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What to Watch: Merkel stepping aside, UK Budget, Wild stock markets, HSBC surges

Alanna Petroff
Senior Economics Correspondent at Yahoo Finance UK
German chancellor Angela Merkel is also chairwoman of the German Christian Democrats.

Here’s a daily overview of the top business and economic developments the Yahoo Finance UK team is monitoring in the UK, Europe and abroad:

Merkel stepping aside

German chancellor Angela Merkel has announced she will not seek re-election when her term as the country’s leader ends in 2021. She will also not seek re-election as chairwoman of her Christian Democrats (CDU) political party, thus launching a race within the party to succeed her.

Merkel, who leads the largest economy in the European Union, is widely respected around the world. She has been chancellor for 13 years. 

Merkel’s party lost some support in a vote in the western state of Hesse on Sunday, the second electoral setback in as many weeks for Merkel.

The euro dropped sharply against the US dollar and British pound as the news came out, but then quickly recovered. Germany’s Dax index jolted up by roughly 2%.

Merkel’s weakness at home may limit her capacity to lead in the European Union at a time when the bloc is dealing with Brexit, a budget crisis in Italy and the prospect of populist parties making gains at European parliament elections next May.

UK Budget

The UK’s chancellor of the exchequer, Philip Hammond, will outline his government’s spending plans on Monday afternoon. Photo: Jack Taylor/Getty Images

The UK government’s highly anticipated budget will be unveiled on Monday afternoon at 3:30PM local time, giving citizens insight into spending, taxing and borrowing plans.

This is the final annual budget before the UK leaves the European Union in March 2019, and it comes as UK unemployment is at its lowest level in decades but economic growth is significantly below other developed nations.

The new budget will be unveiled by Philip Hammond, who is formally known as the chancellor of the exchequer, but more informally known to outsiders as the country’s finance minister.

He’s been tasked with executing on promises by prime minister Theresa May to end years of austerity and give billions in extra funding to the NHS, the country’s national healthcare service.

“Promises of extra funding for the NHS and ending austerity could signal unexpected announcements, and taxes may have to rise,” said Deloitte’s head of tax policy, Daniel Lyons.

The UK’s Office for Budget Responsibility (OBR) is also set to publish revised forecasts for the economy and public finances on the same day.

Related: Budget 2018: What to expect for the NHS, taxes, pensions and more

Wild stock markets

European shares, set for their worst monthly performance since August 2015, opened in positive territory on Monday in a rebound from a sell-off which has pushed them to a level not seen since December 2016. Many of the main European indices are up by more than 1%.

However, sentiment remains fragile as ongoing worries about China’s slowing economy weighed on Asian shares. The benchmark Shanghai Composite dropped by 2.2% on Monday.

HSBC shares surge

Shares in HSBC (HSBA) are rising by about 6% in afternoon trading in London after the bank reported well-received third-quarter results.

HSBC reported a better-than-expected 28% rise in its quarterly profit before tax, which was bolstered mainly by the lender’s Asia business and stronger loan growth.

The bank reported pre-tax profit was $5.9bn, up from $4.6bn in the same period last year.

US earnings

US earnings season continues with new quarterly reports on Monday morning before the opening bell from Booz Allen Hamilton (BAH). Then Transocean (RIG) and the maker of Oreos and Ritz crackers, Mondelez (MDLZ), will report after the close.

With files from Reuters