A week in advance 23 - 27 November

This coming week sees attention once again focusing on the overall UK economic strength, while the corporate results season remains ongoing. In the US, the week is cut short by the Thanksgiving Day holiday on Thursday.

Economics

In the UK, the second estimate for overall economic performance – Gross Domestic Product (GDP) – during the third quarter period of 2009 is expected to be announced on Wednesday. The initial estimate provided back in late October surprised the majority of economists. The UK, against expectations and unlike many countries such as Germany, France and the USA, remained in recession over Q3 2009 – the sixth consecutive quarterly period. The economy contracted by 0.4pc, significantly below the consensus economist forecast of a 0.2pc gain. Details in the Bank of England’s recent quarterly inflation report appeared to provide some grounds for a possible positive. A current economists’ consensus forecast suggests a revision to around 0.2pc.

In the US, data in relation to the housing market features high on the agenda for investors. Existing (secondary) home sales data for October is scheduled for Monday. In September, sales rose by 9.4pc aided by the Government’s tax incentive – the highest level in two years. On Tuesday the latest house price survey from S&P Case-Shiller covering the month of September is due. In August, house prices across 20 US cities rose by 1pc, the third consecutive monthly rise.

Away from the US housing market, minutes in relation to the US Central Bank’s most recent interest rate policy meeting from early November (3rd and 4th) are expected to be released. With comments accompanying the November policy meeting suggesting that additional factors in tandem with economic growth, such as employment and inflation trends, would be evaluated before increasing interest rates, investors will be looking for any further in-depth explanation.

Finally, a number of so called ‘forward looking’ indicators are due over the shortened week. Results from different consumer confidence surveys are expected to be announced on both Tuesday and Wednesday. A number of such surveys have indicated a downward trend in consumer confidence over the last month or so, a pattern investors would rather not see continued.

Companies

On the corporate front, platinum refiner and manufacturer of pollution control systems, Johnson Matthey, is scheduled to report its half year results on Wednesday. As a major manufacturer of catalytic converters for motor vehicles, the group’s fortunes have been fairly closely linked to the car industry over recent years. As such, profits have been declining for a number of quarters. However, a series of Government stimulus schemes around the world aimed at generating new car sales have provided a boost to sales. Although earnings are still likely to have declined as of these half year results, investors will be monitoring management comments closely in order to assess prospects for the second half. Furthermore, emissions legislation continues to support company sales, whilst auto sales in the emerging market arenas have proved impressive over recent months. Ahead of the results, market consensus opinion currently denotes a hold rating.

On the same day, contract catering group Compass is due to report its full year results. Trading at the group has proved reasonably resilient to date. The group’s late September trading update saw management highlighting another progressive performance. Profit margins have continued to increase, aided by the group’s ongoing efficiency programme, whilst significant overseas business and the decline in the pound have created a sizeable currency boost to revenues and profits. In addition, the group also noted that the year to date has seen the level of new contract wins and underlying retention remaining strong across the business. Current consensus analyst estimates for the company’s full year pre-tax profits stand at £755m (+33.4pc over last year). Ahead of the results, market consensus opinion currently denotes a buy.

Other corporate announcements expected over the course of the week include results or trading updates from electrical retailer DSG International, utility groups Severn Trent and United Utilities, along with defence company QinetiQ Group.

Week Ahead Diary

Corporate Diary

•    Monday – Northumbrian Water (I)
•    Tuesday – Severn Trent (I), De La Rue (I), Intermediate Capital Group (I), KCOM Group (I),
•    Wednesday – Johnson Matthey (I), Compass Group (F), The London Stock Exchange (I), Britvic Group (F), QinetiQ Group (I), United Utilities (I)
•    Thursday – DSG International (I), Mitchells & Butlers (F), Daily Mail & General Trust (F),
•    Friday – Carphone Warehouse Group (I)

Key: Full year results (F), Interim results (I), Trading statement (TS)

Economic Diary

•    Monday – US existing home sales data
•    Tuesday – US S&P Case-Shiller house price survey, US consumer confidence survey
•    Wednesday – UK GDP Q32009 second estimate, US Central Bank meeting minutes
•    Thursday – Nationwide monthly house price survey
•    Friday – UK Land Registry house price survey

Note: This list represents what we believe are the highlights of the coming week and is not an exhaustive list of company announcements or economic events. Source: Dow Jones news, Digital Look.