07.11.14 Friday Morning

The markets were still feeling the effects on Monday of the Bank of Japan’s announcement at the end of last week to significantly extend their quantitative easing program. The Dow Jones was the biggest beneficiary, closing at 17360.5. This was to be a trend that continued all week. The good news continued in the US with the ISM manufacturing PMI coming in 2.5 points higher than expected at 59.0. The Dow was not alone, with the dollar closing at 113.768 against the yen, its strongest performance in 4 years. The tendrils of the BoJ’s decision were far-reaching, with the FTSE recovering from an October slump closing at 6480.8, whilst the DAX sharing a similar fate, creeping out of its own decline, reaching 9343.2. The Nikkei also fared significantly better than the yen, opening at 17089.5 and closing at 17422.5.

A disappointing construction PMI, only 61.4 instead of the estimated 63.5, lead to a weakened FTSE on Tuesday, closing at 6479.5, a 76 point drop from the highs of 6556 the day before. The Dow showed no sign of slowing down, closing slightly higher at 17371, up 11 points from Monday. Tuesday was to be the slowest day for the Dow and dollar, a brief pause before another upward surge. In the world of commodities, Brent Crude Oil, who had opened the week poorly, fell further on Tuesday with the reveal that Saudi Arabia had drastically cut the contract price for the USA, causing the price per barrel to drop $2 to a dismal $82.64. A combination of oil overproduction and decreasing call for barrels leaves oil in a dire situation at present. The World Oil Outlook on November 27th should provide greater clarity into oil’s long and short term future.

The big news on Wednesday was the confirmation of the Republican’s emphatic win in the midterm elections. The GOP now control the House and Senate, and were full of promises of bi-partisan comprise with the Democrats. This Congressional change led to the Dow closing at another record high of 17473.5, alongside a rampant dollar that closed at 114.708 against the yen. The power of the greenback spelled bad news for gold, whose torrid past few months continued, with prices falling nearly 2% on Wednesday to a recent low of 1145.05 at close. There is currently no incentive to invest in the yellow metal due to the dollar’s powerful charge. On the other side of the pond, Marks & Spencer were the big winner, shares reaching 444.10p from 39.4p, despite declines in clothing sales. The strength of their Simply Food range helped provide the first increase in half-year profits since 2010, and this positivity was reflected in the market.

President Draghi’s ECB conference was the main focus on Thursday. The Italian banker announced the ECB’s intention to maintain their record low interest rates at 0.05%, whilst, in the face of increasing pressure, promised to consider a variety of stimuli for the European economy when the time calls for it. In reaction to these comments, both the DAX and the FTSE closed higher, at 9401 (1.06% growth) and 6557.8 (0.47% growth) respectively. The Republican win was still being felt on Thursday as the Dow Jones closed at 17562.5, only 4 points less than its daily peak. AstraZeneca and Tesla were the big Q3 announcers of the day, with the former posting a third consecutive quarter growth of 5% to $6.542 billion, whilst Tesla’s stocks jumped to $241.18 (up 4%) after a total quarter of $932 million. After the recent disasters in the British supermarket industry, Sainsbury’s announced a joint venture with Netto to open 15 discounts stores, a direct challenge to Aldi and Lidl’s discount dominance.

Perhaps the most important figures of the week came on Friday, with the reveal of the US non-farm employment change and unemployment rate. 214k jobs were created in October, less than the estimated 225k, with the unemployment rate falling to 5.8%, 0.1% higher than predicted. The FTSE100 opened strongly on Friday morning at 6565.2, up 8 points from Thursday’s closing figure. This and a Goldman Sachs’ rating of ‘buy’ helped Royal Mail rally to 470.55, its highest price since mid-July. The Nikkei, following the calming effects of the ECB announcement, opened 5 points higher at 16997.5. After the disappointing construction PMI figures earlier in the week, Britain’s trade deficit widened more than expected. The September figures were 9.821 billion instead of the forecasted 9.4bn, growing from August’s 8.950bn. The House of Mouse posted a better than expected fourth quarter report, with the predicted $12.36billion instead reaching $12.39bn. Disney continue to be boosted by their acquisition of Marvel, with the summer hit Guardians of the Galaxy joining Angelina Jolie vehicle Maleficent in a stellar year for the film-giant.

Economic Diary

Monday:

1.30am - CNY CPI
11.50am – JPY Current Account

Tuesday:

12.30am – AUD NAB Business Confidence
8.00pm – NZD RBNZ Financial Stability Report
8.05pm – NZD RBNZ Gov Wheeler Speaks

Wednesday:

9.30am – GBP Average Earnings Index 3m/y
                  GBP Claimant Count Change
10.30am – GBP BOE Gov Carney Speaks
                     GBP BOE Inflation Report

Thursday:

5.30am - CNY Industrial Production y/y
1.30pm – USD Unemployment Claims
4.30pm – USD Crude Oil Inventories

Friday:

1.30pm – CAD Manufacturing Sales m/m
                  USD Core Retail Sales m/m
                  USD Retail Sales m/m
Earnings

Monday:

• Trinity Mirror PLC – Interim Management Statement
• E2V Technologies – Half Year 2014 Earnings Release
• AVEVA Group PLC – Half Year 2014 Earnings Release

Tuesday:

• Capita PLC – Q3 2014 Interim Management Statement
• Fenner PLC – Full Year 2014 Earnings Release
• Blinkx PLC – Half Year 2-14 Earnings Release
• Vodafone Group PLC – Half Year 2014 Earnings Release
• TalkTalk Telecom Group PLC – Interim 2014 Earnings Release

Wednesday:

• J Sainsbury PLC – Half Year 2014 Earnings Release
• Burberry Group PLC – Interim 2014 Earnings Release
• WH Smith PLC – 2014 Interim Management Statement

Thursday:

• ITV PLC – Q3 2014 Interim Management Statement
• Rolls-Royce Holdings PLC – 2014 Interim Management Statement
• Ted Baker - Interim Management Statement Release for the 13 week period from 10 August 2014 to 8 November 2014
• 3i Group PLC – Half Year 2015 Earnings Release
• London Stock Exchange Group PLC – Interim 2014/15 Earnings Release