Week ahead – the biggest events in the markets

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UK data

 

After the Bank of England surprised markets by leaving interest rates at 0.5%, the focus in the UK is inflation data due out Tuesday. A weak pound, which has slipped around 10% since the June 23rd referendum, is expected to drive prices in Britain higher as oil and other imports get more expensive.

Twelve-month CPI inflation was 0.3% in May, while measures of core inflation are steady at a little over 1%. “The shortfall in headline inflation is due predominantly to unusually large drags from energy and food prices, which are expected to attenuate over the next year,” the BoE noted. “In addition, the sharp fall in the exchange rate will, in the short run, put upward pressure on inflation as the prices of internationally traded commodities increase in sterling terms, and as importers pass on increases in their costs to domestic prices.”

The data may offer the first clues about inflation post-Brexit and the ramifications on monetary policy. Employment and wage data for the UK is out Wednesday.

ECB

 

The European Central Bank convenes for its first policy meeting since the Brexit vote on Thursday. Following the commencement of its corporate bond buying scheme a month ago, the bank is expected to hold off from announcing any fresh stimulus measures. Nevertheless this is the first ECB meeting since the Brexit vote and will therefore be closely scrutinised for how policymakers view the risks to the Eurozone economy from Britain’s decision to leave the EU. Meanwhile a sharp slump in Eurozone industrial production in May will weigh, especially as this could fall further over the coming months.

Mr Draghi is likely to face scrutiny over the state of the European banking sector and the prospect of a bailout for Italy’s embattled financial institutions. With European bank stress tests due out at the end of the month, this could be an important moment for the ECB to set out its stall.

Earnings

 

Quarterly earnings releases will dominate equity markets, with a host of large US companies set to report. Microsoft, General Electric and Intel are among the big name firms but it’s Amazon that will steal the limelight.

Amazon’s stock has hit a record high and investors are looking at another impressive set of figures.

Among banks, Morgan Stanley and Bank of America are due to report earnings. Schlumberger may offer some clues about the health of the energy sector when it delivers its quarterly figures on Thursday.

Eurozone PMIs

 

Friday morning sees the release of flash manufacturing and services PMIs for Germany, France and the Eurozone. Growth remained steady in the run-up to the Brexit vote, with Markit's final composite PMI hitting 53.1 in June, which topped the earlier flash estimate of 52.8.

The new figures will show if the Brexit vote is starting to feed through into the real economy and whether it is beginning to hit output.