Thursday preview: Bank of England in focus, Next and Morrisons report

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Thursday preview: Bank of England in focus, Next and Morrisons report

Wed, 13 September 2017
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Thursday preview: Bank of England in focus, Next and Morrisons report

(ShareCast News) - Bank of England rate setters will reveal the fruits of their deliberations on Thursday, while on the corporate front there are results from Next and Morrisons.
The Monetary Policy Committee will announced their decision on interest rates and asset purchases at midday, with minutes of the meeting also released.

Although inflation is much higher than the Bank's 2% target, there is not expected to be any change in interest rates or asset buying this month, or for a while longer according to many economists.

"Our view is that UK monetary policy will remain unchanged again this month, although the risk is the MPC sounds increasingly uncomfortable about a sleepy market attitude to interest rates," said Deutsche Bank.

The bank's macro strategists expect the BoE will remain on hold until uncertainty about the Brexit transition diminishes.

"Too many aspects of the policy trade-off hinge on the outcome. There are justified concerns about the profile of future spare capacity and inflation, but protestations about these may cut little ice with the market absent a clear acceleration in wage growth or resolution of political uncertainty. Indeed, a reversal of the emergency cut from last year, which cannot be entirely discounted before year end, might serve to further lower expectations of growth, and thus be counterproductive."

With inflation increasing again in July, real core average weekly has been negative for a fourth consecutive month and Barclays expects it will "remain in negative territory for the rest of the year, weighting on consumption and likely deterring the BoE from any imminent rate hike despite upside surprise in August inflation".

Analyst Neil Wilson at ETX Capital added that the stuttering wage growth figures and subsequent drop in the pound reflect the fact that the conditions are not yet in place for any tightening.

"Nevertheless, the rally in sterling looks ominous for a hike sooner rather than later, and a sign that the market is at long last starting to take seriously some of the more hawkish language we've heard over the last few months.

"In the minutes of its last meeting on August 3rd the Bank said that monetary policy could need to be tightened by a somewhat greater extent than financial markets are suggesting. Carney said outright in the press conference that one hike over the next three years would not be enough to tame inflation."


Next is due to publish half-year results having already issued a quantitative second quarter sales update, showing improved trends and fine-tuned full year guidance.

UBS analysts expect minimal change in gross margin, but a deterioration in cost ratios from retail deleveraging which they see driving a circa 11% decline in first-half PBT.

"Q3 sales will not be released until 1 October, but six weeks into the Autumn/Winter season, Next should have some feel for whether self-help measures are continuing to deliver results."

Deutsche forecasts pre-tax profits will have declined 17% to £284m, overwhelmingly due to the weak sales performance of the store-based retail channel.

However, analysts expect the interim 53p regular dividend to be retained, the 45p per quarter special dividend to be reiterated and even see scope for management to suggest a resumption of a small buyback if the seasonal peak sees further improvement in momentum.

Supermarket group Morrisons is also due to release half-year results, with consensus pointing to PBT of £176m.

UBS sees "some headwinds and some tailwinds" during the half, forecasting EBIT of £215m, PBT of £172m and net profit of £132m.

Following LfL of +3.4% in the first quarter, the Swiss bank forecasts +2.9% in the second.

Thursday, 14 September

RICS Housing Market Survey (00:01)
Retail Sales (09:30)
BoE Interest Rate Decision (12:00)

Continuing Claims (US) (13:30)
Initial Jobless Claims (US) (13:30)
Consumer Price Index (US) (14:30)


Ophir Energy, Property Franchise Group, GVC Holdings, Regional REIT Limited, Gresham House, Forbidden Technologies, Morrison (Wm) Supermarkets, Corero Network Security, Warpaint London, Next

Safestore Holdings, Booker Group

Abzena, Arian Silver Corporation (DI), Columbus Energy Resources, Falcon Oil & Gas Ltd., JPMorgan Brazil Inv Trust, Miton UK Microcap Trust, Worldwide Healthcare Trust, Colefax Group, Mobeus Income & Growth 2 Vct, Datatec Ltd. (DI), Xafinity

Colefax Group

Trifast, Jupiter Green Inv Trust, BCA Marketplace, South32 Limited (DI), Sophos Group, UniVision Engineering Ltd., Filta Group Holdings

Derwent London, Standard Life Equity Income Trust, Ediston Property Investment Company, Alpha Fx Group, Holders Technology, Tex Holdings, Highland Gold Mining Ltd., JPMorgan European Investment Trust, Highcroft Investment, Xaar, JPMorgan European Inv Trust Growth Shares, Sanne Group, BBA Aviation, Communisis, Zotefoams, Centaur Media, Total Produce, Computacenter, ECO Animal Health Group, Foresight VCT, Stobart Group Ltd., PPHE Hotel Group Ltd, Costain Group, A&J Mucklow Group, 888 Holdings, Henderson Diversified Income Ltd, Equiniti Group, Carr's Group, Harworth Group, Lighthouse Group, F&C Managed Portfolio Trust Income Shares, Gocompare.Com Group, Restaurant Group
RPS Group, Inmarsat, Octopus AIM VCT 2, Belvoir Letting

4Imprint Group, Quartix Holdings

Assura, XP Power Ltd. (DI)