Tuesday preview: Watching UK wages, results from Esure, Polypipe

The jobs market will be the UK focus on Tuesday, coming in between a barrage of economic data from around the world, plus half-year results from Antofagasta, esure and Polypipe.

June's UK unemployment rate is expected to remain at 4.2% of the job-hunting population, though there are many economists who estimate it will fall to 4.1%. Under more scrutiny are average weekly earnings growth, which is expected to remain at 2.5%, or 2.7% if excluding bonuses.

The wage figures are being closely watched for hopes that they can accelerate further ahead of inflation, which remained just 0.1 percentage point behind in May. But the consumer price index is seen rising to 2.5% from 2.4% for June, so if wages growth remains unmoved it will show that consumers are being squeezed more tightly again.

When justifying its decision to raise interest rates at earlier this month, the Bank of of England pointed to the strength of the jobs market, in particular the strong recent gains in employment.

Noting that the last three labour market reports have posted three-month job gains of +197k, +146k, and +137k, economists are RBC Capital Markets felt it was likely that the unemployment rate will drop to 4.1% this month.

"For this month, a m/m gain in employment in June in the region of 100k would be necessary to maintain the pace of headline job growth at around the same pace as in the prior two months, a figure not entirely out of step with recent months."

For earnings, Pantheon Macroeconomics noted that while the headline rate of year-over-year growth in average weekly wages is likely to hold steady in June at 2.5%, June is a key month for financial sector bonuses, "which are volatile and might cause a temporary shift in overall wage growth".

Earlier on Tuesday, Chinese retail sales, industrial production and fixed asset investment for July will be of interest to the wider world, especially in light of recent geopolitical machinations. There will also be inflation data from around the eurozone, plus German and euro area GDP later in the morning.

COMPANY NEWS

Esure's results will come a day after the company revealed it had received a proposed takeover offer from private equity group Bain Capital.

Shares in the insurer had lost 30% of their value in the last year, before jumping on the Bain proposal, which at 280p is still below where the shares were 12 months ago.

Before the news broke, stockbroker Peel Hunt were looking for "fair amount of bad weather losses, low investment returns and exceptional expenses", leading to an adjusted net profit, excluding exceptional items, down 13% to £32m.

Analysts assumed a 14% increase in premium income to £447m following the 18% rise reported during the first quarter as the motor footprint expansion strategy continues and is partly offset by a shrinking home insurance book.

Given the importance of cross-selling to Esure, one key metric to watch out for is policy numbers, said analysts at Hargreaves Lansdown.

Better weather in the summer should have helped Polypipe, which reported a 0.9% fall in revenues in the first four months of the year as poor weather impacted activity. Shares are down more than 9% since the end of last year.

Management estimated that underlying revenues were ahead by 5% in that period and Peel Hunt expected the clement weather through the second and third quarters to have provided a boost to activity.

While the repair and maintenance market remains "relatively benign", the diverse mix of the group's end markets "leaves it well placed to deliver further profit growth in the full year", Peel Hunt said.

Deutsche Bank said Polypipe's growth in the half is expected to entirely be driven by the residential division, "and we do not expect management to suggest a significant tick-up in infrastructure or commercial activity into H2 18, but this should already be well-known by the market". Although, analysts forecast a slight compression in first half margin due to lost sales from bad weather in the first quarter, "we expect management to remain comfortable with 2018 consensus" which is for margins to remain flat versus 2017.

Shopping mall owner Capital & Regional's shares are down 16% since new chief executive Lawrence Hutchings started work in June last year, down more than 30% since hitting a post-crisis high in 2015, with many column inches written on the headwinds facing the retail sector.

But, while rental income may have taken a knock from several of the recent wobbles suffered by prominent retailers, Hutchings is confident of delivering annual dividend growth in a range of 5% and 8% over the medium-term from the group's seven shopping centres.

These half-year results should be viewed with the maxim in mind that "not all retail is equal", broker Numis suggested, believing not all the winners in the shopping mall market will be "experiential destination malls while not all the losers will be smaller malls", with the key being a landlord’s ability to "attract the right retailers that are suited to and targeted at the target demographic at an affordable rental price point".

Numis said Hutchings has "moved up a gear" in proactively managing tenants at each mall, avoiding a one-size-fits-all approach, and thinks earnings are likely to be "towards the lower end" of the 5-8% guidance "with a direct flow through to dividend growth off the current 7.8% yield".

Tuesday August 14

INTERNATIONAL ECONOMIC ANNOUNCEMENTS

Consumer Price Index (GER) (07:00)
GDP (Preliminary) (GER) (07:00)
GDP (Preliminary) (EU) (10:00)
Industrial Production (EU) (10:00)
ZEW Survey (EU) - Economic Sentiment (10:00)
ZEW Survey (GER) - Current Situation (10:00)
ZEW Survey (GER) - Economic Sentiment (10:00)
Import and Export Price Indices (US) (13:30)

UK ECONOMIC ANNOUNCEMENTS

Unemployment Rate (09:30)
Claimant Count Rate (09:30)

INTERIMS

Antofagasta, Apax Global Alpha Limited, Capital & Regional, esure Group, JPJ Group, Mears Group, Menzies (John), Polypipe Group, Realm Therapeutics, Telecom Egypt SAE GDS (Regs), Touchstone Exploration Inc NPV (DI), Transgloble Energy Corporation NPV (DI)

TRADING ANNOUNCEMENTS

Castings, JPJ Group, Telecom Egypt SAE GDS (Regs)

AGMS

Castings, Gabelli Value Plus Trust