Wednesday preview: Last day of polling, ECB growth confirmation, house prices

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Wednesday preview: Last day of polling, ECB growth confirmation, house prices

Tue, 06 June 2017
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Wednesday preview: Last day of polling, ECB growth confirmation, house prices

(ShareCast News) - Wednesday is the last day of political campaigning before the UK general election, with low hum of business news to keep the rest of the market ticking over.
Political polls have been moving the pound, though increasingly less as traders have got used to their individual peculiarities.

Most polling companies will make their final calls on Wednesday, though MORI usually wait until Thursday morning.

The main piece of macroeconomic data will be the Eurozone GDP print at 1000 BST, while the main UK data is due to be Halifax's monthly house price update, while corporate news includes annual results from RPC Group and Workspace Group.

Plastic products design and engineering group RPC put out a pre-close trading update at the end of March, where it said revenues would be significantly ahead of last year.

UBS forecast revenues of £2.76bn and adjusted EBITA of £296m.

"We believe the focus will be on any commentary on change in M&A strategy and management incentives following the recent concerns around management being incentivised to drive EPS growth at the expense of declining returns," analysts wrote, liking RPC for its potential to be a key beneficiary of structural shifts in the plastic packaging industry.

As for Workspace, analyst's estimates for its net asset value vary greatly with a highly dispersed spread from 812p up to 979p.

With an estimate towards the top end of consensus, despite supply concerns, Numis expects minimal outward yield shift and believe that WKP will have been able to drive like-for-like rental income growth, particularly in the long tail of lower quality offices which start from a low base.

"However, we continue to flag the potential volatility in yields of WKP's shorter leases, and as LfL income growth slows and becomes harder to achieve we remain cautious on the outlook for WKP."

Numis noted that Workspace is facing more competition as interest in flexible working increases apace, with British Land the latest to launch its own offering in London's Broadgate.

"Our concern for WKP is not the credibility of flexible working as a product, indeed we see the phenomenon as a structural change for the office market which continues to play out, but instead the dramatic increase in supply which has responded to increased interest."


Recent data back up a picture of distinct cooling in the UK housing market, with Halifax's update following Nationwide's report last week showing the slowest annual growth for almost four years and the Bank of England's mortgage approvals numbers falling again in April.

"Although the Halifax index is renowned for being more volatile, it has recorded flat or negative growth for the last four months," said HSBC.

HSBC expects this to continue and see a further 0.3% month-on-month fall in May, taking the three-month rate to 2.9% compared to the same period last year.

But the later second release of eurozone GDP growth for the first quarter should have much wider implications, coming a day before the European Central Bank's rate announcement on 'super Thursday'.

The flash reading for Q1 2017 came in at 0.5% quarter-on-quarter, matching the growth rate seen in the fourth quarter of 2016 but slightly below what was expected based on PMI surveys.

With the final release giving the full breakdown of GDP, HSBC said the final releases of the big four eurozone economies have pointed to investment as the main driver of growth the quarter.

"Consumption and government expenditure are also likely to have contributed positively, while net trade is likely to recover after exhibiting a huge drag in Q4 2016," HSBC said, predicting the final reading will be unchanged from the flash, at 0.5%, corresponding to annual growth of 1.7%.

Wednesday June 07

Consumer Credit (US) (20:00)
Crude Oil Inventories (US) (15:30)
Gross Domestic Product (EU) (10:00)
MBA Mortgage Applications (US) (12:00)

Halifax House Price Index (08:30)

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