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Last 'super Thursday' before Brexit as BoE, Shell and LSE updates eyed

On 1 August, other half-year updates include British American Tobacco, Barclays, Standard Chartered and Capita

mark carney
BoE governor Mark Carney's update is 'should not be missed', economists urged

The first of August sees some august establishments unloading updates for the first half of the year, including Royal Dutch Shell PLC (LON:RDSB), British American Tobacco PLC (LON:BATS), Barclays PLC (LON:BARC) and London Stock Exchange Group (LON:LSE).

Away from corporate news, the Bank of England will announce the policy update from its monetary policy committee (MPC), unveil the MPC’s latest forecasts and forward guidance, all wrapped up with a press conference from governor Mark Carney and pals. 

This will be the last ‘super Thursday’ before Brexit is scheduled to happen on 31 October and is "not to be missed", excited economists said.

Shell profits should be down

A half-year update from Royal Dutch Shell on Thursday comes after a recent rebound in crude oil prices amid tensions in the Persian Gulf.

But oil and natural gas prices have been slightly lower during the first half of this year compared to last year, which act as a dampener on the group’s revenues even though production is expected to have increased.

UBS has forecast net income of $5.259bn for the second quarter, down 1% on the first quarter despite the higher oil price but up 12% this time last year.

“This result would still leave Shell by some distance the most profitable and cash generative of the oil majors.”

READ: Shell shows way forward for dividends as other blue chips cut their cloth

Shell’s downstream operations, including refining, have found it tougher lately and investors will be keen to hear of some improvements in these markets, analysts at the Share Centre said.

“Overall performance in recent years has been good with cost cuts and divestments helping to dramatically improve the cash flows. The previously announced cash and capital returns should be reiterated,” they added.

LSE interims follow Refinitiv revelation

LSE is riding high, helped by its confirmation at the start of this week that it is in talks to buy US$27bn financial data firm Refinitiv.

Even before that news, the shares were on the front foot on the back of strong trading so far this year.

READ: What's behind the London Stock Exchange's acquisition of Refinitiv?

Half-year results on Thursday follow a May update that revealed gross profit of £490mln in the first quarter of the year, up 6% on the same period last year but flat against the preceding quarter, on revenues up 3% year on year to £486mln against a market backdrop described as “challenging”.

For the first half, gross revenues are expected to rise 5% year-on-year to £1.1bn, predicted UBS, with gross profit of £1.0bn forecast, with adjusted EBITDA expected to rise 8% to £589mln.

“From a revenue perspective, we think the market will be most focused on LSE's index business (FTSE Russell) and its OTC clearing business (LCH) as these divisions are the main driver behind company's revenue growth,” UBS said in a note put out before the Refinitiv confirmation.

Barclays follows Lloyds PPI surprise

Shares in Barclays are down 20% over the past 12 months, worse than its FTSE 100 banking peers, and not much higher than they were three years ago.

After rival Lloyds unveiled a whopping £550mln of PPI charges a day earlier, investors will be eyeing restructuring costs, loan impairments and litigation and conduct costs at Barclays, which were £2.5bn in the first half of last year.

That investors have, so far at least, taken little comfort from the board’s success in fending off activist investor Edward Bramson, is a slight surprise to Russ Mould at AJ Bell.

As well as one-off costs and banking margins, analysts will look for two headline numbers, he said, profit and the dividend, where the City consensus is for 7.4p in total for the year compared to 6.5p last time, so they will be looking for a hike in the interim payment.

The investment bank, Bramson’s bugbear, "must perform,” says Mould, noting that last year the investment bank controlled 56% of group equity but made a return on that equity of 9.3%, compared a 16% return at the UK business – though quarterly trends can be volatile.

BoE policy hints ‘not to be missed’

The Bank of England’s Super Thursday “should not be missed”, said economist Kallum Pickering at Berenberg.

“While MPC will meet again in September, and policymakers will get a chance to communicate to markets via ad hoc speeches ahead of Brexit, the BoE is likely to set out its stall for the various possible Brexit outcomes this week.”

Given the uncertainty surrounding Brexit, the committee is expected to leave interest rates at 0.75% and its asset purchase programme at £435bn.

But governor Carney may provide hints on the future direction of policy when he speaks at a press conference after the policy announcement and quarterly inflation report have been published.

The inflation report will set out the economic growth and inflation projections that Bank uses to make rate decisions.

Pickering expects the BoE to offer two sets of guidance, a base case where it signals continued rate hikes over the medium-term, on the assumption that there is an orderly Brexit on 31 October and also, in light of the rhetoric from Downing Street after the ascension of Boris Johnson to Prime Minister, emphasise “how it may act in the downside scenario of a hard Brexit at the end of October”.

Analysts at UBS said the Bank cannot be too opinionated about the Brexit outlook due to political sensitivities, although it is likely to say that market participants see a greater possibility of a no-deal outcome under new prime minister, Boris Johnson, and that is negatively affecting sentiment and activity.

“We expect a message designed to endorse current market pricing, helping ensure that monetary conditions stay supportive through what could be a turbulent few months for sentiment and confidence,” UBS said.

“There is around a 50% chance of a cut priced in for the November MPC meeting, and we doubt the MPC will be minded either to try and push back against this possibility, or to give the market a green light to price it in with greater confidence.”

Thursday August 1:

Bank of England rate decision and inflation report

Interims: Royal Dutch Shell PLC (Q2) (LON:RDSA), Barclays PLC (LON:BARC), Standard Chartered PLC (LON:STAN), Rio Tinto PLC (LON:RIO), RSA Insurance PLC (LON:RSA), British American Tobacco PLC (LON:BATS), London Stock Exchange Group PLC (LON:LSE), Schroders PLC (LON:SDR), Intertek PLC (LON:ITRK), Mondi PLC (LON:MNDI), Spirent PLC (LON:SPT), Coats PLC (LON:COA), ConvaTec PLC (LON:CTEC), Merlin Entertainments PLC (LON:MERL), RPS Group PLC (LON:RPS), T Clarke PLC (LON:CTO), UK Commercial Property trust PLC (LON:UKCM), FBD Holdings PLC (LON:FBD)

Finals: Renishaw PLC (LON:RSW)

FTSE 100 ex-dividends: none

Economic data: US weekly jobless, US ISM manufacturing

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