After this week’s above forecast UK inflation data revived thoughts that a UK interest rate hike could be edging closer, the latest Bank of England Monetary Policy Committee meeting on Thursday will be eyed keenly for any signs of more members turning hawkish.
Hargreaves Lansdown commentator George Salmon still thinks that any hike in UK interest rates by the MPC this month would be a surprise, as the BoE knows that a subsequent rapid increase in borrowing costs would have significant consequences for individuals, businesses and the stock market as a whole despite inflation bumping up near the bank's 3% target rate.
In August, two members of the MPC, Ian McCafferty and Michael Saunders, voted for interest rates to be increased, but this time there will be the full complement of nine voting members for the first time since March as Dave Ramsden arrives from the Treasury for his first meeting.
Although Tuesday’s increase in the UK consumer price index to 2.9% for August has increased the pressure on the MPC to consider a move to hike rates, other UK data has been pretty mixed, and – importantly – the latest UK average earnings growth remains subdued at 2.1%, meaning real wages are still lagging inflation.
Retail Focus
The main corporate news on Thursday will also come from the high street, with updates due from clothing and home stores Next Plc (LON:NXT), food retailer Wm. Morrison Supermarkets PLC (LON:MRW) and wholesealer and conveniece stores operator Booker PLC (LON:BOK).
Next has already pre-warned investors that its first half results will show a sales decline as consumers become increasingly squeezed by falling disposable incomes.
In a trading update last month, the FTSE 100-listed firm said total sales in the first half fell 2.3% after a weak first quarter offset a return to growth in the second quarter.
The company had added that although second quarter sales edged up 0.7% in the second quarter, this was mainly due to warmer weather attracting customers to its summer collection. Next also remained cautious on the outlook, saying it sees another drop in second half sales.
“Combined with the currency headwinds facing the group, even the uptick in second quarter trading is unlikely to prevent a meaningful decline in first half profitability,” said George Salmon, equity analyst at Hargreaves Lansdown.
More from Morrisons
However, recent price cuts and store refurbishments are expected to help William Morrison continue its recent recovery.
Britain’s fourth largest supermarket has returned to growth in recent quarters under chief executive David Potts. It notched up its sixth consecutive quarter of underlying sales growth in the opening three months of the year and investors will be looking for that trend to have continued.
The industry remains intensely competitive though and Walmart-owned Asda has started to show signs of life again, so the market will be looking to see if any customers have defected.
Also of interest will be any more news on the deal to supply 1,600+ McColls convenience stores up and down the UK which it agreed last month and could add increase annual sales by around £1bn.
As for the numbers, analysts at Barclays are expecting the supermarket to grow first half sales by 5.4% to around £8.5bn, with underlying pre-tax profits pencilled to come in at £216mln (H1 2016: £157mln).
And Tesco PLC’s (LON:TSCO) bid target Booker will also update the market on Thursday, with the FTSE 250-listed firm having reported solid first quarter numbers back in July thanks to favourable weather and a good Easter.
Significant events expected on Thursday September 14:
Bank of England monetary policy meeting
Trading update: Booker Group PLC (Q2) (LON:BOK), Safestore Holdings PLC (LON:SAFE)
Finals: Ricardo plc (LON:RCDO)
Interims: Corero Network Security PLC (LON:CNS), Forbidden Technologies plc (LON:FBT), Gresham House Plc (LON:GHE), GVC Holdings PLC (LON:GVC), Wm. Morrison Supermarkets PLC (LON:MRW), Next Plc (LON:NXT), Ophir Energy Plc (LON:OPHR), Regional REIT Limited (LON:RGL), Property Franchise Group PLC (LON:TPFG), Spire Healthcare PLC (LON:SPI), Warpaint London plc (LON:W7L)
FTSE 100 ex-dividends: None scheduled
Economic data: US CPI, US weekly jobless