1. UK CPI (Dec) – 19/01 – Last month the Bank of England surprised the markets by increasing interest rates by 0.15% to 0.25% in a move that most had expected to occur the month before. This appeared to be in response to a sharp move higher in headline CPI to 5.1%, which was much higher than expected and also a ten year high. The RPI index also rose sharply hitting a 30 year high of 7.1% at the same time. The central banks uncertainty or procrastination over last month’s rate hike has reignited speculation that we could see another rate rise in February, particularly since there is likely to be further inflationary pressures in the weeks and months ahead. PPI input prices have been leading the way over the past few months, and in November rose by 14.3% year on year, indicating the potential for UK headline inflation to move even higher, above the 2008 highs of 5.2% and to levels last seen in March 1992, when it was up at 7.1%. Bank of England governor Andrew Bailey has already said that he expects CPI to hit 6% in the coming months and well above the central banks 2% inflation target. A further increase in headline CPI this week will increase the pressure on the MPC to act on rates again in February, and while some are arguing that another rate rise will have little impact on what is prompting inflation to let rip, that doesn’t mean the central bank shouldn’t attempt to try and normalise policy to a point. The mistake would be tightening too aggressively, not tightening at all. Expectations are for December CPI to rise by 5.3%. 

2. UK ILO Unemployment (Nov) – 18/01 – Last month saw the ILO measure of UK unemployment fall to a 15-month low of 4.2% in October, with the number of people on payrolls rising by over 257k in November, and the number of vacancies rising to 1.22m. This trend looks set to continue during November, and while average weekly earnings have fallen back to 4.3% from 6% in October, it’s unlikely that they will fall much further given the number of vacancies available. We’ve already seen in recent weeks the likes of Next and Sainsbury’s announce wage rises in line with current inflation levels, and they are unlikely to be alone as their rivals look to match them in order to keep staff. UK ILO unemployment for November is expected to come in at 4.2%.

3. UK Retail Sales (Dec) – 21/01 – After a strong performance in April, UK retail sales spending ended up being quite subdued over the rest of the year, as consumers adopted a fairly cautious stance to their spending over the summer months. With warnings about supply chain disruptions in the leadup to Christmas due to the prevalence of the Delta variant across the world, the word started to go out at the end of Q3 for consumers to get their shopping in early to avoid disappointment. These warnings appear to have been heeded given the rebounds seen in UK consumer spending in October and November, which saw retail sales rise by 1.1% and 2% respectively. This pace looks likely to slow in this week’s December numbers for a number of reasons, with the implementation of the UK governments Plan B restrictions, as well as self-isolation rules tempering consumer behaviour in the lead up to Christmas. Pubs and hospitality will have been particularly affected as consumers stay at home in order to ensure they can spend Christmas with their families, less they catch the virus and have to isolate themselves because of catching the virus. Supermarket food sales are likely to have been a strong point as people get together to enjoy the Christmas, they didn’t have last year. December retail sales are expected to come in at -0.6%.

4. China Q4 GDP – 17/01 – At the beginning of last year China’s economy was expected to see annual GDP growth of 6%. At the time this came across as somewhat on the conservative side. As the year progressed it became ever more apparent that it may have been too optimistic. 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% although on the quarter we did see a modest improvement to 1.3%. In Q3 the Chinese economy almost ground to a halt on a quarterly basis, with a rise of 0.2%, below expectations of 0.4%. This was caused by port disruptions due to covid restrictions, supply chain issues, as well as surging power costs and enforced shutdowns of the Chinese economy. The performance of the economy also hasn’t been helped by the various crackdowns by Chinese authorities on various parts of the economy, as well as the problems around Evergrande and the property sector. The performance of the Chinese economy over Q4 is expected to see a modest improvement, however the zero-covid policy being pursued by Chinese authorities isn’t helping, and with the more contagious nature of Omicron looks destined to fail. This week’s Q4 GDP is expected to see a quarterly expansion of 1.2%, largely driven by strong exports growth, however on an annualised basis the 6% target is set to be missed, coming in at 4.9%. 

5. China Retail Sales (Dec) 17/01 – The stop start nature of the China’s policy response to Covid outbreaks appears to be doing significant damage to consumer confidence as well as spending patterns amongst Chinese consumers after a strong first half of the year. Since July retail sales growth has slowed sharply, and in November retail sales slowed to 3.9 %, from 4.9% in October. This was especially disappointing given that it covered the period for “singles day” and would appear to indicate that Chinese consumers remain cautious amidst concerns over Covid outbreaks, and higher inflation. With Omicron now becoming the dominant global strain this caution is likely to remain, with further softness expected in December, and a rise of 3.8% expected. Industrial production has been slightly more positive after the factory shutdowns of September, however even here economic activity has been subdued, more than halving from levels of 6.7% in July to lows of 3.1% in September. Since then, we’ve seen modest improvements however after the rebound to 3.8% in November, we’re expecting to see a similar number of 3.8% in December.       

6. CPI (Dec) 20/01 – The ECB’s insistence that it won’t raises rates in 2022 continues to face challenges from within the Governing Council in the weeks and months ahead as inflationary pressure builds further. Earlier this month the EU flash CPI hit a record high of 5%, beating expectations of a rise to 4.8%. Further increases in power prices specifically along with eye-wateringly high PPI is expected to continue filtering through into the headline CPI numbers even more in the months ahead. Factory gate prices in Spain, Italy, France and Germany are already well above or close to 20%, and likely to rise further. On a more positive note, core CPI remains much lower at 2.6%, however across northern Europe, particularly Germany, headline CPI is at its highest levels in 30 years. At the time the Bundesbank took aggressive steps to address this by hiking rates to 8.75%, from 8%, thus helping pushing the rate back down. Similar action to curtail higher prices from the ECB is highly unlikely to happen, thus making the next few years a much more difficult period for savers across the euro area.

7. Associated British Foods Q1 22 – 20/01 – When ABF reported back in November, the share price was in the process of recovering from 11-month lows, having seen its revenues hit hard as a result of the early year lockdown at the start of 2021. Since the shares have recovered strongly as it became apparent that its Primark operation was enjoying a strong recovery with a decent rebound in margins, and a 12% fall in sales. Full year revenues came in at £13.9bn, only slightly lower than the previous year, while profits before tax came in at £725m. The payment of a special dividend of 13.8p, as well as a final dividend of 20.5p also helped sweeten the deal and bring down the curtain on a year when all of its businesses performed well. As we look ahead to this week’s Q1 numbers, in December management provided a trading update saying that like for like sales were ahead of the numbers in Q4. Expectations for Q1 are expected to be ahead of equivalent sales a year ago, although that wouldn’t be difficult given that most stores were closed. The retailer is also facing challenges from the increase in restrictions and lockdowns imposed in the Netherlands and Austria, as well as vaccine passes in Germany. Lower footfall is also likely in the UK in the leadup to Christmas as consumers exercise caution less they pick up Covid and have to isolate over the holiday break.  

8. Deliveroo Q4 21 – 20/01 – As IPOs go last year was a nightmare debut for Deliveroo with its shares now at record lows, after going public at 390p in April last year. After briefly recovering to breakeven back in August the shares have now fallen below 200p with little sign that investors have recovered their faith in the business. In 2020 Deliveroo generated £1.2bn in revenues and is well on course to beat that this year, however despite evidence of improving margins and new delivery tie-ups the shares have continued to struggle. Consensus estimates for full year revenues are for an increase of 56% to £1.9bn. In Q3 Deliveroo raised its guidance for this number to between 60% and 70%, while leaving gross profit margins unchanged at 7.5% to 7.75%. in August German rival Delivery Hero bought a 5% stake in Deliveroo and now probably wishes it hadn’t. Another key concern for investors is rising costs and while Deliveroo has seen orders surge due to its deals with Amazon and Morrisons the competitive nature of the delivery market, and falls in the share prices of its nearest competitors isn’t helping sentiment. Will this week’s Q4 update, and the implementation of Plan B restrictions by the UK government helped boost its Q4 numbers and provided a much-needed lift to the share price?   

9. JD Wetherspoon Q2 22 – 19/01 – Pubs have been an area that has been absolutely clobbered in the past two years as a result of the various Covid restrictions that have either seen wholescale shutdowns or limits on numbers on the premises. The implementation of Plan B restrictions in December by the UK government prompted a firestorm of criticism from the industry in what is a crucial time of year in the lead-up to Christmas. The loss of those two weeks just before Christmas, as big parties cancelled their reservations is likely to have hit the industry hard. In October Wetherspoon posted a record loss of £154.7m. The most notable statistic was an almost 40% drop in revenues to £772.6m from £1.26bn in 2020, and down from £1.8bn in 2019. In the first quarter of 2022 the pub chain reported an 8.9% decline in sales compared to a year ago, although this also needs to be set in the context of the record numbers in 2020 when “Eat Out to Help Out” boosted the numbers to record levels. Its Lloyds Bar pubs which appeal to a younger cohort saw decent outperformance, apart from in London. The announcement of December restrictions prompted Wetherspoons to issue a trading update to the effect that this week’s numbers could see the business slip to a H1 loss.   

10. Goldman Sachs Q4 21 – 18/01 – Having set aside significant amounts of provision in respect of non-performing loans in 2020, US banks have had a blue riband year these past 12 months. Not only have we seen record revenues, but we’ve also seen big increases in profits as well. In Q2 Goldman Sachs blew past expectations as revenues came in at $15.39bn, well above expectations of $12.43bn, although trading revenue fell short at $4.9bn, although this appeared to be a one-off, as Q3 saw a pick up. This was more than offset by investment banking revenue which rose 26% to $3.45bn, with the high number of IPOs, as well as M&A fees helping to boost the numbers. Consumer and wealth management, which was expanded to the general public at the beginning of 2021, generated a record $1.75bn in revenues in Q2. In Q3 revenue came in at $13.61bn, $2bn above expectations while profits rose to $14.93c a share, well above the consensus of $9.92c a share. There were beats across the board in all divisions with the trading division standing out, with a return of $5.61bn, while equities also outperformed with revenues of $3.1bn, well above expectations of $2.2bn. The bank has also been better at cutting operating expenses. Unlike JPMorgan, Goldman seems to have a better handle on costs, however that’s probably easier given they have far fewer bank branches and no retail operation to speak of. Last week it was reported that its commodities desk reported record revenue for the full year, pushing through $2.2bn. Q4 profits are expected to come in lower, at $11.60 a share, however this may well understate this weeks number. Despite the excellence of these numbers over the past couple of quarters the shares have struggle to make any gains to speak over the past two quarters. This may be down to concerns that banks could struggle to match the performance of the last 12 months, as speculation over possible rate rises tempers economic growth expectations and lending activity.

11. Netflix – Q4 21 – 20/01 – Netflix shares have taken a bit of a tumble in the past few weeks, largely due to concerns over valuations and the prospect of higher US rates. Having hit a record high in November of $700 last year the shares have drifted lower, and could fall further even if we see a decent set of Q4 numbers later this week. When the streaming giant reported its Q3 numbers back in October, all the chatter was about the success of Squid Game even as the company faced increasing competition from the likes of Disney+, Apple TV+, Warner Media/Discovery, and Amazon who recently added the MGM back catalogue, for its Prime offering. While its US market is pretty much saturated, and given to quite a bit of churn, on a global scale Netflix remains out in front with over 210m subscribers and is very much holding its own, despite its worst first half for subscriber numbers since 2016. In Q3 subscribers came in at 4.4m, while management were also cautious about Q4, although revenue numbers continue to show decent improvements. In Q3 revenues came in at $7.4bn and are expected to come in at $7.7bn in Q4. Profits however are expected to come in much lower with management downgrading these to $0.80c a share, largely due to higher spending on content which will see margins decline from 23.5% to 6.5% during this quarter. Full year operating margins are still expected to come in at 20% or slightly better, despite the higher spend in Q4. This quarter we’ve seen Netflix release new series of The Witcher, Cobra Kai and the Tiger King, and Lost in Space, while viewers are still keenly awaiting new seasons for Stranger Things, which is now due in the summer of 2022. As Netflix increasingly focusses on its international markets there appears little sign that revenues are slowing, and the scope for user growth, particularly in international markets still looks fairly decent, even when measured against 2019 subscriber growth numbers. With the addition of streaming video games on mobile devices, and the recent acquisition of the Roald Dahl Company the potential for management to grow and diversify the business towards a younger cohort, as well as existing users can’t hurt either.

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