The Week Ahead: Autumn Statement, US Fed minutes; Nvidia results.

Here's our pick of the top three economic and company events in the week commencing Monday 20 November:

US Federal Reserve minutes 

Tuesday: The decision at the previous meeting to hold US interest rates at their current levels wasn’t a surprise to markets, however the fact that Fed chair Jerome Powell wasn’t as hawkish as he might have been for another rate hike prompted a sharp decline in US yields in the days afterwards. The market seems to think there is a higher bar when it comes to another rate hike, and although it doesn’t mean we won’t see one, it might get pushed out to early next year, unless US economic data starts to weaken further. 

The weakest non-farm payrolls report this year for October appears to feed into the soft-landing scenario for the US economy, which the Fed will continue to hope is their preferred scenario. The possibility of a December hike remains on the table, especially if inflation data remains sticky, however Powell did say that the Fed was “close to the end of the cycle” as well as referencing the fact that financial conditions were starting to act as a headwind. 

This suggests that the Fed would need to think very carefully before hiking again, in can it causes more harm than good. Tuesday’s minutes should offer a decent insight into how much appetite there is for further rate hikes, at a time when the US economy is clearly slowing  

Nvidia Q3 results

Tuesday: When Nvidia posted its Q2 results in August, the share price opened at a record high, but since then Nvidia shares have slipped back, rebounding from four-month lows at the end of October. 

With the bar already set high for its Q2 revenue numbers, the growth in datacentre revenue alone managed to beat the total headline estimate. Q2 revenue came in at $13.5bn, with datacentre revenue accounting for $10.3bn of that total, a 171% increase from a year ago. The revenue growth is astonishing, with the business set to grow its annual revenue from last year’s $26.97bn to $48.69bn in the current fiscal year, and up to $70bn in 2025. Annual profits are expected to surge to $14.60 a share by 2025, a huge jump from $3.34 in 2023. 

Nvidia projected Q3 revenue of $16bn, plus or minus 2%, as well as approving an extra $25bn in share buybacks. Of course, there are risks, one of which is Nvidia’s exposure to China, given that China accounts for 20%-25% of its datacentre revenue. Another risk is that Nvidia’s competition is likely to get more intense, which could put longer term pressure on margins. It may be number one now, but staying there could become more challenging, while the shares already up over 200% year to date. 

UK Autumn Statement 

Wednesday: Will this week's Autumn Statement shift the dial on any new measures chancellor of the exchequer Jeremy Hunt can take to help boost the UK economy? These events tend to be more political theatre than substance, especially with an election looming, and the Conservatives’ dire poll ratings. There has been some good news over the past two weeks, in that the UK economy managed to avoid a contraction in Q3, while headline inflation fell to a two-year low of 4.6% in October, putting it below the UK base rate for the first time since 2016. 

This has meant that the chancellor has about £90bn of fiscal headroom to make some tweaks to fiscal policy this week. With wage growth now solidly above headline inflation, the squeeze on the cost of living also finally appears to be easing, all of which is good news. The key question now is what the government can do to help businesses who are still struggling? 

The chancellor has been under pressure to cut taxes; however, this seems unlikely, though he may offer help to businesses struggling with higher taxes and costs, and extend “full expensing” beyond the current expiry date of 2026. We can expect tweaks to pensions: will the triple lock survive, or more to the point, will Mr Hunt raise it by 8.5%, or use the 7.8% number which strips out bonuses? Will he make tweaks to stamp duty to aid a struggling housing market?

There has also been speculation that Hunt could shake up ISAs to encourage more domestic investment in the UK stock market. There are also the old favourites, fuel and tobacco duty, which could see changes. 

Here's our pick of the rest of the week's major economic and company events:

Zoom Video Communications Q3 results 

Monday: Zoom shares have continued to struggle despite initially rallying in the aftermath of its Q2 numbers back in August, the shares rising to 6-month highs in September, before slipping to 3-year lows in October. The decline in the share price has shown little signs of slowing despite continuing to grow its revenue base. Q2 revenues comfortably came in ahead of forecasts at $1.14bn. This prompted Zoom to upgrade its full year revenue forecasts to between $4.49bn and $4.50bn, while keeping Q3 revenue forecasts unchanged at $1.12bn, but nudging profits up to $1.08c a share. Q2 profits were also stronger than expected at $1.34 a share.  

Kingfisher Q3 results 

Wednesday: The last three months have seen B&Q owner Kingfisher shares slip to their lowest levels since October last year on concern that high inflation and squeezed consumers will impact its business. We’ve already seen evidence of slowing consumer demand in the form of recent weak updates from sector peers Travis Perkins and Wickes. In September Kingfisher shares fell sharply after the company reported a 1.1% rise in H1 revenues to £6.88bn, and statutory pre-tax profits fell 33.1% to £317m. H1 like for like sales fell 2.2%, although Q2 like for like sales improved to -1.2% from -3.3% in Q1. France and Poland were weak spots, while the UK business performed well, like for like sales rising 1.7%, helped by a strong performance from Screwfix. For Q3 Kingfisher was downbeat, projecting Q3 like for like sales to decline by -2.4% and downloading full year profit before tax to £590m from £634m. 

Germany, France flash PMIs (November) 

Wednesday: These key activity indicators have continued to look weak, and although manufacturing has been struggling for a while, the malaise has now started to spread to the services sector. Manufacturing activity in both Germany and France came in at 40.8 and 42.8 in October respectively, with little in the way of any growth in the last 15 months. This isn’t expected to change in November either, while economic activity in the services sector, which had been robust until recently, has also started to stall and slow quite sharply. In France, service sector activity slowed to 45.2 the fifth monthly contraction in succession, while German services activity has also started to slow in the last three months, dipping into contraction territory at 48.2. Expectations are for more of the same in the flash numbers on Wednesday. 

UK public sector borrowing (October) & flash PMIs (November) 

Thursday: Rising interest costs have been exerting upward pressure on headline government borrowing numbers, so the recent decline in UK gilt yields will be welcome to the chancellor, Jeremy Hunt. In September, public sector borrowing rose to £13.5bn; the October numbers are expected to show a modest improvement. 

UK manufacturing PMI data hasn’t been able to escape the malaise affecting its European peers, and has now been struggling since July 2022. The sector has been in contraction territory for the last 15 months, and set to make it 16 in a row on Thursday, although we have started to see an improvement from the lows of 43.0 back in August. Services has been slightly more resilient, slipping into contraction territory in August, where it has been ever since, albeit only as low as 49.3. In October we edged up to 49.5, showing a remarkable resilience, despite a tough economic backdrop. Whether that can continue remains to be seen, however slowing inflation as well as wage growth that is trending at 7.8% appears to be offering a modest buffer.      

Jet2 half-year results 

Thursday: With Ryanair reporting record profits earlier this month it would be easy to suppose that the civil aviation sector has put its Covid woes behind it, even though share price values remain below their pre-Covid 19 levels. With easyJet also seeing a return to profit this week it’s the turn of Manchester based Jet2 to report its latest H1 numbers. The Jet2 share price has been in decline for most of this year after rising to a one year high back in February. In July Jet2 shares plunged despite reporting full year revenues of just over £5bn, and pre-tax profits of £371m. The announcement of the retirement of chair Philip Meeson may well have had a part to play in some of the weakness, although it could be argued that the reluctance to provide definitive guidance for the upcoming year may also have played a part.  Altogether the outlook remains promising with seat capacity for this summer up by 7.5% on last year. H1 revenues are expected to have risen to £4.4bn, a solid increase on the previous year’s £3.57bn, with most of that coming from package holidays of £3.86bn. pre-tax income is expected to have risen to £613m, up from £450m a year ago. The number of passengers carried is expected to have risen to 11.95m, although the load factor is expected to have fallen to 85.8% from last year’s 90.7%. 

German IFO business climate (November) 

Friday: Judging by recent PMI numbers its perhaps surprising that German business confidence is as upbeat as it is. Having slipped to a low of 85.7 in August we’ve seen a modest recovery to 86.9 in October. Whether that can continue remains to be seen, however having seen the German economy contract in Q3 its hard to see how Q4 won’t go the same way given the weaknesses being seen in manufacturing, construction as well as services as we head towards year end.  

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SELECTED COMPANY RESULTS

Note: While we check all dates carefully to ensure that they are correct at the time of writing, company announcements are subject to change.

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