Weekly Trading Update
15.08.14 Friday Morning
After last week’s geopolitical concerns, the European markets opened higher in the absence of further negative developments over the weekend. Although geopolitical factors were still dominant in trader minds, the big economic news of the beginning of the week was the ZEW Indicator of Economic sentiment for Germany which declined drastically this month. The indicator lost 18.5 points, falling for the 8th consecutive month and its strongest decline since June 2012.
The figures for the last quarter from the Average Earnings Index were released on Wednesday, which were down 0.2% on previous quarter and 0.1% lower than forecast. This is the first drop in pay since 2009. In contrast, the unemployment figures dropped 0.1% to the lowest figure since late 2008. Bank of England Governor Mark Carney told reporters in London that policy makers are focusing on wages, and share a similar view to investors on the path of interest rates being “gradual and limited.” The bank now projects pay growth of 1.25 percent in the fourth quarter, down from an earlier estimate of 2.5 percent.
US Retail Sales also disappointed failing to meet expectations of a 0.2% increase, showing unchanged at 0.0%, the weakest performance in six months. What was more concerning was that Core Retail Sales (which filters out big ticket automobile purchases and is more closely watched by policymakers) came in at just 0.1% m/m against expectations of a 0.4% rise.
Thursday brought about more negative news from the Eurozone as both the French Prelim remained stagnant at 0.0%, and the German GDP shrank 0.2%, undercutting Bundesbank forecasts that GDP would be unchanged. This is the first time that the German economy has shrunk since 2013, and it is the second quarter in a row in which the French GDP has shown no growth. German Economy Minister Sigmar Gabriel blamed his country's slowdown on threats from Eastern Europe and the Middle East, and a weaker euro zone.
The markets however have been buoyed following Russian President Vladimir Putin’s speech on Thursday calling for an end to the disputes with Ukraine and the rest of Europe. In addition, Iraqi Prime Minister Nouri al-Maliki has stepped down after finally accepting the candidacy of Haider al-Abadi, nominated by the Iraqi President last week. He had initially disputed the appointment, claiming the nomination violated the constitution, however he has finally stepped aside and ended legal proceedings that he had started earlier in the week.
Stock of the week: Balfour Beatty
Having rejected merging with Carillion twice, Balfour have organized the sale of PB at an attractive price which is important to put the group back onto a sound footing. The sale should happen before the end of the year for c.£600m meaning net debt reduction and shareholder returns of up to £200m are in line with previous estimates. Net average debt will be around £450 - 460m up from £400m previously, reflecting UK Construction outflow plus higher working capital requirements in Professional and Support Services.
Open (Monday)
6604.2
Close (Thursday)
6694.2
Change
1.4%
High
6693
Low
6591.3
Open (Monday)
16553.5
Close (Thursday)
16706.5
Change
0.92%
High
16719.5
Low
16515.5
Open (Monday)
1.6778
Close (Thursday)
1.6685
Change
-0.5%
High
1.6836
Low
1.6658
Open (Monday)
1310.75
Close (Thursday)
1314.05
Change
0.25%
High
1320.35
Low
1306.05
Earnings calendar:
Monday
- Amlin PLC – half year earnings release
- Clarkson PLC – half year earnings release
Tuesday
- Cairn Energy PLC – half year earnings release
- Bhp Billiton PLC – full year earnings release
- John Wood Group PLC – interim earnings release
- Home Depot – earnings
Wednesday
- Hikma Pharmaceuticals PLC – half year earnings release
- Hochschild Mining PLC – half year earnings release
- Staples – earnings
- Target –earnings
Thursday
- Kazakhmys – half year earnings release
- Quindell PLC – half year earnings release
- Salesforce – earnings
Friday
Economic calendar:
Monday
- Consumer Confidence
- Retail Sales
Tuesday
- German ZEW Economic Sentiment
Wednesday
- Average Earnings Index
- Unemployment Rate
Thursday
- House Price Balance
- French Prelim GDP
- German Prelim GDP
Friday
- French & Italian Bank Holiday
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