Following a week of almost unprecedented turbulence, the coming week is likely to see further volatility in financial markets as authorities struggle to contain the spread of the coronavirus pandemic and central banks try to do their best to contain the economic consequences.
Biggest of them all, the US Federal Reserve will be meeting on Wednesday, having already caught markets on the hop earlier this month by trimming rates and has also pledged a US$5trn cash injection.
Financial markets expect further easing, potentially taking interest rates to zero.
"This week markets are expecting the Fed to do more, and while the US central bank may well cut again so it is hard to see what effect more rate cuts might have given that this is not only a supply shock, but a demand shock as well," said market analyst Michael Hewson at CMC Markets.
If the Fed cuts rates to zero, Powell’s press conference is likely to focus on the next policy steps should the outlook deteriorate further.
Before that, Monday could see a stimulus response from the eurogroup meeting of EU finance ministers, having been largely out of the limelight since Grexit was a thing, and with the ECB anticipating fiscal policy will “join forces” with monetary policy.
Retailers in focus
In corporate news, there will continue to be a major focus on the effects that coronavirus is having on industries and individual companies, with the real potential that some in a precarious position could go to the wall.
Retailers are among the biggest names on the calendar in the coming week, with a trio of FTSE 100 names reporting, including two supermarkets, which through their essential nature are likely to fare better in a crisis than their non-food cousins on the high street.
On Wednesday WM Morrison Supermarkets PLC (LON:MRW) will be the first of the UK listed grocers to come out with its final numbers, a few weeks ahead of its larger rivals.
But despite coronavirus fears driving sales of hand sanitiser and loo roll, the most recent industry figures showed the Bradford-based chain’s tale of woe dragging on, with the consistently worst performance of the Big Four in the March and February updates, with sales down 2% and 3%.
Morrisons’ shares have been on the wane since the start of 2020 since it struck a decidedly gloomy tone with its post-Christmas trading update, as sales over the key period failed to stem its ongoing decline, and the company only narrowly avoided dropping out of the FTSE 100 in this month’s quarterly reshuffle.
Like-for-like sales over the 22 weeks to 5 January were down 2.8%, including fuel, incorporating a flat performance in its wholesale division, while total sales fell 2.9%.
Morrisons has since looked to cut more costs, with plans announced in January to get rid of 3,000 store managers in favour of increased hourly-paid roles.
Ocado may be benefitting most from virus worries
While Ocado Group PLC (LON:OCDO) is becoming a tech company, it is still very much intertwined in grocery retail and its first-quarter update on Thursday will show what effect the coronavirus is having after the company said last month it was experiencing “exceptionally high demand”.
“More people than usual seem to be placing particularly large orders,” the online grocer said in an email to customers. “As a result, delivery slots are selling out quicker than expected.”
For the medium- and long-term, while an update on UK groceries and its joint venture with Marks and Spencer PLC (LON:MKS), the big picture for Ocado is all really about the delivery of its overseas Solutions contracts.
The FTSE 100 group is spending £600mln in capital expenditure this year, mostly on those client projects, and targeting retail revenue growth of 10-15%.
Analyst Bruno Monteyne at Bernstein said in a note this week that Ocado could be a “ten-bagger”, forecasting that the share of grocery sales that are made online could rise from the current 1.7% to at least 10% and perhaps even 40% as technology improves and delivery times shorten.
He set a price target of 1,700p for now, but suggested the shares could be worth between 4,000p and 10,000p in ten years.
Next’s online strength provides buffer
Clothing retail powerhouse Next PLC (LON:NXT), which gave a solid update post-Christmas, is relatively well placed to cope with Covid-19 impact, reckon analysts at Citigroup.
The high street retailer's strong profit margins and a proportion of online sales of around 55% are “buffers to any EPS downgrades”, the analysts said.
“The highly cash generative business may see a postponement of its share buyback but there is no balance sheet risk.”
However, current trading and outlook will be the items to watch, with Citi expecting Next boss Simon Wolfson will lower his guidance for 2021 sales growth to flat from 3% and for PBT to £650-670mln from £734mln.
A cautious but perhaps prudent move in current circumstances might be to remove guidance, which analysts at Morgan Stanley said, "could be taken badly not only for Next but also the wider retail sector" because of the company's bellwether status.
Wetherspoons bullish over corona contagion
JD Wetherspoon PLC (LON:JDW) has already jumped the gun ahead of its interim results on the coming Friday as the publican released a brief update for the start of 2020.
The FTSE 250 group reported that like-for-like sales in the first six weeks ended 8 March, so the beginning of the second half of the year, were up 3.2% while total sales were up 2.9%, meaning the group is on track for the fourth successive quarter of slowing growth.
Results for the half-year to end-January will include second-quarter growth of to 4.7%, which was the slowest growth for eight quarters but still outperforming the wider market.
Spoons said the more recent numbers were “more adversely affected by poor weather than by the [coronavirus] health scare” and that its full-year outlook was unchanged.
Investors' eyes will be on the medium-term as the new government containment measures to limit the spread of the virus will likely keep people away from pubs and beer gardens in the coming months.
Analysts at Liberum, however, are upbeat about the long term, saying they expected pubs to be “resilient based on loyal customer behaviour and portfolio diversification”.
Gym Group sweats under coronavirus pressure
Shares in The Gym Group PLC (LON:GYM) have been battered in recent weeks as the coronavirus causes investors to pull their cash out of operators in the leisure sector.
Various health authorities around the world have mentioned gyms as possible place where Covid-19 can be spread due to the sharing of equipment in an enclosed area.
As a result, when the group delivers its full-year results on Thursday investors will be scrutinising the group’s comments about membership this year, as well as whether the outbreak had led it to alter or delay its expansion plans as the virus reduces demand for its gyms.
A trading update in January was upbeat so investors will be hoping as much of this momentum has been preserved as possible.
Ferguson to update on demerger and US listing plans
Plumbing and heating group Ferguson PLC (LON:FERG) will deliver its half-year results on Tuesday, with investors likely to be focusing on any updates on the group’s planned demerger of its UK business, Wolseley.
Shareholders may also be on the lookout for any hints around whether the firm will choose to pursue a listing in the US following the demerger, with the company set to make a final decision in the spring.
As a result of this, the key focus in the numbers themselves will be the performance of the US business as well as the company’s outlook for the territory going forward.
Analysts at UBS expect first half revenues of US$11bn, with second-quarter like-for-likes up 2.1%, feeding through to underlying profit (EBITA) up 2.6% to US$815mln - all still including the UK.
"Key will be outlook, which we expect to be highly uncertain due to Covid-1."
Fags a mining bellwether?
Shares in giant copper producer Antofagasta PLC (LON:ANTO) had tumbled almost 40% since the coronavirus outbreak became a worldwide worry in January but a few days before the FTSE 100 group's final results were bouncing back hard.
'Fags' has already reported its 2019 top-line numbers and 2020 guidance across production and cash costs, therefore the focus will be on profits for last year and the outlook for 2020.
Analysts on average expect EBITDA of US$2.46bn, while those at Morgan Stanley also forecast net debt of US$0.5bn versus consensus of US$0.7bn.
They told clients the things to look out for were dividend payments and any updates to guidance.
Significant announcements expected for week ending 20 March:
Monday 16 March:
Finals: Diaceutics PLC (LON:DXRX)
Interims: Ceres Power Holdings (LON:CWR), Cap-XX Limited (LON:CPX), Volution Group PLC (LON:FAN)
Tuesday 17 March:
Finals: Antofagasta PLC (LON:ANTO), ContourGlobal PLC (LON:GLO), Gamma Communications PLC (LON:GAMA), Genel Energy PLC (LON:GENL), Harworth Group PLC (LON:HWG), Kape Technologies PLC (LON:KAPE), Polypipe Group PLC (LON:PLP), Smart Metering Systems PLC (LON:SMS), TI Fluid Systems PLC (LON:TIFS), Tritax Big Box REIT PLC (LON:BBOX), Vectura Group PLC (LON:VEC)
Interims: Ferguson PLC (LON:FERG), Softcat PLC (LON:SCT), ScS Group PLC (LON:SCS), Litigation Capital Management Ltd (LON:LIT)
Economic data: UK unemployment, US retail sales
Wednesday 18 March:
Federal Reserve interest rate decision
Finals: WM Morrison Supermarkets PLC (LON:MRW), Ferrexpo PLC (LON:FXPO), Anpario PLC (LON:ANP), Cello Health PLC (LON:CLL), Centaur Media PLC (LON:CAU), Curtis Banks Group PLC (LON:CBP), EMIS Group plc (LON:EMIS), Empiric Student Property PLC (LON:ESP), Empresaria Group plc (LON:EMR), Gamesys Group PLC (LON:GYS), Judges Scientific PLC (LON:JDG), Pendragon PLC (LON:PDG), Science In Sport PLC (LON:SIS), Strix Group PLC (LON:KETL), Tribal Group plc (LON:TRB)
Interims: MJ Hudson Group PLC (LON:MJH)
Thursday 19 March:
Finals: Next PLC (LON:NXT), The Gym Group PLC (LON:GYM), Capital Drilling Ltd (LON:CAPD), Hurricane Energy PLC (LON:HUR), Energean Oil & Gas PLC (LON:ENOG), Everyman Media Group PLC (LON:EMAN), Portmeirion Group PLC (LON:PMP), Safestyle UK PLC (LON:SFE), Sanne Group PLC (LON:SNN), Sportech plc (LON:SPO), TClarke PLC (LON:CTO), OneSavings Bank PLC (LON:OSB)
Trading announcements: Ocado Group PLC (LON:OCDO), IG Group Holdings PLC (LON:IGG), Halma PLC (LON:HLMA)
FTSE 100 ex-dividends to knock 1.09 points off the index: SEGRO PLC (LON:SGRO), Meggitt PLC (LON:MGGT), Hikma Pharmaceuticals PLC (LON:HIK)
AGM: Sunrise Resources PLC (LON:SRES), Impax Asset Management Group PLC (LON:IPX)
Economic data: US jobless claims
Friday 20 March:
Interims: JD Wetherspoon PLC (LON:JDW)
Trading announcements: Investec PLC (LON:INVP)
AGMs: Shanta Gold Limited (LON:SHG)