05.07.13 Friday Morning

Non-farm employment data released today has proven to be even stronger than was first forecast, printing a 195 thousand increase in jobs last month. Unemployment rate remained unchanged at 7.1%.

Market participants will be wise to err on the side of caution as the data could be interpreted in several ways. Whilst a strong figure may prove to be bullish, it could be seen as a means to further justify the withdrawal of the Fed’s asset-buying programme.

After last week’s considerable sell-off, bullish investors will be glad to see indices trading back at the levels seen in early-to-mid June. After overcoming several midweek challenges, equities across the world have opened higher on Friday on a surge of optimism with the FTSE 100 trading over 3% higher than the week’s open.

The week did however kick-off in somewhat of a gloomy fashion as Fed stimulus withdrawals and further disappointing Chinese data weighed on global indices. Investors were left desperately seeking a new market driver to help lift sentiment.

Mounting fears over the state of Portugal and Greece’s economy took a firm grip on the markets. With political unrest in Portugal showing no signs of easing, it was feared that deepening turmoil could trigger a snap election, derailing Lisbon’s exit from an EU/IMF bailout.

Portuguese bond prices slumped with returns on 10-year yields going above 8% (8.1% currently) for the first time since November 2012. Politicians have since moved to reassure investors that no such snap election will take place.

After finance ministry officials made clear that Greece are not on track to meet its reform goals, it emerged that international lenders may freeze emergency aid for 3 months unless government officials can convince them that that the economy is recovering. Athens has been given a three-day ultimatum to convince European officials that it can deliver on its promises before unlocking 8.1 billion euros (6.8 billion pounds) in aid.

A change in fortunes seemed to be sparked by the impressive U.S ADP figure released Wednesday, beating forecasts by some distance posting a 188k increase against a 161k forecast. Additionally, Mario Draghi signalled that the ECB will keep interest rates at record lows, lifting the sentiment in the region dramatically.

Introduced by George Osborne as the “outstanding central banker of his generation”, Mark Carney started his role as governor of the Bank of England this week. Mr Carney chaired his first MPC monthly meeting with his first significant decision being to hold interest rates.

It is in these meetings that the tone will be set for the rest of his five-year tenure, and the notes of the meeting published two weeks later will give an important insight in to how receptive the rest of the committee is to his ideas.

At the start of next week, eurozone ministers will meet to discuss the state of affairs within the region with many investors hoping for further clarification from Draghi on stimulus withdrawal plans. Investors will also be keen to see how policymakers deal with the Greek default.

Stock of the Week:

British Sky Broadcasting Group – Company seen engaging in vast share buyback scheme and talk of a U.S takeover, possibly 20th Century Fox (comes after NewsCorp approach), have sent the share soaring from 796p to a high of 829p (+4%)

Next Week’s Notable Economic Events:
 

Monday –

• JPY – Current Account
• EUR – Eurogroup Meeting

Tuesday –

• CNY – CPI
• GBP – Manufacturing Production

Wednesday –

• AUD – Westpac Consumer Sentiment
• CNY – Trade Balance
• USD – FOMC Meetings Minutes
• USD – Fed Chairman Bernanke Speaks

Thursday –

• AUD – Unemployment Rate
• JPY – Monetary Policy Statement
• USD – Unemployment Claims

Friday –

• USD – PPI
• USD – Prelim UoM Consumer Sentiment

Next Week’s Notable UK Earnings:
 

Tuesday –

• SIG Trading Update for the 6 months ended 30 June 2012
• Marks and SpencerQ1 2013/14 Interim Management Statement

Wednesday –

• Barratt Developments Year end Trading Update
• Halfords Q1 Interim Management Statement
• Booker Group Q1 Interim Management Statement
• ICAP Q1 Interim Management Statement
• J D Wetherspoon Q4 Interim Management Statement
• Burberry Group Q1 2013/14 Interim Management Statement & Trading Update

Thursday –

• Premier Oil Trading & Operations Update
• Ashmore Group Q4 Trading Statement
• Balfour Beatty Half-Year Trading Update