04.09.15 Friday Morning

China
Another week, another wave of choppiness for the markets inspired by the goings on in China. Things looked slightly calmer, if still not great, on Monday, only for investors to go back into panic mode on Tuesday are a truly dismal set of manufacturing and services PMIs from China compounding the country’s economic slowdown.

Wednesday saw the Chinese market warriors pour in at the last minute to rescue the Shanghai Composite from more declines, all in order so there was to be no distraction for the 2 day military celebration of China’s WW2 victory over Japan that took place on Thursday and Friday. This also meant the absence of China from the market landscape at the end of the week, and a theoretical moment of respite for the global indices. However, with China back on Monday, and likely without the last-gasp boosting hand of an intervening Chinese government, investors are incredibly nervous going into the weekend.

UK
A pause on Monday, due to the Bank Holiday, only made things worse for the FTSE on Tuesday, as investors fled the index following the latest evidence of China’s slowdown and the subsequent Shanghai Composite fall. It wasn’t helped by a fluctuating commodities sector, with Brent Crude’s surge coming to an abrupt end on Tuesday, alongside its own weak manufacturing and services PMIs. A post-ECB conference, mixed with the lack of China, on Thursday helped the FTSE post some healthy gains, only for non-farm jitters and the return of the Chinese fear to cause yet another fall on Friday.

Of course, China will dominate the start of next week, at the very least, and will dictate what kind of state the FTSE’s opens in. Beyond the formidable weight of the world’s second largest economy, the UK releases its manufacturing production and NIESR GDP estimate figures on Wednesday, the latest bank rate votes on Thursday and consumer inflation expectations on Friday.

Eurozone
Whilst China was the dominating force for most of the week, causing a rollercoaster ride for the markets, the Eurozone had plenty of its own issues to chew over. A wave of dismal manufacturing data on Tuesday only exacerbated the region’s losses, and further highlighted the disparity between a robust Germany and the rest of its Eurozone partners. Services PMIs were better, bar yet another yet showing from France, whilst the region did see a slight decrease in its unemployment rate.

Thursday then saw the latest ECB conference, with hints from Draghi that the central bank is open to more stimulus going forward. The reason? Well the ECB president announced that both the region’s GDP and inflation outlooks had been cut following the downward pressure of Greece and China. Yet investors ignored the falling forecasts to focus on the tantalising potential for more QE, causing the DAX and CAC to gain back most of the week’s losses. However, this couldn’t last and by Friday morning the Eurozone indices were back in the doldrums as the price-eroding Chinese fears returned.

Beyond what is sure to be a China-filled Monday, the Eurozone has little to offer next week bar a few CPI and industrial production figures, with the Eurogroup meetings on Friday the region’s main draw.

US
You know the story by now. Heavy China-inspired losses near the start of the week, before a rebound on Wednesday and, initially, on Thursday until investors lost confidence and caused these gains to gradually vanish. With China ostensibly disappearing towards the end of the week, full focus turned back to the non-farm payroll figures on Friday, arguably the most important piece of jobs data in the last few years. In the run up to the release the US saw weak manufacturing, ADP non-farm, non-farm productivity, factory orders AND jobless claims figures; in other words, a bad weak of data to follow last week’s stellar GDP revision, and one that leaves investors none the wiser on the chances of a rate hike.

The non-farm number should, in theory, provide some firmer guidance on where the Fed stands, but if it arrives at the forecast, and middling, 215k investors are likely to remain confused. Next week doesn’t look like it will make things any clearer; JOLTS job openings, jobless claims, PPI and preliminary UoM consumer sentiment figures are all that’s on offer, and if non-farm can’t help clear things up for investors, it is doubtful these figures can either.

Stock of the week: Glencore Xstrata PLC
Of course, it has been a nightmare year for the majority of commodity stocks; Glencore, however, has been one of the worst. It received yet more bad news this week, with Standard & Poor downgrading the company’s outlook due to, guess what, China. This caused the stock to tank by around 17% across Tuesday and Wednesday, only for investors to pour back in at the low on Wednesday. It has a current trading price of £1.29, compared to a 2015 starting price of £3.01 (IT-Finance.com, 04/04/2015).

(Source: IT-Finance.com 04/09/2015)

Economic Diary, 7^th to 11^th September 2015

 

Monday 7^th September

All Day – USD Bank Holiday

7.00am – EUR German Industrial Production m/m

 

Tuesday 8^th September

12.50am – JPY Final GDP q/q

7.00am – EUR German Trade Balance

7.45am – EUR French Trade Balance

11.00am – USD NFIB Small Business Index

3.00pm – USD Labour Market Conditions Index m/m

8.00pm – USD Consumer Credit m/m

 

Wednesday 9^th September

9.30am – GBP Manufacturing Production m/m

9.30am – GBP Trade Balance

9.30am – GBP Industrial Production m/m

3.00pm – GBP NIESR GDP Estimate

3.00pm – GBP JOLTS Job Openings

 

Thursday 10^th September

2.30am – CNY CPI y/y

2.30am – CNY PPI y/y

7.45am – EUR French Industrial Production m/m

12.00pm – GBP MPC Official Bank Rate Votes

12.00pm – GBP Official Bank Rate

1.30pm – USD Unemployment Claims

1.30pm – USD Import Prices m/m

3.00pm – USD Crude Oil Inventories

 

Friday 11^th September

All Day – EUR Eurogroup Meetings

7.00am – EUR German Final CPI m/m

9.00am – EUR Italian Industrial Production m/m

9.30am – GBP Construction Output m/m

9.30am – GBP Consumer Inflation Expectations

1.30pm – USD PPI m/m

1.30pm – USD Core PPI m/m

3.00pm – USD Prelim UoM Consumer Sentiment

 

Earnings releases, 7^th to 11^th September 2015

 

Monday 7^th September

Associated British Foods PLC – Pre-Close Trading Update

 

Tuesday 8^th September

Berkeley Group Holdings PLC – Interim Management Statement

Ashmore Group PLC – Full Year 2015 Earnings Release

TiVo Inc – Q2 2016 Earnings Release

 

Wednesday 9^th September

Hargreaves Lansdown PLC – Full Year 2015 Earnings Release

Barratt Developments PLC – Full Year 2014 Earnings Release

Barnes & Noble Inc – Q1 2016 Earnings Release

 

Thursday 10^th September

Manchester United PLC – Q4 2015 Earnings Release

Dunelm Group PLC – Full Year 2015 Earnings Release

Next PLC – Half Year 2015 Earnings Release

WM Morrison Supermarkets PLC – Half Year 2015 Earnings Release

 

Friday 11^th September

JD Wetherspoon PLC – Full Year 2014 Earnings Release