Tuesday preview: April employment report, Bellway in focus
The market spotlight on Tuesday will fall firmly on the April employment report, with investors keen to ascertain how hiring fared around the original date for Brexit towards the end of March.
Economists anticipate that the unemployment rate held steady at 3.8%, although the rate of growth in average weekly earnings likely slowed from March´s year-on-year pace of 3.2% to 3.0%.
Stateside meanwhile, the National Federation of Independent Businesses´s small company confidence index for May is likely to garner the most attention following the weaker-than-expected reading on non-farm payrolls released just four days before.
On 7 June, the Department of Labor reported a slowdown in hiring for May to 75.000 after a reading of 175,000 in April, with some surveys having pointed to weakness among smaller-sized firms, whose finances were vulnerable to the uncertainty around the trade situation.
Following May´s non-farm jobs report, Ian Shepherdson at Pantheon Macroeconomics had told clients: "The latest surveys, however, suggest that labor demand has revived somewhat after slowing after the Q4 drop in the stock market. The uptick won’t be sustained if the administration throws itself down the rabbit hole of tariffs on imports from Mexico and on imported Chinese consumer goods but, for now, we think private job growth will average about 175K over the next three months."
On the corporate side of things, homebuilders Bellway and Crest Nicholson were among the companies slated to update investors.
In the case of Bellway, Numis's Chris Millington said he would be focused on whether the positive momentum last reported for the eight weeks since the end of January had continued - something he believed was likely - and if management retained its previous views on the outlook for the builder´s margins.
"In our view Bellway remains at the quality end of the spectrum amongst the UK housebuilders in terms of balance sheet strength, product quality, track record and returns," he said.
Millington also said the company had margin to revise its payout ratio higher as net cash is set to decline as revenue growth slows from the "exceptional" pace recorded in recent years.
The analyst is anticipating full-year profits before tax of £671, versus the prior year result of £641 and consensus on £663m.
For Crest Nicholson meanwhile, Millington's forecast is for a 430 basis point fall in margins to 12.9% over the first half. Hence, he expects the company will provide greater detail around its plans to rebuild margins and increase its cash generation going forward.
"In our view Crest problems have arisen from poor operational performance and management drive to move the average sales price higher at a time when the higher end of the market was becoming more difficult," he said.
"In our view it will take several years to turn Crest round and improve margins to a level comparable with the peer group, which alongside muted top-line growth suggests Crest returns will remain relatively lacklustre."
His forecast for the outfit's profits before tax at the half-year stage was for £146.2 (consensus: £150.2m), which would be down from £176.4m one year ago.
Tuesday June 11
Oxford Metrics, RWS Holdings
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