US spending data in focus as Nike and FedEx bring curtain down on US earnings season

1)  US Personal Income and Spending/PCE (May) – 27/06 – with the Federal Reserve leaving rates unchanged at its recent meeting, against a backdrop of a US economy that is slowing modestly and a US President railing against the reluctance of the central bank to act it rather begs the question as to whether this week’s economic data matters. The resilience shown in recent personal income data suggests that consumer incomes remain resilient, against a backdrop of personal spending which has been consistently lower in recent months. Core PCE inflation slowed in April to 2.5% to a 4-year low, so further weakness here could bring forward the timing of the next rate cut, with September the most likely at this point. Tariffs remain the key unknown with July 9th the next milestone when it comes to what future tariff barriers will look like.

2)  European flash PMIs (Jun) – 23/06 – it’s broken record time with manufacturing stuck firmly in contraction across Europe, although France did see a modest pickup to 49.8 in May, while Germany slowed modestly to 48.3. along with services which also slowed to 47.1 from 49. France services sector activity also improved in May, although still remaining in contraction at 48.9. In France, Services remains the better performer across the board although even here economic activity has been slowing sharply. Can we see further improvements as we enter the summer months or this economic stagnation set to continue despite another ECB rate cut and headline inflation falling to 1.9%.

3)  UK flash PMIs (Jun) – 23/06 – as we come to the end of Q2, how damaging has the recent budget been to UK economic activity, and the UK economy in general? While services have proved to be more resilient than anticipated, the manufacturing sector has continued to struggle, hobbled by higher wage costs on top of the highest energy costs in Europe. Only this week Wigan based Electric Glass Fiber UK announced it was closing due to high energy costs, and an inability to compete against Chinese imports. The company makes components for wind turbines and electric cars amongst other things, but due to the UK government's brain-dead approach to its net zero commitments the company can’t afford to function. The business is owned by Nippon Electric Glass. This should be a case study in the absurdity of UK government industrial and energy policy. In May manufacturing activity improved modestly to 46.4 from 45.4, while services have proved to be more resilient edging up to 50.9 from 49 in April.  

4)  UK Q1 final GDP – 27/06 – this week’s final iteration of UK Q1 GDP, which showed the economy got off to a strong start, has already been overshadowed by a sharp fall in economic activity in the monthly April numbers. While the government has been keen to claim the credit for the Q1 number I have a feeling they won’t be so quick to claim the credit for the slowdown we are likely to see in Q2. As a reminder the recent GDP numbers showed the UK economy grew by 0.7% in Q1, with services being the biggest contributor increasing 0.7% with consumer facing services seeing an increase of 0.9%. Repair of cars and motor bikes did well, along with support service activities. Transportation and storage also had a strong quarter, while exports rose strongly, rising 3.5%, following on from 3 successive quarterly declines, as UK manufacturers rushed to beat Trump’s April tariff deadline with goods exports rising 5.6%, with exports to the US rising sharply. This mirrors what we saw in the US Q1 GDP numbers where we saw an economic contraction due to a surge in imports. While we might see some modest revisions it’s also hard to have much faith in the numbers when the ONS is struggling across a number of different datasets of which trade is one. Nonetheless this week’s numbers aren’t expected to get a lot of attention with this week’s PMIs likely to be more closely watched. 

5)  Babcock FY 25 – 25/06 – defence has tended to be an overlooked sector when it comes to investment decisions, however it has come very much into focus in recent months, with the election of a new US administration that has insisted Europe and the UK start to pull its weight in all matters defence. When we looked at Babcock in March the shares were below 800p. Since then, they’ve risen by 20% as global geopolitics has shifted the narrative to stronger defensive capabilities. Babcock has expertise across a range of different areas including nuclear, aviation and land, in both civil as well as military, providing maintenance services for the UK’s nuclear submarine fleet, as well as the surface fleet at Clyde and Devonport shipyards. The company also provides support to the RAF through its HADES programme which includes aircraft maintenance, general engineering and training support at 16 RAF stations across the UK. When the company reported in February management upgraded its full year forecasts for revenue to £4.9bn, due to strong growth in nuclear and marine.        

6)  Halfords FY 25 – 27/06 – when Halfords issued its pre-close trading update for its full year numbers back in April, the market reaction was overwhelmingly positive, with the shares seeing strong gains, rising to their highest levels since March 2024 at the start of June. The company which has a dual business of autocentres and cycling said it had seen a strong end to the year. Profits are expected to come in at the top end of guidance despite higher costs of £23m as a result of the recent budget. Like for like sales are expected to come in at 2.3%, with gross margins expected to improve further in H2 after the 160bps seen in H1. Sales growth in autocentres was 3.7%, which accounts for 40% of group revenue, while in the retail division of cycling and motor accessories saw LFL sales increase by 1.7%. For 2026 management said they hope to make further savings on top of the £30m made in 2025 in order to help offset some of the effect of last year’s budget, although management also acknowledged that some prices would have to go up.      

7)  FedEx Q4 25 – 24/06 – always a decent indicator of a growing economy, if logistics companies are doing well, it means consumers and businesses are transacting and ordering items for delivery. While recent earnings numbers have been disappointing, they haven’t pointed to an obviously slowing US economy. When FedEx reported in March the shares fell sharply despite reporting better than expected Q3 numbers as revenues came in at $22.2bn, an increase of 2.3% and an increase in profits to $909m, which was slightly below consensus forecasts. The numbers would have been better but for some weakness in its FedEx Freight segment, which saw revenues decline by 5%, although this might see an improvement in Q4 as companies looked to front run tariffs. The reason for the share price slide in March appears to be due to weaker than expected guidance which fell short of expectations, the firm cutting its full year forecasts on both revenue and profits. Could Q4’s earnings numbers offer a respite as businesses front run tariff liberation day in April. Full year revenues are now expected to be flat to slightly down year over year, with full year EPS expectations cut from between $16.45/ $17.45 to between $15.15 to $15.75 a share

8)  Nike Q4 25 – 26/06 – when Nike reported its Q3 numbers in March they didn’t do it for shareholders falling sharply after the company reported another decline in quarterly revenue. With the shares trading at levels last seen in 2017, investor concerns about tariff impacts aren’t helping either given that its supply chains run deep into Asia. Following on from 10% and 8% declines in the previous two quarters, Q3 revenue declined 9% to $11.26bn. The Nike Direct segment saw an even bigger fall of 12%, prompting net income to fall 32% to $794m. Margins were also lower, falling to 41.5%. For Q4 the company was cautious, citing concerns over tariffs on imports from China and Mexico. Revenue expectations are for a decline in the mid-teens, albeit at the lower end, but still expected to be the worst quarter of this fiscal year, begging the question could we see further share price weakness.