Fed signals, miners reveal earnings
Markets await the Federal Reserve’s minutes of its last meeting for signs of a rate rise. Earnings reports are expected to confirm a recovery in global mining giants’ fortunes. Veronica Kan-Dapaah reports on what to look for over the next seven days.
Produced by Veronica Kan-Dapaah. Filmed by Rod Fitzgerald.
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Welcome to The week ahead. Here's the stories we'll be watching over the next few days. Markets will be on the lookout for signals on potential interest rate moves in the United States, when the Federal Reserve publishes the minutes of its February meeting.
Revival in commodity prices has helped turn around the fortunes of the global mining giants. And investors will want to know how they'll be spending the cash. And the United Kingdom, the second chamber of parliament, the House of Lords, will begin on Monday debating the bill for the country's exit of the European Union. Eyes will be on the Federal Reserve next week as business leaders and market participants look for clarity on when to expect a rise in US interest rates.
The central bank is due to release the minutes of its last meeting on Wednesday. Talk that a move from the Fed could come as early as March has strengthened on the back of positive economic data and comments from Janet Yellen, the central bank's chair. This Thursday miss Yellen said it would be unwise to wait too long before tightening policy.
We can expect to get quite a lot of extra detail from the Fed minutes next week. The February the first meeting was widely regarded as non-committal. They really said very little to move the needle one way or the other on whether they would raise rates in March, just the question everybody wants answered at the moment.
I doubt it will be hugely significant, because we've since that meeting had Janet Yellen congressional testimony, which really did seem to raise the chance of a rate. And because we've still got another dose of all important unemployment rates to come at the beginning of March. But this could give us a lot more of a sense of exactly where the Fed is as they decide whether they're going to go through with earlier and greater rate rises.
A revival in commodity prices has helped turn around the fortunes of big diversified miners, Anglo-American and Glencore, once struggling to survive, they're now seen as veritable cash cows. Investors want to know how they plan to spend the money when they report 2016 results next week. For Anglo, the rebound also raises questions about its fundamental strategy. Following more than 70% drop in its share price in 2015, it promised to restructure by selling off non-core assets and focusing on copper, diamonds, and platinum.
Some company watchers felt that plan stalled in late 2016. And in particular, investors want some certainty and direction for its nickel and coal assets, added to that Anglo is widely expected to have met its $10 billion debt targets, which will likely raise questions about when the company will resume paying its dividend after a two year absence. Meanwhile, Glencore has also spent the last 18 months repairing its balance sheet. And Ivan Glasenberg, its billionaire chief executive now appears ready to use a rebound in commodity prizes as a launch pad for new deals.
With a rebound in commodity prices, these miners have gone from struggling for survival to generating excess cash. So investors want to know, well, what are they going to do with this excess cash and will they return it to shareholders. And Rio Tinto, a fellow, a big diversified miner, raised this dividend last month. So that sort of set the tone for the other miners to increase their dividends.
Turn into the UK where members of the opposition parties in the House of Lords are confidence they have enough votes to amend the Brexit bill, but whether that would truly disrupt Prime Minister Theresa May's plans remains unclear. The House of Lords will begin debating the bill Monday, two weeks after it was passed, largely unchanged by members of the House of Commons. Amendments will include requirements for the government to give greater influence to Parliament in its negotiations with the European Union and to guarantee unilaterally the rights of EU citizens living in the UK.
[INAUDIBLE] votes are not expected to take place until March 7. The government does not have a majority in the House of Lords and could be defeated by an alliance of labour, the liberal Democrats, and cross benches. That would force MPs to reconsider the legislation. If they reject the amendments, the lords might back down, allowing Mrs. May to proceed as planned.
The role of parliament and the lords, in particular, has proved controversial. The government only allowed the legislature a binding vote after the Supreme Court ruled that it is was legally obliged to. Some government figures have since suggested that if the lords blocked the bill, the unelected chamber could be subject to far reaching reform, but that threat has not been endorsed by Mrs. May.
So there are two big political stories this week. One comes in parliament, where the House of Lords is going to start debating the Brexit bill. The government does not have a majority in the House of Lords. So the bill could be amended.
Although, there won't be votes this week. It's just the debate that's starting this week. The second big political event is bi-elections in Copeland and the Stoke-on-Trent Central. That's a real test for Jeremy Corbyn. His labour party is trying to hold onto those seats in the face of a challenge from the conservatives in Copeland and from UK [INAUDIBLE] Stoke-on-Trent Central. What this tells us is that Theresa May and her government are very popular in the opinion polls, but they are fragile in parliament.
And that's what the week ahead looks like from here the Financial Times in London.