Big-cap bonanza in coming week as oil majors, banks update market; US eyed for Big Tech earnings and

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The coming week will bring a flood of updates and results from the top end of the market, with the UK’s biggest oil firms and banks all scheduled to report.

It will be a similarly big week over in the US, with quarterly earnings expected from the world’s biggest tech companies as well as the latest interest rates decision from the Federal Reserve.

Oilers feel the pressure

Transition will likely be a keyword as Royal Dutch Shell Plc (LON:RDSB) and BP PLC (LON:BP. update the market.

The themes facing each of what were once called the ‘oil super majors’ are very similar, though each have slightly different priorities and PR.

On Tuesday, BP reports first-quarter results and Hargreaves Lansdowne expects it has been a ‘reasonable trading environment’ for the company.

Attentions will though be skewed towards BP’s views on the accelerating energy transition.

“The UK’s announcement of tougher carbon reduction targets suggests demand for fossil fuels could fall faster than previously envisaged, raising the pressure on Big Oil to reinvent themselves as low carbon energy providers,” said Hargreaves Lansdowne fund manager Steve Clayton.

Shell recently updated investors with more detail on its plan emphasis on customer demand, no doubt it will be a feature in Thursday’s first-quarter results.

“Shell is attempting to pull off a metamorphosis but shrugging off its fossil fuel skin to reveal a new cleaner energy giant underneath is no easy transition,” said Susannah Streeter, analyst at Hargreaves Lansdowne.

“Refocusing on cleaner assets is an expensive path to tread, and needs to be paid for revenues from its traditional oil assets.

“Shell is trying to make the transition through a radical restructuring, that aims to focus the group down onto core assets, shedding billions of dollars of non-core businesses and reduce its refining footprint.”

UK Banks tot up their figures

Just two months after the UK high street banks unveiled their final results for 2020, HSBC PLC (LON:HSBA) will kick off the first-quarter reporting season on Tuesday. Lloyds is on Wednesday, NatWest and StanChart on Thursday and Barclays on Friday.

With the sector having delivered the third-best performance among FTSE 350 shares so far in 2021, the coming week’s banking results should provide a litmus test of whether this return to favour can last – though many of the key issues overhanging the industry are unlikely to be settled until later in the year.

Part of the recent strong performance is likely to be down to the sector’s underperformance last year and before, as well as the strong final quarter of 2020, when most of the banks beat consensus profit forecasts, helped by lower losses from bad loan provisioning.

The ratio may not be as high for Q1 of 2021 but analysts at UBS reckon trading has been “much better than had been expected, principally driven by market-linked activities”.

Investment bank revenues are expected to be strong in the quarter, based on the read-across from the blowout performance from US sector peers, which will be notable for the likes of Barclays PLC (LON:BARC), NatWest Group PLC (LON:NWG) and Standard Chartered PLC (LON:STAN) that have such sizeable IBs.

The current low-interest environment may mean that bank interest income is weak, but the UK mortgage market has been surprisingly strong, which is likely to be good news for the likes of Lloyds Banking Group PLC (LON:LLOY).

Loan impairment charges in the quarter are expected to be low, with analysts at Barclays suggesting credit distress “is on ice” given government support schemes and, following the example of US banks, there is “increasing potential for writebacks” of loan loss provisions, especially where there was high provision building last year, as seen at all the UK names.

Big issues for the banking sector, of dividends and the reopening of the economy, with the relaxation of the government’s furlough scheme revealing the exposed underbelly of the economy, are not likely to be covered in great detail in this quarter’s update, said analysts at UBS.

“We expect results to be marked by strength in capital markets income, contracting credit card books and low loan losses, with impairments benefitting from better macro, more government help and a short loss observation period. Capital trends should also be supportive. But we think this is in the mind of the market already,” said UBS.

With the UK re-opening trade “running into the sand somewhat in recent days”, UBS thinks the key catalysts for the UK domestic banks are “further out”, with details around the full relaxation of mobility restrictions perhaps in June and more dividend clarity likely in July and August.

Whitbread finals to see rude awakening

The last year has not been the best for hotel chains, with lockdown measures across the world forcing most of them to close their doors for months on end.

With this in mind, final results from Premier Inn owner Whitbread PLC (LON:WTB) on Tuesday are unlikely to be positive reading, however, the company has managed to keep itself afloat while awaiting the end of the pandemic.

The benefits from the recent relaxation in the UK won’t show up in the figures, as the financial year ended in February, so as a result, the company’s cash reserves are likely to be the key metric for investors to watch.

Shareholders will also be eyeing any updates on the firm’s expansion plans for Germany, as well as any strategy it has to capitalise on the assumed pent-up demand of UK consumers when hotels are allowed to reopen in late April and May.

Triple threat for GSK

GlaxoSmithKline PLC (LON:GSK) faces a “triple whammy” when it reports first-quarter figures on Wednesday, according to Steve Clayton at Hargreaves Lansdown.

“Last year saw an unusually strong outcome as customers stocked up, anticipating lockdowns ahead. That sets a high hurdle, plus GSK’s Consumer business will have had a weak ‘flu season’ because social distancing has kept seasonal bugs under control. To top it off, the pandemic has reduced the number of patients receiving vaccinations for non-Covid conditions, which will hit their important Shingrix shingles vaccine revenues. So trading numbers could well look a bit light and investors will have to look through a lot of one-off factors to get a feel for the underlying state of play,” Clayton said.

Sainsbury’s checks its receipts

Wednesday will bring full-year results from J Sainsbury PLC (LON:SBRY), with investor expectations likely to be high following its strong third quarter.

The supermarket chain will be eyed to see if it has managed to maintain the high demand for online orders as lockdown measures have eased in the UK.

The outlook statement will also be in focus, particularly regarding costs which have recently been holding back profits. If the firm decides to invest further in its digital capability this pressure could continue, eating into margins.

Persimmon looks to build on housing market activity

The housing market continues to boil, much to the dismay of would-be first-time buyers but to the delight of housebuilders such as Persimmon PLC (LON:PSN), which is scheduled to update the market on Wednesday.

UBS is confident sales rates will be strong at around 0.85 – 0.90 per site for the year to date.

“Given the easy basis of comparison from the prior year (0.66) this will represent a meaningful increase. For 2021, we currently expect +9% volume growth and flat pricing (incl adverse mix) and margins to moderate slightly by 30bps y/y [year-on-year],” UBS said.

Unilever volumes key for first quarter

Consumer good giant Unilever PLC (LON:ULVR) let down shareholders with its last update, so a first-quarter trading statement on Thursday will be watched closely for any signs of recovery.

Volumes will be key for the owner of Persil and Hellman’s Mayonnaise, as well as whether it expects the rising levels of COVID-19 cases in certain countries to impact its emerging markets, particularly India and Brazil.

However, investors will are at least unlikely to worry about the dividend, as the group has previously stressed the importance of growing its shareholder payouts.

AstraZeneca to make headlines again with update

It has been hard to keep AstraZeneca PLC (LON:AZN) out of the news and it will get further attention on Friday when it releases a first-quarter trading update.

UBS is forecasting total revenues of US$7.07bn, which puts it above the consensus forecast of US$6.95bn.

It goes for core operating profit of US$2.76bn (consensus: US$2.55bn) and core earnings per share of US$1.54 versus a consensus forecast of US$1.45.

“We expect the COVID-19 vaccine might negatively impact the margin in Q1,” UBS said.

“We will also look for any commentary around further COVID-19 impact for the rest of the year. Even though the Alexion/AZN deal obtained FTC approval recently we don’t expect an update quite yet,” UBS said.

Macro matters

The big macro event of the week if not the month is often the US Federal Reserve meeting decision, though this Wednesday is one of the times when no one expects much in the way of changes.

Chair Jerome Powell’s subsequent press conference is more likely to make headlines.

The Fed is likely to leave its headline interest rate at 0.25% and its quantitative easing (QE) programme running at US$120bn a month, taking its current asset base up to US$7.8trn.

“Such aggressive monetary policy underpins the ongoing surge in US money supply which some economists think will lead to the return of inflation, something that the Fed clearly craves,” said analyst Danni Hewson at AJ Bell.

The big issue at the Federal Open Markets Committee’s last meeting in March was about trying to balance the optimism of a strong economic rebound against rising expectations of some QE tapering or that interest rates will start to rise rates well before 2024, in the face of rising inflationary pressures.

With another set of stimulus payments having landed in US consumers bank accounts, a big rises in March jobs and retail sales, the economic picture is still improving and yields have gone as high as 1.77%.

However, yields have since slipped back on a belief that the data from here on in is unlikely to be as good.

“This seems a little naïve,” said market analyst Michael Hewson at CMC Markets, “and while the Fed will be pleased at how the economy is looking now and with another bumper payrolls report expected next week, they will be keen to temper any enthusiasm or foster any expectation of a change in stance.”

So, as Hewson says, even if FOMC officials do alter their dot plots to signal a slightly earlier taper, it’s more than likely that the Fed message will remain the same in terms of its “outcome-based guidance” – the new policy of not reacting to perceptions of a direction of travel, but waiting until both goals of higher inflation and full employment has been achieved.

There are other macro data nuggets for the Fed and market to chew over in the week, including US GDP and personal spending, as well as EU GDP.

“It’ll also be worth watching out for the weekly initial jobless claims data from the US, as that’s one of the most timely indicators we get, and has fallen to a post-pandemic low this last week, so it’ll be interesting to see if that decline is sustained,” said Deutsche Bank’s Jonathan Jayarajan.

Tech giant earnings land on Wall Street

Over in the US, earnings season will reach its apex as some of the world’s biggest tech company’s prepare to deliver quarterly earnings.

First up on Monday will be Tesla Inc (NASDAQ:TSLA), with the electric car maker coming off a strong 2020 that saw it turn a yearly profit for the first time and enter the S&P 500.

However, the company and its billionaire boss Elon Musk will have little time to relax as the company looks to scale up and retain its profits amid increasing competition from both established automakers and other tech companies.

Investors will be keeping an eye on the company’s margins as it looks to lower prices and draw in more buyers. Outlook will also be crucial as Tesla seeks to maintain its sky-high valuation, which is mostly based on predictions of huge growth down the line.

Tuesday will bring results from Google parent company Alphabet Inc (NASDAQ:GOOG), with the company likely to look to reassure investors that it won’t take too much of a hit from a possible global tax of tech giants proposed by US president Joe Biden.

Also of interest will be the firm’s outlook statement amid an easing of lockdown restrictions, which will have the effect of allowing people outside again and by extension spending less time on the company’s websites such as YouTube, traffic on which helped it smash earnings expectations last year.

Also due on Tuesday are third-quarter figures from computing giant Microsoft Corp (NASDAQ:MSFT), which is likely to be eyed for more cloud computing news as well as any commentary on which direction the company’s acquisition will take next.

Wednesday will see momentum pick up, with results expected from both Apple Inc (NASDAQ:AAPL) and social network Facebook Inc (NASDAQ:FB).

Given Apple already announced a new suite of products on Tuesday, including new ranges of its iMac desktop computers and iPad tablets, investors may be looking for any details on the rollout of these new products or how the company expects to perform once they hit the market.

Meanwhile, iPhone sales will continue to be a key area of interest, as well as the company’s performance in the critical Chinese market.

More cautious investors may be keeping an eye on any comments about a global shortage of computer chips which could dent the firm’s production capacity.

Facebook has also been unveiling new products recently, notably a suite of audio features including ‘Live Audio Rooms’, audio-only group chats that many see as an effort to compete with audio-only chat app Clubhouse after it surged in popularity last year.

Aside from any further product details, investors are likely to focus on the company’s key metrics of user growth and ad revenue, as well as how it hopes to deal with increasing pressure from national governments over fake news and its influence on society.

The final tech major to report in the week will be ecommerce giant Amazon Inc (NASDAQ:AMZN), the first results since founder Jeff Bezos stepped back from the CEO’s chair.

However, the change of leadership (if you can call it that with Bezos still serving as executive chairman) is unlikely to bring much change in company direction, while new lockdown measures in several countries are likely to have produced increased sales as consumers have found themselves shut out of the high street.

The accelerated shift towards digital services caused by the pandemic is also likely to benefit the firm going forward, particularly its Amazon Web Services cloud computing arm despite it facing stiff competition from both Microsoft and Alphabet.

Significant announcements expected for week ending 30 April:

Monday April 26:

Trading announcements: Pearson PLC (LON:PSON)

Interims: Lok’N Store Group PLC (LON:LOK)

Economic announcements: US durable goods orders

Tuesday April 27:

Trading announcements: HSBC Holdings PLC (LON:HSBA), BP PLC (LON:BP.), AVEVA Group PLC (LON:AVV), IWG PLC (LON:IWG), PZ Cussons PLC (LON:PZC), Vivo Energy PLC (LON:VVO)

Finals: Whitbread PLC (LON:WTB), Inspiration Healthcare Group PLC (LON:IHC), Gaming Realms PLC (LON:GMR), Anexo Group PLC (LON:ANX)

Interims: Focusrite PLC (LON:TUNE)

Wednesday April 28:

Trading announcements: Lloyds Banking Group PLC (LON:LLOY), GlaxoSmithKline PLC (LON:GSK), Persimmon PLC (LON:PSN), 1Spatial PLC (LON:SPA), British American Tobacco PLC (LON:BATS), CRH PLC (LON:CRH), Dixons Carphone PLC (LON:DC.), Fresnillo PLC (LON:FRES), Network International Holdings PLC (LON:NETW), WPP PLC (LON:WPP)

Finals: J Sainsbury PLC (LON:SBRY), French Connection Group PLC (LON:FCCN), LSL Property Services PLC (LON:LSL), Heiq PLC (LON:HEIQ), The Property Franchise Group PLC (LON:TPFG)

Interims: AB Dynamics PLC (LON:ABDP)

Economic data: Fed rates decision

Thursday April 29:

Trading announcements: Royal Dutch Shell PLC (LON:RDSB), NatWest Group PLC (LON:NWG), Standard Chartered PLC (LON:STAN), Unilever PLC (LON:ULVR), Flutter Entertainment PLC (LON:FLTR), Meggitt PLC (LON:MGGT), Indivior PLC (LON:INDV), ConvaTec Group PLC (LON:CTEC), Evraz PLC (LON:EVR), Howden Joinery Group PLC (LON:HWDN), Inchcape PLC (LON:INCH), Lancashire Holdings Ltd (LON:LRE), Schroders PLC (LON:SDR), Smith & Nephew PLC (LON:SN.), Computacenter PLC (LON:CCC), DS Smith PLC (LON:SMDSL), Glencore PLC (LON:GLEN), Kaz Minerals PLC (LON:KAZ), St James’s Place PLC (LON:STJ), Weir Group PLC (LON:WEIR)  

Finals: Woodbois Limited (LON:WBI), Xeros Technology Group PLC (LON:XSG), RTW Venture Fund Limited (LON:RTW)

Interims: WH Smith PLC (LON:SMWH), Proactis Holdings PLC (LON:PDH)

FTSE 100 ex-dividends to knock 3.5 points off the index: RELX PLC (LON:REL), Rightmove PLC (LON:RMV), London Stock Exchange Group PLC (LON:LSE)

Economic data: US GDP, US jobless claims

Friday April 30:

Trading announcements: AstraZeneca PLC (LON:AZN), Barclays PLC (LON:BARC), Smurfit Kappa Group plc (LON:SKG), Hikma Pharmaceuticals PLC (LON:HIK), Rotork PLC (LON:ROR)

Finals: UK Oil & Gas PLC (LON:UKOG)

Interims: Up Global Sourcing Holdings PLC (LON:UPGS)

Economic data: US personal incomes, US Chicago PMI, UK house prices

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