16.01.15 Friday Morning

Europe
The biggest news of the week came on Thursday, as the Swiss National Bank removed its EUR/CHF currency peg and introduced -0.75% interest rates in yet another sign that ECB QE is on its way. The markets exploded in the initial aftermath of the announcement, with both EUR/CHF and the USD/CHF down 25%. This stabilised afterwards, but nevertheless the Swiss caught a lot of people unaware. This news came after already significant hints that QE was on its way, after the European Court of Justice confirmed the legality of the ECB’s OMT plan. The Eurozone indices had a fairly erratic week with the region’s current instability causing waves on the markets.

Next week looks set, in theory, to bring to an end to months of speculation over the ECB’s QE plans, whilst also potentially introducing an entire new set of issues for the Eurozone. The ECB meet on the 22nd January for a summit that has gained an almost untenable amount of expectation. It will be interesting to see how the markets react to this conference, and whether any QE plans announced will be seen as enough of a big step by Draghi and co. Following this is the Greek election on the 25th January, which will bring with it the possibility of a ‘Grexit’ and further volatility for Europe, especially in the case of a Syriza victory.

UK
The UK’s fall in inflation earlier in the week was thoroughly overshadowed by the SNB currency decision. This fall was spun as both positive and negative, with the former pointing to the savings it indicates for consumers, whilst the latter highlighted how these consumer benefits weren’t the result of government strategy but the unforeseen decline of oil.

Speaking of the black stuff, the FTSE managed to finally factor in oil’s fall and its effects on energy-stocks, only to be dragged down in the decline of copper following the World Bank slashing global forecasts. The FTSE’s mining stocks replicated the losses in the energy-sector as the UK index became enslaved to a new commodity. However, as both oil and copper stabilised slightly at the end of the week, the FTSE was allowed to post minor gains by Friday morning. The FTSE will be watching the Eurozone carefully next week, as the UK’s role in the EU means any stimulus for the region will have knock on effects for Europe as a whole. It will also deal with its own average earnings data; a sore point for the UK after wages struggled to grow in the past few months.

US
As well as being hampered by an inconsistent and volatile Europe, the USA failed on home turf. As its retail sales fell, PPI was flat and unemployment claims grew. The Dow Jones suffered 5 days of losses in a row for the first time since January 2014, and with CPI to be announced Friday afternoon, this trend doesn’t look set to change. The dollar’s struggles against the Swiss franc also caused the greenback to incur losses against other currencies, further exacerbating a disappointing week for the US markets. With the focus set to be on Europe next week, the USA looks set for a comparably quiet week as it sees a Bank Holiday on Monday, with only more unemployment claims figures, alongside building permits and housing starts of major significance.

Commodities
It was a choppy weak for commodities, as oil hit new lows with Brent Crude hovering around $45 per barrel, only to rebound by the end of the week to around $49. The commodity showed surprisingly resilience even rebounding that far, after its forecasts were cut to $50 from $83 per barrel for 2015 by Goldman Sachs, as well as being hit by higher-than-expected US crude oil inventories and an IEA comment that said oil’s floor was ‘anyone’s guess’.

There was also a lot of movement in metals, as copper plunged to 6 year lows following a World Bank forecast that indicated a less than healthy industrial environment. Yet, like oil, the metal had managed to stabilise somewhat by the end of the week. Gold, on the other hand, was a rare winner after the SNB decision as it regained its status as a strong alternative investment.

With the ECB QE decision set to cause more troubles for the euro, gold will become a more attractive prospect for investors in contrast to the unstable forex market. And, as has been seen of late, no-one can predict the long term, or even short term, future for oil, as it readies itself for another US crude inventory next week.

Stock of the week: Afren PLC
After struggling recently following boardroom embarrassments and the protracted saga of oil’s decline, Afren saw a turnaround this week after news of a possible merger with Nigeria’s Seplat. Towards the end of the week the stock was up nearly 17% on the back of this news, despite the confirmation that a recent exploration culminated in a dud well. It remains to be seen if Afren can maintain this growth without more news to fuel the bullish sentiment.

Economic Diary, 19^th-23^rd January 2015:

 

Monday 19^th January

8.15am – CHF PPI m/m

11.00am – EUR German Buba Monthly Report

All Day – USD Bank Holiday

 

Tuesday 20^th January

2.00am – CNY GDP q/y

10.00am – EUR German ZEW Economic Statement

11.00am – GBP CBI Industrial Order Expectations

3.00pm – USD NAHB Housing Market Index

 

Wednesday 21^st January

Tentative – JPY Monetary Policy Statement

Tentative – JPY Bank of Japan Press Conference

9.30am – GBP Average Earnings Index 3m/y

9.30am – GBP Claimant Count Change

9.30am – GBP MPC Official Bank Rate Votes

9.30am – GBP Unemployment Rate

1.30pm – USD Building Permits

1.30pm – USD Housing Starts

3.30pm – USD Crude Oil Inventories

 

Thursday 22^nd January

8.00am – EUR Spanish Unemployment Rate

9.30am – GBP Public Sector Net Borrowing

12.45pm – EUR Minimum Bid Rate

1.30 pm – EUR ECB Press Conference

1.30pm – USD Unemployment Claims

 

Friday 23^rd January

1.45am – CNY HSBC Flash Manufacturing PMI

8.00am – EUR French Flash Manufacturing PMI

8.30am – EUR German Flash Manufacturing PMI

9.00am – EUR Flash Manufacturing PMI

9.30am – GBP Retail Sales m/m

2.45pm – USD Flash Manufacturing PMI

3.00pm – USD Existing Home Sales

 

Earnings releases, 19^th-23^rd January 2015:

 

Monday 19^th January

Greene King PLC – Trading Statement for the 36 weeks to 11 January 2015

Rio Tinto PLC – Q4 2014 Earnings Release

 

Tuesday 20^th January

Unilever PLC – Q4 & FY 2014 Earnings Release

IG Group Holdings PLC – Half Year 2015 Earnings Release

William Hill PLC – Q4 2014 Trading Statement Release

Halliburton Co – Q4 2014 Earnings Release

Morgan Stanley – Q4 2014 Earnings Release

Netflix Inc – Q4 2014 Earnings Release

 

Wednesday 21^st January

Poundland Group PLC – Q3 2014 Interim Management Statement Release

Halfords Group PLC – Q3 2014 Interim Management Statement Release

SanDisk Corp – Q4 2014 Earnings Release

eBay Inc – Q4 2014 Earnings Release

 

Thursday 22^nd January

BB&T Corp – Q4 2014 Earnings Release

Southwest Airlines Co – Q4 2014 Earnings Release

Starbucks Co – Q1 & FY 2015 Earnings Release

 

Friday 23^rd January

General Electric – Q4 & FY 2014 Earnings Release