1. Fed rate decision – 19/06
It is hard to believe that just over six months ago Fed officials were talking about the prospect of at least two rate rises this year, even after the rise in rates we saw at the December meeting. Market expectations have changed sharply in the space of the last few weeks with no-one now talking about the prospect of a rise in rates, while markets have started to price the prospect of a decrease in the Fed Funds rate, as soon as next month, and even the prospect of two rate cuts by year end. Even allowing for the weak May payrolls report this seems an incredible prospect. Unemployment is still at multi year lows, while wages are growing at 3.1% a year. The change of tone in recent weeks by Fed officials has in some part helped shape this change in expectations, however it seems way overdone. As such we could well see Fed officials temper market expectations in this regard. A rate cut in July or September would be tantamount to admitting they erred in December, and while no one should be afraid to admit a mistake it could do more harm than good if the Fed were to rush into cutting rates, so soon after raising them.
2) UK CPI (May) – 19/06
The latest inflation data in April showed a modest uptick, largely as a result of increases in energy prices and council tax rates seeing an uptick to 2.1% and a six-month high. Core prices were slightly more subdued but nonetheless the weaker pound and higher energy prices do appear to be exerting upward pressure on prices. We could see prices rise to 2.2% in May.
3) Conservative party leadership TV debate – 18/06
There’s a saying in Conservative party leadership contests that the early favourite rarely ends up crossing the line. Boris Johnson remains the early favourite, however his team has strictly controlled the message when he has been presented to journalists.
This week’s TV debate on the BBC could be the one opportunity his challengers have to derail his tilt at the crown, as he will be exposed to the full scrutiny of the voting public. Nail it and he will go a long way to making it onto the ballot paper of party members for the final two candidates. If he trips up he may find that his lead amongst Tory MPs disappears faster than a rat up a drainpipe. The outcome of the debate in turn could affect how markets view the likely prospect of a “no deal” Brexit. It is Boris’s to lose, faux pas notwithstanding.
4) Bank of England rate decision – 20/06
Given the ongoing uncertainty over Brexit this meeting almost seems irrelevant given that the prospect of the Bank of England doing anything currently sits between slim and none. Recent noises from Bank of England officials do appear to be clouding the picture with respect to interest rates with chief economist Andrew Haldane, as well as external member of the MPC Michael Saunders warning about the prospect for higher rates.
With the Brexit deadline extended to October and the latest economic data showing signs of softening, any talk of rate hikes is increasingly looking detached from reality, whatever these two policy makers might have you believe.
After a decent Q1, the recent April data appears to show a UK economy coming down from a pre-Brexit day deadline boost as UK consumers hold back and become more discerning about how they spend their money.
5) Germany and France flash PMI’s (May) 21/06
Thus far this year manufacturing activity has been abysmal, particularly in Germany where readings are at multi year lows. Services activity has been slightly better, but even here it is looking softer than in recent months.
Trade war concerns are likely to continue to be a worry with the auto sector acting as a significant drag. Markets will be looking for an improvement from the sub 45 readings we’ve seen in the past three months, otherwise recession fears could well increase further in Europe’s largest economy.
6) Bank of Japan rate decision – 20/06
An improving economy is likely to see the Bank of Japan keep policy unchanged. The latest GDP numbers showed the economy expanded 0.6% in Q1; however, the lack of inflation will keep central bankers cautious with Kuroda reiterating that the central bank still has options when it comes to keeping policy loose.
7) Whitbread (LON:WTB) Q1 19 – 19/06
Now shorn of its Costa Coffee chain, Whitbread now has to stand or fall by the performance of its Premier Inn hotel brand, however it still has the luxury of having a good proportion of the proceeds of the £3.9bn, having returned £2.5bn of the Coca Cola funds to shareholders. It was therefore rather puzzling to hear Whitbread CEO Allison Brittain give such a downbeat assessment of the outlook, at the end of last year. At the end of Q4 we saw sentiment and business confidence slip back, and revenue per room decline 4.4%. This could be a case of merely lowering market expectations, against a backdrop of a 1% decline in total occupancy rates, however the company still remains on course to boost room capacity by another 3,000 to 4,000 rooms, from the current 76,000, so the future may not be as bleak as management might be looking to paint. Revenues last year showed a rise of 2.1% to £2.05bn with underlying profit before tax rising to £438m.
8) Berkeley Group FY 19 – 19/06
The slowdown in the London and South East housing market has the potential to hit Berkeley Group’s profits more than most given its exposure to these particular markets. In the first six months of the year the company saw a 26% drop in pre-tax profits with revenues down to £1.7bn. in an attempt to diversify outside London the company launched a new division in Birmingham in 2017 , and has bought a number of sites outside the London area. At its last update in December last year the company upgraded its full year profit target to £3.37bn, while leaving its longer-term outlook unchanged. Given the extension to the Brexit deadline we could well see the company revise this lower in light of the continued lacklustre nature of the London and wider housing market.
9) Darden Restaurants Q4 19 – 20/06
Anyone who’s been to the US knows the Olive Garden chain of restaurants. When the US consumer is confident dining out generally tends to do well. US consumers certainly don’t appear to have lost their appetite as the owner of this US consumer staple has seen its share price go from strength to strength in the last few years. At its most recent update in Q3 the company reported earnings and revenues above expectations. The company also raised its full year outlook with the Olive Garden franchise seeing same store sales rise 4.3%. Full year earnings are expected to come in at $5.76 to $5.80c a share with total sales growth of 5.5% expected for the year.
10) Kroger (NYSE:KR) Q1 20 – 20/06
Finished the end of last year with an earnings miss, however this was mainly down to investment in new areas to help it take on the likes of Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN). The deal with Ocado (LON:OCDO) is a case in point with the upcoming year expected to be a year of transition year, according to some analysts. This helps to explain why the shares are down this year, however revenues still look strong while profits are expected to come in at $0.72c a share. The company is expected to spend $3.2bn this year in overhauling its stores, up from $3bn last year, and this expenditure in 2018 saw digital sales rise 58%, as more warehouses were opened in its on-line operation.
11) Slack Technologies Inc (NYSE:SK) Direct Listing 20/06
Slack Technologies gets set to go public this week and will follow in the footsteps of Spotify in doing a direct listing, rather than an IPO. In normal circumstances when companies embark on an Initial Public Offering (IPO) the process involves the issuing of new shares. This means that the existing private shareholders will make their own private shares available for sale to the wider market, with no clear indication as to where the value might be.
Expectations are for a valuation of $17bn, which would put the shares in a price range of between $25 and $28 a share. The company, which is an instant messaging and collaboration tool, and also provides mobile apps for iOS and Android is expected to generate revenues of around $590m for 2020. This would be an almost 50% improvement on last year’s number of $400.9m. Last year the company lost $138.9m but is expected to see those losses come down.
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