Week ahead: Brexit vote, ECB, Google chief testimony

Following a volatile week in markets, investors ready for further triggers as they look to next week’s Brexit vote, US data and the latest monetary policy decision from the European Central Bank, while also monitoring trade developments.

Here’s what to watch in the coming days.

Brexit vote

UK lawmakers on Tuesday will vote on prime minister Theresa May’s Brexit plan that she negotiated with Brussels. Mrs May suffered a double defeat in parliament after her government was found in contempt for its failure to hand over its Brexit legal advice and after MPs backed a proposal that parliament should have a free hand to determine what happens next if they reject Mrs May’s compromise Brexit deal.

If the hard-fought deal fails to pass, as is widely expected, there is a growing belief there could be a second referendum, which could open the way for Britain to stay in the EU. Alternately, there is what has been dubbed the Norway plus option — Brexit via the European Economic Area — advocated by former minister Nick Boles.

“In the event of a heavy loss for the existing deal in the House of Commons next week we may end up having to raise our probability of a second referendum — and thereby a vote to remain in the EU, overturning the Brexit process — shifting it to our central scenario,” said analysts at Nomura.

Investors will also keep an eye on UK GDP and the labour market report due next week.

European Central Bank

The ECB delivers its final monetary policy decision of the year next week and is widely expected to leave interest rates unchanged and deliver updated economic forecasts.

“The ECB is almost universally expected to end QE in December, which we agree with,” said strategists at TD Securities.

Meanwhile, folks at Nomura expect the most important news from the meeting could be an extension of the targeted longer-term refinancing operations (TLTROs). “With the ECB potentially re-evaluating its entire range of policies there is a risk of more adjustments than we expect,” they said.

“Moreover, as this is an end-quarter meeting the ECB will announce its new macroeconomic forecasts, in which we expect to see modest downward revisions to economic growth and inflation, reflecting a combination of softer activity data and lower oil prices, they added.

Google testimony

Google chief executive Sundar Pichai is expected to testify before the US House judiciary committee in Washington on Tuesday. The wide-ranging hearing is likely to see Google criticised for working on a censored search engine for China and face allegations that it suppresses certain results for political reasons.

The hearing was originally scheduled for Wednesday but was delayed as it conflicted with a day of mourning for former president George HW Bush.

Mr Pichai had refused to testify alongside Twitter’s Jack Dorsey and Facebook’s Sheryl Sandberg in front of the Senate intelligence committee in September, with the search engine giant trying to distance itself from the scandals surrounding Facebook.

US data

With the recent market turmoil markets have ratcheted back their expectations of a rate rise by the Federal Reserve this month and next year. Investors will look to retail sales and consumer prices next week as they watch for the latest updates on the health of the US economy.

Data on Wednesday are expected to show consumer prices were flat on a monthly basis in November and up 2.2 per cent year-on-year. So-called core inflation that excludes food and energy are estimated to have climbed 0.2 per cent month-on-month and 2.2 per cent year-on-year.

Meanwhile, data later in the week are expected to show retail sales at the start of the holiday period edged up. Sales are expected to have climbed 0.1 per cent month-on-month in November, while so-called control sales, that strip out volatile items like autos, petrol and building materials are estimated to have climbed 0.5 per cent.

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