1) Brexit – given the week we’ve just had it looks quite likely that we might get a leadership challenge or confidence vote on the future of Conservative party leader and Prime Minister Theresa May over the next few days. If, as seems likely this happens we could well see further sterling volatility, however getting a vote is one thing, is the appetite there to unseat the Prime Minister and who would take her place? Any new incumbent would be likely to face the same unpalatable choices that Mrs May currently faces unless there was some form of way of resurrecting previously ruled out options like EFTA. For the last few days we’ve had MP’s take to the airwaves criticising what they don’t like about the deal, however we’ve heard precious little about what they would vote for, and this is part of the problem, and time is running out. Partisan politics is all well and good but on something as weighty as Brexit the country deserves better.
2) Black Friday – US retail/ Thanksgiving – 23/11 - the US retail sector hasn’t been without its problems this year, replicating the problems we’ve seen here in the UK as high street stores struggle with the growth of on line shopping. Shopping Malls in the US have experienced similar problems as big US retail names have struggled to keep up with changing consumer shopping habits. From the collapse of Toys R Us to the bankruptcy of Sears last month Black Friday is likely to make or break the years for further US retailers. Already this year store closures have been a feature of well-known brands like JC Penney, Macy’s Walgreens, Gap and Sears.
3) UK inflation report hearings TSC – 20/11, having left interest rates unchanged earlier this month, Bank of England Governor Mark Carney will be appearing before the Treasury Select Committee to talk MP’s through how the central bank views the performance of the UK economy, particularly in light of recent events surrounding the Brexit negotiations. The bank downgraded its outlook for the UK economy in Q4 to 0.3%, while also remaining confident that Q3 would come in at 0.6%. Early data does appear to support this view and while recent economic data isn’t indicative of an economy on the back foot, falls in business investment are a concern. This would suggest that businesses are holding fire on future spending and investment until the shape of any deal becomes clearer.
4) Canada CPI/Retail sales (Oct) – 23/11 – having raised rates in October the Bank of Canada has remained upbeat about the Canadian economy, with the latest jobs numbers showing that the unemployment rate fell to 5.8%, however the number of jobs added was below expectations, coming in at 11.2k. What was more disappointing was that wages growth showed little sign of picking up, and this weakness could feed into this week’s inflation numbers for October and retail sales numbers for September. Retail sales have struggled since the summer, probably not helped by a high inflation rate and weak currency. The decline in oil prices in the past few weeks could go some way to helping with a fall in inflation and a rise in retail sales as we head towards the Christmas period.
5) Germany and France flash Manufacturing/Services PMI’s (Nov) 23/11 last month the German government downgraded its growth forecasts for the German economy, on concerns that escalating trade tensions were set to impact key areas of the German export machine. The latest PMI numbers for both manufacturing and services would appear to bear this out with October manufacturing falling to a new two year low. France’s numbers have also been similarly weak as a slowing global economy affects output, though services in France have started to show signs of a possible turnaround, though with Germany remaining soft, that could simply be a false positive. This week’s flash numbers could reinforce the bearish sentiment that has seen the euro slide to its lowest levels this year against the US dollar.
6) Babcock Int’l Group (H1) - 21/11 – shareholders in Babcock will be hoping for a rare dose of good news this week when the company announces its first half numbers. Despite posting record profits in May the shares have come under pressure over concerns about some of its government contracts, particularly with the MOD, where there is a £20bn funding gap. These concerns over revenues from ongoing government contracts have overshadowed everything else, despite revenues of over £5.3bn in its last set of full year accounts. In July the company was more cautious saying that revenues might be affected due to a restructuring of its UK defence division. While the company was at pains to reassure that the business remained on track to meet its full year guidance, this week’s numbers could cause further shareholder angst at a time when some of its management processes have been called into question, by an anonymous firm of researchers called “Boatman Capital”.
7) Easyjet (FY18) – 20/11 – a long hot summer, air traffic control strikes and a decent World Cup performance from England could well have acted as a big brake on profits, at a time when airline margins have come under significant amounts of pressure, prompting profit warnings from the likes of Thomas Cook, FlyBe and Ryanair in recent months. These concerns, along with the rise in oil prices over the summer has seen Easyjet’s share price fall over 30% from its summer peaks, despite the company stating that it remained on course to meet its full year profits target of £550m-£590m. A large chunk in the improvement in revenues has been as a result of so called ancillaries from checked bags and assigned seating. Items to keep an eye on include provision for disruption costs which came in at £25m higher than in the corresponding quarter the previous year.
8) CYBG (FY18) – 20/11 – during the summer Virgin Money (LON:VM) announced a 10% rise in profits ahead of its merger with CYBG to £141.6m, with net income also higher by 5.1%. This outperformance is in contrast to the most recent numbers from CYBG which saw the bank post losses of £95m in May after setting aside £350m in respect of PPI provision. Despite these numbers the underlying business reported a 28% rise in profits in the first six months of the year. The merger which was finalised last month means that the new bank now offers a full suite of customer products, from current accounts, credit cards, mortgages, savings and ISA’s. Shareholders should now be able to get a clearer picture of how the migration process is likely to play out minimising the impact on clients as management seek to avoid the pratfalls that befell the recent TSB IT upgrades. The share price performance since August has been abysmal so investors will be hoping for a positive trading update given the shares are just above 2 year lows.
9) Best Buy/Target (Q3) – 20/11 – while most of this year’s headlines have been about US retail failures we’ve also seen some successes. US electrical retail giant realised early on that consumer shopping habits were changing, cutting their losses here in the UK early on, while restructuring its US business in 2014, launching a “Renew Blue” strategy that focussed on customer experience, as well as closing areas of the business which weren’t profitable. Management has also focussed on quality as well as partnerships and the success of its turnaround plan has raised speculation that it might be targeted by Amazon (NASDAQ:AMZN) as a vehicle for expanding its own consumer profile as it looks to transform the US retail landscape. Expectations are for Q3 profits of $0.85c a share, above guidance of $0.82c. Target (NYSE:TGT) is another well-known US brand that realised early on it needed to revamp its business mode, only management here realised it needed to compete at the lower end of the US retail landscape. While it has been helped by a resilient US economy the numbers this year have reflected the turnaround with the best sales growth in over a decade and digital sales up 41%. Expectations here are also for a beat of $1.12c a share, above company guidance of $1.10c.
10) Sears (Q3) 21/11 – this week’s latest numbers aren’t likely to make good reading given last month’s filing for bankruptcy protection. With the shares currently suspended, the business has debts of over $5bn and currently has over 700 stores. This week’s Black Friday might offer the business some relief, however the prospects for its 70,000 employees look bleak unless it can organise a restructuring plan that keeps the most profitable stores open.
DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.
No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.