Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

The Week Ahead: Fed minutes; flash PMIs; Kingfisher, Zoom results

The key scheduled economic event this week is Wednesday’s publication of minutes from the US Federal Reserve’s November meeting. Also coming up are the latest flash PMI readings from the UK, France and Germany. Meanwhile, in a subdued week for company earnings as US markets observe Thanksgiving on Thursday, Zoom and Kingfisher are among those set to report quarterly results.

OUR TOP THREE EVENTS FOR 21-25 NOVEMBER:

Monday – Zoom Video Communications Q3 results

Zoom shares dropped sharply after the company released Q2 results on 22 August amid investor disappointment over guidance for Q3. The stock continued to fall until it hit a 52-week low of $70.43 on 11 October, after which it clawed back some lost ground to close at $87.44 on 15 November. 

In Q2, revenue grew 8% year-on-year to $1.1bn, while earnings per share (EPS) came in better than expected at $1.05. However, the company downgraded its outlook for Q3 and the rest of the year, forecasting that Q3 revenue would be flat at $1.1bn and that EPS would fall to between $0.82 and $0.83. 

For the full year, Zoom said it expected revenue of $4.39bn to $4.4bn and EPS of $3.66 to $3.69, down from a previous EPS forecast of $3.70 to $3.77. Zoom blamed the downgrade on a slowdown in its online business and increased competition from Microsoft and Cisco Systems. The Q3 results announcement could provide some commentary on how that fight for market share is playing out.    

Wednesday – Fed minutes

At its 1-2 November meeting the US Federal Reserve raised interest rates as expected by 0.75 percentage points for the fourth time in a row. The increase lifted the federal funds rate to a target range of 3.75% to 4%.

Markets initially welcomed suggestions that the Fed was aware of the need to slow the pace of rate hikes going forward. However, the post-meeting press conference and Q&A with Fed chair Jay Powell sought to manage expectations. Powell pushed back hard against the idea that the Fed was leaning towards a dovish pivot. While he acknowledged that a slowdown in the size of rate rises was likely, he also asserted that, to get inflation back down to the Fed’s 2% target, interest rates would probably need to go much higher than the 4.5% terminal rate that markets had priced in. 

Yields shot higher after the press conference, but fell below pre-Fed meeting levels after the announcement on 10 November that US consumer prices grew a cooler-than-expected 7.7% in the year to October. 

Some Fed members appear to be leaning in to the idea that subsequent rate hikes in December and early next year are likely to be smaller than recent 0.75-point increases. The latest set of meeting minutes could shed light on the extent to which the Fed is becoming concerned about “lags” in monetary policy and their impact on the economy. While Powell may be keen to limit the scale of stock market advances, it will be interesting to find out how many of his colleagues share his views.

Thursday – Kingfisher Q3 results

Kingfisher shares declined almost 15% in a month after the B&Q owner announced its half-year results on 20 September. Like-for-like sales in the six months to the end of July came in at £6.81bn, down 4.1% on an annual basis, but up 16.6% from pre-pandemic levels. Gross margin contracted to 36.7%, down by 130 basis points from the year-ago level of 38%, and adjusted pre-tax profit fell 29.5% to £472m. The biggest hit to profits came from the UK, where retail profit fell 41.3% to £339m. In contrast, the Polish business continued to go from strength to strength, delivering a retail profit of £94m, up 58.6% year-on-year.  

In the past month, the stock has returned to the level it was at prior to those half-year numbers, approaching its 200-day simple moving average in the process.

While the outlook for Q3 was encouraging, with Kingfisher forecasting that like-for-like sales would decrease only 0.7% on a one-year basis and increase 15.2% on a three-year basis. However, the Q3 results will do well to meet those estimates if recent UK retail sales are any guide. A miss could threaten Kingfisher’s full-year adjusted pre-tax profit target of £730m to £770m  

KEY EVENTS OVERVIEW (21-25 NOV):

Monday 21 November

Zoom Video Communications Q3 results

See our top three events, above

Tuesday 22 November

Best Buy Q3 results

The first cracks began to appear in US consumer confidence over the summer as several major retailers warned of challenging times ahead. In August, Best Buy cut its expectations for Q3 and the full year. The company said it expected same-store sales to decline around 11% this fiscal year, a big drop from previous guidance forecasting a decline of 3% to 6%. 

In Q2 sales fell 13% to $10.3bn, in line with lowered guidance, while the company incurred restructuring costs of $34m, primarily due to job cuts in its stores. For Q3, profits are expected to come in at $1.05 a share.

HP Q4 results

Chip shortages and weakening demand for computers have weighed on earnings for the likes of HP and Microsoft this year. When HP reported its Q3 results, the company downgraded its profit forecast for Q4 on the back of a slowdown in notebook sales, which fell 32% in Q3. Revenue in Q3 fell 4.1% year-on-year to $14.7bn, almost $1bn below expectations, primarily due to lower PC sales. However, profit – or non-GAAP diluted net EPS – increased 4% to $1.04 a share, within the expected range.   

Nevertheless, downgraded Q4 guidance sent the HP share price lower. Profit in Q4 is expected to come in at $0.84 a share, down from previous estimates of $1.07 a share, while the full-year outlook is for EPS of $4.07, down from $4.30 previously. 

Wednesday 23 November

UK flash PMIs (November)

In October the UK’s manufacturing purchasing managers’ index (PMI) slid to a reading of 46.2, its lowest level since May 2020. The index has been below 50 points, signalling contraction, for the last three months. November is unlikely to bring much improvement after chancellor Jeremy Hunt raised taxes on business and workers in his Autumn Statement. Meanwhile, the country’s services PMI also slipped in to contraction territory last month with a reading of 48.8 as higher energy prices constrained spending. 

France, Germany flash PMIs (November)

The most recent round of French and German PMI readings were a mixed bag. France’s services activity retained a degree of resilience in October with a PMI reading of 51.7, with the sector buoyed by the French government’s energy subsidy for households. France’s manufacturing PMI dropped to 47.2 last month, partly because French businesses are not covered by the subsidy. 

Meanwhile, Germany’s services PMI was 46.5 in October, the fourth successive reading in contraction territory, while its manufacturing PMI fell to 45.1 from 47.8 in September. November is expected to deliver another month of contraction for France and Germany’s manufacturing sectors.

Fed meeting minutes

See our top three events, above

Deere & Co. Q4 results

Agricultural machinery maker Deere & Company has seen its shares rise steadily since hitting an 18-month low in July. In Q3 revenue rose 22% year-on-year to $14.1bn, comfortably beating estimates of $12.9bn. However, profit came in below forecasts at $6.16 a share, with the company citing disruptions in supply chains and higher costs. This put downward pressure on the company’s operating margin, which dropped to 21.2% from 21.3% a year earlier in the production and precision agriculture division, the largest unit by sales. In the small agriculture and turf division, operating margin fell to 15.2% from 18.5% a year ago. 

Consequently, Deere downgraded the upper end of the range for expected full-year profits to $7.2bn from $7.4bn. Still, the company is on course to increase annual revenue to $47.1bn this year, up from $44bn in 2021. Profits for Q4 are expected to come in at $7.10 a share.

Thursday 24 November

Germany IFO business climate index (November)

German business confidence last month fell to its lowest level since May 2020, but remained above the Covid lows. Sentiment, as measured by the Ifo business climate index, slipped to 84.3 points in October, down from 84.4 in September. Although expectations improved slightly – the Ifo business expectations subindex edged up to 75.6 points in October, versus 75.3 in September – companies remain concerned about the coming months. The recent spell of mild weather is likely to give way to colder temperatures and a difficult winter as high energy prices begin to bite.

Kingfisher Q3 results

See our top three events, above

Dr Martens half-year results

Dr Marten’s results for the year to the end of March delivered better-than-expected pre-tax profits of £214.3m, while revenue also beat estimates at £908.3m, a rise of 18%. The shares hit a four-month high after the results came out on 1 June as investors welcomed reports that the company had overcome supply chain disruptions, rising costs and lockdown restrictions in Vietnam where many of its products are made. 

Since then, the shares have traded choppily between support just above 200p and the resistance level just under 300p that was tested during the summer and again this month. For the current fiscal year, Dr Martens said it expects to see revenue growth in the high teens. The company also expects to be able to offset inflation through P&L. Online sales are expected to grow at least 40%, and EBITDA margin is forecast to reach 30% in the medium term. In July the company reported that it was trading in line with expectations, reiterating its half-year and full-year guidance.   

Friday 25 November

No major scheduled announcements

INDEX DIVIDEND SCHEDULE

Dividend payments from an index's constituent shares can affect your trading account. View this week's index dividend schedule.

SELECTED COMPANY RESULTS

 
MONDAY 21 NOVEMBER RESULTS
Agilent Technologies (US) Q4
Big Yellow (UK) Half-year
Compass (UK) Full-year
Diploma (UK) Full-year
JM Smucker (US) Q2
Molten Ventures (UK) Half-year
Virgin Money (UK)  Full-year
Zoom Video Communications (US) Q3
TUESDAY 22 NOVEMBER RESULTS
Abercrombie & Fitch (US) Q3
Accsys Technologies (UK) Half-year
American Eagle Outfitters (US) Q3
Analog Devices (US) Q4
AO World (UK) Half-year
Assura (UK) Half-year
Babcock International (UK) Half-year
Best Buy (US) Q3
Cranswick (UK) Half-year
Dick's Sporting Goods (US) Q3
Euromoney Institutional Investor (UK) Full-year
HomeServe (UK) Half-year
HP (US) Q4
Jack in the Box (US) Q4
Nordstrom (US) Q3
Telecom Plus (UK) Half-year
VMware (US) Q3
Warner Music (US) Q4
WEDNESDAY 23 NOVEMBER RESULTS
Britvic (UK) Full-year
De La Rue (UK) Half-year
Deere & Co. (US) Q4
Halfords (UK) Half-year
Johnson Matthey (UK) Half-year
Pets at Home (UK) Half-year
Severn Trent (UK) Half-year
THURSDAY 24 NOVEMBER RESULTS
Dr Martens (UK) Half-year
JET2 (UK) Half-year
Kingfisher (UK) Q3
FRIDAY 25 NOVEMBER  
No major announcements  

Note: Company announcements are subject to change. Dates correct at the time of writing.


Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.