Must read: UK inflation, Barratt Redrow, Burberry, easyJet

Next week is shaping up to be a busy week for markets both in terms of economic and corporate events along with ongoing tariff negotiations. For central bank watchers, inflation figures from the US, Euro area, UK, Japan and India are in focus. Elsewhere on the economy, Tuesday brings an important slew of key data from China including its latest GDP figures.

On the corporate side, US second-quarter earnings season kicks off. According to FactSet, S&P 500 earnings growth is expected to hit 5%, the lowest rate since Q4 2023. We kick off with financials on Tuesday including Citigroup Inc (NYSE:C), JPMorgan Chase & Co (NYSE:JPM), Wells Fargo & Co (NYSE:WFC) and BlackRock Inc (NYSE:BLK).

Closer to home, there will be clues as to the strength of the UK retail sector with reports from a variety of companies including B&M European Value Retail SA (LSE:BME), Dunelm Group (LSE:DNLM), Ocado Group (LSE:OCDO), and Burberry Group (LSE:BRBY).

UK INFLATION

UK inflation on Wednesday is expected to remain around 3.4% in June, roughly unchanged for the third consecutive month. Although the inflation rate hasn’t been rising lately, it remains persistently stuck significantly above the Bank of England’s 2% target.

There are concerns about inflationary pressures from rising food prices particularly chocolates and meat products that buoyed price levels last month. However, this was tempered by falling transport costs, like motor fuel and air fares. In terms of the bigger picture, geopolitical uncertainty with tensions in the Middle East and Trump’s trade war make the outlook for domestic inflation uncertain. 

CPI is expected to remain elevated for most of the rest of the year and the Bank of England estimates that it will take until 2027 for inflation to come back down to the 2% target. This time last year, inflation in the UK felt under control again as the price pressures from the pandemic and the war in Ukraine subsided. However, the last 12 months has seen inflation rear its ugly head, landing the Bank of England in a difficult conundrum. The central bank is trying to decide how quickly to cut interest rates.

Expectations are that the Bank of England will carry out two more rate cuts this year with a 25-basis point cut in August, supported by a weakening labour market. Employment has taken a hit following the rise in National Insurance Contributions and the increase to the minimum wage. However, the central bank wants to take a slow and steady approach. Huw Pill, the central bank’s chief economist warned in May about the risk of cutting rates too quickly, because of concerns about inflation.

BURBERRY

Burberry gets set to deliver its first quarter trading update on Friday 18 July. Shares have had an impressive run lately off the April lows, doubling over the last three months. It enjoyed a series of price target upgrades over the last month from the likes of HSBC, Jefferies and Citigroup. In May it delivered an update that was very well received by the market - it announced plans to slash around a fifth of its global workforce and reported a better-than-expected full-year adjusted operating profit of £26 million.

The “Burberry Forward” strategy which the group announced in November has had an immediate positive impact, despite the factors outside of the group’s control which remain a strong headwind.

For all of the instant progress, there remains much to do. Burberry points out, for example, that UK business continues to be seriously impacted by the withdrawal of VAT refunds for overseas visitors, which has led to the UK being the least competitive destination in Europe for tourist shopping. In addition, the group’s important Asian market is also a concern. Consumer sentiment was on shaky ground even before the reciprocal tariffs which could yet damage the US and Chinese economies, and the outlook is uncertain.

Despite having risen by 40% over the last year, the share price remains down by 40% over the last two, highlighting the scale of the damage which has yet to be rectified.

BARRATT REDROW

Richard Hunter, ii's head of markets, says, “The UK’s largest housebuilder Barratt Redrow (LSE:BTRW) will release its FY25 trading update on Tuesday 15 July, just under a year after the completion of the two housebuilders’ £2.5 billion merger.

It has been a mixed picture so far for earnings in the sector – Bellway upgraded its housebuilding forecast but Vistry said it expects first-half adjusted pre-tax profit to plunge by over a third.

For Bellway Redrow, there are creases which are yet to be ironed out, but the expected impetus to the new enlarged group following the acquisition of Redrow is already showing some early signs of success.

The acquisition was a clear signal of intent and Barratt Redrow is under no illusions that challenges remain. The share price is down by 14% over the last year, and the levels of sales and the forward order book are likely to be in sharp focus.”

EASYJET

Richard says, “easyJet (LSE:EZJ) prepares to release its third quarter results on Thursday 17 July. In May, the company’s CEO Kenton Jarvis said easyJet expects record annual profits this year driven by another record summer. While shares had an impressive run off the April lows to the June highs, price action has been more challenging over the past month.

easyJet’s outlook comments may provide some grounds for optimism, with the third and fourth quarters previously being reported as being 80% and 42% sold respectively. This could give some clear visibility of earnings and allow easyJet to avoid the trapdoor which befell Jet2 when it reported full-year numbers this week.

There may be special focus on the burgeoning easyJet holidays business, which seems to have come at the right time with cost-conscious consumers searching for value packages. The group has high hopes for the unit’s longer-term contribution to overall profits, which currently accounts for 11% of total group revenue en route to a medium-term target of more than £250 million of annual pre-tax profit.