12.06.15 Friday Morning

Eurozone
It’s been yet another dramatic week in the Eurozone, with big losses, big gains, but frustratingly little movement on Greece.

Greece submitted a fresh proposal on Tuesday, a 7 page document cut down from the 47 pages provided the week before; the negative reaction from anonymous EU officials was swift and accurate, with Tsipras and co. only appearing to add insult to injury with the proposal’s brevity and lack of concession to creditors’ demands. The overall bearish tone emanating from the Eurozone, with a wave of unsuccessful meeting between varying members of the region’s key institutions and countries, pushed the DAX to 3 month lows by the end of Tuesday.

However, there were brief signs of hope just before Wednesday’s close, with a Bloomberg report that Germany was ready to compromise with Greece and give the country a staggered aid deal in return for just one immediately implemented reform helping to boost the already impressive gains seen in the Eurozone as investors decided the region had been oversold. This swell of positivity continued throughout most of Thursday, despite the S&P downgrading Greece’s credit rating, with the region on track to recover the past week and a half’s losses. However, late in the day comments from the IMF, who withdrew its negotiating team from Brussels after stating that ‘major differences’ remained between the institution and Greece cut these gains in half, and pushed the Eurozone back in the red by Friday morning.

Next week brings with it the latest Eurogroup meeting on June 18th, an important deadline in a month full of them. Head of the group Jeroen Dijsselbloem has repeatedly stated that a deal could be made by the 18th if Greece provided a worthy proposal, and if one materialised if would leave enough time before the end of June for a substantial solution to be hashed out. However given the state of play at the end of this week there is currently little to suggest a change in tact from Greece in time for the meeting. Elsewhere the Eurozone will see a speech by Mario Draghi on Monday alongside ZEW economic sentiments on Tuesday, inflation data on Wednesday, targeted LTRO on Thursday and a set of ECOFIN meetings on Friday.

UK
The FTSE spent the week on the leash of the Eurozone, following its continental cousin up and down based on the movements in Greece. It didn’t help that it was a quiet week of data, with only a dismal manufacturing production figure and stronger industrial data being revealed. Elsewhere HSBC announced it was to cut thousands of jobs in a cost saving move that hints that it could leave its UK HQ by the end of the year, whilst George Osborne revealed that the government is preparing to sell its stake in RBS.

Next week should bring with its slightly more UK-inspired FTSE movements, as the latest inflation figures are revealed on Tuesday, with a flurry of jobs data released on Wednesday and retail sales on Thursday. The FTSE could do with a string of positive figures to shake it from its Eurozone dependency, so it will be interesting to see whether it gets what it desires.

US
Whilst issues surrounding Greece have been the dominant discourse this week, and they certainly have had their effect on the US markets, there is also the case of the Fed rate hike debate, a story that has rumbled on throughout the week. Following the strong non-farm figure last Friday extra scrutiny was on the US data released this week, and by and large, they all performed. Very strong retail sales and flat jobless claims added extra fuel to the hawk argument, with PPI and UoM consumer sentiment to come on Friday afternoon.

This intermittently helped the dollar and limited the Dow’s gains, something complicated by a surprisingly robust performance by the euro despite the ongoing issues in the Eurozone. The change in sentiment on Wednesday helped the Dow Jones recapture some of its losses, but the reversal that came following the IMF warning left the US futures looking slightly ropey on Friday morning.

The rate hike debate should gain extra focus next week; housing data, Empire State and Philly Fed manufacturing indices and inflation data will all be of interest. However, they pale in comparison to the hubbub that will surround the Fed’s economic projections announced on Wednesday evening, which should bring with it more clarity on the state of the interest rate debate.

Commodities
After slipping slightly last week, Brent Crude managed to grow back to $65 per barrel this week, with attempts to creep above this level proving unsuccessful. Copper, on the other hand, had a slightly more tumultuous week, falling to its lowest price since the end of April following more mixed data from China. Finally gold has had a rather varied week, rising to $1192 per ounce at points on Wednesday before slipping back to a rather less exciting $1179 as the dollar’s fortunes rose and fell.

Stock of the week: Vedanta Resources PLC
In a mixed week for the UK’s mining sector, Vedanta Resources showed surprising resilience to post notable gains on Tuesday and Wednesday, alongside periods of Thursday and Friday. Investors have really gotten on board with the Indian subsidiary merger murmurs surrounding Vedanta, which would see the parent company subsume Cairn India and Vedanta Ltd in order to restructure debt and open up funds that may otherwise be unavailable to certain units. This has caused Vedanta to gradually creep up to its highest price since the end of May.

(Source: IT-Finance.com 12/06/2015)

Economic Diary, 15^th to 19^th June 2015

 

Monday 15^th June

8.00am – EUR German Buba President Weidmann Speaks

10.00am – EUR Trade Balance

1.30pm – USD Empire State Manufacturing Index

2.00pm – EUR ECB President Draghi Speaks

2.15pm – USD Capacity Utilization Rate

2.15pm – USD Industrial Production m/m

3.00pm – USD NAHB Housing Market Index

 

Tuesday 16^th June

7.00am – EUR German Final CPI m/m

9.30am – GBP CPI y/y

9.30am – GBP PPI Input m/m

10.00am – EUR German ZEW Economic Sentiment

1.30pm – USD Building Permits

1.30pm – USD Housing Starts

 

Wednesday 17^th June

9.30am – GBP Average Earnings Index 3m/y

9.30am – GBP Claimant Count Change

9.30am – GBP Unemployment Rate

10.00am – EUR Final CPI y/y

3.30pm – USD Crude Oil Inventories

7.00pm – USD FOMC Economic Projections

7.00pm – USD FOMC Statement

7.00pm – USD Federal Funds Rate

7.30pm – USD FOMC Press Conference

 

Thursday 18^th June

All Day – EUR Eurogroup Meetings

9.00am – EUR ECB Economic Bulletin

9.30am – GBP Retail Sales m/m

10.15am – EUR Targeted LTRO

1.30pm – USD CPI m/m

1.30pm – USD Core CPI m/m

1.30pm – USD Unemployment Claims

1.30pm – USD Current Account

3.00pm – USD Philly Fed Manufacturing Index

 

Friday 19^th June

All Day – EUR ECOFIN Meetings

9.30am – GBP Public Sector Net Borrowing

Earnings releases, 15^th to 19^th June 2015

 

Monday 15^th June

Majestic Wine PLC – Full Year 2015 Earnings Release

Lakeland Industries Inc – Q1 2016 Earnings Release

 

Tuesday 16^th June

FactSet Research Systems Inc – Q3 2015 Earnings Release

 

Wednesday 17^th June

Oracle Corp – Q4 2015 Earnings Release

Pier 1 Imports Inc – Q1 2016 Earnings Release

 

Thursday 18^th June

Poundland Group PLC – Full Year 2014 Earnings Release

 

Friday 19^th June

Darden Restaurants Inc – Q4 2015 Earnings Release