Tuesday preview: Budget, Carnival, Whitbread

21st Jun 2010 15:40

The main focus on Tuesday will be the first Budget from chancellor of the exchequer George Osborne in which he will have to perform the difficult balancing act of showing the UK means business about reducing its debt while not threatening the fragile economic recovery.In the election campaign the Conservative party made no secret of its desire to slash public spending, though it was careful to be vague about where the axe would fall, and it will also have to bite the bullet and raise taxes. The expectation is that the ratio of cost savings to increased tax revenues will be about four to one.Osborne toed the party line in a week-end TV interview by repeating the mantra of his leader that "we are all in this together" so it is likely that the tax burden will affect all parts of society, though perhaps the middle classes have the most to fear.The government has already flagged its intention to hike capital gains tax (CGT) from its present level of 18% to 40% but it is probable that there will be numerous exemptions and taper relief clauses following grumbling from the Tory back benches.Value Added Tax (VAT) could be increased from 17.5% to 20%, or the number of items which are exempt from VAT could be reduced, or the chancellor could do both of these things. Retailers moaned when the previous chancellor temporarily cut VAT to 15% in an attempt to keep the economy ticking over, and they moaned again when VAT went back up to 17.5% so soon after the busy Christmas trading period and ahead of the January sales, so there is a good chance that any increase in VAT will be delayed to give the retail trade time to adjust their prices. The departed Labour administration was surprisingly macho about cutting the basic rate of income tax and the political world really will have turned on its head if a Conservative dominated government put income tax up. It is possible, however, given than a two point rise in the basic rate would still leave income tax lower than it was under the last Conservative government, plus they could lump the blame for it on to their Liberal Democrat partners.More probably the chancellor will bump up the tax-free allowance, with the consensus view being that it will raised to £10,000 from £6,475, a move that will be of greater benefit to those on low wages.Results announcements from cruise ship operator Carnival are usually made in the afternoon to ensure that its US shareholders get to see the figures at the same time as the European stakeholders. The company's performance is likely to have been boosted by the weakness of sterling while on the face of it the Icelandic volcanic ash cloud that hit the airlines in Europe earlier this year should not have worried the company much. However, many of the company's cruises rely on passengers flying to the embarkation point, so the ash cloud may have had more effect than initially thought. More topically, the oil spill in the Gulf of Mexico may also be having an effect on bookings, Second-quarter earnings per share (diluted) are expected to be in the range of $0.26 to $0.30 compared to $0.33 in the same period last year, while net revenue yields for full-year are expected to increase 2 to 3% on a constant dollar basis, compared to flat to up 1% in the December guidance.Charles Stanley is expecting a "weak set of results, with the benefit of higher net revenue yields more than offset by the impact of sharply higher fuel prices and negative currency.""Comments on current trading and outlook will be a key focus of investor attention. Positive booking trends seen in Q1 [first quarter] are expected to have continued into Q2, with booking volumes and pricing well ahead of the prior year. Historically the direction of the stock market has been an important factor in determining the willingness of customers in North America to book cruises, so investors will be looking for any signs that recent market weakness has led to a slowdown in bookings," the broker adds.Acquisitive electronic sensors company Halma said back in February that if prevailing trading trends persisted, profit before tax for the year to 3 April would be above the range of broker forecasts, which at the time spanned from £78.9m to £82.1m.Brokers took the hint and bumped up their forecasts so that the median figure rose to £83.85m, up from £72.79m last year. Sales are tipped to remain virtually static at £454.85m.Numis Securities thinks the company will have some good news on the new orders front with "order input running ahead of sales and an improvement in profitability across all divisions".Costa Coffee and Premier Inns owner Whitbread gives an update on first quarter trading, and with the hotel trade recovering and the public's appetite for exotic coffee apparently knowing no bounds, the expectations are high. Deutsche Bank thinks the group will say that all parts of the business, which also includes a number of restaurants housed in former pubs, are doing well.INTERNATIONAL ECONOMIC ANNOUNCEMENTSRichmond Fed Manufacturing Index (US) (15.00)ABC Consumer Confidence (US) (22:00)Balance of Payments (EU) (09:00)Balance of Trade (EU) (10:00)Consumer Confidence Indicator (EU) (10:00)Current Account (EU) (09:00)Existing Home Sales (US) (15:00)House Price Index (US) (15:00)IFO Business Climate (GER) (09:00)IFO Current Assessment (GER) (09:00)IFO Expectations (GER) (09:00)Import Price Index (GER) GMSSunrise Resources INTERIMSCarnival FINALSDaisy Group, Halma, NorcrosIMSSWhitbreadSPECIAL DIVIDEND PAYMENT DATEBlackRock Smaller Companies TrustAGMSAlpha Bank GDR (Reg S) USD, BATM Advanced, Borders & Southern Petroleum, Caza Oil & Gas, China Shoto, Clean Air Power, Game Group, Inch Kenneth Kajang Rubber, Norcon, Northern Electricity Prf, PME African Infrastructure Opportunities, Richoux Group, RTC Group, Vertu Motors, WhitbreadUK ECONOMIC ANNOUNCEMENTSChancellor Budget Statement (15:30)FINAL DIVIDEND PAYMENT DATEBlackRock Smaller Companies Trust