London’s markets started the new year in a frenzy last week, picking up over five per cent and closing the gap on their counterparts around the world.
This week is set to be a busy one for the FTSE, with a raft of companies due to provide updates, as well as key economic data in the UK and US.
City A.M. takes a look at what’s coming up this week.
Vistry & Persimmon trading updates – Tuesday & Wednesday
By and large, housebuilders avoided taking too much damage in 2020, and the latest construction figures suggest that demand is still growing despite further restrictions.
But the longer the threat of more restrictions continue, the more pressure the sector will come under – which means this week’s guidance from Vistry and Persimmon will be of keen interest to traders.
Hargreaves Lansdown’s Laura Hoy explains: “In November, Vistry said it was planning to resume dividend payments. But financial fortitude will once again take precedence. That means the payout could appear in the latter part of the year, if at all.
“This will depend on management’s predictions for what the latest round of lockdown restrictions will mean for the income statement. Debt repayment was also on management’s to-do list, the results of which could help, or hinder, the case for renewed dividend payments.”
For Persimmon, the focus will be on the number of houses it has managed to build, says AJ Bell’s Russ Mould, with a decline expected due to the impact of the virus.
Asos Q1 trading update – Wednesday
The online clothing giant was one of the few winners of 2020, as customers turned to locked-down style to stay sane.
According to CMC Markets David Madden, Asos added over 3m new active customers last year, which pushed sales up 20 per cent to £3.2bn over the full year.
Madden says: “The group cautioned about uncertainty in the short-term because of the health crisis but it feels that it is well positioned to take advantage of new opportunities because of its recent solid performance.
“Asos has had a strong start to the new financial year, and it expects to build on its profit before tax.”
Tesco Christmas trading update – Thursday
Last week was a mixed bag for supermarkets, with Sainsbury’s and M&S having very different experiences over the usually-lucrative Christmas season.
Now it’s the turn of Tesco. Sophie Lund-Yates of Hargreaves Lansdown says that traders will be using Morrison’s impressive holiday performance (an 8 per cent sales jump) as a benchmark for performance.
“If Morrison’s Christmas trading statement was anything to go by, smaller gatherings at Christmas won’t have dampened sales over the key festive period. If Tesco follows the trend, sales of traditional festive fare will have skyrocketed”, she said.
But keep an eye on any full year commentary, she adds. “Huge costs associated with Covid-19 means Tesco’s half-year profits shrunk, ignoring the benefits of business rate relief. To protect margins, higher costs need to be offset by increased scale.
“So, we’ll be looking to see just how much sales rose in the third quarter, especially as November saw the re-introduction of tougher restrictions for much of the UK.”
UK GDP (November) & services data – Friday
On Friday, the impact of November’s lockdown on the economy will be revealed, and ministers will have their fingers crossed that the damage is slight compared to the damage done by the first shutdown in the spring.
In October, the GDP reading was 0.4 per cent on a month-on-month basis, and that was a drop off from the 1.1 per cent growth posted in the previous update.
According to a consensus of analysts, the drop in GDP could be as high as four per cent.
There will also be an update on the UK’s dominant services market, which makes up some 75 per cent of the country’s economic output.
US banking giants – Friday
Finally, Friday will see three of the US’ banking beasts update on their fourth quarter performance, with JP Morgan, Wells Fargo, and Citigroup all due to report.
David Madden says: “The banking sector has been in the firing line because of the pandemic as bad debts are tipped to soar. In the last reporting season, the major banks lowered their bad debt provisions and that suggests that the firms feel we are over the worse of the pandemic.
“JPMorgan set aside $569m in the third quarter and keep in mind the banks’ total provision from the previous two quarters was more than $15bn, so it was a huge fall.
“Wells Fargo is one of the largest mortgage providers in the US so therefore it is more exposed to the residential property market than its peers. The bank announced a $769m provision for bad debts in the third quarter, and that was a big fall from the $9.5bn posted in the previous quarter.
“Citigroup’s third quarter update was well received as earnings per share was $1.40, and that smashed the 93 cents that analysts were predicting. In the three month period, the credit loss provision was $1.9bn, and that compared with the $2.2bn set aside for bad debts in the second quarter.
- Trading statements from JD Sports, ABF, Games Workshop, Halfords, Dunelm, Boohoo et al.
- British Retail Consortium sales figures (Tuesday).
- Federal Reserve “Beige Book” (Wednesday).
- UK construction, manufacturing and industrial production data (Friday)