07.08.15 Friday Morning

UK
The continued presence of a commodity sell-off for much of the week took its toll on the FTSE, even if it gradually climbed to a 2 and a half week high. Monday to Wednesday saw a flurry of PMIs, with solid manufacturing figures but disappointing construction and services data, leading some to calculate that the UK’s second quarter GDP will more likely be 0.6% rather than the preliminary 0.7% given the week before.

This all built to ‘Super Thursday’, with the Bank of England releasing its MPC official bank rate votes, meeting minutes and quarterly inflation report all at once for the first time ever. The expectation was for 2, or even 3, members of the MPC to vote for a rate hike, with the pound eagerly awaiting a boost. Instead, there was only one hawkish hand this time around, pushing the FTSE a bit higher and causing sterling to suffer against the euro and the pound.

Beyond the vote, the Bank still expects inflation to eventually hit its 2% target, but will be at 0% for the next two months due to the recent commodity woes. Carney also clarified that his mid-July statement claiming rates would rise around the turn of the year was only his opinion, not that of the MPC as a whole. All in all, Super Thursday didn’t provide the transparent clarity it was meant to, but was more hawkish than the headline vote would have you believe.

With a quiet Friday on the cards, at least in terms of data, the FTSE’s focus next week will purely be on Wednesday. An absence of anything of note on Monday and Tuesday, and only construction output on Friday, leaves the mid-week jobs data to reign supreme. Out of the three headline figures (average earnings index, claimant count change and the unemployment rate), it will likely be the wage growth numbers that garner the most discussion after Carney reaffirmed that wages are one of the key areas of concern ahead of any rate hike.

US
With the Federal Reserve’s position on a September rate hike still somewhat unclear, there was plenty of data for investors to chew on this week. Not that really helped produce much clarity either. A disappointing ISM manufacturing PMI on Monday was joined on Wednesday by a big miss in the ADP non-farm figure, alongside a dismal trade balance figure. However, on the same day the US saw an 11 year high in its ISM non-manufacturing PMI, giving the hawks a boost just as the doves were starting to raise their voices. Of course, the big daddy is still to come; Friday’s non-farm number is expected to be roughly in line with last month’s figure, around 222k. In other words solid, but unspectacular.

Combine all of this with the commodity issues, and a Disney drag, and the Dow Jones probably came out the loser in its current battle with the dollar this week. Next week doesn’t bring with it the same calibre of Fed-testing data, but still contains a few juicy morsels for investors. The JOLTS job openings figure should provide a bit of extra clarity on today’s data, whilst the retail sales and preliminary UoM consumer sentiment numbers will likely be the most notable releases as the week goes on.

Eurozone
After the frankly insane volatility of the peak Greek hubbub, the Eurozone looks set to complete yet another sedate week. Solid manufacturing and services PMIs across the region helped lift the DAX and the CAC to 2 week highs, with the edge being taken off slightly on Friday as both Germany and CAC saw declines in their industrial production figures. There was effectively no Greek news to disrupt proceedings; an IMF spokesperson reportedly claimed the institution would make a decision on its role in any third bailout until autumn, i.e. after the August 20th ECB repayment/sort of deadline, whilst Tsipras claimed agreement talks are in the ‘final stretch’.

There is just under 2 weeks until that ECB repayment, and without a deal, or another bridging loan, Greece won’t be able to make it. Given the increasing proximity of that payment, there is a chance next week should shed some light on the progress of bailout negotiations. However, the region has managed to maintain its eerie silence for the past fortnight, so there is no reason to expect it won’t make it a third in a row. Elsewhere, ZEW economic sentiments, ECB meeting minutes and region-wide inflation figures are the best the Eurozone has to offer next week.

Commodities
As has been the case for the past fortnight, the commodities were a mess this week. Dismal Chinese manufacturing data on Monday helped cement 6 month lows for Brent Crude, whilst copper and the rest of the metals were similarly weak. An 11 month high Chinese services PMI eased matters somewhat, but couldn’t cause a significant recovery. Brent Crude currently looks set to end the week below $50 per barrel, or at the very least teetering on the edge, whilst copper and aluminium are at near 6 year lows and gold continues to struggle to break beyond $1100 per ounce.

Next week brings with it Chinese industrial production figures, and given the spottiness of the data coming out of the world’s second biggest economy another significant miss could further exacerbate the shaky situation the commodities find themselves in.

Stock of the week: The Walt Disney Co
After spending the year so far hitting fresh highs, Disney had quite the precipitous fall after its third quarter results in the middle of the week, falling from an all-time peak of $122.08 to at one point $104.24. The reason for this? A slight miss in revenue, at $13.1 billion against the $13.2 billion expected, alongside the admittance that its cable subscriptions had fallen, cutting its profit forecasts for that sector in the process. However, the company still posted an 11% increase in earnings per share to $1.45 against the expected $1.41, and, importantly, is yet to release ‘Star Wars: The Force Awakens’ or open its Shanghai Disneyland, meaning any negative claims about its potential for future growth are perhaps premature.

(Source: IT-Finance.com 07/08/2015)

Economic Diary, 10^th to 14^th August 2015

 

Monday 10^th August

12.50am – JPY Current Account

9.30am – EUR Sentix Investor Confidence

2.00pm – USD FOMC Member Lockhart Speaks

3.00pm – USD Labor Market Conditions Index m/m

5.25pm – USD FOMC Member Lockhart Speaks

 

Tuesday 11^th August

10.00am – EUR German ZEW Economic Sentiment

10.00am – EUR ZEW Economic Sentiment

11.00am – USD NFIB Small Business Index

1.30pm – USD Prelim Non-Farm Productivity q/q

1.30pm – USD Prelim Unit Labor Costs q/q

2.30pm – GBP CB Leading Index m/m

 

Wednesday 12^th August

6.30am – CNY Industrial Production y/y

6.30am – CNY Fixed Asset Investment ytd/y

6.30am – CNY Retail Sales y/y

9.30am – GBP Average Earnings Index 3m/y

9.30am – GBP Claimant Count Change

9.30am – GBP Unemployment Rate

10.00am – EUR Industrial Production m/m

3.00pm – USD JOLTS Job Openings

3.30pm – USD Crude Oil Inventories

 

Thursday 13^th August

7.00am – EUR German Final CPI m/m

7.45am – EUR French CPI m/m

12.30pm – EUR ECB Monetary Policy Meeting Accounts

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

 

Friday 14^th August

6.30am – EUR French Prelim GDP q/q

7.00am – EUR German Prelim GDP q/q

7.45am – EUR French Prelin Non-Farm Payrolls q/q

9.00am – EUR Italian Prelim GDP q/q

9.30am – GBP Construction Output m/m

10.00am – EUR Final CPI y/y

10.00am – EUR Final Core CPI y/y

10.00am – EUR Flash GDP q/q

1.30pm – USD PPI m/m

1.30pm – USD Core PPI m/m

2.15pm – USD Capacity Utilization Rate

2.15pm – USD Industrial Production m/m

3.00pm – USD Prelim UoM Consumer Sentiment

Earnings releases, 10^th to 14^th August 2015

 

Monday 10^th August

esure Group PLC – Half Year 2015 Earnings Release

Take Two Interactive Software Inc – Q1 2016 Earnings Release

 

Tuesday 11^th August

Card Factory PLC – Half Year 2015 Earnings Release

Serco Group PLC – Half Year 2015 Earnings Release

Prudential PLC – Half Year 2015 Earnings Release

 

Wednesday 12^th August

News Corp – Q4 2015 Earnings Release

Balfour Beatty PLC – Half Year 2015 Results Announcement

 

Thursday 13^th August

Cineworld Group PLC – Interim Results Announcement

Derwent London PLC – Half Year 2015 Earnings Release

Ophir Energy PLC – Half Year 2014 Earnings Release

 

Friday 14^th August

N/A