10.07.15 Friday Morning

Eurozone
It’s a cliché (of course, clichés are clichés because they are true) but the Eurozone really has had a wild week. Things began with the fairly surprising victory of the ‘no’ vote, and whilst of course the markets sunk to some hefty declines, there were in no way as bad as many expected especially given the reaction when the referendum was first called. Perhaps even bigger news was the fact that Yanis Varoufakis, the controversial Greek finance minister who promised to resign if the ‘yes’ vote prevailed, quit his post anyway, leading to the appointment of Euclid Tsakalotos to the vacant post.

With all this tumultuous action at the start of the week, the markets couldn’t shake their negative trading as the week went on, with a hastily put together Eurogroup meeting/EU summit double feature on Tuesday yielding little due to a lack of Greek proposal. Wednesday then saw Greece submit a request for 3 year ESM programme, before Thursday finally brought with it some 3 digit Eurozone gains as reports leaked about the size of the climb-down by Tsipras.

This climb-down was confirmed Thursday night, when Greece submitted a proposal that contained €13 billion in cuts and tax rises, around €4 billion more than the plan the Greek people rejected with the referendum. A vote on Friday evening should see the Greek government confirm this proposal, and leave the weekend’s Eurogroup meeting and EU summit plenty to chew on. What is interesting about this hefty change in tact is that it comes as one of Tsipras’ key beliefs was just gaining ground. Donald Tusk, Christine Lagarde and Jack Lew (of the US treasury) all called for a haircut to make the Greek debt sustainable; even Wolfgang Schauble acknowledged the need for debt relief, though he swiftly went on to state that it wouldn’t be possible under the EU’s rules. To seemingly capitulate as the debt relief issue gained momentum is odd to say the least.

Obviously the focus next week, or at the very least on Monday, will be the market reaction to whatever occurs over the weekend. The current Greek proposal seems to leave the Eurozone as close to a deal as it has been since Syriza came into power; it is now down to the creditors to respond accordingly to Tsipras’ huge concessions, and prove their commitment to the Eurozone project. Beyond the Greek issue, which admittedly casts a rather large shadow, the region will see the ZEW economic sentiments for Germany and the Eurozone as a whole, another set of ECOFIN meetings, and the latest ECB press conference (the importance of which will be dictated by what happens this weekend).

US
The uncertainty in Greece and China, the latter of which only began to calm down towards the end of the week as the Chinese government implemented strict measures to stall the market’s calamitous decline, really took its toll on the Dow Jones and co. at the start of the week. By Wednesday the Dow was seeing its first 3 digit declines of July, with the dollar taking advantage of the weakness in the pound and the euro.

The bizarre shutdown of the NYSE on Wednesday afternoon, following unexplained ‘major technical glitches’ exacerbated matters and left the US markets near 5 months low by the mid-week close. This NYSE issue also meant that the dovish comments found in the latest Fed meeting minutes couldn’t have the Dow-boosting effect they should have. However, stability in China, growing hope in Greece and the worst jobless claims since March helped lift the US markets by Thursday, something that continued in the futures on Friday morning.

Fed chair Janet Yellen speaks on Friday afternoon, and will surely say something of interest to the markets; next week then sees Yellen testify before the Senate Banking Committee in a 2-day event on Wednesday and Thursday that should yield some more clarity on the current rate-hike debate. Elsewhere the US sees retail sales data, the latest inflation figures, Empire State and Philly Fed manufacturing indices and the preliminary UoM consumer sentiment number.

UK
Whilst the FTSE had one-eye on the Greek situation, it also had other issues to deal with this week. Monday and Tuesday brought with it a haemorrhaging in the commodity sector that weighed heavy on the UK index’s hefty oil and mining stocks, dragging it further into the red. Wednesday then saw the UK Summer Budget, with George Osborne announced the bank levy is to be phased out, huge cuts to the welfare system, changes to inheritance rules in regards to non-dom status, and the introduction of a national living wage.

However any boost (or declines) inspired by this Budget were quickly swept aside by the magnetic effects Greece has on the markets, and since mid-week the FTSE has largely followed the lead of the Eurozone. Next week brings with it the latest UK inflation figures and a host of jobs data in the form of the unemployment rate, wage growth and claimant count change.

Commodities
The volatility in the Chinese stock market, which only began to subside towards the end of the week, had disastrous results for the commodity sector, which is often dictated by movements from the world’s 2nd biggest economy. Copper fell 7% over Monday and Tuesday to a low of $2.39 per pound, whilst Brent Crude at one point hit $55 per barrel.

The strength of the dollar, and the bad news from China, also hit gold and silver; the former hit $1146.15 per ounce mid-week, whilst the latter touched $14.62 per ounce on Tuesday. The commodities have begun to recover has China stabilised, but a return to the kinds of blood shed from the start of the week will have serious ramifications for the sector once more.

Stock of the week: SuperGroup PLC
It was a, um, super week for SuperGroup which jumped by 8.5% across Thursday and Friday lifted the stock to fresh record highs of £13.68 following a strong set of full year results. A 2% increase in underlying profits to £63.2 million alongside a 4.8% leap in like-for-like sales were complimented by an ambitious 13% increase in total retail space. There were also signs of this success continuing into 2015, with the company showing 20.3% growth in like-for-like sales for the first 10 weeks of its current fiscal year. However, perhaps the best news for investors was the announcement of a 10-year deal with Chinese retailer Trendy International Group, which allows the owner of SuperDry to finally extend its reach into the potentially lucrative Asian market.

(Source: IT-Finance.com 10/07/2015)

Economic Diary, 13^th to 17^th July

 

Monday 13^th July

All Day – EUR Eurogroup Meetings

9.30am – GBP BoE Credit Conditions Survey

 

Tuesday 14^th July

All Day – EUR French Bank Holiday

All Day – EUR ECOFIN Meetings

9.30am – GBP CPI y/y

9.30am – GBP PPI Input m/m

9.30am – GBP RPI y/y

10.00am – EUR German ZEW Economic Sentiment

10.00am – EUR Economic Sentiment

10.00am – EUR Industrial Production m/m

1.30pm – USD Core Retail Sales m/m

1.30pm – USD Retail Sales m/m

1.30pm – USD Import Prices m/m

3.00pm – USD Business Inventories m/m

 

Wednesday 15^th July

All Day – G8 Meetings

3.00am – CNY GDP q/y

3.00am – CNY Industrial Production y/y

9.30am – GBP Average Earnings Index 3m/y

9.30am – GBP Claimant Count Change

9.30am – GBP Unemployment Rate

1.30pm – USD PPI m/m

1.30pm – USD Core PPI m/m

1.30pm – USD Empire State Manufacturing Index

2.15pm – USD Industrial Production m/m

2.15pm – USD Capacity Utilization Rate

3.00pm – USD Fed Chair Yellen Testifies

3.30pm – USD Crude Oil Inventories

 

Thursday 16^th July

12.45pm – EUR Minimum Bid Rate

1.30pm – EUR ECB Press Conference

1.30pm – USD Unemployment Claims

3.00pm – USD Fed Chair Yellen Testifies

3.00pm – USD Philly Fed Manufacturing Index

3.00pm – USD NAHB Housing Market Index

 

Friday 17^th July

1.30pm – USD Building Permits

1.30pm – USD CPI m/m

1.30pm – USD Core CPI m/m

1.30pm – USD Housing Starts

3.00pm – USD FOMC Prelim UoM Consumer Sentiment

Earnings releases, 13^th to 17^th July

 

Monday 13^th July

Genel Energy PLC – Trading Statement

 

Tuesday 14^th July

FirstGroup PLC – Q1 2015 Earnings Release

JPMorgan Chase & Co – Q2 2105 Earnings Release

Johnson & Johnson – Q2 2015 Earnings Release

 

Wednesday 15^th July

Burberry Group PLC – Q1 2015/16 Trading Update

Moneysupermarket.com Group PLC – Post Close Trading Statement

ICAP PLC – Q1 2015 Trading Statement

Halfords Group PLC – Q1 2016 Earnings Release

Bank of America Corp – Q2 2015 Earnings Release

BlackRock Inc – Q2 2015 Earnings Release

Intel Corp – Q2 2015 Earnings Release

Netflix Inc – Q2 2015 Earnings Release

 

Thursday 16^th July

BB&T Corp – Q2 2015 Earnings Release

Citigroup Inc – Q2 2015 Earnings Release

eBay Inc – Q2 2015 Earnings Release

Goldman Sachs Group Inc – Q2 2015 Earnings Release

Google Inc – Q2 2015 Earnings Release

Sports Direct International PLC – Full Year 2014 Earnings Release

 

Friday 17^th July

General Electric Co – Q2 2015 Earnings Release