Thursday preview: Central banks may be poised to act

5th Oct 2011 15:58

Attention on Thursday will be directed toward the Bank of England (BoE) and the European Central Bank (ECB), both of which are expected, by some at least, to announce changes to recent policy.Though there has been talk of the Old Lady of Threadneedle Street cutting the UK benchmark interest rate from its historic low level of 0.5%, the chances of that happening this month are close to zero. There is more prospect of the Bank reviving its quantitative easing (QE) programme, though that is also a bit of a long shot.Barclays Capital believes the Bank of England's Monetary Policy Committee (MPC) will stand pat, while Italian bank UniCredit reckons the MPC will wait until next month's meeting to get the money printing presses out of storage."The outlook for the UK economy has significantly worsened over the summer. In spite of the continued significant overshoot of inflation, we now expect the BoE to announce an increase in the stock of asset purchases (as also indicated by recent statements) at the November meeting (£50bn), followed by another increase in February (£50bn). We expect the first rate hike in 2013," Unicredit said.Broadly speaking, Barclays Capital (BarCap) agrees. "Today's UK data provided a mixed picture of the UK economy, with the services PMI for September surprising to the upside at 52.9 (consensus 50.5), while the final estimate of Q2 GDP was revised down to 0.1% from 0.2%. Nonetheless we believe this will be sufficient for the majority of the MPC to wait until November before voting for QE," BarCap said."In our view, several MPC members remain somewhat reluctant to sanction more QE. Although their hand seems likely to be forced by the manifest weakening in the economic outlook, we think they would prefer to announce an expansion within the analytical structure that the Inflation Report provides, which argues for a delay until November," BarCap added.As for the ECB, UniCredit does not think it will cut its key lending rate, but concedes "this is becoming an increasingly close call." UniCredit instead thinks the ECB will step up up "non-standard measures to restore the smooth functioning of the monetary policy transmission mechanism."According to a survey by news agency Bloomberg, 11 of the 52 economists surveyed expect the ECB will cut borrowing costs this week, while 41 think it will leave its lending rate unchanged. On the corporate front, the wheels have come off at bike and car parts retailer Halfords in the last year or so. The shares have lost a third of their value as weak consumer spending has put pressure on gross margins. The company will give an update on trading during its second quarter, and if the first quarter trend is maintained then the shares could carry on going downhill fairly rapidly. Group sales rose 0.3% in the first quarter but like-for-like retail sales were down 1.1%. Broker Oriel Securities is predicting lie-for-like sales in the second quarter will be 3% lower than a year earlier.Even Greggs, the bakery chain famous for cheap takeaway snacks, is suffering from the tough consumer environment. The group is due to give a trading update on Thursday.Like-for-like sales in the 26 weeks to 2 July were up by just 0.4% from the same period a year ago, but Shore Capital thinks the firm will have put in "a resilient performance" in its third quarter. That confidence may have been based on Greggs revealing at the beginning of August that a return to like-for-like sales growth in June had continued into July. INTERIMSTed BakerINTERIM DIVIDEND PAYMENT DATEAmlin, Antofagasta, Churchill China, Eurasian Natural Resources Corp., GlobeOp Financial Services SA (DI), Shire PlcQUARTERLY PAYMENT DATEGlaxoSmithKlineINTERNATIONAL ECONOMIC ANNOUNCEMENTSBloomberg Consumer Confidence (US) (14:45)Continuing Claims (US) (13:30)ECB Interest Rate (EU) (12:45)Factory Orders (GER) (11:00)Initial Jobless Claims (US) (13:30)PMI Construction (GER) (08:55)Q3Sandvine Corp.GMSCash Converters International Ltd. Units, Fubon Financial Holdings Co Ltd.GDR (Reg S), SeaEnergyFINALSMatchtech GroupIMSSGreggs, Hays, XP Power Ltd. (DI)AGMSAngle, IG Group Holdings, Photo-Me InternationalTRADING ANNOUNCEMENTSHalfords Group, VictrexUK ECONOMIC ANNOUNCEMENTSBoE Interest Rate Decision (12:00)Index of Services (09:30)New Car Registrations (09:30)