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QE or not QE, that will be the question for the ECB Council meeting on Thursday

Aside from the ECB meeting, the day ahead also includes an annual general meeting for Wm Morrison Supermarkets, and updates from PZ Cussons and Majestic Wine
Euro sign in Frankfurt
RBC Capital’s economists say their central expectation remains that the ECB will hold off until July to make a QE announcement

With the Federal Reserve rate decision out of the way, attention on Thursday will switch to another central bank meeting, although the latest ECB council get-together is not expected to be quite as interesting.

It has been well-flagged recently that the European Central bank will hold a discussion on the future of its quantitative easing (QE) bond-buying programme after its planned expiry in September at this meeting.

That had raised the possibility that the ECB could make an announcement on Thursday as to whether or not to extend the programme or allow it to expire as planned.

However, RBC Capital’s economists say their central expectation remains that the ECB will hold off until July to make that announcement.

They said; “At that point, we think the programme will be extended by three months to take it to the end of this year, and we expect President Draghi to use his press conference to give a flavour of the GovCo discussions while signalling that we can expect something substantive in July.”

Jordan Hiscott, chief trader at ayondo markets also believes the ECB will maintain quantitative easing until December.

He said: “If I was to read into comments from various ECB bankers, its possible quantitative easing from the ECB could end as soon as September: Indeed, the asset purchase program has been key in stabilising the EU after the 2008 credit crisis.

“What is fundamentally different from the US end to bond purchasing is the state of the respective economies. Importantly, the EU must maintain its extreme low interest rates as unemployment is still at levels from before the credit addition, data from the Eurozone has been notably weak of late. This coupled with political turmoil in Italy make for trepidation for the ECB in general.”

Supermarket sweep

On the corporate front, blue-chip grocer Wm Morrison Supermarkets PLC (LON:MRW) will host its annual general meeting on Thursday, a day ahead of first-quarter numbers from bigger rival Tesco PLC (LON:TSCO).

No trading news is expected from Morrison’s, which issued its first-quarter update on May 10, with the chain steadily increasing like-for-like sales in recent quarters, although much of the growth has been driven by price-cutting, so margin worries remain.

Among products on the supermarket shelves, Imperial Leather soap maker PZ Cussons PLC (LON:PZC) is due to issue a trading update on Thursday, with the firm somewhat unusual in the world of consumer goods.

While most of its peers look to Europe and North America to make a large chunk of their profits, most of PZ Cussons’ business comes from Africa. Cost inflation, increasing competition and cash-strapped consumers in Nigeria – its largest single market – and the UK have weighed on margins and volumes.

PZ Cussons has responded by slashing costs and narrowing its new product pipeline to focus on a smaller number of higher-impact launches, although the effects from those initiatives are unlikely to have been felt yet.

For the year just gone, the consensus among City analysts is for pre-tax profits of £81.7mln on sales of £780.4mln.

Glass half-full for Majestic Wine

Meanwhile, investors in Majestic Wine PLC (LON:WINE) might not require a stiff drink with the wine seller having already carefully lowered expectations for its full-year results back in April.

The retailer then announced plans to accelerate growth by materially increasing investment in new customer acquisition, though it warned that that might reduce earnings by £2mln-£3mln.

The fruits of the investment might emerge in months rather than years but even so, it might be too soon for Majestic to report on whether the new initiative is having any effect.

Analysts are expecting Majestic to report a headline pre-tax profit of £17.2mln on revenue of £480mln, with the group targeting at least of £500mln in fiscal 2019. The full-year dividend is predicted to rise to 5.67p from 3.60p.

Significant events expected on Thursday June 14:

ECB Council meeting

AGMs: Wm Morrison Supermarkets PLC (LON:MRW), International Airlines Group PLC (LON:IAG),

Trading update: PZ Cussons PLC (LON:PZC), N Brown Group PLC (LON:BWNG)

Finals: Majestic Wine PLC (LON:WINE), Aveva Group PLC (LON:AVV), Consort Medical PLC (LON:CSRT), Mountview Estates PLC (LON:MTVW), Syncona Limited (LON:SYNC)

Interims: Care Tech Holding PLC (LON:CTH), Safestore Holdings PLC (LON:SAFE)

Ex-dividends: To knock 4.5 points off FTSE 100 index - 3i Group PLC (LON:III), Mediclinic International Plc (LON:MDC), NMC Healthcare PLC (LON:NMC), Persimmon PLC (LON:PSN), Severn Trent PLC (LON:SVT), WPP PLC (LON:WPP)

Economic data: UK retail sales; US weekly jobless claims; US retail sales; US import and export prices

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