10 Things To Watch This Week: UK GDP, China Trade, Uber IPO, BT, IAG Earnings

10 Things To Watch This Week: UK GDP, China Trade, Uber IPO, BT, IAG Earnings

CMC Markets  | May 05, 2019 11:30

1) UK Q1 GDP – manufacturing and trade data – 10/05

Rising wages and low unemployment are likely to keep the UK economy in expansion territory in Q1, though the numbers are likely to reflect a somewhat cautious UK consumer, and an expansion of about 0.2%, helped by strong performance in manufacturing as a result of inventory building ahead of the March 29th Brexit deadline.

Manufacturing and industrial production data for March is also likely to reflect some of that as well, while business investment is likely to act as a drag, again for reasons of Brexit.

2) China trade (Apr)

The most recent set of China trade data for March were a little bit of a mixed bag after the weakness of the February numbers. There was an improvement in the exports numbers which improved significantly with a rise of 14.2%, well above expectations of 6.5% and a vast improvement on the 20.7% decline in February. Imports on the other hand were a disappointment declining 7.6%, missing expectations of a rise of 5.6%, and while they were better than the February numbers, they remained in the red. This weakness in imports is likely to be concern for Chinese authorities as they suggest that internal demand is still weak.

This week’s April numbers are likely to determine whether the improvement in March was a post lunar new year rebound, or something more pronounced. Internal demand is likely to be a concern, which means we’ll need to see a significant improvement in the import numbers.

3) RBA and RBNZ rate decisions – 07/05 and 08/05

A surprise deterioration in recent Australian economic data has prompted speculation that the RBA may well cut rates this week, from current levels of 1.5%. The latest inflation data, which saw a sharp decline in prices due to lower fuel prices saw the Australian dollar slide back, while recent weakness in the Chinese economy has also weighed on the sentiment around the Australian economy. This seems a rather melodramatic conclusion to what is by and large a good thing for Australian consumers. Lower fuel prices at a time when the Australian jobs markets seems to be in fairly decent health certainly isn’t anything to worry about, which suggests that the RBA is likely to wait and see.

Furthermore, cutting rates eleven days before a Federal election could be seen as a highly political move and something the RBA would be extremely reluctant to do even in the most difficult circumstances. The RBNZ is also expected to hold fire on the rates front even if the bias for a move has shifted to the downside.

4) Services PMIs Europe (Apr) 06/05

The timing of the May bank holiday last week has meant that European data has been delayed by a day and as such with UK markets on a holiday on Monday we’ll get to see how well the services sector in Europe has performed as Q2 gets under way. In March we managed to see a broader improvement in Italy, Spain and Germany, however the French economy has struggled, no doubt due to the disruption caused by the gilet jaunes protests. This trend could well continue in April if the recent flash PMI’s are any guide.

The recent flash numbers out of Germany and France for April appear to have reinforced this divergence, even if they were an improvement on the March numbers, with France improving from 49.1 to 50.5. Investors will be hoping that the improvement in the March services numbers is carried over into this week’s April numbers.

5) International Consolidated Airlines Group (LON:ICAG) Q1 – 10/05

After posting decent profits at the end of last year of €3.5bn on revenues of €24.4bn, the company announced that it would be investing in newer aircraft in an attempt to replace its older planes with more fuel-efficient aircraft. This week’s Q1 numbers are likely to see the effects of higher fuel prices take their toll on profits in these latest numbers, given how the rest of the sector has struggled in recent months.

The grounding of Boeing’s 737 MAX 8, aircraft has also hit the sector, fortunately for BA it doesn’t have any 737 planes in its fleet, so there is unlikely to be any impact on that score, though it does code share with American Airlines which does.

6) BT Group (LON:BT) FY19 – 09/05

BT can’t seem to extricate itself from the accounting scandal in Italy after reports emerged last month that the decision to misreport profits came from its management in London. New CEO Philip Jansen will need to address these allegations head on as he presides over the first set of full year numbers, since the departure of Gavin Patterson at the beginning of this year.

At the end of Q3 the business appeared to be performing fairly well, with revenues for the 9 months at £17.6bn, with profits before tax up 20% to just over £2bn, helped by the ongoing cost cutting program. This week’s full year numbers need to confirm the positive direction of travel given this year’s share price performance which has been disappointing.

7) Lyft (NASDAQ:LYFT) Q1 19 – 07/05

It’s not been a great few weeks for Lyft with heavy falls in its share price, post IPO. In its pre-IPO prospectus Lyft’s latest numbers showed that the company turned over $2.16bn in revenues last year, more than double the amount from 2017, which is encouraging in terms of expanding the business.

Profits on the other hand have proved elusive despite a sharp rise in users, which have risen to 18.6m in the last two to three years, as the company expands its market share. Losses for last year came in at well over $1bn, due to sharp rises in costs, and while its rider metrics have improved in terms of how much money it makes from each trip, it will have to continue to grow exponentially to reverse the trend in terms of overall losses. Currently the margin has risen to 26.8% from 23.1% in 2017.

This week’s Q1 update is likely to show an increase in costs due to the IPO, with the important numbers likely to be focussed on not only the margins but also the number of users, as management try to make inroads into reversing those losses.

8) Uber (NYSE:UBER) IPO – 10/05

In what is set to be the biggest IPO this year ride sharing app Uber looks set is following in the footsteps of sector peer Lyft in the hope that they will fare better in terms of how the market reacts to its decision to float on the stock market. Pricing at between $44 and $50 a share the company is looking to raise $9bn, valuing the business at over $84bn. It certainly comes across as a rich valuation even if it has a more international focus, as well as a more diverse business model. Its main problem is it doesn’t make any money, losses of $3bn last year alone and a cash burn of $2bn a year, with little prospect of a profit in the near future.

The big question is whether that will matter to investors who have already been burnt by the sharp drop in Lyft shares.

9) Occidental (NYSE:OXY) Q1 19 - 07/05

In the news recently for its attempts to buy Anadarko Petroleum (NYSE:APC) from under the nose of Chevron (NYSE:CVX), with the main question being whether they are overpaying for these Permian Basin assets at a time when oil prices are at a multi month high and the focus on the oil majors is more towards renewables, an area that US oil companies don’t seem that much interested in.

With both Chevron and Exxon Mobil (NYSE:XOM) reporting a disappointing performance in Q1, will Occidental follow suit, and if so will it cause their shareholders to question more loudly the wisdom of this particular deal, given its already high debt levels.

10) Marriott International (NASDAQ:MAR) Q1 19 – 07/05

Marriott appears to be looking to take the fight to AirBnB, as it looks to launch a home rental business, in response to alleviating the pressure on its margins from revenue per room rates, as consumers look to make their US dollars, euros and sterling go further. Recent trends have shown that while revenues are holding up fairly well in the sector, profits are getting squeezed as hoteliers increase capacity as well revamping their offerings, as well as looking at extra capacity. Marriott also recently signed a new multiyear deal with Expedia to host any last minutes hotel vacancies on the on-line booking site, in return for a lower rate.

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.

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