02.10.15 Friday Morning

It’s been a tumultuous week, with a third quarter-ending Wednesday sandwiched between a loss-filled Monday (and to a lesser extent Tuesday) and a falsely-jubilant start to Q4 on Thursday that was soon revealed to have no legs.

UK
Harsh declines across the mining sector, chiefly coming from Glencore (more on that below), inspired by sharpest monthly decline in China’s factory profits in 4 years saw the week get off to a volatile start, with the FTSE continuing to struggle on Tuesday despite an improving situation in the rest of the indices. Investors celebrating the end to a truly dismal quarter on Wednesday saw the UK index climb back above 6000, aided by an unexpected improvement in the current account deficit, alongside an as expected final Q2 GDP of 0.7%. Things turned slightly sourer on Thursday, with the global manufacturing slowdown taking its toll on what had initially been a strong start to the day. The FTSE was more resilient than most, however, with only a mild PMI fall month-on-month from 51.6 to 51.5 allowing it to close at just above 6100.

Beyond next Thursday’s rate-hike decision, likely with Ian McCafferty the lone hawk in the MPC, things are fairly busy for the FTSE data-wise; the UK joins the rest of the world by announcing its services PMI on Monday, before manufacturing/industrial production and trade balance figures on Wednesday and Friday respectively round out proceedings.

Eurozone
Like the FTSE the Eurozone indices had a choppy week, with heavy losses on Monday, exacerbated by a separatist victory in the Catalonian elections, followed by a boost on Tuesday after the region’s business confidence figure hit a 4 year high. Negative inflation, and a slightly higher unemployment figure, on Wednesday then appeared to get investors excited for the prospect of some extra ECB QE, and ensured that the DAX and CAC tried their hardest to end Q3 on a high. Those gains looked set to continue on Thursday, before a 5 month low for the Eurozone’s region-wide manufacturing PMI (caused by a 2 month low for Germany, a 7 month low for Italy, and a whopping 21 month low for Spain) took a toll on investors’ nascent optimism and sent the region’s indices into the red.

Eurogroup and ECOFIN meetings will likely dominate region’s focus at the start of next week, alongside the usual early in the month wave of services data. Things dry up after Monday and Tuesday, with only the ECB monetary policy meeting minutes and a sprinkling of industrial production figures to occupy investors.

US
Just like its European peers, the US markets have had a rollercoaster of a week. The Dow dipped its toes below the 16000 mark on Monday, before a slight rebound on Tuesday took it away from these lows. A mixed Wednesday for data, with a healthy ADP non-farm figure joined by a miss by the Chicago PMI, couldn’t dissuade investors from pushing the US markets to some robust end of quarter gains. Then, despite a 28 month low ISM manufacturing PMI and unexpected increase in jobless claims, the US markets then managed to post some mild growth on Thursday, if only after the dour European indices closed for the day.

Of course the main event is the non-farm jobs report on Friday, with analysts expecting 201k against the 173k seen last month, alongside a slight fall in wage growth from 0.3% to 0.2% and a flat unemployment rate at 5.1%. Into next week, and all investors will have to grapple with is the ISM non-manufacturing PMI, jobless claims, FOMC meeting minutes and import prices.

Stock of the week: Glencore PLC
Spiralling debt, a woeful commodity situation and a chaotic, and spluttering, Chinese economy suggest it is no surprise that Glencore is currently trading at or around all-time lows. Yet the fact that the world’s third biggest producer of copper AND the world’s third largest family owned business has plunged as far as it has captures both the arguably severe mismanagement of the company itself and the price-eroding fall in demand the commodity sector as a whole has had to endure.

On Monday the stock fell a whopping 30% after an incredibly bearish note from Investec, hitting all-time low after all-time low to end the day at 69p. Since then Glencore has gradually climbed back towards the £1 level, even if it hasn’t quite been able to reach it just yet, boosted by a statement from executives claiming that the company was ‘operationally and financially robust’.

Yet it is hard whether to tell if the worst is over or not. On one hand, at its current value Glencore really can’t afford to fall much lower, with a debt pile that dwarfs its market cap; on the other hand, the stock has consistently dropped below what people have thought was the bottom throughout the year, continually shocking even the most bearish of Glencore investors – there is no reason it couldn’t do so again.

(Source: IT-Finance.com 02/10/2015)
 

Economic Diary, 5^th to 9^th October 2015

 

Monday 5^th October

Day 1 – EUR Eurogroup Meetings

All Day – CNY Bank Holiday

8.15am – EUR Spanish Services PMI

8.45am – EUR Italian Services PMI

8.50am – EUR French Final Services PMI

8.55am – EUR German Final Services PMI

9.00am – EUR Final Services PMI

9.30am – GBP Services PMI

10.00am – EUR Retail Sales m/m

2.45pm – USD Final Services PMI

3.00pm – USD ISM Non-Manufacturing PMI

 

Tuesday 6^th October

Day 2 – EUR Eurogroup Meetings

All Day – CNY Bank Holiday

All Day – EUR ECOFIN Meetings

7.00am – EUR German Factory Orders m/m

10.30pm – USD FOMC Member Williams Speaks

 

Wednesday 7^th October

All Day – CNY Bank Holiday

7.00am – EUR German Industrial Production m/m

7.45am – EUR French Trade Balance

9.30am – GBP Manufacturing Production m/m

9.30am – GBP Industrial Production m/m

3.00pm – GBP NIESR GDP Estimate

3.30pm – USD Crude Oil Inventories

 

Thursday 8^th October

12.50am – JPY Core Machinery Orders m/m

12.50am – JPY Current Account

12.00pm – GBP MPC Official Bank Rate Votes

12.00pm – GBP Monetary Policy Summary

12.00pm – GBP Official Bank Rate

12.30pm – EUR ECB Monetary Policy Meeting Accounts

1.30pm – USD Unemployment Claims

7.00pm – USD FOMC Meeting Minutes

8.30pm – USD FOMC Member Williams Speaks

 

Friday 9^th October

Day 1 – IMF Meetings

7.45am – EUR French Industrial Production m/m

9.00am – EUR Italian Industrial Production m/m

9.30am – GBP Trade Balance

9.30am – GBP Construction Output m/m

1.30pm – USD Import Prices m/m

2.10pm – USD FOMC Member Lockhart Speaks

6.30pm – USD FOMC Member Evans Speaks

 

Earnings releases, 5^th to 9^th October 2015

 

Monday 5^th October

N/A

 

Tuesday 6^th October

Ted Baker PLC – Interim Results Statement

PepsiCo Inc – Q3 2015 Earnings Release

Yum! Brands Inc – Q3 2015 Earnings Release

 

Wednesday 7^th October

Tesco PLC – Interim Results Statement

Monsanto Co – Q4 2015 Earnings Release

 

Thursday 8^th October

DFS Furniture PLC – Preliminary Full Year Results

Alcoa Inc – Q3 2015 Earnings Release

 

Friday 9^th October

Vendanta Resources PLC - Q2 2016 Earnings Release