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Expected US interest rate hike to draw the attention Wednesday, as Trump trade wars rumble on

Aside from the US interest rate decision, corporate updates are due from online fashion retailer Boohoo Group, outsourcer MITIE, and automotive services firm The AA ...

US Federal Reserve
The US central bank is forecast to hike the Fed funds rates by another 25 basis points to a range of 2.00%-2.25%

The main market focus on Wednesday is likely to be on the latest policy decision from the Federal Reserve, with an increase in US interest rates widely expected once more.

The US central bank is forecast to hike the Fed funds rates by another 25 basis points to a range of 2.00%-2.25%.

Fed boss Jerome Powell’s press conference will, as always, also be closely watched, with economists at RBC Capital expecting his comments to reflect growing upside risks to the economic backdrop given the current US trade wars.

In a preview, they said: “He is likely to throw shade on the notion that tariffs are a significant downside risk. Expect him to be asked about the politicization of the Fed—but also expect that he’ll craftily dodge this one."

The RBC economists’ continued: “Beyond the hike and press conference, we think the summary of economic projections is likely to garner outsized attention.

“We will get the Fed’s estimate for where they think Fed Funds should be in 2021 for the first time. While there is unlikely to be any change to the 2018 and 2019 medians, we think the median increases to 3.6% in 2020 and that allows the Fed to show rates on hold in 2021 at that level.”

No tears for Boohoo

Interim results from online fashion retailer Boohoo Group PLC (LON:BOO) is likely to be the main corporate focus on Wednesday, with the firm’s last trading update in June showing a sales jump mainly thanks to last year’s acquisition of PrettyLittleThing (PLT), which this summer occasioned a warehouse move by the business.

Analysts at Peel Hunt expect the AIM-listed group to report a 48.5% increase in first-half revenue to £390mln, which should drive 37% growth in underlying earnings (EBITDA) to £38.1mln.

In a preview, the City broker’s analyst said: “The implication is a pick-up in trading for the boohoo brand over Q2 into the high teens, c100% growth at PLT despite the warehouse move and scope for outperformance in H2.”

They added: “PLT will create a debating point; the warehouse move required stocks to be run down (impacting availability), next day delivery to be switched off (impacting conversion) and now at the new warehouse, operational efficiency and stock levels will be low, ramping up into autumn. Sales momentum will have been lost over summer.”

But, the analysts concluded: “We are quite comfortable with this temporary impact. Clearly the warehouse move created a one-off disruption event, but PLT is now better placed for medium-term growth and boohoo group as a whole has significantly more operational headroom moving into peak trading.”

MITIE transformation

Meanwhile, a trading update from MITIE PLC (LON:MTO) will focus on the continuing transformation of the once troubled outsourcing group.

The FTSE All-Share listed firm’s full-year results, released on 7 June, showed year-on-year revenue growth of 2.8% to £2.2bn with MITIE’s engineering, security, and care & custody businesses strong but property management and its waste divisions weak.

The group’s full-year underlying earnings (EBITA) were down 6.0% to £77.1mln, as margin fell to 3.5% from 3.8% a year earlier, reflecting investment in customer services and internal capability and the weak property management performance.

The group saw its net debt at the end of March increase to £194mln, up from £147mln a year earlier, reflecting the costs of its current three-year Transformation Programme - scheduled to bring net cost reductions of £45mln per annum by summer 2020 - which the group said was on track.

Hopes of a brighter horizon for the AA

And investors in auto recovery and insurance firm the AA plc (LON:AA.) will be hoping for any uplift in its currently gloomy profit forecast when it reports interims on Wednesday.

In a trading update in August, the FTSE 250-listed firm said its reduced profit forecasts had remained unchanged despite an 8% rise in roadside call-outs in July as they had resulted in higher costs, with the company forced to use third-party garages due to an unexpected surge in breakdowns following severe weather.

In February, the group cut its dividend and earnings expectations and unveiled a strategy to invest more into new technologies and roadside improvement, so investors will likely be looking for any news of positive progress in the second half.

Significant announcements expected on Wednesday September 26:

US FOMC rate decision

Interims: Boohoo Group PLC (LON:BOO), The AA PLC (LON:AA.), Amryt Pharma PLC (LON:AMYT), Armadale Capital PLC (LON:ACP), Billing Services Group Ltd. (LON:BILL), CentralNic Group PLC (LON:CNIC), Corero Network Security PLC (LON:CNS), Crawshaw Group PLC (LON:CRAW), Destiny Pharma plc (LON:DEST), Minds + Machines Ltd. (LON:MMX), Pelatro PLC (LON:PTRO), Summit Germany Limited (LON:SMTG)

Finals: Accrol Group Holdings PLC (LON:ACRL), Allergy Therapeutics plc (LON:AGY), James Halstead PLC (LON:JHD), Town Centre Securities PLC (LON:TOWN)

Trading updates: MITIE Group PLC (LON:MTO), PZ Cussons PLC (LON:PZC), SSP Group PLC (LON:SSP), Trifast PLC (LON:TRI), Futura Medical PLC (LON:FUM), NCC Group PLC (LON:NCC)

Economic data: BBA UK mortgage lending data; CBI distributive trades survey; US new home sales

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