(Reuters) – With the U.S. earnings season already underway, heavyweights in banking such as Goldman Sachs are lining up for next week’s report. Investors will have access to a wide range of China data as the Bank of Japan meets in 2022.

Davos becomes virtual for another year. And how long will it take the pound to withstand Britain’s growing political uncertainty.

In Tokyo, Vidya Rangeanathan in Singapore, Karin Strohecker in London and Dhara in India.

1. BANKING ON It

The U.S. earnings season kicks into high gear and it’s the financial sector with its explosive start to 2022 that is in full focus.

The Index is up almost 6% so far this year, while the broader is down 2%, as investors bet on banks benefiting from new lending and the higher yields https://www.reuters.com/business/rise-real-bond-yields-may-slow-not-stop-stock-market-bulls-2022-01-12 expected to accompany a more aggressive Federal Reserve.

Goldman Sachs, BNY Mellon and Bank of America report on Tuesday. Bank of America reports on Wednesday. Netflix (NASDAQ) reported Jan 20.

Although bank executives will likely be positive about the outlook, it remains to be determined if that enough is sufficient to maintain demand for bank shares. Bank stocks do much better when rates rise than during them.

For a related graphic on financial stocks soar in early 2022, click https://fingfx.thomsonreuters.com/gfx/mkt/gkplgbajdvb/Pasted%20image%201642025201594.png

2 GOOD NEWS FIRST

Bank of Japan official meeting January 17-18, good news: Inflation is climbing higher and the economy is improving.

The November increase in consumer prices was the most rapid in two years. Uniqlo, Japan’s largest retailer of affordable clothing, says that it cannot raise its prices. This is a drastic change for a country where inflation is not a common norm. Firms deal with rising costs by tightening their belts instead of passing on the increase.

What’s the bad news? It is not the right reason that inflation is increasing.

Rising prices don’t reflect a decade of super-charged monetary stimulus. Instead, they are caused by rising energy prices and weakening the yen.

Rising living costs must not be a problem for weak households and a fragile economy. The BOJ will debate when it is possible to start telegraphing rate increases, but also promise that they will continue their ultra-easy policy for the remainder of this year.

For a related graphic on Japan’s yields and inflation ticking higher, click https://fingfx.thomsonreuters.com/gfx/mkt/gkplgxolqvb/Pasted%20image%201635491680033.png

3. BALANCING Act

On Monday, data should show that China’s economy stabilized in Q4, following power outages or coronavirus setbacks. This will allow 2021 to grow by 8%.

Wednesday’s data revealed that bank lending in December fell faster than predicted, but full year lending still set records as the central banking slowly intensifies its policy support for the economy to slow down.

Stop-go measures to improve monetary conditions are a focus of investors. It is also important that policymakers consider how they can manage a overcrowded property market while still limiting stress for home buyers and sellers.

Due to the Chinese New Year Holiday in February and the Winter Olympics at Beijing in March, the central banks will want to ensure that markets and banks are stocked with cash. China’s overnight interest rate has jumped to 4mth high. This policy rate is in sharp focus.

For a related graphic on China growth slowing, click https://fingfx.thomsonreuters.com/gfx/mkt/myvmngkjzpr/Pasted%20image%201634212277756.png

4/ VIRTUAL DAVOS

The World Economic Forum (WEF), a gathering of top business leaders and policymakers from around the globe, will be held in Davos, Switzerland, on January 17-21. They will put on their snow boots, and take part in video conferences to discuss the big issues facing the world.

The general mood is negative: Just one-tenth of the WEF members who were surveyed believe that global recovery will be faster over the next three year, and only six percent are optimistic about the outlook for the planet.

While climate change is viewed as the greatest threat, erosion of social cohesion as well as livelihood crises and mental health problems are the main risks.

Fumio of Japan, Narendra Modi from India, Ursula von der Leyen from the European Commission, Janet Yellen, U.S. Treasury Secretary Janet Yellen, and Christine Lagarde, ECB, are scheduled to all speak. Postponement of the full meeting in person has been made to early summer.

For a related graphic on WEF top global risks, click https://fingfx.thomsonreuters.com/gfx/mkt/akpezejyovr/WEF%20top%20global%20risks.PNG

5/STERLING HIGH

Thanks to Omicron COVID signs of easing, Sterling has been flying high and there are expectations that British interest rate will rise in February. The currency is currently at its two-month high against the dollar, and it has been one of the most stable major currencies in early 2022.

The currency bulls can push sterling higher by boosting rate hike expectations in the future data. On Tuesday, November employment numbers will be released. Then on Wednesday, December inflation and Thursday’s retail sales data will follow.

However, the political uncertainty is not appearing to have any effect on the pound. After revelations that Boris Johnson attended Downing Street parties during the 2020 lockdown, it appears his position as prime Minister is at risk. A week in politics is not a very long time, didn’t someone? For trading the Pound, it might be similar.

For a related graphic on, click https://fingfx.thomsonreuters.com/gfx/mkt/xmvjobemgpr/theme1301.PNG