Israelis go to the polls, central banks set rates
The FT's Daniel Garrahan previews some of the big stories in the week ahead, including Israel's second general election this year, the Bank of England, the Bank of Japan and the Federal Reserve all meeting this week to set interest rates and results from FedEx
Filmed by Nicola Stansfield and Bianca Wakeman. Produced by Daniel Garrahan. Written by Daniel Garrahan, Simon Greaves, Chris Giles and Robin Harding
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DANIEL GARRAHAN: Here are just some of the stories the Financial Times will be watching in the week ahead. Israel goes to the polls this week, again. The Bank of England, the Bank of Japan, and the Federal Reserve are all meeting this week to set interest rates. And FedEx reports first quarter results.
First, to the Israeli general election on Tuesday. It's the country's second vote this year, and it could result in Prime Minister Benjamin Netanyahu securing a record fifth term in office, or it could mean the end of his long political career. It comes after Mr Netanyahu failed to create a new coalition in April and instead engineered a fresh vote. Recent polls suggest that his Likud party is neck and neck with Benny Gantz's Blue and White party, but neither are predicted to have an outright majority.
Mr Gantz, a former military chief of staff, draw support both from secular voters hawkish on security and Israelis tired of Mr Netanyahu's decade-long fractious premierships. Mr Netanyahu has instead focused entirely on right wing Israelis, hoping to boost turnout by reviving unfounded fears of election fraud from Arab voters and vowing to make Israel's hold on the occupied West Bank permanent. That's helped him to counter the threat of allegations of corruption. The polls show that he'll struggle once again to cobble together a governing coalition.
ANDREW ENGLAND: The main reason he couldn't get a coalition together last time is because his former defence minister, Avigdor Lieberman, refused to join his alliance. Lieberman now is polling much better than he did in the previous election, so he could become the kingmaker. And there's a lot at stake because the attorney general will decide whether he's going to indict the prime minister over allegations of bribery, fraud, and breach of trust.
So for Mr Netanyahu, who's been kind of dominating Israeli politics for a decade now, really his future is on the line at this election.
DANIEL GARRAHAN: Now, investors will be eagerly watching first quarter results from FedEx on Tuesday for signs of strength of the American retail sector and consumer confidence. Logistics company is considered to be an economic bellwether, and it's warned that its business is being buffeted by global trade weaknesses. At its full-year results presentation in June, FedEx was cautious about its FedEx Express offering, warning of macroeconomic weakness and trade uncertainty.
Last month it said it would no longer deliver Amazon parcels in the US for ground delivery, instead saying that it would focus on serving the broader e-commerce market. A consensus of analysts' forecasts put adjusted earnings per share for the quarter at $3.17. That's down from $3.46 a year ago, while pre-tax profits could fall from over $1.2 billion to $1.1 billion.
And finally, it looks like this week's meeting at the Bank of England's Monetary Policy Committee is a foregone conclusion. The nine members should unanimously agree to leave UK interest rates on hold at 0.75%. While the Federal Reserve is loosening monetary policy, although not fast enough President Trump, and the European Central Bank are seeking ways to add more stimulus, the Bank of England is aiming to keep out of the limelight.
Politics in Britain is in turmoil, and there'll be no interest rate moves from the central bank until there are some greater clarity over Brexit. Anything else would be toxic. We can expect the Bank of England to sit on its hands at least until the UK leaves the EU at the end of October or extends its membership for sometime longer. If there was a sudden move to leave the EU without a deal, you could expect the bank to swing into action cutting rates to almost zero.
CHRIS GILES: In normal times, the bank of England's Monetary Policy would be considering raising interest rates this week. Why? Well, because unemployment has come down to 3.8%, and regular wages have been growing at 4%, so interest rates would likely rise from the current rate of 0.75%. But it's nothing like normal times at the moment. Brexit is overshadowing everything. And if we get a hard Brexit, a no deal Brexit at the end of October or shortly thereafter, the MPC is much more likely to cut rates than raise them.
DANIEL GARRAHAN: The Bank of Japan, meanwhile, has a difficult decision to make this week, as it meets to set monetary policy the day after the US Federal Reserve is expected to cut interest rates again. With the European Central Bank and other central banks across Asia also in easing mode as they respond to the global economic slowdown, the Bank of Japan is caught in a trap. It has no easy way to provide further monetary stimulus. But if it stands idle, there's a risk the yen will rise and stall Japan's economy.
ROBIN HARDING: As the gap between Japanese and US interest rates narrows, the risk of a sharp appreciation in the Yen to how much Japan's exports increases. The trouble is, the BOJ has few attractive options for doing anything about it. The backlash against negative interest rates has been severe and has already bought huge amount of assets, driving interest rates to zero out 10 years and beyond on the yield curve. Therefore, few analysts expect much to happen this week, although they are increasingly on high alert for action from the BOJ in the near future.
DANIEL GARRAHAN: And that's what the week ahead looks like from the Financial Times in London.