17.07.15 Friday Morning

Eurozone
After an arduous (and reportedly tortuous, at least for some members) EU summit, the Eurozone leaders staggered out into the sunlight on Monday morning and bleary-eyed announced a Greek deal.

The deal contains all the expected pension, VAT, market and labour condition reforms, as well as one rather large new issue, namely a €50 billion transference of Greek assets to a fund for privatisation. That fund was far and away the most controversial aspect of the deal, and the one that most signalled the ways in which Germany had crucified Alexis Tsipras. However, a deal is a deal and the markets obviously benefited from the progress, even if the DAX and CAC were less enthusiastic than one would have expected.

However this agreement was only step one; Greece then had to pass a series of legislations on Wednesday (which they did) with similar votes in France, Finland (both successful) and Germany (still pending), among others in the region. A successful vote in the Bundestag would clear the way for negotiations over a third (likely 3 year, ESM funded) bailout to fully begin, with the Eurogroup already signalling talks had begun after the Greek vote on Wednesday.

The ECB also agreed to raise Greek ELA by €900 million after having kept the cap at €89 billion for the past few weeks; not enough to see capital controls lifted, but a start. There is also the issue of a finance bridge for Greece; the Eurogroup has spent the week trying to hash out details, with the most-rumoured option being a €7 billion loan funded by the EFSM. However, there has been somewhat of a holdup due to the opposition from non-euro countries, including from the UK’s George Osborne. Yet Greece desperately needs the money, with a can’t miss €3.5 billion ECB repayment looming on Monday.

That repayment should be made, at least if the finance bridge funding is found in time, whilst a successful vote in Germany should next week lead to further discussions over the form a third bailout will actually take. The biggest issue in any bailout talks will likely be over debt relief, a measure that has been increasingly called for, yet little acted upon, due to its political toxicity. Beyond the Greek issue (if you can see past its hulking mass), the Eurozone has a fairly light week of data, with current account and consumer confidence figures joined by a flurry of manufacturing and services PMIs.

US
It was a mixed week for US data with a very weak retail sales and a disappointing Philly Fed manufacturing index were countered by strong PPI, Empire State manufacturing, capacity utilization and industrial production. Yet this was just the foreplay before the main event of a 2-day Janet Yellen testimony in front of both the House and the Senate. The Fed chair was vaguely hawkish in her comments, reaffirming that rates should see their first rise in 2015, as long as the much-talked about improvements in job growth and inflation materialise.

However, the continued lack of true clarity over the details of any rate rise left both the dollar and the Dow pretty flat towards the end of the week after a 3 digit surge following the Greek deal on Monday. Next week likely won’t help make the rate hike debate any clearer, with only existing home and new home sales and the flash manufacturing PMI to come.

UK
As is has done for the past few weeks, the FTSE largely followed the movements of the Eurozone. However, there were moments where UK-specific news punctured the Greek smog, namely with mid-week jobs data that saw strong wage growth joined by a lifting away from the previously 7-year low unemployment rate, topped off by another flat inflation figure.

Yet the biggest news came on Thursday, as Mark Carney announced that an interest rate rise was likely to arrive around the New Year, due to the Bank of England wanting to pre-empt the ‘gradual firming of underlying inflation pressures’. This was great news for the pound, which hit a 7 and a half year high against the euro whilst seeing a healthy performance against the normally dominant dollar.

Beyond retail sales, with a sprinkling of earnings season movements thrown in for good measure, the UK has little to offer in terms of data next week, meaning the FTSE will once again be at the behest of the Eurozone.

Commodities
The success of an Iran nuclear deal at the start of the week sparked further declines for Brent Crude, as the commodity slid to towards $55 per barrel; however it has firmed up since then, and the semblance of stability in China as allowed Brent Crude to trade at around $57. Copper, meanwhile, spent the week hovering between$2.50 and $2.55 per pound following a surprisingly strong Chinese GDP figure, whilst gold continued its dollar-inspired slide to hit $1141.05 per ounce.

Stock of the week: Netflix Inc
It was set up for a big fall if it didn’t deliver, but deliver it did as Netflix surged 10% on Thursday following Wednesday’s post-close Q2 earnings release last night. This increase followed a 7-for-1 stock split that takes the company back to the $100s, with its current price at around $118 compared to Wednesday’s $703.15 closing price. A global increase in subscribers of 3.28 million was more than impressive, especially since its 900,000 pairs of fresh eyes in the US eclipsed the 600,000 forecast; similarly, the international increase was 2.37 million compared to the expected 1.9 million. Add on a rise in revenue from $1.34 billion to $1.64 billion, and Netflix’s understandably soaring stock continues to sit atop the S&P 500 in terms of market growth in 2015.

(Source: IT-Finance.com 17/07/2015)

Economic Diary, 20^th to 24^th July

 

Monday 20^th July

All Day – JPY Bank Holiday

9.00am – EUR Current Account

11.00am – EUR German Buba Monthly Report

 

Tuesday 21^st July

9.30am – GBP Public Sector Net Borrowing

 

Wednesday 22^nd July

9.30am – GBP MPC Official Bank Rate Votes

9.30am – GBP MPC Asset Purchase Facility Votes

10.00am – EUR Italian Retail Sales m/m

3.00pm – USD Existing Home Sales

3.00pm – USD Crude Oil Inventories

 

Thursday 23^rd July

12.50am – JPY Trade Balance

8.00am – EUR Spanish Unemployment Rate

9.30am – GBP Retail Sales m/m

1.30pm – USD Unemployment Claims

3.00pm – EUR Consumer Confidence

 

Friday 24^th July

2.45pm – CNY Markit Flash Manufacturing PMI

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

2.45pm – USD Flash Manufacturing PMI

3.00pm – USD New Home Sales

Earnings releases, 20^th to 24^th July

 

Monday 20^th July

Hasbro Inc – Q2 2015 Earnings Release

Morgan Stanley – Q2 2015 Earnings Release

Halliburton Co – Q2 2015 Earnings Release

 

Tuesday 21^st July

Verizon Communications Inc – Q2 2015 Earnings Release

Harley Davidson Inc – Q2 2015 Earnings Release

Lockheed Martin Corp – Q2 2015 Earnings Release

Yahoo Inc – Q2 2015 Earnings Release

GoPro Inc – Q2 2015 Earnings Release

Apple Inc – Q2 2015 Earnings Release

Royal Mail PLC – Trading Statement Release

 

Wednesday 22^nd July

Coca Cola Co – Q2 2015 Earnings Release

Boeing Co – Q2 2015 Earnings Release

SanDisk Corp – Q2 2015 Earnings Release

Marston’s PLC – Interim Management Statement Release

 

Thursday 23^rd July

Amazon.com Inc – Q2 2015 Earnings Release

TripAdvisor Inc – Q2 2015 Earnings Release

Shire PLC – Q2 2015 Earnings Release

McDonald’s Corp – Q2 2015 Earnings Release

General Motors Co – Q2 2015 Earnings Release

Kingfisher PLC – Q2 2015 Pre-Close Trading Statement Release

Daily Mail and General Trust PLC – Q3 2015 Trading Statement Release

 

Friday 24^th July

American Airlines Inc – Q2 2015 Earnings Release