The Bank of England is expected to keep interest rates on hold at 0.1 per cent when it announces its latest policy decision on Thursday. At 2.5 per cent, inflation is rising rapidly above target, but policymakers insist that much of the recent jump will be brief.
The bank has upwardly revised its growth forecasts for the economy and will publish an updated set of projections in its Monetary Policy Report. Strong growth and inflation have caused some policymakers to turn more hawkish in recent days. While interest rates are likely to stay unchanged, Michael Saunders and Sir Dave Ramsden could follow Andy Haldane, the former chief economist at the Bank, by voting to reduce the bank’s stock of gilt purchases by £50 billion to £825 billion.
“Other members, notably Andrew Bailey, the Bank of England governor, and Ben Broadbent, the deputy governor for monetary stability, were more doveish. It is possible that the robust nature of the UK economic recovery triggers a significant debate of the design of the current quantitative easing programme,” analysts at Investec said. “Our feeling, though, is that any proposal to reduce or halt it is unlikely to gain a majority on the committee and we expect that the vote to maintain the current programme will be 6-2.”
Tomorrow
BP is set to swing back into profit on the back of soaring oil prices as investors await details of promised buybacks.
The London-listed oil major is expected to report underlying profits of almost $2.2 billion for the second quarter, up from an underlying loss of $6.7 billion a year ago when it suffered huge writedowns after crude prices crashed. Brent crude, the global benchmark oil price, averaged $69 a barrel in the second quarter, compared with less than $30 a barrel in the same period, severely affected by the early stages of the pandemic, last year.
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BP kicked off a modest $500 million share buyback in the last quarter, but Bernard Looney, its chief executive, has indicated that there should be much more to come, promising “material shareholder distributions in the form of buybacks”.
Interims BP, Coats, Direct Line, Domino’s Pizza, Fresnillo, Greggs, Hiscox, Keller, Rotork, Standard Chartered, Travis Perkins
Finals Filtronic, Joules, NWF
Trading updates AG Barr, Lamprell, TP Icap
Wednesday
All eyes are likely to be on Legal & General’s dividend as the insurer unveils an expected increase in first-half profits to about £1 billion. L&G kept its dividend flat last year and reduced its guidance for the future. That lower level is expected to be maintained, as L&G may show some signs of strain, with a solvency ratio at the lower end of its European counterparts that may constrain its growth.
L&G, along with other leading insurers, has benefited from capital releases prompted by actuarial views that people’s lives are not going to keep increasing in length as had been expected, lightening the load on firms providing annuities. Those releases are thought to have largely come to an end.
Interims Ferrexpo, Ibstock, Legal & General, LSL Property Services, Morgan Sindall, Taylor Wimpey
Trading update UDG Healthcare
Thursday
Shares in Rolls-Royce start this week below £1 and at only 78 per cent of all-time highs, even after factoring in a £5 billion refinancing last year. That does not augur well for what the company will have to say about its cash burn during the aviation recession, running at £1 billion a quarter, or tepid demand for the jet engines it makes for Airbus and Boeing.
Interims Centamin, Evraz, Glencore, Hammerson, IP Group, Meggitt, Mondi, Rolls-Royce Holdings, Royal London, Savills, Secure Trust Bank, Serco, Spirent Communications, TT Electronics, WPP
Finals Frasers, NCC
AGM/EGM: Investec, Naked Wines
Friday
Ofgem updates the level of the government’s energy price cap on default tariffs, with the regulator expected to authorise suppliers to raise bills by as much as £150 a year. The increase of about 13 per cent would rank as the biggest price rise in a decade by leading suppliers and would take bills for a typical household on a default tariff to £1,288 a year. It comes on the back of soaring wholesale gas and electricity prices, which are at their highest levels in more than a decade. The increase will affect about 11 million households on default tariffs and four million with prepayment meters.
Interims Hikma Pharmaceuticals, London Stock Exchange Group