By Sam Unsted
July 29, 2019
It’s a huge week for the global economy, topped by U.S. data, the Federal Reserve and U.S.-China trade talks starting again. On trade, negotiators will meet in Shanghai with expectations for a breakthrough pretty low; they probably took a further hit from President Donald Trump opening a new front in calling on the World Trade Organization to crack down on countries that he feels shouldn’t be allowed to be classed as developing. Note too Chinese industrial profits dropped in June and there are early signs the country’s economy weakened further in July, demonstrating the concerns the trade war is creating.
The U.S. economy is going to hog a lot of attention this week. There’s a dump of data on the way but the main event will be the Federal Reserve, where the potential the bank will cut rates for the first time in a decade is sparking serious debate for traders about what will happen next. Chairman Jerome Powell seems to like a hot economy, seeking to extend the benefits of a boom to those areas of the country that often miss out. But it will all come in the shadow of ongoing, public debates in the Trump administration about taking the extremely rare move about intervening in the dollar.
Exchanges and Takeout
A big selection of weekend M&A chatter to get one’s teeth into as the week begins. London Stock Exchange Group Plc is in talks to buy financial data and trading platform outfit Refinitiv in a $27 billion deal that would boost its fastest-growing unit. Dutch food delivery firm Takeaway.com NV is eyeing a bid for Just Eat Plc, its U.K. equivalent, in a deal that comes not long after Amazon.com Inc. made a hefty investment in Deliveroo, a rival to Just Eat. In the U.S., also keep an eye on drug giant Pfizer Inc., in talks to combine its off-patent unit with Mylan NV.
Boris Johnson’s first week as the U.K.’s prime minister will likely be dominated by the question of how much of a real prospect a no-deal Brexit now is. The government certainly thinks the likelihood of that is much higher and Johnson has reportedly created a war cabinet to manage such an eventuality. Labour’s Jeremy Corbyn is ready for an election, he says, should that be how things shake out. Johnson wants the backstop, the key hurdle for the deal previously rejected by U.K. lawmakers, taken out. Bond traders will be watching closely how those demands go down and more keenly than the Bank of England’s rate decision.
Asian stocks slipped with the trade talks about to start again and hesitation before the Fed. European futures are pointing to a mixed open. Irish budget airline Ryanair Holdings Plc has reported a drop in first-quarter profit and Dutch beer giant Heineken NV’s first-half volumes missed expectations. Still to come we’ll have more on the state of the U.K. consumer from mall owner Hammerson Plc, plus data in the form of mortgage approvals in the U.K. and inflation from Spain, a country still engulfed in political wrangling.