Watch our week ahead video preview (above), read our top 12 stories to look out for this week (13-17 May), and view our key company earnings schedule.
Chief Market Analyst Michael Hewson looks back at this week’s declines in equity markets and asks if there more to come. He also looks ahead to the upcoming week’s key economic announcements, and key levels on US 30, S&P 500, DAX, FTSE 100 and GBP/USD.
UK wages & unemployment
Tuesday: The recent Brexit extension appears to have given the UK economy an April lift in terms of consumer spending. This is down to unemployment being at 40-year lows, and wages outstripping inflation by more than 1%. We could see some evidence of an uptick in inflation in the April numbers, though we won’t find out until next week. Tuesday’s March data is expected to show wage growth at 3.4%, and unemployment remaining steady at 3.9%.
Vodafone full-year results
Tuesday: Vodafone shares have been having a tough time recently, struggling with lower margins and falling revenue across its geographical divisions. Earlier this year, the shares hit their lowest levels since May 2010. Moreover, in the last 12 months the shares have seen some big falls, driven by concerns about the size of the company’s debt, as well as future costs with 5G licences coming up for bidding. Vodafone has also found competition fierce in most of its markets, in particular Italy and Spain, while its takeover of large parts of Liberty Global has come under scrutiny. This has prompted the company to open up its network to competitors in order to alleviate competition concerns, the latest being a cable agreement to allow Telefonica Deutschland to offer high-speed broadband services on their network in Germany. On the other side of the world, the company suffered a setback after the Australian regulator blocked its merger with TPG Telecom.
China retail sales & industrial production (April)
Wednesday: Last week’s China trade numbers for April suggested that the Chinese economy continues to face challenges of weak domestic demand. With the US keeping up the pressure on the trade front, April’s retail sales and industrial production numbers need to maintain the rebound we saw in March. Industrial production in particular rebounded strongly, from 5.3% in February to 8.5% in March, a four-and-a-half-year high, though this might partly be down to a catch-up after the lunar new year holiday. As a result, activity in April could have slipped back a touch, while the improvement in retail sales may also have been tempered after rebounding to a six-month high in March.
British Land full-year results
Wednesday: It’s been a tough environment for the retail sector across the UK, and nowhere has that been more keenly felt than in commercial retail estate. The sector has seen its margins battered as retailers struggle to maintain profitability against a backdrop of discerning consumers and the growth in online retail. Earlier this month, Intu Properties warned that rental income is likely to fall by between 4% and 6%. The likes of Debenhams and House of Fraser can testify to the option of closing stores or looking for lower rents to offset a drop in footfall, and this is something that Intu appears to have woken up to. British Land has already sold off its stake in 12 Sainsbury’s superstores for £429m, as it looks to mitigate the fall in revenue and profit in the first half of this year.
US retail sales (April)
Wednesday: US consumer spending has been patchy for some time now, exploding one month and then slowing the next. Q1 activity was positive by and large, mostly due to a strong performance in March of 1.6%. Whether this spills over into April remains an open question, but the labour market continues to look robust while wages are still growing at a healthy clip above inflation, suggesting limited scope for disappointment in Q2.
Thursday: This week’s EU summit in Brussels is likely to be a low-key affair ahead of the European elections. It’s also expected to be a Brexit-free zone, allowing EU leaders to focus on areas that have taken second place to the Brexit negotiations. The summit is likely to entail a statement which agrees to a range of goals, but will probably struggle to amount to anything tangible, given the widespread disagreements about what should be in the EU’s remit, and what shouldn’t.
Burberry Group full-year results
Thursday: Burberry has had its fair share of ups and downs in the past few years, however, new CEO Marco Gobbetti appears to be on the right track, if the second half of this year is anywhere near as positive as the company’s first-half update. Back in November, Burberry’s net profit rose 42% on the back of lower costs, as well as optimism that new chief creative officer Riccardo Tisci’s debut at London Fashion Week would result in the company meeting its earnings targets for the full year. Its main competitors LVMH and Hermes have left the British fashion house lagging behind, as their shares hit record highs, so Burberry has some catching up to do.
Thomas Cook half-year results
Thursday: The holiday retail sector has struggled in the first half of this year, hindered by Brexit uncertainty, which prompted most consumers to delay overseas holiday commitments. It’s also been a tough year for Thomas Cook, whose shares are down over 80% in the last 12 months following two profit warnings and concerns that the business may have to raise more money from shareholders. Last summer’s hot weather and England’s World Cup outperformance hammered the package holiday sector. The shares have recovered a little in the past few days following reports that Lufthansa might bid for its German airline, Condor. It may also have benefited from an April lift in the wake of the October Brexit extension, which saw UK consumers rush to make some late summer bookings.
Pinterest Q1 results
Thursday: Having seen its IPO surge out of the blocks this week, the Q1 results will show how well management are doing with respect to making the business profitable on a sustainable basis. Currently valued at over $15bn and trading at a premium to its IPO price, like most unicorns it is yet to make a profit. But its losses are dropping, falling from $182m in 2016 to $63m last year, on revenue of $750m. The biggest concern remains around Pinterest’s ability to expand its user base beyond its core audience, which is 80% women. This would involve the company expanding its appeal to a much broader demographic, without alienating the existing core user base. Thursday’s Q1 update will be impacted by post-IPO costs, but progress on reducing overall losses and expanding revenue will be of particular interest.
Walmart Q1 results
Thursday: One of the few US retailers that has been able to take the fight to Amazon, recent sales figures have shown that Walmart has continued to outperform its peers, while also taking steps to expand into new markets. The acquisition of India’s biggest online store Flipkart for $16bn a year ago has seen it take on Amazon, and while there have been some teething problems, the long-term potential remains enormous. Despite this, there is a sense that Walmart’s share price may be getting slightly ahead of itself. Expectations are for profit of $1.02c a share, a decline from $1.41c at the end of Q4. However, Q4 tends to be a strong quarter due to Thanksgiving and Christmas, with food sales helping to boost revenue. Guidance for 2020 was kept unchanged in the company’s last update, with e-commerce sales growth of 35% over the year. Operating income is expected to decline by around 10% in Q1, and continue to do so in Q2 and Q3, before recovering in Q4.
NVidia Q1 results
Thursday: Chipmakers have had a difficult last few months, with NVidia shares plunging sharply from the record peaks in October last year. Battered on one side over concerns about tariffs, NVidia has also been hurt by the slide in cryptocurrencies. While the company was able to meet expectations for its Q4 numbers, management were keen to warn that continued weak China demand and a poor macro outlook are likely to act as a drag through the new fiscal year. With bellwether chipmaker Intel guided lower in recent weeks, NVidia’s update could offer the potential for a surprise given the low bar being set. Profit is expected to come in at $0.80c a share.
Friday: Avantor is a chemical company that was acquired by private equity company New Mountain Capital in 2010 from Covidien. It's looking to raise over $2bn, though that will depend on the IPO price it gets. The company provides services and products in education, healthcare and biopharma, and while it appears to have seen decent revenue growth ($5.8bn in 2018, largely due to acquisitions) it hasn’t made a profit in the last three years.
Index dividend schedule
Dividend payments from an index's constituent shares can affect your trading account. See this week's index dividend schedule
Selected UK & US company announcements
|Monday 13 May||Results|
|Gladstone Investment (US)||Q4|
|I3 Verticals (US)||Q2|
|Legg Mason (US)||Q4|
|Navigator Holdings (US)||Q1|
|Take-Two Interactive Software (US)||Q4|
|Tuesday 14 May||Results|
|Agilent Technologies (US)||Q2|
|Container Store Group (US)||Q4|
|CorePoint Lodging (US)||Q1|
|EI Group (UK)||Half-year|
|Land Securities Group (UK)||Full-year|
|New Relic (US)||Q4|
|Ralph Lauren (US)||Q4|
|Wednesday 15 May||Results|
|Brewin Dolphin (UK)||Half-year|
|British Land (UK)||Full-year|
|Cisco Systems (US)||Q3|
|Compass Group (UK)||Half-year|
|Flowers Foods (US)||Q1|
|New Fortress Energy (US)||Q1|
|Rubius Therapeutics (US)||Q1|
|Sanderson Group (UK)||Half-year|
|Thursday 16 May||Results|
|Apollo Investment (US)||Q4|
|Burberry Group (UK)||Full-year|
|Eagle Materials (US)||Q4|
|Euromoney Institutional (UK)||Half-year|
|Investec Bank (UK)||Full-year|
|National Grid (UK)||Full-year|
|Sophos Group (UK)||Full-year|
|Thomas Cook (UK)||Half-year|
|Friday 17 May||Results|
|Sage Group (UK)||Half-year|