The main focus Friday will be on the latest US jobs figures, particularly after Wednesday’s drop in the country’s trade deficit showed the impact on the US economy of trade tensions with China, and given the US government shutdown plus expectations of moderating global growth rates.
The ADP payrolls report for the US private sector, also released on Wednesday, showed an increase of 183,000 jobs in February, below the 190,000 forecast by analysts although the previous month’s figure was revised markedly higher from 213,000 to 300,000.
Mark Zandi, chief economist of Moody’s Analytics which helped compile the ADP report commented: “The economy has throttled back and so too has job growth. The job slowdown is clearest in the retail and travel industries, and at smaller companies. Job gains are still strong, but they have likely seen their high watermark for this expansion.”
December’s US jobs data showed the US unemployment rate tick up slightly to 4% while slowing hourly earnings growth raised some eyebrows even though over 300,000 jobs were created.
For February expectations are that the unemployment rate may have once again dropped below 4%, with the wage rate recovering a little, but only 170,000 jobs being created.
Bodycote and SIG to post numbers
On the corporate front, full-year results from two FTSE 250-listed firms are the only items on the company news diary.
Metal heat treatment engineer Bodycote PLC (LON:BOY) is likely to have seen a strong aerospace backdrop in the fourth-quarter partially offset by a weak European auto market, which saw production fall by 4% in the period.
Analysts at Peel Hunt are expecting Bodycote to report organic revenue growth of 6.6% for 2018, with a margin of 18.6%.
Into 2019, the City broker’s analysts are forecasting organic revenue growth of just 2% with European auto production set to fall by 5% in the first quarter although they again expect this to be offset by a strong aerospace backdrop.
Peel Hunt is forecasting Bodycote’s 2018 adjusted pre-tax profit to increase to £133.3mln, up from £121.5mln in 2017, on sales of £728mln, up from £690.2mln.
The analysts are expecting Bodycote to pay a 25p special dividend again, reflecting the net cash position of the balance sheet, but if it happens to be absent they think this will generate much debate around M&A.
Headwinds to continue for SIG despite cost-cutting
Insulation group SIG (LON: SHI) has been making decent progress on cutting overheads and pushing gross margins ahead across the group, but especially in the UK.
Peel Hunt expects these benefits to be more fully felt in 2019 but the headwinds from softer construction activity will continue to limit the group's overall progress in its full-year 2018 numbers.
The City broker’s analysts pointed out that softness in European economies - especially France, Germany and Poland – is felt more at SIG than any of the other sector stocks.
They said the other key attention for the market will be the group’s cash flow performance, with a reduction in debt levels a key factor for many investors.
Peel Hunt is forecasting SIG’s 2018 adjusted pre-tax profit to slip to £76.0mln, down from £9.2mln in 2017, on sales of £2.71bn, down from 2.78bn.
Significant announcements expected on Friday March 8:
Finals: Bodycote PLC (LON:BOY), SIG PLC (LON:SHI)
Economic data: US jobs data; US wholesale inventories