UK wages, Q4 GDP and unemployment
With inflation staying sticky at the 3% level it’s more important than ever that wages keep up and this week’s wages data for the three months to December are expected to continue an acceleration that has started to gain traction in the last few months. Recent increases in the minimum wage are also likely to start showing up in the overall numbers in the next few month’s data, and with unemployment remaining at 42 year lows, a tight labour market could see wage growth hit 3% in the coming months. UK Q4 GDP is expected to be confirmed at 0.5%.
Fed minutes
The FOMC teed up the prospect of another rate rise next month at its most recent meeting at the end of January, by upgrading its outlook for inflation on a 12 month basis while staying optimistic about the health of the US economy. Given recent volatility these minutes may not be too instructive, but as long as US data continues to show increasing price pressure then a March rate hike could be the first of many this year.
German IFO Business survey (Feb)
The German economy has started 2018 the same way it finished the end of last year, with business sentiment holding up well, along with the more sector specific PMI numbers. There is some evidence that higher costs could start to impact profitability as we head into 2018, if the recent 4.3% pay rise won by German metal workers heralds a wider shift to higher wages across the economy.
HSBC (LON:HSBA) FY17 results
HSBC’s focus on Asia is expected to yield a big jump in profits when the company releases its latest full year numbers this week. At its Q3 update the bank reported a jump in profits of nearly 450% as the bank benefited from the strong growth from its core Asia markets of China and Hong Kong. Like most of its peers the investment banking division is likely to have underperformed, though the recent rise in yields is likely to have some positive effects.
Reckitt Benckiser (LON:RB) FY17 results
Consumer goods is a sector that has seriously underperformed in the past year or so as rising costs have started to eat into revenue growth. We’ve already seen sector peers Unilever (LON:ULVR) and Nestle (LON:0QR4s) offload underperforming parts of the business, while Reckitt has gone the other way when it acquired Mead Johnson. At its Q3 update the company announced another underwhelming performance, and while some of these can be laid at events outside its control, like the cyber-attack in June, there are doubts as to whether the reorganisation announced in October last year will be enough to turn things around. A poor update could hasten calls for the business to be broken up, and become more focussed on its consumer health business.
Lloyds and RBS FY17 results
The contrasting fortunes of two of the UK’s bailed out banks could not be in more contrast to one another. Lloyds Banking Group (LON:LLOY) now back in private hands having paid back all of its government bailout has reinforced its presence in the UK market with a significant restructuring of the business, improving its digital and on line presence as well as buying MBNA credit card division from Bank of America (NYSE:BAC) Merrill Lynch to increase its presence in the UK credit card market.
Royal Bank of Scotland (LON:RBS) on the other hand, while performing well with respect to the underlying business is still wrestling with a number of legacy issues, the latest of which is malpractice at its Global Restructuring Group unit where it is alleged staff were encouraged in mis-selling unsuitable interest rate products to small businesses. This week’s final numbers could see RBS return to profit for the first time this decade, though both are likely to have taken hits from the recent collapse of Carillion (LON:CLLN).
Wal-Mart (NYSE:WMT) Q4 update
Has been one of the few US retailers that has been able to take the fight to Amazon (NASDAQ:AMZN) in terms of the on-line shopping experience. Big box retailers have come under increasing pressure from the low overheads model that Amazon is able to bring to the table, however Wal-Mart’s stronger grocery offering is helping it ride out the storm. At its last trading update at the end of last year it showed that revenues in its US stores were holding up well, however the recent increases in wages and bonuses announced recently by its management could cause the company to revise down its outlook for 2018.
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