Week Ahead: an 'Atlantic divide' and a stopover in Brussels

Not another euro summit! This one, on Monday, is intended to cultivate measures to boost growth in Europe, and also to endorse some of the actions taken to save the euro in December at the meeting where a ‘fiscal compact’ was drawn up – and where British prime minister David Cameron wielded his controversial veto.

With a successful outcome on Monday, and continued funding help from the European Central Bank, Carsten Brzeski of ING is hopeful that ‘the eurozone could master this stage of the crisis’ – a sentiment seemingly shared by some investors, who have started the year much more positively.

But it is what is not on the meeting agenda that is worrying economists. Negotiations for a debt restructuring between the Greek government and the country’s creditors – with compromise needed between Greek’s commitment to bring down its debt, investors' willingness to accept losses and aid from foreign governments – have continued to fray investors’ nerves.

‘The big question remains whether Europe can deliver a credible plan to restore confidence and growth. We do not expect any clear-cut answers next week and, as with many of the previous EU Summits, markets are likely to be left disappointed,’ wrote Michala Marcussen of Société Générale in her preview of the week ahead.

Brzeski added that the likely ‘unspectacular’ summit would only be a ‘brief stopover’ amid more pressing questions over the details of Greece’s bailout.

Next week will also test the market’s willingness to fund the eurozone’s more troubled members with Italy to auction up to €8 billion worth of bonds on Monday. Weaker European governments’ ability to refinance their debts will be a continuing source of anxiety throughout 2012.

That said, economists note that there is little economic data due from the eurozone this week to darken the relatively bright picture so far this year.

Atlantic divide

In the US, however, there is plenty of opportunity do so, with a string of potentially market-moving data. ‘The highlight looks likely to be Friday’s jobs data, with markets keen to see the better momentum from recent releases continuing,’ noted Philip Shaw at Investec. Economists at ING said that Friday’s payrolls data, as well as manufacturing data (ISM) due on Wednesday, would highlight the ‘Atlantic economic divide’ whereby the UK and the eurozone face recession, while the US is set for robust growth.

In the UK, where recent data showed the economy has been contracting, this week should provide the first clues as to whether this really is a double dip recession. Updates are due on activity in the manufacturing, construction and services industries.

Meanwhile a raft of data and monetary policy decisions are due in the world’s faster growing emerging markets. Chinese markets re-open after the New Year holiday, with manufacturing figures likely to be closely scrutinised for more clues as to whether the world’s fastest growing major economy is successfully averting a sharp economic slowdown.

Blue-chip numbers

Monday is quiet for scheduled major UK company announcements, but on Tuesday BskyB (BSY.L), ARM Holdings (ARM.L) and Citywire Top Stock ® National Grid (NG.L) are among the blue chips reporting numbers to the market.

Then Wednesday sees results from United Utilities (UU.L) and ICAP (IAP.L).

Thursday is a big day for company reports, with AstraZeneca (AZN.L), Smith & Nephew (SN.L) and Compass Group (CPG.L) all issuing numbers, as well as Top Stocks Shell (RDSb.L) and Unilever (ULVR.L).

Finally, on Friday another Citywire Top Stock ®, BT (BT.L), will publish its third-quarter numbers.