UK CPI 13/11 - UK unemployment and earnings 14/11
The UK unemployment rate is at its lowest level in decades. Politicians are happy to gloat about the multi-decade low jobless rate, but as far as the markets are concerned, the UK economy is essentially at full employment, and any incremental movements in either direction are unlikely to have a major impact on the pound.
Dealers will be focusing on the average earnings data as a decent lift in wages would point in the direction of monetary tightening. Recently, average earnings have been outstripping the CPI rate, which is positive for the pound.
The latest reports showed that UK average wages excluding bonuses grew by 3.1%, while the inflation rate dipped to 2.4%. Rising wage growth and falling inflation is a double win for the British worker, and equates to a ‘real’ increase in wages. When workers earn more they tend to spend more, and this should help the British economy tick along.
Vodafone (LON:VOD) (H1) - 13/11
The update will be the first set of figures announced under the leadership of Nick Read, who took as CEO from Vittorio Colao, last month. Mr Colao called the firm a ‘European Champion’ and his last big move was to acquire Liberty Global’s German and eastern European cable networks for €18 billion. The move still needs regulatory approval, but it if gets the green light, it was add 128,000 broadband customers to Vodafone’s books.
The company has undergone a transformation, which involved disposing of assets in Africa, the US and China, and it is clearly focusing on Europe. That being said, low cost competitors in Italy and Spain have hurt the firm operations. The stock recently fell to an eight year low, and investors will want to see a reason to invest.
Land securities (1H) - 13/11, British Land (1H) and Workspace (1H) – 14/11
Real Estate Investment Trusts (REITs) have been in focus recently given the uncertainty surrounding Brexit, and there has been a lot of concern about the future of the commercial property market.
The share price of Land Securities (LON:LAND) and British Land (LON:BLND) have been in decline since 2015. Both companies have exposure to shopping centres and retail parks and that is weighing on their businesses. The rise of online shopping has hurt the high street, and footfall at retail centres is in decline. Online retailers have lower overheads, and in turn offer much more competitive prices, and hence why traditional retailers are struggling to keep up.
Some REIT’s blame Brexit, for the poor stock price performance, but it is retail that is holding them back. Workspace (LON:WKP) only invests in office space in desirable locations, and their share price hit an all-time high in June – which makes it the standout performer for its sector.
Home Depot (NYSE:HD) (Q3) - 13/11
The company continues to perform well in the face of a cooling housing market in the US. The group is the largest home improvements company in the US, and the latest set of numbers were strong. The company confirmed that customers were ‘willing to spend’, as home improvements are often seen as an investment rather than an expense.
In the latest quarter, same store sales jumped by 8%, which comfortably topped the 6.65% rise that analysts were expecting. The company issued a positive outlook as the full-year guidance for earnings per share, and total sales were both increased, so investors will have high hopes for this earnings update.
Home Depot need to stay nimble as their competitor Lowe’s (NYSE:LOW), revealed they will shut down underperforming stores in North America in a bid to become more competitive. The sector as a whole might be under pressure from the US housing market. According to the S&P/Case-Schiller 20 city index, house prices are growing at their slowest rate in 20 months. This could be an indication of what to expect from the sector in the medium-term.
Chinese retail sales, fixed asset investment and industrial production - 14/11
The Chinese economy cooled greatly between 2010 and 2016, and broadly speaking we have seen a plateauing of the economy since then. It would appear that economic growth of 6.7% and 7% is the new normal for China.
The growth reading is for the third-quarter was 6.5% - its slowest growth reading in nearly a decade. The level of fixed asset investment has been in steady decline for well over a decade, and this does not bode well for future growth. The level of industrial output has been stable year-to-date, but still well below the average levels witnessed between 2010 and 2012.
Retail sales have been growing at a faster rate in recent months, but the wider downward trend is obvious. We have yet to see any strong evidence that the trade spat between the US and China is hurting the Chinese economy, but given that Beijing have been introducing more pro-business policies recently, suggests they are worried.
Eurozone GDP 14/11 - eurozone CPI 16/11
Eurozone GDP dipped to its lowest rate in four years. The stagnating Italian economy and new emissions tests in the car industry were cited as reasons for the slowdown in the economic activity. The services and manufacturing sectors has been growing at a slower pace recently and this has fed into the wider economy. The headline flash inflation rate hit 2.2% - its highest level since late 2012.
The CPI rate is also above the European Central Bank (ECB)’s inflation target of 2%. The high oil prices have fed into the headline inflation figure. The core inflation rate reached 1.1% - its joint highest level in over a year.
The ECB have made it clear that they won’t be hiking interest rates until at least the back end of 2019, but a genuine increase in demand would assist the single currency.
The political battle between Rome and Brussels could spark contagion across the eurozone governments bonds. The region is undergoing an economic cool down, the higher cost of living is likely to add to the country’s woes.
US inflation 14/11 - US retail sales 15/11
The US economy is ticking along nicely. Growth is higher and unemployment is low, and demand is firm. The latest core PCE reading was 2%, unchanged on the month. The core PCE reading is the Federal Reserve’s preferred measure of inflation.
The most recent US jobs report showed that average earnings on a yearly basis grew by 3.1%. The bump up in earnings should trickle down to an increase in spending by workers, and that in turn might lead to a higher cost of living. The Conference Board consumer confidence report jumped to an 18 year high, but actual retail sales are a far barometer of consumer sentiment.
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