US midterm elections, results from Japan’s big carmakers
The FT's Daniel Garrahan previews some of the big stories the Financial Times will be watching in the week ahead, including US midterm elections, and earnings reports from Japan’s leading carmakers and UK high-street retailers.
Filmed by Rod Fitzgerald. Edited by Petros Gioumpasis. Produced by Daniel Garrahan
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Here are some of the big stories the Financial Times will be watching in the week ahead. A referendum on Donald Trump's presidency as the US votes in midterm elections, Japan's big carmakers report second-quarter results. And it's a big week for UK retailers, with all eyes on M&S. First, to the US, which this week holds its first major set of elections since Donald Trump came to power. Control of the House of Representatives, the Senate, and numerous state capitals are up for grabs.
And it'll be a serious blow for the Democrats if they don't seize back the House, where they need 23 seats to pick up control. Their brightest prospects for gaining seats are in better off suburban areas, where Mr Trump can be an electoral liability. A rule of thumb is that Democrats will need a lead of at least seven points in the national popular vote to clinch the House. That's according to the Cook Political Report.
Data from Real Clear Politics suggest the average of national polls has been hovering around that level. But on the other hand, the outlook in the Senate is more precarious. Most of the seats being contested in the Senate this time around are held by Democrats, putting them on the defensive.
In recent days and weeks, the president has been on a series of rallies, trying to fire up his core supporters. He's also pushing hardline immigration policies, which similarly he expects to bring more of his supporters to the polls. For their part, the Democrats are hoping they can regain control of the House of Representatives, where they need to gain 23 seats. In order to do that, they're hoping to capitalise on unpopularity about the president in numerous suburban and more prosperous districts. The Senate, however, is a much tougher proposition for the Democrats, where they're defending numerous seats and where the Republicans are hoping to retain control.
Now, Japan's major carmakers - Toyota and Nissan and Mitsubishi Motors - report fiscal second-quarter results this week. And investors will be watching Toyota in particular, which has adopted an aggressive new strategy in China to expand market share. It's expected to build on a record first quarter to increase both revenue and profits on the back of steep cost cuts and solid sales in Asia.
Mitsubishi Motors is also likely to deliver robust results, boosted by the release of new car models, while benefiting from its alliance with Nissan Renault. Investor focus will be on how Japanese carmakers will address challenges in their two biggest markets. Facing declining profit margins in the US, slowing vehicle sales in China, that's partly the reason why analysts are cautious on Nissan, which has struggled to boost profitability in the US, while it also combats rising raw material prices.
So far, Toyota and other Japanese carmakers have offset slowing growth in the US and China with cost cuts and sales in other Asian markets. But that hasn't helped ease investor concerns. One reason is the uncertainty over the global trade war. In September, Prime Minister Shinzo Abe and President Donald Trump agreed to negotiate a new trade agreement on goods.
Japan clinched a promise from the US that it would not increase car tariffs while the talks were in progress. But investors are worried whether Japan has really avoided additional tariffs. Another concern is the trade tensions between China and the US. If the Chinese economy slows down, it would weigh heavily on Japanese carmakers looking to boost sales in the world's largest car market.
And finally, to the UK high street - the most straightforward of this week's retail reports is likely to be Morrisons. The UK's fourth-largest grocer has been gaining market share in recent weeks with its value focused approach. Analysts expect same-store sales growth of 1.6 per cent in the supermarkets, down from 2.5 per cent in the second quarter, when the football World Cup boosted sales of booze and burgers. Then there's Sainsbury's. Investors will be watching the supermarket group for any loss of focus on the shop floor.
Senior executives are busy steering its takeover at Asda through the regulatory approval process. But several sector watchers have grumbled that store standards are slipping after a previous round of cost-cutting. Expect vigorous denials and a half-year year of £286m million pounds. Perhaps the most interesting of this week's UK retail earnings is Marks and Spencer, which reports half-year results on Wednesday.
This stalwart of the British high street is in the midst of a five-year transformation programme, driven by Archie Norman, its chairman and renowned retail troubleshooter. But there are some signs that not everything is going to plan. One or two analysts have speculated that the launch of autumn and winter clothing has been disrupted by all the management changes and that there are as a result gaps on the shelves and gaps on the rails. Normally what happens at Marks and Spencer is the food division saves the day.
But food has problems of its own too. Shoppers have reacted adversely to its premium pricing. They figure they can get the same quality at lower cost elsewhere. In response, Marks has overhauled the management team in its food division. But many of the new appointees have probably not been there long enough to make a big difference. So watch carefully for any potential finessing of full-year profit target.
And that's what the week ahead looks like from the Financial Times in London.