The coming week will be a major one for global markets as US voters head to the polls to decide whether Joe Biden or Donald Trump will become their next president.
Macroeconomics will also be squarely in focus as both the Federal Reserve and the Bank of England make their latest interest rate decisions alongside US October non-farm payroll data as well as a smattering of PMI’s from both Britain and the US.
The corporate calendar will also have its own share of major news, with results and updates due from the grocery, retail, pharmaceutical and airline sectors.
More capacity cuts for Ryanair?
Ryanair PLC (LON:RYA) is publishing its first-half earnings on Monday, which may not put investors in a good mood for the rest of the week.
The budget airline could be in for another capacity cut, after announcing earlier this month it would fly only 40% of possible passengers during the winter compared to 2019, down from 60% initially.
The Irish firm also noted “this guidance could be further revised downwards if EU Govts continue to mismanage air travel and impose more lockdowns this winter”, with the market bracing for more fiery comments.
“We’re starting to worry that this second wave may not be the last,” analysts at Hargreaves Lansdown commented.
“The airlines need a big summer in 2021, and if that’s prevented by a third wave, some names in the sector will struggle to survive.”
Associated British Foods finals drop
The FTSE 100 giant posted an upbeat update in September, saying that Primark profits would come in at the top of the forecast range of £300mln-350mln while noting strong trading in Grocery, Sugar and Ingredients.
The market will look for guidance for the group's new year across the different divisions, as well as for earnings per share (EPS).
The conglomerate previously said adjusted EPS will be “significantly below” the year to September 2019 figure, due to a drop in Primark’s profits amid lockdowns and a fall in consumer confidence.
For AJ Bell, adjusted EPS is expected to be 122.6p in 2021, down from a forecast 77.8p in the year to end September 2020.
Investors are also expecting indications on how the first month of trading in its new year has been and updates on the pipeline of 14 new Primark openings across Europe.
In terms of dividend, AB Foods decided not to make an interim payment although analysts have pencilled in a 12.7p-a-share final distribution for the year and then a 43.1p-a-share payment for the whole of fiscal 2021.
“A down year in 2020 would nevertheless snap a streak of annual dividend growth that stretches back to 2000,” AJ Bell commented.
M&S delivers figures as it swings the axe
Marks and Spencer Group PLC (LON:MKS) will report half-year results on Wednesday, it’s first update since a surprise trading statement in August when the retailer announced 7,000 job cuts but said food performance had been better than it had expected in May.
Since then, there has been an update from its new UK online grocery joint venture partner Ocado in September, which revealed UK sales growth accelerated in the third quarter and that customers “responded positively” to the switchover to an initial range of M&S products from the start of September, which was made up of 4,400 food lines and around 700 Home & Lifestyle product lines.
The UK joint venture, which is 50% owned by M&S, is expected to make an underlying profit (EBITDA) of “at least £40mln” for the full-year, based on current trends.
“Huge uncertainty” remains around M&S, said Sophie Lund-Yates, analyst at Hargreaves Lansdown in a preview, especially around profit margins as discounting in clothing and home has weighed on performance.
“The closure of physical selling space for much of the ‘full price’ season in lockdown means there’s a very real chance this has got worse. Higher margin food items like sandwiches won’t have been flying off the shelves either as many people continue to work from home, so overall the gross margin story is likely to be a downwards one.”
Sales had fallen 49.5% by August and the analyst said she suspected this trend hasn’t reversed, while significant charges will hit the bottom line to cover restructuring.
It’s AstraZeneca again
All eyes are on the coronavirus (COVID-19) vaccine candidate developed with Oxford University, which may be submitted for emergency approval as early as this year.
The market is also eager to hear on the COVID-19 antibody treatment, AZD 4772, which recently entered Phase III clinical trials.
According to AJ Bell, the pharma giant’s wider drug pipeline will also be of keen interest, since it has 37 treatments in Phase I trials, 45 in Phase II and 11 in Phase III, across its three specialist areas of oncology, cardiovascular, renal and metabolism and finally respiratory and immunology.
“The pipeline is key as that represents the future,” A Bell's analysts noted.
“Remember that at the first-half stage, ten drugs generated US$4.6bn of sales, or nearly three-quarters of the total, and three of those showed drops in sales as they are off-patent and open to generic competition – they were Pulmicort, Crestor and Nexium and they were down to 12% of Q2 sales.”
Investors will also want to know whether the previously shared guidance for the full year still applies, after chief executive Pascal Soriot forecast high-single-digit to low-double-digit percentage sales growth and mid-to-high teens percentage growth in what it terms as Core Earnings Per Share, which excludes restructuring expenses, amortisation and impairment of intangible assets and other items.
Consensus places the latter at US$4 per share, up from US$3.50 a year ago.
Sainsbury’s shows its receipts
Like most of Britain’s supermarkets, the group has benefited from the accelerated shift to online grocery shopping caused by the coronavirus pandemic, although the trend has slowed recently as shoppers attempt to return to in-store shopping as lockdown restrictions have relaxed.
However, with fresh lockdown restrictions likely to emerge in the coming months, investors will be hoping the company can hang on to its new influx of digital shoppers as the crucial Christmas period approaches. This may result in some price cutting activity, which is likely to erode profit margins.
Meanwhile, the group could provide some surprises in its general merchandise division, particularly through its Argos brand, as lockdown encourages more customers to buy non-grocery items and collect them during the weekly shop. However, this trend may begin to splutter if consumer spending begins to tighten in the wake of economic difficulties.
Auto Trader rides in with interims
Thursday will also see interim results from car marketplace Auto Trader Group plc (LON:AUTO), with investors likely hoping the firm has benefitted from the pandemic driving more traffic to its websites.
In its final results in June the company said it was still confident in its long-term growth prospects and that it believed the pandemic will “only accelerate the shift towards greater digitalisation of the car buying process”, so investors will be hoping this acceleration has bled into the figures, particularly as lockdown measures have relaxed and people begin venturing out again, increasing demand for vehicles.
However, with new restrictions creeping back in slowly and the threat of another national lockdown looming, the outlook statement will likely be the clincher for many shareholders as to whether the firm may be about to pump the brakes on growth.
US votes in fractious election
On Tuesday, US voters will head to the polls in what has become one of the most volatile elections in the country’s recent history, with Democratic presidential candidate Joe Biden hoping to oust Republican incumbent Donald Trump.
At the start of the year, many were expecting a close-run election, with Trump favoured to win re-election on the back of a healthy stock market and incumbent advantage. However, the coronavirus pandemic, social unrest and a collapsing economy have seen Biden maintain a polling lead over the president unprecedented in modern times.
Polling averages with less than a week before election day put Biden at around 51% of the national vote compared to just under 43% for Trump. Biden is also leading in a number of key battleground states that will decide the election. With such a commanding lead in the polling, the Democrats are also hoping for a so-called ‘Blue Wave’ in which they will secure control of the Senate, the House of Representatives as well as the Presidency.
AJ Bell’s Russ Mould said it is “particularly difficult to judge how financial markets will react this time around, given the poor quality of the Presidential debates, the absence of any real discussion of policy and the likelihood that either winner will sanction substantial increases in spending and the US federal deficit”.
“The worst-case scenario for markets would probably be a contested result. President Trump’s combative stance on postal voting and his cry that he could challenge the election result bring back bad memories of the 2000 election, when George W. Bush and Al Gore wrangled over a recount in Florida, argued over ‘hanging chads’ and ultimately had to go to the Supreme Court to settle the matter. By the time the dust had settled, the S&P 500 had lost 12% of its value”, he added.
The US central bank’s policymakers meet the day after the election, the first time the two events have occurred in the same week since 1984, when the Federal Open Market Committee did not hesitate to loosen policy.
With many FOMC members calling for more fiscal stimulus from Washington, Marshall Gittler market analyst at BDSwiss said: “I doubt if they would make any changes in policy just a few weeks before they might actually get what they’ve been pleading for. That would be a waste. They could downgrade their outlook somewhat, although it’s pretty bleak already.”
The Bank of England also is meeting on Thursday, and is in a similar position to the Fed in that, while there has been a lot of speculation about the possibility of negative interest rates, there are some big events to watch, with a potential Brexit deal possible at the EU summit the following week.
However, markets have been expecting the BoE Monetary Policy Committee to act in some way at the November meeting, especially now that economic prospects have not really brightened as hoped and more parts of the country are going into local lockdowns.
“The summer boom has faded since the Bank of England last met and the resurgent second wave of the pandemic has dented the economic outlook. We may get another dose of QE but the Bank is unlikely to rock the boat by imposing negative interest rates just yet given the state of flux in the pandemic and the economy,” said Laith Khalaf, financial analyst at AJ Bell.
“However they are clearly warming markets up for the possibility, having written to banks to check they can handle rates going below zero. Somewhat counterintuitively, they are likely to wait until economic conditions have improved a little because if banks are worried about loan losses mounting up at the same time their interest income is cut they may just curtail lending.”
While the central bank meetings will be the big events, investors will also keep an eye on UK and US manufacturing PMI data due on Monday, followed by services PMI for both countries on Wednesday and the UK construction PMI on Thursday.
Also in focus will be the always important US jobs data on Friday which will be preceded by US ADP employment data on Wednesday.
Significant announcements expected for week ending November 6:
Monday November 2:
Trading updates: Hiscox Limited (LON:HSX)
Finals: Lok’N Store Group PLC (LON:LOK), The Brighton Pier Group PLC (LON:PIER)
Economic data: UK manufacturing PMI, US manufacturing PMI
Tuesday November 3:
Interims: Warehouse REIT PLC (LON:WHR)
Wednesday November 4:
Finals: Gattaca PLC
Economic data: UK services PMI, US ADP unemployment, US services PMI, US trade balance
Thursday November 5:
BoE rates decision, Fed rates decision
Trading updates: AstraZeneca PLC (LON:AZN), Amryt Pharma PLC (LON:AMYT), Superdry PLC (LON:SDRY), RSA Insurance Group PLC (LON:RSA), DWF Group PLC (LON:DWF), Hansard Global PLC (LON:HSD), Lancashire Holdings Ltd (LON:LRE), Derwent London PLC (LON:DLN), Hikma Pharmaceuticals PLC (LON:HIK), Inchcape PLC (LON:INCH), TI Fluid Systems PLC (LON:TIFS)
Finals: Bowleven PLC (LON:BLVN), RDI REIT PLC (LON:RDI)
Interims: J Sainsbury PLC (LON:SBRY), Auto Trader Group plc (LON:AUTO), Aveva Group PLC (LON:AVV), Trainline PLC (LON:TRN), Wizz Air Holdings PLC (LON:WIZZ), Wincanton PLC (LON:WIN), Biffa PLC (LON:BIFF), Tate & Lyle PLC (LON:TATE)
FTSE 100 ex-dividends: None
Economic data: UK construction PMI, UK new car sales, US jobless claims
Friday November 6:
Trading updates: Beazley PLC (LON:BEZ)
Economic data: US non-farm payrolls, UK house prices