A week in advance. 7th April- 11th April 2008
By Keith Bowman | 04 Apr, 2008
A week in advance - 07 April - 11 April 2008
Our Equity Analyst, Keith Bowman provides you with his summary of what to look out for in the coming week.
This coming week again sees corporate announcements remaining somewhat subdued, whilst economic decisions and data remain significant.
Economics
In the UK, the Bank of England’s decision over interest rate policy will likely prove the major economic feature of the week. Whilst the Central Bank left rates unchanged (currently 5.25pc) at the March meeting, a series of recent considerations may have heightened the prospects for an April cut. A recent speech from the Bank of England Governor appeared to highlight the balance of economic risks moving to the downside, with Mr King highlighting the view expressed by his US counterparts that a cooling economy should eventually reduce inflationary pressures. Furthermore, a recent construction related activity index released by the Chartered Institute of Purchasing and Supply saw the lowest reading over the last six years, suggesting that the construction sector is really feeling the pressure from the credit squeeze. However, set against this is a jump in February UK inflation figures (2.5pc from 2.2pc in January), although allowances have to be made for recent adjustments made to the basket of goods used by the Office of National Statistics (ONS) to calculate the figure – on an unadjusted basis the figure was unchanged at 2.2pc. On balance, consensus expectations continue to suggest that no change in interest rates will be made, although the balance of opinion remains very finely balanced.
In Europe, the European Central Bank (ECB) is also due to decide on interest policy. A recent weakening in German retail sales may have added to concerns at the ECB that weakness in the US economy is beginning to cast a shadow across Europe. Whilst still elevated inflationary data is likely to result in a no change decision, a growing number of economies believe that the ECB will eventually be forced to cut rates in order to head off a slowdown in economic activity. Interest rates in Europe have remained on hold at 4pc since early June last year.
In the USA and following a significant cut in interest rates (3/4 of a percent to 2.25pc) back in mid March, minutes of the policy meeting which led to the move may prove the key feature for investors. Whilst clues as to whether the US Central Bank has finished cutting rates or not may for now prove elusive – given the degree of uncertainty surrounding events in the housing and credit markets – investors may well scrutinise the minutes closely.
Companies
On the corporate front, general retailer Signet Group is due to report its latest full year results on Wednesday. Back in early February, the Anglo-American jewellery retailer whose brands include H.Samuel and Ernest Jones reported a 6.7pc decline in like-for-like sales over the fourth quarter trading period. Weak consumer sentiment, particularly in the USA on the back of declining house prices, has seen trading become increasingly challenging. The US division, where brands include Kay and Jared, currently generates around three quarters of group sales and concern for the health of the US consumer in particular has seen the share price down by nearly 50pc over the last 12 months alone. With the group reporting in US dollars, current consensus analysts’ forecast for full year pre-tax profits stand at around $335m, down 15.7pc on last year. The dividend is expected to be left unchanged, whilst the management’s outlook statement will be as important as ever. Market consensus opinion is for now a weak hold.
Staying on the high street, travel group Thomas Cook Group is expected to provide a trading update at its Annual General Meeting (AGM) in London. This major travel group, now a constituent in the UK’s premier FTSE-100 index, was formed back in June last year following the merger of the UK’s MyTravel group and Germany’s Thomas Cook Group. Not only will investors be looking to assess current and forward trading from any comments, but the impact of high oil prices on the group’s near 100 airline fleet would prove of importance. The current consensus analysts’ forecast for full year 2008 pre-tax profit stands at around £440m.
Other corporate announcements expected over the course of the week include results and trading updates from gaming group 888 Holdings, mining group Eurasian Natural Resources and drinks group SAB Miller.
Week Ahead Diary
Full Year Results
Monday – Charles Taylor
Tuesday – 888 Holdings
Wednesday – Signet, Eurasian Natural Resources
Thursday – Hardy Oil & Gas
Friday – n/a
Half Year Results
Monday – Carr’s Milling Industries
Tuesday – n/a
Wednesday – n/a
Thursday – n/a
Friday – n/a
Trading Statements
Monday – n/a
Tuesday – n/a
Wednesday – n/a
Thursday – Thomas Cook
Friday – SAB Miller
Economic Diary
Monday – n/a
Tuesday – Minutes from the US Central Banks last interest rate policy meeting (on 18th Mar08)
Wednesday – n/a
Thursday – Bank of England interest rate decision, European Central Bank interest rate decision
Friday – n/a
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: Digital Look.
