Apple results, Fed decision, UK elections
The FT's Josh de la Mare looks at the main stories making news this week. Including: Apple's results and the latest smartphone sales figures; a decision by the Federal Reserve on interest rates; and difficult local elections for the UK Conservative government.
Studio filmed by Petros Gioumpasis, Nicola Stansfield and Rod Fitzgerald. Produced by Josh de la Mare.
Hello, and welcome to The Week Ahead from the Financial Times in London. Here are some of the big stories we'll be watching in the coming days. Local elections in the UK will severely test Theresa May and the Conservatives. Results from Apple will show if its crucial smartphone sales are flagging, and the Fed makes its latest rate decision amid concerns about inflation.
It's a year since Theresa May won a commanding victory in UK council elections. The voters in England are expected to give a very different verdict on the prime minister and the Conservative party on Thursday. All 32 boroughs in London are up for grabs as are 119 other English local authorities. Labour and the Conservatives will both be trying to benefit from the decline of the UK Independence party.
In London, which voted to remain and swung heavily to Labour in last year's general election, the Conservatives could go below the lowest ever total of counsellors, 519 set in 1994. Sitting governments normally do badly in local elections. Last year was a real exception when Theresa May was at the height of her popularity. It's a very different scenario now when you see the Labour party making real noise with its criticisms around immigration, around austerity and the impact on policing and crime, and then also growing public frustration around housing and the high cost of accommodation around, particularly, the southeast where some of these elections are being held.
The Labour party hasn't had all its own way. It's got allegations around anti-Semitism which have been problematic. So it's not in a particularly brilliant shape going in, but it's still expected to do pretty well. The Conservatives will be pointing towards their selling point, which is the low council tax and particularly in some of the London boroughs, which they have held for a long time.
One wild card in all of this is Brexit. There are an estimated 1.2 million EU nationals living in the UK who are eligible to vote in these local elections who couldn't vote in last year's general election, or they couldn't vote in the EU referendum. Will they use their votes to punish the government for its Brexit plans? The party to benefit from that will be the Liberal Democrats.
Apple's shares have come under pressure in the run up to its results this week after some of its key supplieRs in Asia warned that smartphone sales were flagging. Chip makers are fueling fears that the iPhone X has not turned out to be the massive hit that investors had hoped for, and the high $1,000 price tag has backfired on Apple. However, even if its iPhone sales forecast does come in below expectations, Apple might be able to buy back investors' affections with its pledge to reduce its $163 billion dollar net cash pile to zero.
Also, in the US, the Federal Reserve, which raised interest rates in March, is widely expected to leave monetary policy unchanged on Wednesday. Investors will be focused on what the Fed says about inflation and signs of pressure from the wage data in Friday's jobs report.
Inflation is the common thread running through the Federal Reserve's monetary policy meeting and the US jobs report, both of which are due next week. Concerns about inflation have pushed the yield on the US 10-year Treasury above 3% for the first time since 2014. The minutes of the Fed's March meeting have already showed that some officials see an increased chance that inflation could return to the Fed's 2% target over the medium term. They've also predicted that because of that, the path of rate rises may need to be slightly steeper than they had initially thought. Markets are now trying to determine if inflation is being driven by rising commodity prices, which could be more transient, or if it is, in fact, starting to trend higher. The wage component in the jobs report next week could provide a clue.
John Flint, the new chief executive of HSBC, gives his first results announcements when the global bank reports quarterly earnings on Friday. The bank is expected to report earnings per share of about $0.20, unchanged from the first quarter of 2017. During a road show recently in China, Mr Flint told investors he aimed to return the bank to profitable growth and to use technology to improve cost efficiency.
Three things that investors will be watching closely for when John Flint presents quarterly results at HSBC. Firstly, is he going to accelerate and intensify the shift of resources and capital to Asia where they make most of their profits. Secondly, is he going to take more capital away from the investment bank, which has been underperforming compared to the rest of the group. And finally, what's he going to do with some of the less profitable parts of the HSBC empire, such as the struggling US business, and also its underperforming French retail operations.
In Lebanon on Sunday, May the 6th, there'll be the first parliamentary elections in almost a decade. The tiny Mediterranean neighbour of Syria has remained relatively stable through more than seven years of war next door despite deep historical and political ties to the country, not to mention hosting more than one million Syrian refugees and the fact that Lebanon's powerful Hezbollah movement has sent thousands of flights to Syria. It's the first time the Lebanese will be voting under the country's new electoral law and it could stir Lebanon's entrenched and sectarian political system, but few analysts expect a huge shake up in the country. And that's what the week ahead looks like from the Financial Times in London. Goodbye.