• US non-farm payrolls (Mar) – 07/04 – the last US payrolls report saw yet another set of strong numbers with February jobs seeing a gain of 311k, while January was revised lower to 504k. The rise in the unemployment rate to 3.6% from 3.4% was treated as a slight negative, but it also coincided with a rise in the participation rate to 62.5%, which was the highest level since March 2020, and thus suggests that more US workers are returning to the workforce. We also saw a larger than expected increase in average hourly earnings to an annualised 4.6%, once again indicating some upward pressure in wages. With weekly jobless claims still averaging below 200k per week, and vacancies well above 10.8m it is quite apparent that despite recent concerns about the US economy, the jobs market remains resilient, despite recent high-profile announcements of job losses. The ADP employment numbers have also been shown to be solid rising to 242k in February, after slowing to 106k in January. As we look to this week’s US non-farm payrolls numbers, expectations are for another 221k, with the unemployment rate set to remain steady at 3.6%, and wages set to increase 0.3% month on month. The bigger question here is what a strong report will do to expectations around future rate rises. Recent events have seen markets look at the prospect of a Fed pause due to concerns about financial stability.   
 
  • Services PMIs – 05/04 – one notable trend in recent months has been an improvement in the services sector, despite trends in rising prices. While manufacturing has been struggling and is in large part contracting, services activity has been picking up across the board, whether it be in the US, Europe or the UK. While energy prices have been falling, notably petrol prices, as well as that of natural gas consumers have had more disposable income than expected. This has had the effect of exerting upward pressure on services inflation which is prompting concerns over stickier than expected prices. As we come to the end of Q1 the latest March services numbers are expected to point to economic activity that has seen a significant pick up since the end of last year, although France could well see a slowdown given the recent social unrest. In February France services PMI came in at 55.5, and it will be hard to see a repeat of that. Germany has been improving but again could see a slowdown from 53.9, while in the UK this is expected to slow to 52.8. Italy and Spain are also expected to come in above 50, while in the US the latest ISM services survey is expected to remain resilient, slowing to 54.5 from 55.1.
 
  • RBA rate meeting – 04/04 – when the RBA met last month it raised rates by another 25bps pushing the headline rate to 3.6%, however the tone was markedly different to the tone in February when the central bank said that “further increases in interest rates will be needed over the months ahead”, suggesting the potential for further hikes in the months ahead. This tone changed at the March meeting, which came just days before the sharp declines as a result of concerns about the banking sector. The March rate rise was accompanied by a change in the language to a more data dependant approach opening up the potential for a pause when the central bank meets in the lead-up to Easter. A fall in headline inflation back to 6.8% in February suggests that the spike up to 8.4% in December may well have been a one-off and may give policymakers confidence that a pause may be appropriate. Recent turmoil in financial markets may well make policymakers more cautious as well.  
 
  • RBNZ rate meeting - 05/04 – the RBNZ has been one of the more aggressive central banks when it comes to raising rates. At its last meeting in February the central bank hiked by 50bps pushing the headline rate to 4.75%. RBNZ governor Adrian Orr suggested that while further rate hikes were likely, that another downshift to 25bps could come at the April meeting. Unlike other central banks Orr was at pains to suggest that the RBNZ had more room to be flexible when it comes to further tightening, suggesting that perhaps a pause might also be an option in light of recent turmoil on financial markets. Inflation is expected to peak at 7.3% in Q1 and drop to 6.6% in Q2.
 
  • EnQuest FY22 – 05/04 – having seen Harbour Energy report that all of its 2022 profits were wiped out by the new windfall tax levied by the UK government, its highly likely that Anglo-Swedish oil company EnQuest will suffer a similar fate. It had to delay the publication of its full year results as a result of the recent changes to the UK Energy Profits Levy from the original 23rd March date. Its share price has undergone similar declines to Harbour Energy over the past 12 months more than halving from the peaks seen in April and May last year. At its most recent trading statement EnQuest said it expected to see full year daily production to rise to 47,259boepd from 44,415boepd, with UK production expected to increase to 40,801boepd. Kraken was its best performing well with average gross production of 26,091 boepd, and above the top end of guidance. EnQuest said it had completed the shutdown of 24 wells at Heather and Thistle as part of its UK decommissioning program. Full year revenues are expected to come in at $1.6bn. For 2023, in response to the EPL EnQuest has said it will defer further drilling on its Kraken field and that capex will be approximately $160m, while full year net production is expected to fall to between 42k and 46k boepd.  
 
  • Saga FY 23 – 04/04 – even before the pandemic hit its cruise ship and travel business Saga’s share price had been in decline since 2016. Having IPO’d all the way back in 2014 the shares have performed poorly, falling below its previous lows from October 2020 to new record lows in October last year of 74p, falling from peaks of 460p back in June 2021. In its financial year 2022, the company managed to return to profit, posting an underlying pre-tax profit of £1.8m, driven by its insurance business which returned £120.5m. Its travel business, on the other hand has struggled, posting losses for the last 2 years. There was a lot of optimism over the outlook for 2022/23, however the reality has been somewhat different. When the company reported in the first half of 2023, revenues showed a big improvement, rising 65% to £258.3m, and while underlying profits came in at £14m, a £269m impairment of insurance goodwill saw that change to a loss of £257.5m, in respect of a reduced view of motor and home insurance margins was poorly received. For the rest of the year, while the outlook for the travel and cruise business was expected to improve Saga downgraded its underlying profit before tax outlook to between £20m and £30m from between £35m to £50m. At its January trading update Saga reiterated its profits guidance, but said it expected revenues to be between 40% and 50% ahead of the previous year, driven by the continued improvement in its travel business, which it hopes will be able to get the business on a more stable footing as it looks to reduce its debt load, and repay a £150m bond which is due in 2024. Load factors of 84% are expected, which should translate into a FY load factor of 75%. There was some chatter earlier this year that Saga was in discussions about the sale of its insurance underwriting business which ultimately came to nothing.     
 
  • Constellation Brands Q4 23 – 06/04 – the shares have struggled since briefly pushing up to record highs back in December. The reason for the sharp fall appears to have been as a result of a profit downgrade back at the start of the year when it reported its Q3 numbers. The maker of Corona beer said it generated $2.44bn of revenue which was better than expected, while profits came in at $3.01c a share., however a downgrade to its full year guidance saw investors take fright. For the full year Constellation said it expected to see EPS fall from $11.20c to $11.40c a share to between $11 and $11.20c a share. The company blamed higher costs as operating margins declined to 37.5%, a decline of 380bps due to higher-than-expected costs of raw materials, packaging and logistics. The beer business continues to be a strong performer with beer sales expected to see 9% to 10% sales growth, while wine and spirits sales are expected to be on the weak side, of between 0% and -2%. Q4 profits are expected to come in at $1.84c a share.    
 
  • Levi Strauss Q1 23 – 06/04 – it’s not been a great couple of years for the Levi Strauss share price, with the shares sharply down from its May 2021 peaks above $30, although we have managed to see a decent rebound from the October lows at $13.60. In Q3 Levi cuts its guidance for 2022 on concerns over softening demand. In Q4 the company reported that revenues fell to $1.6bn, a 6% decline on the previous year, with the European business acting as the main drag with a fall of 18%. Net income fell by 1% to $151m. On a full year basis annual revenues did show a rise of 7% to $6.2bn, while net income rose by 3% to $569m. For 2023 the company said it expects to an increase in net revenues of between 1.5% and 3%. Q1 profits are expected to come in at $0.32c a share.

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