After the Bank of England’s Monetary Policy meeting outcome on Thursday proved more hawkish than expected, sending sterling into orbit on rate hike possibilities, attention in the week ahead will be on the Federal Reserve and the outlook for another increase in US borrowing costs.
The two-day Federal Open Market Committee meeting, on Tuesday and Wednesday, could see the Fed unveil another hike in US interest rates, up from the current range of 1% to 1.25%, although most commentators still expect them to hold fire.
In a preview, Graham Spooner, investment research analyst at The Share Centre said: “There are reasons for and against. The US consumer confidence index is surging, GDP grew at a brisk pace in Q2 – 3.0% annualised – new farm payrolls are still increasing at a strong rate – these are reasons to suggest that US rates need to rise again.
“But US inflation remains subdued – 1.7% in August. The odds are that rates will stay on hold.”
UK retail sales to grow
After last Tuesday’s above-forecast UK inflation data provided the initial fuel for the soar-away pound before the BoE boost, investors this week will be eyeing the August retail sales data from the Office for National Statistics for further evidence of a strengthening UK economy.
Last month, UK retail sales increased by 0.3% month on month, the same as the month before, and were up 0.6% quarter on quarter and a tepid 1.3% year on year.
The latest report from the British Retail Consortium showed some encouraging signs, but the Confederation of British Industry distributive trades survey for August was not so good, although there is still a good chance that the official August numbers on Wednesday will show mild growth in retail sales.
Is Kingfisher ready for another plunge?
The main corporate news of the week will also come from the retail world, with half-year results due on Thursday from Kingfisher PLC (LON:KGF), although they are expected to be on the bleak side if last month’s trading update is anything to go by,
The DIY stores owner then reported a 1.9% drop in like-for-like sales for the second quarter as the group continued to be hit by weak trading in France.
The retailer - which owns the B&Q and Screwfix chains in the UK and the Castorama and Brico Depot stores in France - said like-for-like sales in France fell 3.3% in the three months to 31 July and were down 1.0% in the UK and Ireland.
The shares took a pounding and the apparent remedy for Kingfisher’s ills – its “ONE Kingfisher” strategy – was said to be partly responsible for the poor performance in the second quarter, as the overhaul of operations caused disruption.
One of the key things in the interim results statement will be the full-year guidance. Last month Kingfisher said it was happy with consensus forecasts and although it has only been a month, trading can change as fast as the weather for a home improvements retailer.
Food price inflation lift for Ocado
Elsewhere on the retail front, the ongoing recovery in food price inflation should have benefited online supermarket group Ocado PLC (LON:OCDO), which reports a third quarter trading update on Tuesday
Deutsche Bank estimates Ocado reporting growth of 16% in its weekly orders for the 13 weeks to 27 August, driven by 1.8% growth in the average order size.
That should drive total retail sales growth of 18%, the German bank’s analysts think, an increase on the 13% growth in the first half when average order size had seen a 1.4% decline.
Back in early June, Ocado announced its first international licensing deal with an un-named regional player for software only, and any more detail, or further international deals are sure to be welcome.
Cheesed off Dairy Crest shareholders hoping for more good news
Staying with food, shares in Cathedral City cheese maker Dairy Crest Group PLC (LON:DCG) have marked time this year, but things may be looking up for the dairy products firm.
Last week the company decided to switch future annual increases in pension payments to a lower measure of inflation, which pleased the market – if not Dairy Crest’s employees.
On Tuesday, shareholders will be hoping the company can keep the good news coming in a pre-close trading statement.
The company said in a July update that trading in the first quarter of the financial year was in line with expectations with combined sales of its four key brands – Cathedral City, Clover, Frylight and Country Life – up 7% year-on-year.
Profits are expected to be back-loaded into the second half of the current financial year, so the second quarter might not provide many fireworks.
More of the same from Gulf Keystone
Investors would probably welcome a change of narrative on Tuesday when Gulf Keystone Petroleum Limited (LON:GKP) releases half yearly results, for the six months to June 30, but, the North Iraq focused oiler will likely serve more of the same.
Kurdistan oil payments and production numbers have been the key issues for the market, and that’s probably not going to change any time soon.
Nonetheless, a mid-August update revealed that GKP had US$140mln of cash on account following the latest US$12mln payment for Shaikan crude.
The question, however, will be whether the company’s efforts to invest in and grow output can actually deliver.
On balance positive for engineer Smiths Group
Diversified industrials firm Smiths Group PLC (LON:SMIN) has generally reported good numbers in recent years as poor market conditions for its oil services focused John Crane business has been offset by better trading conditions for other divisions
In a preview, Graham Spooner, investment research analyst at The Share Centre said: “We should see that new products help the Medical devices division while continued strong housing and construction business in America will no doubt be reflected in the Flex-Tek division.
“Its Detection business should benefit from increased counter-terrorism measures and improved government budgets.”
Overall, the analyst concluded, Smiths Group should see a big boost from currency movements while there should be a steady rise in the dividend and an improvement in the dividend cover.
Significant events expected on:
Monday September 18:
Trading update: Dairy Crest PLC (LON:DCG)
Finals: City of London Investment Group PLC (LON:CLIG), Finsbury Food Group PLC (LON:FIF), Green REIT PLC (LON:GRN), Petra Diamonds Ltd (LON:PDL)
Interims: Concurrent Technologies PLC (LON:CNC), Ergomed Plc (LON:ERGO); Learning Technologies Group PLC (LON:LTG), Medica Group PLC (LON:MGP), MP Evans Group PLC (LON:MPE), Secure Income REIT PLC (LON:SIR), Veltyco Group plc (LON:VLTY)
Tuesday September 19:
Trading update: Ocado Group PLC
Finals: Eagle Eye Solutions PLC (LON:EYE), Purecircle Limited (LON:PURE))
Interims: Anpario Plc (LON:ANP), Augean PLC (LON:AUG), Bango plc (LON:BGO), DP Eurasia NV (LON:DPEU), Escher Group Holdings PLC (LON:ESCH), Flowgroup PLC (LON:FLOW), Gulf Keystone Petroleum Ltd (LON:GKP), Gulf Marine Services PLC (LON:GMS), Judges Scientific PLC (LON:JDG), Keywords Studios PLC (LON:KWS), Maxcyte PLC (LON: MXCT), NAHL Group plc (LON:NAH), Sinclair Pharma PLC (LON:SPH), Yu Group PLC:YU.)
Economic data: US housing starts, building permits
Wednesday September 20:
US Federal Reserve FOMC meeting rate decision
Interims: Kingfisher PLC (Q2) (LON:KGF), Accesso Technology Group PLC (LON:ACSO), Attraqt Group PLC (LON:ATQT), Cambian Group PLC (LON:CMBN), Science in Sport PLC (LON:SIS), Shield Therapeutics PLC (LON:STX)
Trading update: Babcock International Group PLC (LON:BAB)
Economic data: UK retail sales, CBI industrial trends survey; US existing home sales
Thursday September 21:
Trading update: IG Group PLC (LON:IGG), Mitchells & Butlers PLC (LON:MAB), NCC Group PLC (LON:NCC)
Finals: Kier Group PLC (LON:KIE)
Interims: Capita PLC (LON:CPI), Cambridge Cognition Holdings PLC (LON:COG), Elektron Technology PLC (LON:EKT), Quixant plc (LON:QXT), Safestyle UK PLC (LON:SFE), Scisys Plc (LON:SSY), The Mission Marketing Group PLC (LON:TMMG) Venture Life PLC (LON:VLG)
Ex-dividend factors: 0.9 points off the FTSE 100 index - Old Mutual PLC (LON:OML),Taylor Woodrow PLC (LON:TW.)
Economic data: UK public sector finances, BBA UK mortgage lending; US weekly jobless claims
Friday September 22:
Finals: Smiths Group PLC (LON:SMIN)
Interims: Saga PLC (LON:SAGA)
Economic data: CBI distributive trades survey