Dutch election, Fed rate meeting
A look at some of the big stories in the coming week with Josh de la Mare, including the climax of the Dutch election race, German corporate results from Lufthansa and RWE, and an expected rise in US interest rates as the Federal Reserve meets.
Produced by Josh de la Mare. Edited by Petros Gioumpasis. Filmed by Nicola Stansfield and Rod Fitzgerald.
Hello, and welcome to "The Week Ahead" from the Financial Times in London. Here are some of the big stories we're watching this week-- it's a close race in the final days of the Dutch election; the G20 is set to refine its position on protectionism; Brexit and terror attacks will weigh heavily on Lufthansa; and the Fed's widely expected to raise rates, while in the UK, there's likely to be no change.
Dutch voters head to the polls on Wednesday in the climax of an extraordinarily tight election battle. The centre right People's Party for Freedom and Democracy is the largest party in most polls, just ahead of far right rivals Party for Freedom, led by populist Geert Wilders. Beyond them, the Christian Democratic Alliance are neck and neck with centrist D66. The closeness of the race means that the Netherlands is likely to face months of complicated coalition talks. All the mainstream parties have ruled out forming a coalition with Mr. Wilders, as D66 leader Alexander Pechtold made clear.
I understand people are afraid of Wilders here in the Netherlands, but also abroad. But in our system, he will never become prime minister. He can have many votes, many seats in parliament, but since he doesn't want to work with others-- in my own opinion, it's useless to vote for him, because in the end, it won't help.
And the impact of rising populism globally is also likely to be seen over the border, in the German town of Baden-Baden, at a two-day meeting of G20 finance ministers. In a move to accommodate the more protectionist policy of US President Donald Trump, the meeting's draft communique is set to drop the phrase adopted by G20 finance ministers last year to resist all forms of protectionism.
And staying in Germany, 2016 profits at airline Lufthansa are expected to be down 12% on the previous year. The results will reflect the impact of low oil prices, but also the effects of recent terror attacks, a weaker euro, and a focus, due to Brexit, by low cost airlines on Europe. Patrick McGee in Frankfurt has more.
The passenger figures that we've seen for February were really quite good for Lufthansa. And the price of oil has just been dropping, which should help them. But this is also a company that's been struggling with pilot strikes as they try to cut costs and better compete with the low cost carriers. And the groups like Ryanair have actually been putting more resources into the continent since the Brexit referendum last year. So there really is quite a bit going on for them to comment on, and that's probably likely to overshadow whatever figure actually comes out for that headline result.
Also in Germany, results from utilities RWE and AEON will show both utilities under great pressure as a result of Germany's green revolution, in which abundant subsidised wind and solar energy is squeezing power generated from coal and gas out of the market. RWE and AEON have also been hit by Germany's decision to switch off all its nuclear reactors by 2022.
These results come out against the backdrop of upbeat US economic data and hawkish remarks from a number of Federal Reserve officials, including Chair Janet Yellen. These have led many economists to forecast the central bank will lift rates by a quarter of a percentage point, adding to its December rate rise when it meets next week. However, some think the Fed may await more details on President Trump's fiscal plans.
Meanwhile, the Bank of England's monetary policy committee meets to decide whether or not to make any changes to the UK's current historically low level of interest rates. Since November, the bank's maintained a firmly neutral line, saying the next interest rate move could be as likely up as down. But virtually no one is expecting them to announce any action this week. Instead, markets are pricing in the first interest rate increase for late next year.
In the US, the Fed is widely expected to raise interest rates this week by 25 basis points. Recent good economic data and the communications that come out of the Fed recently have strongly hinted that there will be an interest rate increase there. On this side of the Atlantic, a slightly different story for the Bank of England. In some sense, they're facing a rather similar short-term economic picture, with strong economic growth and decent indicators, but on the horizon is the great uncertainty around Brexit. And for that reason, it seems very likely that Bank of England will maintain their neutral stance of neither raising or lowering interest rates at this point.
The Fed's rate decision will be announced on Wednesday, and the Bank of England's on Thursday. And concerning the US budget, Mr. Trump's administration has previously signalled that it plans to unveil its 2018 fiscal outline by mid-March. It's slated to include a $54 billion rise to military spending, and most other discretionary spending programmes are likely to be cut to pay for it.
And that's what the week ahead looks like from the Financial Times in London. Goodbye.