13.06.16 Monday Morning

With the global markets severely losing steam across last Thursday and Friday will they fare any better in this central bank-dominated week?

US
Having touched 18000 last week following a fairly dovish set of comments from Janet Yellen on Monday the Dow Jones couldn’t hold onto that landmark level for long, trickling back towards 17900 after a series of poor European sessions.

While last week was pretty quiet for the Dow this week looks set to be utter chaos. A bizarrely empty Monday gives way to retail sales and import prices on Tuesday, the Empire State manufacturing index and industrial production data on Wednesday, the inflation, Philly Fed manufacturing index and current account readings on Thursday AND the buildings permits and housing starts figures on Friday.

This would be a lot to deal with at the best of times. Yet to add more mayhem to the madness Wednesday evening also sees June’s Federal Reserve meeting and subsequent statement. Now, this Fed get together is nowhere as vital as it would have been if those non-farm figures hadn’t been such a shocker a couple of weeks ago. Nevertheless investors will be eager to see if Yellen and co. leave a July hike on the table, or whether the fact that the meeting is before the UK’s EU referendum will prevent the central bank from providing any real guidance on the likelihood of a summer rate raise.

UK
With the FTSE at points falling below 6200 last week it is clear that the pre-referendum jitters are beginning to take hold of the index. 

At least this week gives the FTSE something to distract itself with data-wise. After a disappointing 0.3% reading last month the Bank of England will be hoping the country’s inflation can creep higher on Tuesday, while Wednesday sees workers hoping wage growth has seen another unexpected increase in the monthly jobs report. Thursday then brings the week to a close (Friday being a bit of a damp squib) with the latest BoE rate vote (expect things to remain unchanged) and retail sales reading.

In terms of earnings the UK economic calendar begins to get a bit busier this week as the end of Q2 comes into sight. Home shopping company Findel and transport firm FirstGroup reveal their full year figures on Monday, joined by a half year report form Crest Nicholson and a Q4 update from the Ashtead Group. Brexit-fearing Berkeley Group Holdings posts its preliminary results on Wednesday, while high street mainstay Poundland and high class handbag producer Mulberry reveal their full year earnings on Thursday.

Eurozone
Following a rather sharp fall last week (the DAX lost around 300 points from its highs) the Eurozone will likely be shunted aside by the central bank dominance from the US and UK. Nevertheless the region still has a decent set of data for investors to deal with. 

The Eurozone-wide quarterly employment change and industrial production figures arrive on Tuesday, with French inflation and the region-wide trade balance reading on Wednesday. Thursday then sees the region-wide inflation figure alongside the latest Eurogroup meeting, something that, with the Greek issue unresolved, could cause a bit of movement. Friday finishes things up with the Italian trade balance and Eurozone-wide current account data, as well as month’s ECOFIN meetings. 

Stock of the week: FirstGroup PLC – Full Year 2016 Earnings Release
After spending much of the year just getting back where it started, will FirstGroup be derailed by its full year figures next week? 

Much of the company’s early troubles stemmed from its third quarter statement at the end of January. Revealing a wince-worthy 9.5% fall in revenue the stock plummeted over 11% in a single day, FirstGroup blaming ‘terrible’ weather for its own terrible performance. The killer was FirstGroup admitting this weather-woe would impact its full year operating profit, explaining the violent reaction from investors. 

Yet having hit an all-time low of 79p in the middle of February the company soon began to recover, building up a real head of steam in the second half of May, investors jumping aboard as FirstGroup announced that from 2021 it will provide a London to Edinburgh rail service that rivals both budget airlines and Virgin Trains’ East Coast operation in price and speed. The fear now is that the company’s full year figures next Tuesday will halt the climb it has been on since the middle of February. The post-results reaction will likely hinge on the extent of the damage those aforementioned weather woes have done to the company’s operating profit, and whether FirstGroup has managed to sufficiently mitigate those costs in the final quarter of its fiscal year.

(Source: IT-Finance.com 10/06/2016)