Trade war fears dominate IMF and World Bank meetings, Cuban era ends
Daniel Garrahan previews some of the big stories the FT is watching in the week ahead, including the IMF and World Bank meetings in Washington, first-quarter results from Unilever and three of the big six US banks, and the end of an era in Cuba, as Raul Castro steps down as president.
Filmed by Rod Fitzgerald. Produced by Daniel Garrahan
Hello, and welcome to "The Week Ahead" from the Financial Times in London. Here are some of the big stories we'll be watching this week. Fears of a US-China trade war are set to dominate the IMF and World Bank meetings in Washington. First quarter result season is in full swing. We'll be looking at earnings from the consumer goods group Unilever and three of the big six US banks. And it's the end of an era in Cuba, as Raul Castro steps down as president.
First to Washington, where fears that the US and China are heading towards a trade war are set to dominate discussions at this week's spring meetings of the International Monetary Fund and the World Bank. Christine Lagarde, the IMF Managing Director, says the fund remains optimistic about the state of the global economy. It predicted 3.9% growth for the world this year back in January, and it's likely to reinforce that forecast, or tinker only modestly with it, when it releases its new estimates on Tuesday. But the IMF's also increasingly concerned about the rising threats of protectionism and the tit-for-tat tariff wars that the US and China have begun to engage in, as our world trade editor Shawn Donnan reports.
On Tuesday we'll get the IMF's semiannual forecast for the global economy. Last time we heard from them in January it was a prediction of 3.9% growth for the global economy this year. That may be-- that's likely to stay put. But it's also likely to have a big shadow of trade fears cast over it. Also look later in the week for Christine Lagarde to repeat her calls for the world's leaders to calm down and to not take the world into a trade war. Last we heard from her last week in which she said that doing so would be a major policy mistake.
Now, Raul Castro will step down as President of Cuba on Thursday, 10 years after formally taking power from his brother, Fidel. He's said to be replaced by the Vice President Miguel Diaz-Canel. The presidency is a largely symbolic role, and Mr Castro is expected to remain head of the party and the army. But it'll be the first time since 1976 that a Castro brother hasn't held the post between them. They ruled Cuba for 60 years.
Although the change is of huge symbolic importance and marks the end of an era, little is likely to change, at least not immediately, given the transition is from president to vice president. But some change in the future is inescapable. The government is desperate for tourist dollars. And it's under pressure to reform its crumbling Soviet-style economy. And now to Unilever.
The Anglo-Dutch consumer goods group reports first-quarter revenues on Thursday. The company behind Dove soap and Knorr stock cubes had a strong finish to the year, with the best growth in volumes in 10 quarters, thanks in part to a recovery in emerging markets. Unilever's a good bellwether for emerging markets' performance, since it makes almost 60% of its sales in these countries.
The question is whether this momentum can be sustained in the first three months of this year, with an uptick in mature markets. Unilever also kicked off a political storm over Brexit last month, when it picked the Netherlands rather than the UK for its single legal base. This has raised big questions for investors, as our consumer indices editor Scheherazade Daneshkhu explains.
So Unilever, last month, dropped its bombshell that it had chosen Rotterdam over London for its headquarters. And what UK investors, in particular, want to know is whether it will be able to remain in the FTSE 100 index. It will be quoted on the London Stock Exchange. But given that its going to be a Dutch company, it looks unlikely that it can stay in the index, unless it manages to persuade the index providers otherwise.
And finally, Bank of America, Goldman Sachs, and Morgan Stanley continue the first-quarter earnings season for US banks this week. And investors we focused on two big questions. First, to what extent do the banks revel in brighter trading conditions, boosted by a return of volatility to their national markets? Results so far from JP JPMorgan, Chase, Citigroup, and Wells Fargo suggest a definite upturn in volumes.
And how well did Goldman do? It was the real laggard on Wall Street last year. But according to the Royal Bank of Canada estimates, it's set the biggest year-on-year rise in trading revenues this quarter, at about 8%. And it will be the only one of the big six to record a double-digit gain for the full year.
The second big question is over the health of retail banking. Are there signs of strain in Bank of America's consumer businesses, such as car loans and credit cards, after years of steadily improving conditions? And as interest rates continue to rise, is the bank finally beginning to pay more for deposits? Here's our US banking editor, Ben McClannahan.
On loan growth, since the Trump administration took over, there's been a weird drop in the amounts of commercial-industrial loans, in particular, that the big banks have been doing. Has the recent revival in the past few weeks, will that continue for the rest of the year? That'll be a key question.
On regulation, there's been some recent moves to relax rules governing capital and liquidity. To what extent will that continue and will that effect the big banks' plans to hand back capital? And, in particular, will effect their plans to do deals?
And that's what the week ahead looks like from the Financial Times in London. See you again next time.