For Britons the big news this week will be the Budget, the last spring Budget before the main Budget moves to November. As such it will be a bit of a holding operation, coming a week before the probable date, 15 May, when the Government is expected to trigger Article 50 to take the UK out of the EU.
Everyone will be looking for news on the fiscal position – borrowing a bit higher than forecast in the spring Budget last year but a bit lower than feared in the autumn statement. They will also be looking for the new forecasts from the Office for Budget Responsibility: will it go along with the Bank of England and expect growth of 2 per cent, little changed from last year? Or will they respond to the slight slowing evidence since the Bank did that forecast?
Beyond that, expect the Budget (and the forecasts) to acknowledge the huge uncertainties facing the economy once Article 50 is triggered. Most of what is in it will be detail, jumped on by policy wonks now but forgotten in five years’ time. But building a fiscal position that is robust in the face of a huge potential shock is not detail and that will be the thing to look for.
For anyone outside the UK, the Budget is a sideshow. The biggest financial story last week was the avid reception that Snap got when it launched on the US market. A business that is losing money, with a co-founder and CEO aged 26, was worth $34bn.
Almost as noticed, however, was the plight of Uber, another business losing money. For me the killer news was not the unfortunate remarks of its CEO, who lost his rag with an Uber driver recently, and not even the pushback on its London operation – drivers now have to pass a (rather difficult) written exam. No, the disturbing news was that people taking an Uber ride were paying less than half the cost, with Uber footing the rest.
So the question is this: will Snap investors become frightened by the Uber troubles or will they brush them off? It matters because Wall Street is in a great late-cycle bull market, that has uncomfortable parallels with the dotcom boom that ended in 2000. The thing to look for is the classic sell signal, and an overvalued public float is one of the standards. But maybe the values are justified. That is something to look for this week: what do high-tech share valuations tell us about the wider bull market?
There is a further twist. It looks very much as though the US Federal Reserve will increase interest rates again next week, on 15 March. But Fed policy, we have been assured, is data-driven. Well, the last significant data before the Fed meeting in 10 days’ time will be US employment figures on Friday. Unless they are disastrous, expect that increase in rates to come trotting though.
In Europe, all eyes will be on the European Central Bank’s meeting to decide policy, now that inflation has reached the 2 per cent target. Its present policies of QE and negative interest rates were intended to push inflation back towards the target. They have worked, or so it would seem. There is strong pressure from Germany to start tightening policy again. But it won’t, or rather it would be a huge surprise were it to do so.
One reason is that core inflation – allowing for seasonal and other items – is still well below 2 per cent. The other is that this is a fraught summer in European politics, and any change might risk upsetting an unstable situation.
That leads us to the final item: European politics. Any news about the French elections matters not just for France but for the EU as a whole. Look for a surprise – and not necessarily an encouraging one.