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The Week Ahead: BoC, RBA rate meetings; China trade; FirstGroup, BAT results

The Bank of Canada’s interest rate decision on Wednesday could give traders a sense of what to expect when neighbouring central bank, the US Federal Reserve, meets to discuss a possible rate rise one week later. On the other side of the world, the Reserve Bank of Australia could be set to raise the cost of borrowing again on Tuesday after its surprise rate hike in May. Meanwhile, cigarettes and alcohol are a minor theme of a quiet week for company results as British American Tobacco and Brown-Forman pull up a stool at the earnings bar. 

Our top three economic and company events in order of importance are:

1. Bank of Canada interest rate decision – Wednesday

Concerns over stubbornly high core inflation have raised the prospect of further interest rate hikes from central banks this month. In April the Bank of Canada held its key rate at 4.5% as policymakers looked to assess the impact of prior rate hikes on the Canadian economy. 

Canada’s economy appears to be holding up well. Although inflation edged higher in April, with the country’s consumer price index (CPI) rising 4.4% year-on-year, the labour market remains robust. The economy added 41,400 jobs in April, more than double market expectations and higher than the March tally of 34,700. Unemployment was steady at 5% in April, while average hourly earnings rose 5.2% year-on-year. 

All things considered, there is a chance that the BoC might raise rates by 25 basis points on Wednesday. Markets could interpret that as a leading indicator for what the Federal Reserve might do the week after. 

2. RBA interest rate decision – Tuesday

Last month the Reserve Bank of Australia surprised markets, unexpectedly raising its cash rate by 25 basis points to 3.85%. For quite some time, the Australian central bank has leaned towards the dovish side. In November it was the first central bank to signal a pause to rate hikes. However, it has faced criticism for being slow to spot the inflation surge that began in late-2021 and continued through 2022. 

The criticism may have stung. That’s one explanation for the hawkish pivot in May. But in becoming more hawkish, policymakers risk making a mistake. Tighten too hard and they could unsettle the housing market. The tone of the RBA’s statement last month was also more hawkish. It stated that more tightening could be required in June and beyond if inflation continues to run above target, with services prices singled out for remaining stubbornly high. 

This “stickiness” is manifesting itself in expectations of higher inflation among consumers. Inflation expectations increased to 5.2% in May, up from 4.6% in April, based on the Melbourne Institute consumer inflation expectations survey. 

3. FirstGroup full-year results – Thursday

The last few years have been challenging for FirstGroup. Lockdowns during the Covid-19 pandemic caused a sharp drop in revenue and profit. However, the UK-based transport company is slowly clawing its way back. In the second half of its latest financial year, which started from 24 September, its bus passenger volumes increased to 83% of pre-pandemic levels, while demand for its rail services during the same period was “stronger than anticipated” according to a company update issued on 10 March.

That said, the company was in the news for the wrong reasons in May as the UK government nationalised TransPennine Express, a train service previously operated by FirstGroup, after customer complaints about cancellations and delays. The ending of that contract isn’t expected to be reflected in the upcoming full-year numbers, though. Full-year revenue is expected to rise to £4.77bn, while pre-tax profit is expected to increase to £65m.

More key events

Our calendar of selected upcoming economic and company announcements:

MONDAY 5 JUNE

Services PMIs (May)

The recent flash purchasing managers’ index readings for services showed that economic activity in May remained resilient, particularly in Italy and Spain. Readings there were closer to the 60 level than 50. A reading above 50 indicates expansion. However, flooding in parts of southern Europe may prompt a bit of a slowdown over the coming weeks. 

In France and Germany, economic activity has slowed but remains robust. Meanwhile, the UK’s services PMI reading was 55.1 in May – the fourth successive month that the print has come in above 50 – despite three bank holidays during May. 

US services activity has also picked up after a dip in the wake of the banking crisis in March. 

Apple Worldwide Developers Conference

Starting on Monday and running until Friday, Apple’s Worldwide Developers Conference is an annual event at which the iPhone maker showcases its latest products, enhancements and services. This year, expectations are high for the launch of new MacBooks, including a new MacBook Air. New laptops might include the M2 chip, with M3-powered models coming later. 

The company is also expected to launch a new mixed reality headset called Apple Reality Pro, which is likely to have a hefty price tag. We’re also likely to get a variety of software enhancements including announcements of what might be coming in the new iOS 17. Additionally, there could be insights into the role Apple might play in the development of AI.

TUESDAY 6 JUNE

RBA interest rate decision

See our top three events, above

British American Tobacco Q2 results

Down by almost a quarter this year, shares of British American Tobacco slumped in May on the surprising news that Jack Bowles had stepped down as chief executive with immediate effect after only four years in the role. The lack of a commitment to further buybacks may also be weighing on recent share price performance.

Although the shares have slipped to their lowest levels since December 2021, the company has posted solid results of late. Full-year adjusted revenue grew 2.3% to £27.7bn, buoyed by increased sales of so-called next-generation products (NGP) including vapes and e-cigarettes, although BAT makes only about 14% of its revenue from this segment. The company’s “new category” revenue increased over 40% to £2.89bn. 

The company reiterated guidance that NGP revenue would reach £5bn by 2025, and it expressed optimism that it could meet its 3% to 5% currency growth targets as it looks to offload its Russian and Belarus businesses. 

WEDNESDAY 7 JUNE

Bank of Canada interest rate decision

See our top three events, above

China trade balance (May)

The rebound in China’s economy after Chinese New Year appears to be running into headwinds. Trade picked up in March, with exports from China soaring 14.8% versus a year earlier. However, recent inflation and consumption data suggest the recovery may have stalled. Factory gate prices continue to fall, while in April imports to China declined 7.9% year-on-year to around $205.2bn, although some of that decrease may be due to lower prices in certain areas rather than lower volumes. 

Also in April, growth in exports to China slowed to 8.5%, adding to the sense of a stuttering recovery. Manufacturing and services purchasing managers’ index readings have also pointed to a slowdown in economic activity. 

The upcoming trade figures are unlikely to ease slowdown concerns. Imports are expected to have fallen 8% year-on-year in May, and exports are expected to have slipped back into contraction territory with an estimated 2.1% year-on-year decline.

Brown-Forman Q4 results

Brown-Forman shares have fallen almost 5% this year, partly due to a disappointing set of Q3 results. The Jack Daniel’s maker reported Q3 revenue of $1.08bn as profits came in at $0.21 a share, below expectations of $0.54 a share. Operating margin more than halved from 33.5% to 15.9%, while the company also took a $27m charge on pensions. For the full year, the alcoholic beverage business said it expects to see high single-digit growth in operating income.

THURSDAY 8 JUNE

Eurozone Q1 GDP

Germany, Europe’s largest economy, slipped in to recession in Q1 after a second consecutive quarter of negative GDP growth. That increases the possibility of a eurozone recession this year, although better performances from the likes of France, Italy and Spain could help offset economic struggles elsewhere in the bloc. 

Estimates suggest that economic output in the eurozone during Q1 could show zero growth, down from a tiny 0.1% expansion in Q4. The lack of growth threatens to complicate the European Central Bank’s task when it comes to considering further rate hikes.

FirstGroup full-year results

See our top three events, above

DocuSign Q1 results

When DocuSign reported its full-year numbers back in March, the shares fell sharply as the company’s forward guidance underwhelmed investors. Since then, the stock has regained some of the lost ground, leaving it up almost 2% year to date at just under $58. 

For Q4 the company reported revenue of $659.6 million, up 14% year-on-year, and a profit of $0.65 a share, compared to a profit of $0.48 per share in the year-ago period. For the full year, profit grew to $2.03 a share, up from $1.98 in the previous year, on revenue of $2.51 billion, an increase of 20% year-on-year. 

However, there was disappointment at the weak guidance as the company forecast Q1 revenue of between $639m and $643m. On a full-year basis, the company expects to grow revenue to between $2.69bn and $2.7bn, despite competition from the likes of Microsoft. Profit for Q1 is expected to come in at $0.55 a share.

FuelCell Energy Q2 results

With renewable energy becoming more mainstream in the US and money flowing into the sector on the back of government tax-breaks, Nasdaq-listed FuelCell Energy – which makes fuel cells for power generation and transportation, among other uses – ought to be doing much better. The shares spiked to more than $26 in February 2021, but since then they have declined steadily to current levels of around $2.26 amid intense competition in the industry. 

Consensus estimates suggest that Q2 revenue grew 44.8% year-on-year to $23.7m, but loss per share is expected to be unchanged from the year-ago period at $0.08.

FRIDAY 9 JUNE

No major scheduled events

INDEX DIVIDEND SCHEDULE

Dividend payments from an index's constituent shares can affect your trading account. View this week's index dividend schedule.

SELECTED COMPANY RESULTS

MONDAY 5 JUNE RESULTS
Gitlab (US) Q1
Sprinklr (US) Q1
TUESDAY 6 JUNE RESULTS
Academy Sports & Outdoors (US) Q1
British American Tobacco (UK) Q2
Chemring Group (UK) Half-year
Ciena (US) Q2
Core & Main (US) Q1
Couchbase (US) Q1
Dave & Buster's Entertainment (US) Q1
Ferguson (US) Q3
Gooch & Housego (UK) Half-year
JM Smucker (US) Q4
N Brown Group (UK) Full-year
Paragon Banking Group (UK) Half-year
Speedy Hire (UK) Full-year
Thor Industries (US) Q3
Warehouse REIT (UK) Full-year
WEDNESDAY 7 JUNE RESULTS
Brown-Forman (US) Q4
Campbell Soup (US) Q3
DiscoverIE Group (UK) Full-year
Greif (US) Q2
LXI REIT (UK) Full-year
Residential Secure Income (UK) Half-year
Smartsheet (US) Q1
THURSDAY 8 JUNE RESULTS
Braze (US) Q1
Crest Nicholson Holdings (UK) Half-year
DocuSign (US) Q1
FirstGroup (UK) Full-year
FuelCell Energy (US) Q2
Mitie Group (UK) Full-year
Oil-Dri Corp of America (US) Q3
Planet Labs (US) Q1
RWS Holdings (UK) Half-year
Schroder Real Estate Investment (UK) Full-year
FRIDAY 9 JUNE  
No major scheduled announcements  

Note: While we check all dates carefully to ensure that they are correct at the time of writing, company announcements are subject to change.


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