Friday preview: Will Yellen and Draghi Jackons Hole speeches be worth waiting for?
Friday is a key day for the Jackson Hole central bank symposium, with speeches from Janet Yellen and Mario Draghi, while being a quieter day for FTSE 350 company news.
The European Central Bank has already hinted that President Draghi won’t use Friday’s speech to signal any major shift in the central bank’s policies -- although the Italian has been known to change his speeches at the last minute and could be influenced by his US counterpart's comments.
Analyst Connor Campbell at Spreadex similar tentativeness is expected from Federal Reserve chair.
"Investors will be on the lookout for signs relating to a) when the Fed will start reducing its balance sheet (something that could happen as early as next month, and b) whether there will be another rate hike before the end of 2017," he said.
However both speeches are rather late in the day to affect European markets, with market sources unsure on the timings of the speeches, some expecting Yellen at 1500 BTS and some at 1700 BST, with Draghi at 2000 or 2100 BST depending on who you believe.
The odds of the ECB chair flagging an imminent wind down of QE as soon as this week appear slim, said Rabobank's Head of macro strategy Elwin de Groot, but "this is likely only a few weeks away". Therefore, while it remains to be seen whether Draghi "will lift a tip of the veil hanging over the autumn decisions" in his speech "it would obviously be complacent not to keep at least a firm eye on that event".
De Groot felt Draghi is likely to stop short of commenting on the immediate policy challenges as he has a strong interest in obtaining the strongest support/consensus for the decisions to be taken in the autumn and in avoiding strong market moves. "Front-running on the September and/or October meetings may undermine both objectives."
Noting that Yellen's speech topic is financial stability, economists at HSBC said: "Markets will also be alert for comments
on the Fed's balance sheet plans or on how the Fed Chair views the recent downside surprises to inflation."
HSBC expects introductory comments from Yellen to touch on the Fed's intention to begin shrinking its balance sheet "relatively soon", and the slowing in inflation over the past four to five months.
"Meanwhile, financial markets will watch closely to see if there has been any evolution in how Ms. Yellen views the recent slowdown in inflation. A portion of the inflation weakness since March has reflected 'transitory factors', such as those affecting wireless telephone services and prescription drug prices. However, the repeated downside surprises to inflation have also highlighted softness in other areas, which could prove to be longer-lasting.
"In her remarks, Ms. Yellen could underscore the FOMC's commitment to its 2% inflation target and indicate the Committee's intention to carefully monitor incoming information on the inflation outlook before raising the federal funds rate any further."
While believes Draghi is unlikely to break major new ground on the near-term monetary policy outlook but could, maybe depending on how Yellen's comments are received, could let slip some thoughts "aimed preventing a further rise in the euro, rather than providing anything for hawkish investors to latch on to", HSBC said.
COMPANY UPDATES
Computacenter is expected to post solid first-half results to follow a first quarter update from April where it notified of an improved outlook for the full year.
The independent IT infrastructure services provider believed the group's performance for 2017 as a whole would exceed current market expectations due to buoyant market conditions for new investments in technology, particularly by its German business, backed up by steady progress in France and the UK, as well as favourable currency movements.
Group revenue for the first quarter increased by 16% on an as-reported basis and 9% at constant currency rates, with services revenue up 14% and 7% at CCRs, and supply chain revenue climbing 17% and 11% at CCRs.
Barclays forecast half-year revenues of £1.6bn, representing 2.4% constant currency growth.
With weaker comparatives from last year, analysts expect a higher adjusted PBT growth in the first half and the company to return to a "more normalised seasonality".
"We look for £35.7m of the adjusted PBT to be delivered in H1, a significant 41% y/y improvement versus the weak comp and this is the main KPI."
Henry Boot also will issue half-year results that follow a last trading update in May, which pointed to activity levels being "very encouraging" across the group’s three divisions.
Management said full year results should be "comfortable ahead" of expectations thanks to strong trading at the property and land divisions.
Broker Numis felt investors will be most interested in progress made on the group’s key property schemes, in particular the £333m Aberdeen exhibition centre, and whether further progress has been made in regards to sales discussions on land schemes.
"Should these areas be progressing to plan, we believe that there is scope for further upside to our forecasts."
Friday August 25
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Durable Goods Orders (US) (13:30)
Gross Domestic Product (GER) (07:00)
FINALS
ITM Power
INTERIMS
Henry Boot, Computacenter
INTERIM DIVIDEND PAYMENT DATE
Berendsen, Independent Inv Trust, Microgen, Nichols, Octopus Titan VCT , Relx plc
QUARTERLY PAYMENT DATE
Primary Health Properties
SPECIAL DIVIDEND PAYMENT DATE
Artemis Alpha Trust
AGMS
Naspers Ltd. ADR, Sysgroup
FINAL DIVIDEND PAYMENT DATE
CMC Markets, GB Group, Halfords Group, Latham (James), Micro Focus International