12.12.14 Friday Morning

Brent Crude Oil
Once again Brent Crude oil dominated the headlines this week, as it sunk to $63 per barrel by Friday. This news came as the US crude inventory figures showed strong US oil production were followed by an OPEC announcement that oil demand in 2015 is going to fall to lows not seen in a decade. This double damage dragged oil to its current levels, and, as has been said before, there is nothing in the future that looks like it will help oil recover, at least in the short term. Another strong showing from US crude oil inventories could see another oil drop; on the other hand, if the inverse is true, an oil production drop, however brief, may give the commodity a chink of hope.

UK
The FTSE looks set for its biggest weekly drop in 2 and a half years after a dismal week prompted by the ongoing oil situation. Energy companies like Tullow Oil, Petrofac and Enquest, among others, had a week of big losses due to Brent Crude’s continual decline, and the prevalence of the energy sector on the FTSE has meant that the UK index has suffered a week-long loss. This was compounded by disappointing manufacturing and industrial production alongside dismal construction output. 

Looking ahead, with oil’s future looking unlikely to get any better, the FTSE will be reliant on bullish sentiment stemming from the UK itself. Luckily, or perhaps unluckily if recent form is any indication, next week is a busy week for UK economic data, including bank stress test results, the Bank of England’s financial stability report, CPI, claimant count change and retails, alongside a host of other figures, all being announced. As mentioned, the UK’s current run of figures has been very disappointing; however, strong showing from the key announcements could see a reversal in fortune for the FTSE.

Europe
Overall the situation in the Eurozone has been just as bleak as that in the UK, with the DAX et al spending most of the week at a loss. The one anomaly was a bullish Thursday, which was inspired by the stalling of the ECB’s zero-cost loans to banks and the renewed pressure on Draghi and co to implement quantitative easing. However, as has been seen recently, these QE-inspired rallies in the Eurozone don’t have much staying power, and a flurry of disappointing figures, alongside the general gloomy global mood, caused the Eurozone’s indices to have a bearish week.

Next week sees manufacturing PMI figures from France, Germany and data from the Eurozone overall, alongside an EU economic summit. The Eurozone indices have tended to go one of two ways recently on the back of bad news; either gone done to the poor figures, or gone up due to the pressure these figures put on the ECB. However, in the long term these poor figures have always ended up hurting the Eurozone with no actual speeding up of the QE process, so they will be looking for better data next week than in recent times.

Japan
After breaching the 18000 level at the start of the week, the Nikkei spent much of the week receding from this figure, as the election loomed. However, in a boost to Shinzo Abe’s re-election hopes, the Nikkei closed Friday positively; alongside this, the dollar spent the week depreciating against the yen, giving a much needed boost to the Japanese currency. With Abe almost certain to win the election on Sunday, next week may see some volatility creep in due to the post-election frenzy, and the potential for Abe to ramp up his ‘Abenomics’ policies. However, once the post-election period is over, the Nikkei may see a return to stability by the end of next week.

US
The US opened the week with the Dow agonisingly close to the 18000 level, only a few points from reaching this target. However, like the rest of the world, the US markets were knocked for six by oil’s new lows, with the Dow shedding 400 points as the week went on. The target of 18000 will have to be shelved for now, but there were signs of positivity at the end of the week, as strong US data, including core retail sales and unemployment claims, meant that the Dow began to regain some of its losses.

If the Dow Jones stands a chance of reaching 18000 before the New Year, it will require another strong week of US data to combat the likelihood of oil’s prolonged slump. Next week sees building permits, a statement from the FOMC, alongside more unemployment claims and the Philly Fed manufacturing index; the US markets will be looking to these to instil a bullish sentiment in the Dow especially before Christmas.

Trading announcement: due to a shift in the opening times of the underlying market, our FTSE contracts will now only be tradable between 8am to 9pm.

Stock of the week: ASOS PLC
Despite a slight sales decline, ASOS had a strong week, growing by around 300 points to 2700 as the week went on. After its Q1 2015 earnings release, it looked like ASOS has recovered from its warehouse fire in June that burnt up £30 million in merchandise. And regardless of an initial drop in shares prices after the announcement, the youth-orientated clothing company has seen healthy growth on the markets this week.

Economic Diary, 15^th-19^th December 2014:

 

Monday 15^th December:

11.00am – GBP CBI Industrial Order Expectations

1.30pm – USD Empire State Manufacturing Index

2.15pm – USD Capacity Utilization Rate

2.15pm – USD Industrial Production m/m

 

Tuesday 16^th December:

1.45am – CNY HSBC Flash Manufacturing PMI

7.00am – GBP Bank Stress Test Results

8.00am – EUR French Flash Manufacturing PMI

8.30am – EUR German Flash Manufacturing PMI

9.00am – EUR Flash Manufacturing PMI

9.30am – GBP CPI y/y

10.00am – EUR German ZEW Economic Sentiment

10.30am – GBP BoE Gov Carney Speaks

1.30pm – USD Building Permits

 

Wednesday 17^th December:

9.30am – GBP Average Earnings Index 3m/y

9.30am – GBP Claimant Count Change

9.30am – GBP MPC Offical Bank Rate Votes

1.30pm – USD CPI m/m

1.30pm – USD Core CPI m/m

7.00pm – USD FOMC Economic Projections

7.00pm – USD FOMC Statement

7.00pm – USD Federal Funds Rate

 

Thursday 18^th December:

9.00am – EUR German Ifo Business Climate

9.30am – GBP Retail Sales

1.30pm – USD Unemployment Claims

3.00pm – Philly Fed Manufacturing Index

 

Friday 19^th December:

Tentative – JPY Monetary Policy Statement

Tentative – BoJ Press Conference

7.00am – GfK German Consumer Climate

9.30am – GBP EU Economic Summit

11.00am – GBP CBI Realized Sales

 

Earnings releases, 15-19^th December:

 

Monday 15^th December:

Carpetright PLC – Half Year 2014 Earnings Release

Verifone Systems Inc – Q4 2014 Earnings Release

FuelCell Energy Inc – Q4 2014 Earnings Release

 

Tuesday 16^th December:

Domino Printing Sciences PLC – Full Year 2014 Earnings Release

National Express Group PLC – Full Year 2014 Earnings Release

FactSet Research Systems Inc – Q1 2015 Earnings Release

Darden Restaurants Inc – Q2 2015 Earnings Release

 

Wednesday 17^th December:

Dixons Carphone PLC - Interim 7M 2014/2015 Earnings Release

General Mills Inc – Q2 2015 Earnings Release

Joy Global Inc – Q4 2014 Earnings Release

 

Thursday 18^th December:

Nike Inc – Q2 2015 Earnings Release

Red Hat Inc – Q3 2015 Earnings Release

ConAgra Foods Inc – Q2 2015 Earnings Release

 

Friday 19^th December:

Blackberry Ltd – Q3 Fiscal 2015 Earnings Release

Carmax Inc – Q3 2015 Earnings Release

Paychex Inc – Q2 Fiscal 2015 Earnings Release