1) US payrolls report – 05/07
This month’s payrolls report could go a long way to determining whether the markets are correct in their assessment that we could see a US rate cut by the end of the month. Looking at some of the recent data from the US economy the case for a lower Fed funds rate can’t really be supported on the basis of the US economy alone. At the most recent Fed meeting policymakers were evenly split on whether rate cuts were needed, with St. Louis Fed President James Bullard dissenting on keeping rates unchanged. If the Fed does move in July it could face accusations of bowing to political pressure in the event the data remains robust. A weak May reading of 75k is expected to see a rebound to 169k while wages are expected to remain steady at 3.1%. The ADP (NASDAQ:ADP) report is also expected to improve on the 3rd July from 27k to 91k.
2) RBA rate meeting – 02/07
The RBA recently cut rates to a new record low, and while RBA governor Philip Lowe suggested recently that more cuts were coming, it’s unlikely that we’ll see another move this month. He also went on to state if every other central bank followed suit in easing policy, that the actual effect of any measures to stimulate growth would be diluted.
3) OPEC meeting – 02/07
There have been a number of factors helping to underpin oil prices over the last few months, from the imposition of US sanctions on Iran, which has helped raise geopolitical tension in the Gulf region. This week’s OPEC meeting is likely to be a focal point for a decision on whether to extend the production cuts originally agreed at the beginning of this year for another six months. Only two months ago prices hit $75, before slipping back on a combination of rising US shale production and slowing demand. A failure to agree a deal extension could well see prices come under further pressure and head back to the lows this year.
4) Global manufacturing PMI’s – 01/07
One of the characteristics of the past few months has been the poor performance from the manufacturing sector, which has been in a recessionary environment for all of this year. Germany in particular, along with China has seen its output struggle, though it does appear that in some areas we may be seeing a gradual pickup in economic activity, albeit from fairly weak levels. In the recent flash numbers out of Germany and France for June we did see slight improvements, however they still remain well short of the level of economic activity that would suggest a sustainable improvement.
Both Italy and Germany are expected to remain in contraction territory, while the China and Japan are expected to stagnate. The main outlier has been the US where manufacturing has been fairly solid all year, however there is rising concern that even here activity is slowing after the ISM hit its lowest level since late 2016 in the recent May numbers.
5) Global Services PMI’s – 03/07
Unlike manufacturing the services sector has managed to hold up well, however the main concern is that the manufacturing malaise could start to infect sentiment in services which has until now, been a bright spot, particularly in Germany, which has consistently posted readings in the mid 50’s for the last four months.
The US has also been a strong performer here with a decent jump in May. With markets increasing pricing in the prospect of a US rate cut, a strong number here, will inevitably raise the question as to why the Fed feels the need to cut rates as soon as July.
6) J Sainsbury PLC (LON:SBRY) – Q1 20 – 03/07
Sainsbury share price has been in the doldrums ever since the CMA put the kibosh on its merger deal with Asda, earlier this year. Buffeted by shrinking margins and a tough retail environment, the UK’s second biggest grocer is feeling the squeeze from Aldi and Lidl, on the one hand, and a squeeze from its more immediate peers of Tesco (LON:TSCO) and Asda.
It continues to vie with Asda for that number two position in terms of market share, and while it does have the advantage of its Argos division, management do appear to have lost sight of the overall goal of how to take the business forward now that the Asda deal has gone. This makes it all the more controversial that CEO Mike Coupe is in line for a bonus, helping to boost his pay by 7% from last year, despite the share price languishing at all-time lows, and down 40% from a year ago. With margins set to get ever tighter, currently close to 1%, cost control is likely to gain a much bigger focus, particularly if sales continue to struggle.
7) Superdry (LON:SDRY) – FY19 – 04/07
The Superdry share price has struggled for the most part of this year. Having sunk like a stone last year as management came under fire from founder Jamie Dunkerton for their stewardship of the company, the shares managed to find a base at the end of last year. Since then they’ve broadly stabilised and traded sideways with the return of Dunkerton raising hopes that he can turn the business around. In May the company followed up its two profits warnings from last year with another one. In the year to 27th April the company saw wholesale revenues rise 3.6%, however a poor Q4 undermined hopes of a much better performance overall. On-line sales were also disappointing, rising a meagre 1.6%. Against such a weak backdrop investors will be wanting to know how Dunkerton intends to turn the business around and help the share price recover in what is becoming an ever tougher environment for clothes retailers.
8) International Consolidated Airlines Group S.A. (LON:ICAG) - June traffic figures – 05/07
It’s not been a great year so far for airline stocks, with IAG’s share price languishing at levels last seen in December 2016, the sector has been rocked, by higher fuel prices, as well as the controversy over the crashes of the Boeing (NYSE:BA) 737 MAX aircraft, while Brexit uncertainty appears to have caused UK holidaymakers delay any plans to travel until the end of March. In May the company announced a big drop in profits to €135m for Q1, as well as a decline in revenue per passenger. With airlines across the sector all struggling, and Lufthansa last month reporting it would miss earnings expectations for the year due to underperformance at its Eurowings subsidiary. With budget carriers also struggling due to higher costs the bar is likely to be low for IAG (LON:ICAG), in terms of how the business has done in June.
9) Purplebricks (LON:PURP) – FY19 – 03/07
When Purplebricks came to market back in 2015, the way was open to a cheaper and easier way to list a property for sale without the plethora of fees that went with a traditional bricks and mortar estate agent. Its advertising tagline “commisery” has become ubiquitous amongst estate agents across the UK, however the slowdown in the housing market in London and South east since mid-2016 has slowed its business model, and brought “commisery” to its shareholders. Its overseas expansion plans turned out to be an Achilles heel for the business as well as senior management. Over ambitious expansion plans in the US and Australian finally prompted the decision to exit its Australian business, while its US operation was put under review, earlier this year. CEO and founder Michael Bruce was also replaced by COO Vic Darvey, while speculation has started to rise that Germany’s Axel Springer might look to take over the struggling business, given it received a £125m investment from them just over a year ago, and the German company then boosted that stake in June to 26.6%, after buying out previous CEO Michael Bruce, and his family’s stake in the business.
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