Sunday 31 January 2021 11:49 am

The week ahead, 1-5 February: FTSE heavyweights front up to third lockdown

After a turbulent opening to 2021, with new Covid-19 lockdowns around the world, spats over “vaccine nationalism”, and chaos on both Wall Street and Pennsylvania Avenue, a slew of FTSE heavyweights are set to update the market in what will be a crunch week for London’s indices.

Despite a strong opening week, the FTSE 100 ended January down, with the Reddit-inspired GameStop revolt the final nail in the coffin after a dire month.

Traders will be looking for anything hopeful to grasp onto, with the UK’s lockdown set to continue for at least another month.

Monday – Ryanair Q3 results

After Easyjet and Wizz Air released their latest earnings reports last week, it’s Ryanair’s turn to follow suit tomorrow.

Even by airline executive standards, Michael O’Leary is no supporter of European governments’ approach to the Covid crisis, so expect some strong words from the Irishman.

With services expected to continue at a minimum for the foreseeable future after last week’s quarantine announcement, traders will be looking at both Ryanair’s balance sheets and its plans for the summer season.

The carrier came into the crisis with one of the healthiest cash piles of all the major airlines, but 10 months of restrictions would dent even the fullest of balances.

Easyjet and Wizz Air both announced aggressive expansion strategies last week which could set them on a collision course to snap up routes and bases across the continent.

Will Ryanair, already the continent’s biggest low-cost carrier, throw itself into the fray?

Tuesday – BP Q4 results

A year ago, BP’s Bernard Looney was laying out his plans to turn the oil giant into a new type of company fit for the coming “energy transition”.

Then came Covid, prompting a massive plunge in oil prices and months of volatility for the sector.

After a remarkable recovery in oil prices – they are now just six per cent down year-on-year – AJ Bell’s investment director Russ Mould is expecting a small profit of around $375m for the fourth quarter.

But despite that, shares are still down 40 per cent on last year. Mould explains:

“This may reflect market scepticism over the sustainability of oil’s recovery, investors’ doubts over whether BP can pull off its pivot toward more sustainable forms of energy or even concerns among (former) shareholders that the company is not going far or fast enough with the new, net-zero strategy outlined last year by Looney.”

Fellow oil behemoth Shell reports its fourth quarter figures on Thursday.

Wednesday – Spotify Q4 results

In recent weeks, the economics of streaming have come under increasing scrutiny, with growing concerns that platforms like Spotify are leaving artists high and dry.

But with lockdowns providing a boost for subscription services – see Netflix’s latest boom – Spotify will be hoping to see a continuation of last quarter’s user boom.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, says: “Subscriber numbers remain the most important metric to watch at Spotify. Lockdowns worked wonders for this, as consumers cooped up inside looked for alternative entertainment.

“The number of monthly active users and premium  subscribers (those who pay to use the ad-free version) rose 29% and 27% respectively last quarter. With restrictions tightening again in many countries , we have reason to suspect another round of impressive subscriber growth.”

Wednesday – GSK Q4 results  

Poor GSK. While rival pharma giant Astrazeneca has been taking the plaudits (well, mostly) for its rapid work on developing a Covid vaccine, its fellow blue-chip has been in something of a slump.

A look at the firm’s share prices over the last year illustrates the point. Astrazeneca is trading a little ahead of where it was a year ago. GSK, on the other hand, is down a quarter, twice as bad as the FTSE’s 12 per cent slide.

Russ Mould explains: “Possible reasons for the turgid share price performance include the company’s recent pedestrian earnings and dividend growth profile, some lingering concerns among analysts about weak dividend cover, and also disappointment that the company seems slow off the mark in the race to beat COVID-19.

“In addition, perhaps investors are taking time to warm to the strategy implemented by CEO Emma Walmsley, which means a move away from the three-legged structure built by predecessor Andrew Witty, based on pharmaceuticals, vaccines and consumer healthcare.”

Analysts will be looking for an update on GSK’s progress on its Covid vaccine, as well as an update on sales, earnings, and the firm’s dividend.

Thursday – BT Q3 results

It was a difficult first half for the telecoms giant, with the dearth of live sport denting its revenues, as well as a decline in business revenue.

It’s a mixed picture, says Will Ryder of Hargreaves Lansdown.

“Revenues for BT Sport should have started to recover, thanks to special exemptions for elite athletes and associated staff, but are still likely to be depressed and will probably remain so until pubs are back up and running.

“Demand from some business customers could also be suffering in lockdown 3.0, but we doubt to the same degree. Businesses have more experience with social distancing now than they did last March and that should help operations to keep ticking-over.

“Management’s view on this subject will be interesting.  In its half year results BT raised the lower end of its cash profits guidance range from £7.2bn to £7.3bn. The upper end of the range stayed at £7.5bn. Given the relative predictability of much of BT’s core business we don’t expect a large swing outside that range.”

Thursday – Bank of England February MPC

Three words: negative interest rates. Despite consistently ruling out taking such a step, speculation continues that the BoE’s governors may be forced to go further.

Michael Hewson, chief markets analyst at CMC Markets, takes a look:

“It seems highly likely that further fiscal interventions will be warranted for the first half of this year, however the mood music around negative rates have definitely become much more muted in recent weeks.

“While some on the MPC still appear enthusiastic about the prospect it is hard to see how cutting rates further can help an economy that is essentially shutdown, with people confined to their homes. 

“As such we can expect little in the way of change on the monetary policy front, despite the prospect of a technical recession for the UK economy.” 

In addition:

  • Results from: SSE, Amazon, Glencore, Imperial Brands, Vodafone, Unilever, Severn Trent et al.
  • US employment report – Friday.