Source: Sharecast
On Tuesday, the BoJ will announce its latest interest rate decision, with markets expecting a 25 basis points increase to 1.0%. ING said the BoJ will also announce its latest Japanese government bond (JGB) purchase plan.
"It’s a close call, but we expect the BoJ to pause JGB tapering from next April, as market functioning has improved over the past year," it said. "A pause could help ease market concerns about further sharp rises in JGB yields. This would also reduce government concerns about higher market rates and allow the BoJ to focus more on policy-rate decisions."
The Reserve Bank of Australia is also set to make a policy announcement on Tuesday, while Wednesday sees the release of full-year results from electricals retailer AO World and Speedy Hire.
As far as AO World is concerned, AJ Bell analysts Russ Mould and Danni Hewson said investors already know profits will come in at the top end of expectations after the company upgraded its outlook in April, while free cash flow is set to increase sharply.
"After getting in a spin over the years as it struggled to convert sales growth into profits, there will be questions over the sustainability of higher margins in the face of higher labour-related costs," they said. "A key question for 2027 surrounds a reduction in the profit drag from the musicMagpie acquisition and how material it could be for group earnings going forward now it is approaching breakeven point.
"With £200 million of liquidity, the balance sheet is in its strongest shape in years, so investors will naturally want to know if a maiden dividend is in the cards or if buybacks are on the agenda. Either could act as a positive catalyst for the shares."
On the macro front, the UK consumer price index and producer price index for May are due, along with a policy announcement from the US Federal Reserve, which is expected to keep the policy rate steady at 3.50%-3.75%.
AJ Bell analysts said CME FedWatch data shows markets are pricing in virtually zero chance of a June rate cut, while May’s unexpectedly strong non-farm payrolls report and inflation moving above 4% have largely extinguished hopes of a cut this year.
On Thursday, investors will turn their attention to full-year results from FirstGroup and XPS Pensions, and Q1 trading updates from Tesco and Premier Inn owner Whitbread. Across the pond, Q1 earnings are due from Kroger.
Derren Nathan, head of equity analysis at Hargreaves Lansdown, said: "Whitbread’s first quarter got off to a reasonable start with total UK accommodation sales for Premier Inn up around 1.9% in the eight weeks to 23 April, split broadly evenly between organic growth and new room space. Forward bookings have also been positive, but with UK cost inflation nudging 4%, this year’s margins are under pressure. There’s evidence to suggest international visitors to London hotels are starting to feel the effects of disruption from the Middle East conflict. While Whitbread is likely to feel this less than the competition, any slowdown is likely to disappoint.
"The younger Germany division had a stronger start to the quarter, with accommodation sales up 9% despite a relatively empty events calendar, but with Germany trading only just above breakeven, it's still UK performance which will be the key driver of this year’s results. As things stand, analysts expect revenue to fall 1% to £2.9bn, with inflation amplifying the pressure on operating profit, which is forecast to decline 8% to £0.6bn."
The market will also be eyeing the latest policy announcement from BoE, which is expected to stand pat on rates at 3.75%.
Danske Bank said that while the BoE is expected to stay on hold, "hawkish voices are growing louder".
"Data has come in on the soft side since the April meeting, but the inflation risks remain pronounced," it said. "Data releases ahead of the meeting could push more votes back in the hawkish camp but are not likely to change the hold decision."