Share Talk Stocks To Watch Week Commencing 2nd August 2021

Standard Chartered and HSBC are both due to report. Also, Rolls Royce, the engine manufacturer, and insurer Legal & General, Taylor Wimpey, the housebuilder, and exchange operator LSE Group, are all due to report.

This week will bring more results from blue-chip banking institutions like HSBC (LSE :HSBA) or Standard Chartered. Meanwhile, oilers will be back in the spotlight as BP delivers figures.

The Bank of England’s latest interest rate decision will dominate the macro calendar, as well as the US non-farm payrolls at week’s end.

StanChart and HSBC wrap up big bank reports

The UK’s banking results season is over with updates from Standard Chartered PLC and HSBC Holdings PLC (LSE-STAN).

Analysts will be able to gauge progress towards the consensus forecast of US$14.9bn in full-year pretax profits by HSBC when HSBC releases half-year results.

UBS predicts a second-quarter profit before tax of US$4.6bn, and a CET1 ratio of 16.2%. This is a measure of balance sheets strength.

UBS stated that conference call guidance indicated that 2Q net income would likely remain stable QoQ as margin pressure decreases.

Net interest income is US$6.52bn, and non-interest income US$6.13bn.

Like Standard Chartered’s focus on Asia, HSBC’s focuses on Asia mean that political considerations are always present.

Russ Mould (investment director at AJ Bell) stated that HSBC is still the meat of the sandwich between China’s politicians and regulators. They are taking a harder, colder line on Beijing’s policies. This could make it difficult for Chairman Mark Tucker, CEO Noel Quinn, and their team as they can’t afford to annoy authorities in their most lucrative Asian markets.”

The bank doesn’t have to worry about the Bank of England judging its dividends and tutting at them. There will likely be a lot of interest in the dividend level.

It was not able to announce a quarterly dividend in its first-quarter results, so the bank has some work ahead of it. Analysts expect a divi at 23 cents for the entire year, up from the 15 cents last year.

Standard Chartered reports on its second-quarter results Tuesday. The market is expecting an adjusted profit before taxes of US$999mln.

Provisions for bad loans will be approximately US$197mln. This is a significant increase from US$611mln during the same quarter last year.

BP PLC (LSE :BP.) will focus on renewables. Despite the release of its trading update on Tuesday by BP the strong oil price will continue to drive financials.

July already saw BP make a PS10bn pledge to offshore wind in the UK North Sea in its bid for acreage under a government leasing round. It also plans to invest in green hydrogen and electric vehicle charging networks.

The oil giant said that it would make Scotland BP’s global centre for excellence for offshore wind’. According to Dev Sanyal (BP executive vice president), BP sees a bright future for clean energy in the country.

This is the latest environmental flex by BP, which seeks to improve and decrease the amount of hydrocarbons in its operations.

Operatively, the focus is still oil-centric. Current crude prices are driving cash flows.

Forecast UBS predicts that the second-quarter net income will be close to US$2bn. This is down 24% from the previous quarter, but up from a loss of US$6.68bn a full year ago when results included a write-off for large amounts of BP’s non-tangible exploration costs.

Analysts stated that BP had made a substantial but not disclosed power trading and gas profit from Storm Uri.

Half-year results for Greggs PLC (LSE :GRG), a bakery chain, will be scrutinized on Tuesday to see if the chain is still on the right track and bringing home some bacon.

According to the firm’s June trading update, demand for pasties, sausage rolls and other pastries rose strongly after lockdown measures were relaxed. Sales at its stores increased by 3% over 2019 levels.

Greggs has stated that it expects sales levels to return to pre-pandemic levels in the coming year. We will keep an eye on the outlook for more information about forecasts and any new features the company plans to launch to reach more customers after the success of its vegan products.

The macroeconomic developments of the last months should support Legal & General Group PLC‘s half-year results (LSE:LGEN), Wednesday.

The life insurance company last spoke to us in March. It stated that it had put aside £110mln to cover early deaths from COVID-19 strains. We expect pandemic-related claims will rise in 2021.

Operating profits fell by £228mln in 2020 due to the pandemic. This includes PS76mln for COVID-19-related claims.

Excess deaths are decreasing, but investors shouldn’t expect this to be the focal point of half-year results. Analysts at Barclays stated that mortality and longevity assumption changes are usually made at year-end.

Analysts stated that retail sales volumes in life insurance should show a “modest, but continued recovery”, while bulk annuities had a “pedestrian start to the year, however, these are often skewed towards half-year.”

The LGIM arm’s investment margins, which has been one of the most influential industry voices on ESG issues in the past year, should be supported “favourable market trends”, while solvency rates should be supported with higher rates and stronger equity marketplaces.

Taylor Wimpey, a housebuilder, could have some interesting comparatives on Wednesday due to the fact that house purchases slowed down last year during the first round of UK lockdowns.

Investors will likely look forward to 2019 to get a better idea of the business’ performance. However, given that the firm has maintained its full-year guidance, there won’t be many surprises.

When compared to the current UK house price situation, it is likely that comments on demand levels will be a major focus.

Half-year results for Rolls-Royce Holdings PLC, (LSE:RR.) The propulsion systems manufacturer should see a slight increase in engine flying hours. This group expects that these will recover in 2021 at around 55% of their 2019 levels.

UBS says it will be “likely another difficult set of outcomes with limited improvement in-flight hours of the fleet beyond cargo engine (757/767/some A330s and the A350)”.

“Investors are pondering about the A330’s return to flight in Asia and China, as the fleet is still parked at 21.7%. Airlines request payment deferrals. The PS recovery appears to be slower than other Industrial peers, which all seem to report strong 1H, so more colour on orders, risk of supply chain and inflationary pressure might be welcomed,” the Swiss bank said.

Market participants expect half-year revenues to fall to US$5.50bn, compared to US$5.56bn for the first half.

Although expected to improve from the $1.67bn loss last year, earnings before interest and taxes (EBIT) should still be negative. The consensus forecast for a $129mln loss is for EBIT.

Final results will be presented by Mike Ashley’s Frasers Group PLC (LSE:FRAS) on Thursday. However, attention will likely be on any updates regarding the firm’s cautious outlook as the firm continues to worry about the possible impact of the latest COVID-19 infection on consumer confidence.

However, although the positive spending data after the removal of most restrictions on sales may have eased some of the anxiety, it is possible that the large number of stores owned by the company could be a concern due to the increasing pressure on bricks-and-mortar shops in the face of online shopping.

ONS data showing a decline in clothing sales between May and June could also be troubling, especially for House of Fraser and Flannels. Investors will likely hope that a rebound in football apparel sales from Sports Direct during Euros has compensated any weakness.

When London Stock Exchange Group PLC (LSE :LSEG) reports half-year results, Friday, the market will likely focus on London Stock Exchange Group PLC’s revenue growth and costs.

This update will be the first since LSEG reported higher-than-expected 2021 integration costs for Refintiv’s March acquisition.

The LSE said that London-listed companies raised the most money in the past decade. However, Amsterdam’s share trading outperformed the UK earlier in the year.

Despite a strong year for new listings, the IPO pipeline continues to channel new companies onto the market in 2021.

The US non-farm payroll (NFP), which is the most important report in macro data, comes Friday.

We have two important flash PMI surveys from both sides of the Atlantic on Wednesday. A Bank of England monetary policy meeting follows a Bank of England meeting. This is after two rate-setting committee members questioned the merits of current policy, suggesting that the asset purchasing program may need to be reined back in.

Dave Ramsden, Deputy Governor of Massachusetts, stated that there was increasing evidence for the need to consider the reduction of stimulus measures. He also acknowledged the potential impact on the way the virus is being managed by the vaccine program.

Notable was the fact that Michael Saunders was also an external MPC member. Both expressed growing concern about how transitory or other inflation levels were likely, according to Michael Hewson, CMC Markets market analyst. This was after recent unemployment figures showed that there may be as many as 1mln vacant positions in the UK.

Marshall Gittler, BDSwiss, stated that “The Bank of England will not make any policy changes.” “The August Monetary Policy Report forecasts will change and the vote for the quantitative easing program (if any) will be the main focus. When the time is right, the Bank could release the results of a study on how it would unwind its asset purchase program.

Friday’s NFP Report – an important reading of the US economy that the Federal Reserve policymakers use – will show that 925k new jobs have been added in the US economy in the last month. This is up from the 850k reported in June and May’s 583k.

Hewson stated that the last month’s numbers “didn’t tell us much about the state of the US labour market in terms how quickly those US workers have dropped out of work since February last year are likely back”. Hewson also noted that there was a surprise rise in the unemployment rate, to 5.9%, and an unchanged participation rate at 61.6%.

This number seems to be more concerning for Fed committee members – because it wants a broad and inclusive recovery in the labour market – than the current spike in inflation.

Significant announcements expected for the week ending 6 August:
Monday, August 2:

Interims: HSBC Holdings PLC, Senior PLC (LSE:SNR), XP Power Ltd

Economic data: UK manufacturing PMI, US manufacturing PMI

Tuesday, August 3:

Trading announcements: BP PLC, AG Barr (LSE:BAG) PLC, Lamprell PLC (LSE:LAM, OTC:LMPRF)

Finals: Filtronic PLC (LSE:FTC), Joules Group PLC (AIM:JOUL), NWF Group PLC (AIM:NWF)

Interims: Standard Chartered PLC, Greggs PLC, Direct Line Insurance (LSE:DLG) Group PLC, Travis Perkins (LSE:TPK) PLC, Ultra Electronics (LSE:ULE) PLC, Aferian PLC, Coats Group PLC (LSE:COA), Keller Group (LSE:KLR) PLC, Rotork (LSE:ROR) PLC, Fresnillo PLC (LSE:FRES), Domino’s Pizza Group PLC, Weir Group (LSE:WEIR) PLC, TP ICAP (LSE:TCAP) PLC

Economic data:

Wednesday, August 4:

Trading announcements: UDG Healthcare (LSE:UDG) PLC

Interims: Legal & General Group PLC, Taylor Wimpey PLC, Ibstock PLC (LSE:IBST), Morgan Sindall Group PLC (LSE:MGNS), Hiscox Ltd, Ferrexpo PLC (LSE:FXPO)

Economic data: UK services PMI, US ADP jobs, US services PMI

Thursday, August 5:

Finals: Frasers Group PLC, NCC Group PLC (LSE:NCC)

Interims: Rolls-Royce Holdings PLC, Serco Group (LSE:SRP) PLC, WPP PLC (LSE:WPP), Centamin PLC (LSE:CEY), Glencore PLC (LSE:GLEN), Meggitt PLC (LSE:MGGT), Evraz PLC (LSE:EVR), Hammerson (LSE:HMSO) PLC, IP Group PLC (LSE:IPO), Mondi PLC (LSE:MNDI), Secure Trust Bank PLC (LSE:STB), Spirent Communications (LSE:SPT) PLC, Synthomer (LSE:SYNT) PLC, Tritax Big Box REIT PLC (LSE:BBOX), TT Electronics PLC (LSE:TTG), ConvaTec Group PLC (LSE:CTEC)

FTSE 100 ex-dividends to knock 5.15 points off the index: Unilever PLC (LSE:ULVR), Reckitt Benckiser Group PLC (LSE:RKT)

Economic data: BoE rates decision, UK construction PMI, US trade balance, US jobless claims

Friday, August 6:

Interims: London Stock Exchange Group PLC, Hikma Pharmaceuticals PLC (AIM:HIK, OTC:HKMPF), ContourGlobal PLC (LSE:GLO), The Renewables Infrastructure Group

Economic data: US non-farm payrolls, US earnings


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