The week ahead: UK economic data, interest rates, Japanese GDP

calendarThis week the world will be keeping its eyes on rates ahead of the US Federal Reserve’s decision next week.

Fund Strategy looks at some key events shaping the week and what to expect.

Monday 6 June

  • Janet Yellen speech at World Affairs Council of Philadelphia

Following underwhelming US job figures announced on Friday, the Federal Reserve chairwoman will address the non-profit civic engagement organisation in Philadelphia.

“She may refer to the figures, she may not,” says Russ Mould, investment director at AJ Bell. “But that’s the last time she’ll open up before the Fed meeting on the 14th and 15th.”

  • FundForum International kicks off in Berlin

The three-day conference covers everything from blockchain to the rise of absolute return investing.

  • Society of Motor Manufacturers and Traders (SMMT) releases car sales figures

Tuesday 7 June

  • Australia central bank decision

The Reserve Bank of Australia cut its cash rate to a record low of 1.75 per cent last month and will announce whether it keeps them on hold or cuts them further this Tuesday.

Their decision is followed by the Reserve Bank of New Zealand’s decision due on Thursday, when rates are expected to remain on hold at 2.25 per cent.

“Australia, New Zealand, Denmark, Sweden, the European Union all tried to raise rates 2010, ’11, ’12, and all backed off and ended up cutting them back to where they started,” Mould says.

“I’m sure that’s something the Fed is all to aware of, so we’ll keep our eye on what our Antipodean cousins have to say.”

  • South Africa releases Q1 GDP figures
  • Deadline to apply to vote in the EU referendum

UK citizens wanting to have their say in the Brexit referendum must sign up by midnight.

Wednesday 8 June

  • Chief executive pay to come under scrutiny at WPP AGM

Shareholder advisory groups have recommended voting against chief executive Martin Sorrell’s “excessive” pay packet, which is 196 times higher than the average employee in the advertising and public relations company.

“[Sorrell] points out that when it was Wire and Plastic Products it wasn’t a very well-known company and ever since he’s run it it’s become a fabulously profitable, fabulously successful enterprise,” says Mould.

  • Japan announces its Q1 GDP figures

Rowan Dartington Signature managing director Guy Stephens says: “A seemingly bottomless pit of Quantitative Easing measures has so far failed to ignite any inflation in an economy that has been dogged by deflationary pressures for decades.”

Stephens points out that Japan’s government debt is the largest in the world relative to the size of its economy, standing at roughly 230% of GDP. 

  • ONS – UK Index of Production

IHS Global Insight chief UK and European economist Howard Archer says manufacturing output is expected to have been flat month-on-month in April, which would cause it to be down 1.5 per cent year-on-year.

Overall industrial production is also expected to have been flat month-on-month in April, causing it to be down 0.4 per cent year-on-year, says Archer.

He says: “The suspicion remains that the upside for manufacturing activity is likely to be limited at least until June’s EU referendum is out of the way.”

“Should June’s referendum result in a vote to leave the EU, it seems highly likely that the UK economy would suffer markedly for some time with negative repercussions for manufacturers.”

Thursday 9 June

  • ONS releases UK trade figures

Total UK trade deficit narrowed in March. Exports rose by 1.2 per cent month-on-month while imports inched up 0.1 per cent month-on-month. However, exports rose just 0.4 per cent quarter-on-quarter over the first quarter, while imports increased 1.1 per cent quarter-on-quarter.

Archer says: “UK exports have struggled as they have clearly been hampered by moderate global demand. Sterling’s overall strength in 2015 was also a problem for UK exporters, and there is likely still some lagged impact from that.

“The hope has to be that UK exporters will increasingly be helped by the overall marked weakening of the pound in 2016 although sterling has climbed well off its April lows when it traded at the lowest level since November 2013 on a trade-weighted basis.”

  • Remy Cointreau results

The brandy and luxury spirits maker releases earnings today.

“Obviously we’ve seen a lot of grief in the luxury goods sector over the last 12 to 18 months,” says Mould. “There was the Chinese crackdown in gifting and a slowdown in Asian demand, but the last set of Remy figures weren’t too bad so let’s see.”

Friday 10 June

  • Deutsche Bundesbank hosts its spring conference

The German central bank’s president Jens Weidmann will welcome participants with an address on the interplay of monetary, financial and fiscal stability. 

Last week, ECB president Mario Draghi urged Eurozone government’s to take more decisive action on fiscal and structural policy in order to boost economies, instead of relying on monetary stimulus.