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The Week Ahead: US jobs; BoJ rate decision; Aviva, Darktrace results

A fresh US jobs report is due out on Friday, one month after the last update showed that US payrolls increased by 517,000 in January, smashing economists’ forecasts of 185,000 additional jobs. The coming week also brings interest rate decisions from the Bank of Canada and the Bank of Japan. On the company earnings front, insurer Aviva and cybersecurity firm Darktrace are set to reveal their latest results.  

Here’s our calendar of the key economic and company events in the week beginning 6 March:

Monday 6 March

No major scheduled events

Tuesday 7 March

China trade balance (February)

In the last two months of 2022, coronavirus restrictions and lockdowns continued to weigh on the Chinese economy. This was reflected not only in the trade numbers, but also in a sharp decline in consumer spending, with retail sales down sharply. In Q4 Chinese economic output stagnated, with GDP growth of 0%. That meant annual GDP growth came in at 3%. 

This week’s trade numbers for January and February, covering the Chinese New Year period, should reveal the extent to which the relaxation of restrictions unleashed pent-up demand. After imports and exports slumped 7.5% and 9.9%, respectively, year-on-year in December, the data for the first two months of 2023 may also provide insights into consumer confidence. A year ago, exports from China grew 16.3% year-on-year in January and February combined. 

Wednesday 8 March

Bank of Canada interest rate decision

At its last meeting in January the Bank of Canada raised interest rates by 0.25 percentage points to 4.5%. The central bank also signalled a pause to further rate hikes on the condition that inflation continues to fall. The BoC is not expected to announce any major changes to monetary policy at its upcoming meeting, but could issue hawkish guidance.

That’s because the decision to pause its tightening cycle may have been a little hasty. Headline CPI in Canada has fallen to 5.9%, but core prices still look sticky at 5%. Consumer spending has held up well in recent months, indicating a resilient economy, and January payrolls increased by 150,000 – versus consensus estimates of just 15,000 – with most new positions being full-time. The labour force participation rate also surged to 65.7%, a sharp rise from 65.4% a month earlier. 

Darktrace half-year results

In January Darktrace shares fell to a record low of just under 200p after management cut its recurring revenue growth forecasts for the full fiscal year to between 29.5% and 31%, down from a previous forecast of 31% to 34%. Management said they expect half-year revenue to come in at $258m, up 35.2% year-on-year, as the number of customers has risen by 10%, or 741 clients, to 8,178 since the end of the last fiscal year. 

Back in August the shares briefly spiked on reports that the company was in talks with US private equity firm Thoma Bravo. Since these talks ended, the shares have trended lower. Last month, activist investor Quintessential Capital Management expressed concerns over the validity of Darktrace’s financial statements and took a short position against the FTSE 250-listed firm.

Brown-Forman Q3 results

When Jack Daniels maker Brown-Forman released its Q2 numbers on 7 December, the company said it was on track for a “solid” year of growth. However, investors don’t appear to have swallowed that line as the shares have fallen roughly 5% since then. 

For the half-year, the company reported net sales of $2.1bn, up 11% mainly because of higher prices and strong growth in sales of Woodford Reserve bourbon and the company’s Tequila brands. However, gross margin fell 1.3% as costs increased. The strong US dollar and high inflation also weighed on profitability. Profit in Q3 is expected to come in at $0.46 a share, slightly down from $0.47 in Q2.

Thursday 9 March

Harbour Energy full-year results

The UK government’s windfall tax on energy companies has contributed to the Harbour Energy share price falling from highs of around 530p last April to a low of 270p in February. At around 294p, the shares remain narrowly above their record low of 260p set in 2020. The largely domestic producer accounts for 5% of UK gas output. Around 90% of its UK production comes from five key hubs, with the latest site to come on line being the Tolmount gas field in the North Sea, just off the coast of Bridlington in East Yorkshire. 

Thanks to higher gas prices, Harbour Eenrgy’s annual revenue is expected to rise to $5.4bn, up sharply from 2021’s figure of $3.48bn. But because of the extension to the windfall tax, the company said that it needs to set aside more than the $600m it set aside in the first half of the year. Full-year production is expected to come in at 208,000 barrels of oil equivalent per day, close to the top end of expectations, with a 50/50 split between oil and gas. 

Total capex for the year is set to be around $1bn, down from the previous estimate of $1.3bn due to the axing of several North Sea exploration and appraisal wells as the company reassess its investment in the North Sea. The company did not bid for the new round of UK oil and gas licences, resulting in job losses earlier this year. It’s hardly surprising that the company is rethinking its UK investment plans, given current government policy.

Guidance for 2023 is likely to see production forecasts lowered to between 185,000 and 200,000 barrels of oil equivalent per day. 

Aviva full-year results

The Aviva share price has been trading between 430p and 460p over the last three months after the insurance company posted its Q3 numbers in November. The general insurance business saw a 10.7% rise in gross written premiums from a year ago, turning over £7.2bn. The UK and Ireland life insurance business delivered a 46% rise in new business to £466m, though the wealth division’s assets under management fell to £7bn, down from £7.3bn a year ago. Aviva maintained its dividend guidance of 31p for the year just ended and 32.5p for the new year, suggesting that the company is performing in line with expectations. 

In January rival insurer Direct Line cut its dividend, citing higher claims costs due to the extremely hot weather in Britain last summer and the cold snap in December. Later, Aviva reported that it expected to record an extra £50m in costs due to the cold spell over winter.

DocuSign Q4 results

DocuSign shares are up by more than 50% since hitting a record low of $39.63 on 4 November. The Q3 numbers, which were released in December, showed that revenues and profits beat expectations, boosting investor sentiment towards the shares. Revenue in Q3 rose 18% to $645.5m while profit came in at $0.57 a share. The electronic signatures company also upgraded its full-year revenue guidance to between $2.49bn and $2.5bn. Gross margin improved during Q3 to 83%, up from from 80.6%. 

In response to concerns about margin pressures last year, the company announced plans to lay off 10% of its workforce, taking an impairment charge of $25m to $35m in Q1 of the next fiscal year. Profit in Q4 is expected to come in at $0.52 a share, though the main focus for shareholders is likely to be the outlook and how the company plans to grow over the next six to twelve months.

Friday 10 March

US non-farm payrolls (February)

The upside surprise in US payrolls a month ago proved to be a turning point. The US economy added 517,000 jobs in January, almost triple the consensus estimate of 185,000, raising the prospect of further interest rate hikes this year. The positive data contributed to a shift in investors’ perception of the strength of the US economy, shaking markets out of the complacency that had characterised sentiment and driven strong stock-market gains in early 2023.

US bond yields rose on the jobs report, and while equity markets have continued to cling to a narrative that further interest rate hikes are likely to be limited, the strength of economic data to be published since then has called that view into question. 

How quickly things can change. A month ago investors were betting that interest rates could be cut later this year. Now, the focus is on how many more rate hikes are coming. Friday’s payrolls report could help answer this question if it shows that the US labour market remained hot in February. 

Just to be clear, nobody expects a repeat of last month’s figure of 517,000, which could even be revised, but a February print of around 200,000 would still underline the strength of the US labour market. Wages will also be a focal point, as will the unemployment rate, which fell to 3.4% in January – its lowest level since 1969. 

In a sign that people are returning to the workforce, the participation rate rose to 62.4% in January, matching its highest level since the start of the pandemic. Job vacancy levels will also be a key benchmark given that the number of unfilled roles increased to over 11m in December. One would expect that vacancy levels dropped after that bumper hiring spree in January.  

Bank of Japan interest rate decision

With Kazuo Ueda set to replace Haruhiko Kuroda as governor of the Bank of Japan, much of the commentary on this changing of the guard has suggested that any policy tweaks are likely to come about gradually. The current policy of yield curve control may not change at all in the short term. 

That said, Friday’s meeting will be Kuroda’s last as governor, raising the possibility that he might seek to lay the groundwork for a shift in monetary policy under his successor in the coming months. Japan’s inflation rate is running at 4.3%, well above the central bank’s 2% target, and seems set to continue rising. It’s hard to imagine that the Bank of Japan would be happy for inflation to rise even higher, or for the yen to weaken against a strengthening US dollar. The central bank’s incoming leader may therefore look to pivot away from a decade of ultra-loose monetary policy, but change is unlikely to be abrupt. 

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 6 MARCH RESULTS
Craneware (UK) Half-year
Dave (US) Q4
Weight Watchers International (US) Q4
TUESDAY 7 MARCH RESULTS
Ashtead Group (UK) Q3
Barnes & Noble Education (US) Q3
Crowdstrike Holdings (US) Q4
Foxtons Group (UK) Full-year
Greggs (UK) Full-year
Keller Group (UK) Full-year
Petrofac (UK) Full-year
Reach (UK) Full-year
Squarespace (US) Full-year
WEDNESDAY 8 MARCH RESULTS
Admiral Group (UK) Full-year
Brown-Forman (US) Q3
Campbell Soup (US) Q2
Darktrace (UK) Half-year
Legal & General Group (UK) Full-year
Restaurant Group (UK) Full-year
Tullow Oil (UK) Full-year
THURSDAY 9 MARCH RESULTS
Allbirds (US) Q4
Aviva (UK) Full-year
Build-A-Bear Workshop (US) Q4
Del Monte Foods (US) Q3
DocuSign (US) Q4
Domino's Pizza Group (UK) Full-year
Endeavour Mining (UK) Q4
Entain (UK) Full-year
Gap (US) Q4
Harbour Energy (UK) Full-year
Informa (UK) Full-year
Kier Group (UK) Half-year
M&G (UK) Full-year
FRIDAY 10 MARCH RESULTS
Century Casinos (US) Q4
Robert Walters (UK) Full-year

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


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.

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