Share Talk Expected Market Updates For The Week Ahead – 17 January 2021

For the week ahead, another packed diary is in store. The US earnings season will add to the variety of news available for investors, as well as important UK employment numbers and inflation figures.

This week’s update will be provided by Taylor Wimpey PLC, (LSE: TW). ) and Ashmore PLC, emerging markets asset manager Ashmore PLC. The following days will include mining giants Rio Tinto, BHP, Primark owner AB Foods and bookmaker Entain. Retail investment groups AJ Bell, CMC Markets and publican JD Wetherspoons will be featured in the next few days.

The FTSE 100 housebuilder is expected to complete 13,930 full years, which is approximately 90% of the 2019 level, according to UBS. This average selling price (ASP), of £296k, is also predicted.

UBS analysts include the contribution from Spain. They expect group revenues to reach £4.2bn, underlying earnings (EBIT), of £820mln, consistent with previous guidance, as well as net cash of approximately £22mln. This is around £700mln more than guidance.

The market expects EBIT to be around £903mln in 2022.

UBS stated that while there won’t be any formal guidance for 2022 we expect +5% volume growth and slight ASP declines (-0.5%), as well operating margins of 20%, which will result in an EBIT of £883mln.

Ashmore is expecting another challenging quarter in the second quarter, after US$1bn net outflows that were reported in its first quarter. Emerging markets remain difficult.

According to Peel Hunt, the consensus forecasts have already fallen to reflect the headwinds that are affecting assets under management.

“We also noted that GBP has been weakening for a while, and there will likely be some FX effects as currency trends have reversed in the past few weeks.

“To some degree, the share price already reflects lower forecasts. It has fallen 25% in the past six months.”

Tuesday, 18 January

Are there any improvements in the mining industry? Due to huge dividend payments, a rise in copper and iron ore prices, big mining shares have risen since November.

Rio Tinto PLC, (LSE: RIO) and BHP PLC will update production next week on Tuesday and Wednesday, respectively. However, there is still potential for more cash to hand analysts expect a cautious tone.

These are production updates and don’t usually contain financial information. However, cost pressures in the form of raw materials, power, labour, and freight are a concern for all sectors.

Anglo American, a sector peer, has already warned of inflation at 10% in 2021. Analysts warn that other miners will also mention them.

According to consensus forecasts, Rio’s iron ore production will fall by around 4% in 2021. However, a forecast for growth of the same amount is expected in 2022.

For 888, decline expected

888 holdings PLC (LSE 888) will report a trading update Tuesday. Investors are eager to see the impact of Dutch regulations on the last quarter of 2021.

The Netherlands Gambling Authority introduced a new policy that required the company to stop trading in the country for at least the second half of 2022. The rule is expected to result in a US$10mln decrease in underlying earnings in 2022 (EBITDA).

The group has recently added Virginia to their list of licensed sports betting licenses in the US. However, the final quarter revenues are expected to be lower year on year.

Peel Hunt, a broker, stated that “the share price has been low since shortly after the William Hill acquisition was announced, and we believe it will remain so until clarity emerges.”

Caesars Entertainment agrees to purchase William Hill’s non-US business from 888. Caesars Entertainment recently stated that it hopes to close the deal in the current quarter.

UK jobs update

We had data for October showing that the UK’s unemployment rate fell to 4.2% in October. The number of people on the payroll increased by more than 257k in November and the number of vacancies rose to 1.22mln in November.

The headline ILO unemployment rate for November will be 4.2%

Although average weekly earnings are down to 4.3%, they still look set to increase in November. Michael Hewson, CMC Markets, stated that the trend is likely to continue given the high number of available jobs.

“We have seen Sainsbury’s and Next announce wage increases in line with inflation in recent weeks. They are not the only ones doing this, as they look to compete for staff.”

Economists at ING stated that the UK’s labour market resisted the ending of the furlough scheme in September last year quite well.

“Redundancies are stable and we expect next weeks data to reflect the favourable hiring backdrop.

“But wages are what matter most to the Bank of England, and the jury is still out about where they are heading. It appears that wage growth is about the same as it was before the pandemic. This is an important part of the Bank’s hike rationale. Some evidence also shows that wage increases have been greater in short-staffed areas like IT and transport. We are less certain that we are heading for a wage-price spiral, but we’re not convinced.

Wednesday 19 January

Ladbrokes owner becomes a winner in the US

Entain PLC, (LSE: ENT) stated it will publish a trading update on its US joint venture BetMGM Wednesday. A wider group update from FTSE 100-listed group is scheduled for Thursday.

Analysts expect more positive news as the bookie reported an increase of 4% in revenues in its third-quarter results year-on-year, despite the high growth in the comparable period last year.

Citigroup sent a note to the Ladbrokes owner last week, in which it reiterated its ‘buy” rating. Flutter is also being considered. They expect their dominance in America’s new betting market to continue.

The question of M&A remains after DraftKings, a US competitor, pulled out of offer talks in October following a PS16.2bn Entain bid.

Draftkings cannot return to Entain with a bid after six months, which is late April, under the City’s code regarding takeovers.

The JD Wetherspoon Plc trading update (LSE: JDW ) offers Tim Martin another chance to make his point.

Regular themes include Brexit, tax disadvantages for pubs (as opposed to retailers), and government handling of the pandemic. The former occupies the voluble Mr Martin position of late.

Martin stated in the last month’s update that there had been no Covid-19 outbreaks as reported by health authorities.

Well, there have been no outbreaks.

Martin suggested that the first-half results of the pub’s group “may have been loss-making, or marginally profitable” in their rant on the government’s mercurial Covid-19 policy.

UK inflation

Last time, the UK consumer price index was 5.1%. This was much higher than anticipated and also a ten-year high. The RPI index reached a 30-year high of 7.1%.

This was the main reason why the Bank of England decided to raise interest rates by 0.1% to 0.25% last month, even though it had been widely anticipated the month before.

The UK’s producer price growth was 14.3% in November, suggesting that there is potential for headline inflation to rise even higher. This would be above the 2008 levels of 5.2% and the levels last seen in March 1992 when it was at 7.1%.

The perceived lack of confidence or conviction by the BoE has sparked speculation about another rate hike. CMC Markets’ Michael Hewson stated that “we could see another rate increase in February”, especially since inflationary pressures will likely to continue for several more months and weeks.

Andrew Bailey, the Bank of England Governor, has already stated that he expects CPI will reach 6% within the next few months. This is well above the central bank’s 2% inflation target.

Hewson stated that “a further rise in headline CPI this Week will increase the pressure upon the MPC to take rates action again in February.”

“The mistake is to tighten too aggressively and not at all.”

Thursday, 20 January

Primark owner Associated British Foods PLC(LSE: ABF) joins the retail after-Christmas frenzy on Thursday. This follows an update in mid-December that stated it was raising prices at its family cheap fast-fashion chain, as it struggles with closures of European stores and supplies chain disruptions, higher costs, and increased competition.

The Omicron-related squeeze may not be over yet. Therefore, the FTSE 100-listed group will need to keep an eye on the outlook and guidance.

“We want to hear management’s thoughts on the potential pitfalls ahead,” stated Laura Hoy, an analyst at Hargreaves Lansdown.

The board predicted Primark sales would be “significantly higher” than those in the same period last year. This was from December 2020 to April 20,21 when the estate was closed.

Hoy says: “Impressive stock controls at Primark and business as usual at its Grocery, sugar, Ingredients, and Agriculture segments meant that the group was able to weather the storm.

“However, despite the ease in restrictions, conditions remain tough for retailers — ABF included.”

Trading in and investing in focus

Mid-cap financials are under focus as CMC Markets PLC and AJ Bell PLC both released trading statements that provided insight on the same day into how trading and investment platforms sub-sectors performed in the third quarter of 2021.

Things were a little more difficult for trading-based businesses after the release of the lockdown boom which lifted all boats.

CMC reported that revenues dropped by 45% and active customer numbers fell by 9% in the latest half-year. However, this is still a significant increase over the pre-pandemic total.

Spread-better also began an exploratory review of the possibility of splitting up into two distinct businesses.

This would see splitting off its contracts-for-difference (CFD) operations, labelled as the ‘leveraged’ business, from its growing investment platform and business-to-business operations.

There may be more news about that that could boost a share price that has remained flat for approximately four months, as trading volumes have stabilized.

Wealth platform company AJ Bell has launched Dodl, a product that does not require commission and targets younger investors.

High-profit margins at A Bell are a target for low-or-no-fee competitors such as Freetrade or e-Toro. Chief executive Andy Bell suggested that the FTSE 250 group might have to sacrifice some profitability in order to keep its market position.

“It would be a mistake to try to preserve profit margins. Bell stated to reporters that Dodl needed to expand its reach and look for younger, less experienced investors when it launched Dodl.

“But we don’t want the GameStop investor or people who day trade.

AJ Bell saw net inflows of £6.4bn in its last financial year. Total assets under administration closed at a record £72.8bn. It will be interesting to see how these have changed over a period with relatively stable markets.

Friday, 21 January

Close Brothers Group, (LSE: CBG) will publish its pre-close trading update Friday. It covers the financial half-year that ended 31 January 2022.

In November, the company stated that it had an encouraging start to its new financial year with strong results in Banking and strong growth momentum in Close Brothers Asset Management.

It’s Winterflood Securities was the only thing that could be considered a flaw in its market-making arm. Trading income has continued to decline since the 2021 financial year.

UK retail sales

While the majority of retailers reported being bullish, economists from ING anticipate a drop in UK retail sales following a bumper in November. This is due to what seems to have been a stronger than usual Black Friday trading period.

“What is less clear is whether Omicron’s arrival and lower spending at social venues translated into a boost in goods purchases, as we saw with past Covid waves.

“We believe that this effect will be less prominent and shorter-lived. Early hints suggest that consumers are less cautious about going to hospitality venues than they were before Christmas.

Important announcements are expected between 17-20 January

Monday, 17 January

Trading announcements Ashmore Group, (LSE: ASHM), Taylor Wimpey PLC

AGMs Boston International Holdings PLC. Cardiff Property PLC. Edge Performance VCT PLC.

Tuesday, 18 January

Finals Pressure Technologies PLC, Watkin Jones PLC (AIM.WJG)

Interims: Accrol Group Holdings PLC (AIM: ACRL), Kromek Group PLC (AIM: KMK)

Trading announcements 888 Holdings PLC and Boot Henry PLC Elementis plc (LSE: ELM)  Hotel Chocolat PLC and Integrafin Holdings PLC Marshalls Marshalls (LSE: MSLH)  Petra Diamonds Rio Tinto PLC (LSE: THG)

AGMs : C4X Discovery Holdings PLC [AIM:C4XD] , Smart & Co PLC, Tracsis PLC

Economic data Unemployment (UK).

Wednesday 19 January

Finals: Crest Nicholson Holdings PLC (LSE: CRST)

Trading announcements: Antofagasta PLC(LSE: ANTO), Appreciate Group PLC(LSE: APP), Audioboom Group PLC (LSE: BOOM), Burberry Group PLC (LSE : BRBY), Centamin PLC (TSX: CEE, LSE: CEY, OTC: CELTF”), Diploma PLC (LSE: DPLM), Eve Sleep PLC. Galliford Try PLC, JD Wetherspoon PLC.

AGMs – Diploma PLC. Majedie Investments PLC. WHSmith PLC

Economic data: MBA Mortgage Applications (US), Building Permits, Housing Starts (US), Crude Oil Inventories(US), Consumer Price Indexes (UK), Producer Price Indexes (UK), Retail Sales (UK)

Thursday, 20 January

Interims: Ilika PLC (AIM:IKA, OTCQX:ILIKF), Superdry PLC (LSE:SDRY)

Trading announcements: AJ Bell PLC. Associated British Foods PLC. City Pub Group PLC. (AIM: CPC), CMC Markets PLC. Entain PLC. Ibstock PLC. LSE: IBST), Kier PLC. Network International Holdings. Premier Foods PLC. QinetiQ Group PLC. (LSE : QQ), Wickes Group PLC (LSE : WIX), Workspace Group PLC (LSE : WKP)

AGMs: Countryside Properties (LSE: CSP) PLC, GCM Resources (AIM: GCM) PLC, Henderson Far East Income Ltd, MJ Hudson Group PLC (AIM: MJH), Smiths News PLC

Economic data Continuing Claims (US), Initial Jobless Claims(US), Philadelphia Fed Index, Existing Home Sales.

Friday, 21 January

Trading announcements Big Yellow Group (LSE: BYG) Close Brother Group PLC

AGMs: Character Group (AIM: CCT) PLC

Economic data GFK Consumer Confidence, Retail Sales (UK),

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