What’s most likely to affect UK stocks in the coming week? Well, we have some key company news. But the UK’s latest interest rate decision is also due.
ASOS first half
ASOS (LSE: ASC) shares have slumped in recent years. But might an H1 update on 10 May give them a boost?
Russ Mould, investment director at AJ Bell, and Danni Hewson, head of fiancial analysis, identify a few things that investors should look for.
They point to the firm’s January update, which was pretty much a “no news is good news” thing. There were no unexpected shocks, which was a relief.
It sounds like ASOS should deliver a first-half loss. But it should turn into a profit in the second half. ASOS also expects cash outflow for the full year of between zero and £100m.
Any change in that outlook could mean a lot for the share price. But the balance sheet will be the key for many. We saw £153m net debt at the end of last year. And a lot of us will want to see progress on that.
Interest rates
Then, on 11 May, comes the one we’re all waiting for. The Bank of England (BoE) will post its latest interest rate decision. UK inflation has dipped a bit, but not by much. There are signs, though, that it should fall further in the next few months.
So will the BoE hike interest rates even further? The base rate currently stands at 4.25%, and most watchers seem to think it will rise to 4.5% on Thursday. And maybe reach 5% before it falls.
The US Federal Reserve and the European Central Bank both lifted their rates last week. But rises are slowing. And there are hints that we might have seen the last US rise, at least for now.
Will a new rate hike make a difference to the UK stock market? Maybe, but it looks like most analysts have already factored it in to their outlook.
Beazley update
Hewson and Mould also have their eyes on Q1 figures from Beazley (LSE: BEZ) on 12 May. Beazley is a Lloyds of London insurer, and that can be a risky business.
But despite concern over the firm’s exposure to Russia, the shares only fell modestly when the war in Ukraine started. And they’ve had a decent, if slightly volatile, few years.
When insurance stocks come under pressure, the weaker ones can get squeezed out. And the better-managed ones can mop up the market, while maintaining profits.
Forecasts for Beazley suggest a big pre-tax profit jump to $896m in 2023, and hitting over $1bn by 2024.
But for now, for the first quarter, the AJ Bell experts reckon we should watch out for gross written premiums. The figure reached $1.2bn in Q1 last year. And forecasts put it at $6.1bn for the full year.
Renewal rates are going to be important too. And the markets are sure to be watching for overall returns across Beazley’s portfolio, and keeping their eyes on its key combined ratio.
