15.05.15 Friday Morning

Eurozone
Greece once again dominated proceedings in the Eurozone, with a predictably unsuccessful Eurogroup meeting on Monday setting the tone for the rest of week. The European Bank of Reconstruction and Development warned that Greece could slip into a ‘major recession’ if a deal isn’t reached soon, signs of which are already appearing as the country’s GDP contraction led it into technical recession territory.

Things were made worse at the start of the week by the refreshed prominence of a potential ‘Brexit’ from the EU, with Michel Sapin effectively stating that Britain could hold its horses and wait until the region’s latest exit fears were sorted. However towards the end of the week Greece began to finally show signs of compromise with reports suggesting the country is in 'advanced talks' to privatise its largest port at Piraeus, signalling fresh hope for the much beleaguered negotiation process.

Add to this another set of worrying movements on the bond markets, yet again inspired by the German Bunds, and the Eurozone was awash with volatility. Even a wave of strong GDP data from the region couldn’t calm the choppy waters as a stronger euro played havoc with the markets, causing the DAX to alternate between 150 in losses and 250 in gains, sometimes within the same hour.

Looking ahead to next week and it’s hard to tell whether the Eurozone’s busy calendar is a blessing or a curse. More data in theory could add to the region’s instability; on the other hand, when left to its own devices things have been even worse. Regardless, the Eurozone will have to content with the latest ZEW economic sentiments, inflation data, a flurry of manufacturing and services PMIs and a few comments from Draghi for good measure.

UK
The FTSE was suffering somewhat of a post-election hangover at the start of this week, with the robust gains seen after the Tories surprise majority disappearing by Monday. Despite strong manufacturing and industrial production figures, as well as the lowest unemployment rate since 2008 and healthy wage growth, the volatility in the Eurozone crept over to the UK and prevented the FTSE from matching last Friday’s surge. This was exacerbated by the Bank of England slashing the UK’s growth forecasts for both 2015 and the next couple of years, with Mark Carney dovish on the chances of an interest rate rise.

However, with cable touching a 6 month high on Thursday things began to turn around, and come Friday morning the FTSE was tickling 7000 once more. Next week has some big figures on the horizon, the most important of which will be the latest inflation data released on Tuesday; retail sales and fresh comments from Carney come towards the end of the week.

US
A strong performance on Wednesday and Thursday helped the US markets overcome their start of the week stagnation, culminating in the S&P hitting a record high. In line with recent trends the USA’s data this week was incredibly mixed; the markets saw a big miss in PPI countered by improved jobless claims figures, whilst JOLTS jobs openings slipped and retail sales crumbled.

Yet this doesn’t paint the entire picture, and investors’ wariness of a stronger dollar and the current interest rate debate meant that negative data was often treated with joy as the greenback capitulated in the face of the pound and the euro. This meant that, despite a week of less than desirable data, the S&P high those aforementioned highs with the Dow Jones perilously close to breaking its own record.

Like in the UK and Eurozone, inflation will be the main focus next week, with the USA’s latest CPI figure arriving on Friday. Leading up to that will, of course, be Thursday’s jobless claims data, with Philly Fed manufacturing figures, building permits, housing starts and NAHB housing market index numbers sprinkled throughout the week.

Commodities
Brent Crude is still looking relatively stable, despite slipping as the week went on, with another low US crude oil inventories figure helping to support the commodity’s post-$65 per barrel level. In fact, at points this week Brent was a whisker away from $70; regardless, Brent has a major plunge in a while now, even if OPEC feels the commodity will stay below $100 per barrel for the next decade.

The dollar’s loss has been gold’s gain as the week went on, with the precious metal rising from $1188.95 at the start of the week to $1218 by Friday. Gold actually reached highs of $1227.25 during Thursday amidst robust growth from the euro against the pound. Copper had a similarly good, if incredibly flat week, with a decent Chinese industrial production figure allowing the metal to maintain its post-$2.92 per pound price.

Stock of the week: SABMiller PLC
It was a busy week for SABMiller. On Wednesday the world’s second largest brewer announced its full year 2015 results, and things were largely positive. Despite a 2% slip in revenue, when an organic constant currency basis is factored in that figure changed to 5% in gains. Beer volumes were flat in US and China but helped by growth in Africa and Latin America, whilst soft drinks volume increased by 8%. After 2.5% in losses before the announcement on Tuesday, following the better than expected results on Wednesday the stock was back up 2.7% by Thursday’s close.

On Friday SABMiller then announced its plans to purchase small craft beer brewer Meantime, a company whose sales grew by 58% in 2014. The move makes sense for both companies: for SAB, Meantime allows the brewer to borrow the current cultural cachet craft beers carry whilst adding another premium ale string to its beer bow in the shape of Meantime’s London Pale Ale; for Meantime, SAB will allow the Greenwich-based brewer to expand more robustly into Europe. This news clearly pleased investors as SABMiller jumped up by nearly a percent after the bell.

(Source: IT-Finance.com 15/05/2015)

Economic Diary, 18^th to 22^nd May 2015

 

Monday 18^th May

7.00am – USD FOMC Member Evans Speaks

3.00pm – USD NAHB Housing Market Index

 

Tuesday 19^th May

9.30am – GBP CPI y/y

9.30am – GBP RPI y/y

10.00am – EUR German ZEW Economic Sentiment

10.00am – EUR Final CPI y/y

10.00am – EUR ZEW Economic Sentiment

1.30pm – USD Building Permits

1.30pm – USD Housing Starts

 

Wednesday 20^th May

12.50am – JPY Prelim GDP q/q

8.00am – USD FOMC Member Evans Speaks

9.30am – GBP MPC Official Bank Rate Votes

2.45pm – USD Flash Manufacturing PMI

3.30pm – USD Crude Oil Inventories

7.00pm – USD FOMC Meeting Minutes

 

Thursday 21^st May

8.00am – EUR French Flash Manufacturing PMI

8.00am – EUR French Flash Services PMI

8.30am – EUR German Flash Manufacturing PMI

8.30am – EUR German Flash Services PMI

9.00am – EUR Flash Manufacturing PMI

9.00am – EUR Flash Services PMI

9.00am – EUR Current Account

9.03am – GBP Retail Sales m/m

11.00am – GBP CBI Industrial Order Expectations

12.30pm – EUR Monetary Policy Meeting Accounts

1.30pm – USD Unemployment Claims

3.00pm – EUR Consumer Confidence

3.00pm – USD Philly Fed Manufacturing Index

3.00pm – USD Existing Home Sales

 

Friday 22^nd May

12.00am – USD FOMC Member Williams Speaks

9.00am – EUR German Ifo Business Climate

9.30am – GBP Public Sector Net Borrowing

1.30pm – USD CPI m/m

1.30pm – USD Core CPI m/m

 

Earnings releases, 18^th to 22^nd May 2015

 

Monday 18^th May

Take-Two Interactive Software Inc – Q4 2015 Earnings Release

Urban Outfitters Inc – Q1 2016 Earnings Release

 

Tuesday 19^th May

Bloomsbury Publishing PLC – Full Year 2014 Earnings Release

Big Yellow Group PLC – Full year 2014 Earnings Release

Wal-Mart Stores Inc – Q1 2016 Earnings Release

Vodafone Group PLC – Full Year 2014 Earnings Release

 

Wednesday 20^th May

Target Corp – Q1 2015 Earnings Release

Staples Inc – Q1 2015 Earnings Release

Burberry Group PLC – Preliminary 2014/15 Earnings Release

Thomas Cook Group PLC – Half Year 2014/15 Earnings Release

Marks & Spencer Group PLC – Full year 2014/15 Earnings Release

 

Thursday 21^st May

Gap Inc – Q1 2015 Earnings Release

Hewlett-Packard Co – Q2 2015 Earnings Release

Best Buy Co Inc – Q1 2016 Earnings Release

 

Friday 22^nd May

Campbell Soup Co – Q3 2015 Earnings Release

Foot Locker Inc – Q1 2015 Earnings Release