Watch our week ahead video preview, read our pick of the top stories to look out for this week (4-8 May), and view our key company earnings schedule.
UK chief market analyst, Michael Hewson, looks back at the best month for the S&P 500 since 1987, as well as ahead to the latest US jobs report, services PMIs and earnings announcements from IHG, BT Group, Disney and Uber. He also looks at the key levels on FTSE 100, S&P 500, DAX, GBP/USD and EUR/GBP.
Global manufacturing purchasing manager indices (May)
Monday: The slide in manufacturing activity has been slightly more manageable than the services sector, which has borne the brunt of the hit to economic activity in the last few weeks. Nonetheless, manufacturing activity is still expected to remain weak, particularly since most countries have been in lockdown throughout April. China PMIs did rebound in March, and the hope is that this is sustained into April.
Reserve Bank of Australia rate decision
Tuesday: In recent comments, RBA governor Philip Lowe warned that the economy would shrink 10% in the first half of 2020, as the country goes into its first recession in 30 years. The RBA also expects unemployment to hit 10% by June, with the outlook set to remain gloomy for the rest of 2020. It’s likely to be the worst economic outcome since the 1930s, as consumers hold back on spending against an uncertain economic and employment outlook.
Disney Q2 FY20 results
Tuesday: The success of new streaming service Disney+ with over 50m subscriptions in the first few months, plus the UK launch on 24 March, is likely to have prompted a big uptake in revenue, assuming subscribers stumped up the cash after the 7-day free trial. Disney’s biggest problem is around the closure of its theme parks, movie productions and the length of time it may have to wait until it can reopen and restart. Even then footfall is likely to be much lower, as consumers avoid large-scale events in crowded places. Disney+ is unlikely to fill the gap given the small margins and the fact that it’s also one of the cheapest providers, while the content is quite limited. Any subscription boost from the lockdown is likely to be fairly short-lived, as Netflix indicated in a recent earnings announcement. Expectations are for revenue to come in at $17.5bn, with profit of $0.91 a share. The revenue number in particular seems optimistic, given it’s much higher than the $14.9bn this time last year when all of its businesses were up and running.
ITV Q1 FY20 results
Wednesday: The decline in ITV’s share price from the December peaks undoubtedly speaks to investors who are concerned about the collapse in advertising revenue, as well as the suspension of sporting events, which the broadcaster relies upon to make a lot of its money. On the plus side, ITV Studios has helped cushion the worst effects of the slowdown in its advertising business. At its last set of numbers, ITV Studios contributed £1.82bn in total revenue, which helped boost profit by 5% to £267m, though the recent shutdowns in production could hit its output timetable and revenue in the short term. The company is still looking to rollout BritBox, with the addition of Channel 4 content in Q2 and Film 4 in Q3, as well as uploading the app on to Freeview Play, and YouView delivery systems by the end of Q2. In the outlook for 2020, CEO Carolyn McCall expected advertising revenue to rise by 2% in Q1, despite early indications of a big drop in April due to coronavirus disruption, which caused some major advertisers to pull their output.
Global services purchasing manager indices (May)
Wednesday: Global services PMI data isn’t expected to be particularly positive given the flash readings seen a couple of weeks ago. Record lows for Germany, France and Italy pointed to sharp economic contractions heading into Q2, and while we are now seeing evidence of a relaxation of lockdown measures, it’s unlikely that we’ll see a big rebound in economic activity in the months ahead.
Peloton Q3 FY20 results
Wednesday: One of many overhyped initial public offerings (IPOs) last year, Peloton priced at $29 a share, valuing the business at $8.1bn. This was on the premise that punters would pay over $2,000 a pop for a branded indoor exercise bike, and then $40 a month subscription fee, with the company streaming exercise classes to the user. At the time, selling this as a sustainable business might have been a tall order, but times have changed since then. An economic lockdown which closed gyms appears to have prompted a surge of interest, with over 20,000 attending one of its streaming classes in April. If this surge in interest is replicated in the sale of its bikes, then Peloton could be on course to meet expectations in doubling revenue to $2.1bn by the end of 2021.
BT Group full-year FY20 results
Thursday: When BT updated the market in January, its Q3 numbers showed an adjusted revenue decline of 3% to £5.8bn, while profit fell 4% to £2bn. Among a number of reasons for the decline in profit was higher spending, after BT Sport secured exclusive rights to screen the UEFA Champions League until 2024, along with the rights to other European leagues. Revenue also declined across its enterprise business as customers made less use of fixed phone lines. Its Openreach division remains the jewel in the crown, as revenue rose 2% in Q3 to £1.3bn. BT’s biggest problem going forward is how much it will cost to roll out fibre broadband to 4m premises by 2021, as well as how it will finance the £500m it will cost to roll out 5G, without cutting its dividend or increasing debt levels substantially. Underlying net debt has already risen £1.1bn from the beginning of the year and is now at £18.2bn, due to higher capex, pension contributions and dividend payments. Will BT become the latest FTSE 100 company to take an axe to its payout in these uncertain times?
Bank of England rate decision
Thursday: This week’s Bank of England meeting will be new governor Andrew Bailey’s first in the hot seat, as he and the monetary policy committee cast their eye over the wreckage of the UK economy in the wake of the Covid-19 crisis. The central bank has already made it quite clear it will do whatever it takes to help the UK economy through the current crisis, working with the UK treasury and government to smooth out any potholes that might come the government’s way in the months ahead. With the UK’s base rate already at a record low of 0.1% nobody is expecting any more cuts, but that’s not to say the central bank won’t go further in the range of assets it looks to purchase.
InterContinental Hotels Q1 FY20 results
Thursday: Having secured new financing arrangements to strengthen its financial position, Holiday Inn and Crowne Plaza owner IHG says that it expects to report that Q1 revenue per room will fall 25%, with 55% of that decline taking place in March due to the various lockdowns across Europe and the US. The Greater China region is expected to show a continued improvement, as China recovers from its own lockdown, with most hotels there now reopened. While only about 10% of its US hotels are closed, occupancy rates are likely to be well below the norm.
Uber Technologies Q1 FY20 results
Thursday: One of the biggest losers on the IPO front last year could have been one of the major winners from the lockdown, if only its Uber Eats business was able to contribute more in terms of overall revenue. Sadly, the delivery business is a much smaller proportion of Uber’s revenue stream than its taxi business, which has seen a big hit to its revenue as a result of the global economic lockdowns. Having launched all the way up near the $45 a share level at its IPO in the middle of last year, the shares hit a low of $14 in mid-March, just after the company announced an $8.5bn loss for 2019, sending a painful message to investors. At the end of February, the company said it was optimistic of making a profit by the end of 2020, however that was before the full effect of Covid-19 was known. The company is now confronted with the reality that its business model lies in tatters, with bookings down 80% from a year ago. Uber drivers have been helping out with transporting medical staff with a pilot programme being launched in the UK, with a view to getting NHS staff to where they need to be, as well as helping with other logistical programmes. One thing seems certain: Uber is likely to remain some way from being profitable in the short term.
US employment report (April)
Friday: The rise in weekly jobless claims over the past few weeks is a fairly decent leading indicator into how bad this latest US employment report is likely to be. Expectations are for 20m jobs to be lost, though it’s quite likely the number could come in well above that, closer to 22m. The unemployment rate is also set to surge from 4.4% in March, when 701,000 people lost their jobs in the non-farm payrolls report, to 15.1%. Here again the estimate could be a conservative one, with some forecasts as high as 20%.
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 4 May||Results|
|Mohawk Industries (US)||Q1|
|Shake Shack (US)||Q1|
|Tenet Healthcare (US)||Q1|
|Tuesday 5 May||Results|
|Beyond Meat (US)||Q1|
|Coca-Cola Bottling (US)||Q1|
|Imperial Brands (UK)||Half-year|
|Western Union (US)||Q1|
|Wednesday 6 May||Results|
|Aspen Technology (US)||Q3|
|BlackRock Capital (US)||Q1|
|General Motors (US)||Q1|
|Hyatt Hotels (US)||Q1|
|Marathon Oil (US)||Q1|
|Meet Group (US)||Q1|
|Office Depot (US)||Q1|
|Oxford Biomedica (UK)||Full-year|
|Virgin Money (US)||Half-year|
|Thursday 7 May||Results|
|BT Group (UK)||Full-year|
|Microchip Technology (US)||Q4|
|Motorola Solutions (US)||Q1|
|Friday 8 May||Results|
|Bloomin' Brands (US)||Q1|
Company announcements are subject to change. All the events listed above were correct at the time of writing.
Disclaimer: CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.