Share Talk Expected Market Updates For The Week Ahead – 13th September 2021

A flurry of activity in the markets this week, along with the most recent inflation data, Games Workshop, Keywords Studios, and Tullow Oil will also need to be updated. In the next week, the FTSE 100 will be the focus of corporate calendars. Heavyweights JD Sports and AB Foods will update investors.

Games Workshop, Keywords Studios, and Tullow Oil represent the mid-cap space. In terms of economic data, we will see some updates on US and UK inflation after the GDP update.

The second week of the month typically has very few indicators, aside from updates on consumer price indexes in the US, UK and elsewhere. This week, the focus will be on inflation and perhaps the dreaded spectre if stagflation is possible, given the weak UK GDP numbers of the previous week.

Market analyst Marshall Gittler, BDSwiss, said that there will be ample space to reflect on where we are in terms of inflation. This is especially true given the fact that almost all G20 countries have seen an increase in inflation over three months.

Gittler says that the big question was raised earlier in the year as inflation rose everywhere. In this case, central banks would need to respond with tighter policies, or if they were structural. If they were, they would have to tighten their policies, or if they were caused mostly by distortions due to the reopening economies. In which case, they are likely to fade as supply chain readjusts and things get back on track.”

“This would justify the consensus among central bankers that higher rates are transitory’ and don’t warrant tightening policy.”

Despite price increases being more rapid in recent months, most countries will see lower inflation in 2022 than 2021 and even lower in 2023. Japan, China, and the UK are notable exceptions.

According to data from the US, the recent price surges in the US are largely due to components that fell in price after the pandemic.

Gittler says, “Eventually, one assumes these effects will work throughout the system, similar to a snake eating a mouse.”

The fear is that the virus could spread to other countries, causing stagflation in some economies. This could lead to central banks choosing between inflation and employment.

The UK‘s headline inflation rate is expected to rise by a sharp 0.9% month-on-month. However, it will slow significantly below the Bank of England’s central target of 2% over the three-month period.

Gittler says that if the market perceives the rise in inflation, and believes “BoE tightening”, it would cause a spike in the pound.

The market expects a rate increase of 10 bps by February and a 25 bps rate rise by July. Investors could speculate about a steeper tightening path if inflation is higher. This would be GBP positive.

Other macro data include a UK labour market update Tuesday and an official retail sale Friday.

The week begins with FTSE 100 heavyweight Associated British Foods PLC, (LSE: ABF), owner of Primark fast-fashion brand.

Although the retailer doesn’t have an internet shop, trading was booming for them over the summer, with loyal customers flooding into their stores when they reopened.

Hargreaves Lansdown believes that August’s relaxation of social distancing rules gave the retailer an additional boost because of the increased number of shoppers.

Analysts commented that “although the company previously acknowledged the outlook was still uncertain, it has been confident enough to maintain its store opening program and the retailer will also likely to benefit by the exodus from Gap from UK high street.”

“Sales in the grocery division were also likely to be resilient, but have tempered slightly since last year’s stockpiling and because lockdown baking is less popular. It is well-positioned to avoid any more pandemic surprises, thanks to its diverse business and the availability of more than PS1bn net cash.

JD Sports Fashion PLC, (LSE:JD) Investors will be reassured that trading momentum is still strong after the lifting of restrictions 

Peel Hunt, a house broker, predicts strong performances on both sides. This is due to stimulus cheques that were spent in stores such as Finish Line (NASDAQ;FINL) in the early summer.

Analysts noted that “in the UK, it is expected that the early promise after restart 3 has persisted also.”

Europe is less optimistic, with duties and slower post-Covid-19 bounce-backs. But in general, this should be an impressive set of group numbers and the risk to full year forecasts remains to be to the upside.”

Market participants will want to hear about the Footasylum saga after the FTSE 100 group was subject to a competition ruling which could make it sell it back.

It’s a setback to the company’s efforts to be a leader in the sportswear market, which has seen its share price rise. Analysts at Hargreaves Lansdown stated that the clock is ticking to provide alternative solutions to the sale. Views on the provisional ruling are due by the end next week.

JD Sports is arguing to keep Footasylum alive because of the direct competition from brands like Nike, who have benefited from the shift to digital sales and are selling directly to customers. JD is a formidable online player, with significant investment in e-commerce and a 2-year agreement with Clipper Logistics to improve its fulfillment operations.

Ocado Group PLC, LSE:OCDO will also release a trading update on Tuesday. This might be a more casual read than usual.

Online grocers saw their sales drop for the first time in record during the four weeks leading up to August 8, as UK shoppers moved away from online shopping and returned to physical shops.

This was according to Kantar data. However, Barclays expects that next week’s third-quarter trading update from the online giant will confirm the drop.

Analysts from the bank predict that revenue will fall 1.2% year-on-year, compared to +5.4% growth during the second quarter and +39.7% during the first quarter.

According to the bank, “A drop in sales would not be unusual but must be seen within the context of capacity limitations and fire disruption.”

Comparatives are also difficult, with overall sales up by 44.4% in comparison to 2019, Kantar’s fastest two-year growth.

You will want to keep an eye out for updates on partnerships with Marks & Spencer, and on spending on automation.

Fevertree, the manufacturer of the mixer, has lost some of its sparkle. A recent update indicated strong sales growth but concerns over margins. Investors will be keeping an eye on Wednesday’s trading update.

Global revenue increased 39% to £141.8mln in the first half 2021, but UK revenues were only 4% higher at PS50.3mln.

UBS suggests that pricing and the pace of on-premise channel recovery in Europe, the UK and elsewhere should be monitored. It also recommends looking at online trends and expanding local production in America.

According to the broker, sentiment is still negative in advance of the results because investors are becoming more concerned about FeverTree’s expectation of “some” margin growth in 2022 given rising cost pressures.

FeverTree’s guidance for the year ending December 2021 is £295m-304mln with an EBITDA margin c.20%. It will be important to see if there are any changes.

Games Workshop PLC might have an update for Wednesday, just in time for its annual general meeting.

Peel Hunt, the broker, believes that Warhammer Gaming Company should be able to make a strong start to the new year despite the poor start it had last year.

“Recent launches (Kill Team and Age of Sigmar), have been a success, but the company is having trouble keeping up with demand. Warhammer+ was launched at the end August, providing a new revenue stream and recurring revenue.

“There are also strong upcoming video releases. Analysts stated in their preview that profits will always turn to cash which means capital returns should remain attractive.

Keywords Studios PLC, a video games contractor, (AIM:KWS), is expected to receive a warm welcome when it releases its results on Wednesday. It wouldn’t surprise if there were some acquisition news or commentary.

This acquisitive company has seen a significant increase in its value over the past few years and is currently seeing positive trends in this sector.

Stockbroker Liberum raised its forecasts for the group last month.

“Margin trends in H2 may moderate as certain costs return after-lockdown; however, we see strong demand continuing; we, therefore, raise out FY21 forecasts again with our profit estimate now 9% above consensus,” Olivia Honychurch, Liberum analyst, stated in a note.

Netflix’s recent entry into gaming is a promising growth driver that may open the door to a wider range of customers in the future.

“Near-term upside may come from additional M&A in this year. The business is still reviewing a strong pipeline despite Day’s departure.”

Tullow Oil PLC’s July trading update (LSE:TLW), reported that gross production in Ghana was slightly higher than expected, but the optimism didn’t last long – the shares languished for most of the summer.

The stock is an ordinary play on oil prices because of the company’s focus on production, cash flow, and debt repayment.

Tullow said that it had strong financial standing, but the outlook statement will be a highlight in Wednesday’s results statement.

On Thursday, Ashtead Group will provide a trading update (LSE:AHT), PLC that will include first-quarter trading details for the company. This will give more insight into how the US and UK building markets have performed.

Management will likely comment on the Sunbelt strategic ambitions that they set out at April’s investor conference.

These results also represent the shift to reporting in US Dollars for the FTSE 100 group. This means that the consensus forecasts may be a little distorted.

Peel Hunt, a broker, stated that “Overall we believe that group performed well during the quarter”, with continued volume momentum in Sunbelt US.

“The outlook is strong and we see upside risks building to FY22E estimates.”

Significant market announcements possible for the week ending 19 September:

Monday 13 September:
Finals: Abcam (AIM:ABC) plc, City Of London plc, Dianomi PLC (AIM:DNM), Itm Power plc

Interims: Blackbird plc, Gaming Realms PLC (AIM:GMR, FRA:RNE1, OTCQX:PSDMF), Greencoat Renewables plc, Iqgeo plc, Verici Dx PLC (AIM:VRCI), Xpediator PLC (AIM:XPD)

Trading announcements: Associated British Foods plc

Tuesday 14 September:
Finals: Diurnal (AIM:DNL) Group plc, MJ Gleeson (LSE:GLE) plc, Petra Diamonds (LSE:PDL) plc

Interims: Accesso Technology plc, Bluejay Mining plc, Corero Network Security PLC (AIM:CNS), Filta Group plc, JD Sports Fashion Group plc, Made.com Group PLC (LSE:MADE), Property Franchise Group PLC, Sanne Group PLC (LSE:SNN), Smart Metering Systems PLC (AIM:SMS), Staffline (AIM:STAF) plc, STM Group PLC (AIM:STM), TP Group PLC (AIM:TPG), VR Education Holdings PLC (AIM:VRE)

Trading announcements: Chemring Group (LSE:CHG) plc, Ocado Group plc

Economic data: UK unemployment rate, US inflation rate

Wednesday 15 September:
Finals: Darktrace PLC (LSE:DARK), Pan African Resources pls, Redrow PLC (LSE:RDW)

Interims: Fevertree Drinks (AIM:FEVR) plc, Keywords Studio plc, Pendragon plc, Restaurant Group PLC (LSE:RTN), Science in Sport PLC (AIM:SIS), Surgical Innovations Group (AIM:SUN) Plc, Trackwise Designs PLC (AIM:TWD), Trinity Exploration & Production PLC (AIM:TRIN), Tullow Oil plc

Economic data: UK inflation rate, UK retail price index, US industrial production

Thursday 16 September:
Finals: Clinigen plc, Duke Royalty Ltd (AIM:DUKE), Galliford Try Holdings Plc (AIM:GFRD), Kier Group PLC (LSE:KIE)

Interims: Hilton Foods Group plc, Foresight Solar Fund (LSE:FSFL) Ltd, Genincode PLC, Keystone Law Group PLC (AIM:KEYS), RTW Venture Fund Ltd (LSE:RTWG)

Trading announcements: Ashtead Group plc, C&C Group PLC (LSE:CCR), IG Group (LSE:IGG) Holdings plc

Economic data: US retail sales, US initial jobless claims

FTSE 100 ex-dividends to knock 0.2 points off the index: Intertek Group (LSE:ITRK) plc

Friday 17 September:
Interims: Midatech Pharma PLC (AIM:MTPH)

Economic data: UK retail sales


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