Tory leader contest, Fed rates decision, Turkey election
The FT's Josh de la Mare on some of the top stories the FT will be watching this week, including the continuing contest for the next UK Conservative party leader and prime minister, the US Federal Reserve decision on interest rates, the controversial rerun of the mayoral election in Turkey and earnings from US bookseller Barnes & Noble
Written by Mark Vandevelde, Laura Pitel, Peter Wells, Chris Giles, Mamta Badkar, Sebastian Payne and George Parker
Transcript
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Here are the top stories we'll be watching this week. The US Fed decides its next move on interest rates. The UK's Conservative party moves closer to deciding a new leader and prime minister.
Turkey reruns a controversial election in Istanbul for a new mayor. And figures from US bookshop chain Barnes & Noble will shed more light on why hedge fund manager Elliot has bought into bricks and mortar booksellers. First, the US Federal Reserve comes out with its latest interest rate decision later this week in the face of a weakening jobs market, and continuing fallout from the trade war between China and the US.
Now, people in the markets are not expecting there to be a cut from the current rate of 2 and 1/4 per cent to 2 and 1/2 per cent, but they are expecting cuts in subsequent meetings. By January, they're expecting three cuts. And the reason is essentially twofold.
One is because there are signs that the US economy is slowing. Last week, the jobs numbers were particularly poor. There are still jobs growing in the US - 75,000. But that was a lot worse than expected. And inflation, underlying inflation, is weaker than expected.
And we've also heard from Fed officials who've been saying that they'll do the appropriate thing. And people are seeing that as code for they are thinking now about lowering rates rather than raising them. And one of the reasons they won't take action at the meeting on Wednesday is because really what they're waiting for is what's happening in the global trade disputes between the US and China.
The progress on that will be seen at the end of the month from the 28th and 29th of June at the G20 meeting in Japan, in Osaka, where President Trump will meet President Xi of China. And there might or might not be a deal, but it's after that that I think we'll get more sense of exactly where the global and the US economies are going.
The contest to replace Theresa May as Conservative party leader and UK prime minister hots up this week after the list of Tory MPs fighting for the position was announced last week. At the heart of the interest in the leadership election is Brexit, and what each candidate proposes to do about leaving the European Union, and whether they plan to stick to a departure date of October 31 this year.
The Conservative party leadership contest continues this week. After the first rounds of voting and the first TV debate, MPs will further whittle down the list to try and get down to those final two candidates, who will then go in front of the Tory party grassroots membership. Boris Johnson remains the clear front-runner to succeed Theresa May later this summer. So the battle is on for the all-important second place to go up against him when the party members vote.
What does this all mean for Brexit? Well, Mr Johnson is equivocated, saying that the UK should leave at the end of October, but has also said he doesn't want a no-deal Brexit. At this point in the race, the obvious second place on that ballot paper will go to somebody who is taking a slightly softer Brexit position.
Turkey's to rerun a critical election in Istanbul for a new man, next Sunday. Whatever the outcome, the election will further deepen concerns about the growing authoritarianism of Turkey under President Recep Tayyip Erdogan.
Istanbul already had a mayoral election just over two months ago. That contest was won by Ekrem Imamoglu. A hitherto little-known figure, he was fielded as a unity candidate by the opposition. His victory brought an end to a 25-year dominance of the city by President Recep Tayyip Erdogan and his ruling party.
Mr Imamoglu's party refused to accept the result. They said that it was marred by irregularities and fraud. And the country's high electoral board ultimately agreed and called a rerun of the election. The same candidates are running again - Ekrem Imamoglu for the opposition and Binali Yildirim, a former prime minister, for the ruling party.
The polls, so far, put either of the two candidates neck and neck, or they put Imamoglu, who's gained hugely in prominence and popularity, ahead. The election really matters for President Erdogan. Not only does he face a flagging economy, but he also faces rising tensions with the United States. And perhaps, most importantly, growing discontent within his own party. Defeat, a second time here in Istanbul, could raise new questions about the president's legitimacy and his control of his own party.
And finally, can the bricks and mortar US bookseller, Barnes & Noble, survive against the onslaught of online book sales by Amazon? Activist hedge fund, Elliott Management, took a bet in early June that it can, by acquiring Barnes & Noble for $3m to add to its purchase of UK bookseller chain, Waterstone's, in 2018. The most recent quarterly earnings figures from Barnes & Noble this Thursday will help indicate what state the bookseller is in.
Analysts expect the company will report adjusted earnings of $0.24 a share on revenues of $759m. They'll also keep an eye on other items like cash flow. The sale to Elliott, which already owns UK bookseller, Waterstone's, comes after Barnes & Noble, in March, slashed its outlook for the year. Now, Elliott agreed to buy the bookstore, which was the first victim of Amazon's attack on physical retail stores in the US. At a transaction value of just under $700m, including debt, the fund is hoping to replicate the formula that worked at Waterstone's, namely, allowing local stores the flexibility to operate with autonomy.
And that's what the week ahead looks like from the Financial Times in London.