08.05.15 Friday Morning

UK
It was another busy week for the FTSE as investors looked ahead to the General Election.  Investors seemed to tread carefully towards the beginning of the week. City traders obviously took a very cautious approach to the election, seeing the result as a hung parliament and therefore creating some instability.  The FTSE fell off 1.6% by Thursday morning, trading down below 6900.

The topsy-turvy FTSE started the shortened week with some poor construction PMI data coming in at 54.2 vs 57.6 anticipated. The index couldn’t restore any modesty as HSBC briefly caused some excitement but fell away as Q1 profits were up £0.3bn to £7.1 billion.  However this vast improvement failed to stimulate much of a rally as investors took little notice with the stock ending down 2% on the day. Moreover this poor PMI data, along with the Australian central bank squashing interest rates, toppled the mining sector and pulled down the FTSE.

Mid-week saw Sainsbury come out with its first pre-tax loss in a decade. Sainsbury fell 3.16% on the day and joined the trend of a pretty stagnant and sorry-looking FTSE with pre-election nerves.
As Thursday came to a close, the FTSE looked pretty limp but a shock announcement from the exit polls showed that the Conservatives were on to win by a majority. This put a bounce into traders' steps and they bought into this stability. The FTSE rallied to over 7,000 which may have really caught out those sellers in the market.

Eurozone
The Dax was as volatile as ever as the UK markets opened on Tuesday. The week started with some very positive news putting confidence back into investors that the Eurozone was growing sustainably as the European Commission raised its 2015 growth forecast up 0.2% to 1.5%. However the unpredictable Dax then took a turn for the worse as Greece’s growth was slashed to 0.5% as the stagnation that the Greek election had brought caused the severe downgrade.

After a very poor start to the week the DAX had a quiet mid-week with European service PMI’s being at least as good or better than expected. This gave European bourses something to shout about, however as is so often the case, the DAX fell away with Janet Yellen highlighting the possibility of a global slowdown and retail sales coming in at -0.8%. This resulted in the DAX ending the day flat.

Finally as the week came to a close, the main talking point in Europe was the yield on German bonds.  The government bond buying party showed signs of coming to an end with a big sell-off leading the German 10-year Bund to reach a yield of 0.75%, a 2015 high and a stark contrast to the 0.07% yield seen in mid-April. This bond sell off created some negativity and anxiety in the Eurozone, however the US unemployment claims claimed the mood and the Dax recovered into the close on Thursday.

U.S.
The U.S. had a positive start to the week, breaking through 18100 as factory orders hit expectations and restored some sort of normality to what has been a very hit and miss period for results. Some positive results on Tuesday in regard to manufacturing wasn’t greeted with cheering investors as the realisation hit home that these positive results could bring back unwanted side effects in the form of a rate hike.

As what seems to be a trend of late, the ADP non-farm employment change was 30K below analysts’ expectations. The Dow reacted poorly to this and headed south once the sentiment of the poor result overrode the brief hope that this result would delay a rate hike.

Tesla motors results disappointed with its previous full year results in February. The firm saw rapid growth in April and announced record sales for the first 3 months of 2015. Tesla’s revenue rose by 52% year on year but couldn’t avoid reporting a loss of $154 million. Alibaba also reported results alongside an introduction of  a new CEO, Daniel Zhang. The stock rose 7% as the day went on. 

Friday's Non farms employment change results came out in line with analysts’ expectations at 223K and this result caused a surge in buying of the Dow Jones which now looks to recover most of its recent losses.

Commodities
US oil inventories fell for the first time in 2015, down 3.5M barrels. This has seen WTI rally over $19 from the recent low in March of $42, when the continuous build up of inventories threatened to spill over the amount of storage available and flood the market and hence put downward pressure on oil prices.

Gold has been a volatile market as of late ranging between $1,200 and $1,180 this week as the price of the precious metal reacts to every piece of data that may give an indication of where interest rates are heading. As results come out that may show a delay on interest rate rises, gold shines, but on the other hand, as soon as interest rate hikes are in the picture, gold looks doomed.

Stock of the week: J Sainsbury's
Following recent poor figures from Tesco, Sainsbury’s followed in the footsteps of its rival by slumping to an annual loss for the first time in a decade on Wednesday.

Sainsbury’s, Tesco, Asda and Morrisons have all been under pressure facing price-wars and other challenges as they bid to stem the flow of shoppers moving to cut-price outlets Aldi and Lidl.

The bulk of Sainsbury’s pre-tax loss of £72m was blamed on a £753m charge it booked in its half-year results in November relating to writedowns on store values.

However like-for-like sales fell 1.9% for the 52 weeks to 14 March and Sainsbury’s said it anticipated like-for-like sales to remain negative into 2015/16 due to the price wars and continuing competition.

The firm has also had to contend with a bizarre situation of chief executive Mike Coupe being ‘jailed in absentia’ following a legal judgment in Egypt.

(Source: IT-Finance.com 08/05/2015)

Economic Diary, 11^th to 15^th May 2015

 

Monday 11^th May

All Day – EUR Eurogroup Meetings
12.00pm – GBP Official Bank Rate

Tuesday 12^th May

All Day – EUR ECOFIN Meetings
9.30am – GBP Manufacturing Production m/m
9.30am – GBP Industrial Production m/m
3.00pm – GBP NIESR GDP Estimate
3.00pm – USD JOLTS Job Openings
5.45pm – USD FOMC Member Williams Speaks

Wednesday 13^th May

6.30am – CNY Industrial Production y/y
7.00am – EUR German Prelim GDP q/q
7.45am – EUR French Prelim Non-Farm Payrolls q/q
9.00am – EUR Italian Prelim GDP q/q
9.30am – GBP Average Earnings Index 3m/y
9.30am – GBP Claimant Count Change
9.30am – GBP Unemployment Rate
10.00am – EUR Flash GDP q/q
10.00am – EUR Industrial Production m/m
10.30am – GBP BOE Gov Carney Speaks
10.30am – GBP BOE Inflation Rate
12.30pm – EUR ECB Monetary Policy Meeting Accounts
1.30pm – USD Core Retail Sales m/m
1.30pm – USD Retail Sales m/m
3.00pm – USD Business Inventories m/m
3.30pm – USD Crude Oil Inventories

Thursday 14^th May

All Day – EUR French Bank Holiday
All Day – CHF Swiss Bank Holiday
All Day – EUR German Bank Holiday
1.30pm – USD PPI m/m
1.30pm – USD Unemployment Claims
 

Friday 15^th May

9.30am – GBP Construction Output m/m
1.30pm – USD Empire State Manufacturing Index
2.15pm – USD Capacity Utilization Rate
2.15pm – USD Industrial Production m/m
3.00pm – USD Prelim UoM Consumer Sentiment

 

Earnings releases, 11^th to 15^th May 2015

 

Monday 11^th May

GW Pharmaceuticals PLC – Half Year 2015 Earnings Release

 

Tuesday 12^th May

Spire Healthcare Group PLC – Post Close Trading Statement

 

Wednesday 13^th May

SABMiller PLC – Full Year 2015 Earnings Release
Barratt Developments PLC – Interim Management Statement
Ralph Lauren Corp – Q4 2015 Earnings Release
Shake Shack Inc – Q1 2015 Earnings Release
 

Thursday 14^th May

Vedanta Resources PLC – Preliminary 2014/15 Earnings Release
TalkTalk Telecom Group PLC – Preliminary 2014 Earnings Release
Kohl’s Corp – Q1 2015 Earnings Release

Friday 15^th May

Coca-Cola HBC AG – Q1 2015 Earnings Release