The Week Ahead: US Fed Minutes, UK GDP; Tesco, Levi Results

Read our pick of the top stories to look out for this week (6-10 April), and view our key company earnings schedule.

Opec+ meeting

Monday: Oil prices have experienced huge swings this week, as concerns about demand destruction run into the politics of a price war between Saudi Arabia and Russia, with US shale producers caught in the middle. Recent comments from President Trump, that the Russians and Saudis might be persuaded to cut production by 10m barrels a day, led to a price rally from 18-year lows to the highest levels in two weeks, all in the space of 36 hours. There is plenty to worry about for US shale producers, who have breakeven prices near to $50 a barrel, including the Saudis wanting to crush them, and the potential to go bust in the coming weeks. Oil storage facilities are already filling up, and with Opec+ set to meet on Monday, it is in all parties’ interests to agree to a significant cut, if only to underpin prices. Despite this, even a 10m cut is unlikely to be enough to push prices up much higher from here with demand on the floor, which means there may be widespread defaults in the US crude producer sector in the coming weeks.

Countrywide full-year results

Monday: Countrywide’s results have already been delayed due to the recent turbulence in the UK economy. The housing sector is one of many industries that is set to see significant disruption from the ongoing lockdown. The share price has been battered since the end of January, losing over 80% of its value. The downward spiral wasn’t helped by Your Move owner, LSL Property Services, pulling out of its talks to take over the troubled estate agent, or the departure of its new CEO, Bruce Marsh, before he had even joined. With banks pulling a range of mortgage products as a result of the disruption, the government stepped in to suspend the housing market. For a sector that is already finding life difficult due to slowing sales, the upcoming recession could signal the final straw for a lot of the smaller players in the division.

German factory orders & industrial production (Feb)

Monday & Tuesday: These numbers have been chaotic in recent months, showing big falls regularly. However, we did see a big jump of 5.5% in factory orders and a 3% rise in industrial production in January, but the upturn is not expected to last. With China on lockdown for all of February, and Germany being one of China’s leading exporters, the data is likely to fall off a cliff; if not in February, then in March as the coronavirus sweeps across Europe.

Levi Strauss Q1 results

Tuesday: In January, the newly-floated Levi Strauss posted a Q4 revenue decline of 2%. Gross profit rose 1%, helped by an improvement in margins. The Americas region was the laggard here, while revenue in Europe posted a net increase of 8% on a currency basis. Over the full year, revenue gained 3%, with growth of 7% expected in 2020. This target is likely to be scrapped, however, along with its full-year profit range of $1.18 to $1.22 a share. Profit for Q1 is expected to come in at 35c a share.

Reserve Bank of Australia interest-rate meeting

Tuesday: Recent actions by the Reserve Bank of Australia to cut interest rates to 0.25%, as well as embarking on quantitative easing last month, have opened up a new front for the Australian central bank. It has now joined other major central banks in trying to ease tightness in credit markets, as well as announcing new measures to help small businesses and complement fiscal measures by the Australian government. Tuesday’s meeting could see the central bank go further, or highlight a willingness to do so, in terms of keeping interest rates low over the long term, as well as keeping the yield curve under control.

Tesco (LON:TSCO) full-year results

Wednesday: Tesco was one of those rare beasts last year, a supermarket retailer with a decent share price performance. Despite having declined around 8% from levels at the end of December, it still remains higher than at the beginning of 2019. The company had a decent Christmas trading period, as sales grew 0.1% for the six weeks to 4 January – the fifth successive annual rise. On a quarterly basis, the numbers weren’t so great, but it was still able to outperform its peers. Tesco has taken further steps to bolster its balance sheet, announcing the disposal of its Thailand and Malaysia business for $10.3bn, with $5bn of that set to be paid out to shareholders. However, that could be scaled back given the current challenges facing all retailers. The optics of paying out money to shareholders when the sector is receiving wholesale tax breaks, may not be well received. The business is also likely to be one of the primary beneficiaries of the current coronavirus uncertainty. This is not only due to the surge of shoppers stockpiling, but also the wholesale suspension of business rates for a sector that has struggled immensely over the last five years.

US Federal Reserve minutes

Wednesday: At the start of March, many expected the US Federal Reserve to cut interest rates at its 18 March meeting, as concerns about the health of the global economy started to grow, due to the spread of the coronavirus across Europe. The decision to slash rates by 50 basis-points three days into March surprised many, and spooked the markets over concern the US central bank was acting prematurely. If that decision was a surprise, the resulting decision to act again, this time three days before the official meeting, marked the stepping up of central bank action on a global scale. The Fed slashed rates again by a full 100 basis points, as well as restarting its quantitative easing programme, with the financial system on the cusp of a sudden stop as global economies went into lockdown. Wednesday’s minutes to that emergency meeting on 15 March are likely to make for interesting reading, given there wasn’t complete unanimity in the decision, even though events have since moved on quickly. It’s hard to imagine that all Fed board members aren’t now on the same page, as the coronavirus death toll rises across the US and the economy shuts down, while April’s non-farm payrolls showed a decline of a record 701,000 jobs in March.

UK gross domestic product (Feb)

Thursday: It was already apparent that the UK economy was starting to slow at the end of last year. We did see a pickup in consumer spending in January, but the February floods are likely to have impacted economic activity significantly. Thursday’s UK GDP data could be as good as it gets for a while, as the hit from the various shutdowns trickles down into March’s numbers, sending the UK economy, along with the rest of the world, into a recessionary tailspin.

UK manufacturing & industrial production (Feb)

Thursday: The latest manufacturing and industrial production numbers for February aren’t expected to be particularly cheery for the UK economy. These sectors held up better than most towards the end of last year, largely as a result of Brexit preparations with the 31 January deadline looming. However, with that deadline passed, there could be a pullback in activity in the coming months The UK could start to see the consequences of events taking place in Europe, as rising cases of the virus prompt sharp economic slowdowns in Italy, as well as across the rest of Europe.

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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