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UK economic health eyed from inflation, jobless numbers; Kingfisher updates on trading

Week ahead includes UK inflation, unemployment, average earnings data; trading update from Kingflsher PLC, interims from Hargreaves Lansdown PLC, Admiral PLC ...
Cloudy Houses of Parliament
UK inflation data for July will be released on Tuesday, and Dutch bank ING is expecting a tick up to 2.7%

Although the North Korea/US tension is likely to remain the biggest worry in the coming week, concerns over the health of the UK economy will also be a focus, with official data due on inflation, jobs and house prices.

Rising inflation following a slump in the pound after the June 2016 Brexit vote, coupled with weak wage growth, has put a squeeze on household incomes recently.

The Office for National Statistics (ONS) last month revealed the consumer price index fell to an annual rate of 2.6% in June, down from 2.9% in May, but it remained well above the Bank of England’s 2% target and is expected to reach a peak of 3% by October.

Inflation data for July will be released on Tuesday, and Dutch bank ING is expecting a tick up to 2.7%.

Meanwhile, wage increases have continued to fall behind inflation, with data from the ONS for the three months to May showing average earnings, excluding bonuses, rose by 2.0% year-on-year, while real wages, including the impact of inflation, fell by 0.5% in that three month period.

ING predicts the latest UK average earnings growth to remain at 2.0% for the three months to June, when the data is released on Wednesday.

UK unemployment also dropped in May, down 64,000 to 1.49 mln, while the jobless rate fell by 0.2% to 4.5%, its lowest since 1975.

Figures for the three months to June, also due on Wednesday, are forecast to see the unemployment rate hold at 4.5%, although ING are predicting a 100,000 rise in the jobless count.

And the ONS also releases its data for UK house prices for the three months to June on Tuesday amid a slowdown in the market due to political uncertainty.  In the preceding three months, the annual rate of house price growth eased to 4.7% from 5.3%.

All eyes on Kingfisher’s French business

On the corporate front, the traditional summer lull sees fewer blue chip news releases but there will still be some highlights.

It’s been a disappointing 2017 so far for Kingfisher PLC (LON:KGF) investors, with shares losing more than 12% since the turn of the year.

Its French retail business has struggled to cope with a downturn in the home improvement market across the Channel and investors will be hoping the outlook there is a little more optimistic than it has been in recent months.

Those issues in France have overshadowed decent performances from its B&Q and Screwfix stores here in the UK, the latter in particular.

The markets will be looking on Thursday to see if that’s still the case and it will give a pretty good idea of how the economy is faring; if tradesmen are buying more materials, it generally follows that people are spending more on home improvements.

More generally, any update on plans to unify the French and UK back office systems and cut costs will also be of interest.

Hargreaves Lansdown has already warned

Meanwhile Hargreaves Lansdown PLC (LON:HL. reports its preliminary results on Tuesday, having already warned that it expects annual profits to fall and that it won’t pay a special dividend.

Earlier this month, the financial services firm said it will not have sufficient regulatory capital surplus for a special dividend after assessing its requirements by the Financial Conduct Authority.

"The board has concluded it needs to retain an additional £50mln of capital and hence the group will not pay a special dividend for the financial year ended 30 June 2017," it said in a statement.

It also said it expects annual pre-tax profit of between £265mln and £266mln, compared to £218.9mln the previous year.

Assets under management are forecast to rise 28% to £79.2mln. Net business is projected to climb 15% to £6.9bn and the number of active clients rose by 118,000 to 945,000.

Admiral solid despite Ogden cut

Shares in motor insurance outfit Admiral Group PLC (LON:ADM) are up 18% year-to-date but have lagged those of sector peers esure and Hastings Group.

They have at least outdone sector leader Direct Line, but investors will be hoping for a bit of va-va-voom in Wednesday's results.

The half-year report from Direct Line at the beginning of the month provided some comfort, with Direct Line reporting that the impact from the change in the Ogden rate – the discount rate applied to personal injury claims – was not as severe as feared.

In its 2016 results Admiral estimated the cost of the change in the Ogden rate on open claims at about £150mln; much of that hit was recognised in the 2016 results with around £65mln expected to be recognised in coming years.

The change did not prevent the insurer from continuing to pay a handsome dividend; the shares yield more than 5% so the level of the interim dividend will be of interest to income investors.

Significant events expected on:

Monday August 14

Finals: Real Good Food Group PLC (LON:RGD)

Interims: Akers Biosciences Inc (LON:AKR),  Clarkson PLC (LON:CKN), Caledonia Mining Corp (LON:CMCL)

Tuesday August 15

Finals: Hargreaves Lansdown PLC (LON:HL.)

Interims: H&T GROUP PLC (LON:HAT), Jackpotjoy PLC (LON:JPJ), Mears Group PLC (LON:MER), Marshall Motor Holdings PLC (LON:MMH), John Menzies PLC (LON:MNZ)

Economic data: UK CPI, RPI, PPI inflation; US retail sales

Wednesday August 16

Interims: Admiral PLC (LON:ADM), Balfour Beatty PLC (LON:BBY), CLS Holdings (LON:CLI), Hochschild Mining PLC (LON:HOC), Lookers PLC (LON:LOOK)

Economic data: UK unemployment, average earnings

Thursday August 17

Trading update: Kingfisher PLC (LON:KGF)

Interims: Allied Minds PLC (LON:ALM), Capital Drilling Ltd (LON:CAPD), Gem Diamonds Ltd (LON:GEMD), Hikma Pharmaceuticals PLC (LON:HIK), Kaz Minerals PLC (LON:KAZ), Oxford Biomedica PLC (LON:OXB)

Finals: Rank Group PLC (LON:RNK)

Economic data: UK retail sales

Friday August 18

AGMs: System1 Group PLC (LON:SYS1)

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