Yazar: Noreen Burke
Investing.com – Investors in the US will focus on the new coronavirus stimulus package with earnings reports. Markets will also follow Wednesday’s CPI figures with the expectation of an increase in the light of the acceleration of vaccine distribution and economic developments. Friday’s data in Europe is expected to show that the UK economy continues to grow in the fourth quarter. On the other hand, Mario Draghi, the former head of the European Central Bank (ECB), who is credited with saving the euro, will continue negotiations with the aim of forming a new Italian government.
Here’s what you need to know when starting the new week:
1. Earnings reports
Better-than-expected corporate earnings reports in the fourth quarter so far raised analysts’ expectations, and their companies are thought to be on track to share earnings growth rather than the initial expected decline. Reports coming from the US next week include Cisco Systems (NASDAQ :), Twitter (NYSE :), General Motors (NYSE :), Pepsi (NASDAQ :), Coca-Cola (NYSE :), AstraZeneca (NASDAQ 🙂 and Walt. Disney (NYSE 🙂 var.
Optimistic earnings reports supported the markets, as well as developments in incentive negotiations and vaccine distribution. The S&P 500 recorded the biggest weekly percentage increase since the US elections in November.
The optimistic results for the fourth quarter will support expectations for a strong recovery in earnings in 2021 and help allay investor concerns that market valuations are overly tense.
US President Joe Biden’s $ 1.9 trillion Covid-19 stimulus package gained momentum on Friday. A budget plan that would allow Democrats to pass the law through Congress in the coming weeks, with or without the support of the Republicans, was marginally approved in the US Senate.
The Republicans had offered a $ 600 billion package – less than a third of the Democrats’ package.
Congressional committees will begin preparing the legislation this week, and President Nancy Pelosi predicts that the final law could be passed in Congress before 15 March, when private unemployment benefits increased during the epidemic ended.
Data on Friday showed a weaker-than-expected recovery in the US labor market in January, highlighting the need for additional incentives to support the economy.
Market watchers will be paying attention to Wednesday’s data amid growing expectations that the rise in inflation could be longer and larger than the Fed now anticipates.
U.S. Treasury investors are betting on an increase in inflation as the U.S. economy returns to more normal levels in the second half of this year, following the deepest contraction in 2020 since the Second World War.
The possibility of a new stimulus package also increases inflation expectations.
In other news, the Fed Chairman will speak on the labor market Wednesday at a webinar hosted by the New York Economic Club. Thursday will also be in the limelight.
4. UK GDP
Figures from Friday are expected to show that the UK economy continued to grow in the fourth quarter, but still below the 16% growth rate seen in the previous quarter when the economy reopened. Economists forecast quarterly growth, but that was before comprehensive quarantine measures were in place, and data for the start of the year could show another decline in activity.
It rose against the dollar on Thursday. The Bank of England (BoE) focused on the possibility of a post-quarantine recovery, with the help of the UK’s rapid vaccination program, pointing out that negative interest rates are unlikely for now.
The central bank lowered its growth forecast for 2021 to 5% from its forecast of 7.25% in November, but increased its forecast for 2022 from 6.25% to 7.25%.
5. Super Mario
Mario Draghi, who was credited as the person who saved the euro from collapse when the euro zone was in a public debt crisis in 2012, was tasked with establishing a new government in Italy.
Investors are hoping that Draghi can implement reforms to accelerate growth in a country that has long underperformed against its European counterparts and is a burden to the entire eurozone.
Italy’s financial markets rallied with expectations that Draghi would be successful. Last week, Italy’s 10-year bond yield shared its biggest weekly decline since July, while the spreads with the German Bund yield came to a five-year low.
– This news has the contribution of Reuters.