The Week Ahead: Good Money Week plus BP, Shell and Next results

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Good Money Week is this week’s protagonist with debates all over the UK on ethical and responsible investing from key industry speakers. This week we’ll also see financial results from BP and Shell, as well as retailer Next.

Fund Strategy looks at some key events shaping the week and what to expect.

Monday 31 October

  • Good Money Week

The campaign to help grow and raise awareness of sustainable, responsible and ethical finance kicks off on Sunday 30 October.

  • Preliminary flash estimate EU and euro area GDP
  • Bank of England – Money and Credit report
  • France – GDP Q3 (preliminary)
  • WPP (Q3 results)

The Share Centre investment research analyst Graham Spooner says advertiser WPP is widely regarded as a global economic barometer.

He says: “It offers a wide range of exposure to both digital media and global markets. Investors will appreciate that the firm got a boost from the EU referendum result and subsequent weakening of Sterling. The group reported further good sales growth news in the second quarter and confirmed its full year guidance for a 3 per cent increase in revenue and sales growth.”

Tuesday 1 November

  • PMI for manufacturing, worldwide – Markit, ISM and others

In September, the PMI covering manufacturing rose to 55.4, the highest reading since June 2014.

  • BP (Q3 results)

Spooner says investors interested in BP should note that management have indicated that production levels for 2016 are likely to be similar to last year, but the moderate rise in oil prices in Q3 compared to the first half of the year should help the firm report better results.

He says: “The upstream exploration and production businesses should report another quarter of profits. Despite a modest recovery in oil prices the group should not be complacent and management will continue on the programme of cost cutting, reducing capital expenditure and streamlining the business. The dividends remain attractive and pressure to cut it should be alleviated.”

  • Royal Dutch Shell (Q3 results)

As the average in oil prices picked up in the third quarter of the year compared to the first half Spooner says Shell should report higher revenues and profitability.

However, he says: “Cost cutting and streamlining of the business will be an ongoing feature and we could still see some asset write-downs. Investors will expect an update on the integration of the BG acquisition and whether it should still expect annual cost synergies of $2.5bn per annum and whether there have been any further divestments, especially in Nigeria and the US as previously indicated. The dividends should remain unchanged.”

Wednesday 2 November

  • Federal Open Market Committee Meeting, Two-day meeting – Federal Reserve

Spooner says: “It is widely thought that the Fed will increase interest rates before the end of this year, but it is not likely to do so just a few days before the US election. As for the jobs report, in September, non-farm payrolls rose by 156,000, which was seen as a little disappointing. Will this week’s report, coming as it does just days before the US election, contain good or bad news? If recent US PMIs and consumer confidence indexes are any guide, it should be good news.”

Thursday 3 November

  • Next (Q3 trading update)

Spooner says: “In September the clothing retailer reported better than expected interim results but revealed that it made more price reductions in its high street stores than analysts had forecast. The market will be watching that area again carefully in these third quarter figures. The weakness in sterling in recent months will also lead to a focus on Next’s margins.

“The market and investors will be interested by the group’s progress with the plan to open larger stores. Furthermore, given the company’s previous downbeat comments on expectations for this year any comments on full year profit forecasts will also be noted by the market.”

  • UK interest rates

The Bank of England cut rates by one-quarter point to 0.25 per cent in August. BoE’s governor Mark Carney hinted that the MPC would consider another cut at this meeting, perhaps to 0.1 per cent.

AJ Bell investment director Russ Mould says since the latest announcement from Carney on a possible further cut in rates, sterling has dropped and economic data stabilised. He adds:”Unemployment remains low, retail sales and industrial production have held relatively firm and the lead-indicator purchasing managers’ indices have rallied strongly.

“The weak pound in particular may be doing Carney’s work for him and the Governor may not want sterling to fall too far, even if weakness could help stoke the inflation he is mandated to deliver.”

  • EU unemployment, September – Eurostat
  • Morrisons (Q3 results)

Mould says the ongoing price war between Morrisons rival firms Aldi and Lidl is “raging on” but Morrisons shares recovered over the past year.

He says:”The key numbers to watch are the like-for-like sales numbers, which have grown for three quarters in a row after a desperate spell. By way of comparison, like-for-like sales grew by 0.7 per cent year-on-year in Q1 and 2 per cent in Q2, excluding fuel and VAT.”

Russ also says investors should look at Morrison’s cost-cutting plan, further debt reduction, and Brexit impacts, in particular what the weaker pound meant for the business.

Friday 4 November

  • US Employment – Bureau of Labor Statistics