The week ahead...

The week gets off to a very quiet start on Monday, with recruiter SThree's (STHR) preliminary results the only notable corporate announcement.

Babcock (BAB) kicks off reporting on Tuesday with a third-quarter interim management statement.

The company has delivered strong momentum in new contracts since the first-half results (Dounreay, £750 million; London Fire Brigade, £500 million; National Grid (NG.), £300 million; Devon Schools, £100 million; and BBC World Service, £200 million), which should give confidence in near-term organic growth.

Additionally, recent press comments that the Ministry of Defence "is preparing for its biggest shake-up in decades" could lead to further outsourcing opportunities.

"While we anticipate a confident update, backed by good contract win momentum of late, we see earnings upgrades being the key share-price driver from here," said Mike Allen, analyst at Panmure Gordon.

He had a 'neutral' rating on the stock given that the shares have increased by about 27% over the past year and are currently trading on a 2012 price to earnings ratio of about 13 times.

Online retailer Ocado (OCDO) will also publish its preliminary results on Tuesday.

In midweek, investors will receive trading updates from ICAP (IAP) and Eurasian Natural Resources (ENRC).

Thursday sees a number of heavyweights reporting, including Royal Dutch Shell (RDSB), AstraZeneca (AZN), Unilever (ULVR) and Smith and Nephew (SN.).

Shell raises the curtain with its fourth-quarter results. The oil heavyweight has lowered analyst expectations ahead of the results, as a result of tough trading in the downstream business. The quarter also saw a sharp deterioration in refining markets, especially in North America, a weaker European gas market and higher maintenance costs.

Additionally, Shell has been plagued by a leak in its Bonga (Nigeria) offshore field and a lack of success in Tanzania.

"The key outlook in the results will be the cash flow and the dividend outlook," commented Charles Stanley analyst Tony Shepard. "Shell has held the quarterly dividend at 42 cents for three years, but the improved cash flow of the group in 2011, and more importantly for 2012, should give it the opportunity to increase the quarterly dividend."

The shares are trading on a 2012 price to earnings ratio of about eight times.

Investors will be keen to hear news of AstraZeneca's dapagliflozin after the company received a response letter from the Food & Drug Administration (FDA) in mid-January, requesting additional clinical data for enhanced assessment purposes. Management is also expected to update investors regarding nexium, the first generic version of which went on sale in the UK by Ranbaxy Laboratories.

On a positive note, James Dawson, analyst at Charles Stanley, stated that initial concerns over the sales implications for Crestor following the introduction of Lipitor in November 2011 seems, at this stage, to be overly pessimistic. He rated the stock 'accumulate'.

However, Dawson was less optimistic on Smith & Nephew, which reports its full-year results on the same day, rating the stock a 'hold'.

"We expect to hear management's opinion on the various segments of the medical devices industry and where pricing and demand is anticipated to trend towards," he said. "With significant company sales in the US, any thoughts on reimbursement attitudes will be vital for near-term sales performance. From a volume perspective, the strength or weakness in the elective surgery market will support, or not, the anticipated sales volumes."

And how emerging markets are holding up will be revealed on Thursday, when Unilever reports its full-year results.

"Our concern is that, whilst taking a footprint in the emerging market regions makes sense in the long term, it is necessary to consider what degree of margin erosion will be built into earnings," voiced Dawson. "This is likely to be a significant feature as expansion in the emerging markets gathers pace," he added.

Other companies reporting on Thursday are Great Portland Estates (GPOR) and Investec (INVP).

The week winds down quietly with traffic statistics from International Consolidated Airlines Group (IAG) and a trading update from Electrocomponents (ECM).

On the economic front, on Tuesday the Bank of England will publish its mortgage approvals for the month of December, with Howard Archer, chief UK and European economist at IHS Global Insight, predicting the number to be 54,000.

"While mortgage approvals have been creeping up overall in recent months, they remain extremely low compared to long-term norms and there is still little evidence that housing market activity is shifting up significantly," articulated Archer, forecasting that net mortgage lending would amount to £0.8 billion in December.

Meanwhile, the Nationwide house price index is expected to show a 1.4% year-on-year increase in house prices, according to Philip Shaw, economist at Investec.

Archer was more pessimistic, estimating the corresponding figure to be 1.2%. "Despite the recent modest rise in mortgage approvals, housing market activity remains very low compared to long-term norms, and it is likely to be increasingly pressurised in the early months of 2012 at least by weakened economic activity, rising unemployment, muted wage growth and very low consumer confidence," he said.

The Bank of England will also report its unsecured consumer credit figures on Tuesday, which Archer calculates to have risen by £400 million in December, similar to November's £394 million, but a far cry from October's nine-month low of £53 million.

"The recent limited rise in unsecured consumer credit suggests that some people had to borrow to help finance their spending for Christmas as a consequence of the extended squeeze on their purchasing power coming from elevated inflation, low wage growth and tighter fiscal policy. In addition, higher unemployment and the extended squeeze on personal finances may be leading to increased stressed borrowing," stated Archer.

Even with the rise in consumer credit, indications are that consumer appetite for new taking on new borrowing remains low, while there is also a strong desire among many consumers to reduce their debt.

Thursday will see the manufacturing purchasing managers' survey and the construction purchasing managers' index out.

For manufacturing, the Confederation of British Industry (CBI) has already released its industrial trends survey for January, which showed total orders picking up appreciably from a 14-month low in December and near-term production expectations improving.

The CBI survey suggested that, at the very least, manufacturing activity will not be such a drag on the economy in the first quarter of 2012 as it was in the fourth quarter of 2011.

"Nevertheless, it is evident that manufacturers are facing a hugely challenging environment early in 2012. Domestic demand for manufactured goods is being pressurised by the current, still serious, squeeze on consumers' purchasing power, reduced public spending and less favourable inventory developments. On top of this, muted global economic activity - particularly in the eurozone - is limiting manufacturers' export orders while the eurozone crisis is additionally causing major uncertainty for manufacturers and weighing down on confidence," said Archer.

However, he did note that one area of relief for manufacturers was that input prices were now softer after surging earlier in 2011.

With regards to the construction purchasing managers index, Archer declared it was "evident" that the sector currently faces an extremely challenging environment.

"The government's public spending cuts are limiting overall expenditure on public buildings, schools and hospitals. On top of this, housebuilding activity is likely to be constrained by persistently weak housing market activity, soft prices and a worrisome outlook. And if the economy continues to struggle markedly over the coming months, there is the likelihood that construction activity will suffer increasingly from projects being put on hold or cancelled altogether," he noted.

However, the construction sector does stand to benefit from the government's measures to boost infrastructure that were outlined in last November's Autumn Statement.

In addition, the government is looking to boost housebuilding through instructing government departments to release state-owned land to be built on under a "Build Now, Pay Later" scheme. The government has also announced a £400 million "Get Britain Building" investment fund aimed at reviving stalled housebuilding projects.

The week will end with the service sector purchasing managers' survey for January.

Monday 30 January

Trading update

SThree

AGM/EGM/Special Meetings

Weather Lottery, New Britain Palm Oil

Tuesday 31 January

Trading updates

Porvair, Hansard Global, Mattioli Woods, Babcock, Ocado

AGM/EGM/Special Meetings

Artemis Aim Vct 2, Arc Capital

Wednesday 1 February

Trading updates

Eurasian Natural Resources, ICAP

AGM/EGM/Special Meetings

JP Morgan Asian

Thursday 2 February

Trading updates

AstraZeneca, Great Portland Estates, Royal Dutch Shell, AstraZeneca, Smith & Nephew, Unilever, Investec

AGM/EGM/Special Meetings

Baltic Oil Terminals

Friday 3 February

Trading update

Electrocomponents, International Airlines Group

AGM/EGM/Special Meeting

Coburg