Watch our week ahead video preview, read our pick of the top stories to look out for this week (12-16 August), and view our key company earnings schedule.
Chief market analyst, Michael Hewson, looks at the latest moves in the FTSE 100 and S&P 500, as well as looking ahead to the latest UK data after this week's weak Q2 GDP reading.
UK wages & unemployment (June)
Tuesday: Despite reports of job losses across a range of sectors, the unemployment rate has remained anchored near its lowest levels since the 1970s at 3.8%. In the aftermath of the Brexit extension in March, the UK economy has shown evidence of a marked slow down, but so far this doesn’t appear to have been reflected in the pace of wage increases. These have continued to pick up despite a weak economic backdrop. In May wages excluding bonuses rose by 3.6%, an eleven-year high, and have been rising steadily for the last two years. This looks set to be extended into June with a rise of 3.8%.
UK CPI (July)
Wednesday: In contrast to wages, headline CPI has been falling steadily for some time now, despite upward pressure on prices caused by a lower exchange rate. This decline in sterling could start to exert upward pressure on prices in the coming months, which might suggest that we have seen the low point for CPI earlier this year. Currently the Bank of England is meeting its inflation target of 2%. However, core prices are proving to be more stubborn, currently at 1.8%, and just above a two-year low of 1.7%.
China retail sales & industrial production (July)
Wednesday: In the last set of numbers for June we saw a decent rebound in both areas of the economy. This was welcome news given that it has been struggling for most of this year. The rebound in manufacturing appears to have been driven by infrastructure spend on railways and other related projects. Exports growth has still lagged. Retail sales also saw a rebound in June to a 13-month high of 9.8%, helped by heavy discounting on car sales, as well as Chinese consumers staying at home and spending more of their money locally. This is expected to slip back to 8.6%. With trade tensions now ramped up to elevated levels there is a risk that the rebound seen in June could slip back in July.
Balfour Beatty half-year results
Wednesday: The construction sector has been in the news for all the wrong reasons in recent months, however one company has been able to set itself apart from the carnage. Having avoided falling into Carillion’s clutches a few years ago, Balfour Beatty management realised early on that the business needed massive restructuring. In March this process received a further boost as the company posted a big jump in pre-tax profit to £123m, despite a 5% fall in revenues. The company’ s strategy in only focusing on “higher quality” has allowed the business to maintain a healthy margin in terms of the type of work it takes on, reducing the risk to its cash flow. That hasn’t prevented the share price falling back sharply in recent months to levels last seen in June 2016, as concerns about Brexit heap pressure on the entire sector.
Prudential half-year results
Wednesday: A lot of the growth seen in the past few years for this blue chip UK insurer has been driven by decent progression in both UK and Europe, as well as its Asia division. In March the company announced that it was looking to spin off its UK and Europe division into a separate company, M&G Prudential, and absorb the Hong Kong business into its Asia division. While there may have been sound business reasons for going down this route, not least to focus on the more profitable Asia region, the recent unrest in Hong Kong and slowdown across Asia may cause some investors to question the wisdom of such a move. This week’s first-half numbers should add extra colour to the timetable for the restructuring, and whether UK and Hong Kong regulators are actually minded to approve the separation of the businesses. The share price has seen heavy falls in recent days, due to concerns over the deteriorating economic backdrop in Asia.
Cisco Systems Q4 results
Wednesday: At its last quarterly update, Cisco posted profits of $0.77c a share, up 18% from the same period a year ago. Revenues also rose nicely, coming in at $13bn, with its security division sales helping drive the rise. The company was fairly sanguine about the effects of Chinese tariffs, saying that modifications to its supply chain would mitigate some of the negative effects. However, given recent events this could be a concern, as the economic outlook has deteriorated considerably since that statement was made. Profits are expected to come in at $0.81c a share on revenues of $13.35bn.
UK retail sales (July)
Thursday: Despite some weak retail spending numbers in April and May, the UK consumer bounced back in June. A strong rebound of 1% surprised a lot of people. This trend could see a continuation in July, particularly since hot weather tends to cause people tospend more. July was also a big month for major events, including Wimbledon, the cricket World Cup (which England won), as well as the British Grand Prix. Against that sort of backdrop, it would be a surprise if the rebound seen in consumer spending in June didn’t carry on into July, even if most estimates are suggesting that we see a decline of 0.2%.
Walmart Q2 results
Thursday: Walmart is one of the few US retail stocks that has managed to adapt to the presence of Amazon in the US retail space. They have also proved to be far-sighted enough to look overseas for growth, as shown by their $16bn acquisition of India’s Flipkart just over a year ago. At the end of Q1 the company reported a big jump in profits to $3.8bn, while revenue rose 1% to $123.9bn, slightly below expectations. On the other hand, the US business saw its best performance in nine years, however the company did warn it might have to raise prices if tariffs started to impact profit margins. Over the last three months US retail sales have continued to look positive, and with consumer confidence at decent levels expectations are high that we’ll see a similarly decent performance in Q2. The company is expected to see sales rise to $130bn and profits come in at $1.216.
Nvidia Q2 results
Thursday: Chipmakers have had a turbulent time of it in recent months. Only a few months ago the company issued a profit warning as a result of concerns about a slowdown in China, weaker gaming sales, and a slowdown in chip sales to bitcoin miners. In the lead up to its Q1 numbers, management warned that a weak macro outlook had the potential to act as a drag throughout the rest of the year. The company was able to beat expectations in Q1, despite a 31% fall in year-on-year revenue. For Q2, expectations are for revenues to come in at $2.55bn, which would still be 18% below the levels of a year ago. In terms of expectations for the share price, we’re not too far from where we started the year
Deere & Co Q3 results
Friday: Trade and tariff concerns are again a key factor for companies like Deere who make agricultural machinery for farmers. US farmers have found that markets for their products are much more limited in the wake of President Trump’s tariff attacks. In May the company warned that 2019 was likely to be a tough one, after reporting $10.3bn in Q2 numbers that missed expectations. As a result, the company cut its full-year forecast due to concerns over the effects that lower crop prices were likely to have on its margins. The ongoing trade spat with China has also hit US farmers’ profit potential, and that is likely to act as a headwind as well.
Index dividend schedule
Selected UK & US company announcements
|Monday 12 August||Results|
|Navigator Holdings (US)||Q2|
|Tuesday 13 August||Results|
|CLS Holdings (UK)||Half-year|
|John Menzies (UK)||Half-year|
|Wednesday 14 August||Results|
|Agilent Technologies (US)||Q3|
|Applied Industrial Technologie (US)||Q4|
|Balfour Beatty (UK)||Half-year|
|Cisco Systems (US)||Q4|
|Thursday 15 August||Results|
|JC Penney (US)||Q2|
|KAZ Minerals (UK)||Half-year|
|Friday 16 August||Results|
|Deere & Co (US)||Q3|
Company announcements are subject to change. All the events listed above were correct at the time of writing.