Drinks giant Diageo is due to publish a trading update on Thursday.

Some people believe that sales of spirits is a good barometer of the global economy itself, so investors will be keen to hear whether the slowdown in the US economy is starting to adversely impact on Diageo’s turnover.

Last time the company reported in February, it suggested that particularly in the US people were drinking ‘less but better’. In that sales of ‘ordinary’ brands were slipping, but that ‘premium brands’ like Captain Morgan, Smirnoff and Johnnie Walker continued to experience decent growth, despite putting through price rises.

Geographic diversity is often championed by global brand companies, and Diageo is no different. Should sales slow in the developed world, then the group has exposure to many emerging markets where double digit sales growth should counter any modest slowdown in the major markets of the US and Europe. Latin America in particular has seen runaway growth in scotch sales, whilst in Africa, sales of Guinness have been strong aided by its reputation as ‘liquid Viagra’.

Not sure that I personally agree with this, but Mr. FT likes a drop of the black stuff and has 4 kids, so maybe there is something to it!

Market research data indicates that trading has remained relatively resilient in the US, whilst competitor Pernod-Ricard’s recent trading statement suggests that emerging markets continue to deliver strong growth. As a result, analysts expect Diageo to reiterate its 9% organic operating profit growth target for the full year on sales ahead by around 6%.

On Friday, in stark contrast to many of the other retailers HMV is expected to issue an upbeat pre-close trading statement. A particularly buoyant computer games market (Game Group’s recent full year figures showed like-for-like sales up 41.2%) is expected to offset the long term decline in CD music sales.

Analysts are looking for +8% like-for-like sales growth at HMV UK, a more modest +2% at bookstore Waterstone’s, whilst the international division is expected to show a small decline. There is a view that suggests that in the longer term, competition on the High St. (from the likes of Zavvi, formerly the Virgin retail chain) is likely to diminish, possibly leaving the field to just HMV.

The shares have put in a good run ahead of these numbers, partly as a result of a ’short squeeze’. For a while investors have thought that HMV’s days might be numbered in the long-term as competition from downloads and other internet offerings ate into its profitability. As a result they ’shorted’ the stock hoping to buy it back cheaper on ‘the inevitable’ profit warning. Except that there may not be a profit warning!!

If you are not sure about what ’shorting’ is all about have a look at the handy paddypowertrader.com tutorial here

Gossip suggests that ’short’ positions in HMV were among the largest in the retail sector with up to a third of the shares being sold short. However results from Game Group and the likelihood of a decent statement out of HMV has seen people scrambling to buy back the stock in recent days, just in case they surprise on the upside.

All of which could lead to an exaggerated price move on a decent trading statement.

Volatility-don’t you just love it!