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The Week Ahead: ECB rate meeting; UK banks, US tech results

Here's our pick of the top three economic and company events in the week commencing Monday 23 October:

Lloyds Banking Group Q3 results

Wed 25 Oct: After reaching a one-year high in February, shares of Lloyds fell to nine-month lows in September, weighed down by investor concerns over the health of the UK economy, particularly a second-half slowdown, and fears that rising impairment provisions could outweigh any improvement in net interest margin (NIM). When Lloyds set its guidance in February, the bank said it expected to see annual NIM improve to greater than 3.05%, up from its previous estimate of 2.8%, with operating costs to remain static at £9.1bn, rising to £9.2bn in 2024. The bank raised its NIM guidance to above 3.1% in Q2 after the bank’s profit disappointed the market. The miss on profits came as the bank set aside $419m to cover potential losses from non-performing loans, while Q2 NIM fell to 3.14%, down from 3.22% in Q1. Statutory profit before tax in Q2 came in at £1.6bn, pushing first-half profits up to £3.87bn, on revenue of £9.54bn. Customer deposits fell by £5.5bn, an improvement on the £8bn fall in Q1, helped by an increase in retail savings balances. In a sign that loan demand is slowing, lending to customers in Q2 fell by £1.6bn on a quarterly basis, and by £4.2bn on an annual basis. Lending will be a key area to watch in the upcoming Q3 results, especially given the recent weakness in mortgage approvals.

Meta Platforms Q3 results

Wed 25 Oct: Facebook and Instagram owner Meta has been one of this year’s best performers on US stock markets, its shares up more than 150% year to date. The gains come after a disastrous 2022, when the shares lost over 70% of their value as they slipped from 2021’s record highs of $384. The shares bottomed out at around $88 in October 2022. Since then we’ve seen a solid rebound, despite ongoing losses from Reality Labs, the unit responsible for building the so-called metaverse. After Meta announced its Q2 results, the shares pushed up to their highest levels in 18 months. Revenue in Q2 rose 11% to almost $32bn, pushing net income up by 16% to $7.79bn, or $2.99 a share. Ad impressions and price per ad were also higher to the tune of 34% as daily active users rose 7% year-on-year. For Q3, Meta expected revenue of between $32bn and $34.5bn, with total annual expenses of between $88bn and $91bn. On the downside, Reality Labs is likely to see an increase in operating losses over the next year. Revenue here fell to $276m from $452m, while losses rose to $3.7bn, pushing half-year losses in this area to $7.7bn.

ECB interest rate meeting

Thu 26 Oct: Is the European Central Bank done hiking? The bank’s decision last month to raise interest rates on its main refinancing operations to a record high of 4.5% was somewhat surprising given the narrative from ECB president Christine Lagarde ahead of the increase. Clearly, the governing council is split on the future path of monetary policy. Northern members of the eurozone, in particular Germany, seem keen to raise rates further to fight inflation, even though the headline rate is falling. In contrast, southern euro area members oppose further rate hikes as that would increase the burden of their debt repayments. Commenting on the ECB’s rate rise, Bank of Latvia governor Martins Kazaks argued that it was appropriate and that future increases couldn’t be ruled out given the inflationary pressures of higher energy costs and pay growth. Nonetheless, the tone of the September press conference leaned towards a wait-and-see approach regarding further rate rises, partly because of downgrades to economic forecasts. The eurozone’s GDP growth forecast for 2023 was lowered to 0.7% from 0.9%, while the forecast for 2024 was cut from 1.5% to 1%. Meanwhile, eurozone inflation forecasts were revised upwards to 5.6% for 2023 and 3.2% for 2024. Given poor recent economic data, the most likely outcome of Thursday’s rate meeting is a pause. 

Here's our pick of the rest of the week's major economic and company events:

UK unemployment (September)

Tue 24 Oct: Having been delayed a week, the International Labour Organization’s unemployment reading for the UK in September is expected to remain unchanged after edging up to 4.3% for the three months to August. The UK’s Office for National Statistics said publication was postponed because of delays in collating responses and that the extra time would be used to craft better estimates of the UK labour market. In the three months to August, the number of unemployed people rose by 159,000, the number of employed people dropped by 207,000, and the number of job vacancies fell below 1m for the first time since the summer of 2021. For the three months to September, the number of employed people is expected to have declined by 200,000, with the unemployment rate forecast to remain unchanged at 4.3%.

France, Germany flash PMIs (October)

Tue 24 Oct: It’s unlikely that the latest flash purchasing managers’ index (PMI) readings will move the dial much when it comes to the ECB’s upcoming rate decision. With the ECB set to keep rates on hold, the October flash PMIs could merely serve to underscore how weak the European economy remains. The September PMIs for France, Germany and the UK indicated weakness in the services sector. France slipped to 43.9 from 46, despite hosting the Rugby World Cup. Germany saw a modest pickup from 47.3 to 49.8. And the UK slowed to 47.2 from 49.5. Manufacturing prints for all three countries also remained in the doldrums, at 44.2 for France, 39.6 for Germany, and 44.3 for the UK. We’re not expecting to see a significant improvement in the October numbers given the recent surge in energy prices. 

Barclays Q3 results

Tue 24 Oct: After a choppy first half of the year, the Barclays share price has settled into a tighter range since July, with the shares trading broadly between 140p and 160p. They haven’t regained the levels they were at prior to the US regional banking crisis, which sent the shares down to their lowest levels since November 2020. There was a common theme to UK banks’ Q2 results: namely, downgrades to net interest margin. Barclays’ Q2 income was disappointing, falling by 6% to £6.28bn, though profits after tax were higher, rising by 25% year-on-year to £1.6bn. Impairments increased by £372m in Q2, pushing first-half impairments across the group up to £896m. The bank said that it expected NIM to come in below 3.2% at around 3.15% as the bank looks to offset the impact of dynamic deposit balances as clients go in search of higher rates. The corporate and investment bank saw Q2 revenue fall 22% to £3.16bn, but the UK business benefitted from the higher interest rate environment with revenue up 14% to £1.96bn. Revenue in Q3 is expected to come in at £6.35bn, with close attention likely to be on the investment bank given the strong numbers that we’ve seen from US banks in this area.

Microsoft Q1 results

Tue 24 Oct: The tech sector has driven gains in US markets this year. Microsoft, along with the rest of the so-called ‘Magnificent 7’, has seen strong gains since the lows of October last year. Microsoft shares hit a new record high back in July, after the company reported a strong set of Q4 and annual numbers. Q4 revenue increased 8% to $56.2bn, a new record for an individual quarter, pushing total revenue for the year to $211.9bn. Profit came in at $2.69 on the quarter and $9.68 on an annualised basis. A strong performance from the Intelligent Cloud division saw revenue rise to $24bn, an increase of 15%, while cloud services revenue from commercial and consumer products for Microsoft 365 and Office 365 also saw strong gains. On the downside, revenue from personal computing fell by 4% to $13.9bn, mainly due to weak Windows OEM revenue, which fell 12%, and devices revenue which fell 20%. Xbox content and services revenue, on the other hand, performed well, rising 5%. Hopes are high that the purchase of Activision Blizzard will now go ahead after the deal was approved by UK regulators. The shares have slipped back a touch since the July peaks amid concerns that revenue growth in Azure might slow to between 25% and 26% in Q1. This compares to 42% last year and 48% the year before, with some disappointment that the move into its OpenAI hadn’t delivered a higher estimate. Q1 revenue is expected to come in at $54.5bn, with commercial cloud expected to deliver $30.7bn, up from $25.7bn a year ago.

Alphabet Q3 results

Tue 24 Oct: Shares of Google owner Alphabet have also made strong gains, rising more than 50% this year. Since the company reported its Q2 results, the shares have maintained a steady upwards momentum, rising to 18-month highs last month. In Q2 total revenue rose by 7% to $74.6bn, with a strong performance from Google Search which posted revenue of $42.63bn. YouTube revenue increased to $7.66bn, up from a weak Q1 of $6.69bn. Q2 profits were also strong, coming in at $21.83bn, comfortably beating last years $19.45bn. One of the main reasons for the underperformance in Q1 was a $2bn charge in relation to severance costs for 12,000 job losses. In Q2 the company set aside a further $69m in relation to optimising office space, on top of the $564m set aside in Q1. For Q3 total revenue is forecast to increase to $75.5bn, with YouTube set to increase to $7.7bn and Google Search to increase to $43.2bn. Profits are expected to come in at $1.45 a share. 


Thu 26 Oct: As inflationary pressures ease, the US economy has performed well. Recent indicators suggest that Q3 could be the country’s best quarter this year. In Q1 the US economy grew by 2.2%, followed by 2.1% in Q2. The final revision in Q2 saw personal consumption cut to 0.8% from an initial estimate of 1.7%, while the headline number was left unchanged at 2.1%. Growth estimates for Q3 are higher, with some estimates as highs as 4.5%. That would make Q3 the US’s best quarter since Q4 2021. With a robust labour market and US company earnings also looking strong, there is a danger that a big GDP growth number could prompt the Fed to raise rates once more between now and the end of the year.

Amazon Q3 results

Thu 26 Oct: The Amazon share price has undergone an underwhelming quarter, despite seeing a decent spike higher in the aftermath of its Q2 numbers back in August. The shares went on to reach a one-year high in September but have struggled somewhat since then. Its Q2 results saw revenues come in at $134.38bn, an increase of 11%, with outperformance coming from online stores and AWS. Profits also comfortably beat expectations, coming in at $0.63 a share. Online stores contributed $52.97bn, while Amazon Web Services saw a 12% increase in sales at $22.14bn. Amazon also saw decent gains in its online subscription services, with revenues there rising to $9.89bn from $8.7bn, driven by shows like Citadel and the film Air. Amazon also added to its international content, as well as sporting events. Over the past 12 months Amazon has been cutting jobs after over-hiring during the pandemic. The company said that 5,000 jobs had been cut during Q2. Amazon also upgraded its Q3 guidance for sales to between $138bn and $143bn. Investors will be looking for revenue growth in both online stores as well as AWS, which is expected to see revenues increase to $23.2bn. Looking ahead to Q4 Amazon is likely to face challenges from a consumer slowdown, while the business is also looking to the future having invested up to $4bn in AI startup Anthropic. Profits are expected to come in at $0.58 a share.

US core PCE (September)

Fri 27 Oct: The core personal consumption expenditures (PCE) price index reading for September could help guide the Federal Reserve’s decision on whether to hike rates again this year. With the latest economic projections citing a fed funds rate of 5.6% by year-end, and a spike in oil prices exerting upward pressure on prices, there is a chance that the Fed might raise rates on 1 November. The strong US jobs market and sticky wage growth appear to be causing a split on the Federal Open Market Committee, despite recent data showing that core inflation is starting to ease. The core PCE inflation reading slowed to 3.9% in August, down from 4.3%. This is welcome news for those who worry that inflation in the US is too persistent. Estimates suggest that the September print could show a further slowdown to 3.7%.

NatWest Group Q3 results

Fri 27 Oct: NatWest shares haven’t had a good 2023. Although in February the shares reached their best levels since May 2018, since then they have slumped by around 25%, leaving them down almost 18% year to date. The drop has mainly been due to concerns over the management of the bank following the departure of CEO Alison Rose after it was revealed she was the source of a leak about the bank’s relationship with Nigel Farage. This issue raised serious questions over the governance of the bank and more specifically the Coutts business. It also raised questions over the judgement of outgoing NatWest chairman Howard Davies, and the oversight of GDPR and other client confidentiality rules. As we look towards the upcoming Q3 numbers, the small matter of Alison Rose’s payoff threatens to overshadow the results. It remains to be seen whether the bank will cancel millions of pounds worth of share awards and bonuses in the wake of the scandal. Anything other than the minimum legal payoff which Rose is entitled to could invoke a huge political storm. It’s certainly a headache that new CEO Paul Thwaite could do without as he looks to take the bank forward. In Q2 NatWest was forced to downgrade its full-year guidance even as attributable profits to shareholders came in at just over £1bn. That marked a slight fall from the same period last year and was also lower than the £1.28bn in Q1, but still pushed half-year profits up to £2.3bn. Net interest margin fell in Q2 to 3.13%, down from 3.27% in Q1, with the bank cutting its full-year forecast to 3 15% from 3.2%. The full-year figure could get reduced further as it was based on an assumption of a Bank of England base rate of 5.5%. NatWest also said it was planning to buy back another £500m of its own shares, while paying an interim dividend of 5.5p a share. On the business itself, net loans saw an increase to £352.7bn during the first half of the year, with £5.9bn of that being new mortgage lending, though most of that growth came in Q1. This could slow further in Q3, given the weakness in house prices and in mortgage approvals. The bank added another £153m to cover non-performing loans in Q2, on top of the £70m it added in Q1. Customer deposits declined by £11.8bn during the first half, although we did see a £2bn rise in deposits in Q2 as customers put money back into their accounts as the bank raised savings rates.


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Monday 23 OctoberResults
Bank of Hawaii (US)Q3
Packaging Corp of America (US)Q3
Tuesday 24 OctoberResults
Alphabet (US)Q3
Barclays (UK)Q3
Coca-Cola (US)Q3
Danaher (US)Q3
General Electric (US)Q3
General Motors (US)Q3
Microsoft (US)Q1
NextEra Energy (US)Q3
Verizon Communications (US)Q3
Visa (US)Q4
Wednesday 25 OctoberResults
ASOS (UK)Full-year
Boeing (US)Q3
Cazoo (US)Q3
Lloyds Banking Group (UK)Q3
Meta Platforms (US)Q3
Moody's (US)Q3
Morningstar (US)Q3
ServiceNow (US)Q3
Thermo Fisher Scientific (US)Q3
Thursday 26 OctoberResults
Altria (US)Q3
Amazon.com (US)Q3
Bloomsbury Publishing (UK)Half-year
Bristol-Myers Squibb (US)Q3
Ford (US)Q3
Harley-Davidson (US)Q3
Hasbro (US)Q3
Hershey (US)Q3
Hertz Global Holdings (US)Q3
Honeywell (US)Q3
Intel (US)Q3
Linde (US)Q3
Mastercard (US)Q3
Standard Chartered (UK)Q3
United Parcel Service (US)Q3
Willis Towers Watson (US)Q3
Friday 27 OctoberResults
AbbVie (US)Q3
Aon (US)Q3
Colgate-Palmolive (US)Q3
International Consolidated Airlines (UK)Q3
NatWest Group (UK)Q3
T Rowe Price (US)Q3

Note: While we check all dates carefully to ensure that they are correct at the time of writing, company announcements are subject to change.

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