Wednesday’s big news will be the size of the latest US interest rate hike and anything else that comes from the Federal Reserve.
Fed boss Jerome Powell will announce the latest decision from the Federal Open Markets Committee (FOMC) after the London close with the US central bank having already hiked rates four times so far this year, from a record low of 0.25% all the way up to 2.50%, the highest level since July 2019.
Powell and Co have accelerated the pace as inflation has ramped up higher than expected, starting with a rise of a quarter of a percent in interest rates, then doubling the hike to 0.5 percentage points and then following that with two 0.75-point increases.
The market’s money is currently predicting another three-quarter-point hike to 3.25%, with a full one-percentage-point rise to 3.50% second favourite.
Either way, it would be the highest level for US interest rates since early 2008, when Powell’s predecessor-but-one Ben Bernanke was slashing borrowing costs in the wake of the credit crunch.
Also in focus will be comments from Powell about the Fed’s quantitative tightening (QT) programme as it looks to shrink its massive balance sheet.
“The Fed’s balance sheet is already slowly shrinking, and this withdrawal of liquidity could be an interesting test for US equities, which seem to have bathed in the dollops of cheap cash that the US central bank has provided,” said analysts at AJ Bell.
“This why the debate over the so-called Powell Pivot, and if or when the Fed does a U-turn and starts cutting rates (and even adding to QE again), is so important," they added.
Aside from the Fed focus, London’s company diary is fairly full again, especially among some well-followed mid-cap names.
Semiconductor IP company Alphawave IP Group PLC (LSE:AWE) may be followed as much for the drama of potential bad news as good, after the stock tumbled only a few months after its listing last year when the FT’s Alphaville team revealed its heavy reliance on a small number of customers, some of which were “close and undisclosed relationships”, including via family ties and companies owned by directors.
Since then, despite worrying investors further with delayed results, things seem to be going a bit better for Alphawave, with mid-term guidance reiterated.
Another company that worried investors earlier this year by delaying results – several times in this case – was Sir Martin Sorrell’s S4 Capital PLC (LSE:SFOR).
Since then it delivered another update on time, before issuing a profit warning in July, with underlying earnings (EBITDA) expected to be £120mln for the year, or around 25% below market expectations at the time.
With S4’s peers all reporting robust top-line growth for the first half, broker Peel Hunt said it expects S4 to follow this trend, with the focus on profit margins and what Sorrel has to say about the outlook for client spending for the rest of the year.
Elsewhere, results from Keywords Studios PLC (AIM:KWS, OTC:KYYWF) will be closely watched by followers of the computer games market, as the acquisitive group covers most bases in the industry.
The specialist services supplier is expecting to report a 34% increase in half-year revenues, including 22% organic growth, with underlying pre-tax profit anticipated to be up over 35% to about €54mln.
Looking ahead though, Keywords guided last month that margins are moving to historic levels of around 15% as it invests in the business, transitions people and work from Russia, and as more costs return and economic headwinds blow.
Analyst Derren Nathan at Hargreaves Lansdown said: “It would be good to get a bit more detail on things that are tracking on this front”,
Also in the games sector, Frontier Developments PLC (AIM:FDEV) will announce final results, having recently announced a board reshuffle, which included founder David Braben moving aside to allow creative chief Jonny Watts to take the chief executive role.
Having started the year with a big stumble, after lower than expected sales of its Jurassic World Evolution 2 game and a delayed launch for the Warhammer real-time strategy game, June saw the company announce record annual revenues of £114mln, up 26%.
Frontier Developments said then it expected group adjusted EBITDA to be in line with consensus at circa £7-8mln and that it was comfortable with current analyst expectations for the 2023 financial year.
Significant announcements scheduled for Wednesday
Interims: Alphawave IP Group PLC (LSE:AWE), City Pub Group PLC (AIM:CPC), Dianomi PLC (AIM:DNM), Hostmore PLC (LSE:MORE), Ingenta PLC (AIM:ING), Keywords Studios PLC (AIM:KWS, OTC:KYYWF), LBG Media Ltd, M&C Saatchi, MyHealthChecked PLC (AIM:MHC), Pendragon PLC, Pennant International Group PLC (AIM:PEN), Petershill Partners PLC (LSE:PHLL), S4 Capital PLC (LSE:SFOR), Ten Entertainment Group PLC (LSE:TEG), Warpaint London PLC (AIM:W7L)
Finals: Frontier Developments PLC (AIM:FDEV), Galliford Try Holdings PLC (LSE:GFRD), Supermarket Income REIT PLC (LSE:SUPR, OTC:SUPIF)
AGMs: Enteq Technologies PLC (AIM:NTQ), Hipgnosis Songs Fund Ltd, IG Group Holdings Plc (LSE:IGG), India Capital Growth Fund Ltd (LSE:IGC), MERIT Group PLC, Odyssean Investment Trust PLC (LSE:OIT), SDI Group PLC (AIM:SDI), Seraphine Group PLC (LSE:BUMP), Tintra PLC (AIM:TNT)
Economic updates: Public Sector Net Borrowing (UK), MBA Mortgage Applications (US), Existing Home Sales (US), Crude Oil Inventories (US)