Wednesday preview: Rate hike may hang on wages report; Reckitt, Rathbone report

A first Bank of England rate hike since the financial crisis hangs on Wednesday's labour market report, while company news includes trading updates from Reckitt Beckiser and Rathbone Brothers.

Acting as a backdrop, the 19th Chinese Communist Party Congress kicks off on Wednesday, with analysts interested in the potential for multiple new faces among the top ranks of China's government and any hints as to the direction the country is headed in over the medium-term.

But closer to home, talk of November's Bank of England policy meeting had been heating up in the days leading to Wednesday's data release from the Office of National Statistics on average earnings and the unemployment rate.

After a rise to 3% in the consumer price index, BoE Governor Mark Carney told MPs that inflation would probably rise over 3% “in the coming weeks” but that was almost certain to be its peak.

Paul Hollingsworth at Capital Economics was one of many economists who were fairly sure of a small rate increase from the MPC at its meeting on 2 November, though wages not inflation will be the driver.

"The MPC will probably be focussed more on tomorrow’s wage growth figures for any signs that domestic cost pressures are building," he said, predicting inflation will be back below 3% by the end of the year and will end 2018 at around 2.25%.

A month ago, average weekly earnings growth remained at 2.1% for the three months to the end of July, short of the expected 2.2%, while the month of July saw earnings growth drop to just 1.4% from 2.8%.

For the three months to August, total average earnings are expected to remain at 2.1%, with earnings excluding bonuses forecast to ease to 2.0% from 2.1%.

After the unemployment rate dropped to 4.3% in the three months to July, the lowest since 1975, this strength in job creation fed into the BoE’s more hawkish stance, said HSBC, leading it to expect no further signs of weakening in this release.

However, the risks are skewed to another fall.

"By contrast, regular pay growth should remain sluggish, potentially slipping back below 2%.

"The BoE has signalled it sees positive signs in private sector pay growth on a 3-month annualised basis, so this measure may be one to watch out for."

COMPANY RESULTS

A third-quarter update from Reckitt Beckiser will kick off the reporting season for the home and personal care sector.

At July's half-year results, chief executive Rakesh Kapoor said he expected the RB business to return to growth progressively over the second half of the year.

Kapoor has set a "challenging" target for full year like-for-like net revenue growth of 2% for the RB base business.

For the newly acquired Mead Johnson business, he targeted LFL net revenue growth range of '-2% to flat' in the second half, with operating margin prior to closing slightly weaker than initially expected.

Analysts at UBS predicted RB will cut its FY17 guidance due to a range of factors.

Those at Deutsche Bank were thinking on similar lines, expecting third quarter LFL growth to be flat for the core business as the back end of the Scholl/Amopé and cyber-attack woes continue to weigh.

Based on an assumption of flat core business LFL growth in the quarter, management’s current full year guidance of +2% would imply fourth-quarter LFL growth of 6-8%. The analysts added: "true, year-on-year comparisons will be a lot easier in the fourth quarter (+1%) than in the first nine months (+4%), but this range feels ambitious".

Rathbone Brothers also reports its Q3 numbers.

Barclays analysts forecast investment management flows of £0.3bn, in line with the previous two quarters, plus a further £0.1bn of unit trust flows, bringing group flows to £0.4bn.

With a market movement forecast of £0.1bn for the group, this would bring AUM to £37.1bn at the end of September.

Predicting underlying operating income for the quarter at £70.5m, up 7%, Barclays said: "The market will be keen on any management commentary around business outlook and regulation."

Numis expected Rathbones to announce AUM up 1.3% during the quarter to £37.1bn reflecting net inflows of £157m, investment performance of £223m and acquired new business of £80m.

Wednesday October 18

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Building Permits (US) (13:30)
Crude Oil Inventories (US) (15:30)
Housing Starts (US) (13:30)
MBA Mortgage Applications (US) (12:00)

UK ECONOMIC ANNOUNCEMENTS
Claimant Count Rate (09:30)
Unemployment Rate (09:30)
Average Earnings (09:30)

FINALS
Softcat

INTERIMS
U And I Group

TRADING ANNOUNCEMENTS
Rathbone Brothers, Reckitt Benckiser Group

DRILLING REPORT
Hochschild Mining

AGMS
BATM Advanced Communications Ltd., India Capital Growth Fund Ltd.

INTERIM DIVIDEND PAYMENT DATE
IDOX, Non-Standard Finance, Somero Enterprises Inc. (DI), Standard Life Aberdeen

QUARTERLY PAYMENT DATE
Assura

FINAL DIVIDEND PAYMENT DATE
Stewart & Wight