Markets are pricing a Federal Reserve interest rates hike of 50 basis points on Wednesday, which has been telegraphed by several officials and chair Jerome Powell.
Powell also said “it is appropriate” in his view to “move a little more quickly” on interest rates than the Fed did during the 2004-2006 cycle when the Fed hiked by 25 bps at every other meeting or even less frequently.
But fears of a policy overreaction by the Fed are “driving markets, and will keep volatility elevated”, as UBS observed.
So markets the world over will be “laser-focused” on what the Federal Open Market Committee (FOMC) does and says, said analysts at Deutsche Bank, with consumer price inflation at its highest in four decades at 8.5% and an unemployment rate at 3.6%.
Aside from rate hikes, markets will be looking for Powell to outline when the FOMC plans to start ‘quantitative tightening’ (QT) – in other words rolling back a large part of its US$9 trillion balance sheet built up through its support of markets since the 2008 financial crisis sheet by allowing bonds that they hold to mature without being rolled over – and the committee’s view on the ‘terminal’ interest rate.
Deutsche’s economists expect a 50bps hike at each of the next three meetings and a terminal rate of 3.6%, with QT starting in May and amounting to around $1.6tn of run-off through the end of 2023.
Unlucky Flutter?
In UK company news, Flutter Entertainment PLC is reporting first-quarter results, with its shares down more than 30% so far this year.
Full-year results two months ago were underwhelming, with the owner of the Paddy Power and Betfair saying the final quarter of 2021 was a challenging one in the UK & Ireland with a lot of sporting results going in favour of the punter.
The company also took a £543mln non-cash charge for amortisation of acquired intangibles, which meant it posted a reported loss of £288mln for the year.
Reported revenue grew 37% year-on-year, benefiting from the May 2020 acquisition of Stars Group, although underlying earnings (EBITDA) were 6% lower reflecting increased US investment and regulatory impacts in its international business.
For the whole of 2022, consensus expectations are for revenues to rise 10% to £6.6bn and EBITDA to jump more than a third to just over £1bn, with its US business making an EBITDA loss of £251mln, according to UBS.
Boohoo's laundry list
Elsewhere, former ‘king of AIM’ Boohoo Group PLC will be releasing its final results with its shares, like sector rivals, having tanked this year, down 30% to 81.8p, down 80% from its peak and, like online rival Asos, lower than their pre-pandemic levels.
Management reassured in March that profits will be within guidance for the year to end-February 2022, with adjusted profits are expected to be £125mln, up 61% compared to two years prior and 14% on the previous year.
The online fashion retailer said ongoing supply challenges continue to impact the group’s international performance, with longer customer delivery times affecting performance.
"The group has delivered strong growth over the last two years, which has translated into significant market share gains,” commented chief executive John Lyttle at the time.
As analysts at Barclays have also mentioned, online businesses such as Boohoo are also generally facing “a laundry list of headwinds”, which as well as supply chain issues, also include growing competition and environmental, social and governance compliance.
At Peel Hunt they said: "We are keen to understand how boohoo intends to address the current distribution challenges that have left US customers facing a c.10 - day standard delivery proposition and 5+ days in the EU."
Significant announcements on Wednesday 4 May
Finals: Dianomi PLC (AIM:DNM), e-Therapeutics PLC, Inspiration Healthcare Group PLC (AIM:IHC), Boohoo Group PLC (AIM:BOO)
Interims: Aston Martin Lagonda Global Holdings PLC (LSE:AML)
Trading announcements: Direct Line Insurance Group PLC (LSE:DLG), Flutter Entertainment PLC (LSE:FLTR), OSB PLC
AGMs: Barclays PLC (LSE:BARC), GlaxoSmithKline PLC (LSE:GSK), Just Eat Takeaway.com NV (LSE:JET, NASDAQ:GRUB), Mpac Group (LSE:MPAC) PLC, Ocado Group PLC (LSE:OCDO), Standard Chartered PLC (LSE:STAN), Ten Entertainment Group PLC (LSE:TEG), Tribal Group, Tritax Big Box REIT PLC (LSE:BBOX), Unilever PLC (LSE:ULVR)
Economic data: US Federal Reserve (US), MBA Mortgage Application (US), ISM Prices Paid (US), ISM Services (US), Crude Oil Inventories (US), BRC Shop Price Index (UK), Consumer Credit (UK), M4 Money Supply (UK), Mortgage Approvals (UK)