Read our pick of the top stories to look out for in the week commencing 3 January 2022, and view our key company earnings schedule.
Our top three events for 3-7 January 2022
US Federal Reserve minutes – Wednesday
As expected, the Federal Reserve went ahead and accelerated its tapering programme at its pre-Christmas meeting, to $30bn a month from January, while adopting a slightly more hawkish outlook when it comes to tackling the risks of rising inflation. Fed officials also brought forward their expectations for rate hikes to three in 2022 and three in 2023. However, the tone of the statement and press conference suggested a belief that current levels of inflation were likely to be transitory, even if the word wasn’t used in the statement. A reference to supply and demand imbalances and the reopening of the economy was just a roundabout way of saying the same thing. Nonetheless, the change of tone does suggest the Fed is alive to the risk of higher prices and will act if deemed necessary.
Recent comments from a number of Fed officials also suggests that a US rate rise could come as soon as March. For the moment, markets appear to be discounting the possibility, however when you have the likes of San Francisco Fed’s Mary Daly, and board governor Chris Waller, suggesting that the Fed could act in March, the minutes could illustrate how widespread this view actually is within the federal open market committee (FOMC). Markets don’t appear to think that having three hikes is a viable position; however if they feel the Fed is serious about moving rates, we could see some volatility.
Next Q4 results – Thursday
Looking back at the last 12 months, Next has managed to navigate the problems posed by the pandemic very well, with its share price managing to hold on to the gains in 2020, despite challenges from last year’s early lockdown. Next’s share price hit a record high in September last year, after the retailer’s half-year results were better than expected and raised full-year guidance for the fourth time.
In its last trading statement, released in November, the company posted another decent quarter. Full price sales rose 17% compared with the same period two years previously, while sales to the end of October were running ahead of expectations at 14%. Next said it expected this growth to slow to 10% in Q4, while keeping its full-year profit forecast unchanged at £800m, a figure that was upgraded back in September. This growth number come in short given the Omicron wave of Covid infections. There are also concerns over supply chain disruptions, which could hinder stock availability, while increases in prices might also crimp demand.
US non-farm payrolls (December) – Friday
The November payrolls report turned out to be a rather lacklustre affair, however it was still good enough for the Federal Reserve to accelerate the winding back of its taper programme. The headline number was disappointing, coming in at 210,000 jobs against an expectation of 550,000. The unemployment rate was much more encouraging however, falling back to 4.2%, from 4.6%, and the participation rate rose to 61.8%, as more people returned to the workforce. Wage growth was also encouraging from an inflation point of view, remaining unchanged at 4.8%. One reason for the weak headline number was weak payrolls growth in leisure and hospitality, while the household survey recorded strong gains, with vacancy rates still very high.
With Omicron spreading across the US like wildfire in December, and weekly jobless claims starting to edge higher from their lowest levels in 1969, there is a risk that January’s report could similarly disappoint. On the flip side, the November number could be revised higher given that the ISM services report, which was released after the November payrolls, hit a record high, with the employment component making decent gains. Expectations are for December’s non-farm payrolls to improve to 420,000, and the unemployment rate to fall further, to 4.1%.
More key events (3-7 January):
Germany services PMI (December) – Monday
The latest Germany services purchasing managers’ index (PMI) showed economic activity slide back into contraction territory, at 48.4, its lowest level since the lockdown back in February 2021, as Germany’s health service battled soaring delta variant cases, and local authorities in Germany imposed new restrictions, as well as floating the prospect of mandatory vaccines in an attempt to get on top of the health crisis. German consumers are also having to contend with supply chain issues and soaring power prices, which is also likely to prompt consumer retrenchment, with the attendant risk that new Omicron cases could make a bad situation worse.
UK services PMI (December) – Wednesday
The latest flash purchasing managers’ index (PMI) data showed that UK services activity slowed sharply in December, falling to 53.2, from 58.5 in November. This is quite a slowdown and can be mainly attributed to concerns over the spread of Omicron, as well as the reimposition of limited restrictions by the UK government in the lead-up to Christmas period. Since those numbers were released, economic activity across the UK, particularly in hospitality, has fallen sharply, , as consumers limit their movements to try and avoid catching the virus and having to isolate over the Christmas period. This self-imposed limitation on their pre-Christmas socialising has hammered the hospitality sector, with government’s mixed messaging around a possible new lockdown not helping. As such, the flash PMI reading could see a miss to the downside.
Greggs Q4 results – Thursday
Greggs has also been a winner from the pandemic, with its shares among the better performers on the FTSE 250 in 2021. At its last capital markets day, the bakery chain said it hoped to be able to double its revenue target to £2.4bn by 2026, from £1.2bn this year. It’s certainly an ambitious target, however the company plans to open 150 new stores a year from 2022, with the capacity to operate over 3,000 stores across the UK. Greggs’ biggest problems right now appears to be difficulty finding new staff, and product shortages due to supply chain disruptions, which are exerting upward pressure on costs.
The popularity of its sausage rolls, vegan and otherwise, has shown no signs of dipping. In Q3, the company said two years’ like-for-like sales rose 3.5%, and that its full-year performance was likely to beat previous guidance, although that came with the caveat that Covid disruption might impact that expectation. The key question for Q4 will be whether Greggs has been able to pass on the increase in VAT rates that rolled off at the end of September, or whether the company absorbed the increase.
EU flash CPI (December) – Friday
The European Central Bank’s (ECB) insistence that it won’t raises rates in 2022 is likely to face further challenges from within the governing council as inflationary pressure is set to build. The increases in power prices, along with an eye-wateringly high producer price index (PPI) reading, is expected to start to filter through into the headline consumer price index (CPI) inflation data even more in the months ahead. Factory gate prices in Spain, Italy, France, and Germany are already well above or close to 20%, and likely to rise further. EU CPI has already hit a record high of 4.9% in November, with core CPI rising to 2.6%, and this is highly likely to head even higher when Friday’s latest flash numbers are released for December.
Index dividend schedule
Selected company results
|Monday 3 January||Results|
|No major announcements|
|Tuesday 4 January||Results|
|SMART Global Holdings (US)||Q1|
|Wednesday 5 January||Results|
|Richardson Electronics Ltd (US)||Q2|
|UniFirst Corp (US)||Q1|
|Thursday 6 January||Results|
|Conagra Brands (US)||Q2|
|Constellation Brands (US)||Q3|
|Duck Creek Technologies (US)||Q1|
|Helen of Troy (US)||Q3|
|Lamb Weston Holdings (US)||Q2|
|Made.com Group (UK)||Full-year|
|Walgreens Boots Alliance (US)||Q1|
|Friday 7 January||Results|
|Acuity Brands (US)||Q1|
Company announcements are subject to change. All the events listed above were correct at the time of writing.