US-Turkey talks, H&M under pressure
Veronica Kan-Dapaah looks at some of the big stories to watch this week, including the most high-level US-Turkey meeting since President Donald Trump took power, German economic figures and pressure at clothes retailer H&M over its low-price strategy.
Filmed by Rod Fitzgerald and Nicola Stansfield. Edited by Filip Fortuna. Produced by Veronica Kan-Dapaah.
Welcome to "The Week Ahead." Here are the stories we'll be watching in the next few days. US Secretary of State Rex Tillerson arriving in Turkey, where the thorny issues of Kurdish militias and the exiled Turkish cleric Fethullah Gulen threaten to overshadow talks. Meanwhile, economists are more optimistic about the prospects for Europe's largest economy ahead of the publication of economic data. And can Swedish clothes maker Hennes and Mauritz say anything to assuage investor fears as sales decline?
Kurdish militias and the exiled Turkish cleric Fethullah Gulen are expected to feature high on the agenda when Rex Tillerson holds talks with the Turkish president, Recep Tayyip Erdogan. The United States Secretary of State is the most senior member of the Donald Trump administration to visit Turkey so far. Ankara has greeted Trump's election with cautious optimism, but two crucial topics could sour the mood. The first is the issue of cooperation with Kurdish forces in the fight against Islamic State in Syria. The second is Turkey's campaign to extradite Fethullah Gulen, an Islamic cleric based in the US.
The US-Turkey relationship is always crucial, but it's perhaps more sensitive now than it's ever been. Because first of all, Turkey's right in the front line of the war in Syria. Clearly, Donald Trump wants to do something new in the Syrian conflict, but whatever he wants to do, he'll need Turkish cooperation. And that's extremely difficult at the moment, because Turkey is in internal political turmoil after a potential coup last year, which the Turks themselves blame on a US-based cleric, Fethullah Gulen, who they want extradited to Turkey. So that's a very sensitive issue.
And meanwhile, Turkey is also heading up to a referendum on internal political change, where President Erdogan is in a very anti-Western mood after the coup and because of Gulen. And the Americans need his cooperation. They're important NATO allies, the Turks, but they are increasingly difficult allies. So it will be an early test of Rex Tillerson's diplomatic skills.
Data to be published next week is expected to confirm that the German economy remains in good shape. What is more, retail trade figures have in recent years shown that a nation renowned for its savings is experiencing something of a consumer boom.
The doom and gloom on the eurozone's economy is finally lifting, and in its place is a sense of cautious optimism. Next week, we're going to get some data from Germany which is likely to build on that sense of optimism. The three pieces of data that are out next week are retail trade figures. We've also got a business confidence indicator from the Ifo think tank, which is very closely watched and has been doing quite well in recent months. And we've also got the unemployment rate. Now, the unemployment rate is showing that joblessness in Germany is now at its lowest level since the east and west of the country reunified in 1991.
And in Sweden, Hennes and Mauritz will face questions from investors about its performance on Thursday. The Swedish purveyor of fast fashion has already revealed a fall off in income.
H&M have already reported some numbers for the first quarter, their sales figures, and they weren't particularly good. In fact, in February, they recorded their first monthly sales drop in almost four years. That led investors to send shares down to their lowest level since 2013. Now there's a number of concerns. Analysts at Citi felt that the full-year earnings numbers would come down by about 1% to 2% because of this, while at RBC Capital Markets, they're very worried about the gross margin, which is a kind of key measure of retailer's profitability. The one good thing was that February had one fewer day than last year, which was a leap year, and there's a feeling that maybe there's a bit of pent up demand. There's still Easter to come. And so maybe H&M can get back on track in the months to come.
The Swedish group-- majority owned by the Persson family, who provide both the chairman and the chief executive-- has dropped further behind Inditex, the Spanish owner of Zara. According to Bloomberg data, the spread between Inditex and H&M shares reached a record high earlier this month.
And that's what the week ahead looks like from here at the FT in London.