BT Group, Sainsbury’s and takeover talk are likely to be the main focus for investors in early proceedings but thoughts have been turning towards Thursday’s Bank of England meeting for some weeks now.
The will-they-or-won’t-they arguments about an interest rate hike have been frenzied since governor Andrew Bailey said that the central bank “will have to act” to rein in inflation, with chief economist Huw Pill chiming in a few days later to add that the Monetary Policy Committee would face a “live” decision on whether to raise rates.
Pill said the MPC was “finely balanced” on the matter, just a few weeks after almost all the committee voted to stand pat on rates and leave bond-buying unchanged in September, though it was the second meeting in a row where at least one member voted to taper the amount of stimulus.
However, markets are overwhelmingly forecasting a 0.15% BoE hike, with Goldman Sachs among those predicting a rise but many economists that are not in agreement.
Economists at ING said it is “a close call between a November and February move, but we suggest the former is more consistent with the governor’s latest hints”, while UBS predicted a delay until the 16 December meeting but said “we acknowledge the risk that the decision could come as early as this week”.
While markets predict a hike, they are also simultaneously flagging a potential policy error by the BoE, namely that the MPC is overreacting to near-term inflation risks and will be forced to cut the rate in 2023 to compensate for the mistake.
Either way, there could be a volatile market reaction.
Takeover on the cards at BT?
Takeover talk may make headlines for BT Group PLC (LSE:BT.A) or at least it may be the subtext to what could be a defensive statement.
BT’s recently appointed advisory firm Robey Warshaw to head off any potential takeover attempt from French billionaire and shareholder Patrick Drahi.
Altice, Drahi’s vehicle, took a 12% stake in June and at that time was ostensibly friendly, but its six-month bid preclusion period ends in early December and possibly BT is being wise to bolster its defences just in case.
Openreach, the broadband network, is the key to Altice’s interest but the competition here is mounting with the formation of VMO2 and the possibility it will link with Sky or TalkTalk.
UBS expects BT’s update on Thursday to show second-quarter revenues of GBP5.18bn, down slightly on a year ago, with underlying profits of GBP1.88bn, again a slight dip.
Sainsbury’s results in the basket
Thursday is coming with grocery heavyweight J Sainsbury PLC (LSE:SBRY) interim results, which are facing some tough comparisons to last year, when trips to the supermarket were the most eventful activity UK residents could aspire to.
It’s also a tricky time for retailers as inflation is pushing prices up, but the FTSE 100 group is trying to keep a lid on them in line with the pledge to improve its value position.
“That all puts added pressure on margins that are already a little stretched. Online sales continued to improve in the last quarter. It’s important this trend continues,” said Matt Britzman, analyst at Hargreaves Lansdown.
“If it doesn’t, the extra costs associated with adding online capacity add up to another drag on margins. Owning Argos, the group is more exposed to shifts in discretionary spending than its rivals. Last year was a bumper one for general merchandise sales, giving some tough comparable numbers. Sales were ahead of expectations in the first quarter, albeit down year-on-year, but supply challenges are likely to remain a challenge.”
Significant announcements expected on Thursday 4 November
Trading updates: Aston Martin Lagonda Global Holdings PLC (LSE:AML), Apax Global Alpha Ltd, Barrick Gold Corp, Derwent London (AIM:DLN) (Derwent London (AIM:DLN)) PLC, Deutsche Post ADR, Lancashire Holdings Ltd (AIM:LRE, OTC:LCSHF)), Smith & Nephew PLC (LSE:SN), (TI Fluid Systems PLC (LSE:TIFS)
Interims: BT Group PLC (LSE:BT.A), Electrocomponents PLC (LSE:ECM), J Sainsburys Plc, Wizz Air Holdings (AIM:WIZZ), Tate & Lyle (LSE:TATE) Plc
Finals: Gattaca PLC (AIM:GATC)
AGMs: Argos Resources Ltd (LSE:ARG), Capital Metals PLC (LSE:CMET), Induction Healthcare Group PLC (AIM:INHC), NCC Group PLC (LSE:NCC), Provexis (AIM:PXS) Plc
Economic data: PMI Construction (UK), BoE Interest Rate Decision (UK), Initial Jobless Claims (US), Continuing Claims (US), ISM Manufacturing (US), ISM Prices Paid (US)