The Week Ahead (1-5 Sept): housing market, ALU, MBH, ECEL

Welcome to The Week Ahead! I hope you all have just enjoyed the last Bank Holiday before Christmas. The US market gets its turn on Monday, when the country shuts down for the Labor Day holiday.

Investors who’ve been riding the AI momentum in US markets should at least be able to relax over the long weekend. The reception given to this week’s results from $4trn chip giant NVIDIA (NSQ:NVDA) suggest the market is not banking on a slowdown in AI spending anytime soon.

Nvidia’s share price fell slightly on Thursday after its results on Wednesday night, but investors seem largely reassured by a solid set of figures that showed revenue up by 56% year on year.

Even so, I think it’s worth noting that the sequential quarterly growth rate reported on Wednesday was the company's lowest since ChatGPT launched in 2022. There’s also still some uncertainty over the company’s ability to capitalise on sales opportunities in China.

A correction in the booming AI market may still be some way in the future. But a new report from MIT this week has suggested 95% of corporate AI programs are not currently achieving any measurable benefits. Unless this changes soon, I suspect that we’ll see the current pace of growth slow at some point.

UK housing market in focus

The week ahead will bring a selection of high-profile US economic data, including key data on employment and manufacturing activity. However, corporate earnings from across the pond seem likely to be of limited interest, with very few big names due to report.

Here in the UK, next week sees us at the beginning of a much busier period for UK company news.

One sector I think could be worth watching next week is housing and construction supplies. While the FTSE 100 has continued to move higher over the last couple of months, the summer lull has seen UK housebuilders’ share prices fall sharply.

The big listed firms have all fallen by 10%-20% since June, thanks to a mix of sluggish trading, cost headwinds and weak sentiment. Some are also suffering a notable cash drag from ongoing building safety remediation programmes:

We’ve covered updates from Persimmon, Barratt Redrow, Berkeley Group, Bellway and Taylor Wimpey in the DSMR over the summer. We’ve been neutral on most of these (with one exception). I think this reflects expectations that profitability and growth rates are likely to remain under pressure in the near term, in the absence of any catalyst from lower interest rates or stronger economic growth.

However, with housebuilder stocks now starting to dip below book value again in some cases, I think this sector could be worth keeping an eye on.

We could get an early sign of any change in sentiment next week, with new UK economic data on consumer credit, mortgage approvals and house prices potentially providing some fresh insight into the state of the market.

Alongside this, we’ll also have results from building materials groups Alumasc (LON:ALU), Michelmersh Brick Holdings (LON:MBH)  and Eurocell (LON:ECEL), potentially providing more forward-looking data on domestic demand. A recent update from volume brick producer Forterra (LON:FORT) struck a pretty positive tone, so it will be interesting to see if this is echoed by premium brick specialist Michelmersh next week.

I tend to see brick producers as a possible leading indicator of housebuilding activity. In my view, several of these businesses are looking well invested and strongly positioned for a recovery – watch out for a closer look at this sector in the coming weeks.

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Here’s a summary of what’s expected next week:

Economic Calendar

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Companies Reporting