Thursday 23 November 2017

Latest Exchequer Returns will test Brexit resilience

European Central Bank President Mario Draghi
European Central Bank President Mario Draghi
Donal O'Donovan

Donal O'Donovan

At home, Exchequer Returns on Friday will give some flavour of how the national finances have been holding up since June's Brexit vote in the UK.

With employment holding up and a boost from multinationals paying more of their tax here expected to continue, the Returns for the 10 months to the end of November are unlikely to contain major shocks. November is a big tax month for SMEs and the self-employed, however, and with retailers and others selling into the Irish market under pressure, VAT and excise figures are worth watching.

On the spending side, the perennially spendthrift health system could remain the weak link in the national accounts, and will be closely watched.

Retail credit statistics are due from the Central Bank on Wednesday, worth watching for any sign mortgage switching is actually happening among retail customers after a succession of bank chiefs last week told the Oireachtas Finance Committee that cheaper deals are available in the Irish market.

On a similar note, retail sales data is due from the Central Statistics Office (CSO) today with jobs figures due tomorrow (monthly unemployment) and Thursday (Live Register).

On the corporate side, it's a relatively quiet week. ARYZTA and Donegal Investments are both due to update the market today.

Elsewhere, European Central Bank (ECB) President Mario Draghi (pictured below) is due to give an introductory statement at the quarterly hearing of the European Parliament's Committee on Economic and Monetary Affairs in Brussels today - where investors will be listening out for any hints on whether and how his quantitative easing programme will be slowed.

In Berlin, German Chancellor Angela Merkel, World Bank Group President Jim Yong Kim, German Finance Minister Wolfgang Schaeuble and Bundesbank President Jens Weidmann will line out on Wednesday attend the launch of Germany's G20 presidency.

The centre piece of the event will be a summit in Hamburg in July, and the Chancellor is already facing controversy at home over the forecast €185m cost of hosting leaders, due to include Donald Trump at his first G20 summit.

In the US, Wall Street will spend the next few days parsing the Black Friday and Cyber Monday sales.

Analysts expect consumers to have opened their wallets a little wider this holiday shopping season but bargains among red-hot retail stocks could be hard to find, especially as profit growth proves elusive for many big names.

Retailers, including Best Buy, Kohls Corp and Macy's, that were pummeled in last year's disappointing holiday quarter have seen their shares surge recently on expectations that the worst is over, and that an improved economy will send more shoppers into their stores.

Those gains in recent days have helped push the S&P 500 to a record high.

With US consumers bolstered by wage gains and higher employment, holiday sales will grow 3.6pc, National Retail Federation predicts.

Last year's growth was a modest 3.2pc, short of the federation's 3.7-pc growth forecast.

A positive holiday shopping season, and consumer confidence, will likely boost market expectations that the shock of the Trump election win is already abating as a financial issue.

Expectations of tax cuts under president-elect Donald Trump leaving consumers with more disposable income have already fuelled gains in the retail sector. But it's not yet a given, however.

US shoppers were relatively thin on Friday in an underwhelming start to the holiday shopping season.

A selection of 15 large retailers that are big Black Friday players, including traditional brick-and-mortar chains and online heavyweight Amazon, averaged a total return of 12pc this year, including dividends, according to Thomson Reuters data. Best Buy's stock has jumped 55pc in 2016 and Macy's surged 26pc.

That's made it more difficult to find bargains, said Telsey Advisory Group analyst Joseph Feldman.

Irish Independent

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