Next week starts with a trading update from BP on Tuesday morning. We also have the monthly UK sentiment surveys (purchasing managers indices) on Tuesday, Wednesday and Thursday, as well as the latest decision on US interest rates from the Federal Reserve on Wednesday.
Below, Russ Mould, investment director at AJ Bell, looks at some of the key points to keep an eye out for.
1. Tuesday 2 May: First-quarter update from BP
France’s Total got the Q1 reporting season off to a strong start with a 56% jump in (adjusted) net profit and plans to develop the Argentina Vaca Muerta shale field so that sets the bar for BP, even if a fresh drop in the oil price toward $50 is a concern.
In the first quarter of 2016 BP made a replacement cost loss of $460 million, as upstream – exploration – made a loss of $1.2 billion, downstream (refining and petrol stations) made a profit of $1.9 billion and Other Expenses came to just over $1 billion. A year-on-year increase in oil prices and cost cuts should underpin a big leap.
Other Expenses features costs related to the 2010 Gulf of Mexico oil rig disaster – this should now drop after a final $5.1 billion charge in Q2 2016 that took the total bill to over $60 billion.
If oil weakens again that would stoke fresh concern over BP’s dividend (which runs at $0.10 a quarter) and was last cut in 2010 (and before that in 1992). The dividend comes to around $1.2 billion a quarter and capital investment $4 billion-plus and profits are not big enough to cover both so the firm is cutting investment, borrowing and selling assets (though none of these are long-term solutions).
Watch comments on capex and net debt – capex was $18.4 billion last year and debt ended 2016 at $35.5 billion -
All of these themes will also be important in Royal Dutch Shell’s Q1 results two days later – Shell has not cut its dividend since at least 1945.
2. Tuesday-Thursday 2-4 May: UK sentiment surveys (PMIs)
After Friday’s disappointing Q1 GDP growth number of 0.3% quarter-on-quarter (2.1% year-on-year) attention will switch to the latest round of economic confidence indicators, also known as purchasing managers’ indices (or PMIs), with the manufacturing, construction and services surveys on 2,3 and 4 May respectively.
These are just surveys, not hard facts, and are indicators of confidence in the future – generally any reading above 50 speaks of future growth, any score below 50 could warn of a slowdown or even a recession. In April the readings were
54.2 for manufacturing (12-month average 53.1)
52.2 for construction (12-month average 52.3)
55.3 for services (12-montha average 52.1)
All three indicators slackened badly going into the June 2016 EU referendum vote but picked up again strongly afterwards, although construction has softened a little again in 2017 and manufacturing has dropped for three months in row:
3. Wednesday 3 May: interest rate decision from the US Federal Reserve
The Federal Open Markets Committee is not expected to sanction a hike in US interest rates from the 0.75%-1.00% target range.
However, chair Janet Yellen may look to lay the groundwork for a 0.25% increment (the second of the year and fourth of this upcycle) at the next meeting 14 June – futures markets put a 68% chance on a rate rise then (www.CMEFedwatch.com).
Attention will also focus on whether the Fed starts to prepare to shrink its $4.5 trillion balance sheet and sterilise Quantitative Easing (QE) in what will be a huge test for the strength of both the US economy and its stock market (and for that matter the UK stock market, which tends to follow where the US goes).
OTHER NEWS ITEMS TO WATCH:
Monday 1 May
Speech from US Treasury Secretary Steve Mnuchin in Los Angeles
US ISM manufacturers’ purchasing managers index (April reading 57.2)
US Loan Officer Survey
Tuesday 2 May
Interim results from bid target Aberdeen Asset Management
First-quarter results from acquisitive FTSE 100 drug firm Shire
Trading statements from accident-prone FTSE 250 housebuilder Bovis and Just Eat
Interest rate decision from the Reserve Bank of Australia
EU unemployment figures and manufacturing PMI data
US car sales figures (showing signs of stress of late)
In the USA, quarterly results from Apple and Mondelez (now the owner of Cadbury)
Wednesday 3 May
Full-year results from Sainsbury
Interim results from Imperial Brands and Sage
Trading statements from PaddyPower Betfair, Direct Line and JD Wetherspoon,
EU Q1 GDP growth data
US ADP payroll survey
US services PMI (April reading 55.2)
In Europe, quarterly results from French bank BNP Paribas
In the USA, quarterly results from Facebook, Kraft-Heinz, Time Warner and Yum!
Thursday 4 May
Trading statements from Next , Ladbrokes Coral, Morrisons and RSA
UK mortgage applications and credit data from the Bank of England
US Challenger job cuts survey
US factory orders data
In Europe, trading updates from Air-France KLM and Anheuser Busch-Inbev
In the USA, quarterly results from Kellogg, Marathon Oil and Viacom
Friday 5 May
First-quarter results from International Consolidated Airlines and Smurfit Kappa
Trading statements from Smith & Nephew and InterContinental Hotels
US non-farm payrolls, wage growth and unemployment figures