15.02.13 Friday Morning

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Investors this week have been gearing up towards today’s G20 summit in Moscow with the topic of currency wars set to be the main talking point. So far, G20 leaders have pledged to avoid currency devaluation, leaving it up to the market to decide the exchange rate.

However, with Japan keen on spurring economic stimulus measures, which will prompt further yen weakness, traders are worried that G20 leaders will be divided over the issue which may lead some central banks to interfere with FX rates in order to stem the rising price of their domestic exports that could ultimately derail the nascent recoveries.

The week started out rather tentatively with European markets swaying from gains to losses given a lack of economic data to act as a catalyst. U.S. stocks meanwhile fell off as investors took a pause for breath following the S&P 500’s longest stretch of weakly gains since last April.

European stocks did start to pick up pace as the week progressed with investors reacting by raising risk exposure following recent weakness in global equities. Inventor’s erred on the side of caution however after Moody’s lowered its growth outlook for some of the world’s biggest economies including; U.S, U.K, Germany and Japan.

A sense of doom and gloom has slowly developed towards the end of the trading week with the Euro slipping further against the Dollar as grim growth figures from the euro zone indicated the deepest rate of contraction in nearly 4 years.

Traders shifted from the risky assets entered earlier on in the week to the safety of core government bonds. With Italian elections on the horizon, it is encouraging to see that demand for Italian bonds remains relatively healthy with the country selling close to its maximum target range.

Euro zone Q4 GDP fell 0.6% against the previous quarter (worse than the expected 0.4%). Whilst contraction was expected, it was the drop in the core eurozone economies that rattled sentiment as it was an indication that the European peripheral crisis has been eroding the core’s growth.

Despite business and confidence indicators from Germany picking up since the start of the year, along with manufacturing activity from the eurozone, markets are concerned that Q1 GDP may now be more vulnerable than previously thought. Any significant pickup within the region could be pressured throughout the year.

Next Week’s Notable UK Dividends:

• Tuesday - Intercontinental Hotels Group preliminary 2012 earnings release.
• Tuesday – Drax Group preliminary 2012 earnings release.
• Wednesday – Rathbone Brothers preliminary 2012 earnings release.
• Wednesday – RSA Insurance Group preliminary 2012 earnings release.
• Wednesday – BHP Billiton interim 2012 earnings release.
• Wednesday – Galliford Try interim 2012 earnings release.
• Thursday – Lancashire Holdings Q4 2012 earnings release.
• Thursday – Kingfisher Q4 trading update.
• Thursday – Filtrona full year 2012 earnings release.
• Thursday – Mondi preliminary 2012 earnings release.
• Thursday – Ashmore Group interim 2013 earnings release.
• Thursday – CSR Q4 & full year 2012 earnings release.
• Thursday – Go-Ahead interim 2012 earnings release.
• Thursday – Ladbrokes preliminary 2012 earnings release.

*One’s in bold are FTSE 100

Next Week’s Notable Economic Data:

• Monday – ECB president Draghi speaks.
• Tuesday – German ZEW economic sentiment.
• Wednesday – GB MPC meeting minutes.
• Wednesday – FOMC meeting minutes.
• Thursday – Spanish 10-year bond auction.
• Thursday – US unemployment claims.
• Friday – German Ifo business climate.