24.07.15 Friday Morning

Eurozone
After weeks, nay months, of Grexit hysteria, it was a relatively quiet few days for the Eurozone, with everything proceeding as planned.

Following the successful parliamentary votes last week, focus was on Wednesday, when the Greek parliament would debate the second tranche of creditor-specified reforms. Firstly, however, was the little matter of the country’s ECB repayment on Monday. To meet the deadline (and get itself out of arrears with the IMF), Greece had to use up most of its €7.2 billion, EFSM-funded bridging loan, causing a financial whiplash in the process given how fast the money entered, and then left, Greek shores at the start of the week.

This paved the way for a successful vote on Wednesday, which passed with a convincing majority despite a 36-strong Syriza MP rebellion, a rebellion that could cause Alexis Tsipras trouble down the road. This ‘yes’ vote then led to the dreaded troika returning to Greece on Friday to formally begin third bailout negotiations; Greece wants these talks wrapped up by August 20th (the date of its next ECB repayment), leaving the Eurozone with around a month to figure the latest funding package out. Given how late things are normally left, however, I wouldn’t expect any success to be forthcoming until midnight on August 19th.

The quietness of the week meant that the Eurozone indices could focus elsewhere; not that this helped with their performance, with the global drag caused by falling commodities helped the DAX and CAC to a dismal week-off from pressing Greek concerns.

Beyond the gradual leaking of negotiation details that are likely to begin appearing next week, the Eurozone will serve up a host of German figures; Ifo business climate and Gfk consumer climate data, CPI, unemployment figures and retail sales. Beyond Germany, the region wide flash inflation figures and unemployment rate will be presented on Friday. It will be interesting to see how much the Greek saga has weighed on these figures.

US
After being boosted by post-results surges by Netflix and Google last week, this week wasn’t quite as successful for the US markets. Tumbles by Yahoo, Microsoft and especially Apple (see below), dragged down the US indices, in particular the Nasdaq, whilst a lack of true recovery from Coca-Cola and McDonald’s didn’t help matters much either. Amazon, on the other hand, was explosive; a 20% increase in sales to $23.2 billion (around 4% higher than expected) caused an 18% post-market surge, sending the company nearly $100 higher and causing it to surpass WalMart as the world’s most highly valued retail stock in the process.

In terms of rate-hike specific news, the week was light on data; however, jobless claims did come in at a four decade low, helping to increase the volume of the hawkish drum in the process. Next week should bring a bit more Fed-clarity, with GDP data, durable goods orders, consumer confidence figures and the Chicago PMI all window dressing for FOMC’s second quarter report on Wednesday. The recent string of US data would suggest many of the Fed’s metrics for a lift-off are being met, so it will be interesting to see whether the central bank gives a firmer comment on any potential September lift-off.

UK
The FTSE spent the week dealing with the horror show that has been the global commodities market. Constantly dragged down by the latest declines Brent Crude, copper and gold (not to mention the other metals), and the subsequent slides by the UK index’s hefty oil and mining stocks, the FTSE struggled to escape the same issues that was plaguing it before the Greek crisis reached peak hysteria. Matters weren’t helped by dismal retail sales, something that made the pound even weaker in the face of the dominant pound, and caused it to give back some of its recent gains against a strengthening euro.

Looking to next week and once again the UK has precious little to offer, bar one key figure. The preliminary GDP number for the second quarter is released on Tuesday, and given the weakness of the first quarter investors will be keen to see if there has been any improvement. Beyond that, and CBI industrial order expectations and realised sales and net lending to individuals are the only things the FTSE will have to distract it from the worrying form in the commodity sector.

Commodities
As mentioned, the global commodities market had a nightmare of a week, with fears over the looming US rate-hike alongside Chinese market instability and economic slowdown (as evidenced by a 13-month low in China’s manufacturing PMI on Friday) helping to extend the sector’s sell-off. Metals in particular suffered this week, sparked by gold falling to 5 (and at one point 6) year lows following a 5 tonne sell-off of the yellow stuff on the Shanghai gold exchange on Monday.

This dismal performance caused massive headaches for the oil and mining stocks throughout the week; it appears that since the Greek saga has calmed down (for now) investors have gone back to worrying about the fragile state of the commodity market.

Stock of the week: Apple Inc
Whilst Google and Netflix last week, and Amazon on Thursday, all wowed investors with some truly spectacular figures, Apple fell afoul of its own expectations on Tuesday. However, the extent of its price-damaging ‘disappointment’ was perhaps overstated. The company’s revenue still (marginally) beat expectations, surging 33% to $49.6 billion, whilst earnings per share were $1.85 against the forecast $1.81. Sales in China, meanwhile, doubled to $13.2 billion. Yet, these figures were ignored due to the fact Apple merely sold 47.5 million iPhones instead of the expected 49 million; mix this in with a cautious outlook for the fourth quarter and investors had a fit, sending the stock 7% lower to just above $121 in after-market trading. Whilst the stock has climbed back to $125 since then, it just goes to show, however dazzling your figures are, expectations are everything.

(Source: IT-Finance.com 24/07/2015)

Economic Diary, 27^th to 31^st July

 

Monday 27^th July

9.00am – EUR German Ifo Business Climate

9.00am – EUR M3 Money Supply y/y

11.00am – GBP CBI Industrial Order Expectations

1.30pm – USD Core Durable Goods Orders m/m

1.30pm – USD Durable Goods Orders m/m

 

Tuesday 28^th July

9.30am – GBP Prelim GBP q/q

2.45pm – USD Flash Services PMI

3.00pm – USD CB Consumer Confidence

 

Wednesday 29^th July

7.00am – EUR Gfk German Consumer Climate

9.30am – GBP Net Lending to Individuals m/m

11.00am – GBP CBI Realised Sales

3.00pm – USD Pending Home Sales m/m

3.30pm – USD Crude Oil Inventories

7.00pm – USD FOMC Statement

7.00pm – USD Federal Fund Rate

 

Thursday 30^th July

8.00am – EUR Spanish Flash CPI y/y

8.00am – EUR Spanish Flash GDP y/y

8.55am – EUR German Unemployment Change

1.30pm – USD Advance GDP q/q

1.30pm – USD Unemployment Claims

1.30pm – USD Advance GDP Price Index q/q

 

Friday 31^st July

12.30am – JPY Tokyo Core CPI y/y

10.00am – EUR CPI Flash Estimate y/y

10.00am – EUR Core CPI Flash Estimate y/y

10.00am – EUR Unemployment Rate

1.30pm – USD Employment Cost Index q/q

2.45pm – USD Chicago PMI

3.00pm – USD Revised UoM Consumer Sentiment

 

Earnings releases, 27^th to 31^st July

 

Monday 27^th July

Acacia Mining PLC – Half Year 2015 Earnings Release

 

Tuesday 28^th July

Drax Group PLC – Half Year 2015 Earnings Release

BP PLC – Q2 2015 Earnings Release

ITV PLC – Interim 2015 Earnings Release

Ford Motor Co – Q2 2015 Earnings Release

Pfizer Inc – Q2 2015 Earnings Release

 

Wednesday 29^th July

Barclays PLC – Half Year 2015 Earnings Release

GlaxoSmithKline PLC – Q2 2015 Earnings Release

Sky PLC – Q4 2014/15 Earnings Release

Mastercard Inc – Q2 2015 Earnings Release

Facebook Inc – Q2 2015 Earnings Release

Whole Foods Market Inc – Q2 2015 Earnings Release

 

Thursday 30^th July

T-Mobile US Inc – Q2 2015 Earnings Release

Virgin America Inc – Q2 2015 Earnings Release

AstraZeneca PLC – Q2 2015 Earnings Release

BT Group PLC – Q1 2015/16 Earnings Release

Diageo PLC – Full Year 2014/15 Earnings Release

Royal Dutch Shell PLC – Q2 2015 Earnings Release

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

 

Friday 31^st July

Lloyds Banking Group PLC – Half Year 2014 Earnings Release