16.08.13 Friday Morning

The FTSE 100 is up around 12 percent year-to-date but has struggled to make much headway since the start of August as investors fret about a possible reduction of British and U.S. monetary stimulus in the coming months.
 

U.S headline indices are more than likely to end the week in the red again (along with European indices), adding to last week’s considerable losses. Whilst a slowdown in the Japanese economy has been cited as a reason behind the sell-off, the realisation that the Fed will most likely trim their monthly bond purchases to $65 billion when they next meet to discuss monetary policy on Sept 18th has begun to take its toll. After yesterday's unexpected drop in US jobless claims, talk of an imminent reduction has been further fuelled.
 

Asian shares have struggled to add considerable gains this week with the MSCI up 0.3 percent amid mixed corporate earnings across the region. Sony was one of the notable poor performers, sliding around 6 percent as Japanese exporters continue to wrestle with a rising yen. Less than 50 percent of members that have reported earnings this season posted profits that beat analyst estimates.
 

Strength in the UK housing market had initially provided a boost to the FTSE 100 after The Royal Institution of Chartered Surveyors released data showing that UK house prices were rising at their fastest pace in seven years helping to lift overall investor sentiment. However, during trading on Thursday housing shares broadly plummeted after economists warned that the Help-to-Buy scheme could stoke a new property boom as more buyers start chasing sales with opportunistic landlords fuelling the recent market rebound.
 

Whilst house prices don’t feed directly into the Consumer Price Inflation measure, the resurgence in the housing market has done little to help lower inflation - (a measure the BOE seeks to lower before withdrawal of stimulus). Despite this, CPI eased slightly in July, helped by lower airfares and clothing costs. The consumer price index fell to 2.8 percent last month, down from 2.9 percent in June and in line with economists' forecasts.
 

Output at euro-zone factories rose broadly in line with expectations in June, driven by a jump in durable goods production; reinforcing expectations the bloc was on track to exit recession in the second half of the year. Industrial production in the 17 countries using the euro was up 0.7 percent in June from May slightly below analysts' expectations for a 0.8 percent increase.

With US stocks suffering their worst drop since June, investors will keep a close eye on developments within the Fed with certain members harbouring a sentiment that it would perhaps be more prudent to hold fire on stimulus withdrawal for now.
 

Stock of the Week - Glencore Xstrata PLC +2.4%

DJ Chinalco Mining is considering a bid for Glencore’s Las Bambas copper mine possibly worth somewhere in the region of $5B. Additionally, JP Morgan have confirmed a solid first half output with copper production up 20%, Coal production +22% & gold production +14%. Trading today at 304.35.

Next week’s notable UK earnings:

Tuesday –

• Cairn Energy Interim 2013 Earnings Release
• BHP Billiton Full Year 2013 Earnings Release

Wednesday –

• Hikma Pharmaceuticals Interim 2013 Earnings Release
• Hochschild Mining Interim 2013 Earnings Release

Thursday –

• Kazakhmys Interim 2013 Earnings Release
• Premier Oil Interim 2013 Earnings Release
• WH Smith Pre-Close Trading Update
• IMI Interim 2013 Earnings Release

Next week’s notable economic data:

Tuesday –

• AUD – Monetary Policy Minutes @ 02:30

Wednesday –

• USD – Existing Homes Sales @ 15:00
• USD – FOMC Meeting Minutes @ 19:00

Thursday –

• CNY – HSBC Flash Manufacturing Index @ 02:45
• EUR – French Flash Manufacturing PMI @ 08:00
• EUR – German Flash Manufacturing PMI @ 08:30
• CAD – Core Retail Sales m/m @ 13:30
• USD – Unemployment Claims @ 13:30

Friday –

• GBP – Second Estimate GDP q/q @ 09:30
• CAD – Core CPI m/m @ 13:30
• USD – New Home Sales @ 15:00