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Week ahead: Brexit, EU summit, ECB rate meeting, US fiscal stimulus

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Suban Abdulla
·6-min read
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Brexit: Flag of EU with Big Ben in the hole
Brexit is still delivering much volatility to global stock markets and the sterling. Photo: Getty

It’s poised to be another action packed week for investors with the European Central Bank’s (ECB) rate meeting, a potential US stimulus agreement and a host of economic data.

Brexit is still delivering much volatility to global stock markets and the sterling, but the more time passes without a deal, the more pressure mounts on the pound.

Also on the slate, the Food and Drugs Administration (FDA) will meet to discuss COVID-19 vaccines and UK's industry and manufacturing production data for October is out.

As ever, coronavirus-related developments will keep markets busy. The US reached another grim record yet again, reporting 227,885 new infections on Friday.

Company wise, following months of speculation, Airbnb could be finally set to launch its initial public offering (IPO) on Wednesday, with a valuation expected to be in the region of $35bn (£26bn).

Other key developments over the weekend that will interest investors:

Watch: What is a no-deal Brexit and what are the potential consequences?

Britain: Brexit, manufacturing and industrial production, host of company results

On Saturday, talks between European Commission president Ursula von der Leyen and UK prime minister Boris Johnson ended in another stalemate, after the pair were called in to solve the deadlock.

The two sides are struggling to agree on, access to fishing water, a level playing field and governance over a Brexit deal.

There isn’t much time left on the clock to get a deal through the door before the UK leaves EU trading rules on 31 December.

Talks between UK’s chief negotiator David Frost and his EU counterpart Michel Barnier are due to restart on Sunday, after a “pause” on Friday. Johnson and von der Leyen will hold talks again on Monday.

There’s also the Halifax House Price Index on Monday with industrial and manufacturing production readings due on Thursday.

While services is the UK economy’s biggest sector, the performance of the manufacturing industry in recent months has been in the positive. Manufacturing has reported gains in every month since May, though the pace of expansion has slowed as we have headed into the fourth quarter.

The third quarter was particularly positive, after a post-lockdown rebound helped make up some of the lost ground in Q2. Recent PMI figures have highlighted the resilience of the manufacturing and construction industries, compared to the services sector which is much more exposed COVID-19 measures.

Nonetheless, experts predict manufacturing and industrial production will continue the positive trend, with a modest gain of 0.3% for both sectors expected.

Hopes of a rebound in Britain’s economy in 2021 have been heightened after US investment bank Goldman Sachs (GS) upgraded its forecasts for the gross domestic product (GDP) growth, saying its expectations were now “significantly above consensus.”

Other key events: Bank of England’s Financial Stability report on Wednesday.

Company results:

  • Ted Baker (TED.L) — half-year (Monday)

  • Stagecoach (SGC.L), Superdry (SDRY.L) — half-year (Wednesday)

  • Firstgroup (FGP.L) — half-year (Thursday)

  • Marston’s (MARS.L) — finals (Thursday)

  • Ocado (OCDO.L) — Q4 (Thursday)

  • Rolls Royce (RR.L) — interim (Friday)

Eurozone: Will the ECB take fiscal action? EU summit, Germany data and region-wide GDP

FRANKFURT AM MAIN, GERMANY - MARCH 12: Christine Lagarde, President of the European Central Bank, speaks to the media following a meeting of the ECB governing board at ECB headquarters on March 12, 2020 in Frankfurt, Germany. The ECB is pursuing measures to counter the economic impact of the rapidly spreading coronavirus. The number of confirmed cases across Europe has reached 25,000. (Photo by Thomas Lohnes/Getty Images)
Christine Lagarde, President of the European Central Bank. Photo: Thomas Lohnes/Getty Images

Could this be the month where the ECB finally pulls the trigger on a stimulus package? We will see on Thursday, when the central bank holds its interest rate decision meeting.

But, reports say could run as high as half a trillion euros via the pandemic emergency purchase programme.

So far, PMI numbers have disappointed and President Christine Lagarde has stressed downside risks to Q4 amid tighter coronavirus restrictions.

In addition to the ECB there is also the EU summit on Thursday, with much of the talks to focus on Brexit.

But, member states must also try to persuade Poland and Hungary to approve the budget as the battle continues between the two nations and the other 25 countries of the EU over the "rule of law" clause tied to the 2021-2027 budget.

The budget includes the €750bn ($909bn, £677bn) COVID-19 stimulus.

So far, Poland and Hungary have vowed to stand side by side in their fight against Brussels to veto the budget, which they claim is punishing them for their conservative values.

Key economic data to watch are primarily the German industrial production on Monday.

The revised region-wide GDP data is also due, with German ZEW economic sentiment figures on Tuesday, German trade balance on Wednesday and finally Italian industrial production on Friday.

US: Will FDA buckle under pressure to approve COVID-19 vaccines?

This illustration picture taken on November 23, 2020 shows a bottle reading "Vaccine Covid-19" and a syringe next to the Pfizer and Biontech logo. - The European Commission has signed five contracts to pre-order vaccines, among which with the U.S.-German company Pfizer-BioNTech (up to 300 million doses). (Photo by JOEL SAGET / AFP) (Photo by JOEL SAGET/AFP via Getty Images)
Britain has said it is ready to give the vaccine to people over 85 years of age and frontline workers. Photo: Joel Saget / AFP via Getty Images

America seems to be on a path towards a stimulus by the end of the year, albeit much smaller than anticipated.

US politicians have insisted they are attempting to get some sort of a stimulus deal done, with a bi-partisan House putting together a deal worth $908bn (£676bn).

But, Republican Senate leader Mitch McConnell shot down the efforts saying, president Donald Trump would never approve and that both sides will continue talks in good faith. Meanwhile, president-elect Joe Biden said any pact this year will not be enough, and congress will need to act again in January.

The pandemic continues to ravage many States, which are buckling under record infections, hospitalisations and deaths — with healthcare systems pushed to breaking point.

The country is recording a daily case average is 210,000 and deaths are averaging 1,800 per day. Meanwhile, on Thursday the number of Americans hospitalised with COVID-19 hit a record high at 100,667.

On Thursday, the FDA meets to discuss whether to recommend emergency use authorisation of the COVID-19 vaccine developed by Pfizer (PFE) and its German partner BioNTech (BNTX).

The US health advisory panel will be under pressure after the UK has given the Pfizer-BioNTech vaccine emergency use authorisation, last week — becoming the first country in the world to do so.

While markets didn’t move much in the aftermath of the UK Medicines and Healthcare products Regulatory Agency approval, any sign that the FDA is on course to approve could warrant a bigger reaction, as it might be a sign that more nations will follow suit.

Britain has said it is ready to give the vaccine to people over 85 years of age and frontline workers.

Once the FDA meets, attention turns to the vaccine rollout as well as comment from the incoming Biden administration or incumbent Trump’s, depending on how quick the turnaround is.

The FDA will focus on Moderna (MRNA) talks the week after.

Data wise, the monthly consumer credit number is on Monday, followed by revised non-farm productivity on Tuesday, the Job Opening and Labour Turnover Turvey (JOLTS) job reading on Wednesday, inflation and jobless claims on Thursday, and rounding up the week, PPI and consumer sentiment on Friday.

Watch: How the Pfizer/BioNTech vaccine is being rolled out - and who will get it first