Weekly outlook: Aussie and Canadian central bank to 'set the scene'

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02 December 2022

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Portfolio Adviser

Monday 5 December

– Purchasing manufacturers’ indices (PMIs) for services industries from Asia, Europe, the UK and US
– US factory orders
– Latest EU sanctions on Russian oil and shipping of it come into force
– In Asia, monthly sales figures from Taiwanese silicon chip foundry UMC
– In the US, quarterly results from AutoZone

Tuesday 6 December

– Full-year results from Paragon Banking, SSP Group, Victrex and Victorian Plumbing
– Trading statements from Ashtead
– German factory orders
– Purchasing manufacturers’ index (PMIs) for the construction industry in the UK
– In the US, quarterly results from former FTSE 100 member Ferguson

Wednesday 7 December

– Full-year results from Carr’s Group
– First-half results from Moonpig
– German industrial production
– Halifax UK house price index
– US oil inventories
– Interest rate decisions in Australia and Canada

The Reserve Bank of Australia (RBA) and the Bank of Canada (BoC) will announce their latest interest rate decisions on Wednesday. AJ Bell’s Russ Mould and analyst Danni Hewson said the decisions could “set the tone” ahead of the Fed and Bank of England announcements the following week.

In November, the RBA hiked rates by 25bps to take the interest rate to 2.85%, while the BoC increased its rates by 50bps to 3.75%.

Mould and Hewson said: “[The decisions] may at least shape financial market thinking about monetary policy, as markets continue to seek out (and hope for) the longed-for slowdown, pause and then pivot in interest rates.

“It will be intriguing to see what [RBA governor] Mr Lowe and [BoC governor] Mr Macklem have to say this time around, but after a difficult year for investors – and one that has so far seen 325 global interest rate hikes against just 13 cuts, to the detriment of bond and share price alike – it is easy to see why markets are baying for more cheap money to give them a lift,” they added.

Thursday 8 December

– Full-year results from On The Beach, British American Tobacco and Mitchells & Butlers

British American Tobacco will unveil its full-year results on Thursday. The firm is the 11th best performing FTSE 100 company this year in capital terms, with its latest results expected to show how investors have turned to the tobacco sector in 2022’s turbulent market conditions.

Mould and Hewson said: “Investors have, no doubt to the despair of health campaigners and investors who run strict environmental, social and governance screens, latched on to the tobacco sector’s relatively predictable demand and pricing power at a time when the threat of recession has reared its head and inflation has run rampant. In addition, both Imperial Brands and British American Tobacco come with fat dividend yields, low earnings multiples and share buyback programmes for good measure.

“Imperial Brands’ positive trading update in mid-November also sets the scene for British American Tobacco’s announcement, which will provide a comment on trading for the 2022 calendar and fiscal year. The actual full-year figures are due for release on 11 February 2023.”

– First-half results from DS Smith and Frasers
– Trading statements from S & U and Balfour Beatty

Balfour Beatty post their Q3 results on Thursday. The results may provide investors with an insight into how inflation has impacted the construction sector.

Susannah Streeter, Hargreaves Lansdown senior investment and markets analyst, said: “The wind has been in the sails of Balfour Beatty as it has overcome the pandemic set back and pushed up profits slightly ahead of pre-Covid levels.

“Margins will be watched closely given how thin they are in the construction sector and worries remain that continued inflationary pressures will continue to nibble away at the edges. Given the huge reliance on public sector contracts, there was relief that the UK government’s cost-cutting drive was largely delayed.

“The company should be well positioned to capitalise on rising demand for renewable energy, and better transport infrastructure in the UK and the US, but it will depend on how quickly contracts are tendered and won, so any inkling of fresh deals in the pipeline would be very well received.’’