Europe's Week Ahead: ECB in Frankfurt, Boris Goes to Brussels

Central bankers meet in Frankfurt for the first time since the Brexit referendum, while EU foreign ministers hold their first meeting since Boris Johnson was named British Foreign Secretary.
By Renee Cordes ,

Next week's main attractions include a key economic indicators from the euro zone and the U.K. The spotlight will also be on the first European Central Bank meeting since last month's Brexit referendum and the first European Union foreign ministers gathering in Brussels since former London Mayor Boris Johnson was named British Foreign Secretary.

Over breakfast on Monday, EU foreign ministers and U.S. Secretary of State John Kerry will discuss the transatlantic relationship as well as regional issues such as Syria and Lebanon.

The rest of the day will focus on Latin America, China and, closer to home, EU priorities and actions, migration and the bloc's foreign and security policy.

On Tuesday, the ZEW Center for European Economic Research in Mannheim, Germany, will release its July gauge of economic sentiment in Europe's largest economy as the European Central Bank publishes its quarterly bank lending survey.

In June the ZEW indicator rose to 19.2, from 6.4 in May. Trading Economics forecasts a July reading of 16.5, while Credit Suisse economists are more pessimistic with a bet on 10.0.

U.K. June inflation data is also due out on Tuesday, with the core rate expected to remain flat at 1.2%. And on Wednesday, the U.K. Office for National Statistics will release labor market statistics in the three months to June.

A report on euro area consumer confidence is also due out on Wednesday. Credit Suisse forecasts a July flash estimate of minus 9.0 from minus 7.3 in June.

On Thursday, the action shifts to Frankfurt for the first ECB sit-down since last month's referendum for the U.K. to leave the European Union.

Carsten Brzeski, chief economist at ING-DiBa in Frankfurt, said while the meeting comes too late for any imminent ECB action to calm markets, "we believe the ECB will simply try to buy some time by sounding dovish."

UBS economists also expect the ECB to keep its "wait and see mode", and see how data unfolds over summer. "After all, the first meaningful eurozone data points after the U.K. referendum will only come out after the ECB meeting," they noted.

The first of these is Friday's flash July Purchasing Managers' Index for Germany, France and the entire euro area, to be released by Markit Economics.

In June euro area business activity lost a bit of momentum, while manufacturing PMI inched up to 52.8 from 51.5 in May, with strong German June PMI at 54.5 buoyed by the best export performance since December.

Credit Suisse economists expect the July readings for the single-currency area to retreat slightly, led by a small drop in both core and periphery economies' PMI.

The July flash PMI estimate for the UK, due out the same morning, may be more dramatic in reflecting Brexit's immediate economic impact.

Credit Suisse expects the figure to fall significantly to 48.5 from 52.4, with manufacturing down to 47.5 from 52.1 and services slipping to 48.7 from 52.3.

The Japan Markit/Nikkei manufacturing PMI flash report for July is also due out on Friday. Trading Economics forecasts a reading of 47.5 from 48.1 in June. Output fell in June for the fourth consecutive month, led by a drop in new orders and amid slowing employment growth.

European investors will also be watching out for earnings reports from companies including French luxury goods maker Hermes (HESAY) and Anglo-Dutch consumer products giant Unilever (UL) - Get Report , both releasing second-quarter results on Thursday.

Swiss watch maker Swatch (SWGAY) will also publish its first-half report Thursday, after giving a grim preview of a 50% to 60% slump in operating profit and amid lower sales in key markets. Swatch, whose brands include Harry Winston, Omega and Longines, said it expects first-half sales to fall by 12%.

Loading ...