Bank of England interest rate decision, EU-Japan trade deal
The FT's Veronica Kan-Dapaah on the main stories to watch for this week, including the latest interest rate decision from the Bank of England, the ratification of an EU-Japan trade deal and second-quarter results from FedEx and Nike
Written by James Sandy, Chris Giles, Robin Harding, Mamta Badkar and Peter Wells. Filmed by James Sandy and Rod Fitzgerald
Here are some of the big stories we'll be watching this week. The Bank of England will announce its latest decision on interest rates. The European Council is set to ratify the EU-Japan free trade agreement. And we'll have second-quarter results from FedEx and Nike.
First up, the Bank of England will announce its latest interest rate decision on Thursday. This underpins interest rates across the UK. The announcement comes just days after UK labour market data revealed that British wages are growing at an annual rate of 3.3 per cent.
Consumers also spent freely over the hot summer months, in a positive sign for the UK economy. In August, the Bank of England responded by raising interest rates to 0.75 per cent, the highest they've been since the financial crisis. But as our economics editor Chris Giles explains, uncertainty around Brexit is likely to halt any further rate rises for now.
The positive mood in the UK economy has damped down quite a bit this autumn. We had a very strong summer in the UK economy, particularly people going out and spending in very, very good weather. Now the latest data suggests that in the autumn, consumers are much more cautious.
But if this is just the Brexit uncertainty issue, and if that uncertainty were to clear quite soon, then you might expect the economy to start growing faster again. And again, the Bank of England, I think, in those circumstances, would be quite quick to raise interest rates up to 1%, still not a very high level. But they would want to show that they are getting a grip with inflationary pressure in the UK economy.
The European Council is poised to sign off an EU-Japan free trade agreement this week. The deal between two of the world's biggest economic blocs will strengthen the roles of Brussels and Tokyo in setting global product standards. Following US President Donald Trump's withdrawal from the Trans-Pacific Partnership Trade deal in 2017, this agreement also signals the EU and Japan's commitment to global free trade. The FT's Robin Harding has this analysis.
Signing off has political significance to both sides. Exposing Japanese farmers to foreign competition is supposed to drive improvement in a very inefficient sector of the Japanese economy. For Brussels, this shows the EU can get trade deals done after it struggled to ratify a similar agreement with Canada.
The big question is what comes next for global trade? The US is still pushing for concessions from all sides. But with a web of free trade agreements now linking the EU, Japan, Canada and others, one exciting possibility for the future is bringing them all together in some way.
Now to the United States, where FedEx will post second-quarter results on Tuesday. Investors will be keeping a close eye on the company's performance as it reacts to market turbulence and a deepening trade war between China and the United States. There is also cause for concern closer to home. The surprise retirement of David Cunningham, head of FedEx Express, could spell trouble for the company's largest division, as Mamta Badkar reports.
Parcel delivery company FedEx, which is considered an economic bellwether, reports results at a time when fears of a global economic slowdown are weighing on markets. Now headed into the quarter, the company had assumed moderate growth and stability in global trade in its forecasts. And investors will watch for updates on these assumptions when FedEx reports results.
Investors will also pay close attention to the company's Express Unit, which is its largest division. Earlier this week, the company announced the surprise exit of the head of FedEx's Express business and some analysts suggested that this could signal a reduction or delay in its profit improvement target. Any commentary on the impact of Amazon's delivery network will also be closely watched.
And finally, Nike will publish earnings results this week. The company's performance over the second quarter will reveal how Nike's customers responded to a controversial advertising campaign launched in August. The "Just Do It" campaign featured former American football star Colin Kaepernick, who knelt during the US National Anthem in protest against police brutality. Nike's customers reacted strongly to the brand's choice of Kaepernick, with many taking to social media to express their feelings. The FT's Peter Wells has more.
One of the most interesting things about Nike earnings this week is that this is the Colin Kaepernick quarter. So that's one thing that investors will be looking out for, whether there is a bump or any loss of sales as a result of that decision. The other key thing is just overall sales momentum in the North American market.
Nike, for most of 2018 financial year, had seen sales sliding as it lost ground to its main competitor Adidas, which has been putting out lines of its interesting and popular Yeezy sneakers from Kanye West. But in the first quarter of 2019, they managed to see positive sales momentum in the American market. And investors will be keen to see whether that momentum can be maintained in the year ahead.
And that's what the week ahead looks like from the Financial Times in London.