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Bank of England’s first “Super Thursday” of 2019 expected to be a bit of a damp squib amid Brexit uncertainty

Aside from the Bank of England's latest pronouncements, investors will have updates from the likes of Thomas Cook, Smith & Nephew, Compass Group and Superdry to digest on Thursday

Bank of England
The Bank of England is unlikely to change monetary policy given the uncertainties over Brexit

The Bank of England’s first “Super Thursday” of 2019 and a big batch of blue-chip corporate updates will provide plenty for investors to get their teeth in to on the day ahead.

Super Thursday is expected to be a bit of a damp squib, with the Bank of England unlikely to change monetary policy given the uncertainties over Brexit, which also makes the forecasts in the central bank’s quarterly inflation report opaque.

Lee Wild, Head of Market Strategy at interactive investor commented: “The trend for hyping up a day of sporting events has spilled over into the world of finance, and perhaps even the Bank of England was surprised when it too got its own ‘Super Thursday’.

“Britain’s central bankers will announce both their latest decision on UK interest rates and quarterly inflation report at midday on the 7th. Of course, each of these has implications whatever is decided, but the Brexit debacle and its impact on economic growth has taken a rate hike off the table.

“Weak consumer spending and a pullback in oil prices should also deliver a benign outcome on inflation near to the 2% target. While interest rate policy will do nothing to underpin sterling, a soft Brexit, or no Brexit at all, will.”

Thomas Cook to post wider quarterly loss

The main corporate focus will be on holidays firm Thomas Cook Group PLC (LON:TCG) which is expected to post a wider first-quarter loss after a slow start to winter trading.

In its full-year results statement in November, the travel firm said bookings for winter holidays were down 3% on last year while bookings for summer this year have had a “mixed start”. Summer holiday bookings were ahead in the UK but lower in Northern and Continental Europe.

Morgan Stanley said since then it has seen “anecdotal evidence” of relatively weak trading and very low prices in the UK for holidays during the peak summer season.

The investment bank pointed to research from price comparison site, TravelSupermarket, which claimed summer 2019 holiday package prices have been slashed by more than a third in a bid to attract early bookings.

“While some UK agents mentioned a good start to the booking season, this seems to be coming at the expense of lower prices,” Morgan Stanley said.

“The outlook for the German market is also mixed, with TUI recently mentioning strong demand for Turkey, Egypt and long haul destinations (read here), but our call with a major German operator citing mid-single digit booking drops in January.”

Morgan Stanley expects Thomas Cook to post a loss of £52mln, compared to last year’s loss of £42mln, on revenue up 1% to £1.77bn.

Smith & Nephew tipped to deliver solid 2018 numbers

Staying with blue chips, Namal Nawana, the new boss of medical devices firm Smith & Nephew PLC (LON:SN.) is expected to report a solid 2018 in what will be his first full-year results presentation since taking the helm last May.

Back in November, the FTSE 100-listed group told investors that its artificial hips and knees division had been performing slightly better than expected.

But weakness in Europe and in the Wound Bioactives business means that revenue growth will likely be towards the “bottom end” of the previous guidance of 2-3%, according to UBS analysts.

While revenue is unlikely to beat forecasts, S&N expects margins to be above last year’s thanks to successful cost-cutting and a favourable legal settlement.

Another solid showing expected from Compass

The performance of Compass Group PLC’s (LON:CPG) all-important US division will be in focus when the world’s largest catering firm serves up its first-quarter trading update.

Full-year numbers unveiled back in November were solid with revenues rising 5.5%, and the FTSE 100 company expects a similar level of growth this year.

Costs have been on the rise recently so any cost-related comments will be of interest, as will Compass’ outlook in its emerging markets given signs of an economic slowdown in China.

The market is expecting profit margins to increase slightly this year so any mention of that will be a focus as well.

Housebuilding trifecta completed by Bellway

Moving down to the second-line, Bellway PLC (LON:BWY) will complete a housebuilding trifecta following updates from Barratt Developments PLC (LON:BDEV) and Redrow plc (LON:RDW) on Wednesday, with the group’s first-quarter trading news eyed for any deviation from its currrent expansion strategy.

In its full-year results in October, the FTSE 250-listed firm said its order book at the end of September had grown to £1.47bn, representing 5,380 homes, from £1.36bn a year earlier (5,034 homes).

The group had also cited potential risks from Brexit but was confident it had a solid platform to increase output in 2019, so any deviation from this will be noted as exit day approaches.

Investors hope for better news from Superdry

On the retail front, FTSE 250-listed Superdry PLC (LON:SDRY) has already warned that it expects full-year profits to slump due to consumer uncertainty and a lack of innovation in its core clothing categories.

The clothing stores group said in a December update that its over-reliance on sales of jackets and sweats meant it was affected by “unseasonably warm weather” in November and into December.

“This has resulted in an adverse profit impact of around £11mln in November and the Company expects a potentially similar profit impact in December if trading conditions do not improve,” the company said.

It anticipates underlying profit before tax of £55mln to £70mln for the year, compared to £97mln the previous year.

When Superdry publishes its third-quarter results on Thursday, investors will be looking to see how much progress it has made with its product innovation and diversification programme that was launched last spring.

The group has hired former Nike executive Phil Dickinson as its new creative chief to help the company with the programme.

Tate & Lyle hoping to keep investors sweet

Food group Tate & Lyle PLC (LON:TATE) will be aiming to keep investors sweet with its third-quarter trading update.

In its interims in November, the group saw higher costs hold back profitability, so shareholders will be eying any mitigation or milestones in its cost efficiency programme, which is aiming to save £75mln over the next four years.

Analysts at The Share Centre said that investors will likely focus on North America, the company’s biggest market, adding that “an amount of positive expectations” have been building as the share price has made steady progress and was outperforming.

Significant events expected on Thursday February 7:

Bank of England monetary policy decision/inflation report

Trading updates: Thomas Cook PLC (Q1) (LON:TCG), Bellway PLC (LON:BWY), Compass Group PLC (AGM) (LON:CPG), Superdry PLC (Q3) (LON:SDRY), Tate & Lyle PLC (LON:TATE)

Finals: Smith & Nephew PLC (LON:SN.), Beazley PLC (LON:BZY)

Interims: Supermarket Income Reit PLC (LON:SUPR)

Ex-dividends to clip 0.45 points off FTSE 100 index: Sage Group PLC (LON:SGE)

Economic data: Halifax UK house prices; US weekly jobless claims

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