Week Ahead: UK rates set to hit 15-year high

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Hello and welcome to the working week.

There are few certainties in life, but there is little doubt that the Bank of England’s monetary policy committee will meet this Thursday and the expectation in the markets is that members will raise rates to a 15-year high.

The question of by how much rests on a knife-edge however, with investors split almost equally on whether a 0.25 or a 0.5 percentage point increase is most likely.

June’s sharp drop in UK inflation to 7.9 per cent (albeit still at a significantly higher rate than the country’s peers) has given succour to those backing the lower rate increase. Market pricing suggests that UK rates will now peak below 6 per cent. One thing everyone can agree on is that the battle to tame inflation around the world is far from over.

The markets will also be watching the US employment update on Friday for signs of a cooling in the world’s largest economy. The US jobs market has remained tight despite the Fed’s monetary policy tightening measures. Last month’s data showed that total nonfarm payroll employment increased by 209,000 in June, while the unemployment rate was 3.6 per cent.

Falling inflation in France has led to hopes that the ECB will halt its run of rate rises. This Monday will provide another data point for that debate as the EU second-quarter growth and monthly inflation figures for the bloc are published.

The earnings season rush has yet to cool. Once again Big Tech is a big theme, this time with results from Apple and Amazon, both on Thursday. Like the rest of Big Tech, there’s a lot of focus on whether slowing growth can be reversed (or, in Apple’s case, an actual revenue contraction) with better profit margins being the bright spot — in Amazon’s case, helped by big job cuts earlier this year.

Investors will be taking a keen interest in the performance of Amazon Web Services, where growth slowed to 16 per cent in the first quarter, from 29 per cent in all of 2022. Amazon said on its last earnings call that growth has slowed to only 11 per cent in April, and analysts are expecting 10 per cent AWS growth for the quarter as a whole.

Apple is battling weaker consumer demand and tough comparisons with a strong quarter last year, expected to leave iPhone and iPad sales down, possibly by double digits. But steady services growth has contributed to improvements in Apple’s gross margin that mean earnings per share is likely to be pretty flat year on year, despite falling revenue, and Apple’s stock being close to its all-time high.

Back to the certainties: it is a fairly safe bet that Monday will bring news of another British by-election. It is the closing date for the recall petition of Rutherglen and Hamilton West MP Margaret Ferrier, suspended from parliament for 30 days for speaking in the Commons while awaiting Covid test results during the 2020 lockdown. If more than 10 per cent of registered voters in the constituency sign the petition, a by-election will follow.

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One more thing . . . 

This Sunday marks the 78th anniversary of the second world war atomic bombing in Hiroshima. It is a sombre reminder of the importance of assessing the legacy of J Robert Oppenheimer — not least by going to see Christopher Nolan’s powerful biopic — but also, as FT columnist Janan Ganesh notes, that of the US president at the time, Harry Truman.

Key economic and company reports

Here is a more complete list of what to expect in terms of company reports and economic data this week.

Monday

• EU: preliminary Q2 GDP and July inflation figures

• Results: Bank of Ireland H1, Heineken H1, Mizuho Financial Group Q1, Panasonic Q1, Pearson H1, Spectris H1, Sumitomo Mitsui Financial Group Q1

Tuesday

• Germany: July unemployment rate

• UK: Nationwide July House Price Index and British Retail Consortium July Shop Price Index

• Results: AIG Q2, AMD Q2, BP Q2, Caterpillar Q2, DHL Group H1, Diageo FY, Electronic Arts Q1, Fresnillo H1, Greggs H1, HSBC H1, Man Group H1, Marriott International Q2, Metro Bank H1, Mitsui & Co Q1, Mitsubishi UFJ Financial Group Q1, Molson Coors Q2, Nomura Q1, Pfizer Q2, Pinterest Q2, Robert Walters H1, Smurfit Kappa H1, Starbucks Q3, Toyota Q1, Travis Perkins H1, Uber Q2, Weir Group H1

Wednesday

• Chinook Therapeutics special meeting of shareholders to vote on the proposed acquisition of the company by Novartis.

• Results: Albemarle Q2, BAE Systems H1, Bunge Q2, CVS Health Q2, DuPont Q2, Ferrari Q2, Ferrexpo H1, Haleon H1, Hugo Boss Q2, Kraft Heinz Q2, MGM Resorts Q2, PayPal Q2, Prudential Financial Q2, Qualcomm Q3, Taylor Wimpey H1, Virgin Money Q3 trading update, Yum Brands Q2

Thursday

• Turkey: July consumer price index (CPI) inflation rate data

• UK: Bank of England’s monetary policy committee rate-setting meeting

• Results: Adecco Q2, Adidas H1, Amazon.com Q2, Anheuser-Busch InBev Q2, Airbnb Q2, Apple Q3, AXA H1, Cheniere Q2, ConocoPhillips Q2, DBS Q2, Expedia Q2, Hasbro Q2, ING Q2, Kellogg Q2, London Stock Exchange H1, Lufthansa Q2, MetLife Q2, Mitsubishi Q1, Next Q2 trading statement, Nintendo Q1, Pets at Home Q1 trading update, Rolls-Royce H1, Serco H1, Smith & Nephew Q2, Veolia H1, Warner Bros Discovery Q2, Wizz Air Q1

Friday

• US: July employment report

• Results: AP Møller-Maersk Q2, Capita H1, Commerzbank Q2, Crédit Agricole H1, Dufry H1, Nippon Steel Q1, Royal London H1, Swiss Re H1, WPP H1

World events

Finally, here is a rundown of other events and milestones this week.

Monday

• UK: closing date for the recall petition in the Rutherglen and Hamilton West constituency of Margaret Ferrier MP, who was excluded from the House of Commons for breaching Covid lockdown rules in September 2020

• US: alleged Russian intelligence officer Vadim Konoschenok is due to appear in a New York courtroom on charges of smuggling US-made electronics and ammunition to Russia to aid its war effort against Ukraine

Tuesday

• China: Army Day, marking the founding of the Chinese People’s Liberation Army

• UK: reforms of the alcohol duty system come into effect, taxing all alcoholic drinks based on their alcohol by volume (ABV) and increasing draught beer tax relief. This will mean that the duty charged on a typical pint in pubs is in effect frozen and is lower than beer bought in the supermarket

Wednesday

• Earth Overshoot Day, the date when humans begin living beyond their ecological means and move into the ecological equivalent of deficit spending, according to environmental research body Global Footprint Network

• Portugal: Pope begins a six-day visit of the predominantly Catholic country

• UK: service of remembrance marking the 50th anniversary of the Summerland Fire Disaster, which killed 50 people at a holiday complex on the Isle of Man, the third worst loss of life from fire on land in the British Isles since the second world war

Thursday

• UK: a two-day strike by GMB union members begins at Amazon’s Rugeley fulfilment centre in Staffordshire in a dispute over pay. Another two-day strike is planned at the ecommerce company’s Coventry warehouse tomorrow by up to 1,000 staff, which the GMB says will be the biggest day of industrial disruption in the tech company’s history

Friday

Saturday

• France: Open Water Swimming World Cup contest begins on the River Seine as a foretaste of sporting events to be run in next summer’s Paris Olympics

• UK: National Eisteddfod of Wales begins, running until August 12. In England, the five-day flat horseracing event Glorious Goodwood concludes with the Stewards’ Cup Day

Sunday