Weekly Trading Update
26.07.13 Friday Morning
The risk tone in the markets has finally picked up after dovish comments from the Federal Reserve chairman Ben Bernanke. Bernanke finally managed to get his message to the markets that he will continue the loose monetary policy for the foreseeable future with tapering not a pre-set course.
Asian stocks started the week in positive territory as investors speculated a positive week on the earnings front. Japanese stocks were also lifted after Prime Minister Shinzo Abe’s ruling coalition solidified control of parliament during elections which took place on Sunday. The widely expected victory will make it easier for Abe to push through economic reform to help tackle high deflation in Japan. The majority of gains in the UK came from precious metal stocks as gold surged past the $1300 an ounce barrier, trading at its highest level since June 20th. Overall gains did remain limited in Europe as investors took to the side-lines to analyse what will be a busy week due to second quarter corporate earnings.
Overnight gains in the US and Asia provided a more favourable tone on Tuesday helped by an improving political situation in Portugal. Stocks were also helped after Chinese Premier Li Keqiang’s told economists that 7 percent is the “bottom line” for growth. One of the leading European sectors was telecoms after the Dutch telecom group KPM agreed to sell its German business to Spain’s Telefonica.
By midweek stocks looked to be performing well after better than expected earnings from Apple helped technology stocks. Shares in Apple rallied nearly 5 percent in after-hours trading when the tech giant reported better than expected EPS and Sales, helped by healthier iPhone sales. Easyjet also helped sentiment after reporting a 3.6% increase in capacity and improvement in revenue per seat. However, the positivity was soon erased once the US markets opened, taking a late reaction to the China data overnight which showed a contraction for a third-straight month in the manufacturing sector.
With markets struggling to hold onto gains all week, the bears finally managed to overcome the bulls towards the end of the week. US durable goods orders on Thursday rose more than expected to 4.2 percent, distorted by a large increase in aircraft bookings. However, stripping out aircraft orders, core durable goods actually came in slightly below expectations at 0% for the month. US unemployment rose by 7,000 last week to 343,000 but the broader trend is showing an improving job market.
Figures from the UK gave investors some positive signs that the UK economy is improving. Economic growth accelerated in the second quarter in all main industries for the first time in three years. Gross domestic product increased 0.6 percent, evidence the economy is gradually getting back on its feet.
The trend this week has showed that the majority of earnings have exceeded analysts’ expectations. Of the 249 companies in the S&P 500 that have posted results, 73 percent have exceeded estimates for profit and 57 percent topped sales projections. However, despite the positivity, earnings have failed to lift markets this week. The S&P 500 trades 0.7 percent lower since the start of the week but remains on course for a monthly gain of over 5 percent.
Stock of the week – Facebook
Shares in Facebook leapt almost 30% after reporting earnings that beat estimates with stronger-than-expected mobile ad sales. A year ago, Facebook had no mobile advertising and many were sceptical about the firm’s ability to make money. However, Facebook have discovered a new recipe for success, extracting value from its 1.16 billion global users through social advertising. Following the release of their results on Wednesday night, 16 brokerages raised their price targets for the firm.
Open (Monday )
6634
Close (Thursday)
6590
Change
-0.66%
High
6662
Low
6539
Open (Monday)
15541
Close (Thursday)
15488
Change
-0.34%
High
15618
Low
15455
Open (Monday)
1317
Close (Thursday)
1333
Change
1.2%
High
1348
Low
1309
Open (Monday)
1.5287
Close (Thursday)
1.5387
Change
0.65%
High
1.5435
Low
1.5264
Economic diary
Monday
- JPY Retail Sales
- USD Pending Home Sales
Tuesday
- BOJ Gov Kuroda Speaks
- AUD Building Permits
- EUR German Prelim GDP
- USD CB Consumer confidence
Wednesday
- NZD ANZ Business Confidence
- EUR French and German Consumer Spending
- EUR Unemployment Rate
- USD ADP Non-Farm Employment Change
- USD Advance GDP
- FOMC Statement
Thursday
- CNY Manufacturing PMI
- EUR Spanish and Italian Manufacturing PMI
- GBP Manufacturing PMI
- GBP Official Bank Rate and Asset Purchase Facility
- EUR ECB Press Conference and Minimum Bid Rate
- USD Unemployment Claims
- USD ISM Manufacturing PMI
Friday
- AUD PPI
- GBP Construction PMI
- USD Non-Farm Employment Change
- USD Unemployment Rate
- USD Factory Orders
Corporate diary
Monday
- Reckitt Benckiser – earnings release
- Intertek Group – earnings release
- Fidessa Group – earnings release
Tuesday
- Barclays – earnings release
- Domino’s Pizza – earnings release
- BP – earnings release
- GKN – earnings release
- Weir Group – earnings release
- Tullett Prebon – earnings release
- ITV – earnings release
- Next – earnings release
Wednesday
- Centrica – earnings release
- Diageo – earnings release
- Vedanta Resources – earnings release
Thursday
- Smith & Nephew – earnings release
- Lloyds Banking Group – earnings release
- RSA Insurance Group – earnings release
- Spirent communications – earnings release
- Thomas cook – interim management statement
- Aggreko – earnings release
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