21.08.15 Friday Morning

China
Once again it is impossible to discuss the week’s events without a small Chinese prologue. More volatility for the Shanghai Composite Index played havoc with the commodities and Western indices alike for much of the week, with Brent Crude and copper intermittently hitting fresh 6 year lows. The cherry on top came on Friday, with a 6 year low in the August Caixin/Markit manufacturing PMI intensifying the weight of fears over China’s economic slowdown, and leaving August’s trading in dire straits.

UK
Of course, such a commodities collapse did some pretty noticeable damage to the FTSE, which is teetering on the edge of a new 2015 nadir. Things were slightly different at the start of the week, where Tuesday’s inflation data put focus firmly on the Bank of England and interest rates; with both CPI and core CPI coming in higher than expected the pound received a nice little boost, and continued to suggest a rate hike wouldn’t be too far awat. Comments from Kristin Forbes (a voting member of the MPC), meanwhile, saw the number of the hawks in the central bank increase to arguably three (Forbes, David Miles and Ian McCafferty) or four, if you include the New Year lift-off eyeing Mark Carney.

However, the week soon turned into a Chinese horrorshow, with the FTSE’s energy sapped by the fears over the long-term ramifications China’s current situation will have for global growth. Frustratingly for the FTSE there is little on the cards next week than can make much of a difference, at least not until Friday. Monday to Thursday brings with it nothing of any real note, before the end of the week sees the second estimate GDP figure, something that isn’t necessarily going to be good news.

US
It was a similar week for the US indices, with the Dow Jones already at its worst price since the end of last October. Like the UK, the USA’s economic week was ostensibly centred on inflation data; unlike the UK, however, the US figures came in lower than expected. This still didn’t necessarily dissuade the market that a rate hike isn’t still on the horizon, and whilst the dollar looked perky the Dow was hit pretty hard. Things were complicated by an unclear FOMC meeting minutes that highlighted fears over China and weak inflation (and this before the start of August yuan-devaluation and actual weak US inflation figures), as well as disappointing jobless claims but a robust Philly Fed manufacturing figure.

Of course, all of this was fighting for investors’ attention with the price-eroding situation in China, and the latter was the clear winner, causing (or at the very least exacerbating) the Dow Jones’ dismal performance this week. A September rake hike is also increasingly looking in doubt, with the lack of clear endgame for this current Chinese volatility making the Fed’s decision even more difficult than it was already. Like the UK the US sees GDP data next week, on Thursday, which could help the markets guess which direction the Fed is leaning in, whilst CB consumer confidence, durable goods orders and goods trade balance figures provide the week’s window dressing.

Eurozone
Like the rest of the Western indices the Eurozone was in no way immune to the chaos caused by China, with the DAX and CAC among the biggest losers. However, it also had some pretty monumental news of its own. Successful votes across the region, most importantly in the Bundestag on Wednesday, cleared the way for a third Greek bailout to be signed, sealed and delivered by Thursday, just in time for the country to pay the ECB its latest loan instalment. Yet, what once would have shifted the markets up by 100 points was lost in wave upon wave of fleeing investors, with the China situation (not to belabour the point) removing the mere idea of risk appetite from the markets. Matters weren’t helped on Thursday by Alexis Tsipras announcing a snap Greek election for September 20th, plunging the country back into uncertain territory just as the saga looked like it was over.

Beyond the inevitable chatter over the Greek election that is set to occur next week, the Eurozone can look forward to the German Ifo business climate number and the M3 money supply before the arrival of region-wide inflation figures at the end of the week.

Stock of the week: KAZ Minerals PLC
Whilst it has by and large been an awful week for commodity stocks as a whole, KAZ Minerals managed to end up in the green after Kazakhstan devalued its currency, the tenge. The move helps the Kazakhstan-based company’s cost base going forward, and came just at the right time, with KAZ announcing its EBITDA for the first half of its fiscal year had fallen 55% to $88 million the very same morning. This Kazakhstani price rescue lifted the stock by around 20%, with it at one point hitting a 6 week high of £1.89, and whilst it began to tail off on Friday it has still fared much better than the rest of the suffering mining sector.

(Source: IT-Finance.com 21/08/2015)

Economic Diary, 24^th to 28^th August 2015

 

Monday 24^th August

8.55pm – USD FOMC Member Lockhart Speaks

 

Tuesday 25^th August

7.00am – EUR German Final GDP q/q

9.00am – EUR German Ifo Business Climate

2.45pm – USD Flash Services PMI

3.00pm – USD CB Consumer Confidence

3.00pm – USD New Home Sales

 

Wednesday 26^th August

3.00am – CNY CB Leading Index m/m

11.00am – GBP CBI Realised Sales

1.30pm – USD Core Durable Goods Orders m/m

1.30pm – USD Durable Goods Orders m/m

3.00pm – USD FOMC Member Dudley Speaks

3.30pm – USD Crude Oil Inventories

 

Thursday 27^th August

9.00am – EUR M3 Money Supply y/y

1.30pm – USD Prelim GDP q/q

1.30pm – USD Unemployment Claims

3.00pm – USD Pending Home Sales m/m

 

Friday 28^th August

8.00am – EUR Spanish Flash CPI y/y

9.30am – GBP Second Estimate GDP q/q

9.30am – GBP Prelim Business Investment q/q

1.30pm – USD Goods Trade Balance

1.30pm – USD Core PCE Price Index m/m

1.30pm – USD Personal Spending m/m

1.30pm – USD Personal Income m/m

3.00pm – USD Revised UoM Consumer Sentiment

 

Earnings releases, 24^th to 28^th August 2015

 

Monday 24^th August

Amlin PLC – Half Year 2015 Earnings Release

 

Tuesday 25^th August

Antofagasta PLC – Half Year 2015 Earnings Release

BHP Billiton PLC – Full Year 2015 Earnings Release

Best Buy Co Inc – Q2 2016 Earnings Release

 

Wednesday 26^th August

Stagecoach Group PLC – Trading Statement

Abercrombie & Fitch Co – Q2 2015 Earnings Release

Brown-Forman Corp – Q1 2016 Earnings Release

PVH Corp – Q2 2015 Earnings Release

 

Thursday 27^th August

Playtech PLC – Half Year 2015 Earnings Release

Gulf Keystone Petroleum Ltd – Half Year 2015 Earnings Release

Amec Foster Wheeler PLC – Half Year 2015 Earnings Release

Tiffany & Co – Q2 2015 Earnings Release

 

Friday 28^th August

888 Holdings PLC – Half Year 2015 Earnings Release

Bwin.party Digital Entertainment PLC – Half Year 2015 Earnings Release

Marshalls PLC – Half Year 2015 Earnings Release

Restaurant Group PLC – Half Year 2015 Earnings Release