Week Ahead

Bank to offer rate clues, BP updates on green plan

Andrew Bailey
Bank of England governor Andrew Bailey will update on monetary policy

Markets expect no change in the base rate of interest rates on Thursday, with the focus on hints as to when it will be timely to make the first cut.

Inflation is the key consideration and debate continues between Bank officials as to whether an interest rate cut is merited or not, say analysts at A J Bell.

This especially so as unemployment remains relatively low at 4.2% and total pay growth is robust at 5.6% year-on-year, although the unemployment rate is up from summer 2022’s low of 3.6% and job vacancies continue to fall.

“Either way, inflation has taken longer than expected to cool and the financial markets’ expectation back in January that there would be six one-quarter point rate cuts this year, with the first one in March, has proven way off beam,” says the firm.

Markets have recalibrated their expectations and now expect just two cuts this year, down to 5% in August and then 4.75% in December.

BP will lead the corporate news announcements and AJ Bell analysts say shareholders continue to wrestle with BP’s strategy for how it best positions itself for the global move away from hydrocarbons and towards renewables.

“Even though BP has since refined its plan and slowed down its move away from oil and gas, with the result that output is expected to drop by 25% between 2020 and 2023, rather than by 40%, this is still more radical than anything planned across the other super majors.”

BP’s shares have lagged those of its peers since now-departed CEO Bernad Looney first outlined the plan in February 2020.

The consensus analysts’ forecast for underlying replacement cost profit is $2.9 billion, not far below the result in the fourth quarter of 2023 but well down from the $5 billion earned in the first three months of last year.

Shares in IAG, the owner of the airline British Airways, Iberia, Aer Lingus and Vueling, as well as low-cost operator Level are touching a two-year high, although they still trade at less than half the highs seen immediately before the pandemic hit home in early 2020.

IAG is expected to return to the dividend list with a full-year payment of just over €0.05, the first dividend since 2019’s €0.1450 (the company last ran a share buyback in 2018)

Analysts and investors will be looking for any additional detail on all of those points, although the first-quarter statement does not tend to go into great detail and issues such as the dividend are more likely to be raised at the half-year or full-year stage.

In terms of the headline figures for the first quarter: sales are expected to rise by 8% to €6.4 billion. For the full year, the consensus is looking for a 6% increase in revenues to €31.2 billion and analysts will look for comment on capacity growth

Other notable companies announcing figures include Virgin Money which is in the throes of a takeover by Nationwide, and pubs chain JD Wetherspoon which continues to satisfy those seeking out low cost beer at a time of soaring prices elsewhere. John Wood and ITV provide updates.

DIARY

Monday 6 May

Bank Holiday

Tuesday 7 May

  • First Quarter from BP
  • rading statement from IWG
  • British Retail Consortium retail sales monitor
  • Halifax UK house price index
  • UK purchasing managers’ index for the construction industry

Wednesday 8 May

  • First-half results from Virgin Money
  • Trading updates and quarterly results from Renishaw, OSB and JD Wetherspoon

Thursday 9 May

  • Full-year results from 3i, Airtel Africa,
  • Trading updates and quarterly results from Flutter Entertainment, IMI, ITV, Derwent London, Harbour Energy, Balfour Beatty, John Wood and Synthomer

Friday 10 May

  • First Quaerter from IAG
  • UK Q1 GDP growth
  • UK industrial, construction and manufacturing output
  • US monthly Federal budget deficit


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