Pricing trends both here and in the US move squarely back into focus over the coming week. Trading updates continue to dominate the corporate front, whilst in the US, the second quarter results season commences - companies such as Intel, J.P.Morgan and General Electric are set to report over the course of the week.
Economics
The delayed third and final estimate for UK first quarter Gross Domestic Product (GDP) is expected on Monday. The second estimate provided in late May was in line with economists’ estimates of an upward revision to +0.3 percent from an initial estimate of +0.2 percent. This followed stronger-than-expected industrial production. Growth is expected to be revised up further to +0.4 percent according to the National Institute of Economic and Social Research, equalling that achieved in the fourth quarter of 2009.The debate between inflation (rising prices) or deflation (falling prices) is expected to return to focus on Tuesday when Consumer Price Index (CPI) data for June is released. Whilst the current ultra low Bank of England interest rate policy appears set to combat deflation, recent monthly CPI readings have suggested inflation could be more of a problem. Prices rose 3.4 percent year-on-year (+0.2 percent on the month) in May, well above the Bank of England’s 2.0 percent target rate. Concerns were voiced by Monetary Policy Committee (MPC) member Andrew Sentance at the June meeting, as he voted for a 0.25 percent increase. Investors continue to monitor the data closely. Finally, the latest unemployment figures are set to be announced on Wednesday.
The debate between inflation or deflation also return to the limelight in the US. Consumer Price Index (CPI) data for June is due to be released on Friday. However, deflation still appears to remain the primary concern. The CPI reading fell 0.2 percent on the month (+2.0 percent on the year) in May, following a 0.1 percent decline in April. The week also sees the latest retail sales and industrial production data released.
Companies
Children’s retailer, Mothercare, is expected to provide investors with its first-quarter trading update on Thursday. The group’s May full year results proved to be generally robust in nature. Group sales rose by just under 6 percent to £766.4m, while adjusted underlying profit rose 15.9 percent to £52m. The group’s overseas sales continued to expand, increasing 21.4 percent to £490.9m, with the company launching both the Mothercare brand in Australia and the ‘Early Learning’ brand in South Africa during the year. On the downside, management did highlight a more challenging UK environment, although the group’s burgeoning international sales are expected to help counterbalance this. Ahead of the update, market consensus currently denotes a strong hold.Barratt Developments, owner of such brands as Wilson Bowden, Barratt Homes and David Wilson, is expected to report its full year trading update on Wednesday. Management continued to report recovery in the group’s mid-May trading statement. Forward sales rose 32 percent for the 19 week period, against the comparative period last year. Average selling prices increased by around 15 percent, largely due to a change in the sales mix - houses now represent around 60 percent of total volumes compared to 46 percent the previous year. In all, price increases driven by the change in the sales mix and continued cost-cutting measures were expected to improve the company’s profit margin. Management expected this to enable the group to move back into profit during the second half of the year. Prior to the trading update, market consensus currently denotes a buy.
Other corporate announcements expected over the course of the week include results and trading updates from luxury goods group Burberry, takeaway group Domino’s Pizza and credit checking company Experian.
Week Ahead Diary
Corporate Diary
Monday – Domino’s Pizza (I),
Tuesday – Burberry (TS), Intermediate Capital (TS), Computacenter (TS)
Wednesday – Barratt Developments (TS), ICAP (TS), J.D Wetherspoon (TS), London Stock Exchange (TS),
Thursday – Mothercare (TS), Experian (TS), Premier Oil (TS)
Friday –
Key: Full year results (F), Interim results (I), Trading statement (TS)
Economic Diary
Monday – UK GDP Q1 2010 final estimate
Tuesday – UK Consumer Price Index (CPI) data, RICs monthly house price survey data, US international trade data
Wednesday – UK unemployment data, US retail sales
Thursday – US industrial production,
Friday – US Consumer Price Index (CPI) data
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.
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