Interest rate rises in the UK and the US will be on everyones mind in the coming week, with the Federal Reserve and Bank of England monetary policy committees set to meet and a hike seen as likely from both, according to many economists.
Following recent solid UK data, including stronger than expected third quarter GDP growth numbers and above-forecast inflation, the BoE is widely forecast to undertake its first rate increase in over a decade on Thursday.
However, the expected 0.25% rise to 0.75% will only take interest rates back to the level they had been before the surprise post-Brexit vote rate cut last summer, and many economists are still unsure whether a move by the MPC would be a good one or not given the path towards Britain’s likely exit from the European Union in a couple of year’s time.
The Bank will also release its quarterly inflation report, as well as the minutes from the MPC meeting on another ‘Super Thursday’, with the forecasts likely to provide the back up for any rate move made by the central bank.
US rates may rise
US interest rates, on the other hand, have been steadily rising over the past year as the economy across the Atlantic has been growing steadily, with President Trump’s post-election boost of promised tax cuts and infrastructure spending still to come.
Economists are still not completely certain whether the FOMC will sanction another 0.25% hike at the end of the latest meeting on Wednesday, or wait until the last of the year on December 12-13, particularly given the uncertainties over the future of Fed chair Janet Yellen, whose tenure ends next year.
Once the rate news is out of the way, the focus will shift to the US economy’s most important data point, with the October jobs report due on Friday.
September’s numbers were battered by the hurricanes that hit Texas and Florida during that month and in August, showing a 33,000 drop, but economists are predicting a sharp rebound in the following month.
HSBC continues banking results season
With interest rates rising, HSBC Holdings PLC (LON:HSBA) wraps up the ‘Big Four’ UK banks’ third quarter results season on Monday, as time begins to run out on Stuart Gulliver’s stint as its chief executive.
John Flint, chief executive of Retail Banking and Wealth Management, will take over early next year so there may not be a lot of forward looking commentary in the third quarter earnings update.
Deutsche Bank is forecasting adjusted profit before tax of US$5,323mln, a common tier equity 1 ratio of 14.6% and a tangible net asset value of 731 US cents.
It also expects that the third quarter will have been a quiet one for loan losses given limited signs of stress in key markets.
BT investors hopes for calm
It’s probably fair to say that it’s been a difficult year FTSE 100-listed telecoms giant BT Group plc (LON:BT.A.) with an accounting scandal in Italy, lower growth in some international markets and concerns about its pension deficit all unsettling investors.
But Deutsche Bank expects BT’s second quarter update on Thursday to be “somewhat calming post recent shocks” with the lender anticipating a guidance reiteration, together with a 5% hike in the quarterly dividend to 5.1p.
However, the German bank still think’s BT’s host of major issues will take longer to resolve and will cap the stock’s short term performance, making new chairman, Jan du Plessis’s induction demanding.
Deutsche’s analysts concluded: “We don’t dispute that BT will be strong in both fixed and mobile in the LT, but view that a painful catch up vs European peers on investment and convergence has yet to run its course. There is no imminent ‘return to normal’ for BT and risk of owning is high vs peers.”
Oils could look slick
Oil markets and oil investors have now had a good bit of time to get used to the ‘new normal’ of US$50 per barrel of crude, so as oil majors BP PLC (LON:BP. and Royal Dutch Shell PLC (LON:RDSB) release updates they can focus more on the numbers than the commentary of mitigating circumstances.
In terms of the broader market trends there should be a degree of positivity - crude prices continued higher in the period, averaging about US$52 a barrel, and, according to analysts, refining margins were notably stronger.
RBC Capital analyst Biraj Borkhataria, in a recent note, highlighted that BP is the “most positively exposed” with regards to the refining story and investors may also expect “materially lower” impacts in respect of the Macondo disaster come Tuesday.
Shell, meanwhile, may have a quieter time when it reports on Thursday.
Previewing the Anglo-Dutch’s update, the same analyst said: “A number of one-offs, both positive and negative could lead to a volatile quarter, and we expect strategic answers to be deferred to the Nov mgmt day.”
Overall, investors can likely expect some healthier looking numbers, but, perhaps there won’t be a huge amount to shout about.
Next to give clues about health of UK high streets
On the high street, Next Plc’s (LON:NXT) interim results back in September were well-received by the markets, with shares jumping by almost a third over the course of that month as a result.
The enthusiasm seems to have died down in recent weeks, however, with the stock tumbling 10% from its peaks at the end of September, so investors will be hoping Wednesday’s trading update will get it going once again.
One reason for that fall are perhaps recent signs of weak consumer sentiment and challenging conditions on Britain’s high streets, so any mention of how trading is currently faring will be keenly eyed.
Full-year guidance will once again be in focus as well – the retailer slightly upgraded it back with its interims and profits were previously forecast to be somewhere between £687mln and £747mln.
No ‘major disappointments’ expected from Morrisons
Staying with retailers, last month’s WM Morrison Supermarkets PLC (LON:MRW) interim numbers were by and large in line with what markets had expected, although concerns over a weakening trend in the second quarter and deteriorating margins weighed on the share price.
Both of those issues are likely to be in focus this time around as well when the supermarket chain updates markets on Thursday.
Analysts at Barclays Capital aren’t the biggest fans of the company – they think it’s too pricy – but they don’t expect the quarter just gone to be a “major disappointment”.
In a preview, they said: “We expect a fourth consecutive quarter of LFL sales growth exceeding 2%, which would be a creditable performance given a somewhat more robust ASDA and continuing strength from the discounters - though of course food inflation will likely have helped.”
International sales growth in focus at Just Eat
Online food delivery firm Just Eat PLC (LON:JE.) reports its third quarter trading update on Tuesday, and investors will be looking out for any comment on its takeover of Hungryhouse, which got the provisional green light from regulators earlier this month.
Aside from that deal, the online food delivery marketplace upped its full-year revenue guidance over summer to between £480mln and £495mln, so any updates to that will also be eyed.
It kept its underlying profit forecasts unchanged though, saying it would spend more on promotions and marketing.
True to its word, Just Eat has just launched a multi-million cross-channel ad campaign in the UK, so any impact that this additional spend is having on margins will be of interest.
With international revenues starting to account for more of total sales, investors will also want to see continued strong growth in territories such as Canada, Spain and Italy.
Market shares gains eyed for Paddy Power Betfair
Paddy Power Betfair plc (LON:PPB), which gives a third quarter trading update on Wednesday, may have gained market share during the trading period, according to the UK Gambling team at Barclays.
Analysing data from its proprietary Oddschecker software, the team also reckons gross win margins will most likely have weakened in September as a result of punter-friendly football results, which will reduce the potential for gross win margin upgrades in the bookmakers’ results season.
Barclays said September was a quieter month for the bookies, with regulation continuing to dominate the debate.
Specific to the FTSE 100-listed firm, the City will be looking for further progress on the integration of the Paddy Power and Betfair technology platforms, which has been a key focus since the merger of the two, and an update on when Peter Jackson is likely to take over the reins from current chief executive, Breon Corcoran.
Uncertain advertising budgets weighting on WPP
Advertising giant WPP PLC (LON:WPP) has been squeezed recently due to an unsettled marketing spend environment following contrasting third quarter performances from major peers Omnicom and Publicis.
WPP’s Q3 results, due on October 31, come after the FTSE 100-listed firm reported a 3% year-on-year decline in like-for-like net sales in July and trimmed its full year net sales guidance to 0%-1% from 2% growth.
Given uncertainty around the marketing plans of large consumer advertisers - such as Unilever, Nestle, and Reckitt Benckiser following weak trading updates from all three - an update on short-term pricing pressure, the frequency of client review activity, and net new business wins will be keenly sought.
“Perky” first half expected from Tate & Lyle
Food ingredients firm Tate & Lyle PLC (LON:TATE) has been under pressure this year on worries over the end of the tariff-free fructose (HFCS) trade into Mexico following President Trump’s election last November, but despite this US broker Jefferies International expects the firm to report “perky” first half results on November 2.
In a note upgrading its rating for the FTSE 250-listed firm to ‘buy’ from ’hold’, Jefferies analysts said: “We remain 3-4% ahead of market on FY18 earnings and expect a decent H1 on November 2, where we are looking for £157m PBT.”
They concluded: “We're not complacent about risk, but think it's being over-discounted, with a worst case outcome far from the certainty that is implied.”
Significant events expected:
Monday October 30:
Interims: HSBC Holdings PLC (Q3) (LON:HSBA)
Finals: Artilium PLC (LON:ARTA), Lok’n Store Group PLC (LON:LOK)
Production update: Glencore PLC (Q3) (LON:GLEN)
Economic data: GfK UK consumer confidence; Nationwide UK house price index; UK consumer credit/mortgage approvals; US personal income, spending
Tuesday October 31:
Interims: BP PLC (Q3) (LON:BP.) , Ryanair PLC (LON:RYA), Great Eastern Energy Corp (LON:GEEC)
Trading updates: Croda International PLC (Q3) (LON:CRDA), DS Smith PLC (Q3) (LON:SMDS), Just Eat PLC (LON:JE.), Plus 500 Ltd (LON:PLUS), Weir Group PLC (Q3) (LON:WEIR), WPP PLC (LON:WPP)
Finals: Egdon Resources Plc (LON:EDR), Earthport plc (LON:EPO)
Wednesday November 1:
Federal Reserve US rate decision
Trading updates: Next Plc (LON:NXT), Paddy Power Betfair plc (LON:PPB), Standard Chartered PLC (Q3) (LON:STAN), Just Group PLC (Q3) (LON:JUST)
Interims: Apax Global Alpha Limited (Q3) (LON:APAX), Smurfit Kappa Group PLC (Q3) (LON:SKG)
Economic data: BRC shop price index; UK manufacturing PMI; US ISM manufacturing; US construction spending
Thursday November 2:
Bank of England UK interest rate decision
Trading update: BT Group plc (Q2) (LON:BT.A), Centaminl PLC (LON:CEY), Howden Joinery Group PLC (LON:HWDN), Indivior PLC (Q3) (LON:INDV), Intu Properties PLC (LON:INTU), Lancashire Holdings Limited (Q3) (LON:LRE), Randgold Resources PLC (Q3) (LON:RRS), Royal Dutch Shell PLC (Q3) (LON:RDSA), RSA Insurance PLC (Q3) (LON:RSA), Schroders PLC (LON:SDR), Wm Morrison Supermarkets PLC (LON:MRW)
Interims: 3i Infrastructure PLC (LON:3IN), Tate & Lyle PLC (LON:TATE)
Economic data: UK construction PMI; US weekly jobless claims
No FTSE 100 ex-dividends
Friday November 3:
Trading updates: Smith & Nephew PLC (Q3) (LON:SN.), Informa PLC (Q3) (LON:INF)
Economic data: Halifax house price index; UK services PMI; US non-farm payrolls; US balance of trade; US non-manufacturing ISM; US factory orders