01.07.16 Friday Morning

Well, what a difference 7 days can makes. From a bevy of lows to the FTSE hitting a 10 month high, last week saw a remarkable rebound from the major indices despite the continued political chaos post-Brexit. This week will likely see the referendum result continue to dominate, with a US non-farm jobs report thrown in for good measure.

UK
Considering the market panic that greeted the referendum result, the fact that the FTSE managed to climb all the way above 6500 for the first time since last August in the space of a week is staggering. The index was propelled to this 10ish month high by the promise of stimulus, including a rate cut, from the Bank of England. Understandably this news wasn’t greeted with unanimous cheer; cable, which had been teasing $1.35, plunged to $1.32 during Carney’s speech. 

It will be interesting to see if the index can push any higher this week, or whether it will find itself capped around the 6500 mark. Data-wise the UK does provide some numbers of note, including the construction and services PMIs on Monday and Tuesday, the manufacturing and industrial production figures on Thursday and the goods trade balance reading on Friday. However focus will undoubtedly remain on the post-Brexit fallout, with the performance of the banking and property sectors key to the FTSE’s continued recovery. 

In terms of company earnings there are a couple of big hitters this week, namely Marks & Spencer and Sports Direct. Both report on Thursday (Q1 2017 and full year), and will likely see their updates dominated by the Brexit. Sports Direct has already commented that the Brexit will impact its purchases for 2017, while M&S suffered a 23% fall between the Friday of the referendum results and the following Monday. Elsewhere Imagination Technologies reports its full year figures on Tuesday (see below), with catering company Booker Group and Topps Tiles updating the markets on Wednesday.

US 
Like the rest of the global markets the Dow Jones saw a health recovery last week, travelling from 17050 to 17850. The index is very much on the back-burner at the moment, ceding the spotlight to its European peers. That could change this week, however, with the non-farm jobs report set to arrive on Friday (though its impact will admittedly be diminished given that the Federal Reserve now seems a long way from raising rates). 

Things start slowly for the US indices, which take Monday for the 4th July celebrations. Tuesday then sees the latest factory orders reading before Wednesday brings with it the Markit and ISM services PMIs alongside the trade balance number and last month’s Fed meeting minutes. The ADP non-farm employment change and jobless claims arrive on Thursday, before the week comes to a close with the aforementioned jobs report on Friday.

Earnings-wise the US still finds itself on the edge of the sector quarter deluge, with Walgreens Boots Alliance on Wednesday and PepsiCo on Thursday the most notable releases.

Eurozone
While not quite as exuberant as the FTSE the Eurozone indices nevertheless pushed ahead with a fairly substantial recovery last week, the DAX and CAC both rising around 4%. The region will likely be keeping its eyes on the UK as this week gets underway, though the Eurozone-wide services PMIs on Tuesday and Germany factory orders and industrial production figures on Wednesday and Thursday does provide investors with a bit of non-Brexit news to digest.

Stock of the week: Imagination Technologies Group PLC – Full Year 2016 Earnings Release
Given its propensity for large plunges Imagination Technologies has looked remarkably firm in 2016. It’s been a very busy year for the company, with the announcement of a robust restructuring plan, the departure of long-term CEO Sir Hossein Yassie and the sale of its Pure digital radio arm. Then there has been the latest round of M&A chatter around the company, from both Apple (whose iPhone sales slowdown has been one of the key issues for Imagination) and China’s Tsinghua Unigroup. 

Despite another profit warning at the end of May, stating that its losses would be worse than expected thanks to restructuring costs (of around £50 million) and the write down of unpaid debts, Imagination Technologies has largely managed to hover near the £1.80s. In terms of its performance post-full year report it really depends on how severe the company’s losses are. Last year saw Imagination Technologies post a pre-tax loss of £11.95 million, though it appears that fiscal 2016 has seen that figure widen rather than shrink.