Thursday preview: QE decision, Rio, BG, Diageo

Busy though the company news schedule is on Thursday, it is the outcome of the meeting of the Bank of England's Monetary Policy Committee (MPC) that is likely to garner most of the attention on Thursday, as the market expects the MPC to announce another round of asset purchases (quantitative easing, or QE).

The smart money is on the MPC boosting its QE programme by £50bn to £325bn, while the committee is almost certain to leave its key lending rate unchanged at 0.5%, where it's been for nigh on three years. Barclays Capital (BarCap) expects the Bank of England (BoE) to again indicate that the asset purchases will be exclusively of conventional gilts.

"The November Inflation Report gave a clear signal that the MPC believed it would have to expand asset purchases beyond the £275bn announced in October. The report showed that without further policy stimulus the MPC expected inflation to undershoot the 2% target by 50-75bp [basis points; 100 basis points = one percentage point] in the medium term. Using the BoE's ready reckoners for the effects of asset purchases on inflation, additional QE of anywhere between £75bn and £200bn would be needed to eliminate the projected undershoot," BarCap said.

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"Even so, we have taken the view that the practicalities of asset purchases meant the MPC was unlikely to announce more than a £75bn expansion this month, since, if implemented over three months (tiding the committee over to the May Inflation Report), such a move would require upping the pace of asset purchases, something the BoE appears reluctant to do. At the same time, we believe the MPC is unlikely to announce less than £50bn of asset purchases, as this would make little headway in closing the projected gap," BarCap opined.

Sticking with the economy, manufacturing and industrial production figures for December are due to be released. Manufacturing output is tipped to have risen 0.2%, after falling by the same percentage in October, while industrial production is also expected to edge up 0.2% after November's 0.6% decline.

On the company results scene, it is another busy day with big beasts Rio Tinto, Vodafone, BG Group, Diageo, Rolls-Royce, Shire and British Land set to report, with ample back-up from the likes of mid-caps Aquarius Platinum, Hargreaves Lansdown and Rank.

Mining leviathan Rio Tinto will follow hot on the heels of perennial rival BHP Billiton with its full year results, which are set to include "record earnings, dividends and write-downs", according to Credit Suisse.

Market expectations, in sterling terms, are for profit before tax of £14.82bn on revenue of £3.94bn, with a full year dividend of 78.88p.

If figures in dollars are your thing (if only because that is the currency denomination Rio will be using) Credit Suisse is going for earnings before interest, tax, depreciation and amortisation (EBITDA) of $28.3bn.

"A 2H [second half] loss in aluminium, cost pressures, low ali [aluminium] price and delay in a global carbon tax indicate to us that Rio may be again forced to examine the $41bn book value in ali (including $15bn of goodwill)," Credit Suisse said.

Gas and oil firm BG Group is another ostensibly British company which announces its figures in US dollars.

Charles Stanley predicts fourth quarter net income of $1.15bn, up from $1.1bn the year before, with earnings per share (EPS) rising two cents to 22 cents. The dividend per share (DPS) is seen rising to 12.8 cents from 11.8 cents.

"For 2011 [as a whole], EPS and DPS could amount to 126 cents and 23.6 cents respectively. In Q4 [fourth quarter], an estimated $2.2bn profit (+22% year-on-year) could see contributions of $1.4bn (+30%) from Exploration & Production (E&P) and $700m (+27%) from Liquefied Natural Gas. Higher finance charges and tax dilutes the earnings performance with a 10% improvement expected," Charles Stanley reckons.

Credit Suisse thinks Guinness brewer Diageo will unveil organic growth for the first half of its financial year of 6.5%, which would imply a pick-up in second quarter growth to 4%. The Swiss bank thinks margins will be up four-tenths of a percentage points, or 40 basis points if you prefer. It notes that market consensus is for organic growth of 6.4% and margin improvement of 60 basis points (bps).

"This will be the first time the group has reported profits since it set its medium-term targets (in September 2011), so we suspect the group will hope to give a ringing endorsement to them. With 200bps to deliver over three years, the consensus (as us) has the increase spread evenly over the period," Credit Suisse said.

INTERIMS

Aquarius Platinum Ltd., Diageo, Hargreaves Lansdown, Rank Group

INTERNATIONAL ECONOMIC ANNOUNCEMENTS

Bloomberg Consumer Confidence (US) (14:45)

Continuing Claims (US) (13:30)

ECB Interest Rate (EU) (12:45)

Initial Jobless Claims (US) (13:30)

Wholesales Inventories (US) (15:00)

Q3

British Land Co

Q4

BG Group, Polski Koncern Naftowy Orlen S.A. GDR(Reg S), Shire Plc

FINALS

BG Group, Catlin Group Ltd., Polski Koncern Naftowy Orlen S.A. GDR(Reg S), Rio Tinto, Rolls-Royce Holdings, Shire Plc

IMSS

Enterprise Inns, Metric Property Investments , Vodafone Group, Volex

AGMS

Enterprise Inns, Greencore Group, Income & Growth VCT , Paragon Group Of Companies

UK ECONOMIC ANNOUNCEMENTS

Balance of Trade (09:30)

BoE Interest Rate Decision (12:00)

Industrial Production (09:30)

Manufacturing Production (09:30)

UK Trade (09:30)

FINAL DIVIDEND PAYMENT DATE

Cardiff Property, Dunedin Smaller Companies Inv Trust, Euromoney Institutional Investor