Still all about banks in coming week as Bank of England finally deciding on interest rate, Standard

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The coming week will finally put an end to speculation on whether the Bank of England plans to raise the interest rate, while, sticking to the banking theme, Standard Chartered will be the last of its peers to release an update.


It’s set to be a busy week for FTSE 100 watchers with British Airways owner IAG, BT, BP, Sainsbury’s and Next all releasing updates.


In the FTSE 250, more airlines will take the lead with easyJet and Wizz Air landing results, alongside fellow transport heavyweight Trainline.


Macro matters


Central bank chat is going to dominate the markets during the week, with a Bank of England meeting on Thursday that many people expect to result in an interest rate hike.


This comes a day after the US Federal Reserve divulges its latest policy decision, where it could steal the BoE’s thunder by announcing its long-awaited tapering of quantitative easing.


However, while 2021 has so far seen 72 rate hikes and 10 cuts, according to the CBrates website, the Federal Reserve is not expected to raise rates this time around, although with heightened levels of inflation financial markets are pricing in a greater likelihood of tighter policy in 2022.


As for the BoE, the argument is finely balanced, just a few weeks after its Monetary Policy Committee voted to stand pat on rates and QE unchanged in September, though it was the second meeting in a row where at least one member voted to taper the amount of QE stimulus.


In a speech on 17 October BoE governor Andrew Bailey said that the bank “will have to act” to rein in inflation, while a few days later chief economist Huw Pill said the central bank would face a “live” decision on whether to raise rates and that the Bank’s policy committee was “finely balanced” on the matter.


Among those predicting a rate rise are Goldman Sachs (NYSE:GS), while economists at ING said it is “a close call between a November and February move, but we suggest the former is more consistent with the governor’s latest hints”.


While markets are forecasting around a 90% chance that of a BoE hike, they are also simultaneously flagging a potential policy error by the BoE, namely an overreaction to near-term inflation risks followed by cuts in 2023 to compensate for the mistake.


Either way, there could be some explosive (or confused) market reaction on Wednesday and Thursday.


Pressure in the cabin


Airlines results are scheduled to land during the week and, with the disappointment of another stop-start summer, analysts expect the numbers to make more uncomfortable reading.


Liberum summed up the mood in its preview describing the third quarter of 2021 as “better but still awful”.


“We expect the forthcoming September quarter results season to show a disappointing summer. While not as bad as 2020, travel activity remained hampered by ongoing travel restrictions.


“Nonetheless, we see the industry as firmly on the recovery path, albeit with risks through the winter if some countries temporarily reverse the relaxation of restrictions.”


Ryanair gets the ball rolling on Monday with Liberum predicting second-quarter revenue of EUR2.1bn and net profits of EUR264mln, against a loss last year of EUR23mln.


British Airways owner International Consolidated Airlines Group (LSE:IAG) SA releases its third-quarter results on Friday, with the broker predicting more red ink and net losses of GBP618mln, though this would be half the deficit of a year ago.


Standard Chartered to finish off banks streak


On Tuesday, Standard Chartered PLC (LSE:STAN) will complete the third-quarter update season for the FTSE 100 banks.


Back in August, StanChart said it expects income to be flat this year with an uneven recovery from Covid-19 across its markets.


The bank has a big presence in India as well as Asia and other emerging markets and half-year profits jumped 57% to US$2.56bn thanks to unravelling its bad debt provisions.


Operating income fell 6% to US$7.63bn as a record first half for wealth management and strong banking trading were offset by lower interest rates.


Profitability or net interest margin (NIM) was stable at 1.22% while expenses rose 8% to US$5.1bn.


Boss Bill Winters said the group is restarting interim dividend payments at 3 cents, which will be one-third of the full-year total.


The emerging markets-focused lender is expected to follow a similar pattern to its peers, said analyst Sophie Lund-Yates at Hargreaves Lansdown.


With Barclays, HSBC and Lloyds seeing profits improve greatly, she also expects Standard’s diverse business model to have continued to offer some shelter in the low-interest rate environment.


“Low rates mean banks’ loans aren’t as profitable, which shines the light on the group’s wealth management and investment banking businesses instead. However, Standard Chartered is more exposed to Asian markets than its Western rivals. Around 83% of quarterly profits come from Asia in fact. HSBC’s recent results showed that Asian markets aren’t faring as well as western areas, which could be a negative sign for Standard’s Q3 income.”


BP still facing environmental woes


BP PLC (LSE:BP.) is the next global energy firm to walk the PR tightrope, balancing the narrative of managing a fossil fuel amidst rising sales prices and its aims to transition its business to net-zero emissions.


In terms of the operating environment and its financials, there should be little if any surprises on Tuesday’s update.


“Investors should already have a flavour of things by the time BP steps up to release its result for the July-to-September period,” AJ Bell said in a preview note.


“However, investors are already voting with their feet (or at least their money).


“BP’s shares may be up 80% over the past year but they are trading well below the levels seen in 2010 and 2014, when oil last traded at around US$86 a barrel – BP traded at around 650p and 450p respectively.”


No more upgrades for Next?


Next PLC (LSE:NXT) is posting its much-awaited third-quarter update on Wednesday and the market, as usual, as high expectations.


The FTSE 100 retailer has been going from strength to strength and emerged from the pandemic even better than before, having picked up market share from fallen high street competitors and playing its cards well in terms of online shopping.


Having a penchant for modest forecasts, it has been reporting better than predicted sales a few times in a row.


Analysts at UBS forecast online full-price sales growth of 44% compared to 2019, retail down 3% and finance down 6%.


They also expect full-year profit before tax to come in at GBP820mln, which is higher than the company’s estimate of GBP800mln, however they don’t expect further upgrades.


“Next already upgraded full-year 2022 profit before tax guidance (for the fourth time) at the interims, only a month ago and most of the scope for upside surprise comes in the fourth quarter given current guidance implies a significant slowdown compared to the third quarter. The fourth quarter is also Next’s largest period in absolute sales given peak trading,” the Swiss bank commented.


“We would expect the market to focus on any further news around key short-term debates such as stock levels and seasonal worker availability.”


Trainline at the barrier


Investors in online ticker-seller Trainline will be hoping for a continuation of its recovery from COVID disruption.


In September’s trading update, the FTSE 250 firm flagged a 179% jump in ticket sales over the six months to the end of August. For that period, revenues at the group rose 151% to GBP78mln and it said it expected to post an underlying interim profit of between GBP13-15mln.


At that time, it guided that net ticket sales for 2021 would be in the range of GBP2.4-2.8bn and underlying profits of between GBP35-40mln.


The market will keenly eye the actual interim results come Wednesday to confirm the financial performance and get an updated outlook through the remainder of this year.


Sainsbury’s results in the basket


Thursday is coming with grocery heavyweight J Sainsburys PLC’s interim results, which are facing some tough comparisons to last year, when trips to the supermarket were the most eventful activity UK residents could aspire to.


It’s also a tricky time for retailers as inflation is pushing prices up, but the FTSE 100 group is trying to keep a lid on them in line with the pledge to improve its value position.


“That all puts added pressure on margins that are already a little stretched. Online sales continued to improve in the last quarter. It’s important this trend continues,” said Matt Britzman, analyst at Hargreaves Lansdown.


“If it doesn’t, the extra costs associated with adding online capacity add up to another drag on margins. Owning Argos, the group is more exposed to shifts in discretionary spending than its rivals. Last year was a bumper one for general merchandise sales, giving some tough comparable numbers. Sales were ahead of expectations in the first quarter, albeit down year-on-year, but supply challenges are likely to remain a challenge.”


BT drama


BT Group PLC (LSE:BT.A)’s latest news was that it has appointed advisory firm Robey Warshaw to head off any potential takeover attempt from French billionaire and shareholder Patrick Drahi.


Altice, Drahi’s vehicle, took a 12% stake in June and at that time was ostensibly friendly, but its six-month bid preclusion period ends in early December and possibly BT is being wise to bolster its defences just in case.


Openreach, the broadband network, is the key to Altice’s interest but the competition here is mounting with the formation of VMO2 and the possibility it will link with Sky or TalkTalk.


UBS expects BT’s update on Thursday to show second-quarter revenues of GBP5.18bn, down slightly on a year ago, with underlying profits of GBP1.88bn, again a slight dip.


Significant announcements expected for the week ending on Friday 5 November:


Monday 1 November:


Trading updates: Gran Tierra Energy Inc (TSX:GTE, LSE:GTE, NYSE-A:GTE, ETR:G1P)


Interims: Ryanair Holdings PLC (LSE:RYA)


Finals: K3 Capital Group PLC (AIM:K3C), Lokn Store Group PLC


AGMs: Vietnam Holding Ltd


Economic data: PMI Manufacturing (UK and US), Construction Spending (US), Auto Sales (US)


Tuesday 2 November:


Trading updates: BP PLC, Standard Chartered PLC, Flutter Entertainment PLC (LSE:FLTR), Activision Blizzard Inc (NASDAQ:ATVI), Hiscox Ltd (LSE:HSX), IWG PLC (LSE:IWG)


Interims: FD Technologies PLC


Finals: Oncimmune Holdings PLC (AIM:ONC), Up Global Sourcing Holdings PLC


AGMs: JP Morgan Mid Cap Investment Trust PLC, Murray Income Trust plc (LSE:MUT)


Wednesday 3 November:


Trading updates: Coca Cola HBC AG (LSE:CCH), Next PLC, Amryt Pharma PLC (AIM:AMYT, NASDAQ:AMYT), Novo Nordisk (NYSE:NVO) A/S, Smurfit Kappa Group plc (LSE:SKG)


Interims: Braemar Shipping Services (LSE:BMS) PLC, Esken Ltd (LSE:ESKN), Trainline PLC (LSE:TRN)


Finals: Nanoco Group PLC (LSE:NANO)


AGMs: Hansard Global (LSE:HSD) PLC, Manchester and London Investment Trust PLC


Economic Data: MBA Mortgage Applications (US), Factory Orders (US), Crude Oil Inventories (US), PMI Composite (US), PMI Services (US), ISM Prices Paid (US), ISM Services (US)


Thursday 4 November:


Trading updates: Aston Martin Lagonda Global Holdings PLC (LSE:AML), Apax Global Alpha Ltd, Barrick Gold Corp, Derwent London (AIM:DLN) PLC, Deutsche Post ADR, Howden Joinery Group (LSE:HWDN) PLC, Lancashire Holdings Ltd (AIM:LRE, OTC:LCSHF), Smith & Nephew PLC (LSE:SN), TI Fluid Systems PLC (LSE:TIFS)


Interims: BT Group PLC, Electrocomponents PLC (LSE:ECM), J Sainsburys PLC, Wizz Air Holdings (AIM:WIZZ) PLC, Tate & Lyle (LSE:TATE) PLC


Finals: Gattaca PLC (AIM:GATC)


AGMs: Argos Resources Ltd (LSE:ARG), Capital Metals PLC (LSE:CMET), Induction Healthcare Group PLC (AIM:INHC), NCC Group PLC (LSE:NCC), Provexis (AIM:PXS) PLC


Economic Data: PMI Construction (UK), BoE Interest Rate Decision (UK), Initial Jobless Claims (US), Continuing Claims (US), ISM Manufacturing (US), ISM Prices Paid (US)


Friday 5 November:


Trading updates: International Consolidated Airlines Group SA, Beazley PLC


Interims: Kainos (LSE:KNOS) Group PLC


AGMs: Go-Ahead Group PLC


Economic Data: Halifax House Price Index (UK), Non-Farm Payrolls (US), Unemployment Rate (US), Consumer Credit (US)

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