1. UK inflation – 22/05
UK inflation has started to tick a little higher in the last couple of months, as the impact of higher energy prices and council tax bills feeds into the headline numbers. Headline CPI hit a two year low in January, coming in at 1.8%, however a weaker pound could well limit the downside in the near term.
This week’s April inflation numbers could see price pressures head back above 2%, however with wages still rising at 3.4% the impact is likely to be minimal as the ability of retailers to pass on price increases remains limited.
2. Fed minutes – 22/05
His weeks Fed minutes are likely to add further colour to the debate about future FOMC policy expectations. Much has been made of the use of the word “transitory” in recent discussions over its use in the context of recent comments from Fed chairman Jay Powell.
The lack of inflationary pressure has raised expectations that we might see the Fed lean into talk of possible rate cuts, with wage growth at 3.4% and the jobs market still robust markets appear to be getting ahead of themselves.
The release of the latest minutes are expected to reinforce the view that the Fed is in no rush to move on policy in either direction.
3. European elections – 23/05
The latest European elections are likely to offer up the prospect of a bloody nose to both the Labour and Conservative parties as they lose voters to the Brexit party. These EU elections are also likely to see the advance of Eurosceptic parties across the bloc, as voters tired of the political status quo, look to take back control from the more established parties, who appear to have lost the confidence of their voter bases.
4. Germany GDP and Germany, France Flash PMI’s (May) – 23/05
Recent manufacturing PMI numbers have thus far shown little sign of a significant pickup on economic activity, from the weak numbers we’ve seen so far this year. Concerns over Brexit and trade war fallout has hammered German output in particular and while we did see a modest pickup in April it was pretty feeble.
Services activity has been better and it is here that we could well see a silver lining, however it is likely to be of little comfort in the medium term. The latest German GDP numbers are expected to show that the German economy stagnated in Q1, in the process narrowly avoiding a technical recession.
5. Royal Mail (LON:RMG) FY19 – 22/05
The Royal Mail share price has been in free-fall since the record peaks above 600p in 2018, falling below its widely criticised at the time IPO price of 330p at the end of last year to be trading at record lows earlier this year. None of this should have been a surprise if investors had bothered to look at the company’s forward projections for earnings.
They always looked optimistic and recent profit warnings appear to have been the final straw for a lot of investors to cash out. The company’s Achilles heel has always been its letters division, where volumes have continued to decline, as well as its lack of flexibility in being able to cut costs. The company is still profitable, and revenues have continued to rise, however it hasn’t been able to cut costs as quickly as it would have liked, with the result that profits are being squeezed. Full year operating profits are expected to come in between £500m and £530m for the year ending 31st March, a big decline from last year’s £694m.
6. Marks and Spencer (LON:MKS) FY19 – 22/05
Marks and Spencer’s share price hasn’t done all that much in the last 12 months, only slightly lower from where it was this time last year.
CEO Steve Rowe’s restructuring plan had started to show some benefits when it reported its first half numbers at the end of last year. First half pre-tax profits rose to £127m, despite revenues declining 3%, falling slightly below the £5bn mark, on the back of a difficult retail environment. Its General Merchandise division has continued to underperform, but no more than a lot of its peers.
Its food division which has for so long set itself apart from the rest of the business in terms of outperformance appears to be feeling the effects of the supermarket price wars, with a slight dip in revenues. Profits are still expected to come in better than expected, however store closure costs could weigh on these full year numbers.
7. Home Depot (NYSE:HD) Q1 20 – 21/05
For a company that posted record sales in 2018, a rise of 7.2% to $108.2bn, the share price performance over the last 12 months has been disappointing.
The company appears to have benefitted from a struggling US housing market, as consumers decide to spend money on improving their existing home, rather than move to a new one. Its forward guidance was also positive in that guiding expectations for fiscal year 2020 of total sales of $115bn to $120bn, however it would appear that investors were hoping for more.
As a bellwether of the US economy and the US consumer, how Home Depot does in this latest update is likely to offer clues as to where the US economy is heading over the next quarter. Profits are expected to come in at $2.18c a share, up from $2.09c at the end of Q4.
8. Best Buy (NYSE:BBY) Q1 20 – 23/05
Having nearly gone out of business a few years ago, the company has enjoyed a decent turnaround in the last six years. With about 15% of the US consumer electronics markets the company has gone from strength to strength. Its ability to take on Amazon (NASDAQ:AMZN) and Wal-Mart (NYSE:WMT) by offering in house expertise to its customers saw its last quarterly numbers come in well ahead of expectations.
The trade war with China is one area that could impact its numbers over the next 12 months, with any increase in tariffs likely to impact its margins, something that CFO Coryn Barry warned about in the company’s Q4 update, and could well expand upon in this week’s update in light of the recent rise in tariffs to 25%. Expectations are for Q1 profits of $0.86c a share.
9. Kraft Heinz (NASDAQ:KHC) Q1 19 – 23/05
When Warren Buffet bought his stake in Heinz a few years ago he probably didn’t imagine the car crash that has happened since then. While Unilever (LON:ULVR) is probably heaving a sigh of relief that it fended off last year’s approach it has become clear that Kraft Heinz management haven’t been paying attention to the underlying business.
Forced to restate its accounts for the last three years, due to procurement issues, the shares have dropped sharply on the last year, to record lows. Even without restating its accounts the company had been struggling with too many products, and too much focus on cutting costs to the detriment of investing in products that consumers want to buy. First quarter profits are expected to come in at $0.60c a share.
10. Foot Locker (NYSE:FL) Q1 20 – 24/05
The company had a strong end to its fiscal year in its last quarter, as revenues and profits crushed expectations. Same store sales rose 9.7% in Q4 on revenues of $2.27bn and profits of $1.56c a share. Its investment in a variety of niche areas is also helping its sales growth, including Super Heroic, Pensole as well as children’s apparel company Rockets of Awesome has contributed to the company’s solid performance.
Profits for Q1 are expected to continue this trend with expectations of $1.60c as the company starts on a new financial year.
11. Metro Bank AGM – 21/05
Metro Bank PLC (LON:MTRO) shares are down over 80% in the last 12 months after an accounting mistake showed that the bank was undercapitalised in terms of risk weighting, and in order to improve that weighting would have to either raise more capital, or sell off some of its loans in question. In any event it was able to raise £375m, however this week’s AGM could see investors call for the removal of either Chairman Vernon Hill and CEO Craig Donaldson as a consequence for what can only be described as significant mismanagement of the business.
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.