09.08.13 Friday Morning

This week will likely be remembered for tight ranges, ultra-low volumes and the threat of tapering in the US doing its rounds, again.

Monday began with a mixed session as banks dominated the markets for both good and bad reasons. Lloyds was a bit of a fan favourite after the chief executive announced that he hoped to return up to 70% of the bank’s earnings to shareholders by 2015. However, HSBC’s fall in half-year revenues resulted in a loss in appetite for the stock. The markets did recover towards the latter period of the day following the release of the best UK Services PMI figure for the last 6 years.

Tuesday was also slow as investors showed signs of fatigue following an exhausting time last week after the markets were presented with a raft of corporate and economic data. Lloyds shed some of the previous day’s gains but RBS and Standard Chartered investors were quick to pick these up. Another analyst-smashing piece of data from the UK which showed the best manufacturing production figure since September 2011 did help to encourage more faith in equities.

At the midweek point, investors decided that it was time for a selloff. Key comments from US officials yesterday that tapering of stimulus measures could occur in September if second-half data was encouraging, rocked investors’ sentiment. Although the threat of tapering as well as a timeframe has been hanging over the markets for a while, investors didn’t expect such a specific timeframe so quickly. The Bank of England Governor, Mark Carney, took being meticulous to the next level and announced that stimulus measures and a historic low interest rate would remain until the unemployment rate falls to 7%. However, many economists do not believe such an achievement will occur for at least the next 3 years, which gives QE fans a bit more leeway.

On Thursday, bulls made a return to the arena owing to better-then-expected import and export data from China. Although China’s exports are generally seen to be flagging, at least investors can begin to extinguish the argument that reduced demand from the global economy is hampering China’s growth.

At the time of writing, data from China on Friday once again lent bulls a hand. The data showed that despite producer prices falling in July, they fell at a slower rate compared to the previous month. Whether the same optimists are simply angling for any positive news on a day with very little to analyse is perhaps a more pragmatic argument.

Equity of the week will likely go to Dutch Telecoms’ company Royal KPN. The stock has been in the limelight over the last couple of months on the back of results as well as a rights issue. Nevertheless, despite the rocky road, traders’ wishes came true on Friday morning. The stock surged almost 20% on the open following news reports over America Movil’s intention to make a public offer, in cash, for all outstanding ordinary shares of 2.40 euros per share.

Next week, investors will once again have an abundance of data to help tease sentiment.  GDP figures from a collection of Eurozone nations, employment figures from the UK as well as more statements from US officials are included in the mix.  Corporate data from the likes of Eurasian Natural Resources and Macy’s Inc could also prove interesting.