The week ahead: UK wages/unemployment in focus, US bank earnings gets underway

1) UK Wages/Unemployment (Aug) – 14/10 – the most recent wages numbers showed that while the size of peoples pay packets was continuing to rise above the headline rate of CPI, expectations of a rapid slowing are still wide of the mark. This means that the prospect of further rate cuts from the Bank of England in the near term remains less likely than the government would like. In the 3-months to July wages growth slowed only modestly to 4.8%, from 5%, while unemployment remained steady at 4.7%. The number of people on payrolls also fell by 142k, from a year earlier, with 6k between June and July. Vacancy rates were also lower, down 10k to 728k in the 3-months to August. If these trends continue it seems unlikely that the Bank of England will be in a position to look at a rate cut in the near term, even if, as expected, the unemployment rate continues to edge higher. What we appear to be seeing is a slow deterioration in the labour market rather than a full crisis in confidence.

2) UK GDP (Aug) - 16/10 – having seen UK Q2 GDP confirmed at 0.3% largely due to a large increase in government spending, attention now turns to how the UK economy might perform in the second half of the year, and Q3 especially. In July there was a significant slowdown from the 0.4% seen in June, to 0%, with a sharp fall in the manufacturing sector which saw a 1.3% drop-in economic activity. Services and construction were both bright spots rising 0.1% and 0.2% respectively, however scepticism has been rising in the past few months as US tariff related effects drop out of the numbers and the status quo reasserts itself. We already know from recent PMI reports that hiring has been slowing sharply, while price pressures are starting to reassert themselves, while consumers appear to be holding back. It seems likely that Q3 could see the economy slow further, and while we may not see a contraction there’s a high chance of further stagnation.  

3) Whitbread H1 26 – 16/10 – despite an initial dip in the shares in the wake of a disappointing set of Q1 numbers, Whitbread shares have managed to edge higher as they look to retest the highs of October last year. Q1 LFL UK sales at Premier Inn fell 3%, although the smaller German business showed a solid improvement with a 16% increase in LFL sales. Total LFL sales still fell 4%. Total UK sales revenue fell 5.4% to £648.2m while revenue in Germany rose 15.9% to £62.7m. UK RevPAR fell 2%, while sales of food and beverages fell 16% on a total basis. Despite the weak quarter Whitbread said it remained confident in delivering £300m in incremental profit by 2030, as it looks to unlock £2bn for shareholders in dividends and buybacks. 

4) Robert Walters Q3 25 – 14/10 – with so little visibility when it comes to employment trends in the UK due to data problems at the ONS it’s useful to look elsewhere for signs of how well the UK labour market is performing. Last week we heard from Hays, and this week is the turn of Robert Walters where we’ve seen similar faltering share price performance. When the company reported in July the company reported a 125 decline in H1 revenue to $302.8m. while sliding to an operating loss of £7.8m. H1 losses before tax was £10.2m, as lower fee income weighed on the business. Net fee income fell 14% to £140m with guidance indicating little expectation of a material improvement in hiring markets in the near term. As far as regions were concerned, Asia-Pacific which accounts for 43% of its fees saw a 14% decline, Europe, a 23% decline in fees and the UK a 6% decline in net fee income. Since that H1 update in July the shares have slid to their lowest levels since mid-2009, after the prospect of a resumption of the dividend was pushed into next year, as the company looks to cut its cost base further.    

5) Travis Perkins Q3 25 – 16/10 – despite reporting a -2.1% decline in H1 revenue to £2.3bn in August Travis Perkins shares have seen some solid gains over the last few weeks, rising to their highest levels since February, after reporting a solid improvement in H1 profits to £26m. Operating profits rose by £11m to £59m in a sign that the company is addressing some of its more structural issues, while the sale of Staircraft has helped reduce its net debt by £88m. The Merchanting division continues to struggle in a tough economic environment, Q2 sales seeing a 1% decline, although that was an improvement on Q1 which saw a 3.2% fall. The Toolstation operation has continued to perform well, its operating profits rising to £21m, a 50% increase. Full year guidance for adjusted operating profits was kept in line with market expectations. Interim dividend of 4.5p per share was proposed.   

6) JPMorgan Chase/Wells Fargo/Citigroup Q3 25 – 14/10 – there’s always a little nervousness when it comes to bank share prices as investors look for clues with respect to consumer spending, as well as loan demand at a time when US consumers are struggling with higher prices and possible spillover effects from tariffs. Recent earnings numbers have indicated there’s been little evidence that US consumers are struggling significantly. JPMorgan Chase Q2 numbers in July testified to that with revenue of $45.68bn, well ahead of forecasts, with profits falling to $14.9bn, however this was due to offloading a stake in Visa last year which boosted the numbers. Trading operations once again did a lot of the heavy lifting with FICC jumping 14% to $5.7bn, while equities also saw a 15% improvement to $3.2bn. The slow return of advisory fees saw investment banking fees rise 7% to $2.5bn. The bank also boosted its NII target by another $1bn, to $95.5bn. CEO Jamie Dimon pointed to resilience in the US economy albeit with lingering risks from US trade policy and rising fiscal deficits. It was a similar story for the likes of Citigroup with a similarly strong performance in Q2, where the bank has also been going through a restructuring process. Q2 revenues came in at $21.67bn, well ahead of forecasts helped in some part by the volatility in April which helped its equities division post a record Q2 performance. The bank also upgraded its full year revenue guidance to $84bn, as well as confirming an increase in the dividend to 60c a share, after the recent Fed stress tests. While the likes of Citi and JPMorgan performed well in Q2, Wells Fargo results were disappointing largely due to the banks more domestic focus even as profits were better than expected, after it cut its full year guidance on new interest income, to the $47.7bn it saw in 2024. Q2 revenue came in at $20.8bn, an increase of 1%, which was slightly below expectations, however net income rose to $5.5bn or $1.60 a share, helped by improvements in efficiency and lower staff costs.