Bank of England decision and inflation report – 10/5
Up until a few days ago it appeared inevitable that we would see a rise in UK rates of 0.25% to 0.75%, the first time rates would have shifted above 0.5% since they were slashed to their current levels in 2008.
The original catalyst for this shift in tone wasn’t any significant decline in economic data, though there were clues it was starting to soften a little. It was comments from Bank of England governor Mark Carney who indicated that a move this month wasn’t the done deal that many thought it was. This was a significant change of tone from the optimism that we saw in the Bank of England inflation report in February and subsequent comments since then. This failure on the part of Bank officials to soften this guidance as some of the recent data weakness became apparent is part of the forward guidance problem the central bank has, and not for the first time.
In 2014 they showed similar shortcomings and once again their ability to guide market expectations is once again being questioned. It is an ability that the ECB and Federal Reserve appear to be able to manage better, and something the Bank of England needs to manage better. Saying that rates will rise sooner than markets expect is usually a signal that a rise is coming. If you retain the flexibility of being data dependant you keep market expectations in check. It is quite likely that the Bank may well guide its growth expectations lower, possibly along with its inflation expectations, which could undermine the pound further. This isn’t something the bank will want in terms of drilling down on inflation, so the guidance will need to be carefully balanced in order not to upend the pound too much. This is something that Mr Carney hasn’t always been particularly good at, while the votes of Saunders and McCafferty will also be scrutinised. Will they remain wedded to their calls to push rates up?
Disney Q2 – 8/5
At its most recent trading update profits came in at the higher end of expectations largely as a result of recent changes to US tax low. What was more disappointing was a fall in overall revenues with the greatest drags coming from their ESPN channels and ABC broadcast networks. Disney (NYSE:DIS) like a lot of other traditional broadcasters is seeing its traditional businesses being disrupted by new streaming services like Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) Prime, which is driving subscription costs down. Fortunately its parks and resorts business is taking up the slack, while its bid for 21st Century Fox appears to have stalled in the wake of a new bid by Comcast for the Sky business which Fox has a 39% stake in.
China Trade (Apr) – 8/5
Since the end of last year we’ve seen a bit of a slowdown in economic activity in the first quarter though some of that is likely to have been down to the disruption caused by Chinese New Year. The March numbers were a big surprise as China posted its first trade deficit with the US in over a year as exports fell back sharply, declining 2.7%, a big variance from the 44.5% rise seen in February. While the timing of Chinese New Year may well cause some variance these are big swings and do raise a concern that trade war worries, or a slowdown in global demand might be behind these swings. The latest Chinese trade numbers will go some way to establishing whether these recent swings are indicative of a wider trade disruptions.
TUI Travel H1 – 9/5
TUI (LON:TUIT) has been fairly successful in the past 12 months in leveraging up its performance by growth across its cruises and hotel business as customers opt for the all-inclusive option when it comes to holiday choice. Bookings in Greece, Turkey and Cyprus have proved to be popular when the company reported numbers earlier this year. This had helped the company pare its overall losses from the previous year but trading conditions are still likely to remain difficult given recent slowdowns in consumer spending across Europe and the UK over the past couple of months.
21st Century Fox Inc (NASDAQ:FOX) Q3 - 9/5
The recent bid by Comcast (NASDAQ:CMCSA) for the remaining part of Sky not owned by Fox has thrown a very large spanner into whether or not the company will eventually succumb to the recent approach by Disney for its media appears to have thrown the company strategy as it looks to focus more on sports and news, while offloading the rest. Like most US companies in the previous quarter there was a lift from the US tax cut, but the business continues to struggle with higher costs. Its Sky business continues to be a positive but management need to decide whether to up their bid for the rest of Sky they don’t own to counter Comcast, while Disney need to consider whether they should up their bid to offset the higher bid Fox will need to pay to counter the Comcast offer.
BT Group (LON:BT) – FY – 10/5
Last year BT Group signed a deal with Sky to cross share its content across their respective platforms. Of the two it could be argued that BT got the better side of that deal but the thinking also made sense in the context of the bidding for Premier League football rights which could have sent prices up to ridiculously high levels. The deal to host Sky content helped fill a gap in BT’s content package but also helped both companies take the fight to Netflix and Amazon, as they look to hang onto their market share.
At its most recent update the company reported a slowdown in its global services division, though its EE mobile division did show an increase in performance, while full year guidance was left unchanged. Over the last month the share price has pulled away from 5 year lows in anticipation that the recent Sky deal has helped to retain clients for its TV services, and that the underperformance that has seen the share price more than halve since the 2016 peaks could be on the cusp of coming to an end.
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.