05.06.15 Friday Morning

Eurozone
Well, it’s certainly been a busy week for the Eurozone. A late Monday night summit between Merkel, Hollande, Draghi, Lagarde and Juncker got things started, setting off a change of events that contained creditor proposals, Greek counter proposals, meetings between Tsipras and Juncker, Tsipras and Dijsselbloem, phone calls with European leaders, and aggressive statements in the press. All of this was meant to culminate with, if not a deal, then the first Greek IMF repayment for June. Instead, Greece announced on Thursday night that it would be delaying all its payments to the end of the month, despite reports that it could have made the payment if it wanted to.

Of course, this constant stream of bullish and bearish Greek news has played havoc with the markets, despite overall strong data from manufacturing and services PMIs, alongside very strong inflation figures. The DAX fell to one month lows, emblematic of the rest of the region, with investors consistently showing their willingness to buy and sell on the smallest of rumours.

The euro-dollar was another big mover, with the region’s currency largely taking its cues from the strong inflation data to spank the greenback for much of the week. And the bond markets, especially the German 10-year which hit a 9 month high yield, were all over the place, a situation exacerbated by Mario Draghi’s warning that volatility is here to stay.

Next week looks a lot quieter data-wise; a few industrial production figures and a revised GDP number is all the region has to offer in terms of cold, hard stats. However, with the Greek saga appearing to enter a new, more dangerous, chapter, and a meeting between the key figures on Monday, the instability felt in the past few weeks, and this week especially, isn’t likely to disappear in a hurry.

UK
The FTSE has largely been on a leash held by the Eurozone this week, as the UK index rose and fell alongside its continental cousins. Things weren’t helped by weak manufacturing and services PMIs, with a strong construction PMI failing to overcome the negativity of the other two figures. The biggest weight, beyond Greece, was the declines felt in the FTSE’s commodity stocks. Big slides by Vedanta and BP, among others, were inspired by a shaky week for copper and Brent Crude respectively, and exhibited their usual downward drag on their home index.

Like the Eurozone, the FTSE has very little to offer next week. A trade balance figure on Tuesday, a NIESR GDP estimate on Wednesday and construction output of Friday is all there is in regards to figures. However, with the FTSE seemingly tethered to the Eurozone, and the Greek situation only worsening, the UK index is guaranteed some movement next week.

US
It’s been a now traditional mixed week of data for the US markets. It saw a poor ISM non-manufacturing PMI but a good ISM manufacturing PMI, an as expected ADP non-farm figure, bad factory orders, weak core PCE price index and personal spending data, alongside a strong personal income number.

Of course, this is all foreplay ahead of the government released non-farm figure on Friday; however, an interesting twist was introduced to the Fed interest rate debate, a debate where non-farm plays a key part, as the IMF warned the US central bank against raising rates this year, recommending the first half of 2016 for any potential hike. As expected all of this had a muddled effect on the US markets. The dollar consistently lost ground against the euro, but the bearish atmosphere wafting over from Europe meant the US markets couldn’t fully enjoy this greenback weakness.

Unlike its European peers, the US has a decent amount of data next week. JOLTS job openings on Tuesday is joined by the usual jobless claims on Thursday, with retail and core retail sale, PPI and core PPI and preliminary UoM consumer sentiment data towards the end of the week. All of this, of course, will be seen through the prism of the rate hike debate, and its relationship to the dollar.

Commodities
In the run up to Friday’s OPEC meeting, Brent Crude saw some heavy losses, falling from $65.39 per barrel on Monday to $61.61 per barrel during Friday morning. However, any inventory/production reducing news from the oil cabal should help this price bounce back going into next week.

Copper had a similarly disappointing week, as news of falling Chinese demand sent the metal from $2.73 per pound to $2.69 per pound, its lowest price since the end of April, and a far cry from the $2.93 highs seen in the middle of May.

Despite the fluctuations in the dollar, gold has largely been on a losing streak this week due to the strength found in the euro. The precious metal fell from $1189.75 per ounce to $1174.75, after hitting a low of $1172.45 on Thursday.

Stock of the week: Royal Mail PLC
Royal Mail began to fall on Thursday, slipping nearly 5% to $4.999, the first time the stock has been below £5 since May 22nd. The decline was caused by the news, announced by George Osborne, that the British government is set to sell its remaining 30% stake in the company to help reduce the UK deficit. An actual date for the sale wasn’t given beyond stating that they would wait until the government was sure it could get the best value for its money. The losses didn’t stop of Friday, as Royal Mail was pushed to a current trading price of £4.95 (as of 05/06/2015, IT-Finance.com) after hitting a low of £4.85 during the day.

(Source: IT-Finance.com 05/06/2015)

Economic Diary, 8^th to 12^th June 2015

 

Monday 8^th June

All Day – G7 Meetings

12.50am – JPY Current Account

12.50am – JPY Final GDP q/q

3.00pm – USD Labour Market Conditions Index m/m

 

Tuesday 9^th June

6.00am – JPY Consumer Confidence

9.30am – GBP Trade Balance

3.00pm – USD JOLTS Job Openings

 

Wednesday 10^th June

7.45am – EUR French Industrial Production m/m

9.00am – EUR Italian Industrial Production m/m

9.00am – GBP Manufacturing Production m/m

9.00am – GBP Industrial Production m/m

3.00pm – GBP NIESR GDP Estimate

3.30pm – USD Crude Oil Inventories

 

Thursday 11^th June

12.50am – JPY BSI Manufacturing Index

6.30am – CNY Industrial Production y/y

6.30am – CNY Fixed Asset Investment ytd/y

1.30pm – USD Core Retail Sales m/m

1.30pm – USD Retail Sales m/m

1.30pm – USD Unemployment Claims

1.30pm – USD Import Prices m/m

3.00pm – USD Business Inventories m/m

 

Friday 12^th June

9.30am – GBP Construction Output m/m

10.00am – EUR Industrial Production m/m

1.30pm – USD PPI m/m

1.30pm – USD Core PPI m/m

3.00pm – USD Prelim UoM Consumer Sentiment

 

Earnings releases, 8^th to 12^th June 2015

 

Monday 8^th June

Drax Group PLC – Trading Statement Release

Sears Holdings Corp – Q1 2015 Earnings Release

FuelCell Energy Inc – Q2 2015 Earnings Release

 

Tuesday 9^th June

Oxford Instruments PLC – Full Year 2014 Earnings Release

RPC Group PLC – Full Year 2014/15 Earnings Release

 

Wednesday 10^th June

HD Supply Holdings Inc – Q1 2015 Earnings Release

Eros International PLC – Q4 2015 Earnings Release

Krispy Kreme Doughnuts Inc – Q1 2016 Earnings Release

 

Thursday 11^th June

Mulberry Group PLC – Preliminary Results

 

Friday 12^th June

Bonmarche Holdings PLC – Full Year 2015 Earnings Release