LONDON (Reuters) - It's a big week ahead as the U.S. Federal Reserve, European Central Bank and Bank of Canada hold their first meetings of 2025.
Into the mix go earnings from heavyweights including Apple (NASDAQ:AAPL) and Tesla (NASDAQ:TSLA), and likely market spikes from comments by new U.S. President Donald Trump - especially any on tariffs.
Here's your guide to the week ahead in global markets from Lewis (JO:LEWJ) Krauskopf in New York, Kevin Buckland in Tokyo and Amanda Cooper, Lucy Raitano and Yoruk Bahceli in London.
1/ FED AHEAD The Fed holds its first meeting of the year, just over a week after Trump's return to the White House. The central bank is widely expected to pause its easing cycle on Wednesday, after cuts totalling 100 basis points (bps) last year. Investors want to know how many more reductions are likely this year. Remember, the Fed rattled markets in December when it lowered projected rate cuts for 2025 as it braced for firmer inflation than it had previously estimated. Since then, data showing slower underlying inflation brought relief, especially after a blowout jobs report. Earnings reports will also take centre stage, with megacap companies Apple, Tesla and Microsoft (NASDAQ:MSFT) headlining a busy earnings week, while the advanced reading of Q4 U.S. economic growth is out Thursday.
2/ CUT? WHY NOT
The ECB is set to cut rates again by another 25 bps on Thursday as tariff threats from the Trump administration cast a shadow over the euro zone's sluggish economy.
Trump did not impose day-one tariffs and said the U.S. is not ready for universal ones, but Canada, Mexico and China are in the firing line, as is the European Union.
Traders are watching for further clues from ECB chief Christine Lagarde that could move the needle for the three further cuts they expect this year after Thursday's move.
Some policymakers have also signalled agreement that rates will fall towards 2%, within the estimated range of the "neutral" rate that neither boosts nor restricts the economy.
The question is whether tariffs will change that. That depends on how they impact inflation.
3/ TICK TOCK TO TARIFFS
The United States' biggest trade partners face a nervous wait until the turn of the month, when Trump has threatened new tariffs on Canada, China and Mexico.
What maybe surprising is the 10% levy faced by Beijing is dwarfed by the 25% duties promised for Trump's neighbours, and well below the 60% blanket tariff on Chinese imports previously mooted.
Perhaps the rekindled Trump-Xi Jinping bromance has something to do with it. Or maybe Trump is just starting slow.
Either way, the self-proclaimed dealmaker looks as if he wants to bring Beijing to the negotiating table, with TikTok as the centrepiece.
So the lead up to Feb. 1 could be busy with backroom conversations, though China breaks for the Lunar New Year on Wednesday.
Beijing made sure it acted before that, fortifying its stock market against tariff shocks with plans to channel tens of billions of dollars of investment from state-owned insurers into equities.
4/ ROLLER-COASTER RIDE
For all the hand-wringing leading up to the inauguration, Trump's first week in office was mostly benign for markets.
Volatility across stocks, bonds and currencies has retreated, and demand for hedging risk around the Mexican peso, the Canadian dollar and the Chinese yuan has shrunk from the extremes hit on inauguration day.
Analysts expect there will be more detail on what tariffs Trump will apply and where on April 1.
Before then, there is plenty of time for more of Trump's off-the-cuff comments, such as remarks to journalists on Jan. 21 that he was considering duties on China from Feb. 1. Investors should brace for more roller-coaster price action.
5/ EUROPE INC Europe's earnings season is overshadowed by uncertainty over Trump's policies, although Q4 numbers are expected to be marginally positive. According to LSEG I/B/E/S estimates, Q4 earnings, on average, rose 1.9% from the same period in 2023, driven by growth in utilities and financials. Energy names are expected to drag. Geopolitics and weak euro zone business activity should be offset by a robust U.S. economy and falling euro, a tailwind to exporters, supporting earnings. After all, 40% of the STOXX 600 index revenue comes from outside Europe. Luxury bellweather LVMH reports Tuesday, Dutch computer chip equipment maker ASML (AS:ASML) Wednesday, and Deutsche Bank (ETR:DBKGn) Thursday. Danish weight-loss drug manufacturer Novo Nordisk (CSE:NOVOb) reports the week after. European stocks attracted their second largest allocation in a quarter of a century in January, a BofA investor survey shows, a sign that sentiment is shifting even as Trump angst reigns.
(Graphics by Kripa Jayaram, Pasit Kongkunakornkul and Vineet Sachdev; Compiled by Dhara Ranasinghe; Editing by Barbara Lewis)