Weekly outlook: Plan B for Brexit, Hargreaves results and US govt shutdown

The key events for UK wealth managers for the week starting 28 January

Make America indebted again

The US is due to be affected by the government shutdown in the week ahead – potentially in more ways than one.

GDP growth for Q4 is due out on Wednesday and non-farm payrolls on Friday, with the latter potentially being affected by the US government shutdown, which began on 22 December and has become the longest in history at more than 35 days.

But, AJ Bell investment director Russ Mould said data that comes from government agencies may not even been published because of the shutdown. “There’s been a number of things scheduled to be published in the last month that haven’t come out,” Mould said. “We haven’t had new homes, we haven’t had new factory orders, we haven’t had business inventories, retail sales, trade balance.”

That could prove problematic for the US Federal Reserve policy meeting on Wednesday. “If there’s no data, it hasn’t got all the numbers,” said Mould.

Gridlock is likely to persist on this side of the Atlantic too with little movement from MPs expected on May’s plan B for Brexit when it goes to a vote on Tuesday. That same day the Financial Conduct Authority will appear before the Treasury committee to discuss the merits of convergence versus divergence when it comes to regulatory alignment with the EU following the UK exit from the trading bloc.

The UK regulator will also seek final comments on its consultation on climate change and green finance this week, while the Department for Work and Pensions’ consultation on pensions dashboards also closes. Auditors will also front up to MPs just one week after Patisserie Valerie went into administration with a £40m hole in its accounts.

Monday 28 January

Industry raises timing concerns on pensions dashboard
DWP’s pensions dashboards: Working together for the consumer consultation closes

This year could see savers able to see all their pensions online in one place with the Single Financial Guidance Body leading the charge and commercial dashboards.

However, Aegon head of pensions Kate Smith cautioned the industry might not be ready to meet the government’s deadlines.

Smith said: “The master trust market is currently undergoing rapid change due to the new regulations and it’s unlikely that all master trusts will be able to start supplying data this year.

“There’s still much to be done to ensure that dashboards are up and running, specifically the Government legislating to compel the pension industry to supply data to the dashboard and the introduction of a common ID verification framework.”

Tuesday 29 January

MPs vote on Brexit plan B

Following her historic defeat in the House of Commons two weeks ago, when MPs voted 432 to 202 against the Brexit deal, Theresa May goes back to MPs with her plan B for the withdrawal agreement.

It doesn’t feel as though the May deal is getting a vast amount of traction, said Mould. “It’s wildly unpredictable because you’ve got political considerations as well as philosophical and economic ones. I’m intrigued every time sterling goes up because the market thinks no deal is less likely, but every time you read what the politicians are saying it seems to be leaning more towards a no deal scenario from what I can see. I’m obviously reading a different newspaper to everyone else.”

Hargreaves reveals how it navigated a volatile Q4
Hargreaves Lansdown – earnings release

In Q3 2019, Hargreaves Lansdown’s assets under administration were buoyed by positive market movements taking the total figure to £94bn despite weaker retail flows. The market backdrop is unlikely to have been so supportive in the following quarter.

FCA weighs in on what the City wants from Brexit
The UK’s economic relationship with the European Union – Treasury select committee 9.15am

The Treasury committee announced on Friday it is examining the risks and rewards to financial services from convergence, equivalence, or divergence from the EU following Brexit. Chair Nicky Morgan said the committee will take evidence from the industry to form recommendations to the government on what the City wants from its future relationship with the EU.

Morgan added: “We’ll also seek to conclude whether it would be in the long-term interests of the UK to align closely with EU financial rules, or to forgo financial services trade with the EU and pursue trade with other third countries.”

Financial Conduct Authority chief executive Andrew Bailey fronts up to MPs with Prudential Regulation Authority boss Sam Woods also joining, alongside John Glen MP, economic secretary to the Treasury.

Wednesday 30 January

FOS weighs in on the Equality Act in its casework
Enforcing the Equality Act: the law and the role of the Equality and Human Rights Commission – Women and equalities committee 9.50am

Financial Ombudsman Service head of external relations Debbie Enever will tell MPs how the Equality Act comes into consideration in its casework including deciding what’s fair and reasonable when making decisions. Her feedback forms part of an ongoing inquiry looking at how the Act can be enforced across industries.

Big Four front up to MPs week after Patisserie Valerie falls
Future of audit – Business, energy and industrial strategy committee 10am

Chair Rachel Reeves said the business, energy and industrial strategy committee would pick up on the issues leading to Patisserie Valerie’s collapse into administration last week in the current inquiry into the future of audit. “The extraordinary black-hole in Patisserie Valerie’s accounts which has led to this administration raises grave corporate governance concerns and poses serious questions regarding the effectiveness of the auditor and the current arrangements for regulation.”

David Dunckley, chief executive of Grant Thornton, the auditing firm embroiled in the pastry chain’s collapse will front up, alongside the C-suite from the Big Four, BDO and Mazaars, plus the Association of Practising Accountants.

Further slowdown in the US economy?
US GDP Q4 2019

In Q3 2018, the US growth rate slowed to 3.4% from the significant growth of 4.2%. The Share Centre predicts the final quarter of 2018 could see the US growth rate further moderate to 3%, justifying the quarter’s market wobble but still better than other developed economies.

US Fed signals whether two rate hikes in 2019 remain on the table
US Federal Open Market Committee meeting

US Fed policy makers have previously indicated two rate rises are in store for 2019. The Share Centre says it will be looking out whether it has turned more dovish on trade wars and the potential impact of the government shutdown – now the longest in US history.

Mould will be keeping an eye on whether it will stick on auto-pilot on the maximum $50bn monthly withdrawal from quantitative easing.

Thursday 31 January

FCA seeks comments on the disruptive threat of climate change to the City
Comments due on the FCA’s discussion paper DP18/8 Climate Change and Green Finance

The FCA is seeking views on a number of issues in the industry affected by climate change, including: whether pensions are adequately assessing climate risk; enabling competition in green finance; ensuring proper climate risk disclosure in financial markets; and whether mandatory reporting should be introduced for financial services firms to explain how they are mitigating climate risk.

FCA chief executive Andrew Bailey described climate change as a “disruptive and potentially irreversible threat to the planet” when the discussion was published in October 2018.

Ashley Hamilton Claxton, head of responsible investment, Royal London Asset Management, wants the FCA help create a common framework and approach to reporting on climate risks. “There are still a number of issues and barriers to wider reporting in the financial industry on climate risks, such as the availability of data, particularly for non-equity investments.”

The FCA will publish a response document and, depending on the feedback received, may consult on new rules or highlight key feedback received.

Friday 1 February

US employment figures set to navigate economic worries
US jobs data, hourly earnings

Expect to see headlines about the effect of the US government shutdown on the jobs market, said The Share Centre. It still anticipates the unemployment rate will tick slightly lower to 3.8% with roughly 300,000 jobs created in January.

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