos, economic data and interest-rate decisions from the Bank of Japan and European Central Bank as well as US 4th quarter earnings reports, but the partial shutdown of the US government on Friday night will overshadow everything until it is sorted out.
President Donald Trump joins leaders from business, government, media and the arts at the annual World Economic Forum in Davos-Klosters, Switzerland late this week.
The four-day talkfest begins tomorrow and will centre on “creating a shared futures for the fractured world”.
Mr Trump could be described as the ‘fracturer in chief”and will be the first sitting US president since Bill Clinton to attend the event, and is due to deliver the keynote speech on Friday.
He is also expected to meet with Theresa May, the UK prime minister, after the president recently cancelled a visit to London, while a meeting with French President Macron is on the cards.
But if the US government shutdown continues, then Trump’s visit will probably not happen. And if the shutdown continues key US economic figures, led by the first estimate of 4th quarter GDP and trade figures for December could be delayed.
Meanwhile key central banks, in Europe and Japan meet and will reveal monetary policy decisions that could impact markets around the globe.
The Bank of Japan is expected to leave its 10-year yield rate and policy rate unchanged at 0% and -0.1%, respectively, when it delivers its decision after a two-day meeting ending tomorrow – but it could signal a change in its securities purchases. There have been suggestions in recent weeks that such a change in thinking is under way.
While the European Central Bank is expected to leave its main refinance rate, marginal lending rate and deposit facility rate unchanged at 0%, 0.25% and -0.4%, respectively, on Thursday, there are expectations in the market that it might start signalling a further change in its securities buying policy.
GDP data is expected from the UK and US on Friday. Economists think the first estimate of US 4th quarter GDP will show that economic growth in the US cooled in the final three months of 2017. to around 3% from 3.2% in the three months to September.
The so-called core personal consumption expenditures, the Federal Reserve’s preferred inflation gauge, is out as well and is expected to pick up, rising 1.7% in the fourth quarter, compared with a 1.3%
The coming week also brings other US economic data including reports on sales of new and previously owned homes, trade and durable goods orders.
Preliminary estimates of UK 4th quarter GDP see growth remaining roughly from the previous quarter around 0.4% to 0.5%. The latest figures on UK employment and wages will also be released. Much will depend on the impact of the fall in the pound and the continuing impact of Brexit generated uncertainty.
The coming week also sees the release of the first estimate of manufacturing and service sector activity surveys.
The so-called flash January data will play a critical role in estimating the health of the economy at the start of 2018, and will thereby provide important signals as to future policy moves by the US Federal Reserve (which holds a two day meeting next week) and other central banks.
Durable goods orders, as well as new and existing home sales, will also be gleaned for indications of the US economy’s health at the end of 2017. The US 4th quarter earnings reporting season continues with around 80 major groups releasing figures (See separate story).
Apart from the two day Bank of Japan meeting, the week sees the release of updates on Japanese inflation and trade.
In Australia the Australia Day holiday on Friday turns it into a short week, with mostly quarterly reports from resource companies being released.
