1. UK retail sales (Sep) – 22/10 – the last few months haven’t been great ones for retail sales growth, with three of the last four months showing quite sharp falls in consumer spending. Since the 9.2% rise we saw in April we’ve seen declines of -1.3%, -2.8% and -0.9%, with only a pitiful gain of 0.2% in June. It’s all the more confusing given that in those summer months UK consumers haven’t been able to really go anywhere but stay at home due to the various overseas travel restrictions. Anecdotally, domestic leisure businesses, particularly in seaside resort areas have had their best season in years, while restaurants have seen similarly strong performances. In August we also saw credit card spending surge on items like cinema tickets, outdoor events, and restaurants, which suggests the official numbers aren’t capturing anywhere close to the full picture of UK economy spending patterns. As we look towards this week’s September numbers, we are therefore well overdue a big rebound, notwithstanding UK consumers sucking petrol station forecourts dry due to misplaced concerns about fuel shortages, and where demand is likely to remain fairly high for some time to come, as drivers keep their fuel tanks at higher-than-average levels than normal.

  2. UK CPI (Sep) – 20/10 – with UK CPI hitting 3.2% in August and energy prices surging across the board, and likely to trickle down into higher costs, higher prices, which will in turn probably lead to calls for higher salaries. The rise from 2% in July was much higher than expected, with price rises in restaurants and other hospitality venues fuelling the increase. With various tax relief measures also set to expire, and energy prices surging along with various supply chain disruptions it is highly likely we could well see another big rise in September. The Bank of England has already said it expects headline CPI to push well above 4% by year end, with various central bank officials making louder noises that they could well be forced to raise rates before the end of this year, with markets assigning the probability of at least a 0.15% rise by year end. If this week’s CPI numbers jump anywhere near close to 4% then it will be very hard to argue for Bank of England officials to push back on a rate rise narrative, having given it so much air in the past week or so. More importantly the quarterly inflation report is likely to point to even higher inflation risks in the weeks and months ahead.

  3. Germany, France flash PMIs (Oct) - 22/10 – in the past few months it has become increasingly apparent that we’ve seen peak PMI, when it comes to Germany and France, although the slowdown has been more marked in Germany where we saw a big fall from levels in the low 60’s to the mid to high 50’s. In September manufacturing activity fell to its lowest level since January, while services slipped to a three-month low. UK manufacturing and services activity has also seen moderate weakness in the past few months, but has shown some evidence of stabilisation, although rising power prices are now starting to become a headwind. Business confidence has been declining in recent months across Europe, and it is highly likely in Germany that this could well continue for some months as politicians try and work out what type of government will emerge from the various coalition talks.

  4. China Q3 GDP – 18/10 – at the beginning of this year it was widely expected that the Chinese economy would see annual GDP growth of around 6%, a number at the time which was thought to be somewhat on the pessimistic side. As it turns out it may well have been too optimistic, given the sharp slowdown that is now expected to be seen in this weeks Q3 numbers. In Q1 the Chinese economy grew by 0.4%, and 18.3% on an annual basis. On an annual basis this slowed sharply in Q2, to 7.9% and 1.3% on a quarterly basis. With the various port disruptions seen through Q3 due to covid restrictions, and supply chain issues, surging power costs and enforced shutdowns the Chinese economy could well see an even weaker performance in Q3. Recent PMI numbers have shown a sharp slowing in economic activity as has lower levels of imports. This could see the Chinese economy grow by 0.5% in Q3, and slow to 5% on an annualised basis, pulling it below the Chinese government’s mandated 6% target.

  5. China Retail Sales (Sep) – 18/10 – retail sales in August slowed sharply, coming in at 2.5%, a sharp decline from 8.5% in July, as well as falling significantly short of the consensus of 7%, while industrial production came in at 5.3%, down from 6.4% in July. Coming on top of the concerns about a crackdown by Chinese authorities on various sectors of the Chinese economy it is becoming clearly self-evident that the Chinese economy is being impacted by a crisis of confidence, albeit a self-induced one as regulators also crackdown on various parts of the Chinese economy. With huge parts of the Chinese manufacturing sector being impacted by the big increases in energy prices, which in turn has prompted power cuts in some parts of the country, its highly likely that we could also see a big drop in industrial production in September. Industrial production is expected to come in at 3.8%, and retail sales is expected to increase modestly to 3.5%, from 2.5%.

  6. Barclays Q3 21 – 21/10 – Barclays H1 numbers showed profits before tax come in at just under £5bn in the first half of the year, well above forecasts, with the bank saying it would pay a dividend of 2p a share, as well as buying back £500m of its own shares. One of the more notable takeaways was a continued improvement in the investment banking division, which saw pre-tax profits rise to £1.58bn, helped by M&A and banking fees, with the equities business outperforming with a 15% rise in revenues to £777m, helping to offset underperformance in FICC. The bank also added back reserves to the tune of £742m. Since July the shares have hit their highest levels this year, and also surpassed the levels seen in the aftermath of the Conservative party election win in December 2019. Whether Q3 will prove to be equally as positive remains to be seen given the slowdowns being seen in its UK market, but also the subdued nature of markets through the summer months, although the latest numbers from US banks do offer hope of a decent quarter. Loan demand did improve in Q2, with business lending remaining static through Q1 and Q2. Overall, this week’s Q3 numbers could well show a similar pattern to the trends in Q2, with the investment bank doing most of the heavy lifting, while on the domestic front, UK businesses and consumers come across as somewhat cautious in their spending patterns. In light of the latest numbers from the US banks it will be very disappointing if Barclays doesn’t do equally as well.

  7. Unilever Q3 21 – 21/10 – Unilever shares have been on a slow downward path since the company warned on margins back in July. A steep rise in costs hit its operating margins, although some of that effect has been mitigated by the company rising prices. Underlying profit margins fell 100bps in the first half of the year. In terms of sales these were still quite good in H1, underlying sales rising by 5.4%, though the growth in Q2 showed a slowdown from the levels seen in Q1. Despite the rise in costs management maintained that the company would still be able to deliver underlying sales growth in the second half of the year, with the numbers in Q3 likely to give a flavour of whether the various global supply chain issues have eroded margins further. At the end of Q2 margins were still at a fairly healthy 18.8%, however if this were eroded further then we could see further weakness. Management was confident that the company would still be able to deliver underlying sales growth of 3% to 5%. We could also get further details on Unilever’s plans to offload its tea business after reports in September that CVC Partners was amongst three bidders vying to snap up the £4bn business, as Unilever gears itself more towards personal care and beauty, which it considers to be higher margin. Intercontinental Hotels Group Q3 21 - Hotels have been another area hard hit by the pandemic, however Holiday Inn and Crowne Plaza owner IHG has managed to cope better than most. Its international footprint has helped it in ways that has seen localised hotel chains struggle, and the first half numbers in August illustrated that quite well. Global RevPAR saw a rise of 20% compared to 2020, and while still down from 2019 levels it has improved from being down 50.6% in Q1 to down by 43% over the first half of the year. This has been driven by improvement in the US as well as China, with the company reporting an operating profit of $138m. The Covid flareups in both China and the US may well have impacted on its numbers in Q3, however this should see an improvement as we look ahead to Q4. The gradual lifting of restrictions across Europe, along with the news that the UK and US are looking at the resumption of international travel in November should augur well for the remainder of the year as the travel and leisure sector attempts to finish the year on a positive note.

  8. Apple event - 18/10 – only last month Apple announced a new low-cost iPad, as well as a new iPad mini, the new iPhone 13, and a new Apple Watch series 7. All these new products came with upgraded specs as well as new chip sets. This week the company is hosting another event, where we could well see the unveiling of upgrades to the Mac suite of products, as well as new AirPod headphones. The MacBook suite of products which include its laptop and desktop products could well get the latest chipsets that the iPhones and iPads got in last month’s product release. Its biggest MacBook is also overdue a revamp having not seen much in the way of an upgrade since 2019. Since its September product launch the shares have slipped back over concerns that the worldwide chip shortage might start to impact production. These fears appeared to be confirmed last week on reports that it could cut its iPhone 13 production targets for 2021 by up to 10m units. Of course, it could simply be reallocating resources towards its more expensive MacBook products as it rolls out upgrades there.

  9. Netflix Q3 21 – 19/10 – when Netflix reported its Q2 numbers back in July, the shares slipped back sharply, not because they missed on Q2 subscriber growth, which was already a very low bar, but because the company guided down expectations for Q3, from 5.86m to 3.5m. In the first half of this year Netflix has seen its worst start to a year since 2016 when it comes to adding new subscribers raising concerns that it might well struggle to achieve break even this year, even if that remains its ambition. The company is facing intense competition on a number of fronts, with the likes of Disney+, Apple TV+, Amazon Prime all adding to their content slates, and that’s even before we look at the potential of the Warner Media/Discovery merger. That hasn’t stopped its share price rising to new record highs in the past couple of weeks, with little sign that it won’t be able to add to its over 210m subscriber base. It has a host of new content in the pipeline and doesn’t appear to be overpaying when it comes to building up its extensive library. The revenue numbers have continued to look impressive with Q2 revenues coming in at $7.34bn, and Q3 guidance pushed up to $7.48bn with profits expected to come in at $2.55c a share. Netflix has thus far been able to pass on various increases in prices to its customer base, while the growth in its international content gives it the edge over its peers, while managing to maintain its operating margins at around 20%. In the last quarter the company has signed a deal with the Roald Dahl company to create a host of new content around the Willie Wonka, BFG and Matilda franchises, as well as signing a long-term lease at Longcross Studios in Surrey in a move that further enhances its production capabilities in the UK.

  10. United Airlines Q3 21 – 19/10 – airlines have had a torrid time of it over the past 18 months, and while US airlines have managed to mitigate some of the damage due to the resilience of their domestic markets, the loss of business travel has still blown a huge hole in their balance sheets. In Q1 United posted a loss of $1.4bn and followed that up in Q2 with a loss of $434m, its sixth consecutive quarterly loss. Total revenue for Q2 came in at $5.47bn, while capacity for Q3 was expected to be down 26% from 2019 levels, pre-pandemic. Costs in Q3 are also expected to increase due to rising fuel prices, while United also warned that booking levels in August were likely to be lower and continue to be subdued into September and October. Passenger numbers in H1 were at 49% of pre-covid levels, with the hope that by the beginning of next year the airline would be able to return to profit. The airline has already said it is gearing up to operate more than 3,500 daily domestic flights in December, or over 90% of its pre-pandemic capacity. Losses are expected to come in at $1.40c a share

  11. Tesla Q3 21 – 20/10 – one of the more notable takeaways from Tesla’s Q2 numbers was not only did the company post a record profit, but it was the first time the company had made a profit from the sale of its cars, and without the help from the sale of its emission credits. This came about despite an increase in supply chain costs, a reduction in revenue from regulatory credits, $354m, down from $518m in Q1, and a $23m bitcoin related impairment. Since then, the shares have slowly moved higher, in anticipation of further increases in quarterly deliveries, which have risen steadily over the last few quarters. In Q1 the company delivered 185k cars, while in Q2 this increased to 201k, a 121% increase on the previous year. For Q3 this rose to 241k, despite the semiconductor shortage with sales of its vehicles continuing to perform well in China, where the company saw record sales numbers from its China Gigafactory. With new capacity expected to come online over the course of the next few months with new plants, the number of deliveries is likely to increase further, as the new facilities in Austin and Berlin get up and running. Q2 revenues came in at $11.96bn, well above expectations of $11.36bn, while profits came in at $1.45c a share, beating consensus expectations of $0.97c. The company was also able to come in cashflow positive to the tune of $619m, despite the challenges being faced by supply chain constraints, with operating margins rising to 11% from 5.7% in Q1. Expectations for Q3 are for profits to come in at $1.56c a share.

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