In a week jam-packed with company results, the grey world of central banking again comes to the fore with the confirmation hearing of arguably the single most important person in the global economy - the Governor of the US Federal Reserve.
While the market has already given a qualified thumbs up to the proposed appointment of academic Ben Bernanke to replace the retiring Alan Greenspan, pointy headed congressional types are keen to grill him on everything from inflation targeting to the US economy's outlook. The view is that Mr Bernanke will follow in Mr Greenspan's inflation busting footsteps, albeit with his own consensual approach and hopefully, for us mere mortals in the market, more intelligible commentary.
Back in the UK, the Bank of England's sworn enemy comes into the spotlight with the publication of the bank's quarterly inflation report and monthly CPI figures. Wednesday's release should help explain why the BoE held rates steady at 4.5 per cent last week, and provide an updated outlook on the UK economy. Even with inflation still outside the target band, HSBC economists think the BoE will predict 2.5 per cent GDP growth with a 2 per cent inflation projection. This helps lay the groundwork for rate cuts in 2006 and is far more conservative than Chancellor Gordon Brown's predictions for economic growth.
All this, of course, has little immediate effect on companies reporting this week. One eagerly awaited result is that of grocer J Sainsbury's. The market range for the interim profit is quite large at £120m to £150m. This largely reflects analysts' views on margin performance and the pace at which management is transforming the company.
Jonathan Pritchard from Oriel Securities, is at the upper end of market expectations, forecasting a £140m result with an expansion in operating margin. "The fact that it's sales led is very important. The margin enhancement that comes through will be reinvested back into the customer," he said. Market leader Tesco has successfully followed this strategy for many years. Analysts are also looking for colour around third-quarter sales performance in the lead up to Christmas and an update on the problematic banking operation.
The action-packed telecommunication sector comes under scrutiny this week with Vodafone, Virgin Mobile and the soon-to-be acquired O2 all fronting the market. These results come against a backdrop of increasing competition in 2006, with news that Deutsche Telekom will sacrifice margin in the UK and Germany to kickstart market share growth.
While Vodafone is expected to produce solid, rather than spectacular, operational results - with Ebitda growth of around 5 per cent - the market will be looking for guidance on dividend policy and chief executive Arun Sarin's outlook statement. Darren Ward, an analyst at Williams de Broë believes that "calendar 2006 remains a year in which Vodafone has an opportunity to push for 3G growth to gain share, possibly sacrificing a little margin".
Virgin Mobile reports its interim result on Thursday. In the past three weeks, the stock's share price has jumped by 13 per cent to 329p on takeover speculation. Analysts at Dresdner Kleinwort Wasserstein are predicting sales and network sales growth of a healthy 10 per cent each. However, Virgin's new focus on growing contract business rather than pre-paid is taking a toll on margin. DKW is forecasting a flat Ebitda of £55m.
A less attractive result is expected from chemical manufacturer BOC. Analysts predict only a modest rise on 2004's £504m pre-tax result. The group's shares hit a five-year high in September as rumours circulated that BASF was interested in BOC. Profit growth will be stymied by the sale of the Afrox division, a weak dollar and tough trading conditions.
And finally, a bitter row between the original Attheraces consortium and 31 leading racecourses, including Aintree and Newmarket, gets its day in court this Wednesday. The complex battle deals with two claims. Following a decision by Attheraces in March 2004 to terminate a £307m, 10-year contract to broadcast racing, the consortium - then Arena Leisure, BSkyB and Channel 4 - started legal action for £50m in rebates.
But the courses issued a £213m counter-claim, arguing that ATR had no right to scupper the deal. Legal opinion is split as to who will emerge victorious.
UK RESULTS: (final) Diploma; (interim) Latchways, Majestic Wine, O2, PD Ports, Proventec, Uniq
UK RESULTS:(I) Babcock International, Big Yellow, Bright Things, Burberry, Business Post, Emap, Endace, Kewill Systems, Luminar, Northern Foods, Vodafone, VT, William Ransom & Son; (3Q) Acambis
UK RESULTS: (F) Dimension Data, Lonmin, Premier Direct, Sanderson, Scottish & Southern Energy, Shed Productions, Touchstone, Vectura, Wyndeham Press; (I) EMI, Glotel, J Sainsbury, Land Securities, Marchpole Holdings, O2
UK RESULTS: (F) BOC; (I) Applied Optical Technologies, Chloride, GUS, Helical Bar, Investec, Man, Mothercare, National Grid, Vedanta Resources, Virgin Mobile
UK RESULTS: None scheduledReuse content