The big news this week will be corporate, not economic. There are two running company takeover stories that affect us all, and will also tell us more about the direction of the US/European economic relations in the years ahead.
One is the attempt by Kraft Heinz to take over Unilever, which will probably turn into a classic hostile bid battle in the next few days. The initial offer would make it the largest takeover bid ever. Kraft, which is backed by the legendary US investor Warren Buffet and a Brazilian investment group 3G Capital, will seek to persuade Unilever shareholders partly by offering them more than the recent share value and also by arguing that the Unilever management has been slack in its cost controls. Unilever will counter by arguing that the owners of Kraft are asset strippers, whereas it invests for the long-term in its brands. There will be a higher bid and a complicated defence strategy.
This will be exciting in the world of finance but for most people the interest will be in the clash between two models: the aggressive US approach and the co-operative European one, for remember that Unilever was an example of Anglo-Dutch cooperation dating back to 1929.
UK news in pictures
The other story is the proposed sale by General Motors of Opel/Vauxhall to Peugeot-Citroen. GM has racked up huge losses with its European operations. But before you think that this is a hard-nosed US company handing over to a more co-operative one, note that Peugeot has shed a lot of jobs in France as well as closing down its Ryton factory near Coventry. Opel, for its part has increased its production in the UK, where Vauxhall has a larger share of the market than Opel does in Germany.
Will the new French owners close down UK plants, for there is overcapacity still in the European car market? Maybe use Brexit as an excuse? Or will it want to protect its 10 per cent share of a profitable market?
We will not get answers to these questions, or much of a clue as to how the Unilever battle will go, this week. But we will get clues – and these are massively important stories.
In the US, the thing to watch will be whether business confidence in President Trump erodes or builds.
To most Europeans the widespread support for the new President is puzzling, but according to a NFBI survey last week confidence among small businesses in the US is the highest it has been for ten years. The interesting thing will be whether this will translate into faster growth.
Faster growth will be on the agenda in the UK next week with public finances on Tuesday and revised GDP numbers on Wednesday. January is always a strong month for revenue so the government will be in surplus, and we will get a feeling as to whether it will hit its fiscal target for this year. We also will learn more about growth last year, with GDP probably revised up further.
Finally Europe. There has been a gradual rise in concern as to whether Italy and Greece will remain in the Eurozone in recent weeks but this has been sharpened by the increased probability of a general election in Italy and the possibility of a breakdown in the debt talks with Greece. There is a meeting of the so-called Eurogroup and the IMF on Monday to try to reach agreement on what is to be done about next stage of the Greek bailout. But the thing that people will be looking at will be the interest differential between Greek and Italian debt and German debt. That is the “fear gauge”. Let’s see what happens to it.