Friday preview: Eyes on LSE, WPP, PMI and FOMC commentary

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Friday preview: Eyes on LSE, WPP, PMI and FOMC commentary

Thu, 02 March 2017
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Friday preview: Eyes on LSE, WPP, PMI and FOMC commentary

(ShareCast News) - In London on Friday, only a small sprinkling of large-cap stocks report as the macro focus turns to the economy's all-important services sector, while across the Atlantic the drone of Fedspeak turns up to 11 with close readings to be made on the exact wording central bank Janet Yellen's last comments before the March meeting blackout.
London Stock Exchange's results, or at least the commentary from management, hold the potential for drama with the merger with Deutsche Borse scuppered over its refusal at one of the final regulatory hurdles.

Will management fall on their swords or come out fighting?

Advertising giant WPP is expected bugle out its net sales growth of 3.1%, held back by 2.0% in the fourth quarter, with the consensus forecast pencilling pre-tax profit close to £2bn and earnings of 112p per share.

Broker Numis said its peer group's results have been mixed, reflecting company specific challenges at Dentsu and Publicis, while both Omnicom and Publicis flagged soft project work in the US in the final quarter, though analysts conceded this could also be company specific.

"Although 2017 lacks quadrennial drivers, we expect continued solid performance, with organic growth of +3% feeding its way through to reported EPS growth of +13% to 130p (consensus 129p).

"We then see scope for an acceleration in organic top-line growth in 2018, boosted by the mini-quadrennial drivers."

Looking at the wider UK services sector, Markit are due to publish their purchasing managers' survey later in the morning.

The sector is expected to have enjoyed reasonable growth in February but continue the slight slowing as seen in January, when the PMI eased after four months of consecutive improvement, with new business slowing and employment reached a five-month low.

Although the headline index remained elevated at the second fastest pace in a year, input prices continued to highlight inflationary pressures, rising at the highest rate since March 2011, as prices charged lagged behind.

The market expects to see a small decline in February to 54.0, still be well above the 50.0 level which indicates unchanged activity, compared to 54.5 in January.

As the economy's biggest driver, the sector losing momentum into 2017 after consistently being an important growth driver for the UK economy during 2016, has wider repercussions.

Growth last year was led by the consumer-facing sectors - and with consumer purchasing power being increasingly squeezed, these sectors are likely to find life becoming more challenging, said economist Howard Archer at IHS Markit, with consumers likely to become increasingly careful in their discretionary spending.

US focus

As well as Markit's US services PMI there is also the ISM non-manufacturing index and Baker Hughes US oil rig count.

The ISM non-manufacturing index is forecast to fall to 56.2 in February from 56.5 in January.

But the Fedspeak is likely to dominate the market narrative as Dovish Chicago Fed President Charles Evans and non-voting, hawkish colleague Richmond Fed President Jeffrey Lacker are due to make public comments, along with central bank Vice Chairman Stanley Fischer, who is due to discuss the framework for monetary policy.

However Barclays expects Fisher's speech to focus on the communications aspects of monetary policy rather than its near-term direction.

The main event is Yellen, with her comments forming the last scheduled appearance by an FOMC member before the March meeting blackout period begins.

"The timing of the speech is not coincidental and these remarks are the FOMC's last opportunity to signal for a March rate hike," said Barclays.

"We do not believe that the FOMC is signaling a March rate hike and instead we have interpreted their 'fairly soon' language as pointing to a rate hike in May or June. Although the Chair will discuss the risks of waiting too long to tighten policy further, we do not believe she is quite ready to hike rates in March, given the overhang of policy uncertainty."

Friday 03 March

Services PMI (US) (14:45)
ISM Non-Manufacturing (US) (15:00)
Retail Sales (EU) (10:00)

Services PMI (09:30)

London Stock Exchange Group, Non-Standard Finance, STV Group, WPP

Aberforth Smaller Companies Trust

Actual Experience

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CPL Resources, IG Group Holdings, Premier Asset Management Group, Puma Vct 8, Puma VCT 9

JPMorgan Claverhouse Inv Trust

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