Thursday preview: Carney decides, Hammond speaks, Drax updates

Thursday's Bank of England announcement is not expected to see any change to monetary policy, even though spiking inflation is putting pressure on consumer spending, though a later speech from Chancellor Philip Hammond could see some comment on wider economic policy and Brexit strategy.

Data from the Office for National Statistics showed consumer price inflation has hit 2.9%, suggesting it is accelerating faster than the Bank expected.

With CPI already at the level at which the MPC thinks it should be peaking later this year and holding the potential to climb over the coming months before the worst of the pound’s weakness dissipates, it poses a headache for the Monetary Policy Committee, said market analyst Neil Wilson at ETX Capital.

"It does not want to rock the boat at such a critical moment for the UK but it risks failing in its mandate to secure low inflation," he said. "A quarter point hike may be proportionate to offset the worst of the inflation and help support the pound. Given the drop in real wages there is certainly more pressure on the Bank to act as low rates start to look like they might be adding to the problem, not tackling it."

With a danger of consumer spending cratering and April's industrial production and construction output data weak, Wilson was not alone in saying he would not be surprised if a second member of the MPC joins Kristin Forbes in voting for a quarter-point increase to the bank base rate this week. This will be Forbes last MPC meeting.

However, most others were less hawkish, with the consensus being for no change to policy.

"We expect no major changes in tone at the BoE's policy meeting this week," said Bank of America Merrill Lynch, predicting another 7-1 vote to keep rates on hold.

"BoE should be a non-event for GBP as markets look ahead to Brexit negotiations."

Ben Brettell at Hargeaves Lansdown noted that wage growth is one of the Bank of England’s key metrics when setting interest rates, as higher wages can ultimately create upward pressure on prices.

Data on Wednesday showed average earnings growth slowing, so with little evidence of this type of ‘wage-price spiral’, Brettell said it "should give the Bank enough latitude to look through higher inflation and hold rates at 0.25% for now".

After Friday's explosive election result, several economists predicted there would be not rate hike until 2020.

Seeing the current CPI spike as a "temporary bout of imported inflation", HSBC chief European economist Simon Wells, for example, said the muted outlook for growth meant he saw no immediate reason to expect a rate rise "for the whole of this year or next".

Mark Carney is also due to speak at Thursday evening’s Mansion House dinner, following Chancellor Hammond at the lectern.

However, unless Theresa May and her fellow Tory negotiators have concluded their talks with their Northern Irish kingmakers, Hammond might not be able to say much.

According to sources, The Times newspaper reported Hammond was seeking to soften the stance of the UK

Company results

Drax Group, PZ Cussons, WS Atkins and Safestore are among those reporting or updating on trading.

For the year to the end of May, Cussons provided a detailed update in mid-April so this final pre-close statement covers off the remaining six weeks.

The last update featured a lack of surprises, although trading had remained tough in Australia, Nigeria and the UK.

Broker Numis noted that management were at ease with consensus pre-tax profit expectations of £100m but after the last update analysts "sensed this would be bettered and upgraded to £102.0m".

They said items to look out for include higher UK raw material recoveries, actions to upgrade profitability in Australia, an update on events in Nigeria in the wake of past currency weakness and any comments on the performance of the Beauty division.

Drax is also due to hold a capital markets day on Thursday, with Citi in its preview saying it expected the power generator to offer an ordinary 4-6% dividend yield in the coming years, more in-line with traditional utilities.

"We also expect Drax to offer top-up special dividends, depending on investment opportunities, performance of the commodity-exposed assets and the optimal balance sheet position."

Thursday June 15

INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Balance of Trade (EU) (11:00)
Capacity Utilisation (US) (14:15)
Continuing Claims (US) (13:30)
Import and Export Price Indices (US) (13:30)
Industrial Production (US) (14:15)

UK ECONOMIC ANNOUNCEMENTS
BoE Interest Rate Decision (12:00)
Retail Sales (09:30)

INTERIMS
Safestore Holdings

TRADING ANNOUNCEMENTS
PZ Cussons

INTERIM DIVIDEND PAYMENT DATE
Aberdeen Asset Management

INTERIM EX-DIVIDEND DATE
Hollywood Bowl Group, Shaftesbury, Standard Life Private Equity Trust, Topps Tiles

QUARTERLY PAYMENT DATE
Canadian General Investments Ltd.

QUARTERLY EX-DIVIDEND DATE
Assura , Ediston Property Investment Company, TwentyFour Select Monthly Income Fund Limited , XP Power Ltd. (DI)

FINALS
Atkins (WS), Consort Medical, John Laing Environmental Assets Group Limited , Liontrust Asset Management, Majestic Wine

ANNUAL REPORT
System1 Group

SPECIAL EX-DIVIDEND DATE
Best of the Best, Marshalls, NewRiver REIT, Persimmon

AGMS
365 Agile Group , Attraqt Group , City Merchants High Yield Trust, CityFibre Infrastructure Holdings , Cyanconnode Holdings, Dragon-Ukrainian Properties & Development, Himalayan Fund NV, International Consolidated Airlines Group SA (CDI), Loopup Group , Metals Exploration, Morrison (Wm) Supermarkets, Motif Bio, OptiBiotix Health, Ranger Direct Lending Fund, Ranger Direct Lending ZDP Shs, Serabi Gold, Sprue Aegis

FINAL DIVIDEND PAYMENT DATE
Action Hotels, Ascential

FINAL EX-DIVIDEND DATE
3i Group, 3i Infrastructure, Aberdeen Japan Investment Trust , Acal, Alliance Pharma, Amati Vct 2, Augean, Electrocomponents, First Derivatives, Forterra, Hargreave Hale AIM VCT 2, Harvey Nash Group, Intermediate Capital Group, JPMorgan Euro Small Co. Trust, Marshalls, Mears Group, New Century AIM VCT 2, Persimmon, Pets at Home Group , ProVen Growth & Income VCT, ProVen VCT, Restaurant Group, S&U, Safestyle UK , Scisys, Severn Trent, Stobart Group Ltd., Telford Homes, Templeton Emerging Markets Inv Trust