The Week Ahead: PMIs for UK and US, easyJet and Tesco results

calendar

Leading manufacturing indicators for September will be published this week for the US and the UK. This week we’ll also see quarterly results on easyJet, one of the hardest hit stocks following the Brexit vote.

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

Monday 3 October

  • US Markit manufacturing PMI for September and construction spending for August
  • UK manufacturing PMI for September

The UK PMI stood at 52.2 in June but IHS Markit chief European & UK economist Howard Archer expects the survey to show “clear” manufacturing expansion in September.

He says: “We suspect that July’s sharp drop in the manufacturing PMI overstated the sector’s weakness in the immediate aftermath of the Brexit vote and that August’s rebound overstated its strength. It is notable that the August manufacturing PMI showed improvement across the board following July’s weakness.”

He notes the CBI’s total order balance stabilised at -5 per cent in September after edging down to this level in August from -4 per cent in July and -2 per cent in June.

He says: “The fact that the overall orders balance stabilised in September despite a modest slowdown in export orders points to some pick-up in domestic demand. Orders were reported to be particularly healthy for food, drink and motor vehicles.

“While the export orders balance dipped in September, it was still pretty close to the two-year high seen in August and “comfortably” above its long-term average.”

Tuesday 4 October

  • Australia interest rate decision
  • UK Construction PMI

Archer says while the latest data suggest that the construction sector has improved from its lows, uncertainties still lie ahead for the sector – particularly regarding clients willingness to commit to major projects, especially in the commercial real estate sector.

He says: “The possibility that the economy will slow appreciably over the coming months despite its current resilience and that the housing market will struggle are also concerns for the construction sector. Commercial property transactions have been particularly weak.”

Wednesday 5 October

  • Tesco (Q2 earnings release)

Investors wait to see if the new management at the company will continue the improvement already seen in June’s results, says Graham Spooner, investment research analyst at The Share Centre.

He says: “Tesco’s chief executive, Dave Lewis, has three key objectives in turning the company around: regaining competiveness in the core UK business, protecting and strengthening the balance sheet and rebuilding trust and transparency with the customer.

“Fierce price competition and promotions are likely to remain a squeeze on margins for some time and the revised strategy is going to take time to implement.”

Thursday 6 October

  • easyJet (Q4 trading update)

Easyjet issued a profit warning immediately after the EU referendum in June and reported a fall in third quarter revenue per seat.

Spooner says: “The shares have underperformed since July but the company got some good news last week as a threatened strike by its pilots was averted. Any comment on fuel costs, which have been rising recently, and prospects for reducing capacity, will be of interest to the market.

“In such uncertain times for European airlines investors will also be looking closely at the guidance for the year ahead – especially given that Michael O’Leary, boss of rival Ryanair, has recently given a downbeat assessment of the industry’s prospects following the Brexit vote.”

  • The ECB publishes the account of its monetary-policy meeting in September

Friday 7 October

  • US employment data for September
  • The 2016 annual meeting of the International Monetary Fund and the World Bank in Washington.