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Looking forward to next week, the ECB holds its first meeting and press conference for this year. Is inflation heading the EU’s way? Elsewhere, earnings season continues with more and more large caps reporting earnings and Joe Biden finally enters the White House as the Trump era finally comes to an end. 

First ECB meeting  of 2021 

The ECB holds its first meeting and press conference of 2021 on Thursday 21st January against a backdrop of heightened stimulus and a warning for governments to not to be too hasty when retightening their post-lockdown belts. 

Christine Lagarde, ECB President, has warned to avoid against reacting swiftly against any improvement in economic conditions this year if inflation starts to bite. Speaking on Wednesday 14th January, Lagarde predicted a rebound due to “pent up demand” but said this wouldn’t be enough to warrant a major readjustment in monetary policy as this could lead to serious risks. 

The pandemic has led to a sharp rise in household savings across Europe with a corresponding drop in services activity like restaurants, holidays and trips to the cinema. This has contributed to downward pressure on prices precipitated by lower energy costs and VAT cuts in countries like Germany. As such, the ECB inflation rate dropped in the negative in the final months of 2020.  

Another deflation cause is the strengthening of the EUR against USD, which has hit three-year highs recently. Import prices are lower, while exports are higher. 

Prices may start to track higher in the coming months, according to ECB forecasts. Its latest eurozone forecasts suggest consumer price inflation will reach 1% in 2021, and 1.3% by 2023. 

In December 2020, the ECB expanded its main stimulus policy. Its emergency bond-buying programme increased €500bn to €1.85tn. The ECB also readjusted its economic forecasts, cutting them in response to the pandemic’s resurgence across Europe. 

The central bank now predicts a pan-EU growth rate of 3.9% in 2021, factoring in longer lockdown measures. However, it did say that any lockdowns post-March could have severe economic affects. Germany’s latest GDP figures show a 5% contraction, so if the bloc’s biggest economy is suffering, what will the knock-on effect be for the rest? 

Earnings season continues on Wall Street 

Earnings season continues in earnest as the large caps continue a steady stream of Q4 2020 reports. 

US big banks kicked things off last week, with JPMorgan Chase, Citigroup, and Wells Fargo giving their initial reports. This week will see a more varied approach as large cap companies and blue chips across all sectors report. 

Netflix is one of the earnings to watch this week. The market expects the streaming service to deliver a year-on-year increase in revenues, but last quarter’s reports only just beat market expectations. Q3 EPS was significantly below forecasts, at $1.74 against the $2.12 analysts expected. Will this be the case again? Asia-Pacific has been the key growth market for Netflix in the lockdown world, so it’ll be interesting to see if the streamer has been able to build on its earlier gains there while offsetting any potential drops in other geographies. 

Joe Biden inauguration 

President-elect Joe Biden becomes President Joe Biden on January 20th, drawing a line under the Trump presidency. Four years since the billionaire reality TV star took the White House, America is as divided as ever. Could Biden prove the emollient the United States requires to become a little more united once again? 

At the time of writing President Trump is accused of allegedly instigating the recent Capitol Building riots with inflammatory rhetoric and is about to be hit by his second impeachment trial of his term. No US President has ever been impeached twice during their term. Even with under a week to go for his full term, Trump could be removed from office and may even face criminal charges – an ignominious end to an sometimes less-than-dignified presidency. 

But what about the start of the Biden era? How will markets react? There are several factors to watch out for as Biden starts his term, such as: 

  • Fiscal stimulus – Investor confidence could be bolstered by potential stimulus packages Biden is expected to introduce. He has vowed “trillions” in stimulus once he enters the White House. The Federal Reserve could also continue giving major supports to markets during the new era’s first couple of weeks. 
  • Foreign trade – Biden is expected to take a multi-lateral approach to foreign trade, and his policies could be more reconciliatory compared with Trump’s more chauvinistic approach.  
  • Covid-19 – After a laissez-faire approach to pandemic control Trump’s administration deployed, Biden is said to favour a more hands-on approach. His plans include a speedier vaccine rollout, a more detailed plan to get children back into school and asking all Americans to wear masks for the first 100 days of his term to combat the virus spread. Essentially, measures to make it so more citizens can get back to work and get the economy rolling again. 

Upon Joe Biden’s election in November, the S&P500 rose 5.2%. Will his inauguration cause the same positive bump for this index? 

Major economic data 

Date Time (GMT) Currency Event 
Mon Jan 18 2.00am CNH GDP q/y 
    
Tue Jan 19 7.00am EUR German Final CPI m/m 
    
Wed 20 Jan 7.00am GBP CPI y/y 
    
 1.30pm CAD CPI m/m 
    
 3.00pm CAD BOC Monetary Policy Report 
    
 3.00pm CAD BOC Rate Statement 
    
 3.00pm CAD Overnight Rate 
    
 Tentative CAD BOC Press Conference 
    
 Tentative USD President-Elect Biden Speaks 
    
Thu Jan 21 12.00am AUD Employment Change 
    
 12.00am AUD Unemployment Rate 
    
 Tentative JPY BOJ Outlook Report 
    
 Tentative JPY Monetary Policy Statement 
    
 12.45pm EUR Main Referencing Rate 
    
 12.45pm EUR Monetary Policy Statement 
    
 1.30pm EUR ECB Press Conference 
    
 1.30pm USD Unemployment Claims 
    
 9.45pm NZD CPI q/q 
    
Fri Jan 22 7.00am GBP Retail Sales m/m 
    
 8.15am EUR French Flash Services PMI 
    
 8.15am EUR French Flash Manufacturing PMI 
    
 8.30am EUR German Flash Manufacturing PMI 
    
 8.30am EUR German Flash Services PMI 
    
 9.00am EUR EU Flash Manufacturing PMI 
    
 9.00am EUR EU Flash Services PMI 
    
 9.30am GBP Flash Manufacturing PMI 
    
 9.30am GBP Flash Services PMI 
    
 1.30pm CAD Core Retail Sales m/m 
    
 1.30pm CAD Retail Sales m/m 
    
 2.45pm USD Flash Manufacturing PMI 
    
 2.45pm USD Flash Services PMI 
    
 3.30pm USD Natural Gas Storage 
    
 4.00pm USD Crude Oil Inventories 

 

Key earnings data 

Date Company Event 
Tue Jan 19 Bank of America Corp. Q4 2020 Earnings 
 Netflix Inc. Q4 2020 Earnings 
 Charles Schwab Q4 2020 Earnings 
 Goldman Sachs Q42020 Earnings 
 State Street Corp. Q4 2020 Earnings 
 Halliburton Co. Q4 2020 Earnings 
 Logitech S.A. Q3 2021 Earnings 
 J.B Hunt Transportation Services Inc. Q4 2020 Earnings 
 Larsen & Toburo Infotech Ltd. Q3 2021 Earnings 
   
Wed Jan 20 Procter & Gamble Co. Q2 2021 Earnings 
 UnitedHealth Inc. Q4 2020 Earnings 
 ASML NV Q4 2020 Earnings 
 Morgan Stanley Q4 2020 Earnings 
 U.S. Bancorp Q4 2020 Earnings 
 Bank of New York Mellon Q4 2020 Earnings 
 Kinder Morgan Inc (P) Q4 2020 Earnings 
 Fastenal Co. Q4 2020 Earnings 
 Discover Financial Services Q4 2020 Earnings 
 Citizens Financial Group Inc. Q4 2020 Earnings 
 United Airlines Holdings Inc Q4 2020 Earnings 
   
Thu Jan 21 Intel Corp. Q4 2020 Earnings 
 Costco Wholesale Corp. Q4 2020 earnings 
 Union Pacific Corp. Q4 2020 Earnings 
 IBM Corp. Q4 2020 Earnings 
 Intuit Inc. Q4 2020 Earnings 
 Intuitive Surgical Inc Q4 2020 Earnings 
 CSX Corp. Q4 2020 Earnings 
 BB&T Corp. Q4 2020 Earnings 
 Investor AB  Q4 2020 Earnings 
 Travelers Inc (Travelers Companies) Q4 2020 Earnings 
 Sandvik AB Q4 2020 Earnings 
 Fifth Third Bancorp Q4 2020 Earnings 
 Northern Trust Corp. Q4 2020 Earnings 
 M&T Bank Corp. Q4 2020 Earnings 
 Woodside Petroleum Ltd. Q4 2020 Earnings 
 KeyCorp Q4 2020 Earnings 
 Baker Hughes Inc. Q4 2020 Earnings 
   
Fri Jan 22 Schlumberger N.V. (Ltd) Q4 2020 Earnings 
 Kia Motors Corp. Q4 2020 Earnings 
 UltraTech Cement Ltd Q4 2020 Earnings 
 Kansas City Southern Q4 2020 Earnings 
 HDFC Standard Life Insurance Company Ltd Registered Shs Q3 2021 Earnings 
 Regions Financial Corp. Q4 2020 Earnings 
 Huntington Bancshares Inc. Q4 2020 Earnings 
 Ally Financial Inc Q4 2020 Earnings 
 Gjensidige Forsikring ASA Q3 2021 Earnings 

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