UK Budget, US jobs report, Biden’s stimulus bill
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Rishi Sunak’s Budget will head the midweek UK news coverage as the chancellor reveals his latest financial plans and economic measures to tackle the pandemic and announces details of how he will flesh out the government’s “build back better” slogan. In the US, the $1.9tn stimulus package continues its journey through Congress after being passed by the House of Representatives, and jobs data at the end of the week will give the latest update on the nation’s economic recovery. For the corporate offerings this week, there are earnings from some of the leading UK insurers, housebuilders and bookmakers while big box retailers Target and Costco Wholesale report in the US.
Rishi Sunak is to announce a £5bn “restart” grant scheme in his Budget on Wednesday to help shops, pubs, hotels and other businesses most affected by Covid-19, taking total spending on such grants to £25bn. The new grant scheme — worth up to £18,000 for the biggest businesses — is intended to help companies in England through to June 21 when ministers hope the final coronavirus restrictions will be lifted.
Sunak is also expected to reveal that other support schemes for businesses and individuals — including the furlough scheme — will be extended until the end of June. The grant scheme, administered by local councils, will help almost 700,000 companies including shops, pubs, clubs, hotels, restaurants, gyms and hair salons.
He will also attempt to flesh out the government’s “build back better” slogan — Britain’s successful vaccine scientists and scrappy tech start-up twenty-somethings will be the poster children of this new approach.
US stimulus bill
The focus of US president Joe Biden’s plan for $1.9tn in additional pandemic aid will turn to Senate consideration this week.
The Democratic-controlled House passed the expansive legislation at the weekend with the support of the vast majority of Democratic lawmakers. The package includes $1,400 in direct payments to individuals, an extension of federal top-ups to unemployment insurance and another $350bn for state and local governments.
The latest House bill also includes a gradual increase of the federal minimum wage from $7.25 an hour to $15 an hour over a five-year period. But that provision hit a big stumbling block late last Thursday when the Senate parliamentarian ruled it could not be pushed through using budget reconciliation, a manoeuvre that would allow the bill to pass the upper chamber of Congress by a simple majority.
The Senate is split 50-50, between Democrats and Republicans, with Kamala Harris, the US vice-president, able to cast a tiebreaking vote when required.
The House vote was a significant milestone for Biden, who has made the stimulus package his top legislative priority for his first 100 days in the White House.
China’s National People’s Congress presents the country’s economic goals on Friday, when the communist leaders announce their annual budget, economic growth goals and detailed targets.
The Congress’s standing committee will then submit the proposals to the annual assembly of the legislature in March.
The IHS Markit’s mammoth annual oil and gas gathering, once described by US Federal Energy Regulatory Commission chairman Neil Chatterjee as “the Super Bowl of energy”, returns this week after a two-year gap.
In 2019 then secretary of state Mike Pompeo called for an age of US energy dominance based on big fossil fuel growth to punish what he called “bad actors” on the world stage. This time the event will be virtual and speakers include Bill Gates and John Kerry, who will discuss climate change and electrification.
At Aviva, new life insurance business sales in the UK and Ireland will be in the spotlight, after rising 40 per cent to £9.2bn because of large bulk annuity deals during the past quarter.
Amanda Blanc, who was appointed chief executive in July, said the insurer would be focusing on a smaller number of markets and it had to change its dividend policy to accommodate the change.
She has already sold businesses in Italy and Singapore, and she announced last week that the operations in France had been sold to French insurer Aéma Groupe for €3.2bn.
Admiral, which has also been busy selling parts of its unit — it signed a £508m deal with the owner of property search site Zoopla for its price comparison division in December — will provide its first investor update with the new chief Milena Mondini de Focatiis.
Admiral’s US comparison business, Compare.com, will not be included in the deal, which is expected to slightly reduce the group’s future earnings.
Prudential reports shortly after announcing it is to demerge its US business in the second quarter of the year and raise up to $3bn of fresh equity, in a move that will complete the break-up of the 173-year-old life insurer and cement its pivot to Asia.
The company, which has been under pressure from activist investor Third Point to split itself up, said it had decided to demerge Jackson, the US unit, directly to shareholders rather than go through an initial public offering of the business.
Retail losses will be in the spotlight when UK bookmaker William Hill reports this week. The British company said in January that its shop closures and lockdown restrictions had led to a steep drop in revenues even as its online operations were boosted by gamblers placing more bets at home.
Overall revenues for 2020 are expected to be £1.3bn, 16 per cent below 2019, and the company forecast a £30m year-on-year loss at its retail division.
However, for other bookmakers such as Ladbrokes-owner Entain, the sharp drop in retail betting has been countered by an increase in online revenue.
Entain said in January that net revenue online increased 27 per cent in the year to the end of December compared with 2019, while retail sales fell more than a third in the UK and Europe.
Housebuilders were hit hard by the first UK coronavirus lockdown in 2020 when sites had to close, but the July announcement that stamp duty would be temporarily cut to zero for properties worth up to £500,000 boosted sales and prices. But signs are cropping up that raise the possibility that this momentum could be petering out.
Still, Taylor Wimpey has taken a bullish stance towards the country’s housing market, saying it expected results for this year to be “materially above the top end” of last year’s expectations.
Persimmon is set to record a drop in sales ahead of the end of the stamp-duty holiday in March. The housebuilder said in January that its weekly sales had settled to a “more normalised level from the elevated rate seen over the summer months”.
A boom in demand for DIY products during lockdowns is expected to help with the recovery of UK builders’ merchant Travis Perkins, which in December announced it would return £50m of government help after sales remained robust throughout the pandemic.
In a previous investor update, the company said that demand from larger customers — which account for far more of its business than consumers — was recovering more slowly.
Pest control company Rentokil is expected to post an increase in profits after it raised its profit guidance last month and said sales had been boosted by demand for one-off disinfection services during the pandemic.
The FTSE 100 group said that it expected full-year adjusted pre-tax profit to be slightly higher than the top end of market expectations of between £292m and £337m.
In the US, investors at video conferencing company Zoom will focus on sales — up more than fourfold last quarter — after strong demand for the San Francisco-based company’s services drove revenues up to $777m in the three months to the end of October, up from $167m a year ago and far above the $693m Wall Street had expected.
However, investors will be keen to hear any updates on Zoom’s strategy to deal with more normal conditions when they return.
February sales and comments on store traffic will be in focus when Costco Wholesale reports, when strong demand for fresh food, groceries and seasonal items is expected to boost second-quarter revenue.
Faster deliveries and higher demand for home goods are likely to have driven same-store sales at Target, but again Wall Street will be on the watch for how the vaccine rollout could affect its coronavirus-driven sales boom.
Zoom Video Communications
Hewlett-Packard; Ross Stores; Target; Veeva Systems; Travis Perkins; Man Group; HelloFresh; Flutter Entertainment; Taylor Wimpey; Weir Group
Brown-Forman; Dollar Tree; Prudential; Persimmon; PageGroup; Hiscox; Vivo Energy
Avago Technologies; Costco Wholesale; Burlington Stores; Cooper Companies; Aviva; Schroders; Lufthansa; Admiral; Rentokil InitialWilliam Hill, Entain, Vistry Group, Melrose Industries, Cairn Energy
London Stock Exchange; Pearson
Federal Reserve chairman Jay Powell is expected to be closely followed when he talks about the US economy before the virtual Wall Street Journal Jobs Summit on Thursday.
A host of other Fed figures speak throughout the week, including board governor Lael Brainard on Tuesday.
Economic data and central banks
The monthly US employment report on Friday is expected to show hiring picked up markedly in February from the previous month.
After the country lost 227,000 jobs in December, hiring rebounded in January — albeit with a modest gain of 49,000 jobs — as the rise in coronavirus infections abated and vaccinations accelerated.
Economists polled by Bloomberg expect that the US will add 145,000 jobs in February, pushing the unemployment rate 1 percentage point to 5.3 per cent. If that forecast holds, it would mark the strongest pace of hiring since November.
The prospect of a resurgence was bolstered by data released last Thursday showing that filings for first-time jobless benefits fell to a three-month low in the week ending February 20.
Eurozone inflation hit its highest level since the start of the coronavirus pandemic in January, after five months of falling prices. On Tuesday the bloc’s statistics body will publish a flash estimate of February’s level, which is expected to continue the upward trend.
Many economists are predicting a steady rise over the spring on the back of higher energy costs, continuing supply-chain disruptions that have raised costs for retailers and manufacturers, and the reversal of a VAT tax cut in Germany.
There is also PMI data for the big economies during the first half of the week.
Turkey publishes gross domestic product, when one of the world’s biggest expansions in the fourth quarter is expected after the policy of cheap credit and rapid interest-rate cuts, though this has been at the expense of the lira, inflation and foreign-exchange reserves.
A report later in the week is expected to show the country’s inflation has risen to more than 15 per cent.
It’s a fairly light schedule for central bank meetings with Malaysia, Australia and Poland all expected to keep rates on hold.
Key data and events
China, manufacturing PMI (Feb)
Turkey, GDP (Q4)
Germany CPI (Feb, flash)
US, ISM manufacturing (Feb)
Australia, rate decision
UK, Nationwide house prices (Feb)
Germany, labour market (Feb)
Eurozone, HICP (Feb, flash)
Canada, GDP (Dec, Q4)
Australia, GDP (Q4)
Turkey, CPI (Feb)
China, services PMI (Feb)
US, ISM services (Feb)
Poland, rate decision
Eurozone, unemployment rate (Jan)
US, initial jobless claims
Malaysia, rate decision
Sri Lanka, rate decision
Germany, industrial orders (Jan)
US, labour market (Feb)
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