Merkel speech, UK inflation, Walmart results

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Here are some of the top stories we're watching this week. German Chancellor Angela Merkel will set out a vision for the EU. We'll get some key indicators on the health of the UK economy, and earnings season kicks off for US retailers. We'll start in Europe, where German Chancellor Angela Merkel is set to address the European Parliament to set out a vision for the EU at a time of huge political change. Her speech on Tuesday comes just weeks after announcing her decision to resign as chair of the Christian Democratic Union party.

So this address will provide the first signs of how the chancellor intends to approach big European issues during her final stretch in office. As one of Europe's most powerful figures, her looming departure has unsettled some allies in Europe who worry the political transition in Germany might hold back reform efforts in Europe. Ms Merkel's speech to MEPs in Strasbourg will also show whether the chancellor feels more emboldened to take big reform decisions before leaving office, or whether the political constraints facing her government in Berlin will be critical. Here's Gideon Rachman with more on what to expect.

This will be, in a way, a poignant moment because Angela Merkel has been the dominant figure in European politics for about a decade. And although inevitably, she's done some controversial things on, for example, the eurozone bailouts. Broadly speaking she is regarded in Brussels as a friend and a defender of the European project, and people will be a little anxious about the direction that Germany, the most powerful state in the EU, will take in the post-Merkel era.

But Merkel will also have to provide guidance and reassurance about other big issues facing the European Union. There's Brexit, which will happen in March 2019 if it goes ahead on schedule. There's a looming confrontation between the new populist nationalist government of Italy and the European Commission over Italy's new budget plans, which break EU rules. And there are big parliamentary elections for the European Parliament in May, which could see the background being a surge in support for populist eurosceptic parties.

So this is a very big year for the European Union, and it's one in which they, I think, will still look to Angela Merkel, even though she is sliding off the political scene. They'll still be looking to her for a bit of guidance and reassurance.

Now, in the UK we'll be watching for a raft of economic data. Labour market statistics published on Tuesday will include figures on wage growth and employment, while on Wednesday the Office for National Statistics will publish the latest inflation figures. This will give us some insight into how quickly living standards are recovering in the UK this year after the cheaper pound squeezed spending power following the EU referendum. And the last edition of wage growth figures, growth in average earnings excluding bonuses rose to 3.1 per cent in the three months to the end of August. This was the highest rate since 2009. But with inflation of 2.7 per cent in the same period, earnings only grew by 0.4 per cent in real terms. Here's Chris Giles on the outlook for the UK economy.

Following a strong summer for the UK economy, the question this week is whether we're now seeing a pretty sharp slowdown this autumn. Business surveys have been really weak recently with companies expressing quite a lot of concern that Brexit uncertainty means that they don't want to invest, don't want to hire staff at the moment. And so the data this week will be a good test of whether these survey indicators, which should be negative, are now reflected in the official data. If it's positive, that means the rest of the year might well be quite strong still. If it's negative, then I think we can say that Brexit is really having quite a depressing effect on the UK economy. And the quicker any deal is done, the better for next year.

And finally, earnings season for US retailers gets into full swing this week with third quarter reporting from several of the sector's largest companies. On Thursday, Walmart, the world's biggest retailer, will publish its results, while on Tuesday the home improvement chain Home Depot reports their third-quarter results. The recent bankruptcy of department store Sears points to persistent challenges facing bricks and mortar companies, but much of the rest of the sector is actually coping better with the ecommerce threat.

The retail industry is benefiting from a robust US economy and strong consumer spending. Even Macy's, the struggling department store chain, is expected on Wednesday to post a year on year rise in same store sales of about 2.5 per cent. Here's Alistair Grey with more on the state of the US retail sector.

The earnings come at a time of strength in share prices for US retailers. Walmart's jumped about a quarter since lows in May. Wall Street's become more comfortable that Americans are still spending in bricks and mortar stores in the age of Amazon. Sales and profits are being supported by a strong economy. Walmart's like for like sales are expected to be up almost 3 per cent from a year ago. The company's been pushing various initiatives to better compete with ecommerce rivals, from curbside pick-up to same-day delivery.

Home Depot like-for-like sales are expected to be even stronger at 4.7 per cent. The figures come ahead of what's expected to be a buoyant Christmas shopping season, but there are still big questions about the threat from internet retail. Investors will also be keeping a close eye on how the companies respond to price increases that are being pushed through by several of their largest suppliers.

And that's the week ahead from the Financial Times in London.