Last week was one of the busiest weeks in the markets in the first quarter of the year. This was because more than 60% of S&P 500 companies released their earnings. The most visible companies that released the earnings were Apple, Microsoft, Facebook, General Electric, and Amazon among others. The results were mixed, with companies like Microsoft and Amazon disappointing. In addition to the earnings, investors focused on the jobs numbers from the United States, the trade talks that were continuing between the United States and China, and the ongoing crisis in Venezuela. This week, the markets may focus on a number of things.
The United States Labor Department will release the reading of the fourth quarter GDP numbers. The numbers are expected to show that the economy expanded by 2.6% in the quarter. This might be lower than the third quarter’s increase of 3.5% and the second quarter’s increase of 4.2%. The slowing economy comes at a time when the effects of the Trump tax cuts is fading. This may be a blow to the Trump administration, which has been working to maintain the economy at a growth rate of more than 3%. However, it could be a catalyst for the Trump administration to hammer a deal with China on trade.
Bank of England
The Bank of England may be the only large central bank expected to release the interest rates decision this week. The bank will release on Wednesday and shortly afterwards offer a press conference. As the United Kingdom continues to debate about its future, it is unlikely that the bank will increase rates at this meeting. This is because of the uncertainties that lay ahead. However, the meeting may shed light to investors about the BOEs decision in the Brexit scenarios. Will it lower rates in case of a no-deal Brexit or will it hike if there is a deal?
Last week, Chinese premier, Liu He visited Washington, where he held meetings with Robert Lighthizer, Steve Mnuchin, and Donald Trump. The meetings were the highest level the two countries had held after the Trump-Xi summit at Argentina. Both sides ailed the meetings as a success although the details were concealed to the public. While China has pledged to increase its purchases of American goods, the Americans want more. They want the country to address systematic issues like intellectual property theft and forced technology transfers. They also want better access of American firms to the Chinese market. This week, the topic of trade will continue.
This week, focus will be on Theresa May and the European Union as the two sides continue to deliberate on Brexit. Theresa May will travel to Brussels, where she will have conversations with her European colleagues. Investors will pay close attention to these discussions. Already, the European leaders have said that they will offer no concessions on the backstop issue. They have also ruled out extending the Brexit exit period. However, since no side wants to exit without a deal, there is a likelihood that concessions will be made.
The focus will also remain in Venezuela, a country that is facing increasing revolt as the population turns against the ruling class led by Nicholas Maduro. Less than two weeks ago, the US and other countries have moved to accept the head of parliament as the real president. While the population supports this move, Maduro has support from the military and the judiciary. This makes the situation a bit complicated, although an increased revolt could lead to the ouster of Maduro. If this happens, it could lead to lower oil prices.