Coronavirus impact comment is likely to be a focus on Tuesday, with global lender HSBC PLC (LON:HSBA) and Holiday Inn owner InterContinental Hotels Group PLC (LON:IHG) - both due to report full-year results - strongly tied to Asia.
Back home, figures on UK unemployment for December will kick off a flurry of data releases that may further reduce expectations of a UK interest rate cut later this year, according to experts.
In a preview of the jobless data, David Madden, market analyst at CMC Markets UK pointed out: "The UK economy is largely in good shape, the unemployment rate is on par with levels seen in the 1970’s, plus wages are growing at far faster than inflation so workers a receiving a nice increase in real wages. Workers who earn more tend to spend more, but there is evidence to suggest that political uncertainty in the UK has curtailed spending as well as investment."
All change at HSBC
When ditching its chief executive John Flint in August last year, HSBC said “change is needed” to meet the “increasingly complex and challenging global environment in which the bank operates”.
Then in October’s third-quarter update, the bank said its trading conditions had gotten worse. Interim chief executive officer Noel Quinn said the lender no longer expected to reach its return on equity target of more than 11% in 2020 and that it was accelerating plans to “remodel” underperforming businesses, namely the non-ring-fenced bank in the UK, continental Europe and the US, and move investment into “higher growth and return opportunities”.
The FTSE 100 constituent - Europe’s largest bank by assets - however still reassured investors that despite additional restructuring charges, the dividend would be “sustained”.
Credit Suisse believes HSBC is at “a pivotal stage” as the Asia-focused bank has “all the pieces in place” to make its new strategy a success.
The Swiss bank's analysts reckon HSBC's management has not yet addressed all its structural inefficiencies, leaving a key area for future improvement that is expected to be reflected in an announced cost-saving target of around US$6bn by 2022, with the appointment of ex-Hewlett Packard executive John Hinshaw as chief operations officer “significant” in addressing organisational complexity.
Credit Suisse forecasts the bank undertaking US$9bn of share buybacks between 2020 and 2022 with a further US$10bn or so potentially.
Hotels already struggling in Asia
Holiday Inn and Crown Plaza owner InterContinental Hotels has already been struggling in Chinese markets, impacted by the political turmoil in Hong Kong last year, with investors braced for an even worse outlook now amid the coronavirus outbreak.
The blue-chip firm's full-year results will also come with updates on its performance in the key US market over the final quarter of 2019, after some weakness across that segment last year.
IHG's group revenue available per room (revpar) in the third quarter was down 0.8%, with a 36% plunge in Hong Kong expected then to hit full-year financial results by US$5mln. Like-for-like revpar was down 0.2% in the second quarter from the 0.3% growth recorded in the first.
The outlook for this key metric “makes it difficult to be more positive on IHG”, according to analysts at UBS, but the room pipeline and asset-light operating model provide some upside.
Analysts at the Swiss investment bank forecast IHG posting US$2.1bn in revenue and US$986mln of underlying earnings (EBITDA) for the full-year.
Significant announcements expected for Tuesday February 18:
Finals: HSBC Holdings PLC (LON:HSBA), InterContinental Hotels Group PLC (LON:IHG), BHP PLC (LON:BHP), Glencore PLC (LON:GLEN), Spectris PLC (LON:SXS), Sunrise Resources PLC (LON:SRES), Renewables Infrastructure Group PLC (LON:TRIG)
Economic data: UK unemployment; UK average earnings; US Empire State manufacturing index