After Tuesday’s labour market report saw a drop in the UK unemployment rate to a 40-year low offset by weakness in average earnings growth, traders will be looking for the latest inflation figures to provide better justification for this month’s Bank of England interest rate hike.
The June UK consumer price index (CPI) measure of inflation surprised the markets by coming in lower than expected at 2.4%, and RBC Capital’s economists are forecasting CPI to have increased by 2.6% year-on-year in July.
In a preview of the data, they said: “With fuel prices up almost 12% y/y, we should continue to see the transport category make a large upward contribution.
“One further factor this month that is likely to make an upward contribution could be food prices; the latest BRC shop price index showed food price inflation, particularly fresh food, accelerating in July.”
Insurer Admiral set to motor
On the corporate front, following Tuesday’s £1.2bn agreed takeover bid from private equity firm Bain Capital for FTSE 250 rival esure Group PLC (LON:ESUR), the latest update from motor insurer Admiral PLC (LON:ADM) will be closely eyed.
Data from the motor insurance sector suggests the firm’s saw a good underwriting performance last year and may achieve a fairly good outcome this year as well.
However, new car sales have been falling steeply and after several years of rising premiums competition has increased, so it will be interesting to see if that is reflected in Admiral’s figures.
The price comparison websites have also seen more in the way of competition so the market will be keeping an eye on profits in that area as well.
First-half declines see for Hikma
Elsewhere, full-year results from Hikma Pharmaceuticals PLC (LON:HIK) in March triggered a re-rating for the stock but it is unlikely Wednesday’s interims will repeat the trick.
Numis Securities, which recently downgraded its rating for Hikma to ‘hold’, is looking for first half sales of US$884mln and US$151mln in underlying earnings (EBITDA).
“This would equate to a slight decline in revenue and 15% decline in profits that may take some of the momentum out of the perceived operational progress in H1,” the broker said.
In a trading statement in May, Hikma’s chief executive, Siggi Olafsson, said the new financial year had got off to an encouraging start.
Pipeline key for Balfour Beatty
Meanwhile, Balfour Beatty plc (LON:BBY) is currently in restructuring mode but that’s better than being in bankrupt mode, which was the fate of its erstwhile contracting partner, Carillion.
In a preview of the Balfour numbers, Nicholas Hyett, an equity analyst at Hargreaves Lansdown said: “With margins heading back in the right direction, the next challenge is to get revenues moving too.
“We’ve seen the order book shrink steadily in recent results as the group has focused on bidding for business it can execute profitably. That’s all well and good, but making great margins on little business isn’t all that different from poor margins on lots of business.”
“In the past Balfour have said the pipeline looks strong, so hopefully it will start delivering from here,” Hyett concluded in a preview of the group’s first-half results due on Wednesday.
Significant events expected on Wednesday August 15:
Interims: Admiral PLC (LON:ADML), Balfour Beatty plc (LON:BBY), Hikma Pharma PLC (LON:HIK), Hochschild Mining PLC (LON:HOCH), Lookers PLC (LON:LOOK, CLS Holdings PLC (LON:CLI) , Riverstone Energy Limited (LON:RSE)
Economic data: UK CPI, RPI, PPI, HPI inflation; UK construction output; US retail sales; US industrial production; US Empire State manufacturing survey; US housing market index