Consumer confidence remains subdued, despite falling inflation and interest rates, although the FTSE All-Share Retailers index trades fairly close to the highs of early 2022.

The stock market seems to think that better times lie ahead and first-half results from high street bellwether Marks & Spencer should be interesting, say analysts at AJ Bell.

Its shares trade at an eight-year high, although this may owe more to its own actions to improve profits, cash flow and the balance sheet rather than the macroeconomic backdrop.

Since the “M&S Reshaped” strategy presentation of October 2022 the share price has tripled. Analysts and shareholders will be looking to chief executive Stuart Machin for another strong showing on Wednesday.

For the first half, total sales should come in 7% higher than a year ago with food up by 11.5% and Clothing & Home sales by 2.5%.

First-half pre-tax profit is expected to be £327 million on a stated basis and £357 million on an adjusted basis, broadly flat against £326 million and £360 million a year ago.

This comes as the company invests in pricing, new stores, refurbished stores and supply chain and logistics, even as it seeks cost efficiencies. For the full year, analysts are forecasting of a 10% increase to £760 million.

That said, the company is still targeting £500 million in overall cost efficiencies over the period from 2022 to 2026. Double-digit percentage sales growth at the Ocado food joint venture is also helpful and could support performance there.

M&S is expected to pay an interim dividend of 2p, up from 1p a share last year, when the company returned to the dividend list after a four-year hiatus.

Interest rates

An interest rate cut this week looks likely, though markets reacted nervously to the Chancellor’s tax and spend budget.

Analysts are marginally expecting the Bank of England to deliver its second interest rate cut of the year on Thursday

A 25 points basis points cut to 4.75% is seen as most likely, as inflation has fallen below the central bank’s 2% target to 1.7%.

Bank of England Governor Andrew Bailey encouraged expectations of cut after saying inflation is falling faster than expected

However, talk of a second cut at the 19 December meeting has eased after investors took fright at the size of Rachel Reeves’ tax bill. Yields on 10-year gilts hit 4.5% on Thursday, indicating a lower level of confidence in the Treasury’s strategy.

Trading was calmer on Friday with yields settling and stock markets rising.  Russ Mould, investment director at AJ Bell, said: “The run-up to the Budget kept everyone on their toes and the subsequent spike in gilt yields caused some big movements on the market.

“Fortunately, there was less drama on Friday, with the FTSE 250 holding firm, the FTSE 100 moving higher and gilt yields settling around the 4.5% level.”

The US Federal Reserve is also expected to cut interest rates this week. Traders are placing a 95% probability of another monetary loosening from the Fed of 25 basis points. It would take US interest rates down to a range of 4.5 to 4.75%.

The US economy recorded its weakest monthly jobs growth since 2020 after devastating hurricanes and industrial action battered the labour market before next week’s presidential election.

US payrolls expanded by 12,000 in October, far lower than the 113,000 forecast by economists and the weakest monthly growth since December 2020.

October’s jobs figures are the last big economic release before Tuesday’s presidential election. The strength of the US labour market and the impressive growth rates of the wider economy has not translated into a polling lead for Kamala Harris, the vice-president and Democratic Party nominee.

DIARY

Monday 4 November

• Purchasing managers’ indices (PMIs) for manufacturing from the EU
• US factory orders
• In Europe, quarterly results from Ryanair

Tuesday 5 November

• Full-year results from ASOS and Smiths News
• BRC UK retail sales monitor
• Purchasing managers’ indices (PMI) for services industries in the UK and USA
• US Presidential and Congressional Elections
• Kantar supermarket sales and market share data
• New car registration figures for October

Wednesday 6 November

• First-half results from Marks & Spencer
• Trading statements from Persimmon, JD Wetherspoon, OSB and Domino’s Pizza
• Purchasing managers’ index (PMI) for the construction industry in the UK

Thursday 7 November

• First-half results from National Grid, Auto Trader, IMI, Howden Joinery, Derwent London, Wood Group, Tate & Lyle and Burford Capital
• Trading statements from Taylor Wimpey, Hiscox, Hikma Pharmaceuticals and ITV
• Halifax UK house price index
• Bank of England monetary policy committee meeets

Friday 8 November

• Trading statements from Rightmove and Vistry
• UK GDP data

Saturday 9 November

• Chinese inflation figures