Friday preview: NFPs and Fedspeak could lift hike odds, IAG and IHG report

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Friday preview: NFPs and Fedspeak could lift hike odds, IAG and IHG report

Thu, 04 May 2017
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(ShareCast News) - Following a what should be a quieter morning of UK company news, attention turns firmly across the Atlantic after lunch, with a Friday Fedspeak frenzy following the non-farm payrolls report.
Currency markets are likely to be quieter overnight with Japan shutting up shop for the Children's Day holiday, Kodomo no hi, while there is no top-line UK economic data and over the Channel the European Commission releases economic growth forecasts.

The non-farm payroll and average earnings figure are likely to be intently watched as they offer the market an early hard-data insight into how the US rebounded in the first month of the second quarter.

Following the Federal Reserve's dismissal of the recent US growth slowdown as only "temporary", the path for US interest rates over the rest of the year will continue to be dependent on the underlying economic data, such as NFP.

The consensus forecast for was hovering just below 190,000 for April, a rise from disappointing rise of only 98,000 in March.

Average hourly earnings are seen as rising 0.3% month-on-month, or 2.7% year-on-year.

After the dollar moved higher on the back of Wednesday's FOMC hawkish view, analyst Naeem Aslam at Think Markets said the dollar was likely to fall if the US NFP data undershot expectations.

"That is without any doubt the major element which is sticking out for traders. If the US NFP data overwhelm the market, we could see the traders taking advantage of the current weakness in the dollar, and the would be a game changer."

HSBC noted that the San Francisco Fed, payroll employment growth on a weather-adjusted basis was close to 230,000 in March, leading it to forecast an NFP reading of 200,000.

"Another solid labor market release on Friday is likely to shift yields slightly higher across the curve, with today's unit labor cost and productivity data grabbing some attention," said UniCredit's fixed income and forex team.

With fed fund futures giving odds for at least two more rate hikes by the end of the year of just 54.8%, this is underpricing the potential for further rate hikes, UniCredit said, meaning it was down to speeches from FOMC members to shine a light on the discussion of future balance sheet action.

A Fedspeak sextet of Janet Yellen, Stanley Fischer, John Williams, Eric Rosengren, Charles Evans and James Bullard all speak on Friday.

UK company results

International Consolidated Airlines Group, holding company of British Airways and Iberia, is forecast to publish first-quarter adjusted operating profits of €148m and adjusted net profit of €31m, according to the consensus.

UBS was more optimistic, forecasting €158m on flat revenues of €5.07bn driven by 4.3% weakness in passenger yield and 0.5% improvement in cargo yield.

Deutsche Bank said management at this stage tend to provide qualitative full-year EBIT guidance -- "eg above prior year", with its full year forecast of €2.77bn ahead of the FactSet consensus of €2.63bn and the €2.5bn produced last year.

"In our view IAG remains the best positioned legacy carrier group in Europe and should see a strong year of earnings and free cash flow generation," analysts wrote, pencilling in a fuel bill just below guidance of €4.7bn and capacity guidance of +2.5%.

InterContinental Hotels is expected to book in with a good start to 2017.

Barclays was forecasting 2.9% group growth in revenue per available room, with revpar up 2% in the Americas, 8% in Europe, 0.2% Asia Middle East and Africa, and 3.5% in China.

"Overall we expect the release [to] be taken well as we expect the group to talk positively about Q1 trading having seen a recovery in the US oil markets and Europe in particular - with an additional boost coming from the Easter shift."

Smurfit Kappa is a favourite of several analysts, though Deutsche Bank said that with the industry cost squeezes going on in old corrugated container packaging, "we don't consider Q1 results as a catalyst for shares but a likely buying opportunity".

DB forecast €278m adjusted operating profit for the quarter, down from €281m last year, which is was still be considered "quite resilient" in light of €25m OCC cost and €10m energy cost headwinds expected.

Friday 05 May

Non-farm payroll report (US) (13.30)
Unemployment rate (US) (13.30)

QinetiQ Group

IAG, InterContinental Hotels Group, Pearson, Smith & Nephew, Smurfit Kappa Group

Electra Private Equity, F & C UK High Income Trust , Quartix Holdings

AssetCo, BBA Aviation, Capital & Counties Properties , Clarke (T.), FBD Holdings, Fitbug Holdings, InterContinental Hotels Group, Kingspan Group, Man Group, Millennium & Copthorne Hotels, Morgan Advanced Materials , Pearson, RSA Insurance Group, Smurfit Kappa Group

Berendsen, CRH, Kingspan Group, Lighthouse Group, Meggitt, Mithras Inv Trust, Nichols, Quartix Holdings , Spirent Communications, Synectics, Telit Communications

Begbies Traynor Group, Redrow, St Ives

British Land Company, F & C UK High Income Trust

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