Watch our week ahead video preview, read our pick of the top stories to look out for this week (4-8 November), and view our key company earnings schedule.
In this week's video, chief market analyst Michael Hewson looks ahead to the latest Bank of England meeting and the prospects for the pound as we head towards a December election. He also looks at the key levels for US and European markets ahead of the latest PMI data. He discusses the latest RBA rate decision, as well as the latest numbers from Marks and Spencer, Sainsbury's and Uber.
Brexit & election update
Having seen the Brexit deadline extended until the end of January 2020, the government has finally managed to persuade MPs that a general election is needed to break the impasse, as they look to push the withdrawal agreement through. We’ve already had an indication as to the type of manifesto the Conservatives will run on in the Queen’s speech, as the parties gear up for a 12 December election. While the opinion polls have the Conservatives ahead, as we know from 2017 these can change quickly. The prospect of a Corbyn-led Labour administration, with less business-friendly and economically questionable policies, is likely to prompt significant levels of volatility in the value of the pound over the course of the next few weeks.
Uber Technologies Q3 results
Monday: It’s not been a good start to Uber’s stock market career, or Softbank for that matter, given its stake in the ride sharing company. Somewhat belatedly, investors have realised that multibillion dollar valuations need something to back them up, and being profitable, or at least the prospect of being profitable, needs to be part of the business plan. This year alone, the company is on course to lose $8bn, having lost $5.2bn in Q2 alone, outstripping last year’s loss of $3bn at a stroke. As a result, the company has started to cut staff, while also looking to expand in India and other emerging markets. Its food operation, while growing, still makes up a very small part of overall revenue, and the outlook for that business is no less competitive than its bigger ride sharing rival. Even a $50bn valuation, which the company currently has, looks optimistic when set against these sorts of numbers.
European manufacturing PMIs
Monday: Last week the latest manufacturing PMIs from the US, China and Japan pointed to a continued weak economic outlook for the manufacturing sector in general. In Europe the picture is expected to continue to remain bleak. In September, German manufacturing activity dropped to new multi-year lows, and is likely to remain weak in the latest October numbers. More worryingly, there was similar weakness across Europe as concerns grew that the malaise in the manufacturing sector could start to infect the services sector. The recent flash PMIs showed little evidence of a pick up in economic activity.
RBA rate meeting
Tuesday: Last month the RBA cut rates again for the third time in five months to yet another record low of 0.75% in an attempt to boost a weakening economy. It is unlikely to succeed given the reliance of Australia on the Chinese economy. One of the things that has helped Australia to avoid recession in the last twenty years has been the emergence of China and the growth in its economy since the beginning of the century. Now that China’s economy is slowing sharply, the Australian economy is also suffering, as lower demand from the ‘Middle Kingdom’ weighs on the global economy. While further rate cuts can’t be ruled out given last weeks fed rate cut, it’s not immediately apparent how they would help.
Qualcomm Q4 results
Wednesday: Despite being caught in the crossfire of President Trump’s trade war, Qualcomm’s shares have managed to push higher year-to–date, albeit in a fairly volatile fashion. In July the company disappointed the markets as Q3 revenues came in short at $4.89bn, while the company slashed its guidance for Q4 from $5.63bn in revenues to as low as $4.3bn. The company cited slowing demand for mobile chipsets, the transition away from 4G to 5G and the Huawei export ban, which has affected its business in China.
Global and European Services PMIs (Oct)
Wednesday: With manufacturing stuck in the doldrums all year, the services sector appeared, up until last month, to have avoided the slowdown affecting economic activity in other areas of the broader economy. This was never likely to last indefinitely, and last month we started to see the first cracks in this story. In Europe, we saw significant slowdowns in the latest flash German numbers for October, and more broadly, services activity has been slipping from the levels seen at the beginning of the year. While the readings are still in expansion territory, in some cases they are moving closer to levels better associated with stagnation.
Marks & Spencer half-year results
Wednesday: Having only just been relegated from the FTSE 100 for the first time in history, Marks & Spencer’s spell away from the limelight may do it some good. CEO Steve Rowe could do with some good news as he looks to steer the business back to relevance, and its share price back from its lowest levels since 2001. The general merchandise business, as well as the food business, have continued to face challenges and with Christmas coming up, M&S could well do with a good pre-Christmas and new year trading period. Its turnaround plan, which involved updating its online offering and sorting out its supply chain, has been a bit of a mixed bag., while in terms of general merchandise, the company can’t make up its mind which demographic it wants to appeal to. This ambiguity has seen several false starts over the years. Its new plan, headed up by former Asda boss Charlie Norman, is already off track after an update in October However, there is optimism that the new five-year plan will fare better than the previous one. The food business still appears to be punching above its weight, despite being squeezed from the bottom by Aldi and Lidl, and from the top by Waitrose.
Bank of England rate meeting & inflation report
Thursday: the recent Brexit extension presents the worst of all worlds for the Bank of England. Combined with the prospect of an upcoming general election, the monetary policy committee will have to contend with yet more uncertainty until next year at the earliest. While the UK economy appears to have recovered a touch from the Q2 contraction, there are still early signs that being stuck in the Brexit waiting room is starting to damage business and consumer confidence. A slight uptick in unemployment could be just the start, though wage growth has remained resilient. Markets are still pricing in the prospect of a possible rate cut sometime next year; however, it is slowly becoming apparent that debate about lower rates is starting to shift towards how damaging they can be in the longer term. This does appear to be prompting some shifts in economic thinking, with some economists slowly coming round to the view that low rates can prompt higher levels of saving, due to lower forward returns. Expect the bank to paint a cautious outlook as we look towards 2020.
Sainsbury’s half-year results
Thursday: The collapse of the Asda merger earlier this year doesn’t appear to have prompted much in the way of soul-searching among senior management, despite the fact that it cost the business £46m. Last month the company decided to embark on a significant improvement programme with respect to cutting the amount of floor space, with a plan to close 125 stores the main headline. However, this was offset by an announcement that it would be replacing these with 110 convenience stores. Inserting 80 Argos outlets inside the bigger stores could go some way to doing this, but would still lead to an upfront cost. More important is what management intend to do with Sainsbury’s Bank, having stopped all new activity in its banking and mortgage operation. If, like Tesco, Sainsbury's intend to sell it off, then they should do so, and stop prevaricating. In the most recent set of sales numbers like-for-like sales growth slowed by 0.2%, and while disappointing, this was slightly better than expected in an environment where the big four supermarkets continue to see their market share come under attack from Aldi and Lidl. Argos also needs to improve after a 2% drop in sales for the 12 weeks to September.
Aston Martin Q3 results
Thursday: After all the optimism of last year’s IPO and a multibillion pound valuation, the shares have come a cropper, losing over 70% of their value, with further losses in July after the company warned on sales and profits for the current fiscal year. Management said that weak demand meant that their sales estimates would have to be cut from over 7,000 vehicle sales to less than 6,500, while also warning that operating profit margins would shrink to 8%. The launch of the new DBX, as well as rising costs from its new factory in Wales, has raised concerns that the company has overleveraged itself, which means that the DBX needs to deliver. Another disappointing quarter and the share price could find itself falling further.
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 November||Results|
|Black Stone Minerals (US)||Q3|
|California Resources Corp (US)||Q3|
|Hallador Energy (US)||Q3|
|Helios Technologies (US)||Q3|
|Hertz Global Holdings (US)||Q3|
|Howard Hughes Corp (US)||Q3|
|Marriott International (US)||Q3|
|NanoString Technologies (US)||Q3|
|Prudential Financial (US)||Q3|
|Shake Shack (US)||Q3|
|Solar Capital (US)||Q3|
|Sysco Corp (US)||Q1|
|Uber Technologies (US)||Q3|
|Under Armour (US)||Q3|
|Tuesday 5 November||Results|
|Associated British Foods (UK)||Full-year|
|Boingo Wireless (US)||Q3|
|Caesars Entertainment (US)||Q3|
|Century Aluminum (US)||Q3|
|Cinemark Holdings (US)||Q3|
|First Derivatives (UK)||Half-year|
|Hackett Group (US)||Q3|
|Harvard Bioscience (US)||Q3|
|Imperial Brands (UK)||Full-year|
|Match Group (US)||Q3|
|MGM Growth Properties (US)||Q3|
|Microchip Technology (US)||Q2|
|Oasis Petroleum (US)||Q3|
|Warehouse Reit (UK)||Half-year|
|Wednesday 6 November||Results|
|AXA Equitable Holdings (US)||Q3|
|Black Knight (US)||Q3|
|BlackRock TCP Capital (US)||Q3|
|Capri Holdings (UK)||Q2|
|Connect Group (UK)||Full-year|
|Dialog Semiconductor (UK)||Q3|
|Liberty Global (UK)||Q3|
|Marks & Spencer (UK)||Half-year|
|New York Times (US)||Q3|
|Office Depot (US)||Q3|
|Papa John's International (US)||Q3|
|Paramount Group (US)||Q3|
|Rosetta Stone (US)||Q3|
|Sophos Group (US)||Half-year|
|Spark Energy (US)||Q3|
|Vulcan Materials (US)||Q3|
|Thursday 7 November||Results|
|AMC Entertainment (US)||Q3|
|Aston Martin Lagonda (UK)||Q3|
|Auto Trader (UK)||Half-year|
|Columbus McKinnon (US)||Q2|
|Keurig Dr Pepper (US)||Q3|
|Lancashire Holdings (UK)||Q3|
|Noble Energy (US)||Q3|
|Nomad Foods (UK)||Q3|
|Saga Communications (US)||Q3|
|Subsea 7 (UK)||Q3|
|Walt Disney (US)||Q4|
|Friday 8 November||Results|
|No major US or UK companies reporting|
Company announcements are subject to change. All the events listed above were correct at the time of writing.