Turkey votes, US banks report results
The FT's Vanessa Kortekaas highlights the main stories in the week ahead, including a referendum in Turkey about presidential powers, US banks reporting first-quarter earnings and inflation data out of the UK.
Filmed by Nicola Stansfield. Produced by Vanessa Kortekaas. Still images by Reuters and Getty.
Hello, and welcome to "The Week Ahead" from "The Financial Times" in London. Here's some of the big stories we're watching in the coming days. Turkish voters will decide whether to grant President Erdogan sweeping powers. We'll get a health check on US banks. And how much are UK consumers feeling the pinch? We'll find out when the latest inflation data is released.
First, Turkish voters are set to go to the polls to decide whether to grant President Recep Tayyip Erdogan his biggest political gamble to date. On April 16, the country's holding a constitutional referendum on granting Mr. Erdogan the most sweeping set of powers ever held by a Turkish leader. This would be controversial under any circumstances, but it also comes as Turkey is under a state of emergency. Scores of journalists, writers, and opposition politicians are in gaol, which has made Turkey's European allies wary and increased fears that this referendum will complete a turn to autocracy for Mr. Erdogan, who's been in power since 2001.
Here's the president speaking earlier this month, appealing for support for the vote.
If Mr. Erdogan wins the referendum, he will have more executive powers, passing decrees, setting budgets, and appointing judges, and the post of prime minister will be abolished by 2019. His critics argue that this outcome would foreshadow the end of Turkish democratic traditions, emasculate Parliament, and lead to one man rule, unchecked by any institution. Pollsters say the result is too close to call.
Now to the US-- where we'll have first quarter earnings from the big US banks when they start reporting on Thursday. JP Morgan Chase, Citigroup, and Wells Fargo are all due to publish their results, and analysts are expecting double digit increases in earnings per share from the same period a year earlier. This is largely thanks to healthier conditions in capital markets and wider interest margins. Here's our US banking editor, Ben McClanahan, with more on what to expect.
I think a strong theme for the first quarter earning season for the US banks is big versus small. If you've got a big investment banking division, if you sell lots of stock or bonds for big companies, then you've probably done quite well. If you've got a big bond trading division, too, you've done much better than a year ago.
But if you're a smaller bank, if you're more focused on supplying loans to companies and households across America, then you probably haven't done quite so well. Since Donald Trump got elected, there's been a mysterious downturn in the aggregate number of loans across the system, and of course, mortgages have dropped a lot since interest rates started creeping higher. So for those banks, the conditions in the first quarter weren't quite so good.
A lot of the focus is likely to be on the outlook for further improvements, assuming the US Federal Reserve sticks to its course of interest rate rises, and the government pushes ahead with reforms on corporate tax and financial regulation. Most executives at big banks in the US are still backing the Trump administration on regulatory reform, even if they don't see eye to eye with the president on everything else.
And finally, are UK consumers already feeling the squeeze from Brexit? We'll find out on Tuesday when UK inflation data from March will be published. We already know that consumer prices rose 2.3% in the year to February, which was the highest rate of inflation since September 2013 and up 1.8 percentage points since last June's referendum on EU membership.
Fuel and food prices have seen sharp rises. But so-called core inflation, excluding these volatile elements, was at 2% in February, which is the highest rate since mid-2014. Chris Giles, our economics editor, has more on what to watch for.
All eyes will be on the inflation data on Tuesday, because it really will show how much Brexit is having an effect on prices in the UK. Are people getting poorer because the pound has fallen so far over the past year, making import prices go up? We've already seen inflation rise to 2.3 percent in February. It's likely to rise further, although there might be a bit of a delay in March, because Easter is at a different time this year. Allied to that, we then look on Wednesday for the labour market data to see whether wages are going up as fast as prices-- most likely they're not. And that's what's going to cause some of the economic problems in Britain this year.
Real wages in the UK fell for six straight years after the financial crisis, followed by two years of recovery. Strong consumer spending has been the driving force behind better than expected economic growth. But this could be threatened if households face another period of retrenchment in real wages. And that's what the week ahead looks like from "The Financial Times" in London. See you again next time.