25.04.16 Monday Morning

With April responsible for a new set of 2016 highs how will the markets fare in a Federal Reserve-dominated end to the month this week?

UK
Having hit a 2016 peak of 6435 last Thursday (despite a very disappointing jobs report), only to fall away from that high as the week came to the close, the FTSE has nevertheless seen a rather impressive recovery since its February lows, the index gaining around 800 points in the space of a month and a half.

And there could well be room for new highs this week; whilst Monday and Friday bring with them CBI industrial order expectations and net lending to individuals respectively, the real data-meat comes on Wednesday as the markets get their first glimpse at the UK’s first quarter growth. Sadly for the FTSE things don’t look too good ahead of that reading, the National Institute of Economic and Social Research expecting the figure to come in at 0.3%, against 0.6% in Q4 2015, its slowest growth since the end of 2012.

Yet even if the UK’s GDP disappoints there is still plenty of earnings intrigue for investors to get their teeth around, with around a tenth of the FTSE 100 reporting this week. Tuesday sees releases from British American Tobacco, Standard Chartered, BP and Costa Coffee-owner Whitbread, whilst Wednesday sees Q1 2016 updates from Barclays and GlaxoSmithKline. Thursday then sees Lloyds throw its ring into the hat, before Friday continues the week’s banking and pharma-domination with reports from RBS, AstraZeneca and Shire.

US
Like the FTSE the Dow Jones couldn’t quite carry its latest 2016 highs through until the end of the week, slipping from the 18160 level (only around 200 points away from a fresh all-time peak) it reached on Thursday.

Whilst the US markets ceded their place in the spotlight to the UK and Eurozone last week, this week sees the American indices return firmly to the forefront. New home sales on Monday, durable goods orders, the flash services PMI and the CB consumer confidence reading on Tuesday and the Core PCE price index, Chicago PMI, and revised UoM consumer sentiment figures on Friday are all mere window dressing for the mid-week main events. Wednesday brings with it the April Fed statement, investors desperate to see the likelihood of an interest rate raise in either June or July. Thursday then follows that up with the advance Q1 GDP reading, the US aiming to beat Q4’s lacklustre 1.4% growth (at the annualised rate).

Yet the US-excitement doesn’t end there, the week being a huge one for the American tech(ish) giants. Tuesday is the most cluttered day for eye-catching releases with a PayPal-less eBay, a user-lacking Twitter (see below) and, most importantly, a iPhone-sales shrinking Apple all updating investors. Wednesday then sees social media monolith Facebook chime in with its first quarter figures, before online omnivore Amazon reveals its own Q1 results on Thursday.

Eurozone
After dominating discussions last week with its April ECB meeting and Greek crisis deja vu (as well as a 10500-touching performance from the DAX) the Eurozone indices take a step out of the spotlight this week.

Not to say the region hasn’t got a steady stream of data to look forward to. The German Ifo business climate figure on Monday is following by the country’s consumer climate number on Wednesday. Thursday then sees the latest German and Spanish inflation figures, as well as unemployment readings from both countries. Finally Friday sees German retail sales, French inflation, GDP and consumer spending, Spanish GDP and the region-wide inflation data.

None of this carries the same weight as the Fed statement or US/UK GDP readings, though if the Greek situation begins to unravel in the way it did this time last year the Eurozone could very well rush to the forefront of investors’ minds.

Stock of the week: Twitter Inc – Q1 2016 Earnings Release
In February Twitter revealed that in the final three months of 2015 it had actually seen a decline in users for the first time in its history (when SMS Faster Followers are stripped out), slipping from 307 million to 305 million across the globe. Despite claiming that those lost users ‘were not high quality’ CEO Jack Dorsey couldn’t calm investors’ fears, the stock at one point plunging to an all-time low of $12.85, a startling decline from the $70 peak hit in the company’s first few months as a public company.

In terms of Twitter’s first quarter results, from a revenue perspective things look ok for the company, analysts expecting a 39.4% year-on-year increase to $608 million with a 43% jump in its non-GAAP EPS to $0.10. However, the pressure is on Dorsey and co. to at the very least reverse the user-slip seen at the end of 2015, and if the company can’t manage any monthly user growth then its surge in revenue will likely be for nought in the eyes of its investors.

(Source: IT-Finance.com 22/04/2016)