After a whirlwind start to the New Year, which saw new Brexit arrangements wreak havoc in the UK, the US Capitol Hill invaded and most of Britain enter a third lockdown, investors can expect a slower, but not less action-filled week.
Coronavirus cases and deaths in Britain have reached grim record highs and London mayor Sadiq Khan declared a COVID emergency in the capital on Friday, saying that the spread of the virus was “out of control.”
So far, over 80,000 people have died in the UK within 28 days of a positive coronavirus test since the start of the pandemic, official figures have shown.
Elsewhere: It is a big data week for the world’s second biggest economy. The International Monetary Fund (IMF) has trimmed back growth projection for the Chinese economy in 2021, and expects it to grow by 7.9%, due to the trade war with the US. While its economy was the first to be impacted by COVID-19 it was also the first to recover and maintain a robust course. Consumer price index data is out for China on Monday, along with PPI figures, latest PPI data hit an eight-month high, boosted by the oil rally. Thursday will see the release of trade numbers, exports in the country have been strong recently, with China being a major exporter of personal protective equipment (PPE).
UK: GDP, services output and Brexit fallout
The week is packed for the UK. There is the monthly gross domestic product (GDP) figure for November out on Friday along with services output, goods trade balance, and industrial and manufacturing production readings.
Forecasts predict an eye-watering 5% drop from the previous month, but considering this was the period when England entered a month-long lockdown and other parts of the UK endured tough restrictions, this is unsurprising.
In October, the GDP reading was 0.4% on a month-on-month basis — a drop off from the 1.1% growth on the previous update.
Services output is a key figure to watch, especially following the lockdown and restrictions, as nearly 80% of Britain’s economic output comes from the sector. In the previous update, the services report showed 0.2% growth, down from 1%.
While the UK and the EU nabbed a last-minute Brexit agreement on Christmas Eve, talks are far from over.
Negotiations will now focus on Britain’s access to EU’s financial services. This was not included in the initial deal which focused primarily on goods. But, there could be some back and forth as the bloc is worried about the UK’s desire to diverge away from EU rules.
On Saturday, Ireland said it was temporarily easing Brexit customs checks on imports from Great Britain after hauliers and firms warned of goods shortages and gaps on supermarket shelves.
The Brexit red tape has also caused issues for shipments into Northern Ireland, despite government assurances that there would be no border down the Irish Sea. Hauliers in the country have said they were “overwhelmed” with the paperwork.
It comes as senior minister Michael Gove warned UK businesses to brace for “significant disruption” at ports. Gove said on Friday that disruption at Britain's border had not been "too profound" yet.
He especially warned on the impact at the French border. "It is the case that in the weeks ahead, we expect that there will be significant additional disruption — particularly on the Dover-Calais route," the cabinet minister said.
Key company results:
JD Sports (JD.L) — Q3 (Tuesday)
ASOS (ASC.L) — Q1 (Wednesday)
Persimmon (PSN.L) — finals (Wednesday)
Associated British Foods (ABF.L) — Q1 (Thursday)
Boohoo (BOO.L) — Q3 (Thursday)
Dunelm (DNLM.L) — half year (Thursday)
US: Federal Reserve Beige book, US retail sales, Democrat stimulus hopesNo
It has been a busy and somewhat dark week for America. President-elect Joe Biden and vice president-elect Kamala Harris have been officially confirmed and will be sworn in to take office on 20 January.
The Democrats took full control of Congress after winning both Senate seats from Georgia runoff elections. The Party now controls the Senate, the House and the Oval office, which will make it easier for them to pass legislation
Meanwhile, an angry mob of president Donald Trump’s supporters stormed the US Capitol, which saw five people lose their lives.
Trump has been accused of inciting the violence that lead to the invasion, and as a result many platforms including his preferred megaphone Twitter (TWTR) have moved to ban or restrict him. Others include Facebook (FB), Instagram, Youtube, Reddit, Discord and Pinterest.
As for data, the JOLTS job opening number is out on Tuesday.
Wednesday will see the release of the Fed’s Beige Book and CPI data. Investors will watch for the levels of demand in the US economy for the all-important shopping month of December.
Import prices and jobless claims on the slate for Thursday, which will have an appearance from Fed chair Jerome Powell at a Princeton webinar.
Eurozone: Germany preliminary GDP data, ECB minutes
It’s a slower week for the region, with Sentix investor confidence numbers on Monday, industrial production on Wednesday, the latest European Central Bank (ECB) meeting minutes on Thursday and the French inflation reading on Friday.
Preliminary GDP data for 2020 is out for the EU’s largest economy on Thursday. The country’s economy has fared decently as it was one of the earlier EU countries to go into a full lockdown.
David Madden, market analyst at CMC Markets says, this is “why it contracted by 1.9%, on a quarterly basis,” in the first quarter.
“The economy shrank by 9.8% in the second quarter — the largest contraction on record — then it rebounded by 8.5% in the third quarter. It was encouraging to see that there was such a robust recovery, but by the end of the third quarter, economic output was down roughly 4% since the end of 2019.”
Watch: Will interest rates stay low forever?