Watch our week ahead video preview, read our pick of the top stories to look out for this week (19-23 August), and view our key company earnings schedule.
Chief market analyst, Michael Hewson, looks ahead to the latest Federal Reserve minutes, the Jackson Hole Symposium, as well as upcoming French and German economic data, and the prospect of further central bank stimulus.
EU CPI (July)
Monday: European Central Bank monetary policy is already extraordinarily accommodative, and yet the outlook for inflation in the euro area has remained stubbornly low. Weak demand isn’t exactly helping, however structural issues are also weighing on inflation. Expectations are for headline CPI inflation to be confirmed at 1.3%, with core prices coming in at 1.1%. Given recent comments from Olli Rehn of the Bank of Finland, a weak reading will merely serve to heighten expectations around the ECB next month.
Persimmon half-year results
Tuesday: When Persimmon updated markets on its expectations for its first-half earnings at the beginning of July, it showed that operating margins were shrinking, along with revenue. The decline in revenue is expected to be in the region of 5.6% to £1.65bn, on the back of lower completion rates, while the company’s order book is also expected to show a decline from the same period a year ago, with a decline of 3.5%. It was also forced to apologise after complaints of shoddy standards and poor customer service were disclosed by Channel 4 on some of its new estates in Yorkshire.
Home Depot Q2 results
Tuesday: US retail sales have been mostly robust in recent months, along with fairly high levels of consumer confidence. Against that backdrop, you would expect retailers like Home Depot to perform fairly well. In 2018, the company posted record sales of $108.2bn, helped by a housing market that has seen interest rates head higher for 18 months. This continued in Q1, with the company posting strong revenue and profit. Home Depot maintained its guidance for this year, saying it expected to see both sales and earnings rise in excess of 3%. Any signs of a slowdown here could prompt concerns that higher prices might be starting to impact consumer spending.
Federal Reserve minutes (July)
Wednesday: Last month the US central bank announced its first cut in the Fed Funds rate since 2008, ending a period of rising interest rates which began in December 2015. The subsequent press conference from Jay Powell pointed to an FOMC split on how to react to the rises in trade tension, subdued inflation prospects, and an increasingly vocal US president, who wants to see faster reductions in headline rates, as well as an end to quantitative tightening. In the wake of the meeting, markets priced out the prospect of a September rate cut. Since then the debate has moved on, with markets now pricing in a 100% probability that the Fed will cut rates again next month. The reasons for this include President Trump ratcheting up the trade tensions with China, and further weakness in some US data. Given the level of dissent on last month's rate cut, this week's minutes are likely to be instructive in terms of the tone of disagreement, and what circumstances would prompt a shift in Fed thinking on the likelihood of a September move.
Target Q2 results
Wednesday: Target is another US retailer that can be a useful bellwether of the US economy. With Walmart beating expectations, can Target hit the mark? At the end of Q1, the company managed to beat market expectations comfortably. Revenue came in at $17.63bn, a rise of 5%, while same-store sales rose 4.8%, the eighth successive quarterly increase. This was helped by strong growth in digital e-commerce, which saw sales rise 42%. Target said it was confident about its guidance for the year, but this could change if the 10% tariffs that President Trump has announced on the remaining $300bn of Chinese goods come into effect on 1 September. Profit for Q2 ia expected to come in at $1.62c, compared to $1.53c in Q1.
France/Germany flash manufacturing and services PMIs (August)
Thursday: Not to put too fine a point on it, the most recent manufacturing numbers have been pretty poor, and the latest flash PMI numbers aren’t likely to show much of an improvement. August tends to be a quiet month anyway with factory shutdowns for maintenance and holidays. Manufacturing numbers are expected to be weak, so these shouldn’t be a surprise. So far services have held up fairly well, but there is a concern this may not last. Services activity in France and Germany expanded strongly in July, at 52.7 and 55.4 respectively, and this needs to continue to keep recession fears at bay.
Jackson Hole Symposium
Thursday: This year’s annual central bank symposium is likely to be topical in more ways than one. With central bankers under fire from various quarters, the topic is set to be centred around “challenges for monetary policy” in an environment of increasingly negative rates. At the beginning of this year, the challenge was about how to normalise policy, but that has now shifted to the topic of what other tools central bankers can come up with to deliver soft landings for those economies that are sitting on the cusp of outright stagnation, and in some cases recession.
Gap Q2 results
Thursday: It hasn’t been a good few weeks for the owner of Old Navy and Banana Republic. In May, the company announced the closure of 130 stores this year, as part of the 230 it intends to close over the next two. It’s also in the process of looking to divide the business in two, and focus more on the Old Navy brand where the majority of its profitability is derived from. In Q1, net sales were 4% lower than a year ago at $3.7bn, while gross profits were down 6% on lower margins. We can expect to get an update on how the business split is coming along. Profits are expected to come in at $0.53c a share, while the guidance is also likely to be important given the recent escalation in the trade war, and the possible impact on margins as new tariffs come in.
Canada retail sales (July)
Friday: The last payroll numbers showed that the unemployment rate unexpectedly rose in July, and the economy shed jobs. While disappointing, the Canadian economy has looked fairly robust in recent months, with retail sales looking strong despite a weak performance in June, after four months of gains. On the plus side, wages grew strongly in July, suggesting that the labour market is tightening up and that the June number was merely a blip. Another negative number in July would increase the prospect that the Bank of Canada might look at cutting rates at its next meeting.
Index dividend schedule
Selected UK & US company announcements
|Monday 19 August||Results|
|Estee Lauder (US)||Q4|
|Tuesday 20 August||Results|
|Empiric Student Property (UK)||Half-year|
|Home Depot (US)||Q2|
|John Wood (UK)||Half-year|
|TJX Cos (US)||Q2|
|Toll Brothers (US)||Q3|
|Wednesday 21 August||Results|
|Hansteen Holdings (UK)||Half-year|
|Keysight Technologies (US)||Q3|
|OneSavings Bank (UK)||Half-year|
|Thursday 22 August||Results|
|Anglo Pacific (UK)||Half-year|
|Citi Trends (US)||Q2|
|Dick's Sporting Goods (US)||Q2|
|Hormel Foods (US)||Q3|
|John Laing (UK)||Half-year|
|Premier Oil (UK)||Half-year|
|Ross Stores (US)||Q2|
|Friday 23 August||Results|
|Foot Locker (US)||Q2|
Company announcements are subject to change. All the events listed above were correct at the time of writing.
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