US politics and fallout from Houthi airstrikes to guide markets next week
Political events will take as much of the attention as economic events for markets over the coming week, with events in the US and the Middle East likely to loom large.
In the US, the 2024 Presidential Election campaign will begin in earnest with the Iowa caucus on Monday.
The caucus is traditionally a barometer for how presidential hopefuls will perform over the long and gruelling election campaign.
Donald Trump is expected to win easily in Iowa, but analysts will be paying close attention to the margin of victory as well as how his closest rivals perform.
“Donald Trump is still the prohibitive favourite to win the Republican presidential nomination,” Paul Ashworth, chief north America economist at Capital Economics said.
“But the Iowa caucuses, which kick off the primary season this coming Monday, should provide insight into whether Nikki Haley or any of the other candidates have any realistic shot.”
Focus will also be on the Middle East where markets will be assessing the potential impacts of US and UK air strikes on the Houthi rebels in Yemen.
The Houthis have been targeting international shipping passing through the Red Sea in recent months, forcing many ships to take the longer and more expensive route around the Cape of Good Hope.
The airstrikes were launched in an attempt to deter the Houthis from further attacks. “Clearly, the focus will now be on whether this might lead to any escalation in the Middle East,” Deutsche Bank’s Jim Reid noted.
Traders will be concerned about the risk that an escalation in the Middle East could have on oil prices, which so far have remained around $80 a barrel.
Earnings season for US banks will continue with both Goldman Sachs and Morgan Stanley revealing results for the fourth quarter on Tuesday.
Last week, JP Morgan announced record results across last year, although its Wall Street rivals flagged a weaker outlook for the year ahead.