Thursday preview: BoE forecasts and policy stance under microscope

'Super Thursday' from the Bank of England rolls around as the main UK economic event this week, with immediate implications for sterling, while BT Group final are notable among the company updates due.

Releasing its quarterly inflation report and forecasts alongside its monthly monetary policy announcement and meeting minutes constitutes 'super' in the BoE's world, while interest in the event is heightened amid some City chatter that there might be another dissenting voting on the rate-setting committee.

March's Monetary Policy Committee meeting revealed a first split vote on interest rates since June’s EU referendum, with "some members" apparently getting closer to joining her, depending on further upside news on economic activity and inflation.

With the pound approaching $1.30, analysts suggested sterling will receive a further boost if Thursday's minutes suggest more policymakers could soon follow Kristin Forbes’ in voting for a hike and a bike spike if a second dissenter emerges this month.

An actual move towards tighter policy is hardly likely, but the inflation report gives the Governor Mark Carney and his committee colleagues the change to adjust their economic outlook.

Analysts at Monex suggested the BoE could become slightly more hawkish given resilient economic growth, rising inflation, and an improving labour market, with MPC member Michael Saunders widely seen as being the most likely to shift given his recent bullish speech.

However, economist Howard Archer at IHS Markit said, Saunders may decide to hold off from voting for an interest rate hike at this stage due to the marked GDP slowdown in the first quarter.

This, plus the snap general election on 8 June, muted earnings growth and early ructions ahead of the start of the Brexit negotiations "make a compelling argument for the Bank of England to sit tight", Archer said.

"Furthermore, while inflation still looks likely to move higher over the coming months and stay above target for an extended period, the upside risks have been diluted by the recent firming in sterling."

Rabobank's currency analysts said they rated the chance of Forbes withdrawing her dissent this month "as higher than the chance that she will be joined by another member".

At Barclays the summary was that the MPC was felt likely to be eager to repeat its slightly hawkish message from the February inflation report, "keeping the focus on inflation, and banking on the support provided to sterling to mitigate risks of excessively high and sticky inflation".

BT full year results

Final results from BT Group come following January's profit warning and a string of mixed newsflow since, including regulatory intervention and fines and higher Uefa football bid costs.

Given guidance issued post the recent profit warning, with the company indicating £7.6bn EBITDA for both the 2017 and 2018 financial years, and free cash flow increasing to £3.0-3.2bn in FY18 from £2.5bn in FY17.

UBS analysts said they did not expect any surprises for either 2017 or 2018, though, in contrast to consensus, recent news flow implied pressure on 2019 operating profits, FCF and the dividend over the coming years.

"We think the bulk of BT is doing well, notably consumer, EE and Openreach. However, investors will be looking for reassurance that segments such as BT Italia and UK public sector/international corporate are not deteriorating further," the Swiss bank said.

Analysts at Barclays also did not foresee any change to the outlook so soon after resetting it.

However for the fourth quarter result, they were looking for continued evidence of the consumer and EE arms to continue to drive strong top line growth, and look for signs of continued strong fibre uptake in both retail and Openreach.

"The latter is key in our view, as we believe that given the wholesale cost of fibre is set to fall in the coming years all ISPs will be strongly incentivised to promote the product."

Mondi, Coca-Cola and Aldermore

On Mondi, UBS noted the company had announced and/or implemented price increase across all paper grades which should come into effect in second quarter.

"Already implemented rises equate to €60-70m on EBITA and it could rise further towards €100m if additional announced price rises are crystallised. A 5% rise in Packaging Paper price adds circa 8% to our EPS (forecast)."

UBS sees two key challenges for Mondi in terms of its cost inflation across divisions and lower forestry gains.

"We still see an upside despite challenging cost inflationary conditions and lower forestry gains driven by pricing in the rest of 2017."

Looking at Coca-Cola, Barclays expected a slow start to the year, forecast Q1 volume will be flat given one less calendar day and the later Easter.

On Aldermore, Barclays forecast loan book growth of 1% in the quarter to £7.5bn, driven by total new originations falling from the buy-to-let boosted £814m last year to around £693m.

Thursday 11 May

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Continuing Claims (US) (13:30)
Initial Jobless Claims (US) (13:30)
Producer Price Index (US) (13:30)
Retail Sales (US) (13:30)

UK ECONOMIC ANNOUNCEMENTS
Balance of Trade (09:30)
BoE Interest Rate Decision (12:00)
Industrial Production (09:30)
Manufacturing Production (09:30)

FINALS
3i Infrastructure, BT Group, Stobart Group Ltd.

INTERIMS
On The Beach Group

TRADING ANNOUNCEMENTS
Aldermore, Coca-Cola HBC,Galliford Try, Hansard Global, Mondi, Rathbone Brothers, Sampo OYJ, TP ICAP,

INTERIM DIVIDEND PAYMENT DATE
Photo-Me International, SCS Group

INTERIM EX-DIVIDEND DATE
Aberdeen Asset Management, Blancco Technology Group, Focusrite, Lok'n Store Group, Sage Group

QUARTERLY EX-DIVIDEND DATE
BP, Ediston Property Investment Company, Honeycomb Investment Trust, Picton Property Income Ltd

SPECIAL DIVIDEND PAYMENT DATE
888 Holdings

SPECIAL EX-DIVIDEND DATE
Admiral Group, Fidessa Group, ICG-Longbow Senior Secured UK Property Debt Investments Ltd

EGMS
Industrial Mlulti Propety Trust

AGMS
Communisis, Convatec Group , Direct Line Insurance Group, Dunedin Enterprise Investment Trust, Hochschild Mining, John Laing Group , Keller Group, Lloyds Banking Group, Melrose Industries, Mondi, Petrofac Ltd., Phoenix Group Holdings (DI), Plant Health Care, Rathbone Brothers, Robinson, Royal Bank of Scotland Group, Serco Group, SIG, Starwood European Real Estate Finance Ltd, TechFinancials (DI), Thalassa Holdings Ltd. (DI), Unite Group

FINAL DIVIDEND PAYMENT DATE
888 Holdings, Dairy Farm International Holdings Ltd. (Singapore), Hongkong Land Holding Ltd. (Sing.Reg), Jardine Matheson Holdings Ltd (Singapore Reg), Jardine Strategic Holdings Ltd. (Singapore), Mandarin Oriental International (Singapore), Property Franchise Group

FINAL EX-DIVIDEND DATE
AA , Admiral Group, Barr (A.G.), BBGI SICAV S.A. (DI), Carillion, Centaur Media, Central Asia Metals, Centrica, Computacenter, Epwin Group, Fidessa Group, Frenkel Topping Group, Hiscox Limited (DI), Ibstock , Integrated Diagnostics Holdings, Macfarlane Group, Merlin Entertainments , NMC Health, North Midland Construction, Ocean Wilsons Holdings Ltd., Quixant, Saga , Sainsbury (J), SDL, Share plc, SQS Software Quality Systems AG, Trinity Mirror, Weiss Korea Opportunity Fund Ltd