Wednesday preview: Inflation in the spotlight, Admiral and Balfour reporting

Wednesday's UK inflation data will be under close scrutiny after wage growth was shown to have slowed, potentially revealing a new consumer squeeze, while companies reporting results included Admiral, Balfour Beatty and Hikma Pharmaceuticals.

The Office for National Statistics will publish readings on July's consumer, producer and retail price indices at 0930 BST, along with the official house price report for June. The market expects CPI to have risen to 2.5% in July from 2.4% in June.

When the Bank of England raised interest rates earlier this month the monetary policy committee's inflation reports indicated the central bankers expect CPI to have hit 2.6% last month, boosted by increased fuel prices and core goods inflation.

Core goods inflation probably rose to about 1.6% from 1.3%, economists at Pantheon Macroeconomics said, boosting the headline rate by 0.10 percentage points, it was depressed in June by a relatively early start to the summer sales, though contributions from electricity and natural gas should hold steady, while services inflation should remain weak.

HSBC felt the dampening effects that prevented overall CPI from rising in June – clothing and computer games – "might have been erratic, so ... could unwind", while fuel price base effects are likely to push up a little on June.

But economists at the bank see core CPI and RPI rates holding steady at 1.9% and 3.4%, respectively. "Although energy prices look set to push up on RPI inflation, continued weakness in vehicle tax inflation is likely to pull in the opposite direction."

Looking overseas, US retail sales and industrial production data will be of interest as major components of GDP. Retail sales growth, excluding the auto sector, is forecast to have slowed to 0.3% from 0.4%. Total retail sales are seen juddering down to 0.1% from 0.5%.

HSBC agreed, saying that while household spending is being supported by strong labour market conditions and robust consumer confidence, the acceleration in certain categories of sales such as food services has been "unusually rapid in recent months".

COMPANY NEWS

Back in February insurer Admiral posted a 43% jump in full-year pre-tax profit and declared a special dividend, saying this reflected record customer numbers, higher UK insurance profits, an improved price comparison result and a lower loss in the international insurance segment, partially offset by higher other group charges and business development costs.

Admiral also said it was considering setting up an insurance company and an insurance intermediary business in Spain to support its European operations, as a result of Brexit.

After results from its peers, Deutsche Bank forecast Admiral will guide cautiously on UK motor market pricing and report higher losses in its home insurance book due to adverse weather, leading to a group pre-tax operating profit of £201m, an August Solvency II ratio of 203% and interim dividend of 52.3p per share, down from 56p a year ago.

Analysts see scope for a positive surprise in the UK car segment from prior year claims. "Admittedly it remains difficult to second guess the precise timing of this or whether this will start to manifest in 1H18 results or from FY18 onwards."

Similarly, construction group Balfour Beatty reported more than a doubling of underlying profit to £196m as its turnaround continued under management's ‘Build to Last’ programme, which includes guidance to achieve industry standard margins in the second half of 2018.

Underlying profits excluded a £44m provision made by the FTSE 250 group on the Aberdeen Western Peripheral route after it and Galliford Try had to pick up the slack after the demise of partner Carillion earlier in the year.

The Aberdeen bypass project also had "ongoing schedule and cost issues" and in May Balfour said completion was expected "this summer", with no change to its expected £105-120m cash outflow guidance for the full year.

Analysts at UBS expect first-half revenues of £4.04bn, a £70m profit from operations, pre-exceptional PBT of £54m up from £22m and pre-exceptional EPS of 6.7p up from 3.2p.

"There have been investment disposals announced already which should contribute £22m of PFO. We expect H1 average cash to be positive. Guidance was previously to hit previously communicated margin targets by H2 2018 – we expect this to be re-iterated."

At Hikma’s first-quarter trading update, guidance was maintained, which includes branded revenue growth mid single-digits at constant exchange rates, injectables revenue $750-800m, injectables core margin low to mid 30s range, generics revenue circa $550-600m and generics core operating margin in the low single-digits.

Ahead of the results, broker Peel Hunt said: "We believe the market will focus on: (i) any comments around generics pricing trends and injectables margins; (ii) contribution from supplying to fill US opioid injectable shortage; and (iii) details around cost cutting."

Wednesday August 15

INTERNATIONAL ECONOMIC ANNOUNCEMENTS

Business Inventories (US) (15:00)

Capacity Utilisation (US) (14:15)

Crude Oil Inventories (US) (15:30)

Industrial Production (US) (14:15)

MBA Mortgage Applications (US) (12:00)

Retail Sales (US) (13:30)

UK ECONOMIC ANNOUNCEMENTS

Consumer Price Index (09:30)

Producer Price Index (09:30)

Retail Price Index (10:30)

FINALS

Falanx Group

INTERIMS

Admiral Group, Balfour Beatty, CLS Holdings, Georgia Healthcare Group, Hikma Pharmaceuticals, Hochschild Mining, Lookers, Marshall Motor Holdings, Riverstone Energy Limited

Q2

Georgia Healthcare Group

AGMS

Afritin Mining Limited NPV, John Laing Environmental Assets Group Limited , Origo Partners

FINAL DIVIDEND PAYMENT DATE

Halma, Majestic Wine, National Grid

INTERIM DIVIDEND PAYMENT DATE

Shoe Zone

QUARTERLY PAYMENT DATE

Marsh & Mclennan Cos Inc.