19.02.16 Friday Morning

It’s been another typically dramatic week, with the return of China, (naïve?) optimism over an OPEC/Russia/Iran oil output freeze deal and a stimulus-hinting speech from Mario Draghi helping to push the markets past their sporadic moments of hesitation to hit two week-ish highs.

Eurozone
Monday’s mixed trade balance data couldn’t get in the way of the Eurozone making gains at the start of the week, the region boosted by an almost stereotypical speech from Mario Draghi. The ECB President stated that ‘[the ECB] will not hesitate to act’ if it finds the need to following its review of the region’s inflationary pressures and the state of ‘transmission of [the ECB’s] monetary impulses by the financial system and in particular by banks’.

Slightly better than forecast, but still 15 and 16 month low-hitting, region-wide and German ZEW economic sentiment figures on Tuesday then caused the DAX and CAC to stutter, before they rebounded with aplomb on Wednesday as each index gained nearly 3%. Thursday saw this rise continue, a better than expected Eurozone current account figure allowing the region’s indices to outperform their UK and US peers. Things began to tail off on Friday morning, however, the DAX harmed by a falling PPI figure.

Next week sees a far busier economic calendar for the Eurozone; Monday brings with it the latest French, German and region-wide flash manufacturing and services PMIs, whilst Tuesday sees the German Ifo business climate figure. A quiet Wednesday then gives way to the latest region-wide inflation figure on Thursday and the flash German, French and Spanish flash inflation figures on Friday. There is likely to be a lot of movement around the data seen in the latter half of the week, the strength of the region’s inflation set to inform the ECB’s actions in March.

UK
By and large it was a decent week for the FTSE; with not much to work with on Monday the juicy stuff began on Tuesday, the UK seeing its highest inflation figure (still only at 0.3%) for a year. Wednesday was a slightly more mixed day for data; coming in at an as expected 1.9% the average earnings index was arguably the biggest disappointment, putting wage growth at a one year low and dismissing any (prematurely) hawkish hopes that may have arisen from Tuesday’s solid inflation figure. The unemployment rate, meanwhile, arrived unchanged at a still-impressive 5.1%, missing the analysts’ forecast that would have seen the figure reach 5.0% for the first time since 2008’s second quarter.

Yet the index still managed to cross 6000 for the first time since the start of February on Wednesday, largely thanks to Brent Crude encroaching on the $35 per barrel mark following reports of a tentative agreement between Saudi Arabia and Russia to freeze oil output levels at their (admittedly high) January levels, with hopes that Iran (still fairly intransigent) would sign on as well. A weaker than forecast Chinese inflation figure then took the wind out of the FTSE’s miners on Thursday, causing the index to drag behind its more positive European peers, dipping back under 6000 in the process. Things just about improved on Friday, however, with a far better than forecast retail sales figure (at 2.3% against 0.8% anticipated) and a solid public sector net borrowing number helping the FTSE crawl towards 6000 once again.

After this week’s inflation and jobs report data splurge next week may look less packed for the FTSE, but it is arguably no less important, with the second estimate of the UK’s fourth quarter GDP arriving on Thursday. The pound will also be carefully eyeing the progress of David Cameron’s attempts to secure a satisfying EU renegotiation ahead of the Brexit referendum later in the year.

US
With traders lazing about at the start of the week thanks to Presidents’ Day the Dow Jones was late to the rebound party, having to wait until Tuesday to enjoy some of the gains seen over in Europe (despite a worse than forecast Empire State manufacturing index figure). Solid building permits and a non-negative PPI number then helped lift the US index further on Wednesday, before they faltered on Thursday as hesitant investors ignored the best jobless claims figure since the end of last November to focus on their macro (namely oil) fears.

Whilst the Presidents’ Day off may have meant it was a fairly uneventful week for the US indices, next week sees a jam packed economic calendar that includes the flash manufacturing and services PMIs on Monday and Wednesday respectively, the durable goods orders figures on Thursday and, most importantly, the preliminary fourth quarter GDP number (alongside the goods trade balance and consumer sentiment data) on Friday.

Stock of the week: Centrica PLC
Though Centrica’s better than expected 12% fall in yearly adjusted operating profit to £1.5 billion was joined by a 5% fall in revenue to £28 billion AND a cut dividend, British Gas’ 31% surge in profit to £574 million appeared to be enough for investors (even if customers remain disgruntled that the oil and gas savings aren’t being passed onto them), the utility company rising by nearly 7.5% in the aftermath of its results. This took the stock, previously at 10 years lows, to £2.08 (IT-Finance.com, 19/02/2016), its highest price since the end of January.

(Source: IT-Finance.com 19/02/2016)

Economic Diary, 22^nd to 26^th February 2016

 

Monday 22^nd February

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

11.00am – GBP CBI Industrial Order Expectations

2.45pm – USD Flash Manufacturing PMI

 

Tuesday 23^rd February

9.00am – EUR German Ifo Business Climate

3.00pm – USD CB Consumer Confidence

3.00pm – USD Existing Home Sales

 

Wednesday 24^th February

11.00am – GBP CBI Realized Sales

2.45pm – USD Flash Services PMI

3.00pm – USD New Home Sales

3.30pm – USD Crude Oil Inventories

 

Thursday 25^th February

7.00am – EUR Gfk German Consumer Climate

9.00am – EUR M3 Money Supply y/y

9.30am – GBP Second Estimate GDP q/q

9.30am – GBP Prelim Business Investment q/q

10.00am – EUR Final CPI y/y

10.00am – EUR Final Core CPI y/y

10.00am – EUR Italian Retail Sales m/m

1.30pm – USD Core Durable Goods Orders m/m

1.30pm – SUD Durable Goods Orders m/m

1.30pm – USD Unemployment Claims

11.30pm – JPY Tokyo Core CPI y/y

 

Friday 26^th February

Day 1 – G20 Meetings

All Day – EUR German Prelim CPI m/m

7.45am – EUR French Prelim CPI m/m

7.45am – EUR French Consumer Spending m/m

8.00am – EUR Spanish Flash CPI y/y

1.30pm – USD Prelim GDP q/q

1.30pm – USD Core PCE Price Index m/m

1.30pm – USD Goods Trade Balance

1.30pm – USD Personal Spending m/m

1.30pm – USD Personal Income m/m

3.00pm – USD Revised UoM Consumer Sentiment

 

Earnings releases, 22^nd to 26^th February 2016

 

Monday 22^nd February

HSBC Holdings PLC – Full Year 2015 Earnings Release

Associated British Foods PLC – Pre-Close Trading Statement

Bovis Homes Group PLC – Full Year 2015 Earnings Release

BHP Billiton PLC – Half Year 2016 Earnings Release

 

Tuesday 23^rd February

Unite Group PLC – Full Year 2015 Earnings Release

Persimmon PLC – Full Year 2015 Earnings Release

 

Wednesday 24^th February

Barratt Developments PLC – Half Year 2016 Earnings Release

Petrofac Ltd – Full Year 2015 Earnings Release

Weir Group PLC – Full Year 2015 Earnings Release

 

Thursday 25^th February

British American Tobacco PLC – Full Year 2015 Earnings Release

KAZ Minerals PLC – Full Year 2015 Earnings Release

Galliford Try PLC – Half Year 2015 Earnings Release

Derwent London PLC – Full Year 2015 Earnings Release

Lloyds Banking Group PLC – Full Year 2015 Earnings Release

Merlin Entertainments PLC – Full Year 2015 Earnings Release

National Express Group PLC – Full Year 2015 Earnings Release

Premier Oil PLC – Full Year 2015 Earnings Release

 

Friday 26^th February

Pearson PLC – Full Year 2015 Earnings Release

Rightmove PLC – Full Year 2015 Earnings Release

Royal Bank of Scotland Group PLC – Full Year 2015 Earnings Release

William Hill PLC – Full Year 2015 Earnings Release