The US-China trade war will continue to hang over the markets this week, and is expected to weigh on growth, along with the tech slowdown, when Japan reports its first-quarter gross domestic product figure on Monday. Still, big as Donald Trump and Xi Jinping’s stand-off is, it is the elections in Europe that take centre stage.

European elections

On Thursday Europe begins elections for a new European Parliament. The vote will run until Sunday and, with 400m people eligible to take part, it is the world’s largest exercise in transnational democracy.

Both the main centre-right and centre-left blocs are expected to lose ground, with rightwing Eurosceptic parties as well as pro-EU reformists and greens set to make gains. Britain will also be electing MEPs after the UK government’s failure to deliver Brexit on March 29.

The feeling among commentators in Brussels is that it will take a coalition of three or four different political groups to form a majority in the EU parliament, which will be key to appointing the next European Commission president. The election begins a period that could last weeks or months of putting in place the new leadership of the commission and other EU institutions.

Background reading

India results

The first hint as to who has the advantage in India’s mammoth seven-stage general election will come after the polls close on Sunday and media outlets can finally report on exit polls after nearly six weeks of voting.

But Indians must wait until Thursday for the official count. First projections last week pointed to prime minister Narendra Modi’s ruling coalition falling short of a majority, raising hopes within the main opposition Congress party that it will be able to cobble together a coalition and return to power.

● Modi faces unlikely challenge as Indian polling draws to an end

On Wednesday Indonesia is due to confirm unofficial polls showing that incumbent Joko Widodo beat ex-general Prabowo Subianto in last month’s presidential election.


President Donald Trump will travel to Japan on Saturday for a three-day visit. North Korea and trade are expected to be high on the agenda when the US president meets Japan’s prime minister Shinzo Abe. Mr Trump is also scheduled to meet Japan’s new Emperor Naruhito, who ascended to the throne earlier this month after the abdication of his father Akihito.

Central banks

The South African Reserve Bank meets on Thursday. Its policy rate was unanimously left unchanged at 6.75 per cent at its March meeting and no change is again expected.

Nigeria, Israel and Egypt announce rate decisions this week, again with no changes likely.

Investors will look for clarity on how transitory the Federal Open Market Committee believes recent weakness in economic activity and inflation to be when the central bank on Wednesday releases minutes of its May meeting.

Committee members voted to hold rates steady, as expected, in response to muted inflation and economic uncertainty. The Fed has adopted a wait-and-see approach to interest rates, and some officials have suggested they could lower rates if inflation growth does not pick up. Fed chair Jay Powell said during a news conference after the meeting he did not see a strong case to move rates in either direction.

The minutes of the ECB’s April meeting are also out on Wednesday.


Ahead of the latest round of first-quarter US corporate earnings, the consensus among analysts was that profits would shrink. However, with about 90 per cent of listed companies having reported, the results instead reveal modest growth in net income of 0.2 per cent, according to Credit Suisse data.

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The increase seems small but it is significant: it means US companies have managed to boost earnings without the aid of last year’s corporate tax cuts, which boosted the profitability of US groups by about 23 per cent. However, there are fears growth in US earnings has peaked. Markets Questions has more on this.

Retailers are at the forefront in the US this week. Big-box chain Target, electronics retailer Best Buy and home-improvement stores Home Depot and Lowe’s are due to report quarterly financial results. JC Penney, Nordstrom, Ross, Kohl’s and TJX will also have earnings updates.

Outside of the retail world, there will be earnings reports from HP, Toll Brothers, Ryanair and Tata Motors.

In the UK high street bellwether Marks and Spencer will be the hot topic on Wednesday when it reports full-year earnings. M&S is expected to post a renewed decline in clothing and homeware sales in its latest quarter, damping the relief felt for the previous three months when it reported a first increase in nearly two years. The retailer is also forecast to report a 14 per cent fall in profit for its 2016-17 financial year, reflecting lower sales and higher employment costs. It is, however, expected to maintain its dividend payment.

Royal Mail is expected to report significantly lower annual profits on Wednesday as letter volumes continue to decline. The postal service has been reviewing its operations and testing new methods including automation for deliveries.

Soft-drinks maker Britvic, food-ingredient maker Tate & Lyle, power operator SSE, children’s goods retailer Mothercare and water groups Severn Trent and United Utilities also report this week.

Metro Bank faces a potential investor backlash at its annual meeting in London, with some shareholders opposed to the re-election of key directors over an accounting error that forced it to raise £375m in a discounted share placement to shore up its balance sheet.

● Metro Bank’s woes are a warning: watch the metrics

Economic data

Japan’s first-quarter GDP data are out on Monday and analysts predict growth to be near the zero mark. Some expect a slight fall into negative territory while others, citing strong domestic demand and an unemployment rate of just 2.5 per cent, forecast a dip into recession will be narrowly avoided.

The reading takes extra significance because Japan holds elections for its upper house in July, while a decision must soon be made on whether to raise consumption tax.

Inflation data out on Friday are likely to show Tokyo’s inflation goal of 2 per cent is a long way off.

Analysts will on Thursday parse the more detailed release of German GDP figures after the first reading of the world’s fourth-largest economy earlier this month showed a better than expected rebound to 0.4 per cent.

France, Germany and the wider eurozone all have purchasing managers’ indices out this week.

In the US there will be fresh data on durable goods orders and sales of both new and existing homes. ING economists have cautioned that durable goods data will be negatively affected by a sharp drop in Boeing aircraft orders.

UK inflation unexpectedly remained stable during March when consumer prices were 1.9 per cent higher than a year ago, the same as in February. City of London economists had expected an increase to 2 per cent. This time the forecasts are that inflation will rise above the Bank of England’s 2 per cent target.

The UK’s retail sales on Friday could once again be volatile, with the sunny Easter weekend likely to play a part. March’s year-on-year figures were more upbeat but were felt to be flattered somewhat by fearful consumers stocking up ahead of Brexit and comparison with 2018’s Beast from the East storm.

Other economic reports coming up include Canadian retail sales and the OECD’s economic outlook.

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