02.05.14 Friday Morning

A positive week for equities and indices saw the bulls in control on Friday afternoon thanks to better-than-expected non-farm payrolls figures from across the pond which saw the U.S. economy add 288,000 new jobs, above analysts’ expectations of 210,000.

This meant the unemployment rate dropped to 6.3% – below the anticipated 6.6% rate – and helped indices record small gains with the Dow pushing back up above 16,600, the S&P nudging above 1880 and the FTSE rising towards 6830.

The news was not good for gold with sellers forcing the price of the precious metal back down towards the $1,280 level while the euro fell to 1.382 against the dollar and the greenback jumped to three-week highs against the yen.

Earlier in the week UK markets had been boosted by strong GDP figures on Tuesday, which showed the UK economy had continued to grow steadily for the fifth consecutive quarter. GDP figures showed growth of 0.8% in the first quarter of 2014, albeit slightly below expectations. The economy is now only 0.6% below the 2008 pre-recession peak.

It is propped up by the service sector outperforming its 2008 peak by 2%, with the construction and production sectors lagging behind at 12% lower than their peak in 2008. According to analysts, the construction sector is set to end the year at least 3% higher as confidence and demand grows.

In the US, the picture was not quite as positive as US Q1 GDP came in well below expectations. Output was forecast to be in the region of 1.2%, but only expanded by 0.1%. However, the ADP beat consensus, showing an increase in 220k jobs against the forecast 203k and the week ended on a more upbeat note with Friday’s impressive non-farm payrolls report.

In Europe, little inroad has been made into the on-going jobs crisis, with unemployment unchanged at 11.8%. Unemployment in the eurozone peaked at 12%, illustrating the slow rate of improvement. This is due partly to the economic recovery feeding through to the labour market and growth remains slow, recently compounded by the crisis in Ukraine.

Precious metals have struggled this week, with Silver sinking as low as $18.685 per troy ounce, down 2.5%. Gold has also softened holding around the $1,280 level. Investors understand the lack of inflationary pressure across the real economy, helping to keep a top on prices for now.

The big equity news of the week however stays with the proposed takeover of AstraZeneca by US pharma giant Pfizer. The US firm has increased their bid to more than £50 a share, however AstraZeneca rejected the offer. It is getting ever more increasingly likely that Pfizer will look to launch a hostile takeover. Pfizer has been accused of asset stripping and job cutting with its last three takeovers, and has only so far provided short-term commitments to the UK. The merged group is proposed to be incorporated in the UK, taking advantage of the low corporation tax rate but listed and headquartered in New York.

Intercontinental Hotels also got off to a positive start to trading on Friday after the market reacted well to its change in tone on potential future asset disposals, this has seen the stock trading 10% higher on Thursday night’s close. Serco, the outsourcing company, saw its shares tank on profit warning news earlier in the week. The stock has been struggling for some time, and this has been compounded by investors avoiding it. Shares were changing hands for £6.00 in the middle of 2013, now they are around the £3.50 mark.

Stock of the week – RBS

A good set of numbers came from RBS on Friday after the beleaguered bank trebled its profits from £400m to £1.2bn in the first quarter, beating analyst expectations of £200m and boosting the confidence in its leadership. The stock was trading up 12% compared to figures in February. Even though this is a positive step in the right direction, the first still has a lot of legacy issues to deal with and taxpayers are still down £14 billion on their stake in the firm.

Next Week's Earnings

Tuesday:
 

Barclays

Aberdeen Asset Management

Blinkx

 

Wednesday:
 

HSBC

J Sainsbury

Imperial

GW Pharmaceuticals

 

Thursday:
 

BT Group

Sage Group

 

Friday:
 

IAG

Borders & Southern Petroleum

Next week's announcments 

Monday:

GB Bank Holiday

EU Sentix Investor Confidence May

EU PPI March

US ISM non-manufacturing PMI

 

Tuesday:

JPN Greenery Day

GB Halifax House Prices March

EU Retail Sales March

EU Markit Services PMI April

US Trade Balance March

JPN BoJ Monetary Policy Meeting Minutes

 

Wednesday:

CHN HSBC China Services PMI April

GER Factory Orders March

US Consumer Credit Change March

 

Thursday:

CHN Trade Balance April

GER Industrial Production March

GB BoE Interest Rate Decision

GB BoE Asset Purchase Facility May

EU Interest Rate Decision

EU ECB Monetary Policy Statement

US Initial Jobless Claims

US Continuing Jobless claims

 

Friday:

CHN Consumer Price Index April

CHN PPI April

GER Trade Balance

GB Industrial Production March

GB Manufacturing Production March

GB Total Trade Balance

GB NIESR GDP Estimate April