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- US non-farm payrolls (Aug) – 02/09 – the resilience of the US labour market has been a standout when it comes to US economic data this year. The last three payrolls’ reports have seen the numbers beat expectations; even as weekly jobless claims hit an eight month high earlier this month. Wage growth has also proved to be resilient even as vacancy rates are still close to record levels. The July payrolls report was doubly impressive given that consensus expectations were for the lowest number this year, and what we got was over double forecasts, at 528k. Wage growth also remained solid rising to 5.2%, while the unemployment rate fell to 3.5%. We should also see the return of the ADP payrolls after this survey took a break as ADP adapted the methodology behind the numbers. Another positive payroll number this week is likely to rubber stamp the possibility of a 75bps rate hike when the US Federal Reserve next meets in September. Expectations are for 290k jobs to be added, however given how much forecasts missed in July one has to question how reliable these estimates are likely to be.
- EU flash CPI (Aug) – 31/08 – already at record highs of 8.9% with core prices of 4% for July, this week’s flash numbers for August could see EU CPI push above 10% given what we’ve seen in energy prices, and more specifically natural gas prices over the past few weeks. In Germany, PPI surged to a record high of 37.2% in July, which means that its more than likely this will feed into higher headline rates over the coming months. With the ECB set to meet on the 8th September another strong number here is likely to increase the pressure on the governing council to go by 50bps, or even 75bps in an attempt to try and support the euro which has now slipped below parity and to new 20 year lows. Of course, any rise in rates needs to be balanced against the risk of pushing borrowing costs even higher for the likes of Italy, who can ill afford for rates to go a lot higher.
- UK Consumer Credit (Jul) – 30/08 – the effect of higher interest rates as well as the rising cost of living has already started to manifest itself in the most recent lending data. It’s been a trend that has been in place since the start of this year, but appears to be accelerating as we head into the autumn. In June mortgage approvals slipped to their lowest levels in two years, coming in at 63.7k. Having seen a well flagged 50bps rate rise delivered in August and the possibility of another on in September, it’s likely that we will probably see another slowdown in July. Net consumer credit was more resilient in June, jumping sharply to £1.8bn from £0.9bn in May, however this could be down to consumers loading up on debt to get by as monthly bills increase in size.
- US Consumer Confidence (Aug) – 30/08 – there has been a significant disconnect in recent consumer confidence numbers this year, when compared to how the US labour market has been faring, along with resilient retail sales numbers. Even as US unemployment has continued to fall and retail sales have been positive in every month with the exception of May it has been notable that US consumer confidence has been on the decline over the last 12 months. It’s been particularly notable in the last 6 months, although in relative terms it’s still above the lows of last year. Nonetheless the combination of higher gasoline prices and rising food prices has seen a particularly sharp drop in the last two months to 95.7 in July. This week’s August numbers may see a slight improvement to 97.5, due to the recent fall in US petrol prices.
- Broadcom Q3 22 – 01/09 – Broadcom was in the news earlier this year after agreeing a deal to pay $61bn for cloud company VMWare as part of a strategy to reduce its reliance on the surge in semi-conductor revenues which according to Broadcom CEO Hock Tan won’t last as capacity gets added to the market. This appears to be part of a strategy to make Broadcom a an even more diversified business than your average chip maker. Broadcom not only makes components for iPhones and industrial equipment, it also has a data centre business, and a software services business. At the end of Q1 Broadcom reported a profit of $8.39c a share, on sales of $7.7bn, beating expectations on both top and bottom lines. For Q2 the company beat expectations on revenues with $8.1bn, which did little to help stem the decline in the share price in the short term. Since hitting 11-month lows in July the shares have managed to recover some ground. For Q3 Broadcom also said it expected revenues to rise to $8.4bn, a rise of 24% from a year ago, and profits to come in at $8.3c a share.
- Brown-Forman Q1 23 – 31/08 over the last three months Brown-Forman shares have been trading steadily higher, after hitting two-year lows in May, and are up over 20% in that period. At the end of its last fiscal year the Jack Daniels maker saw annual revenues of $3.93bn, with Q4 seeing revenues come in at $996m well above expectations of $834m. Net sales for 2002 saw a rise of 14% led by a 20% increase in sales of Jack Daniels Tennessee Whisky. In Q4 the company incurred a $52m non-cash impairment charge on its Finlandia brand name, due to the suspension of its Russia operations. For its outlook for 2023 the company said it expects to be able to deliver mid-single digit organic net sales growth, and similar organic operating income growth. Profits are expected to come in at $0.47c a share.
- HP Inc – Q3 22 – 30/08 – despite a set of upbeat trading numbers in Q2 and a profits upgrade HP’s share price has slipped back from its June peaks hitting its lowest levels this year in early July. In its Q2 numbers HP saw revenues come in at $16.5bn, ahead of forecasts of $16.2bn, while profits came in at the upper end of expectations at $1.08c a share. Most of the gains came from its desktop PC business, with strong demand in that area, particularly from corporates, while consumer demand for laptops was down. Its personal systems division saw revenue rise by 9.2% to $11.5bn in a trend that matched that of Q1. Printing revenue also saw a fall of 7% to $5bn, as its subscription model saw a slowdown. Looking forward to Q3 HP said it expected to see profits of about $1.05c a share an upgrade to previous guidance, while also upgrading its full year guidance to $4.32c a share. In recent days concern about slowing PC demand has prompted a number of brokers to downgrade HP’s outlook particularly around print demand.
- Best Buy Q2 23 –30/08 – a US electronics retailer, the shares hit record highs back in November last year, before slipping back sharply after the company issued a warning about rising costs heading into what is usually the most lucrative period of the year for US retailers. It appears the company saw very early on that the storm clouds were gathering and that margin growth was likely to slow. Nonetheless last year still saw Best Buy post its best ever annual revenues of $51.7bn. This year is unlikely to be anywhere is good as consumers prioritise essential shopping over more expensive consumer electronics and white goods. In July, Best Buy downgraded its expectations for Q2 as well as the rest of this year. Best Buy said it expected same store sales to decline around 11% for the year, a big drop from the previous forecast of between 3% to 6%, when the company reported in Q1. The retailer also paused its buyback program. For Q2 same store sales are expected to fall by 13%, down from the 8% decline which had been forecast in May. This shouldn’t be too surprising given that other retailers have reported similar slowdowns, with companies like Microsoft reporting slowing demand for PCs and other electronics. On current trends for this fiscal year full year revenues are already forecast to be lower than last year, with a worst-case scenario of $46.3bn. Profits are expected to come in at $1.27c a share.
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2022-08
2022-08-27
The Week Ahead – US non-farm payrolls, EU CPI, UK consumer credit, Broadcom and HP results
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