A week in advance 25 - 29 January

This coming week sees the overall health of the UK economy in the fourth quarter of 2009 moving heavily into focus. The emphasis moves away from the retail sector and towards such sectors as Media and Pharmaceuticals on the corporate front. Another busy week for corporate fourth quarter 2009 results lies in prospect in the USA.

Economics

One piece of economic data is likely to dominate events in the UK. The first estimate of overall economic growth in the fourth quarter of 2009 (Gross Domestic Product - GDP) is scheduled on Tuesday. The UK stayed in recession during the third quarter period of 2009 unlike many peer economies such as Germany and France. However, the UK is expected to have emerged from recession during Q4 with the Bank of England having extended its so called ‘Quantitative Easing’ measures (November 2009: +£25 billion), and with an ongoing recovery for the rest of the world potentially aiding export performance. Following 18 months of recession, the UK economy is likely to have grown by around 0.3pc over Q4 2009, according to the National Institute of Economic Research.

In the US, events in the credit bathed US housing market remain in focus. Existing home sales data for December is expected on Monday whilst Tuesday sees the latest S&P Case-Shiller monthly house price survey released. The US Central Bank is scheduled to provide its latest pronouncement on interest rate policy on Wednesday. Comments in relation to so called ‘additional measures’ are again likely to gain investor attention although no change in the actual interest rate in expected.

As in the UK, the US Central Bank has effectively been printing money in order to boost the supply of cash in circulation and ward off deflation (falling prices). Investors will be looking to see whether any reduction of such measures is now planned. Finally, Friday sees the US also releasing its first estimate of fourth quarter 2009 GDP. The US economy grew by 2.2pc during the third quarter. The fourth quarter is expected to have proved positive.

Companies

The UK’s largest pay TV operator, BSkyB, is expected to announce its second quarter/half year results on Thursday. The group’s first quarter results proved to be generally positive in tone back in October. The results comfortably exceeded market expectations. Strong demand for pay television, broadband internet and telephone services drove the performance. The company added an impressive 94,000 subscribers over the first quarter. Sky posted an operating profit of £198m for the period, up 9pc on the £182m achieved in the first quarter last year. Revenue for the period rose by 10pc to £1.38billion, underpinned by customer signings. On the downside, the group continues to be overshadowed by regulatory concern. Ofcom was due to publish its review of pay-tv services around December 2009 and January 2010, although this has subsequently been delayed to March (2010). Ahead of the results, market consensus opinion currently denotes a strong hold.

Anglo Swedish pharmaceutical giant AstraZeneca is also scheduled to report its fourth quarter/full year results on Thursday. The group’s third quarter results once again materialised at the high end of analysts’ forecasts back in late October. The performance was aided by continued cost cutting across the group, along with strong sales momentum for certain drugs – high blood pressure drug Toprol-XL benefited from generic withdrawals, whilst the group’s swine flu vaccine enjoyed strong government-led demand. As for the outlook, management remained upbeat, raising current full year earnings guidance by around 7pc. Current consensus analyst estimates look for a 3.4pc increase in full year revenues to $32.68 billion, whilst full year earnings rise by 23.5pc to 630 cents per share. Ahead of the results, market consensus opinion currently denotes a hold.

Other corporate announcements expected over the course of the week include trading updates or results from accounting software company Sage, utility and water group Severn Trent and high street and travel location newsagent WH Smith.

Week Ahead Diary

Corporate Diary

•    Monday –
•    Tuesday – Sage Group (TS), Severn Trent (TS),
•    Wednesday – WH Smith (TS), Britvic (TS), Vedanta Resources (TS)
•    Thursday – BSkyB (I), AstraZeneca (F), Eaga (I), Greene King (TS)
•    Friday – Marston’s (TS), De La Rue (TS)
Key: Full year results (F), Interim results (I), Trading statement (TS)

Economic Diary

•    Monday – US existing home sales data
•    Tuesday – UK Q4 2009 GDP(1st estimate), S&P Case-Shiller house price survey
•    Wednesday – US Central Bank interest rate decision
•    Thursday – US durable goods data
•    Friday – US Q4 2009 GDP(1st estimate)

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. Sources: Dow Jones news, Digital Look.