Boris Johnson
Boris Johnson is set to present the UK’s ‘integrated review’ of foreign and defence policy © POOL/AFP via Getty Images

The UK will herald a shift towards Asia when it sets out its foreign and defence policy this week. It will be a busy few days for central bank meetings this week, including three of the big hitters — the US Federal Reserve, Bank of England and the Bank of Japan — with the focus on inflation fears and yields. China also gets its first hard data of the year with a boom in activity forecast. The US also has some key data points this week, notably industrial production and retail sales.

UK foreign and defence policy

Boris Johnson’s government will on Tuesday set out its “integrated review” of foreign and defence policy, highlighting the economic opportunities of Asia and the potential strategic threat of China.

Critics argue that Britain’s new focus on the Asia-Pacific region will not offset the economic and diplomatic damage caused by the UK leaving the EU, by far its biggest commercial partner.

Although the review will assert that Nato and the transatlantic relationship with Washington remains the bedrock of UK security, it will provide a shift of focus to Asia.

UK ministers admit that the agonies of Brexit turned Britain in on itself, while the pandemic compounded that problem. Apart from attending international events and short visits to EU capitals, the premierships of Johnson and his predecessor Theresa May involved few foreign diplomatic engagements.

The review will set out a “Global Britain” policy focused on structures such as Nato and the bilateral “E3” relationship where the UK, France and Germany have created a joint Iran policy outside of the EU framework.

But much of the focus will be on the Asian tilt, seen through the prism of Britain’s newly hawkish stance towards China: the UK is now more closely aligned with Washington than Paris and Berlin on its approach to Beijing. 

Although the review will assert that Nato and the transatlantic relationship with Washington remains the bedrock of UK security, it will provide a shift of focus to Asia. 

Elsewhere . . . 

  • Dutch voters go to the polls in a general election expected to be dominated by the country’s handling of the coronavirus crisis. Polls will be open from Monday until the end of Wednesday instead of the regular single day of voting.

  • Italy’s government is also considering new restrictions which could include some areas being put into red zones as the country struggles to reduce coronavirus infections.

  • Eurozone finance ministers meet this week to discuss the impact and structural changes brought by the pandemic. They will also consider exchange rate and inflation developments as they prepare for the bloc’s March summit as well as the IMF, World Bank and G20 meetings.

Earnings reports

Total sales will be in the spotlight at Greggs, the UK bakery chain renowned for its sausage rolls, after the company announced in an earlier trading update that total sales for the 12 months to January 2 dropped more than 30 per cent to £811m from 2019.

Greggs is expected to report a pre-tax loss of up to £15m for its financial year, its first annual loss since listing in 1984. However, the chain was bullish in January saying that it plans to open 100 new shops this year.

It has been a bumper year for Zalando as the pandemic pushed shoppers online. Since the 2014 initial public offering, Zalando’s market capitalisation has more than quadrupled to more than €20bn and investors will be keen to learn if the quarter marks another period of strong growth for the online retailer.

Sales are also expected to have grown for Volkswagen in the second part of 2020. The carmaker, which includes brands such as Audi, Porsche and Seat, has said the final three months of last year were even stronger than the previous quarter, in which it made €3.6bn in pre-tax profits.

Earnings from the group’s operations in China — its largest and most profitable market — will largely be reported separately as they are run as joint ventures, VW confirmed.

China is also BMW’s largest and most profitable market. China’s fast recovery has prompted an increase in sales for BMW, which in the region have surged more than 31 per cent in the quarter to the end of September compared with the same period in 2019.

The rebound in demand helped BMW report a pre-tax profit of €2.5bn in the third quarter, up from €2.25bn in the same quarter last year. However, the manufacturer said its automotive business could still make no profit for the whole of 2020.

Demand for parcel delivery during the pandemic is set to boost FedEx sales, after the company already benefited from an online shopping boom in the run-up to the US holiday season peak, when it reported its highest quarterly sales on record.

FedEx, which has a global network spanning 680 aircraft, 200,000 vehicles and 600,000 employees, has acquired the status of one of the biggest corporate winners from the coronavirus crisis, posting in December quarterly revenues across the group up 19 per cent year on year to $20.6bn.

Nike is set to enjoy another sales boost as people worried about exercising indoors continue to buy items for outdoor activities.

Accenture is also likely to receive a boost from demand for its consulting and outsourcing services as working from home continues.

Saudi Aramco, the world’s biggest oil producer, will unveil its full-year earnings for 2020 before the Saudi Arabia market opens for trade this coming Sunday, when investors are expected to focus on output, dividend and crude production forecasts.

Main reports


Volkswagen; Geox; H&M (trading update);


Zalando; Greggs; Iliad; Antofagasta


BMW; Lennar; Capita


Accenture; Dollar General; Vodafone; FedEx; Enel; Fever-Tree Drinks; Ocado (trading update); National Express


JD Wetherspoon


Saudi Aramco

Central banks and economic data

The Federal Reserve convenes for its policy meeting this week at a pivotal point for the US economic recovery, prompting speculation about its plans to manage a rise in borrowing costs.

Since its previous gathering in late January, trading conditions in the nation’s $21tn government bond market have at times turned choppy.

Yields, which rise as prices fall, have shot higher, and the benchmark 10-year note now trades at a 13-month high of more than 1.6 per cent. The swift surge has rattled equity markets, especially the high-flying technology sector that has benefited from historically low interest rates.

The moves reflect growing optimism among investors about the pace of the economic recovery, but also percolating fears that the Fed may raise interest rates at a faster pace than many anticipate. 

The Bank of England faces a very different market environment on Thursday to the one at its previous interest rate-setting meeting in early February.

In the intervening six weeks, global financial markets have been unsettled by a sharp rise in inflation expectations after a vaccine-fuelled improvement in the economic outlook. In the UK, yields on 10-year gilts, which rise as prices fall, have jumped from less than 0.4 per cent to close to 0.8 per cent in reaction to inflation concerns.

That leaves the bank’s Monetary Policy Committee with the task of deciding how and when to tackle a possible resurgence in inflation. Last week Andrew Bailey, BoE governor, said the risks of rising inflation were “increasingly two-sided”, although he said the bank was not about to raise rates.

No change in policy is expected when the Bank of Japan meets, but it is expected to unveil a review of its monetary policy strategy.

While there are no signs of any big shake-up, Deutsche Bank analysts have dubbed the gathering the “most awaited and least predictable” policy meeting since the introduction of its yield curve control policy in 2016.

Turkey will also be closely watched this week, when the central bank could well deliver one of the first G20 rate rises of 2021 as monetary officials try to rein in inflation.

Further reading

On the data front China’s industrial production will cover the period of the lunar new year celebrations, when Covid-19 fears meant the usual travel to visit families was discouraged and many factories remained in operation.

As such, performance is forecast to be better than previous years over the same period. Commodity, retail and catering services consumption is also expected to have picked up.

In the US investors will focus on retail sales, industrial production, housing starts and weekly jobless claims to gauge the strength of the recovery as the vaccine rollout continues and restrictions are reduced across more states.

Key data and events


China, retail sales (Feb)

China, industrial production (Feb)


Germany, Zew survey (Mar)

US, retail sales (Feb)

US, industrial production (Feb)

Japan, trade balance (Feb)


US; Brazil, rate decisions

New Zealand, GDP (Q4)

Eurozone, HICP inflation (Feb, final)


UK; Turkey; Norway; Taiwan; Egypt; Indonesia, rate decisions

US, initial jobless claims

Japan, CPI (Feb)


Japan; Russia, rate decisions

Canada, retail sales (Jan)

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