Week ahead for financiers: Financial Times recommendations

The US and China will make their “phase one” trade pact official this week, while earnings season will kick off with major banks set to report quarterly results. Here’s what to watch, Financial Times writes in the article Week ahead: US-China trade deal, Brexit, earnings.

US-China trade deal

Donald Trump is expected to sign the preliminary trade agreement between the US and China on January 15, cementing a deal that could lessen trade tensions that have weighed on global markets. Under the deal, China would boost imports from the US and pledged to better protect intellectual property rights. The Trump administration agreed last month to cancel new tariffs on $156bn of Chinese goods and halve existing levies on $120bn of imports. Mr Trump has said negotiations over a “phase two” deal will begin “right away”.

Paul Ashworth, chief US economist at Capital Economists, said the phase one deal should “further bolster confidence” in the domestic economy, particularly after tensions in the Middle East eased last week. Capital Economists forecast that fourth-quarter GDP growth was as strong as 2 per cent on an annualised basis. In other US trade developments, EU trade commissioner Phil Hogan is scheduled to visit Washington for a meeting with US trade representative Robert Lighthizer.

Brexit

Boris Johnson’s Brexit deal will continue to make its way through Parliament. The House of Lords is expected to support the EU withdrawal agreement, after the prime minister’s Conservative party won a large majority in the general election last month. The House of Commons voted in favour last week. Sterling climbed above $1.35 following the Conservative’s election win, but it has since pulled back to levels near $1.30 as investors turn their attention to trade negotiations between the UK and EU. As such, the UK parliament “will play a much lesser role” in the pound’s trajectory this year, Nomura said. “Brexit risks will remain, but are unlikely to be direct market drivers until it becomes clearer on progress (or a lack of it) in talks with the EU,” according to the bank.

Earnings

JPMorgan Chase, Citigroup and Wells Fargo will open the earnings barrage on January 14, followed by peers including Bank of America, Goldman Sachs and Morgan Stanley. A smattering of other companies, including Delta Air Lines, UnitedHealth, CSX and Schlumberger, will also report financial results during the week. Analysts expect members of the S&P 500 to book a 2 per cent decline in fourth-quarter earnings growth against the same period a year ago, according to FactSet, which combines estimates with actual results to date.

Economic data

Investors will also be monitoring economic data on inflation and retail sales in the US and UK, about two weeks before central bank policymakers in both countries meet for the first time in 2020. Economists expect US December retail sales figures to show growth of 0.3 per cent month-to-month — a positive sign for how much consumers were willing to spend during the holiday shopping season. The consumer and producer price indices will offer a look at inflation. The University of Michigan will publish its initial reading on consumer sentiment for January. Other data include the construction of new homes in December alongside building permits, a gauge of future residential construction.  “The coming data flow should, in general, remain consistent with the view that the economy is growing respectably, if unspectacularly,” ING said. Retail sales and CPI data are also due for release in the UK. ING cautioned that retail sales may disappoint, given signs of soft holiday shopping trends before the holidays.