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The week ahead – 27th April

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What to expect from the week ahead.

GDP growth announcements from the UK and US are likely to occupy markets this week, potentially determining whether the long era of rock-bottom interest rates could draw to a close. Nevertheless, only a handful of people are expecting the Fed to announce an interest rate rise at its meeting on Wednesday.

In the UK, GDP growth may be less of a focus than the final days of electioneering. David Cameron will be hoping that it gives the Conservative campaign a last minute boost, but data from the ONS relating to industrial production, construction, trade and services has been weak, suggesting that the first quarter of this year will slow from the 0.6 per cent rate of expansion seen in Q4. That said, surveys from the CBI and Markit both point to a quarterly growth rate of 0.7, so growth may yet surprise.


It’s a busy weak for corporate announcements: Beleaguered Centrica gives an interim management statement. Shares have been held back by concerns over political intervention and a difficult trading environment. Sheridan Admans, investment research manager at the Share Centre, says: “Investors will be concentrating on its focus on reducing costs and driving efficiencies. The recent run of mild weather is unlikely to have helped the ongoing situation. Furthermore, investors should look out for any comments on the strategic review which is due out in the summer and the cut backs on exploration and production capital expenditure.” That said, the shares have fallen a long way and the Share Centre still rates it as a hold.


BP reports its first quarter results on Tuesday. The fall in the oil price compared to the first quarter 2014 provides the backdrop. Nevertheless, there has been some stabilisation in the oil price more recently and investors will be keen to see how this is affecting the outlook.

Keith Bowman, equity analyst at Hargreaves Lansdown says: “The fall in the oil price may have assisted Downstream refining operations, while management’s previously announced move to reduce capital expenditure could again be underlined. On balance and with uncertainties regarding the oil price, the group’s exposure to Russia and full legal settlement of its Gulf of Mexico accident, weighed against speculative takeover hopes following the bid for BG Group and a dividend yield of over 4.5 per cent (not guaranteed), analyst consensus opinion currently points towards a strong hold.”

Whitbread gives its fourth quarter results today. Admans says: “The shares have paused for breath recently after a strong rise over the previous six months. Investors will be watching to see if Whitbread can match the forecast it provided in February of achieving full year profits at the top end of market expectations. Just as important will be any comments on the level of new openings in the pipeline at its Costa coffee chain and value hotel group Premier Inn. Both have been performing well of late so the market will be expecting further good news given the supportive underlying economic situation.” He lists Whitbread as a hold.

Companies also reporting today include: St. James’s Place with its first quarter results and Standard Chartered, which gives an interim management statement.


Home Retail Group reports its full year results on Wednesday. Having already announced another full-year of like-for-like sales growth at both Argos and Homebase, management previously raised its guidance for full year benchmark pre-tax profit. Bowman says: “Updates with regards to both management’s early move to reduce its DIY Homebase outlets and its Argos Transformation Plan may be provided. Prior to the update, analyst consensus opinion denotes a hold.”

High street bellwether Next also gives a trading update. Admans says: “Next’s shares fell away in March after it adopted a cautious tone on prospects for this year. Investors will be interested to hear if there is any change in the forecast for sales growth of between 2.5 per cent and 7.5 per cent in 2015/16 in this trading update, and what guidance range is provided for full year profits. The market will also be interested in any news of further special dividend payments. The company has already announced a 60p special dividend to be paid in May and said it will consider further payments, if the share price remains above £68.27.” The Share Centre lists the group as a hold.

Companies also reporting today include: Antofagasta, British American Tobacco, London Stock Exchange, Standard Life and Weir.


Royal Bank of Scotland reports its first quarter results on Thursday. A pending UK General Election and ongoing uncertainty generate investor uncertainty have weighed on the shares, along with additional bank levy taxes or a possible
vote on leaving the EU. Bowman says: “An update 
for its Corporate & Institutional Banking (CIB) division’s planned reduction of its geographical footprint to approximately 13 countries, compared with 38 at the end of 2014, could be forthcoming – restructuring charges for which may delay the recommencement of shareholder returns – while management’s ongoing focus on cost cutting is likely to be further underlined. Ahead of the news, and with the UK government’s majority shareholding still overhanging, analyst consensus opinion signifies a sell.”

Royal Dutch Shell gives its first trading update since the announcement of the takeover for BG group and this is likely to be the focus for investors. Admans says: “Oil prices have stabilised since the lows in January, but year on year comparisons in revenue terms will obviously fare badly. However, investors should be encouraged by increased production levels. With the lower oil price environment, there could be further cutback in capital expenditure and asset sales such as those in the US and Africa.” He lists the group as a buy.

Regus is also a buy for the group, having made good progress in expanding internationally in recent years. Admans says: “In this trading update, investors will be looking to see how many more locations were added to its global portfolio and where these are, as certain regions like Europe have experienced a weaker recovery than others. Another useful indicator is the average revenue per user, which has been steadily climbing as additional services are beginning to be provided across many locations.”

Companies also reporting today include: Howden Joinery, International Consolidated Airlines, Schroders, Tullow Oil, Smith & Nephew and Shire.


On Friday, all eyes will be on Lloyds Bank’s market update. Bowman says: “The news comes in the wake of the Conservative Party’s pledge to sell £9 billion of Lloyds’ shares if re-elected, with retail investors being offered around £4 billion of the shares at an initial discount. A further reduction (£700m: Q4 2014) or ending of PPI provisions could potentially help set the scene for another reduction in the government’s shareholding, bolstered by a continued shrinkage in impairments or bad debt provisions.

“The board’s reiteration of its aim to pursue a progressive dividend policy with both an interim and final dividend payment for 2015 planned (it paid 0.75 pence per share in 2014) could also help aid a potential further government share stake sale. Prior to the release and with the bank seen as a beneficiary of further UK economic recovery, analyst consensus opinion denotes a buy. ‘

The Share Centre continues to see Lloyds shares as a hold. Admans says: “With the majority of restructuring now over, investors can concentrate on the future plans. Other areas to focus on are costs, margins, bad loans and the group’s outlook on the UK economy, particularly the important housing market. Hopefully there will not be any further provisions for PPI mis-selling or other regulatory issues.”


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