The speed at which the UK economy is growing moves into centre stage over the coming week. On the corporate front, the focus begins to move towards second quarter/half year results, whilst in the US, the second quarter results season is already well under way.
Economics
The first estimate for UK Gross Domestic Product for the second quarter of 2010 is expected to be announced on Friday. The third and final estimate for the first quarter saw the economy growing by 0.3 percent, fractionally below the 0.4 percent recorded in the fourth quarter of 2009. The economy is expected to have grown by a much improved 0.7 percent, according to the much respected National Institute of Economic and Social Research (NIESR). A pick up in industrial production is expected to have been a core driver. Some production from Quarter 1 may have been shifted into Quarter 2 thanks to the exceptionally snowy conditions early this year.
The release of the Bank of England’s July interest rate policy meeting minutes on Wednesday also looks likely to receive close investor attention. The minutes surprised investors in June. Monetary Policy Committee (MPC) member Andrew Sentance voted for a 0.25 percent increase to 0.75 percent against expectations for a unanimous vote. Despite the broader Bank of England view, expressed in the May quarterly inflation report, that UK inflation is undergoing only a temporary spike, Mr Sentance would appear to be unconvinced. Investors will be eager to see whether he has persuaded any fellow committee members to support his view.
The US housing market, arguably the core focus for the current credit crisis, returns to centre stage over the coming week. The National Association of Home Builders releases its latest survey on Monday, whilst Tuesday sees the announcement of monthly housing start figures. Building permits to commence construction fell 10 percent between April and May, below expectations, according to the last report issued in June. This is attributed to the government withdrawing a housing related tax credit aimed at encouraging buyers. The focus moves to the secondary market on Thursday, with the expected release of existing home sales data. Similarly, May figures released in June also disappointed. Sales materialised at 5.66 million during May, below a consensus estimate of over 6 million. With much of the excess credit before mid-2007 finding its way into property, the sector remains an important bellwether for many economies globally, particularly the US.
Companies
Pharmaceutical and consumer health goods giant, GlaxoSmithKline, is expected to provide investors with its second quarter/half year results on Wednesday. The group’s late April first quarter results generally topped analyst expectations. Group sales rose 17 percent to £7.4 billion, aided by swine flu and hepatitis vaccine sales, with newer medicines like the breast cancer drug Tykerb also contributing. Encouragingly, sales excluding pandemic products improved 4 percent on a constant currency basis. Looking towards the second quarter results, a re-balancing of group costs is expected to drag on earnings during the quarter, although underlying sales trends are generally forecast to continue improving over the course of the full year. This is supported by a group focus on emerging markets and an aging population in Japan. Market consensus currently denotes a strong hold prior to the results.
Kingfisher, owner of such brands as B&Q, Screwfix and Castorama, is expected to report its second quarter trading update on Thursday. Trading materialised broadly in line with management expectations in the group’s first quarter announcement in June. 'Self help' initiatives helped drive profitability, although sales were impacted by the snowy weather at the start of the quarter and tough comparisons. As for Quarter 2, sales related to the World Cup were expected by management to aid performance. Progress in emerging markets such as China and Turkey also remains high on the agenda for investors, whilst signs of any impact on consumer confidence from the European government debt crisis will be sought in trading comments covering Castorama and Brico in France. Market consensus currently denotes a buy ahead of the trading update.
Other corporate announcements expected over the course of the week include results and trading updates from gaming group William Hill, property group Land Securities and mobile phone network operator Vodafone.
Week Ahead Diary
Corporate Diary
Monday –
Tuesday – IG Group Holdings (F), Severn Trent (TS), William Hill (TS)
Wednesday – GlaxoSmithKline (I), Johnson Matthey (TS), Land Securities (TS), Cable & Wireless Communications (TS)
Thursday – Kingfisher (TS), International Personal Finance (I), De La Rue (TS)
Friday – Vodafone (TS), United Utilities (TS), Fuller Smith & Turner (TS)
Key: Full year results (F), Interim results (I), Trading statement (TS)
Economic Diary
Monday – US NAHB housing survey
Tuesday – UK public sector finances, US housing starts,
Wednesday – UK interest rate policy meeting minutes
Thursday – US existing home sales data,
Friday – UK Q2 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.
