The fallout from the Catalan referendum and other things to look out for in economics this week

The week will be dominated by the fallout from the Catalan referendum. At the moment it is a huge Spanish story, with an outcome that will be hard to predict – a clash between the constitution and the people. But it becomes a European story from now on, and we may even start to see movements in the markets this week. The three key points are:

Catalonia is the economic powerhouse of Spain, generating 20 per cent of its GDP and roughly one-third of its exports. Without it, Spain is much weaker,

If, some way down the line, Catalonia were to become an independent country, it would want to remain within the EU – but Spain would block it. But the EU would find it hard to exclude a country that was already a member and wished to remain so. This will not be a velvet divorce.

This may become a challenge to the integrity of the eurozone, in a way that Brexit (because the UK did not adopt the euro), is not.

So the thing to look for, as always when political uncertainty intrudes, is what happens to the euro, and what happens to European sovereign bond yields. Expect the euro to move down and yields to move up. The sharper the reaction, the greater the fears for the medium term.

In the US, there are two hot issues: who will take over at the Federal Reserve, and what will happen to Donald Trump’s tax cut? On the former, a number of names have been kicked around and the President has promised a decision next month. We will not get the name this week, but the nature of the speculation will tell us something about the direction of US monetary policy. Key issue: how quickly will US interest rates go up?

This links to tax policy. If there is indeed a significant tax cut – leaving aside the issue of who benefits in the first instance – there will in the short term be more growth. So the scope for a faster-than-expected rise in rates will be increased, whoever happens to get the Fed job. There will be jobs figures this week, but they will be so distorted by the weather last month that for once they should be ignored.

Of the rest, the interesting thing in the UK is not politics – though it is conceivable that Theresa May will not last the week – but whether the economic slowdown was just a blip, or whether there is something more substantial going on. We get purchasing manager indices this week for manufacturing (Monday), construction (Tuesday) and services (Wednesday). All matter, but the last one is the one to look for, because services account for 80 per cent of the economy.

Finally, is nastiness a useful business tool? Ryanair made it its business to be unpleasant to customers but give them cheap fares. Uber is unpleasant to its drivers but gives customers cheap fares. Both prospered in terms of market share (though Uber remains a loss-maker), but now both have run into serious setbacks. Maybe being open about an aggressive business model, rather than pretending to give good service but failing to do so, was a good strategy. But is it still? Let’s see how these two companies fare in the coming days.