1) Brexit – as investors get set to absorb yet another Brexit extension it is perhaps appropriate that in the week we got to see the first-ever representation of a Black Hole, that with MPs set to go on holiday for the next two weeks, we may well get a break from an endless vortex of Brexit headlines until after Easter. In reality the latest extension is the worst possible outcome for business, as it means that we get another six months of delay and procrastination with little in the way of time to find a third way out of the quicksand that UK politics has descended into. A longer delay may well have offered some room for manoeuvre in terms of another election, and a new approach, but as things stand, positions are unlikely to move beyond where they already are, with neither side willing to cede ground.
2) China data Q1 GDP and retail sales/industrial production (March) – some of the most recent economic data out of China has been a little disappointing, despite measures to stimulate demand in the form of tax cuts and relaxation of credit conditions. Nonetheless recent PMI’s do appear to be showing signs of life, though that may have more to do with Chinese new year and a post-holiday rebound than anything else. The most recent imports data would appear to suggest that internal demand has continued to remain weak, which doesn’t bode well for the upcoming retail sales numbers. Retail sales growth has dipped sharply in the last three months from the levels it was at the end of Q3 last year. Industrial production has also been similarly weak, falling sharply below the lows we saw in 2015, when there was similar concern about a sharp slowdown in the Chinese economy. More worryingly unemployment jumped to its highest level since the numbers started to be released, with an increase last month to 5.3%. More encouragingly fixed asset investment does appear to be picking up which could augur well in the coming months for a pickup in economic activity. The Q1 GDP numbers are expected to come in at 6.3%, with retail sales expected to improve from 8.2% to 8.4%.
3) UK wages/unemployment (February) – 16/04 – wages have continued to hold up well in recent months, currently at 10-year highs of 3.4%. With a tight labour market this looks set to continue, particularly since unemployment dropped to 3.9% in the January numbers. Despite all the recent headlines about job losses across the UK economy, we don’t appear to be seeing these numbers yet in the headline numbers. With wages at ten year highs and prices falling Uk consumers will be hoping this trend continues.
4) UK CPI/retail sales (March) – 17/04 – 18/04 – inflation has been falling for several months now, though we aren’t back at the levels we saw back in early 2016, and in last month’s numbers we saw prices edge back up slightly. This trend of higher prices could continue in the next couple of months as council tax bills and energy bills rise from a year ago. Consumers appear to have slowed down their spending ahead of last month’s March 29 Brexit deadline, if recent other third party surveys have been any indication. Any sharp slowdown in the March numbers is likely to rebound in April after the latest Brexit deadline was extended until October as UK consumers book their summer breaks, unencumbered from concerns about a Brexit summer cut off.
5) U.S. retail sales (March) – 18/04 – after a strong performance in 2018 the U.S. consumer appears to be showing some signs of fatigue if the latest retail sales numbers so far this year are any guide. The tax cuts announced at the beginning of last year may well be starting to drop out of the overall numbers and as such the sugar high may be wearing off for the U.S. economy, while the U.S. government shutdown at the beginning of the year probably hasn’t helped. A weak housing market may also be weighing on demand. For an economy that is quite sensitive to the vagaries of the housing market, falling property values could indicate early signs of a slowdown in consumer spending.
6) CAD retail sales/CPI – 17/04 – 18/04 – with the exception of last month’s jobs numbers, the Canadian labour market has remained fairly resilient, despite a recent slowdown in consumer spending, and a stalled housing market. This has equated into a slowdown in GDP growth in recent months, while inflationary pressures have also fallen. Rising wages should start to take the edge off this slowdown, with the latest retail sales numbers for March hoping to see an improvement after five months of weak retail sales. Inflation has also started to pick up in recent months, driven by higher oil prices, and this is also expected to continue in March.
7) JD Sports Fashion FY19 – 16/04 – it’s been a tough year for UK retail with a host of restructurings and profit warnings from a host of well-known retail brands. JD Sports has been one of the few exceptions to this rule, and has been able to build its brand selectively with a number of shrewd acquisitions. Last year the company expanded into the U.S. with the acquisition of Finish Line for £400m, a company that is one of the key suppliers to Macy’s department store. This already appears to be paying off, though it still remains risky given that U.S. consumer spending has slowed in recent months. Earlier this year the company then announced it was acquiring the rest of the FootAsylum PLC shares it doesn’t already own for 82.5p a share, a 77.4% premium on the closing price from last week, at total cost of £74m, valuing FootAsylum at £90m. While other retailers are finding life difficult and peers like Sports Direct (LON:SPD) have seen their shares nosedive, JD Sports has managed to maintain its presence and brand and in spite of these acquisitions has seen its shares rise over 350% since 2015.
8) Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C) Q1 19 – 15/04 – another quarter and more U.S. bank earnings, and while we haven’t seen a reversal of the losses that we saw at the end of last year Goldman Sachs and Citigroup have managed to reverse a good percentage of them. Crucially this has been in spite of concerns that the current rally may well have run its course. The decision by the Federal Reserve to call time on its rate hiking cycle may well have been bad news for the yield curve as it starts to flatten out again and go inverted, this doesn’t appear to have been reflected in the ability of U.S. banks to generate decent profits. This progress could come to a shuddering halt this week given the lack of volatility over the last quarter as well as slowdowns in U.S. consumer spending. Watch for a slowdown in revenues and a narrowing of profit margins for both here.
9) Netflix (NASDAQ:NFLX) Q1 19 – 16/04 – in its most recent quarter Netflix reported revenue of $4.19 billion with total subscribers increasing by 8.8 million to reach 139.26 million, which was an increase of 29m subscribers from a year ago. In an increasingly competitive market place Netflix remains the market leader in this particular space, and for all the talk of Apple’s new streaming service being a “Netflix killer” it is unlikely to be anything but in the short term. The news that Disney is also launching its own streaming service Disney+ in November is another added element of competition that will keep the pressure on Netflix. That being said the valuation for Netflix is still way ahead of the challenges it is likely to face in the short term. Shrinking margins as the company spends more and more money on adding content is likely to exert upward pressure on subscription prices. Profits are expected to come in $0.58c a share.