Fed meeting 13/06.
A rate rise this week isn’t really in doubt, however the narrative for the remainder of this year is what markets are more likely to be more fixated on. How does the Fed see the US economy, and what concerns do they have about recent trade tensions, and the impact on investment decisions as well as expectations around the run rate for inflation, alongside their tolerance levels for a minor overshoot.
ECB rate meeting – 14/06
The recent rebound in the rate of inflation has once again shifted attention back to an expectation that the ECB might be forced to outline in further detail its plans to further curtail its asset purchase program before the end of this year.
At a time when events in Italy could well be in political flux as the new populist government looks to implement its new and controversial spending program, potentially putting itself on a collision course with EU budget rules, the timing of this week’s meeting is likely to be problematic for the ECB President. He will be feeling the pressure from hawks on the committee to look at reining back stimulus to prevent an inflation surge, at precisely the time Italian borrowing costs have spiked due to the political uncertainty caused by the new populist Italian government.
No changes are expected in policy while the press conference is likely to be an exercise in verbal tightrope walking.
UK wages/unemployment/CPI (May) – 12/06 and 13/06
At the most recent inflation report the Bank of England downgraded its inflation target for this year to 2.5% which in light of recent sharp rises in oil prices seems remarkably optimistic on its part.
For the most part inflation has fallen back from peaks of 3.1% at the beginning of the year to 2.4% now, however there is no evidence that any of this reflects the recent surge in oil prices, which saw a sharp jump in EU CPI to one year peaks in its most recent numbers. If this is translated into the UK numbers we could see inflation tick higher.
On the plus side, wage growth still seems to be holding up well, at 2.9% despite a sluggish economy, while unemployment remains at a 42 year low at 4.2%. As long as wages growth remains in or around the 3% level then the outlook is likely to remain positive for sterling.
China industrial production/retail sales (May) – 14/06
Recent May PMI data appears to show that the Chinese economy is bouncing back from a little bit of a soft patch in and around Chinese New Year. Recent data from April showed that Chinese consumers weren’t in a hurry to open their wallets as retail sales dropped to a one year low. Industrial production was slightly better showing a strong rebound from 6% to 7%, however fixed asset investment year to date was also weaker, down from 7.5% to 7%, the lowest level since 1999.
Markets will be looking for an improvement across the board on all three metrics otherwise concerns about further economic weakness in the months ahead are likely to increase further.
Crest Nicholson (LON:CRST) H1 – 12/06
In terms of share price performance Crest Nicholson shares have underperformed the wider house builder sector over the last 12 months. It is true that some of the froth has coming off the UK housing markets but that doesn’t explain the decline in the share price over the last few months.
The appointment of a new CEO at the beginning of the year doesn’t appear to have slowed and at its most recent update in January the company announced slowing sales in London and rising costs as headwinds to its business. This was reinforced last month when the company issued a profits warning guiding its full year operating margin down to 18%, at the lower end of its recent forecast.
Completions still look relatively healthy along with forward sales and selling prices, however the current uncertainty around UK monetary policy may give some buyers pause for thought. Investors will be wary of further downgrades to the outlook given recent declines in mortgage approvals data.
Majestic Wines FY18 – 14/06
Oenophiles will be keeping a close eye and hopefully raising a glass to this week’s full year trading update for Majestic Wine (LON:WINEW), the UK’s leading wine specialist. Having posted a decent first half performance with a £6.7m rise in profits, the share price hit a little bit of turbulence in April, after CEO Rowan Gormley warned that profits would take a £3m hit due to the company’s additional investment in Naked Wines, its online wine business, which it bought for £70m in 2015. This additional spend is expected to pay dividends in future years with the benefits expected to be most notable from 2021 onwards. Revenues are expected to rise slightly to £479.6m and EBITDA expected to come in at £24.7m an increase of 5.1%.
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