14.02.14 Friday Morning

Global bourses received another weekly recovery as investors searched for cheap stock following the global sell-off a few weeks back. With a relatively light economic calendar, market participants focused on a number of Central Bank speeches to try gauge how interest rates and stimulus could be treated in the future.

With data from China being one of the culprits causing the sell-off a fortnight ago, the importance of good data this week was vital. Chinese shares were lifted at the beginning of the week following speculation that Lunar New Year sales were strong. Chinese trade data showed exports rose 10.6% in January compared to a year earlier, accelerating from a 4.3% advance from the previous month. Although a better-than-expected figure would be warmly welcomed, the sharp rise could be due to distortions from the Lunar New Year holidays. Chinese CPI also marginally beat expectations helping the regional index head for its longest streak of gains since late 2013.

The new head of the Federal Reserve, Janet Yellen made her first testimony to Congress on Tuesday, with market reacting positively with the S&P gaining 1 percent after she spoke. Yellen mentioned that the US employment market is “far from complete” and the US central bank is likely to continue reducing or tapering its monthly bond-buying stimulus programme at a measured pace. She also played down concerns that the US economy has hit a soft patch, as shown by the last two unemployment reports.

Sterling has performed well this week, posting new multi-year highs against the dollar following comments from Band of England Governor Mark Carney. Carney, who presented his latest growth, inflation and unemployment forecasts on Wednesday, stressed the economy will not withstand an interest rate increase triggering a rise in mortgage repayments for millions. With unemployment falling faster than expected and favouring manufacturing, production and service sectors, the BOE increased UK growth forecasts from 2.8% to 3.4% for the year.

Global shares gave up some of their weekly gains towards the end of the week, with European shares dragged lower following a number of disappointing updates from blue-chip companies. Rolls-Royce and Tate & Lyle battled for the worst FTSE 100 decliner on Thursday, with shares in RR dropping 16 percent after it emerged US and European spending cuts would halt profit growth in 2014. TATE dropped 15 percent after the sweetener-maker warned on profits, blaming weak sales in developed markets. Over in the US, Cisco Systems and Whole Foods dropped 4% and 7% during Thursday trading following a miss in earnings whilst Time Warner Cable was up 11% after Comcast Corp agreed to acquire the cable company for $45.2bn. With the Dow Jones opening down 100 points, a late rally allowed the Dow Jones to close 64 points higher, erasing all the sessions loses.

Although there are quite a few undesirable points to take from this week, markets remain buoyant as the negativity is overshadowed by comments from Central Banks. With the Federal Open Market Committee meeting minutes next week, this could build on the points raised during Yellen’s statement early this week. World financial leaders will reunite next weekend for the G20 meeting in Sydney, focusing on ways to boost global economic growth. However, officials have mentioned that developments could be surpassed by emerging market concerns over US monetary policy.

Stock of the week – Barclays
Shares in Barclays opened at 276.95, slightly higher from the previous days before dropping to 255 (down 7%) by 10:00. Barclays reported full-year profit that missed analyst estimates as litigation and compensation charges eroded profits. Adjusted pre-tax profit for 2013 was £5.2 billion, 26 percent lower than 2012 figures, missing the £5.4 billion consensus. Barclays also mentioned they would cut between 10,000 and 12,000 jobs this year, including 7,000 in the UK whilst the bonus pot increased by 10%.

Economic calendar:

 

Monday

• EUR Eurogroup Meetings
• USD Bank Holiday

Tuesday

• AUD Monetary Policy Meeting Minutes
• JPY Monetary Policy Statement & BOJ Press Conference
• GBP CPI
• EUR ZEW Economic Sentiment

Wednesday

• GBP Claimant Count Change, MPC Official Bank Rate Votes, Unemployment Rate
• USD Building Permits & PPI
• USD FOMC Meeting Minutes

Thursday

• CNY HSBC Flash Manufacturing PMI
• EUR French & German Flash Manufacturing PMI
• USD Core CPI & Unemployment Claims
• USD Philly Fed Manufacturing Index
• USD Fed Chair Yellen Testifies

Friday

• G20 meeting
• USD Existing Home Sales 

Earnings:

 

Monday

• n/a

Tuesday

• Intercontinental Hotel Group – earnings release

Wednesday

• Monitise – earnings release
• Sports direct International – Interim Management Statement

Thursday

• Centrica – Earnings Release
• Micro Focus – Interim Management Statement

Friday