Weekly outlook: Election campaign trail set to pick up as BoE makes rate call

The key events for UK wealth managers for the week starting 4 November

With the general election now set for 12 December, the associated campaign trail, and all its theatrics, will kick into full swing this week no doubt grabbing the UK wealth management community’s attention.

But money managers will be just as eager to hear the Bank of England’s Monetary Policy Committee’s stance on stimulus, expected on Thursday. The consensus call is for no change to the rate, despite the continuing Brexit malaise and negative outlook for the economy, but you never know.

Monday 4 November

– UK construction purchasing managers index

– Europe manufacturing purchasing managers indices

Tuesday 5 November

– US ISM Non-Manufacturing data

Canaccord Genuity Wealth Management investment manager Sam Buckingham noted last month’s reading fell below even the most conservative estimates, down to 52.6 – the lowest since August 2016. As a result, the revelation on 31 October that China doubts a long-term trade deal is possible with Trump is a cause for concern.

However, he added: “Economists are expecting this slump in the index to be short-lived, with the consensus being for a rebound to 53.9.”

– UK and US services purchasing managers indices

– UK balance of trade figures

– Warehouse Reit interim results

Wednesday 6 November

– US oil inventories data

– Marks & Spencer interim results

AJ Bell investment director Russ Mould said M&S became a FTSE 250 stock in September after its first-ever relegation from the FTSE 100 amid a steady trickle of downgrades to analysts’ profit forecasts, a dividend cut and investor scepticism over the purchase of a 50% stake in Ocado’s food delivery business.

“Overall for the year, M&S has forecast that UK operating costs will be flat to down 1% and that capital investment will come in between £350m and £400m, up from £283m last year,” said Mould. “Besides those numbers, investors and analysts will look toward the sales trends at both the food and clothing & home businesses, since both have been stuck in reverse gear for some time.”

Thursday 7 November

– Bank of England’s Monetary Policy Committee meeting

Buckingham said with Brexit continuing to paralyse any movement by the central bank, the market expects no change to the level of interest rates at 0.75%. The economic outlook remains relatively downbeat and in need of stimulus, despite the UK narrowly missing out on falling into a technical recession.

“The central bank arguably doesn’t have much more room to manoeuvre to spur growth with interest rates starting from where they are – instead, people are looking more-and-more towards fiscal stimulus,” he said. “Although it remains an unknown as to which government will be leading the country following the December general election, what is known is that rhetoric from major parties indicates we will be getting fiscal stimulus whatever the result.”

Mould said: “Governor Carney (pictured) and his colleagues have been hinting for some time at their desire to push through further interest rate increases and this makes sense, given low levels of unemployment and wage growth that is outstripping inflation.

“But MPC’s members have also cited Brexit-related uncertainty as a reason for not increasing the headline cost of borrowing. Throw in interest rate cuts from central banks on Europe and America, to name but two, and it’s pretty hard to see the Bank of England raising rates and a lot easier to see it shifting stance toward making a case for cuts.”

– Interim results from Purplebricks and Sainsbury

– Trading statements from Persimmon and Provident Financial

– Full-year results from Imperial Brands

Mould noted Imperial Brands dished out a profit warning in September, which prompted the board within a week to seek a replacement for chief executive Alison Cooper. At least this means the bar of expectations has been set fairly low for these results, he said.

He added: “Attention will focus on the balance sheet and the dividend. Net debt reached £13.4bn at the first-half stage, the legacy of four acquisitions in the US in 2015 and Imperial has started to focus on debt reduction.”

– ECB economic bulletin and EU economic forecasts

Friday 8 November

– China trade data

Buckingham said the update comes as China’s total trade with the US has plummeted, falling 20.6% in US dollar-terms over the 12 months to September.

“Weak China PMIs released on 31 October reiterated a struggling and decelerating economy. If we are to see a stabilisation it will require success from trade talks and/or government stimulus that’s been implemented.”

– Quarterly results from Allianz

– Germany balance of trade and current account data

 

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