Watch our week ahead video preview (above), read our top eight events to look out for this week (1-5 July), and view our key company earnings schedule.
Market analyst David Madden examines the state of global trade in the context of the G20 Summit and Opec, and discusses the health of the US jobs market.
Global manufacturing PMIs
Monday: One of the characteristics of the past few months has been the poor performance from the manufacturing sector, which has been in a recessionary environment all year. Germany and China in particular have seen their output struggle, although it does appear that in some areas there may be a gradual pickup in economic activity, albeit from fairly weak levels. In the recent flash numbers out of Germany and France for June, we did see slight improvements, however they are still well short of levels that would suggest a sustainable move in the right direction. Both Italy and Germany are expected to remain in contraction territory, while China and Japan are expected to stagnate. The main outlier has been the US, where manufacturing has been fairly solid all year. However, there is rising concern that even here activity is slowing after the ISM hit its lowest level since late 2016 in the recent May numbers.
RBA rate meeting
Tuesday: the Reserve Bank of Australia (RBA) recently cut rates to a record low, and while RBA governor Philip Lowe suggested recently that more cuts were coming, it’s unlikely that we’ll see another move this month. He also went on to state that, if every other central bank followed suit in easing policy, the actual effect of any measures to stimulate growth would be diluted.
Tuesday: There have been a number of factors helping to underpin oil prices over the last few months, including the imposition of US sanctions on Iran, which has raised geopolitical tension in the Gulf region. This week’s OPEC meeting is likely to be a focal point as traders look for a decision on whether the production cuts originally agreed at the beginning of this year will be extended for another six months. Only two months ago prices hit $75 before slipping back on a combination of rising US shale production and slowing demand. A failure to agree a deal extension could put prices under further pressure, sending them back towards this year’s lows.
Global Services PMIs
Wednesday: Unlike manufacturing, the services sector has managed to hold up well. However, the main concern is that the manufacturing malaise could start to infect sentiment in services. Up until now, the services sector has been a bright spot, particularly in Germany, which has consistently posted readings in the mid 50s for the last four months. The US has also been a strong performer here, with a decent jump in May. With markets increasing pricing with the prospect of a US rate cut, a strong number here will inevitably raise the question as to why the Fed feels the need to cut rates as soon as July.
Sainsbury’s Q1 results
Wednesday: The Sainsbury’s share price has been in the doldrums ever since the CMA put the kibosh on its merger deal with Asda earlier this year. Buffeted by shrinking margins and a tough retail environment, the UK’s second-biggest grocer is feeling the squeeze from Aldi and Lidl on the one hand, and its more immediate peers of Tesco and Asda on the other. It continues to vie with Asda for that number two position in terms of market share, and while it does have the advantage of its Argos division, management do appear to have lost sight of how to take the business forward now that the Asda deal has gone. This makes it all the more controversial that CEO Mike Coupe is in line for a bonus, helping to boost his pay by 7% from last year, despite Sainsbury’s share price languishing at all-time lows, and down 40% from a year ago. With margins set to get ever tighter (currently close to 1%), cost control is likely to gain a much bigger focus, particularly if sales continue to struggle. Read our Sainsbury's results analysis
Purplebricks Group full-year results
Wednesday: When Purplebricks came to market back in 2015, the way was open to a cheaper and easier way to list a property for sale without the plethora of fees that went with a traditional bricks-and-mortar estate agent. The word ‘commisery’, from Purplebricks’ advertising campaign, has become ubiquitous among estate agents across the UK. However, the slowdown in the housing market in London and the south-east since mid-2016 has also impacted Purplebricks’ business model, and brought ’commisery’ to its shareholders. Its overseas expansion plans turned out to be an Achilles heel for the business, and senior management. Over-ambitious expansion plans in the US and Australia finally prompted the decision to exit the Australian business, while its US operation was put under review earlier this year. CEO and founder Michael Bruce was also replaced by COO Vic Darvey, and speculation has started to rise that Germany's Axel Springer might take over the struggling business. Purplebricks received a £125m investment from Axel Springer just over a year ago, and the German company then boosted its stake in June to 26.6%, after buying out previous CEO Michael Bruce and his family’s stake in the business. Read our Purplebricks results analysis
International Airlines Group (IAG) June traffic figures
Friday: It’s not been a great year so far for airline stocks, with IAG’s share price languishing at levels last seen in December 2016. The sector has been rocked by higher fuel prices, as well as the controversy over the crashes of the Boeing 737 MAX aircraft, while Brexit uncertainty appears to have caused UK holidaymakers to delay any plans to travel until the end of March. In May the company announced a big drop in profits to €135m for Q1, as well as a decline in revenue per passenger. Airlines across the sector are all struggling – Lufthansa reported last month that it would miss earnings expectations for the year due to underperformance at its Eurowings subsidiary. With budget carriers also suffering due to higher costs, the bar is likely to be low for IAG in terms of how the business has done in June.
US non-farm payrolls report
Friday: This month’s payrolls report could help to determine whether the markets are correct in their assessment that there may be a US rate cut by the end of the month. Looking at some of the recent data from the US economy, the case for a lower Fed funds rate can’t really be supported on the basis of the US economy alone. At the most, recent Fed meeting policymakers were evenly split on whether rate cuts were needed, with St. Louis Fed President James Bullard dissenting on keeping rates unchanged. If the Fed does move in July, it could face accusations of bowing to political pressure in the event the data remains robust. A weak May reading of 75k is expected to see a rebound to 169k, while wages are expected to remain steady at 3.1%. The ADP report on 3 July is also expected to improve from 27k to 91k.
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 1 July||Results|
|Aethlon Medical (US)||Q4|
|Tuesday 2 July||Results|
|Acuity Brands (US)||Q3|
|HML Holdings (UK)||Full-year|
|OMNOVA Solutions (US)||Q2|
|Solid State (UK)||Full-year|
|Wednesday 3 July||Results|
|International Speedway (US)||Q2|
|Purplebricks Group (UK)||Full-year|
|Thursday 4 July||Results|
|Friday 5 July||Results|
|International Airlines Group (UK)||June traffic figures|
Company announcements are subject to change. All the events listed above were correct at the time of writing.
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