The main event on the calendar this week is the eagerly-awaited results of the US government’s stress tests for 19 of the country’s largest banks. This had originally been set to take place on Monday and Wall Street’s reaction would have likely dictated how the UK markets would have reopened the following morning after the long May Day weekend. Instead, the results are now to be announced on Thursday after several of the US banks objected to the White House’s calls for them to raise more capital.
Until that day, we could see the FTSE indices treading water as investors remain on the sidelines, reluctant to risk entering the markets until the future of the US financial sector is better understood. With the UK remaining closed tomorrow for the Bank Holiday, key events on the corporate calendar are relatively thin on the ground.
On Wednesday, Provident Financial will issue an interim management statement. The non-standard creditor is expected to reveal that its trading environment remains favourable following the fall from grace of competitors such as Cattles. Evolution Securities expects the company to report that consumer credit growth in early 2009 has been cautious as management focuses on tight credit management. The broker believes impairments may have begun to tick up from 30% of revenues in 2008 towards its forecast for 2009 as a whole of 32%.
Several consumer-facing companies will report results, issue trading statements or host annual general meetings on Wednesday, allowing investors and market observers to assess the current state of consumer demand. Retailer Next, no-frills airline easyJet and pubs operator JD Wetherspoon will all release interim numbers; train and bus operator National Express will hold its annual shareholder meeting.
The following day, Thursday, Anglo-Dutch firm Unilever will announce its first quarter results. The foods and household products manufacturer is forecast by analysts at Charles Stanley to report sales of around EUR9.5 billion for the first quarter, of which organic growth is expected to account for 2.9% (within which 5.9% is forecast to relate to pricing). The broker believes that a currency headwind of 1 percentage point coupled with a higher tax charge and the dilutive effect of disposals should result in a fall in underlying EPS of around 6% to EUR0.32.
Finishing off the week, and of particular pertinence following the previous day’s US bank stress test news, Royal Bank of Scotland will unveil its own quarterly numbers on Friday. With the bank now more than 70% government-owned having gone through an unprecedented period of turbulence, analysts forecasts are wide-ranging. Morningstar expects the bank’s average growth to be negative through to 2012, as RBS sells troubled assets and raises capital through sales of other assets such as its stake in Bank of China that it sold earlier in the year.
On the economic front, the Bank of England will announce its latest interest rate decision this coming Thursday, although no change is expected from the current 0.5%. On Wednesday, the April reading of the PMI services sector is expected to have decline slightly from the previous month to 45.5 versus 46.5. Across the Atlantic, the US unemployment rate is seen rising to yet another record—to 8.9% in April from March’s 26-year high of 8.5%.
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