Share Talk Expected Market Updates For The Week Ahead – 4th October 2021

In the coming week, it’s all about food with Tesco and Greggs at the forefront. Investors will be updated on the UK’s food-themed week, which includes Tesco, Greggs, a high street bakery, and Hotel Chocolat, a posh chocolatiers retailer.

The corporate calendar will also include Imperial Brands plc, a tobacco giant, and Electrocomponents plc (LSE:ECM). There will be huge interest in job announcements in the US and other PMIs on both the Atlantic and the Atlantic Coast.

This month’s US non-farm payrolls report (NFP) is a key indicator in the financial world.

Other events include a meeting of the powerful OPEC oil producers Monday, data from the services sector for the UK and other countries on Tuesday, data on construction PMIs Wednesday, and data on Halifax house prices Thursday. China observes a weeklong National Day’ holiday on Friday with data on services. This data, along with a statement by the Bank of England’s Financial Policy Committee acts as a prelude to NFP reports later.

BDSwiss market analyst Marshall Gittler made a special plea for his readers to emphasize how exceptional the report on September’s jobs was. He pointed out that many members of the Federal Open Market Committee, the US Fed’s rate-setting agency, said they wanted to see the September job figures before making decisions about their $120bn-a month bond purchases.

He said, “Now they will,”

Gittler explains that September is important for two reasons: “One, there were some people who had to care for their children and didn’t want to be in the workforce. These people can now return to work, as school started in September in many areas. Second, federal government’s extraordinary unemployment benefits ended on September 6th. People imagine these people would rather watch Netflix than collect unemployment, but now that their checks are no longer arriving they will have to look for work.

The weekly jobless claims numbers for the month of February are not encouraging. They have fallen slowly, so there is no sign that Netflix-watchers will get up from their couches and take minimum-wage jobs with unpredictable schedules and no benefits.

The NFP averaged a strong 876,000 per monthly from May to July. However, the rebound of Covid led to a substantial slowdown in August to 235,000.

The market expects September to see a rebound to approximately 500,000 after the sharp decline in Covid cases.

The future is looking bright for jobs growth. High-frequency data points point to a significant uptick in economic activity. Economists at ING expect the FOMC to announce that it will begin to taper its bond-buying from December.

Hotel Chocolat Group PLC, (AIM:HOTC), is delighted to delight investors with its Tuesday finals. This was delayed because its auditors BDO requested more time.

This was not due to any concerns about the actual results, but rather a delay in routine practices.

The AIM-listed company raised £40mln for growth. Analysts at Liberum project a 25% compound annual growth by 25% by 2026, based upon the £500mln target.

The current financial year would see total sales of £205mln, a gross margin (EBITDA), of 61.7%, and underlying earnings of £39mln.

HOTC has multiple touchpoints with consumers in gifting, leisure, and home-based business. Analysts noted that this includes the nascent US-Japan operations, which are 3-5x larger than the UK.

Greggs PLC (LSE:GRG) has the perfect accompaniment for chocolates on Tuesday: sausage rolls

Although the Geordie baker is expected to deliver encouraging results, they are still cautious due to the possibility of a negative surprise in supply chains and the effect of inflation.

Nicholas Hyett, Hargreaves Lansdown analyst, said that Gregg’s half-year results were indicative of sales numbers that would be close to 2019’s pre-pandemic level. Cost inflation is the biggest unknown in the third quarter.

“Food input inflation was already increasing 3 months ago, but well-reported labour shortages and disruptions in supply chains across the economy are likely to have increased this pressure.”

According to an analyst, Greggs may be distracted by new products, store openings and home delivery. However, Greggs hopes to continue to deliver the “impressive growth” that is expected in the market.

Barclays analysts expect Imperial Brands plc to “modestly” surpass its 2-5% underlying earnings growth guidance for the year.

The tobacco group announced that half-year results would show lower US cigarette inventories, lower US MSA settlements, and lower Australian stock profit.

The bank stated that this would normally set comparison for the financial year 2022.

We don’t expect IMB to raise its 2022 EBIT guidance on flat growth. It is losing share in Germany, and it just launched HNB pilot markets for the Czech Republic (and Greece)” Potential for US Excise Tax Increases.

Analysts expect strong half-year results from Tesco PLC (LSE:TSCO).

UBS claims that the grocer’s customer experience (or net promoter score) is at its highest level and growing fast on Aldi.

Kantar’s external data continues to show steady industry growth with Tesco outperforming its peers in the first half.

UBS has increased its earnings forecasts for this year by 6%, and next year by 4%, while the half-year statement should contain positive news regarding cash flow and shareholder returns.

The supermarket giant should win Wednesday in theory. But, as the headlines will show, it’s not that simple.

Sector-wise, the Morrisons bid will be settled this weekend. However, Tesco was not involved in the bidding process.

Even more important is the chaos around shortages of delivery drivers and other supply chain problems.

Tesco warned that Christmas supplies could be disrupted if the situation wasn’t resolved. It should also become clearer whether this might impact its performance after Wednesday.

Forecasts for interim and underlying profits (EBIT), range from £1.35bn to the consensus £1.26bn.

CMC Markets PLC (LSE:CMCX), will provide a trading update Thursday that analysts from Peel Hunt believe won’t be too surprising.

In a recent announcement, the trading platform stated that it would generate net operating income between £250 and 280mln.

Analysts stated that CMC’s investment case is based on significant investments in technology. This will ultimately enable the company to diversify further and less rely on leveraged trading.

Electrocomponents plc closes the week with a trading update following a remarkable 37% increase in revenue for the first quarter.

Due to its strong service offering, product availability and digital offerings, the distributor of industrial and electronic products saw continued market share gains in its key regions.

Stock Market announcements expected for the week ending 8 October:

Monday 4 October:
Finals: James Halstead PLC (AIM:JHD), Quadrise Fuels plc
Economic data: US factory orders

Tuesday 5 October:
Finals: Bluefield Solar Income Fund (LSE:BSIF) Ltd, Hotel Chocolat Group PLC (AIM:HOTC), SCS Group plc

Interims: Inspiration Healthcare Group PLC (AIM:IHC)

Trading announcements: Greggs PLC (LSE:GRG)

Economic data: UK/US services PMI, UK/US composite PMI, UK new car sales, US balance of trade

Wednesday 6 October:
Finals: Netcall PLC (AIM:NET)

Interims: Allied Minds (LSE:ALM) plc, Tesco PLC (LSE:TSCO)

Trading announcements: Ferrexpo PLC (LSE:FXPO), Imperial Brands PLC, Topps Tiles PLC (LSE:TPT)

Economic data: UK construction PMI, ADP US jobs survey, US oil inventories data

Thursday 7 October:
Finals: Eenergy Group PLC, Mondi PLC (LSE:MNDI), Volution Group PLC (LSE:FAN)

Interims: Morses Club PLC (AIM:MCL), Vertu Motors (AIM:VTU) plc

Trading announcements: CMC Markets PLC (LSE:CMCX), Hyve PLC, Robert Walters (LSE:RWA) plc

FTSE 100 ex-dividends to knock 1.26 points off the index: DS Smith PLC (LSE:SMDS), Taylor Wimpey (LSE:TW.), Kingfisher PLC (LSE:KGF)

Economic data: Halifax house price index, US initial jobless claims, US consumer credit

Friday 8 October:
Trading announcements: Electrocomponents plc

Economic data: US non-farm payrolls, US unemployment rate

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