The start of June is hardly the dog-days of summer but investors could be forgiven for thinking so given the meagre fare on the corporate news diary in the week to come.
However, the markets will still have plenty to interest them, with the quarterly reshuffle of the FTSE 100 index, a strategy update from Aviva PLC’s (LON:AV.) new boss, the latest European Central bank council meeting, and – ultimately – the June US jobs report all due to be unveiled during the week.
US payrolls to beat expectations again?
Last month US non-farm payrolls grew at a rate of 263,000, easily beating market expectations, while the unemployment rate fell to 3.8%, a 50-year low.
Attention, however, is increasingly on wages as this has a material impact on inflation expectations and therefore what the Federal Reserve may do next, and earnings in April came in at 3.2%, or 0.2% month-on-month, a touch softer than was forecast.
Looking ahead to the June figures, due on Friday, Neil Wilson, chief market analyst for Markets.com said: “The US jobs machine is still purring in other words, but we need to see what the wage growth will look like. The Fed’s view is that the lack of inflation is transitory and price growth will pick up.”
He added: “The market doubts this and is pricing in a cut this year – something will have to give and you have to look at the wage growth number as central to this. Following the rather dovish remarks from the Fed’s Clarida this week, the market is even more long on a cut happening this year.”
Could ECB meeting be interesting – for a change?
Thursday’s decision from the latest European Central Bank Council meeting could be an interesting one – for a change!
In a preview, Markets.com’s Wilson pointed out: “The pressure is mounting on the ECB now to do more – I would expect a further dovish move to tee up more easing later in the year.
“Minutes from the April meeting show deteriorating confidence in the ECB achieving its growth and inflation targets. ‘Recent data had turned out even weaker than expected,’ the minutes read, adding that there was ‘somewhat less confidence' in hitting the growth target. Meanwhile some policymakers thought that inflation was ‘uncomfortably low’.”
He added: ““In short, the minutes showed the ECB is sticking to its guns but only just. There are serious doubts now and clearly the risks are skewed to the downside.
“One rather feels the ECB has at last woken up to the fact that it missed its chance and is now embarking on a fresh easing cycle that may involve a combination of further rate cuts and fresh QE.”
Wilson also pointed out that with the ECB’s president Mario Draghi's on the way out this year, the market cannot likely expect the current 2020 hike forward guidance to be removed or any new QE (quantitative easing) launched until his successor is in place.
“However,” the market analysts added, “could the arch-dove deliver a parting gift to the person who replaces him?”
Is breaking up not so hard to do for Aviva?
Moving on to the corporate front, Aviva will be in focus on Thursday with the blue chip insurance firm’s new chief executive, Maurice Tulloch due to deliver his long-awaited future strategy for the business.
According to a recent report in the Financial Times, Tulloch unveil a big shake-up which could include a break-up of Aviva’s UK business.
Such a move would reverse Aviva’s decision to merge its two main businesses in 2017.
Tulloch, who was appointed to the top job at the insurer in March this year, has said he wants to “re-energise” the group and is believed to want to simplify the business.
At Aviva’s recent annual meeting he said the company was “still too complex”.
Along with a potential plan to simplify the group, Tulloch is also likely to announce a push to make Aviva more efficient as costs have been rising in recent years.
Auto Trader to drive up profits
Meanwhile fellow FTSE 100 constituent Auto Trader Group PLC (LON:AUTO) is expected to unveil a 10% rise in pre-tax profit on the back of higher sales when the car market place firm reports its full-year results on Thursday.
Citigroup is forecast the group reporting pre-tax profit of £238.9mln for the year to the end of March 2019, compared to £214.5mln a year earlier, and sees sales increasing to £352.4mln from £330.1mln.
The broker anticipates Auto Trader will raise its dividend to 6.4p from 5.9p last year.
Citi thinks the company is “a high-quality asset, operating in an attractive competitive landscape” in which it is the “clear leader”.
“Against this, the shares have performed very strongly in the last 15 months, and are now trading at a premium to peers and notably, recent take-out multiples in the space.
“In addition, we think there may be some risk around capital flowing out of domestic online classified names (including Auto Trader) as Nasper’s spins out the largest internet stock in Europe.”
Workspace boss to deliver last set of results
Hopkins, who has been the London officer provider’s boss since 2012, stepped down on May 31, with its chief financial officer Graham Clemett taking over as interim boss until the appointment of a permanent successor.
In its most recent trading update, Workspace said it had continued to see good levels of demand in the third quarter but it was “mindful” about operating in a “very uncertain” economic and political environment.
Investors will be hoping the FTSE 250-listed firm was able to deliver a strong annual performance despite the uncertainty hitting business confidence. They will also be looking out for any announcement on a new chief executive.
AO World to swing to loss
Further down the market pecking order, online retailer AO World PLC (LON:AO. has already warned that it will swing to a loss this year as it battles to recover following the recent return of its founder.
The white goods specialist, which posts its full-year results on Tuesday, said in a trading update in April that earnings would be hit by one-off costs related to a restructuring of the management team, a loss-making contract in Germany and the acquisition of Mobile Phones Direct at the end of last year.
As a result, adjusted underlying earnings (EBITDA) will likely be at the “lower end of market expectations” of between a £0.4mln underlying loss to a £2.0mln profit.
John Roberts was re-appointed as AO’s chief executive back in January after the firm parted company with Steve Caunce, who oversaw a 30% drop in the company’s share price during his two-year tenure.
The focus of the full-year results is therefore likely to be on Roberts’ plan for turning around the business.
Mitie turnaround plan to boost profits
In a March trading update, the group said it expects full-year operating profit before other items to be in the range of £84mln-£87mln, up from £83.2mln the previous year.
Profits will be boosted by higher revenue, cost savings from the company’s Project Helix restructuring plan and a positive contribution from Vision Security Group, the security services business Mitie took over from contractor Compass Group last year.
Mitie anticipates a revenue increase of 7%-8% and organic revenue growth of 4% for the year, led by a strong performance from its security and care and custody businesses.
However, the order book is likely to fall by 10% as clients have steered away from entering longer-term contracts.
For the next financial year, Mitie sees “moderate growth” in operating profit as higher revenue and cost savings mitigate lower margin contract renewals and investments in the business.
Odds against CMC Markets after warning
Investors are unlikely to be betting on the final results from CMC Markets Plc (LON:CMC), also due on Thursday, after the spread-betting firm warned in April that changes to rules governing customer trading had hit it harder than expected.
Revenues for the year from CFD and spread betting operations are expected to drop by 37% to US$110mln, while net operating income will be US$131mln. Costs are also running higher than expected.
Aside from the damage assessment news in the figures, investors may also be eyeing any news on a potential successor to CMC’s outgoing finance boss and chief operating officer Grant Foley.
Biffa investors looking for deal progress amid flat results
Waste Management firm Biffa PLC (LON:BIFF) is not expected to put on much of a show in its final results on Wednesday, with analysts at Numis Securities predicting flat profit and earnings per share (EPS) growth.
In a preview, the Numis analysts said they are expecting little improvement in Biffa’s municipal trading arm, although they also hope for an update on the progress to financial close of two potential energy from waste facilities with its partner Covanta, which has been progressing slower than expected.
No surprises expected from GB Group
Identity checking specialist GB Group PLC (LON:GBG) has already said it is expecting profit and revenue growth of around 20% for its last financial year in an April trading update, so investors will be hoping the group has been keeping to its promises when its finals are released on Wednesday.
The Numis analysts are not expecting any big surprises from the figures, thinking that that focus will instead be on the integration of the Vix Verify and IDology businesses, particularly with the latter having significantly strengthened GB’s US offering.
Findel hopes to kick off share price recovery with bullish update
Shares in retailer Findel PLC (LON:FDL) have had a bit of a poor run over the last six months despite what has been deemed to be generally good trading from the company’s online retail website studio and signs of recovery in its educational supplies business.
To be honest, the group has been distracted by a hostile takeover attempt from Mike Ashley’s Sports Direct International PLC (LON:FDL) - which owns over a third of the group - saw its offer lapse in early May after persuading less than 1% of Findel’s other shareholders to back its move.
Investors will be hoping, therefore, that the group’s final results on Wednesday will deliver on their loyalty and provide enough pep to kick off the new financial year on the front foot.
In a trading update following the offer lapse, Findel said that its full-year profit would be slightly above market expectations of between £27mln-28mln, so markets will be hoping for that beat to be confirmed as well as any comments on trading in the current financial year.
Shareholders may also be eyeing any info on how the company plans to cut its debt.
Significant announcements expected for week ending June 7:
Monday June 3:
Economic data: UK manufacturing PMI; US ISM manufacturing; US construction spending; US manufacturing PMI
Tuesday June 4:
Finals: AO World PLC (LON:AO.), BlueJay Mining PLC (LON:JAY), Carclo PLC (LON:CAR), Chamberlin PLC (LON:CMH), Fulcrum Utility Services LTD. (LON:FCRM), Palace Capital Plc (LON:PCA), Vianet PLC (LON:VNET), Vp PLC (LON:VP)
AGMs: Rockrose Energy PLC (LON:RRE)
Economic data: UK construction PMI; US factory orders
Wednesday June 5:
FTSE indices quarterly reshuffle announced
Economic data: UK services PMI; US ISM non-manufacturing; US services PMI
Thursday June 6:
European Central Bank council meeting
Strategy update: Aviva PLC (LON:AV.)
Ex-dividends to knock 7.2 points off FTSE 100 index: Associated British Foods plc (LON:ABF), Johnson Matthey PLC (LON:JMAT), Kingfisher PLC (LON:KGF), J Sainsbury PLC (LON:SBRY), Scottish Mortgage Investment Trust PLC (LON:SMT), Taylor Wimpey PLC (LON:TW.), Vodafone PLC (LON:VOD)
Economic data: UK Halifax house prices; US balance of trade; US weekly jobless claims
Friday June 7:
Economic data: US non-farm payrolls