Fed in focus on Wednesday, Capita PLC results in the corporate diary

Wednesday will see all eyes on the US Federal Reserve as it makes its latest decision on interest rates, while the company diary will see numbers from outsourcer Capita as well as funeral firm Dignity and accommodation group Hostelworld among others.

While central banks generally seem content to keep monetary policy ultra-loose in their attempts to let the global economy recover from the effects of the pandemic, bond markets have become a little more nervous about this in the past fortnight.

The single most market-moving item may be the US Federal Open Market Committee’s ‘dot plot’ of future rate expectations for the rest of the year and beyond.

“Markets will be watching for signals that FOMC members have bought forward expectations of future rate hikes. That could be enough to reignite to mini-taper-tantrum once again,” said market analyst Jaffrey Halley at Oanda.

Any commentary from the Fed will also be eyed closely as a potential read-across for the Bank of England, which will have its own meeting on Thursday.

Questions for Capita

Outsourcer Capita PLC (LON:CPI) is due to published results on Wednesday as it continues to try and sell off different parts of the business.

This year it has already completed the sale of its education software business for £298mln cash on completion that could rise to £343mln.

It also confirmed that a sale is being examined of its Axelos joint venture with the Cabinet Office, while its customer management, specialist services and other software businesses are also on the block.

Barclays said their current forecasts put the shares on a bargain rating of around six times 2022 earnings, but if further assets sales are made this could be “materially dilutive” and, while potentially leaving the balance sheet in a net cash position, could reduce earnings by over a third.

“Of course, much depends on the price obtained and management’s ability to reduce central overhead, but at least Capita has assets to sell and this underpins the investment case at current levels, in our view,” the bank’s analysts said. “Of course, profits are only part of the equation.”

On balance, they reckon the “asset underpinning supports a materially higher share price, but recognise much is clouded by near-term uncertainty”.

Significant announcements for Wednesday March 17:

Finals: Ferrexpo PLC (LON:FXPO), Dignity PLC (LON:DTY), Hostelworld Group PLC (LON:HSW), Advanced Medical Solutions Group PLC (LON:AMS), Empiric Student Property PLC (LON:ESP), Kape Technologies PLC (LON:KAPE), Mpac Group PLC (LON:MPAC), Science In Sport PLC (LON:SIS), Tribal Group PLC (LON:TRB), Capita PLC (LON:CPI)

Economic data: Fed rates decision