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Week Ahead: political jitters, BP in court & Lloyds
Our preview of the main financial events of the coming week.
Presidential elections in Italy will kick-start financial markets over a week in which investors are due the whole gamut of political intrigue, major corporate tidings and economic brokering in the world’s most important economies.
On Sunday Italians head to the polls, where they are expected to elect Pier Luigi Bersani’s centre-left Party as their new president, potentially in a coalition with current leader Mario Monti, beating Silvio Berlusconi. This would mark a victory for pro-reformists over anti-austerity protestors, a relief for eurozone doomsters who deem elections in Italy and German later in the year as two of the biggest threats to markets in 2013.
Many voters remain undecided though, opinion polls have shown, and a Berlusconi win could rattle markets. Whoever wins, they’ll face a waning acceptance of austerity among the Italian electorate, analysts say.
As if one eurozone election wasn’t enough, Cyprus – the struggling Mediterranean economy seeking a bailout and causing some wider eurozone jitters in the process – will hold a second round run-off in its presidential election on Sunday.
Some market watchers dismiss Italy’s elections – David Jones of IG Index calls it a ‘mild diversion – with events in the US deemed more important for markets. Namely, ‘sequestration’. The automatic triggering of spending cuts that were postponed back in January, start to take effect on 1 March, with much of Washington seemingly ‘resigned’ to let the cuts take effect, according to the Washington Post.
Federal Reserve chairman Ben Bernanke – the man who coined the term ‘fiscal cliff’ for the threat of sequester cuts with tax rises that were seen off in January – will deliver high profile presentations this week. His semi-annual monetary policy testimony to both the US Senate and House will be scrutinised for clues as to the Fed’s plans for the future of its stimulus programme; suggestions that QE might be wrapped up sooner than previously expected in minutes published last Wednesday night prompted a one-day market crash.
Meanwhile the economic data will flood in, with a second reading of US GDP for the fourth quarter of the year expected to be revised upwards from the initial report of 0.1%. The ISM manufacturing index, and data on vehicle sales and durable goods, are also due from the US.
It's a busy week for corporate results. Over in New Orleans, investors in BP (BP.L), a Citywire Top Stock, await the start of the civil trial in the Deepwater Horizon case on Monday (criminal claims by the US government were resolved in November 2012).
Many analysts and investors remain wary of BP shares until these complex legal issues are resolved. ‘We believe that BP would like to settle the bulk of its civil litigation concerning Macondo and thereby de-risk the company. But the board needs to balance this derisking with the optimal economic outcome which in the past has been lengthy litigation,’ said analysts at UBS in a note to clients ahead of the start of proceedings.
Another UK investor favourite, Lloyds Banking Group (LLOY.L), also a Citywire Top Stock, will also be under scrutiny as it delivers its 2012 results on Friday. Future dividend plans, any further provisions for loan insurance mis-selling, and ongoing strengthening of the bank’s balance sheet will all draw market attention and newspaper headlines. Royal Bank of Scotland (RBS.L) also reports next week (see full FTSE 100 calendar below).
Economically, a revision of UK fourth quarter GDP growth is due on Wednesday. The figure isn’t expected by economists to show any improvement from a previous reading of -0.3%. The February UK manufacturing PMI report is due on Thursday, providing clues as to whether the economy can manage to grow in this first quarter of 2013.
In Asia, data on Chinese manufacturing is awaited, with both the HSBC and official manufacturing PMIs (purchasing managers indices) due. In Japan, prime minister Shinzo Abe will submit his nominations of new Bank of Japan leaders, with currency markets watching closely as they second guess Bank policy and its impact on a weakening yen.
On Tuesday Whitbread (WTB.L) is the sole FTSE 100 company publishing numbers, with a trading statement.
The next day, RBS, BATS (BATS.L), Capita (CPI.L), International Airlines Group (ICAG.L), Reed are all due to update investors on their 2012 numbers. Kazakhmys (KAZ.L) meanwhile will deliver a trading statement.
Citywire Top Stocks is a monthly updated list of the top 10 holdings of five leading UK equity fund managers.
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- BP PLC (BP.L)
- Lloyds Banking Group PLC (LLOY.L)
- Royal Bank of Scotland Group PLC (RBS.L)
- Bunzl PLC (BNZL.L)
- Associated British Foods PLC (ABF.L)
- Whitbread PLC (WTB.L)
- Weir Group PLC (WEIR.L)
- ITV PLC (ITV.L)
- Petrofac Ltd (PFC.L)
- Centrica PLC (CNA.L)
- British American Tobacco PLC (BATS.L)
- Capita PLC (CPI.L)
- International Consolidated Airlines Group SA (ICAG.L)
- Reed Elsevier PLC (REL.L)
- Kazakhmys PLC (KAZ.L)
- WPP PLC (WPP.L)
- Hammerson PLC (HMSO.L)
- Old Mutual PLC (OML.L)
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by Gavin Lumsden on Jul 03, 2014 at 11:31