The week ahead: 30 January 2017 – Interest Rates, SSE and Shell

Central banks take centre stage this week with the Bank of Japan, US Federal Reserve and Bank of England all delivering their latest monetary policy decisions. Russ Mould, investment director at AJ Bell, looks at some of the key points to keep an eye out for in those announcements, as well as the trading updates from SSE and Royal Dutch Shell.
30 January 2017

1.    Tuesday, Wednesday and Thursday 31 Jan-2 Feb: central banks take centre stage

  • Tuesday 31st: Bank of Japan. The BoJ has tinkered with its QE scheme so its target is to cap 10-year Japanese Government Bond yields (JGBs) at zero – they have risen to 0.08% so this is a key test, unless the BoJ is to step back and start tightening policy (which no-one seems to expect).

  • Wednesday 1st: US Federal Reserve. The Fed has pointed toward three interest increases of 0.25% for 2017, having squeaked out one in each of 2015 and 2016. The market puts a 3% chance on a rate rise at this meeting, in light of the weak Q4 GDP number last Friday and June is the favourite for the first hike.  But there’s only a 25% chance put on three increases this year, even as Yellen questions whether the Trump fiscal stimulus is needed, Trump criticises low interest rates, unemployment falls and inflation rises.  Both chair Yellen and vice-chair Fischer have to be reappointed (or not) by Trump in February 2018.

  • Thursday 2nd: Bank of England. The market is currently looking for the first UK rate rise in 2019 and the Governor Carney is unlikely to tinker with the additional £70 billion of QE launched last August. That said, he has begun to express mild concern about rising inflation and sharp increases in consumer borrowing (credit card debt is growing at its fastest level since 2005).

2.    Tuesday 31 January: Third-quarter statement from SSE

  • Electricity utility and FTSE 100 member SSE has three specific financial targets for its 2016-17 financial year:

  1. First, it is looking to deliver a dividend increase that at least keeps pace with retail price inflation, while maintaining earnings cover in the 1.2 to 1.4 times range.

  2. Second, SSE is targeting growth in earnings per share to at least 120p

  3. Third, the utility is planning to invest around £1.85 billion in its business as part of a £4 billion four year plan to March 2020.

  • Also keep watch for comments on the £500 million share buyback programme.

3.    Thursday 2 February: Full-year results from Royal Dutch Shell

  • The oil giant is the biggest company in the FTSE 100 by stock market valuation at nearly £190 billion (or just under 10% of the index all on its own) and it generates around 12% of the benchmark’s total sales, 6% of profits and 15% of dividends on its own.

  • Oil prices have rallied from below $30 a year ago to $55 but Shell’s upstream (exploration and production) arm is expected to have made a $2.5 billion loss last year while downstream (refining, chemicals and petrol stations) are expected to have made a $7.6 billion profit.

  • Also watch for further updates on the $30 billion asset disposal programme, capital expenditure budgets (forecast $29 billion in 2016, down from $47 billion in 2015, with a run rate of $25-30 billion for 2017 and 2018) and cost cuts, as Shell continues to integrate 2016’s huge acquisition of BG, where the budgets included oil prices much higher than we have today to make the deal price add up.

  • Analysts will be looking at how Shell intends to sustain the forecast (unchanged) dividend of $1.88 per share – which earnings will barely cover by half in 2016.


Tuesday 31 January

  • Full-year results from online grocer Ocado

  • Trading statements from Britvic and Carpetright

  • UK consumer confidence survey from GfK

  • UK mortgage applications data from Bank of England

  • Inflation and unemployment figures from the Eurozone

  • In the US, quarterly results from Apple, ExxonMobil, Pfizer and Yahoo! 

Wednesday 1 February

  • Trading statements from TalkTalk Telecom

  • Industrial sentiment surveys (Purchasing Managers Indices, or PMIs) from China, the UK, Europe and the USA

  • ADP job creation numbers in the USA

  • US car sales figures

  • US oil inventory data

  • In the USA, quarterly results from Mondelez (formerly known as Kraft and owns Cadbury) and Facebook

Thursday 2 February

  • Full-year results from FTSE 100 drug giant AstraZeneca

  • Trading statements from Aberdeen Asset Management, Johnson Matthey and Vodafone

  • UK construction industry sentiment survey (Purchasing Managers Index, or PMI)

  • Challenger job cuts survey in the USA

  • In Europe, quarterly results from Nokia

  • In the USA, quarterly results from oil company Conoco Phillips, General Motors, Merck and Visa

Friday 3 February

  • UK services industry sentiment survey (Purchasing Managers Index, or PMI)

  • USA services industry sentiment survey (Purchasing Managers Index, or PMI)

  • US non-farm payrolls employment and wage growth data

  • US factory orders

  • In the USA, quarterly results from oil company Phillips66

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