16.05.16 Monday Morning

With the Bank of England rendered inert by the pre-EU referendum uncertainty, and the Federal Reserve continually hampered the faltering US economy, will the central banks find something to cheer about in an inflation-heavy week of data?

UK
Following on from a Bank of England ‘Super Thursday’ that saw Mark Carney ruffle more than a few feathers as he waded into the great Brexit debate of 2016, sparking a decline that saw the index at points near 2 month lows, the FTSE will hoping for a more productive time of it as the week gets underway.

Things get off to a rather dull start on Monday, before ramping up significantly on Tuesday with the release of April’s inflation figures. Last month saw the UK hit 0.5% for the first time in over a year, so investors will be keen to see if that increase was an anomaly or a sign of a nascent recovery. Wednesday then puts the FTSE front and centre as the latest UK jobs report is revealed; wage growth will likely be the focus having slumped to a 15 month low of 1.8% last month, though if the unemployment rate can finally dip down to 5.0% any earnings-issues may be temporarily forgiven. Thursday slows down somewhat, though with the recent collapse of BHS one imagines there will be plenty of chatter around the UK retail sales, before Friday brings the week to a close with a whimper, the only number of note being the CBI industrial order expectations.

In terms of earnings the week offers up more than a few British classics. Tuesday sees the perpetually unpopular mobile network Vodafone divulge its full year figures, whilst Wednesday will give investors a chance to see how Burberry is coping with the Chinese slowdown when the company posts its preliminary trading statement. Thursday then brings a trio of big names, with a perky Royal Mail delivering its full year report, a struggling Thomas Cook showing its half year statement (see below) and a troubled Mothercare revealing its latest update.

US
A general dearth of interesting information prevented the Dow Jones from gaining much traction last week, the index failing to crawl back to recent 2016 (and 18000-plus) highs. This week should be a bit different, in the data department at least.

Monday kicks things off with the Empire State manufacturing index, which will be looking to build on its recent 15 month peak. Tuesday brings with it a bumper afternoon of economic intrigue as the latest inflation, building permits, housing starts, capacity utilization rate and industrial production are all released. Of those the inflation and industrial production figures are the most important, with the latter especially in focus given the troubles the sector has recently seen in Europe. Wednesday then gives investors a bit of insight into the mind of the US central bank as the FOMC meeting minutes are released, before Thursday and Friday wrap things up with the Philly Fed manufacturing index and existing homes sales figures respectively.

Like in the UK this week is a biggie in terms of recognisable US brands. Wednesday sees first quarter figures from Target, Staples and Urban Outfitters, whilst Thursday brings with it updates from Gap and Wal-Mart and Friday sees statements from Campbell Soup and Foot Locker.

Eurozone
Despite some decent data, including a notably strong German GDP figure, the Eurozone failed to escape the same downward trend that plagued its UK and US peers last week. It will be interesting to see if things change this week, with the region having to work with a smattering of fairly important figures.

A German/French Bank Holiday on Monday means things don’t get underway until Tuesday, with the region-wide trade balance number. Wednesday then sees the month’s final inflation figure for the Eurozone as a whole, whilst Thursday gives investors a chance to assess the inner workings of the ECB as the central bank’s latest meeting minutes are released.

Stock of the week: Thomas Cook Group PLC – Half Year 2016 Earnings Release
Whilst Thomas Cook seemed to be on the road to recovery in February, the month of March derailed the company’s rebound for a variety of reasons. A ratings downgrade from Citigroup on the 16th sent the stock over 6% lower to 95p, before the terrorist attacks in Brussels on the 22nd helped erode the company’s price even further, at one point hitting 86p. In a moment of bleak coincidence the 22nd was also the day Thomas Cook revealed its latest trading update, the company prophetically warning that customers were delaying booking holidays due to uncertainty over safety in previously popular destinations, leading to a 5% drop in summer bookings year-on-year.

So far this earnings season the travel sector has been a mixed bag. easyJet managed to see a 0.3% rise in half year sales but slipped to a £24 million loss for the period as it continued to deal with the effects of both the global terror threat and the falling value of the pound. TUI, meanwhile, was far healthier, with a 16.3% jump in earnings and a 2.7% rise in turnover. Thomas Cook has largely underperformed its rivals in the last few months, so it will be interesting to see how its half year figures compare on Thursday.

(Source: IT-Finance.com 13/05/2016)