Top of the list, for Britons at least, will be the triggering of Article 50 to prepare for the UK leaving the EU. In theory, this may happen as early as Tuesday, but Wednesday or later is quite possible. The day does not matter. The response does. That response is in part what happens in financial markets but also what happens in European politics. Everyone knows this is going to happen but there is still scope for surprises. For example, might there be some stronger signal on the status of EU citizens already in the UK. It would make sense in economic terms to give anyone here permanent residence, and that would give a positive signal that the UK wants a continental partnership with Europe rather than an antagonistic relationship.
The response of UK business matters too. The general wisdom is that Brexit is “in the market” in the sense that everyone knows it is going to happen and financial markets therefore have, so to speak, priced it in. But I’m not sure that is right. So look for a reaction, for example in the currency markets, positive or negative. As for UK shares, look to what happens to smaller companies with a large domestic business, rather than the multinationals.
The second big thing, one that affects the world, will be the next rise in US interest rates, which will happen after the Federal Reserve meeting on Wednesday. There were strong employment figures last Friday, which make an increase certain. So let’s gauge the reaction: will everyone see this as another sign of the return to normality in the US, or will the prospect of steadily rising rates deter people? The thing to look for will be US treasury bond yields. They have been heading upwards slowly in recent months. Do they now move faster? Will there be a stampede to get out? Or will the fact that US bonds have a higher yield than almost all European ones mean they retain their attractiveness?
Third, there are the Dutch elections, also on Wednesday. The obvious question here will be how well the Freedom Party, headed by the controversial Geert Wilders, does – will it be the largest party? Again, it is the reaction that will be interesting as much as the results. The Netherlands is a stable democracy and one of the founders of the EU, or Common Market as it then was. EU membership is not an issue. Nor is membership of the euro, for while Germany remains a member the Netherlands will too. The two economies are very closely intertwined. But wider concern about European integration, for example over the freedom of movement of people, may become an issue. So let’s look at the detail: not so much who forms the government but how might policies on migration evolve. We may have more of a feel for the directions that a multi-speed Europe may take by the end of the week.
The other two issues I would like to know more about will be whether the German economy, which has been sending out conflicting signals, is really recovering. How strong is German growth in the run-up to the election in the autumn? There are a lot of data, but the one bit that really gives the clearest signal will be the ZEW economic sentiment Index, out on Tuesday. The point is simple. A strong economy through the summer is massively helpful to the Chancellor, Angela Merkel. A faltering one would raise questions about her competence but more generally about the thrust of German economic policy. Is it really sensible to be running a current account surplus of around 8 per cent of GDP? The other main political group, Germany's Social Democrats have been revived by their new leader, Martin Schulz, and are pressing for fiscal expansion. That might help cut the deficit, but it also might increase inflation. One indicator of business sentiment is not a crucial element in German politics, but it is a building block telling us about German economic health more generally.
Finally – and actually not so much this week but every week now – I’m really intrigued by any information about applications of artificial intelligence. Every day a new way of using AI to improve the human condition seems to be trotted out. I keep updated with Azeem Azar’s Exponential View. Even if 99 per cent are blind alleys, the combination of big data and AI is changing everything.
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