The Week Ahead: BATS, Berkeley, Rolls-Royce

TL;DR

The week commencing 6 December centers on market volatility and updates from British American Tobacco, Berkeley Group, and Rolls-Royce. Investors are watching Omicron-related travel restrictions, possible faster Federal Reserve tapering, British American Tobacco’s 8.4% dividend yield, Berkeley’s forward sales, and whether Rolls-Royce can restore cash generation. Read on for the specific figures and company signals highlighted in the outlook.

Transcript

hello i'm richard hunter head of markets and welcome to our look ahead for the week commencing the 6th of december it's been a very volatile week in the markets the basic concerns that have been floating around are twofold first of all or of course we've had the outbreak of the omicron variant which has basically um put further cats amongst the pig... Read More

Key Insights

• 🥺 The outbreak of the Omicron variant has created uncertainty and disrupted the global economic recovery, leading to market volatility.
• ☠️ Central banks' hawkish comments, such as the potential acceleration of tapering, are being closely watched as they may result in earlier interest rate hikes.
• 😀 Major indices have maintained positive year-to-date performances, indicating overall resilience in the face of recent concerns.
• 👶 British American Tobacco's trading statement will provide insights into the performance of its new categories division, operating margins, dividend updates, and major market performance.
• ▶️ Barclays Group has struggled due to its reliance on the London market, and investors should monitor forward sales numbers and progress in attracting overseas investors.
• 🤘 Rolls-Royce's stock price volatility is attributed to its dependence on hours flown, and investors should watch for signs of cash generation improvement and balance sheet strengthening.
• 🏦 Overall, market volatility and concerns over the Omicron variant and central banks' actions dominate the financial landscape, requiring careful monitoring by investors.

Questions & Answers

Q: What should investors watch in the week commencing 6 December?

The main company events are a trading statement from British American Tobacco, half-year figures from Berkeley Group, and a trading update from Rolls-Royce. Investors should also monitor Omicron-related disruption and the possibility that the Federal Reserve accelerates its taper program.

Q: What caused the recent market volatility?

The two main concerns were the Omicron outbreak and more hawkish comments from central banks. Omicron brought travel restrictions and weak airline shares, while the Federal Reserve indicated that it might consider accelerating its taper program.

Q: How were the major stock indices performing year to date?

Despite the volatility, the Dow Jones was up 13.2%, the S&P 500 was up 20.9%, and the Nasdaq was up 19.3%. The FTSE 100 was up 10.5%.

Q: What should investors look for in British American Tobacco’s trading statement?

Investors should examine revenue from its new categories division, including e-vaping and heated products. Other points to watch are operating margins, dividend news, and trading in the US, Latin America, and Asia.

Q: What was notable about British American Tobacco’s share performance and dividend yield?

British American Tobacco shares were down around 6% over the previous year. Its dividend yield was described as particularly punchy at around 8.4%.

Q: Why had Berkeley Group underperformed other house builders?

Berkeley Group shares were down about 14.5% over the previous year and had not participated in the rally seen by many other house builders. Its heavy reliance on the London market hurt performance when overseas investors disappeared during the pandemic.

Q: What should investors watch in Berkeley Group’s half-year results?

The key operating metric is forward sales. Investors should also look for any update on potential shareholder returns and signs that the company is recovering from challenges in the London market.

Q: Why were Rolls-Royce shares volatile, and what matters in its trading update?

Rolls-Royce depends heavily on hours flown, so pandemic restrictions severely reduced its income. Its shares were down around 5% over one year and around 47% over two years; after a £2 billion cash call, investors should watch for renewed cash generation and balance-sheet strength.

Summary & Key Takeaways

• The outbreak of the Omicron variant has caused further disruptions to the stuttering economic recovery, leading to travel restrictions and weak airline shares.

• Central banks, like the Federal Reserve, are considering accelerating their taper programs, potentially resulting in earlier interest rate hikes than expected.

• Despite these concerns, major indices such as the Dow Jones, S&P 500, Nasdaq, and FTSE 100 have maintained positive year-to-date performances.