1. EU Summit – new Brexit deadline - 10/04 and 12/04
It's set to be another seminal week for the EU and UK as we approach another Brexit deadline. While it remains the legal default that the UK leaves the EU without a deal the Prime Minister has already written to EU Council President Tusk requesting an extension to June 30th, more or less copy and pasting her previous request which was rejected in favour of the April 12th deadline.
Talks between the Labour party and the government are likely to continue under the pretence that they will try and agree a common position. It seems more likely that any extension will be a longer one and that the UK will have to put up candidates for the European elections. This is likely to be unpopular with Brexit supporters, however the window for finding an agreement before April 12th is pretty much closed which means that an extension is the most likely outcome.
The alternative is “no deal” with the EU throwing Ireland under the bus, but France won’t escape scot-free either. President Macron already has problems of his own and for all his tough talk he would be unwise to exacerbate the tensions with the gilet jaunes in trying to make a political point.
2. China Trade (Mar) 12/04
A rebound in the latest manufacturing PMI’s has raised expectations that the Chinese economy may well have hit bottom and has started to rebound.
In the February trade numbers China trade deteriorated quite sharply as exports declined 20% and imports by 5.7%. It should be remembered that these numbers would have been skewed by the Lunar New Year holiday which means that the March numbers could well see a significant rebound, in so doing introducing a skew the other way.
3. ECB rate decision – 10/04
At its most recent meeting the European Central Bank announced that it would be introducing a new TLTRO later this year over concerns that both growth and inflation were likely to come in below expectations.
Recent data would appear to suggest that this can’t come a moment too soon with recent data out of Germany and France in recession territory and core prices in the EU at 0.8%, just above a three-year low.
The reality is the ECB is already at the limits of what it can do from a monetary policy point of view, which suggests that rates are likely to remain at current levels, or lower for years to come.
4. Fed minutes (Mar) – 10/04
The biggest surprise to come out of last months Fed meeting wasn’t so much about the fact that policymakers said they would be patient on future rate rises, it was the dovishness of the overall message, so soon after the central bank raising rates again at the end of last year.
We’ve gone from the prospect of three rate rises this year, to no rate rises at all and the balance sheet run off to end by September, in the space of ten weeks.
The Fed also downgraded its growth forecasts for this year, and for all of those who were holding out for one more rate rise this year, those rather remote expectations have also gone, which would appear to shift the calculus to when can we expect to see a possible rate cut.
While the Fed may want to push back on such expectations, the reality is markets are already starting to price in the prospect. This makes the coming week’s minutes all the more instructive in the context of the tone of the debate, and how much consensus there was around the sharp turnaround in the central banks guidance.
5. JP Morgan Chase (NYSE:JPM) Q1 earnings – 12/04
JP Morgan’ share price has had an indifferent time of it since its September peaks last year, though it has had a decent run since its lows in December.
Banks across the board are finding it difficult to maximise returns in the current low rate environment. Trading in the first 3 months of this year has proved to be even more difficult, with inversion of the US yield curve prompting the bank to review its staffing levels in news out last month. With the bank missing profit estimates in its last quarter for the first time in 15 quarters, and the recent announcement of job cuts in its asset and wealth management divisions, this week could well see another disappointment.
Profits are expected to come in at $2.37c a share, which seems optimistic when set against the $2.20c a share analysts were expecting in Q4, and which came in much lower at $1.98c.
6. Wells Fargo (NYSE:WFC) Q1 earnings – 12/04
Wells Fargo’s performance is a much better guide to the US economy given its sensitivity to the ebb and flow of the US economy, as well as the housing market. This is one area which has struggled in the last 12 months, with the bank still under Fed scrutiny for previous indiscretions.
Its Q4 numbers were slightly better than expected, though this was mainly down to cost cutting measures. On all other measures revenues were lower across the board from mortgages, to business and consumer lending.
Profits are expected to come in below Q4’s $1.21c a share at $1.10c a share.
7. Tesco (LON:TSCO) FY19 – 10/04
It’s been a long road back but Tesco appears to be fending off the slow rise of Aldi and Lidl into its own market share of the food retail sector. It still remains by far the biggest player in UK food retail, and had a strong Christmas performance, coming out ahead of its peers. That said, the company is continuing to review its cost base with reports at the beginning of the year that it might look at cutting up to 15,000 jobs in its bakery and fresh food counters, as it looks to cut £1.5bn of costs.
New accounting rules are likely to see profits come in lower as rental charges on its leases get replaced by depreciation costs, however management have said that these higher costs won’t impact cash flow.
8. ASOS (LON:ASOS) H1 19 – 10/04
A surprise profit warning at the end of last year saw ASOS shares plunge sharply, losing nearly 40%, with the company blaming a weak performance in November sales growth. The company had previously predicted full-year sales growth of 20-25%, which was downgraded to 15%.
Profit margins were also sharply revised lower to 2% from 4%. Since that warning the shares have struggled to recover against a backdrop of weak consumer spending, and while the company posted a positive update last month the pace of growth does appear to have slowed.
Retail sales for the three months to the end of February rose by 11%, and while it looks set to meet its lower sales forecast from December this may well come at the expense of margins.
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