Watch our week ahead video preview, read our pick of the top stories to look out for this week (23-27 November), and view our key company earnings schedule.
This week, Michael looks at equity market moves in the context of more positive vaccine news, and previews the latest UK spending review, Fed minutes and latest flash PMIs, as well as looking at the key levels on a range of markets including FTSE 100, DAX, S&P 500, EUR/USD, GBP/USD and gold.
Daily Mail and General Trust full-year results
Monday: When the Daily Mail and General Trust reported its numbers for the nine months to June, the company said profits would be 44% lower as the Covid-19 lockdown prevented people from going out to buy a newspaper. This prompted a sharp drop in advertising, which in turn led to revenues declining 7% to £934m. This was a rapid turnaround from the end of February, when group revenues were reported as being up by 3%.
The company, which also owns the Metro and the I papers, was slightly more optimistic when it published its pre-close update in October, after a strong rebound in September's advertising. However revenues and profits are still expected to be much lower than a year ago. Full-year revenues are expected to be either side of £1.21bn, a decline of 6.5% from last year, with an adjusted operating profit of between £85m to £90m.
Germany, France manufacturing & services flash PMIs (November)
Monday: There has been increasing evidence in the past few months that the summer rebound in France and Germany has run its course. The most recent October PMIs painted a mixed picture for the German economy, with services slipping back into contraction territory of 49.5, while manufacturing moved higher to 58.2 - its best levels since March 2018. November is likely to be a different story given the limited lockdowns imposed across the country.
In France it’s been a similar picture, with services remaining weak, slowing to 46.5 from 57.3 in July, as rising infection rates prompted localised lockdowns and restrictions were imposed across the country. As we start out into Q4, it is clear that the recovery in the wake of the contractions in Q2 has been a robust one. However, the deterioration in recent services PMIs is increasing concerns over an economic cliff edge, as we head towards the chill of a European winter. On the plus side, manufacturing has been a strong performer for both Germany and France, helping to offset some of the slowdown of other parts of their economies.
UK manufacturing & services flash PMIs (November)
Monday: The UK economy has proved to be resilient, though that is probably down to having come out of lockdown later, as well as the impact of 'Eat Out to Help Out' in August. No-deal Brexit concerns notwithstanding, the UK economy has continued to perform well in its post-lockdown period, and after August’s outperformance, some decent numbers were posted across the board in September. In the same month, services activity slowed modestly to 56.1, while manufacturing came in at 54.1, showing that the UK economy performed extremely well in Q3. This was always unlikely to continue in Q4 and the October numbers reflected that, with a slowdown to 53.7 and 51.4 respectively, as localised restrictions impaired economic activity. November numbers are set to show further weakness, with the services sector set to bear the brunt as a result of the England-wide lockdown that came into effect on 5 November.
AO World half-year results
Tuesday: It’s universally acknowledged that online retail has been one of the big winners in the economic lockdowns faced by UK consumers. This is perfectly illustrated in the performance of AO World’s share price this year, with the shares up over 300% year to date. Results for the year ended 31 March showed a tiny pre-tax profit of £1.5m. Since then the outlook has changed markedly, with expectations for these numbers to explode higher in 2021 to £36.6m, and £43.6m in 2022. Total half-year revenues are expected to show a rise of 57% to £715m, due to strong demand in its UK and Germany markets, as people spent money on new washing machines, fridges, cookers and TVs.
Best Buy Q3 results
Tuesday: Yet another US retailer that has managed to ride out some of the worst of the coronavirus shutdowns, with its shares also at record highs earlier this month. Best Buy revenues slipped back in Q1 as a result of the store shutdowns, however a 154.4% rise in online sales helped offset a lot of that slowdown. In Q2, online sales rose 242% from a year ago, while same-store sales also rebounded 5.8%, as lockdown restrictions were lifted. Revenues came in at $9.91bn in the second quarter, while profits blew away expectations, coming in at $1.71 a share. The bulk of sales came from electrical items, from computers to kitchen goods, though Q3 sales and revenues could struggle to meet the Q2 levels. As we look ahead to the Q3 numbers, we can probably assume that costs are likely to be higher due to staff safeguarding measures, with profits expected to come in at $1.64 a share.
Compass Group full-year results
Tuesday: When Compass outlined its latest Q4 numbers, the share price dropped back sharply at the end of September, as revenues fell by 36%, only a slight improvement from the -44% of Q3. The company also said it would have to take impairments to the tune of £100m. This is expected to translate into full-year organic revenues showing a decline of 19%. The gradual reopening of schools across Europe and the US has helped revenues rebound in the short term, however the sports and leisure part of the business has continued to struggle largely due to the fact that those industries have had to remain closed. Recent lockdown measures across Europe won’t have helped either, however the recent rebound in the share price suggests that some think the hard yards are in the rear-view mirror. With governments seemingly determined to keep schools open, this view may well be correct, and should help limit some of the cash burn in the short term, with total liquidity at around £5bn as of financial year end.
HP Q4 results
Tuesday: The shift to working from home in the wake of the coronavirus pandemic has precipitated a big shift in demand in recent months. HP struggled to adapt to this change in its Q2 numbers, due to manufacturing and supply chain hold-ups. While the company's notebook and PC sales were solid, peripheral sales have struggled. Printing revenues specifically have suffered over the last two quarters, due to office closures. In Q3, printing revenues were down 20% to $3.9bn, which caused total revenues to fall 2.1% to $14.3bn, slightly better than the $12.5bn in Q2. HP still has a strong position in terms of the global market for PC sales, as it accounts for 21.8% of it, but it's under pressure from some of its more nimble and cheaper peers, like Lenovo. The best sellers in Q3 were notebooks, with a 32% rise in sales, while desktop sales declined 30%. Q4 expectations are for EPS to come in at $0.52, which would be in line with Q3’s numbers.
US consumer confidence (November)
Tuesday: The strong rebound in retail sales since the US came out of lockdown has been surprising to say the least. There’s been a V-shaped recovery when it comes to retail spending, while consumer confidence also rebounded strongly in September after a weak August, and has managed to maintain that into October. This has come about despite a rise in uncertainty ahead of the recent US presidential election, and the lapsing of the $600 weekly payment that went to US households up to the end of July. Tuesday’s November consumer confidence numbers are expected to remain resilient, coming in at 101.5, as the US economy gears up for the Thanksgiving break this week. Concerns remain about rising infection and hospitalisation rates across various US states, not to mention the recent Chicago lockdown announced by the city's Mayor Lori Lightfoot.
Deere & Co Q4 results
Wednesday: In August, US agricultural equipment company Deere & Co reported Q3 revenues and profits that came in ahead of expectations, while also raising its full-year guidance. In Q2, management said they expected global sales to fall by up to 30% to 40% in Q3, despite beating revenue expectations in Q2. While revenues did beat expectations, this was mainly because of the varied measures the company took to cut costs, which has included the laying-off of hundreds of workers, replacing higher-paid more experienced workers with younger and lower-skilled employees. Since the Q2 numbers in May, the US economy has continued to open up, helping to pull the Deere share price solidly up from the March lows, and trading at record highs earlier in November. With over 50% of its business based in the US, the strong rebound in the US economy has certainly helped, with profits expected to come in at $1.30 a share.
US FOMC minutes
Wednesday: At its post-US election rate meeting the Federal Reserve was still a hostage to events. There was little visibility as to who would be in the White House come January, as well as the timing of any new fiscal stimulus plan. Unsurprisingly the central bank chose to keep a low profile, merely content to re-stipulate the need for further fiscal measures from US policymakers. One thing they did do, prior to the election, was lower the minimum loan size of its Main Street Lending Programme to $100,000, from $250,000, in order to catch more of the smaller businesses which ran the risk of falling through the cracks.
It was notable that Fed chair, Jay Powell, was committed to the central bank doing more to support the economy, but he was also insistent that US policymakers needed to do more as soon as practically possible. The Fed decision was unanimous on this occasion, unlike in September where there was some dissent over the new approach towards inflation. Whatever new fiscal measures are agreed, the US central bank will still be at the forefront of not only the US policy response, but also the global policy response in the weeks and months ahead. The minutes on Wednesday may offer further insight into what other monetary policy discussions took place, and what else could be coming down the pipeline.
US personal spending & final Q3 GDP
Wednesday: US personal spending has rebounded strongly in the last five months, after big declines in March and April. This rebound looks set to continue with another positive number, albeit at a slower rate of 0.7%, as we head towards the Thanksgiving holiday period. This has come about despite patchy income data, which suggests that US consumers are dipping into their savings, a situation which is unlikely to continue indefinitely, in the absence of further fiscal support from the US government. On the US economy, the most recent Q3 GDP data looks set to be revised up to 33.2%, helping to further reverse the 31.4% decline in Q2. The 40.7% rebound in personal consumption was the key driver behind that economic rebound, and any upward revision to this week’s data is likely to come from that area. There are big questions over whether that is sustainable as we head into Q4.
UK spending review
Wednesday: The recent extension of the furlough scheme until March next year was the first acknowledgment by the UK government that it needed a change to the somewhat piecemeal approach in supporting the UK economy. The late change of heart regarding the extension of furlough, while largely welcomed, came too late to save some jobs which might have been kept if action had come sooner.
With speculation mounting that the government is trying to identify areas where taxes could go up, in order to start limiting the rise in current debt levels, there is concern that outlining a series of measures so soon, before a viable exit strategy has been identified, could prompt some businesses to rein back their investment plans in 2021. This week’s one-year spending review will look at budgets for the next 12 months, perhaps fleshing out last week’s announcement by the prime minister of a green revolution, covering key areas like energy, infrastructure as well as the NHS, education and other public services, particularly in the hardest hit parts of the UK.
Aviva Q3 results
Thursday: When Aviva reported its half-year numbers in August, profits fell 11%, as insurance claims rose by £165m, dragging operating profits down to £1.2bn. Having suspended the dividend in April, the company announced an interim payment of 6p a share. The firm’s asset management arm, Aviva Investors, took a sizeable hit as profits fell over 40% to £35m, however the recent improvements in financial markets could see some of this clawed back in Q3. New CEO Amanda Blanc has certainly taken over at a very challenging time, but has said that the main focus of the business going forward will be on the company’s core markets of the UK, Ireland and Canada. This suggests that there could be plans to dispose of the businesses in France, Italy and Singapore, as the company looks to reduce its debt, and improve cash levels.
Index dividend schedule
Dividend payments from an index's constituent shares can affect your trading account. See this week's index dividend schedule
Selected UK & US company announcements
|Monday 23 November||Results|
|Daily Mail and General Trust (UK)||Full-year|
|Urban Outfitters (US)||Q3|
|Tuesday 22 November||Results|
|Abercrombie & Fitch (US)||Q3|
|AO World (UK)||Half-year|
|Best Buy (US)||Q3|
|Compass Group (UK)||Full-year|
|Dell Technologies (US)||Q3|
|Dick's Sporting Goods (US)||Q3|
|Pets at Home (UK)||Half-year|
|Wednesday 25 November||Results|
|Deere & Co (US)||Q4|
|Melrose Industries (UK)||Q3|
|United Utilities (UK)||Half-year|
|Virgin Money (UK)||Full-year|
|Thursday 26 November||Results|
|Friday 27 November||Results|
Company announcements are subject to change. All the events listed above were correct at the time of writing.