Watch our week ahead video preview, read our pick of the top stories to look out for this week (14-18 October), and view our key company earnings schedule.
Chief market analyst, Michael Hewson, looks ahead to a big week for Brexit talks, as well as China-US trade. He also looks at the key economic announcements which include UK wages, China Q3 GDP, as well as crude oil prices and the latest earnings numbers from JP Morgan and Netflix. He also discusses the key chart points on GBP/USD, EUR/GBP, Dax, S&P 500.
UK unemployment & average earnings (Aug)
Tuesday: Wage growth has continued to confound expectations, rising to just shy of 4% in July and helping cushion the effects of an economy that contracted slightly in the second quarter of this year. With Q3 economic growth also looking a little on the feeble side, there is the possibility that we may have hit the high watermark when it comes to wage growth. Even if earnings have taken a lot of the sting out of the slowdown in the broader economy, at some point the lack of both business investment and a Brexit solution could see unemployment levels start to rise. So far the loss of retail jobs this year hasn’t led to overall unemployment levels rising, but that can’t continue for ever.
JPMorgan (Q3 results)
Tuesday: Recent earnings numbers from US banks have pointed to a much more resilient environment than that of their European counterparts, though in certain areas they still face similar constraints with profitability. In its most recent Q2 numbers, JPMorgan’s profit came in at a record $9.7bn, helped by recent tax cuts and a resilient US economy, plus higher US interest rates. Since then the US economy has slowed a touch and the US Federal Reserve has cut rates twice, flattening the yield curve sharply. This could hinder the US’s largest bank’s ability to perform as well in the second half of the year as it did the first. The shares hit a record high above $120 in August, since slipping back. Is this as good as it gets for JPMorgan or is there a sting in the tail? Goldman Sachs, Citigroup and Wells Fargo also release their latest figures.
UK CPI inflation (Sep)
Wednesday: UK inflation has consistently remained in or around the Bank of England’s 2% target, with the recent weakness in oil prices helping push the headline consumer price index (CPI) rate down to 1.7% in August. This lack of inflationary pressure is all the more surprising bearing in mind the fairly weak pound. It’s a welcome development for consumers, helping to boost disposable incomes at a time when confidence is low.
US retail sales (Sep)
Wednesday: So far this year US consumer spending has held up fairly well, though a recent decline in consumer confidence has raised concerns that the deteriorating global outlook could start to manifest itself in the US economy. So far this hasn’t happened, but at some point US consumers may feel tempted to rein in their spending ahead of Halloween and Thanksgiving. So far this year only two months have been negative, which suggests that we could be overdue a bit of a slowdown. Even if we do get one, it may only be temporary as we head into one of the busiest times of the year for the US consumer.
Asos (full-year results)
Wednesday: Asos shareholders have been on a rocky ride for the last 12 months: two profit warnings – one at the end of last year and another in April – has seen the shares drop sharply. A year ago the company had predicted that annual sales growth would be in the region of 20% to 25%. This was reduced in December to 15%, with profit margins also reduced to 2% from 4%. Since then the company’s shares have struggled after a less-than-positive update in April, when the shares slid again. Logistical issues in Germany and the US appear to be continuing to act as a drag, with sales in Europe underperforming substantially. Total sales growth for the period to 30 June rose by 12%, short of management’s 15% target. These operational issues still appear to be acting as a drag on overall performance and, while there is optimism that the worst may be behind it, the concern is likely to be centred on whether the company will be able to hit its sales target, without compromising on margins.
Netflix (Q3 results)
Wednesday: When Netflix last reported in July the shares dropped sharply after management reported a sharp slowdown in user growth across the board. In the US there was a loss of 126,000 subscribers against an expected gain of 352,000. More worryingly, international subscriber growth slowed to 2.83m new subscribers, which on the face of it looks good, but it fell well short of expectations of 4.81m. While management said they expected this to bounce back in Q3 to 7m, helped by new series of ’Stranger Things‘ and ’The Crown‘, investors are less convinced, with the shares down over 25% since those July peaks. With Disney and Apple set to launch cheaper packages later this year, Netflix shares could be vulnerable to more declines if subscriber growth slows further, or management revise their outlook lower.
China GDP (Q3), industrial production & retail sales (Sep)
Friday: With all the talk of a China-US trade deal, the Chinese economy has shown consistent signs of slowing throughout the year. Industrial production and retail sales have slowed steadily in the past three months. Industrial production in particular has been feeble, at 4.4% in August, a 25-year low, while retail sales have also slowed sharply. This is unlikely to improve significantly in September, while Q3 GDP is expected to slow from 6.2% in Q2.
London Stock Exchange (Q3)
Friday: The recent pickup in trading activity is likely to see a much improved performance in Q3, and now that the Hong Kong Stock Exchange (HKEX) has withdrawn its £30bn takeover bid, the company can now focus completely on the prospective Refinitiv tie-up. New CEO David Schwimmer is currently looking to reorientate LSE away from exchange pricing towards a more broad market data model, that could pit it against the likes of Bloomberg. While some investors may have concerns about this sort of business diversification, it does make sense in the context of providing extra competition in an area which Bloomberg dominates.
EU Council meeting
Friday: Brexit is set to dominate proceedings this week, with UK prime minister Boris Johnson expected to ask the EU for an extension to the Brexit deadline, in the event he is unable to agree a new Brexit deal. Despite all the optimism of the last few hours, there are still many obstacles to any form of deal, particularly on this side of the Channel where MPs have proven to be the biggest roadblock to a deal being agreed. If the UK government is able to square a deal with Ireland there is no guarantee that it will find favour here. Having said that, if you are one of those MPs who was screaming blue murder about the prospect and potential disaster of the UK leaving without a deal, are you prepared to then block any new deal because it doesn’t meet expectations, when presented with one? A lot can still go wrong in the coming days, but the moment of truth for posturing MPs may be about to arrive. The government has until 19 October to ask for an extension in the event a deal can’t be agreed; however, it’s not immediately apparent how that squares with the prime minister’s claim that Brexit will happen on 31 October, irrespective of what happens this week.
Friday: Strong gains in its marque brands saw Coca-Cola shares hit record highs in the wake of its Q2 results earlier this year, with particularly strong demand in Asia helping fuel sales growth. The company also outlined its plans for new canned coffee drinks in the wake of its recent acquisition of Costa Coffee, as it raised its forecasts for the rest of the year, saying it expected revenue growth of 5%, up from 4% previously.
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 14 October||Results|
|No major UK or US companies reporting|
|Tuesday 15 October||Results|
|Goldman Sachs (US)||Q3|
|Johnson & Johnson (US)||Q3|
|JP Morgan Chase (US)||Q3|
|Wells Fargo (US)||Q3|
|Wednesday 16 October||Results|
|Bank of New York Mellon (US)||Q3|
|Thursday 17 October||Results|
|Morgan Stanley (US)||Q3|
|Philip Morris International (US)||Q3|
|WH Smith (UK)||Full-year|
|Friday 18 October||Results|
|American Express (US)||Q3|
Company announcements are subject to change. All the events listed above were correct at the time of writing.