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UK inflation data macro focus for Wednesday, trading updates headline company news

Last updated: 01:00 17 Jul 2019 EDT, First published: 07:30 16 Jul 2019 EDT

Inflation

All eyes will be on the UK’s latest batch of inflation data on Wednesday while the corporate calendar will be taken up mostly by trading updates from blue-chip miner BHP and utilities group Severn Trent among others.

Following a UK jobs report on Tuesday that showed that unemployment for the three months to May was unchanged from the 3.8% in April, its lowest since 1974, and 3.4% annual growth in average weekly earnings, hopes of an interest rate cut by the Bank of England appear to be on the fade.

Analysts at ING are already downbeat, saying that following the data they “didn’t expect any change in policy” from the central bank this year.

If consumer price inflation performs a similar feat on Wednesday and stays around the May level of 2%, in line with the BoE’s target, it may cause some concerns.

“That means that wages are growing faster than the cost of living, a good thing for consumers and possibly consumer spending (or if not spending than at least the savings rate),” said AJ Bell investment director Russ Mould.

“This is a trend that could be good for consumers, bad for company profit margins and a source of concern for the Bank of England, which is talking about cutting interest rates, depending upon how Brexit plays out, even when this sort of data would normally have had the Old Lady of Threadneedle Street tightening monetary policy and not loosening it.”

TalkTalk hopes for good reception

Accident-prone internet and phone services provider Talktalk Telecom Group PLC (LON:TALK) said in May that it was confident of achieving earnings growth this year in line with market expectations, so not many surprises will be expected when it delivers a first quarter update on Wednesday.

The group, still trying to shake off a reputation for poor customer service and lax cybersecurity, said at the time that its optimistic outlook was underpinned by an acceleration of its roll-out of “fibre to the premises” and a much-reduced cost base, so any updates on either will be closely eyed.

Restructuring to shore up Galliford Try

Having rejected a takeover approach for its homebuilding business from Bovis Homes Group PLC (LON:BVS) in May, investors in Galliford Try plc (LON:GFRD) will be hoping the group at least has a plan for the division when it delivers a trading update on Wednesday.

Success in housebuilding will be even more paramount given the firm’s struggling construction arm has already caused it to issue a shock profit warning in May due to restructuring costs.

While the shrinking of the construction division will see revenues drop from £1.5bn to around £1.3bn, the restructuring is also expected to generate annualised cost savings of up to £15mln from 2021, making it easier to hit targets for improved operating margins.

Dull update expected from Severn Trent

Despite some looming challenges from regulators, analysts have been a little more confident that water group Severn Trent PLC (LON:SVT).

The rest of the sector has the potential to deliver some attractive returns for their shareholders, so the company will be hoping it doesn’t dampen the optimism with a trading update ahead of its AGM on Wednesday.

Severn has performed well in terms of its cost savings and efficiencies -- areas regulators like to keep a close eye on -- although not a whole lot of excitement is expected so investors will be just be hoping the firm has kept its trading steady for the first quarter.

Significant announcements expected Wednesday July 17:

Trading updates: BHP PLC (LON:BHP); Severn Trent PLC (LON:SVT); TalkTalk PLC (LON:TALK), Galliford Try plc (LON:GFRD), Premier Oil PLC (LON:PMO), GVC Holdings PLC (LON:GVC); Hochschild Mining PLC (LON:HOCH), Euromoney Institutional Investor PLC (LON:ERM); Headlam PLC (LON:HEAD)

Interims: Augean PLC (LON:AUG)

AGMs: Yellow Cake PLC (LON:YCA)

Economic data: UK CPI, RPI, PPI, HPI inflation data; US housing starts; Fed Beige book

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