Spain election, UK rate decision, half-year results from Toyota
The FT's Josh de la Mare on some of the top stories the FT will be watching this week, including the UK Bank of England decision on interest rates, half-year results from Toyota, an election in Spain, and the 30th anniversary of the Berlin Wall's fall
Written by Simon Greaves. Produced by Josh de la Mare. Studio filmed by Bianca Wakeman and Rod Fitzgerald.
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Here are some of the top stories the Financial Times will be watching this week. The UK's Bank of England decides on interest rates as the country prepares for a general election amid deep divisions over Brexit. Toyota and Mitsubishi bring out results which will show the impact of a strong yen this year, driven higher by the US-China trade dispute. Spain has its fourth election in four years, as prime minister Pedro Sanchez tries to cling on to his position. And Germany marks the anniversary of the fall of the Berlin Wall.
First, on Thursday, the Bank of England announces an interest rate decision. At its last meeting in September, the central bank's Monetary Policy Committee voted unanimously to keep interest rates at 0.75 per cent. Previously, the bank has described holding rates as a wait-and-see approach to Brexit. But it may consider more decisive action this week, with high uncertainty in the economy.
The Bank of England this week makes its latest decision on interest rates amid political turmoil, a general election, and the Brexit shenanigans still ongoing in the UK. Now, most likely this means that it will vote not to change interest rates from the current level of 0.75 per cent. But in late September, it was very interesting, for the first time announcing that it might consider a cut if uncertainty continues. Well, uncertainty is huge in Britain at the moment, so the real thing we'll be looking for is whether any members of the Monetary Policy Committee actually do vote for a cut in interest rates to 0.50 per cent because of the ongoing uncertainty slowing the economy and causing inflation to fall. I think it's pretty unlikely that there will be a majority in that position, but we might see a little bit of dissent on the committee for the first time in many, many months.
In Japan, investors will be watching the impact of the strength of the yen on half-year results from two leading companies - Toyota and Mitsubishi. Toyota, one of Japan's largest car makers, saw in August a nearly 9 per cent rise in first-quarter profits, thanks to a slight increase in car sales and improved marketing costs. But Toyota has also warned that its annual operating profit will fall for the first time in four years, as the US-China trade disputes drove the yen higher. Meanwhile, Mitsubishi, Japan's biggest trading house, will also give indications of the impact to the currency over the last year. It has seen a boost to income from its energy operations, benefiting from higher prices for commodities such as oil and coal.
Spain is heading for more political paralysis after it holds yet another general election next Sunday. Opinion polls suggest no party or political bloc will get a majority. Prime minister and socialist leader Pedro Sanchez called the election last month, hoping to strengthen his hand after he failed to gather enough backing to govern, following a snap vote in April. But his party is expected to lose seats amid unrest in Catalonia, voter fatigue, and slowing economic growth.
Spain is stuck in a cycle of political instability. It's now heading for its fourth general election in four years. In the general election in April, the Spanish socialist party, led by Pedro Sanchez, emerged the winner. But it fell well short of an absolute majority. And after several months, it failed to strike a coalition agreement with the far left Podemos party. Hence the new elections on November the 10th.
There are two problems. One is political fragmentation. Spain used to be governed ultimately by left and by right. Now it is a five-party system. It is also increasingly polarised. Spain used to be governed alternatively by a centre left bloc or a centre right bloc. But now, neither the left nor the right are likely to have a sufficient majority in parliament to govern on their own. And there is no tradition of coalition. That used to be provided by moderate nationalists from the Catalan region and the Basque country. But given the backlash over Catalan independence movement of 2017 and the failed independence push, the Catalan nationalist parties are now too toxic for the mainstream Spanish parties to do business with.
Finally, Germany marks the 30th anniversary of the fall of the Berlin Wall on Saturday, with 200 public concerts and commemorative gatherings. The wall divided the city's West German enclave from communist East Germany, an emblem of Cold war era separation of west and east.
On the surface, Berlin today is a vibrant European capital, like many others. Thirty years ago, however, it was symbolic of the division that had fallen across the world during the Cold war. That division took physical form in Berlin, where a concrete barrier, guarded by mines and machine guns, partitioned the city between east and west. The so-called Iron Curtain finally cracked open on the night of November 9th, 1989, when East German authorities announced the easing of travel restrictions to the west, following waves of popular opposition to the ruling Communist party. Following the announcement, the wall was mobbed by tens of thousands of jubilant Berliners. Images of them flooding through checkpoints and climbing on top of the wall, unthinkable before that day, have come to represent not only the first steps towards the reunification of Germany, the fall of the Berlin Wall was also a harbinger of the collapse of the Soviet Union two years later, and with it, the end of the Cold war.
Unified Germany has thrived economically and politically, embracing democracy, pacifism, and European unity. New threats loom, however. As the German economy reels from the impact of trade wars, right-wing populism rears once again in Europe and Brexit threatens to destabilise the European project.
And that's what the week ahead looks like from The Financial Times in London.