It is set to be a busy Friday with Barclays, London Stock Exchange Group and Intercontinental Hotels all releasing trading updates for the summer quarter.
The week also ends with a flurry of economic data, including flash October purchasing managers’ indices (PMIs) from the major global economies, plus consumer confidence readings.
For the UK, the ‘flash’ services data for the early part of October is expected to see a decline from the 56.1 figure for September.
Official UK retail sales are also due, with the market expecting a softening of monthly growth to 0.4% in September from 0.6% in August.
“Pre-Brexit uncertainty and the likely impact of re-imposed restrictions on businesses and consumers will make the rebound in activity enjoyed in the third quarter all the more difficult to sustain,” said commentators at broker Peel Hunt.
“The flash PMIs and consumer confidence readings due on Friday may see the appearance of some cracks.”
Barclays to kick off banking results season
Bank shares, as a rule, have been flattened by the coronavirus pandemic, with the FTSE 350 bank sector the third-worst performer over a five-year period.
Barclays shares are now trading at less than 0.3 times book value, reflecting sector-wide concerns about low interest rates, coronavirus losses and the lack of dividends.
However, unlike some of its UK rivals, Barclays has a substantial investment banking arm, which allowed underlying profits to surge in the first half of 2020, even though at the bottom line profit plunged by 77%.
“The most immediate challenge facing the industry is a rise in bad loans,” said analysts at Hargreaves Lansdown in a preview, with Barclays having set aside £3.7bn in the first half of the year as it prepares for rising unemployment and corporate bankruptcies to result in less of its loans being repaid.
“We don’t think the global economic picture has improved much since then and expect more provisions this quarter,” the Hargreaves analysts added.
But, expecting loan losses to have benefitted from better than expected macro data, low levels of corporate defaults and continued good investment bank revenue, analysts at UBS forecast Barclays posting a quarterly adjusted profit before tax of £495mln.
LSE Group hopes to continue cashing in from market turmoil
The trading update from London Stock Exchange Group PLC (LON:LSE) will likely be eyed for any news on how the company has fared during the period of market volatility as a result of the coronavirus pandemic, which has sent investors both dipping in and out of the market with heightened frequency.
The company was one of the few major FTSE 100 firms to continue paying a dividend during the worst period of the pandemic, as increased trading and volatility in the early days boosted revenues. With things a little calmer now, but with plenty of factors that could spark renewed activity, the outlook statement will likely still be watched closely.
Shareholders are also likely to look for any updates on the company’s €4.3bn sale of the Milan stock exchange to Euronext, announced last week, as part of efforts to fund its own US$27bn acquisition of market data group Refinitiv.
Cold winter check-in at Intercontinental Hotels
Intercontinental Hotels Group PLC (LON:IHG) closes the week out with a summer update where there may be dire predictions of how the winter will pan out.
The hotel operator has fared better than many competitors thanks to its franchise system, so it stayed off the hook for running costs.
Global occupancy dropped 25% in the second quarter and revenue per room halved in the first six months of the year, but the FTSE 100-listed firm remained profitable.
“With occupancy levels rising, thanks to Holiday Inn staycations in America, and other key markets opening up, there’s hope this model will continue to work,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown in a preview.
“However, with fresh social distancing restrictions imposed across Europe and regions being locked down one by one, there are big clouds on the horizon.”
Significant announcements expected on Friday, October 23:
Economic data: UK retail sales, UK consumer confidence, UK flash PMIs, US flash PMIs