Thursday preview: ECB and Lloyds non-events? Not Debenhams surely

The European Central Bank's rate-setters meet in Frankfurt on Thursday to decide on policy, while in the UK there's results from Lloyds Banking, WPP and Debenhams.

Norway's central bank rates decision, German IFO survey, US durable goods and pending homes, and later the first public speech by Richard Clarida since he was made vice president of the Federal Reserve.

The ECB is not expected to change monetary policy, but investors should not be quick to label this meeting as a non-event, as Italy is likely to be a key subject at the post-meeting presser.

While euro zone inflation levels have remained fairly benign, despite recent comments from ECB president Mario Draghi that the bank remained on course to raise rates a year from now, Michael Hewson at CMC Markets said the Italian will have plenty more on his mind.

"The biggest concerns for policymakers appear to revolve around trade and the ongoing budget spat between the European Commission and Italy, and it is here that we could see the ECB’s policy start to unravel," Hewson said. "The latest minutes showed that policymakers on the governing council also remain divided as to the accuracy of the banks economic projections, with some suggesting they are too positive."

Economists at Danske Bank said that while Draghi will doubtless receive a number of questions on Italy, as this recent turmoil is a battle between Italy versus Brussels and Italy versus the market, "the ECB will only voice its awareness of the situation and refer to the already established procedures should the ECB be involved. Therefore, we expect the ECB will stay sidelined for now."

Danske said to watch out for the word ‘anticipate’ to remain in reference to the end of the asset purchase programme, implying no formal end to the APP.

"Should it be changed (meaning an official end to APP), it could lead to a knee-jerk market reaction. Nevertheless the initial reaction to the formal end of APP is not expected to have a long-lasting effect. We do not expect discussions on the capital key update but will scrutinise any hints on this. This is of significant importance for the reinvestment strategy. We expect this to be announced at the December meeting."

CORPORATE NEWS

Shares in Lloyds Banking this week fell to a two-year low, down almost 17% since the start of the year, with Britain’s biggest retail bank heavily exposed to the UK economy, where fragile consumer spending and the uncertainties of Brexit are weighing on sentiment. This week the bank looked forward confirmed that it was launching a wealth management joint venture with asset manager Schroders.

Half-year results in early August showed profit up 23% as the bank's bill for payment protection insurance and other compensation costs almost halved, as income rose 2%. Lloyds' core equity tier one capital ratio increased to 15.1% from 13.9%.

The cost of PPI and other remediation programmes fell to £807m from £1.59bn as the PPI charge fell to £550m, though the cost of PPI jumped in the second quarter and the bank increased its estimate for weekly claims. Lloyds was the biggest seller of PPI in the 1990s and 2000s and has has paid out more than £19bn in compensation so far.

Net interest margin improved to 2.93% from 2.82% and for the second half, Lloyds guided for NIM around the first half level.

UBS analysts said: "We expect an uneventful set of numbers despite the trees to be felled and ink spilled poring over the figures. LBG is, in our view, an undervalued, strongly capital generative bank, operating with a cost advantage in a competitive market and with decent medium term growth opportunities in lending, savings, investments and general insurance."

UBS forecast adjusted PBT of £1.96bn, including above-the-line remediation costs of £100m.

Media behemoth WPP will also be announcing third-quarter numbers on Thursday, having reported first-half results and given full year guidance in early September.

Noting the string of major account losses, including Kimberly Clark, Ford, GSK, Amex, United Airlines and much of its Pepsi business, Credit Suisse recently downgraded its expectations for organic growth and dropped its target price to 1,200p from 1,320p.

But with the interim results not that long ago analysts at Deutsche Bank said this update "should be uneventful, partly because the company had already seen much of the period by the time it gave its annual guidance and partly because this is a seasonally small quarter".

The update will, however, be a "stepping stone towards a much larger event", namely the capital markets day that is planned for some time in the fourth quarter. "The market is very focused on the potential for the market research assets to be sold, however we expect to have to wait for the CMD for news," DB said, estimating that selling the unit for 10 times EBITDA disposal and using some of the cash to de-leverage the group down to 1.5x EBITDA, there would be enough cash for a share buy back to boost earnings per share by 3-4%.

Beleaguered department store group Debenhams' final results should make for interesting reading, with investors hoping for comment from chief executive Sergio Bucher and new chief financial officer Rachel Osborne about current trading, the sustainability of the dividend, the planned sale of Magasin and possible UK store closures.

In September the company, having issued three profit warnings this year, said it was working with advisers on longer-term options and reviewing non-core assets. This followed newspaper reports that accountants had been asked to compile a list of options, possibly including plans to hand back excess store space to landlords and ask creditors to accept a compulsory voluntary arrangement.

Bucher said: "The market environment remains challenging and underlying trends deteriorated through the summer months. Nevertheless the product and format improvements we have tested are gaining traction and we are ready to scale up some of our strategic activity ahead of peak."

Thursday October 25

INTERNATIONAL ECONOMIC ANNOUNCEMENTS

Continuing Claims (US) (13:30)
Durable Goods Orders (US) (13:30)
ECB Interest Rate (EU) (12:45)
GFK Consumer Confidence (GER) (08:00)
IFO Business Climate (GER) (09:00)
IFO Current Assessment (GER) (09:00)
IFO Expectations (GER) (09:00)
Initial Jobless Claims (US) (13:30)
Pending Homes Sales (US) (15:00)

FINALS

Debenhams, RDI Reit

INTERIMS

Air Partner, Braemar Shipping Services

TRADING ANNOUNCEMENTS

Evraz, Hastings Group, Lloyds Banking Group, Mail.ru Group Ltd GDR, Novolipetsk Steel, Relx, WPP

SPECIAL EX-DIVIDEND DATE

Artemis VCT, Bioventix

AGMS

1pm, Alumasc Group, Filtronic, Goldplat, Green & Smart Holdings, Mattioli Woods, Octagonal, Oil & Gas Development Company Ltd GDR (Reg S), Premaitha Health, South32 Limited (DI) , Standard Life UK Smaller Companies Trust

FINAL EX-DIVIDEND DATE

Avingtrans, Bioventix, Dechra Pharmaceuticals, El Oro Ltd, Ferguson, Haynes Publishing Group, Joules Group, JPMorgan Emerging Markets Inv Trust, Mulberry Group, TR European Growth Trust, Wetherspoon (J.D.)

INTERIM DIVIDEND PAYMENT DATE

AIREA, Capital & Regional, GVC Holdings, Oakley Capital Investments Ltd. (DI)

INTERIM EX-DIVIDEND DATE

Aberdeen New Thai Inv Trust, Animalcare Group, Coats Group, Hansa Trust, Harwood Wealth Management Group, ITV, M&C Saatchi, Next Fifteen Communications, Rolls-Royce Holdings, S&U, Smart Metering Systems, Walker Greenbank, William Hill

QUARTERLY PAYMENT DATE

Fair Oaks Income Limited 2014 Shs NPV, Fair Oaks Income Limited 2017 Shs NPV, General Electric Co

QUARTERLY EX-DIVIDEND DATE

Custodian Reit , M Winkworth