It's set to be another key week for Brexit developments with Prime Minister Theresa May set to update Parliament on the latest stage of the withdrawal agreement on the 26th February with a view to getting a majority vote on any amended withdrawal agreement. In the absence of a new vote, which seems quite likely, we can expect MPs to try and block the option of a no deal Brexit.
The China, US trade deadline for an increase in tariffs falls due on 1st March, however the current mood music suggests that could well be delayed, or deferred which would be a welcome development, which does appear to be largely priced in already.
It’s also another big week for central bankers with Fed chair Jerome Powell due to testify to US lawmakers on the state of the US economy and he can probably expect questions on how Fed policymakers see the next move on US rates, against the backdrop of the US government shutdown, which may well have had a negative impact on US Q1 economic activity.
Bank of England inflation report hearings (Feb) – 26/02
Another opportunity for MPs to quiz Bank of England governor Mark Carney and other senior central bank officials on the banks preparations for Brexit now that we are just over a month away.
ITV (LON:ITV) FY18 – 27/02
The performance in ITV’s share price over the last two years has been more a symptom of the collapse in advertising revenues, than the performance of ITV studios which has remained the jewel in its crown.
A year ago, the company saw a big drop in advertising revenues in its last set of full year numbers. While the World Cup and Love Island offered a brief boost to advertising revenues last summer, the outlook has remained challenging. In July last year CEO Carolyn McCall acknowledged this new reality by announcing that the business would invest £40m in 2019, in scaling the UK and global production business, as well as looking to deliver content direct to consumers.
She went on to state that the focus would remain on cutting costs, and focus on looking to grow its on-line presence, however given its limited budget, relative to Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) this is likely to be challenging.
Rolls Royce (LON:RR) FY18 - 28/02
It’s been an up and down year for this marque British brand, beset by negative headlines around its Trent 1000 engine which powers Boeing (NYSE:BA)'s 787 Dreamliner. This caused the company to allocate additional resources to combat the problems that were causing the turbine blades to corrode quicker than expected. These costs are expected to come in well above £1bn.
Coming on top of the ongoing restructuring program which remains a work in progress under CEO Warren East the problems have been disappointing, however the company stated it still expected to deliver 500 new engines for this calendar year when it updated the market at the end of last year.
Aston Martin Lagonda (LON:AML) FY18 – 28/02
It’s not been a great start for Aston Martin Lagonda since its debut on the UK stock market. The share price declines seen since the company IPO’d back in October has raised questions as to whether the company was overpriced.
Coming as it has on the back of seven bankruptcies in over 100 years it has enjoyed a mystical cachet for those who have charted its tribulations from afar and have seen the cars venerated in a number of James Bond films from the DB5 which we first saw in Goldfinger in 1964 to the DB10 that we saw in Spectre most recently.
Aston Martin only just recently returned to profit last year with revenues of £876m and pre-tax profits of £87m, after a whopping £163m loss the year before. Putting that to one side the prognosis did look positive in October with demand highest in the UK, US and China and the average selling price up 11% to £160k per car, which helped push its first half profit for this year to £106m.
The biggest risk remains around the global outlook at a time when trade tensions are rising. This raises the risk that the sales numbers have taken a hit, and that is undoubtedly something to bear in mind, even if you take the view that someone who can afford an Aston Martin isn’t likely to be as price sensitive the conventional car buyer.
US Q4 GDP – 28/02
The recent retail sales numbers for December showed that US consumers cut back spending sharply at the end of last year, before you even start to factor in the January US government shutdown.
The US Federal Reserve did raise rates again in December which may well have impacted overall consumer demand, while stock markets also dropped sharply. If the latest Q4 GDP numbers show that the US economy is weakening sharply then that will increase additional concerns around the overall health of the US economy, at a time when global growth continues to look weak, in so doing placing downward pressure on the US dollar.
Global Manufacturing PMI – 01/03
Global manufacturing PMI’s have shown little sign in recent months of suggesting that economic activity is starting to stabilise after several months of declines.
Political instability in France appears to have affected economic activity there with the yellow vest protests, while Germany’s manufacturing sector has been grappling with problems in the auto sector, and where the flash number fell to 47.6 its sharpest drop in over 6 years.
With China manufacturing likely to have been disrupted by the Chinese New Year, it is unlikely that we’ll see much evidence of a pickup in economic activity in these latest February numbers. The weakness in this sector is likely to keep expectations of further central bank monetary policy stimulus at the top of the policy agenda going forward.
JC Penney (NYSE:JCP) and Nordstrom (NYSE:JWN) Q4 19 – 28/02
The latest US retail sales numbers for December were a big wake up call to investors, that despite the restructuring efforts undertaken by US big box retailers, that the outlook for US retail remains challenging.
While Amazon and Wal-Mart (NYSE:WMT) seem able to adapt to the changing outlook the more traditional US retail names have struggled, with the recent bankruptcy of Sears being a case in point. As such this week’s numbers from JC Penney, Macy’s (NYSE:M) and Nordstrom should show whether this part of the US retail sector has stabilised or has further pain to come in terms of restructuring the business model
Canada CPI (Jan) 27/02 and GDP 01/03
It wasn’t too much of a surprise, when the Bank of Canada failed to follow the lead of the US Federal Reserve in hiking rates in January.
It was widely felt that the US central bank may have erred in December when it put rates up, and that the lack of inflation in the Canadian economy was likely to result in a wait and see decision. Since then inflation has shown little sign of picking up with core prices stuck at 1.7%, while both monthly numbers declined in December.
The Canadian economy also contracted in December supporting the cautious approach of the Bank of Canada. The numbers for January should show a modest pick-up, however not by a sufficient amount to suggest a change of stance by the Bank of Canada, with respect to rate policy, which is likely to remain dovish.
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