Weekly Trading Update
22.02.13 Friday Morning
The markets have been exceptionally volatile throughout the trading week with European and U.S. headline indices swinging from gains to losses. After a positive start to the week on the back of successful G-20 talks, concerns over the Fed scaling back its QE programme spooked investors, instigating considerable profit taking.
European shares took a hit on Thursday morning following a hawkish FOMC minutes which indicated that some members are calling for the pace of QE to be scaled back. The Fed did offer an upbeat view of the US economy but traders pressed the sell button on equities in Wall Street Wednesday, as they expressed their worries about the direction the Fed may take in the months ahead.
Markets did however start the week in a bullish fashion following the G20’s pledge to avoid currency wars. The G20 refrained from singling out Japan as the instigator of a currency war as the country attempts to spur economic growth but at the cost of watering down its currency to boost the demand for its exports.
The message was clear that FX rates must be left to market forces to decide and countries must pursue domestic policy objectives rather than participating in currency devaluation.
The FTSE100 had slipped below 6300 after trading as high as 6400 this week while the DAX and STOXX600 indices are off over 1.5%. The euro is firmly below the $1.32 level against the dollar while German bunds have been pushed up on the risk-averse tone.
Traders are parking their cash in safe-havens such as bunds and gilts together with defensive equities in a traditional rotation out of cyclical equities which are prone to economic fluctuations.
At the same time, indices across the world, particularly the DJIA, S&P500 and the FTSE100 were all this week trading at multi-year highs, sitting around the best levels since 2007. For that reason, the temptation to book some profits was running high even before the start of yesterday’s European session with investors also fretting about the upcoming Italian elections and US spending sequesters.
Furthermore, with Germany’s PMIs printing below estimates, much of the wind has been taken out of the optimism over the German economy painted by this week’s solid ZEW survey.
The European Commission's latest projections are kicking down the euro a little but stocks remain broadly supported by the German data. The EC predict that the euro zone economy will contract for the second year in a row in 2013, dampening hopes for a recovery this year and in contrast to ECB chief Mario Draghi's remarks that the euro zone will gradually post growth later this year.
The EC expects the euro zone economy to contract by 0.3% this year and growing 1.4% next year. It also sees the average euro-zone budget deficit falling below the target 3% in 2013 for the first time since 2008.
Open (Monday)
1609.2
Close (Thursday)
1575.7
Change
-2.08
High
1618.7
Low
1554.8
Open (Monday)
1.5508
Close (Thursday)
1.5241
Change
-1.69
High
1.5504
Low
1.5136
Open (Monday)
13955
Close (Thursday)
13873
Change
0.59%
High
14058
Low
13873
Open (Monday)
6321.5
Close (Thursday)
6301
Change
-0.32%
High
6412.3
Low
6276.5
Next Week’s Blue Chip Earnings:
- Monday –Associated British Foods PLC Interim Pre Close Trading Update
- Monday - Preliminary 2012 Pearson PLC Earnings Release
- Monday - Full Year 2012 Bunzl PLC Earnings Release
- Tuesday - Preliminary 2012 GKN PLC Earnings Release
- Tuesday - Preliminary 2012 Croda International
- Wednesday - Preliminary 2012 Petrofac Ltd Earnings Release
- Wednesday - Preliminary 2012 Centrica plc Earnings Release and Strategic Update
- Wednesday - Preliminary 2012 Weir Group plc Earnings Release
- Wednesday - Preliminary 2012 Capital Shopping Centres Group PLC Earnings Release
- Thursday - Kazakhmys PLC 2012 Trading Update
- Thursday - Interim 2013 Hargreaves Services Plc Earnings Release
- Thursday - Full Year 2012 Royal Bank of Scotland Group PLC Earnings Release
- Thursday - Preliminary 2012 British American Tobacco Earnings Release
- Thursday - Full Year 2012 Reed Elsevier PLC Earnings Release
Next Week’s Important Economic Events:
- Monday - Italian Parliamentary Election
- Tuesday - CB Consumer Confidence (US)
- Tuesday - Fed Chairman Bernanke Testifies
- Tuesday - New Home Sales (US)
- Wednesday - Second Estimate GDP q/q (GB)
- Wednesday - Core Durable Goods Orders m/m (US)
- Wednesday - Pending Home Sales m/m (US)
- Thursday - Prelim GDP q/q (US)
- Thursday - Unemployment Claims (US)
- Friday - Manufacturing PMI (GB)
- Friday - GDP m/m (CAD)
- Friday - ISM Manufacturing PMI (US)
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