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Wednesday preview: UK wages, US Fed minutes and Lloyds strategy in focus
Wednesday is a big and busy day for macro news, with crucial UK labour market data, initial Eurozone purchasing managers' surveys and a closely watched set of FOMC minutes, plus corporate results from Lloyds Banking Group, Glencore and Barratt Developments.
FOMC minutes for the January meeting "should garner a great deal of attention", said economists at RBC Capital Markets.
"Given the market's obsession with inflation, we think the odds that the minutes are interpreted as reinforcing this narrative of a firming inflationary backdrop are high. The tweaks to the press statement were significant enough that the minutes are likely to read hawkish overall."
RBC said that, given the recent change towards more more hawkish language, it seems entirely reasonable that the Fed is leading up to a more forceful tone on rate hikes as the year progresses. "We think there is a high probability that the Fed moves the dots to 4 hikes in 2018 (from 3) near-term and that the minutes could be another step in reinforcing this."
Similarly, the UK labour market data earlier that day will be viewed for signs of wages rising, as suggested by the Bank of England's recent regional agents' survey on pay, which showed settlements predicted to average an increased 3.1% rate for 2018. If this survey evidence materialises, it could be enough to bring the more dovish members of the MPC onside to support further gradual increases in rates.
The consensus forecast is for unemployment to remain at 4.3% with another solid gain in the level of employment, while average earnings excluding-bonuses are expected to hold at 2.4% or 2.5% if including bonuses.
"Business surveys are consistent with year-over-year growth in employee numbers of about 1%," said Pantheon Macroeconomics, adding that the headline rate of year-over-year growth in average weekly wages probably held steady at 2.5% in December.
Public finances are also due at 0930 GMT, with the government felt likely to have run a surplus of about £9.6B on the PSNB ex-banks measure of borrowing in January, versus January 2017's £11.6bn, which was boosted because many individuals filed self-assessment tax returns for income in the 2015/16 tax year from the 2016/17 year to side-step April 2016's increase in dividend tax.
At 1415 GMT, members of the Bank's MPC will be in parliament answering questions from Treasury Committee. Governor Mark Carney will be joined by Ben Broadbent, Andy Haldane and Silvana Tenreyro.
It's a big day for Lloyds as CEO Antonio Horta-Osorio is expected to set out plans for the next three years alongside full year results.
As for the financials, the net interest margin in the fourth quarter is expected to be in line with the third's 2.90%.
Analysts at UBS noted that recent research shows mortgage spreads improved around 15 basis points over the last quarter of 2017. "What matters most, we think, to investors, however, is the outlook for margin over the coming three year strategic period."
"We don't expect any great surprises in the P&L and see the dividend declaration and strategy presentation as key to the performance of the share on the day and beyond," the analysts said, forecasting underlying PBT of £1.9bn an ordinary dividend of 2p and equivalent of an additional 1.2p in special distributions, most likely by share buyback.
Though Lloyds is listed as a key credit provider to Carillion, UBS suggested the expense should not impact the dividend "and is not symptomatic of the start of a broader softening of credit quality in the UK".
Ahead of its full-year results, Glencore provided a detailed guidance update in early December and so there are unlikely to be many major changes to guidance. The company will announce the dividend for 2017 to be paid in two equal installments in the first and second half of 2018, with minimum dividend expected to be around $2.2bn.
Deutsche Bank forecast an initial announcement of $2.5bn but see the potential for this to be topped up at the half year point.
DB analysts, who forecast Glencore to report EBITDA of $14.7bn and net debt of $12.3bn, are "structurally bullish" on the company's core base metal commodity exposure, particularly copper.
For 2018 and the two subsequent years the company is guiding to industrial capex of $4.8bn, $4.7bn and $4.0bn, with volumes aiming to grow by around 7% a year, driven primarily by returning suspended assets across its core base metal portfolio of copper/cobalt, zinc and nickel.
Wednesday 21 February
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Existing Home Sales (US) (15:00)
MBA Mortgage Applications (US) (00:00)
PMI Manufacturing (US) (14:45)
UK ECONOMIC ANNOUNCEMENTS
Claimant Count Rate (09:30)
Weekly Average Earnings (09:30)
Unemployment Rate (09:30)
Public Sector Net Borrowing (09:30)
FINALS
Capital & Counties Properties , Glencore , Lloyds Banking Group, Metro Bank, Mithras Inv Trust, OMV Petrom, Unite Group
INTERIMS
Barratt Developments, Hotel Chocolat Group , SkinBioTherapeutics
AGMS
Bankers Inv Trust, Baronsmead Venture Trust, Gooch & Housego, Schroder European Real Estate Investment Trust, Titon Holdings
TRADING ANNOUNCEMENTS
FirstGroup
GMS
Target Healthcare Reit Ltd