The Week Ahead: BoE Meeting, UK CPI; Kingfisher, Nike Results

Coronavirus

It’s been a turbulent week for financial markets, as investors keenly await further fiscal measures from assorted politicians from across the globe. This is against a backdrop of central banks that have thrown the kitchen sink at financial markets, in the form of multiple rate cuts and other policy-easing measures. These measures won’t be enough on their own, which means any sign of policymakers backtracking on fiscal commitments to support their respective economies over this huge fiscal hump, may prompt further declines in financial markets. Volatility is likely to remain extreme against the backdrop of an increase in cases and deaths, as the virus takes its toll across the UK, Europe and the US. There is little likelihood of light at the end of this particular tunnel until cases start to plateau. And that still seems a long way off.

UK, Germany & France flash PMIs (Mar)

Tuesday: The most recent China purchasing managers’ indices (PMIs) were a wake-up call to the brutal effects that the economic lockdown had on the Chinese economy in February. While Tuesday’s flash PMIs probably won’t be as bad as China’s, they are still likely to show a significant slowdown in economic activity across the UK and Europe, pointing to a direction of travel that is likely to filter down into April, across both manufacturing and services.

Kingfisher full-year results

Tuesday: Last week, Kingfisher PLC (LON:KGF) announced that it was closing all of its stores in France and Spain, as the countries went into lockdown. Management also said that so far, there had been little indication of an impact on demand from the coronavirus crisis. However, the situation has since escalated. While the company had a decent start to the year, with growth strongly supported by e-commerce, the next few weeks are likely to be much more difficult, as consumers are encouraged to stay at home in the face of a national and international lockdown. Management are already taking steps to buy time by requesting to pay their rent monthly, as opposed to quarterly, while also benefiting from the business rate suspensions announced by chancellor of the exchequer, Rishi Sunak.

Nike Q3 results

Tuesday: Nike Inc (NYSE:NKE) has announced the temporary closure of a number of its stores as a result of the coronavirus. While its business has been able to navigate the problems of the US-China trade war over the past year, as well as the issues in Hong Kong, this may be one bullet the company can’t dodge. The sharp slide in February’s retail sales for China is likely to ripple out through the rest of the world, impacting its global sales and revenue targets over the next 12 months. Investors will be looking closely to find out how pessimistic management are about the upcoming retail apocalypse that is about to hit the global economy.

Ted Baker full-year results

Wednesday: As if Ted Baker PLC (LON:TED) problems weren’t bad enough, given the troubles in Hong Kong last year, the company has also issued several profit warnings in the last 12 months. The retailer also had to write down the value of its stock by over £20m at the end of last year, and just when you thought things couldn’t get any worse, the coronavirus has hit demand for retail sales globally. The share price is already down over 90% from its peaks, and with little hope of a pickup in consumer demand anytime soon, its near-term prospects could be bleak. The one upside is that its store footprint is narrower than some of its peers, but that won’t help much if consumers stop spending.

UK consumer price index (Feb)

Wednesday: Inflationary pressures have been on the wane in recent months, while the significant declines in oil prices are helping to exert downward pressure on prices. We did see a pickup in inflation in January to 1.8%, but this is normal due to seasonal factors, and is likely to drift back while staying below the 2% level.

US weekly jobless claims

Thursday: Never has a weekly jobless claims number been so important. It has the potential to be a record high, after last week’s move up to 281,000 from 211,000 the week before. Last week’s rise was the first indication of the tsunami that is about to hit the US economy, with estimates touted in the region of a parabolic jump, well above the 1m mark.

Bank of England meeting

Thursday: This is unlikely to be like any other meeting. This month's two emergency rate cuts are unlikely to be followed by any more, after the Bank of England announced a second cut to an all-time low of 0.1%. We may see the central bank commit to further measures to help stabilise the economy, having seen the Bank announce another £200bn worth of purchases of government and corporate bonds. Despite this, it’s doubtful what else monetary policy changes will do to deal with a health crisis which is now morphing into a significant economic downturn. It’s now all about fiscal policy, with the Bank helping to oil the wheels. The recent comments from the new governor, Andrew Bailey, suggests that he might be open to a modern monetary theory style of stimulus. There may also be questions about helicopter money.

Carnival (NYSE:CCL) Q1 results

Thursday: The cruise sector has been at the forefront of the coronavirus crisis for the last few weeks, with reports of cruise liners across the world being forced into quarantine as a result of an outbreak of cases. As one of the world’s biggest cruise ship companies, Carnival PLC (LON:CCL) has borne the brunt of the outbreak, to the extent that it has suspended operations for a month. With the outbreak unlikely to be contained anytime soon, the impact on the company’s revenue is likely to be significant, not only for the current quarter, but for the remaining quarters. There has to be a risk that the cruise line sector could be on the cusp of a significant shrinkage over the next year.

US personal spending (Feb)

Friday: The US economy has so far shown few signs of being impacted by the concerns over coronavirus. However, this is likely to change in the coming months. It’s unlikely that the effect will be seen in the February numbers, but we might start to see the seeds of a slowdown.

Selected UK & US company announcements

Company announcements are subject to change. All the events listed above were correct at the time of writing.

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