Thursday preview: Dovish ECB expected, WPP could turn cautious

The European Central Bank is forecast to leave its main policies unchanged in its meets this week, following a March meeting when the market made a rather hawkish interpretation of the outcome.

As a result, at Thursday's post meeting press conference President Mario Draghi is likely to purposely look to strike a more dovish tone, along the lines of a speech given earlier this month, said economists at RBC Capital Markets.

Draghi emphasised that, despite an improving growth backdrop, the conditions for the ECB to even begin to consider tightening policy had yet not yet appeared.

Ben May at Oxford Economics said the absence of underlying inflation pressures were the missing piece of the puzzle: "Although there are tentative signs that inflation may have reached a turning point, we expect ECB language to remain distinctly dovish for some time yet and no policy tightening until 2018."

May's calculation of cyclical underlying inflation may be starting to turn up, albeit from a low starting point, with a continuation of this trend maybe prompting a gradual adjustment to the ECB’s tone.

By the autumn he thinks "there may be enough evidence for the ECB to conclude that both wage and underlying inflation measures may be trending higher and that a tapering of QE from the start of 2018 is warranted".

Rabobank's Jane Foley noted this week’s moves in the Eonia forward euro interbank interest rate has suggested a 30% rise in the implied probability of a deposit rate hike by December even though Draghi's guidance suggests that it is unlikely to make any actual changes to policy before the end of this year.

"That said, in preparation for a potential end of unconventional measures in 2018, it is possible that the Governing Council will gradually change its tone over the course of 2017."

With Draghi last month indicating there was no longer a sense of urgency with respect to policy measures, she expects further changes in language as we proceed through 2017 regarding the ECB’s guidance or its economic outlook.

Broadly speaking, a less dovish ECB should be supportive to the euro, Foley said.

Corporate focus: Lloyds, WPP, Meggit and Howden

First quarter results from Lloyds Banking come as the Government close to selling up its stake.

This time last year, headline operating profit came to £2.05bn but net profit was just £531m as the profit and loss account was hit by £149 million of write-downs, £115 million of conduct provisions and £161 million of restructuring.

Analysts at Barclays anticipate little new information on the dividend outlook but expect the capital position to be strong and anticipate a relatively flat performance with both income and costs fairly stable, before taking account of provisions.

Although the analysts forecast a significant increase in provisions, expecting £550m in exceptional items including £350m relating to PPI.

"A regulatory review of consumer credit and a competition commission review of Lloyds’ proposed acquisition of MBNA’s UK credit card book are likely to be other areas of focus."

The trading update will be a good test of sentiment toward the stock, said broker AJ Bell, with good news for the profits once Lloyds can get restructuring and provisions under control

"Watch growth in loans, deposits and risk-weighted assets as all have consistently fallen as Lloyds has tried to shrink itself back to health. Also watch for any comments on Brexit, the housing market and also the MBNA purchase and push into credit cards, as well as any comment on the HBOS/small business scandal."

Sir Martin Sorrell's ad giant WPP reports first-quarter results, with the market expecting net organic sales growth of 0.8%, a slowdown from 2.1% in the fourth quarter, mainly reflecting the impact of the AT&T in the preceding quarter and VW in this latest period as well as weaker trends in FMCG.

WPP said like-for-like sales were up 1.2% in January and guided "conservatively" to 2% for the full year, down from 3% due to the impact of account losses.

Goldman Sachs said it expected the main focus to be on the outlook, with more caution eyed on FMCG spend, especially following the April announcement from top client Unilever of a 200-250 basis point marketing spend cut over 2017-2020.

Barclays analysts said they'd had more incoming requests on Meggitt than any other company this quarter, following the 20% cash beat and the unexpected guide to 2021 provided at the annual results.

The capital markets day on 16 May "should be a much more meaningful event" than the trading update, which is typically light in detail.

Looking at retailer Howden Joinery, Numis expect a short statement on the first period to mid-April focussed on revenue growth, with recent guidance pointing to revenue up 3.6% over the first two months, with London and the South East slightly below last year and the rest of the UK flattish.

"Given that Howden also raised prices in November, some comment about how the price increase is sticking relative to FX-driven cost pressures will also be expected."

Thursday 27 April

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Continuing Claims (US) (13:30)
Durable Goods Orders (US) (13:30)
ECB Interest Rate (EU) (12:45)
Economic Sentiment Indicator (EU) (11:00)
GFK Consumer Confidence (GER) (07:00)
Industrial Confidence (EU) (11:00)
Initial Jobless Claims (US) (13:30)
Pending Homes Sales (US) (15:00)

UK ECONOMIC ANNOUNCEMENTS
Nationwide House Price Index (07:00)

FINALS
Air Partner, Allied Minds, Aseana Properties Ltd., Avocet Mining, Brown (N.) Group, Deltex Medical Group, Gaming Realms, Harvey Nash Group, Morses Club , Styles & Wood Group

TRADING UPDATES
Aggreko, Atlas Mara Limited (DI), AstraZeneca, Berendsen, Cobham, Jardine Lloyd Thompson Group, Lloyds Banking Group, Meggit, Persimmon, Schroders, Taylor Wimpey, WPP

INTERIMS
C4X Discovery Holdings

SPECIAL EX-DIVIDEND DATE
Elementis, ITV

EGMS
Societatea Energetica Electrica SA GDR (Reg S)

AGMS
Aggreko, Alliance Trust, AstraZeneca, Berendsen, Cobham, Countrywide, CRH, EFG-Hermes Holding SAE GDR (Reg S), EP Global Opportunities Trust, FDM Group (Holdings), Franchise Brands, Green & Smart Holdings, Jardine Lloyd Thompson Group, Just Eat , LSL Property Services, Meggitt, Minoan Group, Patagonia Gold, Persimmon, Sampo OYJ, Satellite Solutions Worldwide Group, Satellite Solutions Worldwide Group, Schroders, Synectics, Synectics, Synthomer, Taylor Wimpey, Unilever, Weir Group, Witan Inv Trust

FINAL DIVIDEND PAYMENT DATE
Hammerson

FINAL EX-DIVIDEND DATE
Antofagasta, Capital Drilling Ltd. (DI), Cenkos Securities, Chemring Group, Churchill China, Dunedin Enterprise Investment Trust, Elementis, Eurocell , Foxtons Group , Fresnillo, G4S, Greggs, Harwood Wealth Management Group, Henry Boot, Hostelworld Group , Hunters Property , Impax Environmental Markets, Informa, ITV, IWG , Kerry Group 'A' Shares, Legal & General Group, Maven Income & Growth 4 VCT, Morgan Sindall Group, NAHL Group, National Express Group, Polypipe Group , Porvair, Relx plc, Rolls-Royce Holdings, Senior, Smart Metering Systems, Spirax-Sarco Engineering, StatPro Group, UBM, Weir Group, William Hill

INTERIM EX-DIVIDEND DATE
EJF Investments Ltd NPV, McCarthy & Stone, Wetherspoon (J.D.)

QUARTERLY EX-DIVIDEND DATE
APQ Global Limited, City of London Inv Trust, Custodian Reit