Fed could be Grinch-like in final full trading week before Christmas, but BoE seen more festive

Aside from the UK and US rate decisions, the latest UK inflation and retail data will be closely eyed as well in the absence of almost anything on the corporate diary

Fed boss Jerome Powell
A quarter point interest rate rise to 2.5% at the final Fed meeting of 2018 has been a near certainty according to the interest rate swaps market for a while now

Christmas may be fast approaching but the Federal Reserve boss Jerome Powell could be a little Grinch-like in the final full trading week before the holidays, with the US central bank widely expected to hike its borrowing costs for the fourth time this year.

A quarter point interest rate rise to 2.5% at this final Fed meeting of 2018 has been a near certainty according to the interest rate swaps market for a while now, so no rise would certainly be a shock when the announcement is made on Wednesday evening.

However, beyond this meeting, given the volatility in recent months in the financial market led by Trump’s trade wars and economic growth concerns, there is an expectation that the rate path will be a little shallower in 2019.

In a preview of the Fed rate decision, economists at ING commented: “Like the Fed, we are currently predicting three rate rises next year, but there is a lot of uncertainty, particularly relating to trade and we see the risks increasingly being skewed towards just two hikes.

“Trade is a topic the equity market appears highly sensitive too so bad news on this front could have a significant impact on thinking at the Fed.”

Boring, boring BoE

Meanwhile, on this side of the pond, no interest rate hikes are expected when the decision from the last Bank of England Monetary Policy Committee meeting of 2019 is announced on Thursday.

However, recent weak inflation and retail sales data, the general malaise on Brexit and the febrile political environment is now likely to lead to policymakers to take more of a ‘wait and see’ approach on decision making based on the various possible outcomes around the UK’s exit from the EU.

Howard Archer, chief economic advisor to the EY ITEM Club, commented: “We expect just one interest rate hike in 2019 followed by two in 2020 (taking rates up to 1.50% by the end of 2020) as the MPC seeks to gradually normalise monetary policy.

“We see a further two interest rate hikes in 2021, causing them to be at 2.0% at end-2021.”

Data mining

There will also be the latest batch of UK data for the Bank of England to take into account, with November inflation and retail sales numbers likely to be going in opposite directions.

A recent retreat by oil prices and the Brexit worries weakness of sterling will likely act as opposing forces to last month’s consumer price index (CPI), although most economists take expect the annual rate of inflation could rise to near 2.5% from the current level of 2.4%, with the month-on-month increase to 0.3%, up from 0.1%.

Meanwhile, October’s UK retail sales figures were pretty disappointing, falling by 0.4% month-on-month, and investors must be braced for a tough set of November figures – given ‘Black Friday’ comparatives -  which will give key indicators for Christmas sales, the most important month for any retailer.   

The problems seem to be around non-food spending and with the crucial Christmas sales period starting, many high street general retailers are already facing existential threats.

Indivior update main corporate focus

There is very little on the corporate front to provide any real interest in the final trading week before Christmas, with a conference call business update for Indivior PLC (LON:INDV) the main thing of substance on the company diary.

The update comes in the wake of the recent decision by the US Court of Appeals for the Federal Circuit (CAFC) against Dr. Reddy’s Laboratories upholding the immediate sale of the Indian firm’s generic version of Indivior’s best-selling opioid addition drug, Suboxone, at least until the appeal decision against the last Federal Circuit decision on the preliminary injunction is taken.

The company has said the conference call on Tuesday will discuss its strategy and contingency plans, and will also provide updates on the FTSE 250-listed firm’s full-year 2018 performance.

Analysts at RBC Capital are expecting to hear more on potential cost cutting, updates on the launch of its Sublocade product and commercial plans in the face of the generic competition.

They added: “In light of this new information we may hear on a ‘with and without’ generic plan, albeit we think investors will be modelling off a ‘with generic’ action plan from here.”

The analysts said: “This has no material impact on our estimates today, unless the rehearing turns in Indivior’s favour but we also see this as potentially helpful should Indivior still be seeking a settlement with Dr Reddy’s – which would be a positive.

“Combined with the appeal court hearing on the 514 patent scheduled for 1H-2019 there is still some leverage for Indivior should it get Dr Reddy’s to the table.”

No smooth sailing for Carnival

The only blue-chip news expected is from dual UK-US listed cruises operator Carnival PLC (LON:CCL), which issues a fourth-quarter trading update on Thursday.

Carnival’s shares have struggled a bit this year, particularly in the second half, although that has been true of most stock markets more generally.

The combination of higher fuel costs and a stronger dollar prompted Carnival to cut its full-year earnings per share (EPS) guidance for the full-year to US$4.15 and US$4.25 with its third-quarter update, although that would still beat last year’s outcome of US$3.61

A third consecutive year of above-average hurricane and storm activity in the Atlantic, with Hurricanes Florence and Michael have also created disruption in the autumn.

Significant announcements expected week ending Dec 21:

Monday December 17:

Trading update: Hunting Plc (LON:HTG)

Finals: APC Technology Group PLC (LON:APC)

Economic data: UK CBI industrial trends survey; US NAHB housing market index; NY Empire State manufacturing survey

Tuesday December 18:

Trading update: Indivior PLC (LON:INDV), Petrofac Limited (LON:PFC)

AGMs: DotDigital Group PLC (LON:DOTD), Sareum Holdings Plc (LON:SAR), European Metals Holding Limited (LON:EMH)

Economic data: German IFO business climate survey; US housing starts

Wednesday December 19:

US Federal Reserve rate decision

Interims: Begbies Traynor Group PLC (LON:BEG)

Economic data: UK CPI, RPI, PPI, HPI; UK CBI distributive trades survey

Thursday December 20:

Bank of England rate decision

Trading update: Carnival PLC (Q4) (LON:CCL)

AGMs: Block Energy Plc (LON:BLOE), Mosman Oil &Gas Limited (LON:MOS)

Ex-dividends to clip 0.57 points off FTSE 100 index: Berkeley Group PLC (LON:BKG), Burberry Group PLC (LON:BRBY), United Utilities PLC (LON:UU.)

Economic data: UK retail sales; US weekly jobless claims; US existing home sales

Friday December 21:

AGMs: Haydale Graphene Industries PLC (LON:HAYD)

Economic data: UK GfK consumer confidence; UK quarterly GDP; UK public sector finances; US durable goods orders; US personal income and spending; US Schiller-Case home price index; University of Michigan final consumer sentiment index

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