26.04.13 Friday Morning

European markets are set for the biggest weekly gain in five months on hopes that the recent string of bad data will help spur the European Central Bank to cut rates and trigger further easing. There has been some disappointing data from the US and China but this was outweighed by a number of reasonable corporate earnings. 

European markets opened the week on a positive note whilst the Euro stabilised on Monday after Italy’s politicians voted to keep Giorgio Napolitano as President for the second term. Weekend developments form the G20 meeting showed that they did not oppose Japan’s monetary stimulus program. The Yen weakened on the reaction whilst the Nikkei shot up in overnight trade. However, US markets opened lower following a number of disappointing earnings from Caterpillar, Philips and Hermes. US existing home sales disappointed in the afternoon coming in at 4.92M versus 5.02M. 

Despite Chinese manufacturing data coming in worse than expected, European markets opened with small gains Tuesday ahead of Eurozone manufacturing and service data which may provide more clarity over a likely ECB rate cut. Despite the majority of data coming in below analysts’ estimates, markets remained buoyant on speculation the European Central Bank will take measures to help boost the euro zone. A solid string of UK earnings helped support the FTSE with ARM Holdings jumping 7.6% after beating first-quarter results. 

The US session on Tuesday finished on strong gains despite a fake-tweet which caused the Dow Jones to crash 147 points. It turned out that someone managed to hack the AP Twitter account and tweeted about explosions in the White House, injuring President Obama. Four minutes later the account was suspended and revealed the tweet was a hoax, allowing the market to fully recover. 

Markets opened on Wednesday with small gains after Apple reported slightly better earnings, beating EPS and revenue. However, CEO Steve Cook announced a huge share buyback plan, raising the divided which could signal potential blunt growth and a method to help reassure investors. Meanwhile, Barclays reported first quarter profits declined 25 percent; missing analysts’ estimates after it took charge of a cost-savings plan. A bulk of US data in the afternoon paired gains after Core Durable Goods Orders came in much below estimates at -1.4% versus 0.5%. 

Thursday GDP figures showed the UK economy managed to escape a triple dip recession, posting better-than-expected reading of 0.3% expansion in the first quarter. Despite rating downgrades by Moody’s and Fitch, the situation in the UK is not as grim as initially thought. Breaking down the figures, the service sector grew by 0.6% on the quarter thanks to strength in hotel, transport and distribution industries. However, manufacturing still remains poor. Stirling rallied hard after the data, spiking to 1.5420 against the dollar. Stirling continued to rise throughout the day and eventually hit 1.5470 before the bulls ran out of steam. 

Despite the positive data in the UK, Spain conveyed a completely different story. Spanish unemployment climbed to the highest level in 37 years with the number of jobless increasing to more than 6 million. A combination of better than expected US unemployment claims, UK GDP and corporate earnings helped the Dow close higher. 

Global stocks trimmed gains on Friday as investors took profits ahead of the weekend. US advance GDP came in below the 3.1% expectation, with the economy only growing at 2.5% in the last quarter. The data could raise doubts about the ability of the economy to absorb government spending cuts and higher taxes and may fuel speculation on the possibility of more Federal Reserve measure to boost growth. 

Stock of the week – ARM holdings

ARM Holdings on Tuesday reported better-than-expected earnings with revenue rising 28 percent to £170.3 million. Shares rose 103p to 972p on Tuesday. 

Next Week’s Notable Economic Events:

 

Monday –

• USD – Pending home Sales

Tuesday –

• EUR – German Retails Sales
• EUR – German/Italian Unemployment data
• EUR – Unemployment Rate
• USD – CB Consumer Confidence

Wednesday –

• BANK HOLIDAY CNY, CHF, EUR
• CNY – Manufacturing PMI
• GBP – Manufacturing PMI
• USD – ADP Non-Farm Employment Change
• USD – ISM Manufacturing PMI
• USD – FOMC Statement

Thursday –

• AUD – Building Approvals
• CNY – Final Manufacturing PMI
• GBP – Construction PMI
• EUR – Minimum Bid Rate
• EUR – ECB Press Conference
• USD – Trade Balance and Unemployment Claims

Friday –

• AUD – PPI
• GBP – Services PMI
• USD – Non-Farm Employment Change
• USD – Unemployment Rate
• USD – ISM Non-Manufacturing PMI

 

Next Week’s Notable Earnings:

Monday –

• Aberdeen Asset Management Earnings Release

Tuesday –

• BP Earnings Release
• Lloyds Banking Group Interim Management Statement
• Whitbread Earnings Release
• ASOS Earnings Release

 

Wednesday –

• Henderson Group Interim Management Statement

Thursday –

• Smith & Nephew Earnings Release
• British Sky Broadcasting Group Earnings
• RSA Insurance Group Interim Management Statement
• Schroders Interim Management Statement
• Legal & General Group Interim Management Statement

Friday –

• Royal Bank of Scotland Earnings

Renishaw Earnings