Amid the economic gloom and ongoing conflict in Ukraine, there are signs that things are returning to normal.
The Golden Globes are back this week at their home in Los Angeles, after interruptions over a lack of diversity led to last year’s cancellation of the event. Looking ahead, world leaders, business leaders and economic thinkers will begin arriving in the Swiss resort of Davos on Sunday for the following week’s World Economic Forum.
The next seven days also see shooting at the official start of the fourth quarter earnings season, starting with Wall Street banks and British retailers. This will of course remind us that we are far from returning to normal for the global economy – more details below.
For the UK, normal for now means a large-scale industrial move. Ambulance workers and driving instructors walked out this week as the strike closes the polls for teaching unions in England and Wales.
At least normal life has been restored in the US Congress by voting to install Kevin McCarthy as Speaker of the House. Focus can now focus on the economic challenges this year will bring – more on upcoming data announcements this week below.
Can things search? Yes, if you are in Cornwall. Monday promises to be a historic day for the UK boycott – at least according to Virgin Orbit – with the launch of the first space satellite from mainland Britain.
Perhaps best described as a classic British eccentric, nine satellites will be launched into orbit using a rocket launched from a repurposed Boeing 747, due to take off from Newquay airport on Monday night. It certainly shows a degree of creativity and should at least lift the spirits of the British.
Who likes high interest rates? Banks, that is. This will become evident this week when several of Wall Street’s largest lenders reported their fourth-quarter numbers on Friday.
These companies profited from Fed tightening by raising loan rates more than deposits. Analysts estimate that JPMorgan Chase, Bank of America, Citigroup and Wells Fargo will report collective net interest income for the final three months of 2022 at about $60 billion, up 30 percent year-over-year, according to consensus data compiled by Bloomberg. The concern is that this revenue-raising party cannot continue and net interest margins have peaked.
The flip side of rising interest rates is the problem of high inflation, which brings me to the other topic on this week’s corporate calendar, retailers. Increasing withdrawal rates may sound like a good thing for retail traders. Not when inflation reaches double digits, it isn’t.
We’ll find out exactly how bad it was over the Christmas period – or indeed whether stocking up to watch the World Cup provided any kind of boost – via a slew of trading updates from the big British brands and online this week.
Consumer spending may of course be better than expected, as Next showed last week. Games Workshop, which reports first-half numbers on Tuesday, is creating plenty of excitement (and not just among Dungeons and Dragons-obsessed teens) about growth opportunities due to the sharp rise in role-playing games during the pandemic. Investor expectations (as well as teens) have been raised even further in Amazon’s recent TV and movie deal to the fantasy game producer.
We expect a slew of CPI and other inflation data over the coming days from the US, China, Japan, Australia, Brazil and Mexico.
The British Retail Consortium updates its monthly survey of UK high street sales on Tuesday, while on Friday the Office for National Statistics publishes its latest monthly GDP estimate to give an idea of where the country stands in terms of recession.
Monetary policy this week comes from the Bank of Korea, which is expected to raise its benchmark interest rate by another 25 basis points to 3.50 percent on Friday.