HOW many central bankers does it take to change an interest rate? Quite a few, it would seem, as monetary policymakers from the UK, Australia, Europe and Japan are all expected to sit on their hands this week.
Economist Philip Shaw, at Investec, said Britain’s monetary policy committee meeting has the potential to be the more interesting of the set amidst recent clues that a further “nuance” to forward guidance could be on the cards.
It would likely place a greater emphasis on wage growth, which has been unexpectedly subdued.
“This could be crucial in determining the timing of the first move on rates,” Shaw said.
Following Friday’s update from Direct Line, more of Britain’s insurers will provide second-quarter figures and are expected to lay bare the impact of a highly competitive market.
• HSBC – In the first quarter, HSBC beat profit estimates but saw its shares traded down due to disappointing revenue trends. City expectations were duly revised downwards but some analysts say the bank may now be able to deliver an upside surprise.
• Esure – The Surrey-based car and home insurer, which employs 1,400 people and has more than 1.5 million customers, is expected by the market to post flat profits before tax of £56.2 million. The impact of falling premiums and fierce competition will be the key themes.
• InterContinental Hotels – Revenue per available room improved considerably in the first quarter and the trend is expected to have continued in the last three months. Broker Brewin Dolphin is forecasting first-half profits of $310m (£185m), with the revenue rate up to 6.5 per cent.
• Services PMI – After months of sustained growth, economists believe the services sector could be the first to start showing signs of wages heating up.
• Standard Chartered – The focus in the interim results is likely to be on the challenges faced by the bank’s financial markets division, as most of the key numbers for the company were released in a pre-close update.
• MPC – The Bank of England’s monetary policy committee will have much to discuss, given recent signs that growth may be slowing. They will also have the latest inflation report to hand, but ultimately there will almost certainly be no change to policy at this stage.
• ECB – The European Central Bank also holds its monthly policy meeting, but it is expected to hold its fire as it assesses the impact of measures launched in June which introduced negative interest rates.
• Aviva – Chief executive Mark Wilson will want to show the City his turnaround plan has not lost momentum when he unveils the insurer’s half-year results. The country’s second-largest insurer, which has 31 million customers worldwide, is expected to post an operating profit up a modest 4 per cent to £1.05 billion, according to brokers at Panmure Gordon.
• RSA – Analysts at Morgan Stanley expect the group to deliver a pre-tax profit of £177m, compared with £250m a year ago, due to bad winter weather in Canada and an earthquake in Chile. But investors are hoping to get an indication that things are looking up for the second half.
• Tui Travel – With Tui in the process of merging with its German parent, trading figures for its financial third quarter will be of more interest to the wider sector than to shareholders.
• Balance of trade – After May’s alarming deficit of £9.2bn, there are hopes that the latest figures will show an improvement in Britain’s trade balance as “erratic” items such as oil exports improve. But economist Philip Shaw, at Investec, said any real rebalancing will have to wait for a recovery in the UK’s European trading partners.
SPOTLIGHT on... Stephen Hester
The RSA chief executive will update the market on his rescue plans for the insurer when it posts half-year results on Thursday.
The former Royal Bank of Scotland boss joined the firm in February following the resignation of Simon Lee in the wake of three profits warnings and the group’s Irish crisis, when a £200 million black hole was discovered in the division’s finances.
Hester has said he is ahead of where he thought he would be in his three-year plan to turn around a firm that had expanded into 30 countries over the last decade and overextended itself.
He has launched a £775m emergency rights issue, and raised around £600m by selling non-core businesses in regions including Poland, the Baltics and China.
Now Hester is reportedly poised to
launch a plan to cut £150m over the next three years from RSA’s £2 billion-a-year running costs, as well as selling more businesses.