Thursday preview: BoE, Shell, BT, Yellen successor

Thursday is widely expected to see the first interest rate hike by the Bank of England for over a decade, while updates are due from Shell, BT and Morrisons and Donald Trump will reveal his tax bill and Fed Chair Janet Yellen's successor.

While the market is pricing a 90% chance that the Monetary Policy Committee will agree to raise rates by 25 basis points to 0.5%, there were still plenty of people in the City arguing against it.

"Markets can get it wrong and there is a risk of no hike given the Brexit uncertainty and signs of weakness in some quarters of the economy," said Neil Wilson at ETX Capital.

After September’s "hawkish hold", Wilson said the market expected a "dovish hike" in November, with the Bank set to raise rates but sound cautious on the outlook for future hikes.

"November is the ideal window of opportunity to raise rates so that the MPC has ammunition in the event of an economic downturn to ease again."

Meanwhile, Oxford Economics said that with the economic rationale for a hike lacking and some Committee members publicly cautious, a rate hike is by no means a certainty.

"If it goes for a hike on 2 November, the MPC can point to an absence of downside surprises in support of such a move. But the case still looks weak. GDP growth of 0.4% in Q3 was above the Bank’s expectation, although growth in 2017 has undershot the average pace since the current expansion began.

"Meanwhile, the unemployment rate is below the Bank’s 4.5% equilibrium estimate. But headline pay growth flatlined in the latest data. And although CPI inflation reached 3% in September, just shy of letter-writing territory, it is set to fall back as we move into 2018. Last but not least, Brexit uncertainties remain ever-present."

Market participants will also be keeping an eye on developments across the pond, with US President Trump set to announce Fed Chair Janet Yellen's successor. Rabobank said it's now largely viewed as a two-horse race, with hawkish contender John Taylor, Professor of Economics at Stanford University, falling behind Fed Governor Jerome Powell, a candidate viewed as a safe pair of hands and a ‘continuity pick’ having supported Yellen’s cautious stance on interest rates.

On the company front, Royal Dutch Shell is one of many due to report third quarter results on Thursday.

Fresh from completing $4.4bn of asset sales in the North Sea and Gabon a day earlier as it continues its debt trimming blitz, the oil colossus is expected to deliver a net profit of $3.6bn for the quarter.

"We see the potential for Shell to be impacted by a number of one-offs, both positive and negative, which could lead to a volatile quarter," said RBC Capital Markets, also noting that the company will present a strategic update at a 'management day' in a few weeks where it predicted "most of the strategic answers" will be deferred.

Barclays expects Shell to report earnings and cash flow broadly flat quarter on quarter, with the impact of higher prices and margins offset by outages.

Elsewhere, the consensus for BT's second-quarter update is for revenue to drop 1% to £6.0bn with earnings before interest, tax and depreciation down 5% to £1.8bn with a margin of 30%.

Shareholders will be hoping there is no more bad news in the pipeline following the company's profit warning at the start of the year, when it revealed the impact of an accounting scandal in its Italian business was much worse than initially thought.

UBS said it does not expect BT to change its FY 2018 guidance of broadly flat underlying revenue, versus consensus for a 0.3% dip, EBITDA of £7.5-7.6bn versus consensus of £7.52bn, and normalised free cash flow of £2.7-2.9bn, compared to consensus expectations of £2.71bn.

"We look for more visibility on FY 2019 as BT has not yet issued guidance and there are several moving parts including the outcome of the triennial pension review (likely early calendar 2018), Premier League rights auction (likely calendar Q1 2018), the outcome of the latest WLA regulatory review (likely calendar Q1 2018), and the impact of Openreach's FTTH consultation on BT's medium-term capex," said the bank.

Grocer Morrisons will put out a third-quarter trading statement for the 13 week to 29 October as it closes in on the peak trading period, with consensus forecasts for full year earnings before interest and tax of £447m.

Barclays expects to see a fourth consecutive quarter of LFL sales growth exceeding 2%, which it said would be a creditable performance given a somewhat more robust ASDA and continuing strength from the discounters, "though of course food inflation will likely have helped".

RSA Insurance is also among the companies slated to report. RBC Capital Markets expects company to show good premium growth from the rating actions in the UK home business and the momentum in UK motor pricing. It forecasts net written premiums of £4.95bn.

"The statement will be light on actual earnings numbers. We expect that management will provide an update on the large losses from the US and Caribbean hurricanes and Mexican earthquakes as well as the pricing actions taken on the UK Home business. For the remainder of the business, we expect positive management commentary."

Updates from Tate & Lyle and Lancashire will also be in focus. Deutsche Bank expects Tate's management to continue to guide to further underlying progress in FY17/18 but doesn't rule out management updating at some stage the 2020 goals, which the strength of Bulk and weakness of core SFI so far have made more challenging.

As far as Lancashire is concerned, UBS expects "a messy" quarter driven by natural catastrophe losses. "Lancashire has estimated $106-$212m of losses; we assume the mid-point," the bank said, adding that it projects a pre-tax loss of $112m.

Thursday 02 November

INTERIMS
3i Infrastructure, Tate & Lyle

INTERIM DIVIDEND PAYMENT DATE
Downing Four VCT DP2011 Gen A Shs, Downing Four VCT DP2011 Str, Downing Four VCT DP2011 Str A Shs, Downing Four VCT DP2011Gen, Downing Four VCT DSO 'D' Shs, Good Energy Group

INTERIM EX-DIVIDEND DATE
Amati VCT , Bloomsbury Publishing, Braemar Shipping Services, C&C Group, Hilton Food Group, IFG Group, Just Group, Laird, Mission Marketing Group, Morgan Advanced Materials , SThree, Warpaint London

QUARTERLY EX-DIVIDEND DATE
Brunner Inv Trust, JPMorgan Claverhouse Inv Trust, Toro Limited , Unilever

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Continuing Claims (US) (12:30)
Initial Jobless Claims (US) (12:30)
PMI Composite (EU) (09:00)
PMI Manufacturing (EU) (09:00)
PMI Services (EU) (09:00)
Unemployment Rate (GER) (09:00)

Q3
Indivior, Lancashire Holdings Limited, Royal Dutch Shell 'A', Royal Dutch Shell 'B', RSA Insurance Group

IMSS
Schroders

SPECIAL EX-DIVIDEND DATE
Aberdeen Asian Smaller Companies Investment Trust, Artemis VCT, Octopus Apollo VCT, Softcat, TR European Growth Trust

AGMS
Go-Ahead Group, Schroder Japan Growth Fund

TRADING ANNOUNCEMENTS
Amec Foster Wheeler, Croda International, Howden Joinery Group, Intu Properties, Morrison (Wm) Supermarkets, RSA Insurance Group

UK ECONOMIC ANNOUNCEMENTS
BoE Interest Rate Decision (12:00)

FINAL DIVIDEND PAYMENT DATE
Redde

FINAL EX-DIVIDEND DATE
Aberdeen Asian Smaller Companies Investment Trust, Ashmore Group, BlackRock Greater Europe Inv Trust, Dunelm Group, Ideagen, James Halstead, Jupiter Dividend & Growth Trust, Jupiter Dividend & Growth Trust Common, Jupiter UK Growth Investment Trust, NWF Group, Produce Investments, SCS Group , Softcat, TR European Growth Trust, Urals Energy Public Co Ltd. (DI)