18.07.14 Friday Evening

Markets started the week with a modest recovery after losses last week. Asian markets were up slightly overnight as investors’ risk appetites improved. Fears surrounding the Portuguese banking system were starting to cool and gold regaining last week’s losses reflected this. Banking stocks recovered losses, helping European equity markets to make gains in Monday trading. The FTSE also benefitted from shares in Shire moving upward after a new offer from AbbVie in ongoing negotiations for the pharmaceuticals firm. US equities also rose in Monday trading as investors moved out of less risky assets, gold fell around $30 over the day.

Overnight, into Tuesday, Asian markets traded slightly higher after the Bank of Japan announced they would keep monetary policy stable and expected inflation to pick up to its 2 percent target level. The yen also made gains against other major currencies on the announcement. European markets traded fairly flat on Tuesday as investors awaited Fed Chair Janet Yellen’s testimony to Congress on US monetary policy. US and European equities saw volatility after the US open as Yellen spoke. She offered advice that some equities in the US has “substantially stretched valuations.” Wall Street fell on her comments but later regained losses to close flat on the day.

Better than expected Chinese growth figures released early on Wednesday morning failed to excite investors and Asian markets were slightly down in overnight trading. European markets were boosted as UK employment was announced to have reached a record high of 73.1 percent in the three months to May. Mining stocks were also a driving force in European market performance on Wednesday as they grew particularly strongly on the news from China, the world’s largest metals consumer. Mining stocks and bid speculation on engineering firm Meggit send the FTSE 100 index to a one-week high.

Janet Yellen’s continued testimony to Congress helped to calm investors’ worries as she again made it clear the Fed was not looking to raise interest rates soon despite improving conditions in the labour market and economy in general. Eurodollar fell on the news. US markets closed high on Wednesday, the Dow Jones industrial average closing at a record high.

In Thursday morning trading the MSCI’s index of Asia pacific shares closed down 0.2 percent and the Shanghai Composite index was down 0.8 percent, investors lacking the confidence to invest in blue-chip stocks and looking towards upcoming IPOs. American light crude continued to rise after the stock levels announced on Wednesday were lower than expected. Thursday saw new sanctions on Russian enterprise over the ongoing situation in Ukraine, markets falling on the news. US markets opened strongly after a string of better than expected results from US firms, pulling European markets with them.

The afternoon came with news of Israel launching a ground offensive in Gaza and the alleged shooting down of a passenger jet over Eastern Ukraine. Markets in Europe and the US were spooked by these developments and fell as investors moved money into safe-haven assets. The S&P 500 index suffered its largest one-day drop since April, the Dow Jones and Nasdaq also posting losses. The Yen made gains against the dollar and euro as the currency was seen as another safe haven.  Gold reached highs of $1325 overnight and the VIX volatility index jumped 32% to its highest level since April. Brent crude rose around $125/barrel as the conflict in Gaza stoked worries about stability in the region.

Stock of the Week – IBM (International Business Machines Corp.)

Shares in IBM jumped opened up nearly 2% after the announcement of plans to work with Apple to sell mobile devices and services to businesses. The one-time rivals have made agreements to use IBM’s extensive network of established business clients to sell Apple devices pre-installed with software developed by the two firms in partnership. Apple shares were also boosted by the news, opening up 1.5% on Wednesday. The move comes as firms look for alternatives to long-standing business favourite Blackberry.

On Thursday IBM released its 2014 Q2 results. Revenue and earnings both exceeded analysts’ forecasts. Investors appeared not to be impressed however as shares were trading down 0.2% as the markets opened on Friday. This follows Q1 results for the company in which revenues missed expectations and sent the stock price tumbling 4% in after-hours trading.

Next Week’s Data

Monday 21 July

7:00 EUR German PPI m/m
11:00 EUR German Bundesbank Monthly Report

Tuesday 22 July

9:30 GBP Public Sector Net Borrowing
11:00 GBP CBI Industrial Order Expectations
1:30 USD Core CPI m/m
3:00 USD Existing Home Sales

Wed 23 July

9:30 GBP MPC Official Bank Rate & Asset Purchase Facility Votes

Thursday 24 July

02:45 CNY HSBC Flash Manufacturing PMI
7:00 EUR Spanish Unemployment Rate
8:00 EUR French Flash Manufacturing & Services PMI
8:30 EUR German Flash Manufacturing & Services PMI
9:00 EUR Flash Manufacturing & Services PMI
9:30 GBP Retail Sales m/m
1:30 USD Unemployment Claims
2:45 USD Flash Manufacturing PMI
3:00 USD New Home Sales

Fri 25 July

9:00 EUR German Ifo Business Climate
9:30 GBP Preliminary GDP q/q
1:30 USD Core Durable Goods Orders m/m

Next Week’s Earnings

Monday 21 July 

BAB.L  Babcock International Group PLC Interim Management Statement
Tuesday 22 July  
IGG.L  IG Group Holdings PLC   Full Year 2014 Earnings
RMG.L  Royal Mail PLC    Interim Management Statement
QQ.L  Qinetiq Group PLC   Q1 Interim Management Statement

Wednesday 23 July  

PFG.L  Provident Financial PLC   Interim 2014 Earnings
GSK.L  GlaxoSmithKline PLC   Q2 2014 Earnings
JMAT.L  Johnson Matthey PLC   Q1 2014 Interim Management Statement
TALK.L  Talktalk Telecom Group PLC  Q1 2014 Interim Management Statement

Thursday 24 July 

ULVR.L  Unilever PLC    Q2 2014 Unilever PLC Earnings
DMGOa.L Daily Mail and General Trust PLC Q3 Interim Management Statement