Week ahead: UK prime minister, ECB rate decision, tech earnings
The weeks-long race to succeed Theresa May is coming to a close with a new prime minister set to enter Downing Street amid continued uncertainty over Brexit.
Politics will be front and centre next week with a hearing in the US Congress featuring former special counsel Robert Mueller also on the docket. Meanwhile, investors await a rate decision from the European Central Bank and another rush of earnings from technology heavyweights Amazon, Alphabet, Facebook and others.
Here’s what to watch:
UK prime minister
Ever since Mrs May announced her intent to resign as prime minister in May, former London mayor and foreign secretary Boris Johnson has been the favourite to succeed her. Mr Johnson remains favoured in polls over current foreign secretary Jeremy Hunt to win the Conservative leadership election, the results of which will be revealed next week.
The race has Brexit implications, with parliament having failed to approve Mrs May’s agreement with the European Union on the nation’s withdrawal. Mr Johnson has argued that leaving the EU without a deal would be “vanishingly inexpensive”, keeping alive the threat of a no deal Brexit in hopes of gaining concessions from Brussels.
However, Mr Johnson suffered a setback on Thursday when British lawmakers passed a measure that would prevent the next prime minister from suspending parliament to forge ahead with a no deal Brexit on October 31.
The 160,000 members of the Conservative party have received their ballots in the leadership vote, and results are expected on July 23. Mrs May will hand over power the following day.
Robert Mueller hearing
In US political news Mr Mueller, the former special counsel in charge of an investigation into Russian interference in the 2016 presidential election, is scheduled to appear before congressional lawmakers.
Mr Mueller is expected to give testimony about his nearly two-year probe under questioning from Democrats and Republicans who have sparred over his final report, which found no collusion between the Donald Trump campaign and Russia.
The report left it to the justice department to make a determination on allegations of obstruction. The attorney general William Barr and his former deputy, Rod Rosenstein, ultimately cleared the president.
In a brief press conference in June, Mr Mueller said he would not go beyond the written report in any hearing.
The hearing, organised by the House judiciary and intelligence committees, will be held on July 24.
The central bank is seen as unlikely to immediately cut interest rates, but economists expect it to signal that policymakers are prepared to bring rates further below zero.
The market will also be watching if the ECB injects fresh stimulus into the eurozone economy in the form of a bond-buying programme, amid heightened global uncertainty.
“Policymakers have been dropping hints for weeks that they plan to loosen monetary policy soon, and at July’s meeting they are likely to take a step in that direction by formally changing their forward guidance. We suspect that it then won’t be long before the bank cuts interest rates and restarts [quantitative easing],” Jack Allen-Reynolds, senior Europe economist at Capital Economics, said in a note to clients.
Major central banks, including the ECB and US Federal Reserve, have taken a dovish stance in response to weak inflation, slower economic growth and trade tensions. Investors are betting that the Fed will cut its benchmark rate by at least 25 basis points at the end of the month after officials including chair Jay Powell indicated a willingness to act soon.
Earnings season is well underway after some of the largest US banks reported quarterly results this past week. Tech companies will headline the next barrage of earnings reports.
Amazon, Facebook, Twitter, Snap, Intel and Google parent Alphabet are due to report earnings for the most recent quarter. The calendar also includes industrial giants Boeing, Caterpillar, United Technology and Lockheed Martin, plus Tesla, Ford, Harley-Davidson, Coca-Cola, UPS and Visa.