22.07.16 Friday Morning

With both the ECB and the Bank of England following the same inactive path, what will this week’s Federal Reserve meeting produce?

UK
Despite higher inflation, and a far better than expected jobs report, the FTSE couldn’t find much room to move last week, spending each session loitering around 6700; the pound, on the other hand, saw a bit more movement, as it attempted to break through its current caps against the dollar and the euro. The UK also got its first proper glimpse at some post-Brexit data, Markit’s early release of July’s manufacturing and services PMIs showing both had plunged into contraction territory, with the former outperforming the latter.

Data-wise this week there is only one figure that really matters: Wednesday’s preliminary second quarter GDP reading. While not quite the fitting into the post-Brexit timeline (the Q3 figure will be where the real meat is) the markets will still get some kind of signal how the economy was affected in the run-up to, and aftermath of, the referendum, with any specific breakdown on June compared to April and May especially useful.

Beyond that GDP reading the main thrust of the FTSE’s performance will come from its individual components, with nearly a quarter of the index reporting this week. Tuesday sees the first quarter update from BP, while Wednesday brings with it a quintet of releases from M&A-target ARM Holdings, Capita, GlaxoSmithKline, ITV and, arguably most importantly, housebuilder Taylor Wimpey. Thursday is then the big one: Anglo American, AstraZeneca, BAE Systems, British American Tobacco, BT Group, Centrica, Diageo, Lloyds, Merlin Entertainments, Rolls-Royce Holdings, Royal Dutch Shell, Schroders, Sky AND Smith & Nephew all report on the same day, something that either could cause huge movements for the FTSE, or may grind it to a halt. Friday wraps up the week in a comparatively subdued manner, with releases from Barclays, Pearson and Reckitt Benckiser.

US
Spending most of last week hitting a series of fresh all-time highs, while still remaining somewhat on the side-lines, the Dow Jones could well find itself back in focus as the week goes on. While the US has a fairly busy economic calendar, including the flash services PMI and CB consumer confidence on Tuesday, durable goods orders on Wednesday and goods trade balance on Thursday its week will be defined by the GDP reading on Friday and the Fed meeting on Wednesday. Janet Yellen and co. are unlikely to act given the current climate, though the central bank’s tone will likely help dictate sentiment at t the end of the week.

Like in the UK the US also sees a slew of familiar faces releasing their latest earnings reports this week. Most notably Apple reveals its third quarter figures on Tuesday, with Twitter also vying for attention with its Q2 update (see below). Wednesday and Thursday are even more packed, with earnings from Boeing, Coca-Cola, Dr Pepper Snapple, Comcast and Facebook on the former and Alphabet, Amazon.com, Dow Chemical and Ford on the latter.

Eurozone
Having taken the spotlight thanks to Thursday’s ECB meeting the Eurozone recedes into the background a bit this week, lacking the earnings clout of the UK and US. The region does have a steady stream of data to keep investors occupied, however. Monday sees the German Ifo business climate reading, while Wednesday brings with it the latest M3 money supply number. Thursday then sees the German inflation and the Spanish unemployment rate figures, while Friday ends with French, Spanish and region-wide inflation data as well as the latest Eurozone-wide GDP reading.

Stock of the week: Twitter Inc – Q2 2016 Earnings Release
Unsurprisingly Twitter’s subdued stock price across 2016 so far has been due to the persistently disappointing nature of its quarterly releases. While it beat Q4 expectations with earnings per share of 16 cents alongside $710 million in revenue back in February, news that monthly active users had fallen from 307 million to 305 million quarter-on-quarter helped send the stock an all-time intraday nadir (however briefly) of $12.85.

Things were hardly any better at the end of April, with its first quarter report causing a near 21% fall across 6 straight trading sessions as it beat EPS and monthly active user growth estimates but missed Q2 guidance projections. Twitter stated that it expects revenue between $590 million and $610 million in the second quarter, far lower than the $678 million forecast.

In terms of Twitter’s Q2 performance analysts are expecting the company to post revenue of $608 million, a 21% rise year-on-year alongside, more importantly, a 1% rise in monthly active users to 308 million (lower than the 310 million users seen in Q1).

 

(Source: IT-Finance.com 22/07/2016)