06.06.16 Monday Morning

Following the manufacturing/services/US non-farm jobs report triple whammy of last week things cool down a bit, the markets dealing with some lesser data before things begin to hot up towards in the second half of June.

UK
With the UK’s manufacturing, construction and services PMIs failing to inspire much confidence in the country’s economy, and the Brexit debate only increasing in vitriol, the FTSE could arguably consider itself lucky for holding out above 6200 for most of the week.

This week likely won’t provide much more insight into the UK economy, though the FTSE might welcome a moment of respite from what is set to be a tense back end of June. Monday and Tuesday throw up nothing of note for the index, before the Chinese trade balance figures (something the commodity sector will be eyeing carefully) and UK industrial and manufacturing production numbers arrive on Wednesday. Thursday also gives a glimpse into the Chinese economy with the country’s latest inflation reading alongside the UK goods trade balance data, before Friday rounds things off with the construction output and consumer inflation expectations figures.

Earnings-wise it is another quiet one, though there are a few recognisable names reporting. Wednesday sees Sainsbury’s reveal its first quarter figures for 2016/17, while Thursday sees car dealer Auto Trader and independent airline Flybe (see below) post their full year figures. The week ends with updates from London Pride-brewer Fuller, Smith & Turner and clothing brand Bonmarche.

US
Last week saw the US unsurprisingly defined by its non-farm jobs report on Friday. And what a jobs report it was! The headline figure was a mere 38k, the worst rise since September 2010; yet the unemployment rate fell to its lowest point since the end of 2007, complicated the picture painted by the data and leaving the Federal Reserve plenty to mull over ahead of its June meeting.

With that Fed get-together looming large any piece of data gains extra significance, even the B-tier dregs the US will be serving up this week. Tuesday sees the revised non-farm productivity number, while Wednesday and Thursday give another glimpse into the jobs sector with the JOLTS job openings and unemployment claims figures respectively. Friday ends with a slightly more notable number, as the preliminary UoM consumer sentiment reading is released.

Eurozone
Superficially there was a lot for the Eurozone to unpack last week, with manufacturing and services PMIs joined by June’s ECB meeting. Yet there was little to surprise the markets; the manufacturing sector continued to struggle, with its services counterpart a tad better. The ECB, meanwhile, may have raised its inflation and growth forecasts for 2016, but beyond that Draghi and co. provided nothing that wasn’t expected of them.

This week brings a hodgepodge of data that likely won’t reveal anything investors didn’t figure out with the manufacturing and services figures at the start of the month. Germany is the busiest country, with factory orders on Monday, industrial production data on Tuesday, a trade balance estimate on Thursday and its latest inflation reading on Friday. In among that Deutsch-deluge is another look at the region-wide GDP, the Italian quarterly unemployment rate and the French and Italian industrial production data.

Stock of the week: Flybe Group PLC – Full Year 2016 Trading Update
Flybe Group has seen a series of seriously sharp declines following its recent trading statements. Its third quarter update in January sparked a 10% plunge to 74p, with the airline struggling in the aftermath of November’s tragic attacks in Paris. Load factor (i.e. how full its planes are) fell 5.4% to 68.9% year-on-year, in the process dragging revenue per seat over 7% lower to £46.61.

Flybe’s pain didn’t end there, with its fourth quarter update in April wiping another 10% off in value, and putting it on track to touch 50p for the first time in nearly 3 years, as the company revealed a further fall in load factor (down 2% to 68%) and a £7 million increase in operating costs thanks to a stronger dollar.

In terms of the company’s full year figures on Thursday the key metric will be summer sales, which Flybe has tried to bolster with additional capacity. However, April saw only 21% of that capacity sold, 3 percentage points lower than last year, meaning Flybe may be in for another tough update on Wednesday.

(Source: IT-Finance.com 03/06/2016)