Watch our week ahead video preview and read our pick of the top stories to look out for this week (31 August - 4 September).
David talks about the Fed’s change in inflation policy, Shinzo Abe’s resignation announcement, and the major events of the week ahead.
Zoom Video Communications Q2 results
Monday: While many companies have suffered during the coronavirus pandemic, Zoom hasn’t been one of them. The economic lockdowns have been a boon to this young upstart, which came to market just over a year ago at $36 a share with a valuation of $9bn. The biggest concern at the time was the technology was easily replicable, but unlike a lot of its IPO peers it was able to turn a profit, which made it company worth watching. This was helped by the fact that many of its competitors, including Webex, LogMeIn and Skype, were pretty mediocre. Last year revenues rose to $622.7m pushing the market cap up to an eye-wateringly high $44.3bn, as the share price rose above $180. In its most recent quarter, revenues rose to $328m with a prediction that they could rise to $1.8bn this year, almost double its previous estimate. Unsurprisingly investor enthusiasm for the company has risen exponentially, sending Zoom’s share price up 300% since the turn of the year, to within touching distance of $300, with a market cap of over $80bn.
While Zoom has done very well this year, questions do need to be asked as to whether the company is worth over $80bn. For a start Zoom’s success has prompted its competitors to up their game, so the fledgling company may have to work that much harder to stand still as time goes by. This could put the current valuation under slightly more scrutiny, as questions as to whether the price is sustainable are posed. Q2 profits are expected to come in at $0.45c a share.
Reserve Bank of Australia rate meeting
Tuesday: With Australian interest rates already at record lows of 0.25% there had been speculation that we could see more quantitative easing from the RBA, in the event the economic picture was to deteriorate further. Aside from the lockdowns and rising infection rates across the state of Victoria, the overall picture in Australia hasn’t been that bad, despite some evidence of a slowdown in the services sector in July. The impact of this was reflected in a slight rise in the unemployment rate which is already at 7.5%, its highest level since 1999, and is expected to move up to 9.25% by year end. Despite this rise in unemployment there has been little indication so far that the RBA appears inclined to do any more than it already has done to support the economy, while the lockdowns across Victoria appear to have had little impact on slowing the recent spread of the virus. This may change in the coming days given the recent rise in the Australian dollar, which is over 20% off the lows it set earlier this year in March, as it gets dragged higher by a weaker US dollar.
Barratt Developments full-year results
Wednesday: When Barratt released its pre-close trading update in July, the company painted a fairly positive picture for its full-year numbers, despite the shutdowns in April and May, and all sites were reopened by 30 June. Completions were down for the full-year from 17,856 in 2019 to 12,604 this year, largely down to the shutdown in the final quarter of the year. The full-year order book has remained strong, with forward sales well-ahead of last year’s 11,419 at 14,326, with a value of £3.25bn. Overall selling prices were more or less in line with last year’s levels, with the total selling price at £280k, only slightly above 2019’s £274.4k. The company also thanked the government for the support offered by the job retention scheme, and is planning to repay all the furlough money used to pay its employees.
Brown-Forman Q1 results
Wednesday: The Brown-Forman share price has recovered fairly well from the declines of the March sell-off, reaching new record highs earlier this month. At the end of last year, net sales came in flat on an underlying basis at $3.4bn, while operating income fell 5% to $1.1bn. Its US market saw the best performance with a net sales rise of 5%, while international and emerging markets acted as a drag, probably as a result of the various increases in tariffs, particularly in the context of EU/US trade relations. The company did pull its guidance, but said it still expected to be able to pay regular dividends despite the uncertainty around Covid-19. In July the company paid a quarterly cash dividend of $0.1743c a share, and said it expects to be able to continue to do so, keeping intact a record of pay outs dating back 75 years. Q1 profits are expected to come in at $0.30c a share.
US Beige Book economic report
Wednesday: The most recent Fed minutes showed that Fed members continue to have concerns about the overall direction of the US economy, particularly over impacts on the labour market. The last Beige Book indicated that while economic activity was improving in July, there was a mixed employment picture, with talk about job losses, particularly with weak demand in the services sector. There were also anecdotal reports of wage cuts and pay freezes across a variety of sectors, from manufacturing to agriculture to film and television, with a lot of temporary layoffs in these sectors likely to become permanent. This week’s Beige Book could see this trend continue in the wake of a virus rate that could keep economic activity subdued, and the US economy at well below its pre pandemic capacity for quite some time to come.
DocuSign Q2 results
Thursday: Another tech outperformer that’s shares have risen exponentially since the beginning of the year, up over 170%. The electronic signatures company’s revenues have risen sharply this year as new clients use this new technology to close contracts remotely. In Q1 the company saw revenue rise by 39% to $297m. In Q2 the company said it expects revenues to grow further, to $318m at its mid-point, while losses were steady at $0.46c a share. Since its Q1 numbers came out the shares have continued their rise, hitting new record highs at the beginning of August. The big question, as with all of these unicorns, is whether the company will be able to turn a profit, while also justifying a $39bn valuation on annual revenues of just over a $1bn. The company is expected to turn a quarterly profit of $0.08c a share, in what it hopes will be the first year the business turns a profit.
Global services PMIs (August)
Thursday: The recovery in services sector activity in August could have ground to a halt in Europe if the recent flash PMIs for Germany and France are any guide. This is a big concern, particularly for the weaker countries like Italy and Spain who rely so much on tourism in the summer months. The imposition of quarantines and other travel restrictions in August is likely to see the recent recoveries in those economies in July end in August. It hasn’t been all bad news, as the UK and US services numbers have continued to improve, while Chinese services activity has also held up fairly well.
The fear now, with the European recovery stalling and quarantines being imposed on holiday-makers across Europe, is that the European recovery slows right down, at a time when it appeared to be finally gaining traction. The various restrictions being imposed in Spain, as well as Italy, are likely to see similar sharp slowdowns, back into contraction territory, after the sharp drops in the flash PMIs in Germany and France. In the UK there appears to be slightly more optimism, though the UK recovery is slightly behind Europe’s. The UK showed a continuation of the improvements from July, and is expected to come in at 60.1, while France and Germany are expected to slow to 51.9 and 50.8 respectively. Spain and Italy’s July readings came in at 51.9 and 51.6 respectively, however they could struggle to get close to these in the August numbers.
Restaurant Group half-year results
Thursday: In June, Restaurant Group announced the closure of 125 sites as it attempted to restructure its business in the face of the challenges being wrought on it by the Covid-19 shutdowns. Most of the closures will affect its Frankie and Benny franchises, while its Wagamama brand has escaped more or less unscathed. These closures will mean that the company will be left with 160 restaurants, with the hope that further action can be avoided with a reduction in rents and other costs. Restaurant Group’s biggest problem has been that a lot of its restaurants have been in areas like cinemas and retail parks, where footfall has struggled to recover, with customers reluctant to return. The hope is that the Chancellor of the Exchequer’s 50%-off “Eat Out To Help Out” scheme introduced in August has provided the remainder of the business with a timely lift as the whole sector has been struggling to reopen. Anecdotal evidence suggests Wagamama restaurants have seen long queues between Monday and Wednesdays.
US Weekly jobless claims
Thursday: Concerns over a rise in weekly jobless claims in the wake of the ending of the $600 a week enhanced unemployment benefits package at the end of July appear to be starting to be realised. There was a sharp rise a couple of weeks ago with a 130k rise in weekly claims, which pushed the number from 963k to over the symbolic 1m mark at 1.1m. rise in claims, which pushed the number back over the symbolic 1m mark to 1.1m, from 963k. While last week saw a stabilisation at around 1m claims, the feeling is that in the absence of new fiscal stimulus measures from US politicians will start to see this number head back higher again. If this were to happen it could well concentrate minds on Capitol Hill, who appear to have become complacent to the risks facing the US labour market, in the face of new record highs for stock markets, as these same out of touch politicians go into full-on campaign mode.
US non-farm payrolls
Friday: The recovery in the US labour market seen in the July payrolls report turned out to be slightly more robust than expected. 1.76m jobs were added, despite concerns over rising infection rates prompting delays to reopening in a number of US states. Particularly notable in July was the number of jobs that came back in services like retail and restaurants, sectors that had been hit the hardest by the pandemic. In August’s report, attention should be paid to the underemployment rate, as well as the unemployment rate, given that a lot of US workers may have had their hours cut back. So far, a total of 9.2m jobs have returned since the record loss of 20.7m jobs in April, so there’s some way to go before the US economy is anywhere near close to a sustainable rebound in economic activity.
August’s payrolls report will also be important in as it will reflect the two weeks at the end of July when a host of US states re-imposed lockdown measures, during which the latest weekly jobless claims numbers edged back up again. Expectations are for another 1.7m jobs to be added, pushing the number of jobs clawed back since April up over 10m, still fewer than half of those that have been lost since March.
Index dividend schedule
Dividend payments from an index's constituent shares can affect your trading account. See this week's index dividend schedule
|Monday 31 August||Results|
|Zoom Video Communications (US)||Q2|
|Tuesday 1 September||Results|
|At Home Group (US)||Q2|
|STV Group (UK)||Half-year|
|Wednesday 2 September||Results|
|Barrat Developments (UK)||Full-year|
|Gym Group (UK)||Half-year|
|Thursday 3 September||Results|
|Barnes and Noble Education (US)||Q1|
|Designer Brands (US)||Q2|
|Foresight Solar Fund (UK)||Q2|
|Gem Diamonds (UK)||Half-year|
|Oxford Industries (US)||Q2|
|Restaurant Group (UK)||Half-year|
|Toro CO (US)||Q3|
|Friday 4 September||Results|
Company announcements are subject to change. All the events listed above were correct at the time of writing.
Find your flow: four principles for trading in the zone
Learn about the four trading principles of preparation, psychology, strategy, and intuition, and gain key trading insights from some of the world's top investors.Get this free report
Disclaimer: CMC Markets is an execution-only service 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. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.