15.08.16 Monday Morning

Following a series of summer lull-suffocated, though admittedly high-hitting, sessions can the markets produce something a bit more exciting this week?

UK
Climbing above 6900 for the first time since May 2016 last week was a pretty good one for the FTSE, even if it provided investors with little beyond slowing manufacturing production and a widening goods trade deficit.

This week things should be a little bit busier, with a few truly post-Brexit vote figures that is could give the FTSE a clearer, or at least more accurate, sense of direction. In that regard Tuesday is arguably the most important day for data, with the inflation reading for July; considering what happened to the pound in the aftermath of the referendum this figure could well shoot to its highest level in a while. The jobs report on Wednesday is slightly less useful, with the wage growth and unemployment rate figures covering June not July; the claimant count change, however, is for the latter month, meaning it could get a rare moment in the spotlight. Thursday then provides investors with a glimpse into Britain’s consumer confidence with July’s retail sales, following by that month’s public sector net borrowing reading on Friday.

In terms of earnings there are slim pickings, though following last week’s reveal that housing prices grew at their slowest rate for 3 years across July investors may well be interested in the half year reports of Bovis Homes (see below) and Balfour Beatty on Monday and Wednesday respectively. Elsewhere BHP Billiton reveals its full year figures on Tuesday, while KAZ Minerals and Premier Oil produce their interim reports on Thursday.

US
It was a quiet one for the US last week, though this didn’t stop the Dow Jones once again crawling past the 18600 mark. Like in the UK this week should give American investors a bit more to play with; things kick off with the Empire State manufacturing index reading on Monday, before a cavalcade of data on Tuesday with the latest inflation number complimented by building permits, housing starts, capacity utilization rate and industrial production readings. Wednesday is relatively quiet in comparison, though does see the FOMC meeting minutes from July released in the evening, while US week effectively wraps up on Thursday with the Philly Fed manufacturing index alongside the usual jobless claims.

Earnings-wise we are firmly on the other side of the busy season, with major releases coming in trickles more than waves. On Tuesday Urban Outfitters reveals its second quarter update, while there are Q2 reports from megastores Target and Staples on Wednesday and Gap on Thursday.

Eurozone
With German GDP falling to 0.4% in Q2, and Italian growth grinding to a halt, last Friday was a rather sour note to end a relatively strong week for the Eurozone indices. This week could see the region struggle under the weight of more bad news, with the German and Eurozone-wide ZEW economic sentiment readings (which were shockingly bad last month) on Tuesday, the latest inflation figures on Thursday and the German PPI on Friday.

Stock of the week: Bovis Homes Group PLC – Half Year 2016 Earnings Release
While not the first company to update in the aftermath of the Brexit result, just under a fortnight after the referendum Bovis Homes released a trading statement with the intention of reassuring investors about the state of its business. The firm revealed it built a record number of homes in the first half of the year, up 5% to 1601, with a 15% surge in average sale price to £255k, while also claiming that it was ‘too early to assess the impact of the EU referendum on the UK housing market’.

That reasoning likely won’t hold water this time around, with the Bovis Homes now having had more than a month to see if there has been any post-Brexit impact. The latest figures from the sector would suggest there has been, with housing prices growing at their slowest pace for 3 years across July. The company, then, will be under pressure to deliver a more comprehensive statement on the effects of the referendum result, something that will matter far more to investors than the now somewhat irrelevant first half figures.

 

(Source: IT-Finance.com 12/08/2016)