1. US payrolls – 06/12
The low expectations around the October jobs report turned out to be a bit of a mixed blessing, as the better than expected 128k number along with an upward revision in the September numbers offset concerns about a fall in the wages data, and a rise in the unemployment rate. Expectations that the GM strikes would see a sharp fall in the headline number proved to be wide of the mark, and while the number was on the low side it was well above the consensus 90k.
This week’s November numbers should see a pickup in seasonal hiring as well as the adding back in of the GM strike numbers, as the US economy gears up for Thanksgiving and the pre-Christmas period. Over the last few years the last three months of the year has consistently seen decent job gains. This year isn’t likely to be any different, with a decent number here likely to keep the prospect of any further Fed rate cuts at bay until early next year.
2. UK election/Trump visit
As we head into the penultimate week of the UK election campaign and the markets still pondering the MLP YouGov poll and a potential 60+ majority for the Conservative party, there is still a sense of nervousness that it could still go horribly wrong this week. The biggest banana skin is the visit of US President Trump to the NATO summit which starts on 3rd December.
One of Labour’s key attack lines has been to drive a fear about the future of the NHS, with respect to any US trade deal. Conservative HQ will be hoping that President Trump observes normal protocol and keeps his opinions to himself ahead of the December 12th poll date. You can be sure that certain sections of the media will be trying to tease out a reaction from the US President, which might invite further questions about the US/UK future relationship and help Labour’s poor polling numbers in the process.
Any narrowing of the polls in Labour’s favour could well be to the detriment of the pound, which has made decent gains this week against the euro, hitting a six month high in the process.
3. Global manufacturing PMI’s – 02/12
We have some evidence of a pickup in manufacturing activity in the last couple of months, particularly in China and the US, while manufacturing in Germany has also improved albeit from very low levels. Whether it is enough to suggest that the trough is in is another matter, after all, most dead cats bounce, and while there is some optimism that we may see a rebound into year-end there is some scepticism that it can be sustained into 2020
4. Global services PMI’s – 04/12
While we’ve started to see evidence of a pick-up in economic activity in the manufacturing sector, there is a concern that services is starting to feel some of the pain, that manufacturing has been feeling for most of this year.
The resilience of the services sector at a time when manufacturing has been struggling has been particularly notable so far this year so it is concerning, although not surprising that we are starting to see a little weakness now.
5. Bank of Canada rate decision – 04/12
This is likely to be a tricky decision for the Bank of Canada than it would have been five weeks ago. Up until then the Canadian economy had looked quite resilient, however the recent payrolls data would appear to suggest a significant softening after an unexpected decline of 1.8k. Markets had been expecting a gain of almost 15k. It is important to note that the Canadian economy does have a tendency to see surprise drops in the employment numbers. We’ve seen three other declines this year already, so one shouldn’t read too much into one number, however private ADP (NASDAQ:ADP) payrolls were also weaker. Nonetheless the weakness may well prompt the Bank of Canada to be more dovish than normal, if they don’t cut rates when they meet later this week.
Oil prices have remained in a fairly steady range over the last few months with Brent prices fairly steady between $55 and $65 a barrel, apart from a brief spike above $70 after the drone attack on Saudi infrastructure in September. With the Aramco IPO set to launch sometime this month it is unlikely that we’ll see any significant changes to output given concerns about global demand, however the Saudi’s will be keen to keep a floor under prices with the promise of future production cuts if prices fall too low.
7. Berkeley Group (LON:BKGH) H1 20 – 06/12
For all the concerns about a slowdown in the London and South East housing market this year, Berkeley share price has had a decent run higher, with the shares up over 25% year to date, with most of those gains coming since June, when it reported that profits were down over 20%. To mitigate this the company has launched 11 new developments this year with 8 outside London, in places like Winchester, Birmingham, Sevenoaks and Fleet and other key commuter areas. Revenues were still solid with a rise of 4.1% from the previous year, and while the company was cautious on its 2020 year it was nonetheless optimistic that its previous guidance for the new tax year would bear up despite the continuing Brexit uncertainty. With shareholders expecting to get back at least £1.8bn in buybacks and dividends in the months ahead it is clear that the rise in the share price is probably more reflective of that, than any confidence that Berkeley will be able to shrug off the same concerns that have been symptomatic of the wider housing sector in the last two years.
8. Slack Technologies (NYSE:WORK) Q3 20 – 04/12
It’s been almost six months since Slack listed on the US stock exchange, and the share price performance has been less than stellar. Priced initially at a premium to its $26 launch price the shares surged to over $38, however since then the shine has come off sliding below $26 in October. The new issues market has seen a lot of the gloss come off it in recent months, a trend that has been exacerbated by concerns over profitability, and valuations that appear to stretch credibility. Valued at $20bn at the time of listing the company has yet to make a profit, losing $138.9m in its last fiscal year. Revenues have been growing, in September the company posted an increase in sales of 58% to $145m, however its operating expenses more than trebled to $478m partly as a result of the listing. To prevent further downward pressure on the share price markets will be looking for signs of increasing revenue growth and evidence that it was getting its costs under control. The company is still expected to post a loss of $0.08c a share, for the quarter and expected to post full year revenues of between $600m and $610m for the year.
9. Brown Forman (NYSE:BFb) Q2 20 – 05/12
When Jack Daniels maker Brown Forman (NYSE:BFb) updated the market three months ago it was clear that the numbers were likely to have been impacted by the tariffs imposed by the EU in retaliation for US tariffs on EU goods. As a result the company cut its forecasts for the current fiscal year by $0.10c with over half of the reduction being tariff related. Underlying sales growth was still expected to be in the 6% to 7% range, but nonetheless the trend was clear, despite the US being its main market. Annual profits are now expected to come in between $1.65c to $1.75c a share, however the slowdown in Europe and other markets could see this guidance come under threat again later this week, especially if Q2 profits come in shy of the $0.52c a share the markets expect.
10. Tiffany & Co (NYSE:TIF) Q3 20 – 05/12
LVMH’s acquisition of Tiffany has seen the share price surge sharply in the last few weeks, after the French company slipped a $16bn ring on the US jewellery specialist, giving the French luxury giant a big slice of the US market. This could well be the catalyst that Tiffany needed to turn around its fortunes. The brand had been struggling in recent months, and in Q2 the company missed expectations on revenue, though profits did beat expectations. The problems in Hong Kong were acting as a drag on its business, the company has several stores there, while weaker demand in Asia wasn’t helping. Its 93 US stores were also being squeezed by its cheaper rivals like Pandora. Expectations are for Q3 profits to come in at $0.85c a share.
11. Kroger Company (NYSE:KR) Q3 20 – 05/12
The company has been investing in new areas in order to take on the likes of Amazon (NASDAQ:AMZN) and Wal-Mart (NYSE:WMT), with the deal with Ocado (LON:OCDO) expected to deliver results once it’s beyond the transition phase. The company is set to spend over $3bn on revamping its stores this year, with a particular focus on digital sales. In November the company forecast that it could see further improvements in profits and sales in the coming months, however this turned out to be a little premature, after the company slowed down its renovation program in response to a weak sales uplift outside of its core competency which is the groceries business. Its ambition to compete with Amazon and Walmart remains undimmed, however management have realised that perhaps too much change too quickly can be counterproductive.
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