26.06.15 Friday Morning

Eurozone
It is becoming a bit of a cliché, but it has been a rollercoaster of a week for the Eurozone.

Monday saw the most robust gains for the region in 2015, and harkened back to the Draghi-and-QE inspired leaps at the start of the year, as the DAX climbed 3.6% in a single day. The strength of this optimism arrived out of nowhere, and was based on a selection of positive soundbites from key figures; in hindsight this growth looks ridiculous, but the overwhelming bullishness at the start of the week did generally seem to suggest a deal was on its way.

Tuesday saw a continuation of this trend, if slightly less emphatically, as investors watched and waited as the technical work was done behind the scenes. However, Wednesday saw discussions collapse, with the IMF wanting pension reform instead of Greece’s proposed reliance on raised taxes, causing frayed tempers, harsh words and tumbling markets. With the 4th Eurogroup meeting in a week on Thursday things were looking even bleaker and a 24 hour attempt to find a solution yielded little in the way of progress, with Athens rebuffed at every step of the ‘negotiation’ process. This means the region’s finance ministers are set for a 5th meeting in 9 days on Saturday and yet another attempt at producing what has eluded them for the past 5 months.

Of course, deal or no deal, the focus will be on Greece at the start of next week. If by some miracle a solution is agreed upon over the weekend, the markets will be unable to react until Monday, be it a (likely) disappointment or an (unlikely) move that doesn’t just kick the issue further down the road. In all too familiar eventuality of no deal, then all eyes will be on Tuesday, when Greece has to cough up €1.6 billion to the IMF. The country has repeatedly stated that it won’t be able to pay this sum if a deal isn’t in place, so if talks collapse over the weekend the markets will be in for a nervy end to the month.

If anyone is interested, and the markets haven’t been in the past few weeks, next week also sees a flurry of inflation data across the region, manufacturing and services PMIs and a couple of unemployment figures.

UK
Once again it is hard to say much about the FTSE that isn’t captured in discussion surrounding the Eurozone. A light week of data meant the UK index was even more in thrall to the Eurozone, and followed its optimistic highs and its reality-based lows as the week continued. One thing that was meant to be of note was David Cameron’s tabling of his EU renegotiation aims at the EU summit dinner on Thursday; however, the unresolved Greek saga, alongside the Mediterranean migration issue, took the spotlight off Cameron, who didn’t have a real chance to put forth his demands.

Whilst it is hard to look beyond the dominance of Greece at the moment, alongside the general ambivalence the FTSE has had towards its own data of late, next week nevertheless brings with it some important figures out of the UK. The latest current account number arrives on Tuesday, whilst manufacturing, construction and services PMIs will be announced as the week goes on. Whether these figures register with investors, however, will likely depend on what state the Greek saga is in when they are released.

US
Unlike the FTSE, the US markets had their fingers in a few different pies this week. The European optimism on Monday helped carry the Dow Jones higher, despite the resurgence of the strong dollar and some hawk-boosting housing data. Wednesday then brought with it a massive tumble as the collapse of Greek talks, and the news that first quarter GDP was a manageable -0.2% instead of the much more severe -0.7% (good news for those angling for September rate hike), ate away the Dow’s gains from the start of the week. The US indices continued to fall on flat unemployment claims and a stable core PCE price index, alongside better than expected personal spending.

Next week will bring with it some US data to rival whatever is happening with Greece (almost) in an abbreviated week due to the 4th July weekend. Consumer confidence is always a good litmus test for the country’s financial situation, whilst manufacturing data is usually of interest. However, the main focus will be on the non-farm figures on Thursday; last month’s number was much better than expected, and a second strong figure in a row will be the biggest signal yet of an interest rate rise in 2015.

Commodities
This week’s dollar strength has brought with it more bad news for gold; after having crossed the $1200 per ounce mark (by however a slim margin) at the end of last week, the precious metal tumbled by around $25 this week as the greenback surged against the euro and the pound. Brent Crude, on the other hand, had a fairly steady week, not escaping the $63 to $63 per barrel bracket that has been its home for the second half of June, whilst copper hovered in the $2.60s.

Stock of the week: Thorntons PLC
It may not have been the biggest mover this week, but Thorntons was the latest in 2015 long line of M&A participants. On Monday the chocolate company announced a £1.45 per share takeover by Ferrero, of Rocher fame, lifting the stock to that offer price, and nearly 45% gains in the process. This was Thorntons’ highest level since April last year, a level it has steadily maintained across the rest of the week, and a far cry from the near 2 year lows the stock hit at the end of February.

(Source: IT-Finance.com 26/06/2015)

Economic Diary, 29^th June to 3^rd July

 

Monday 29^th June

12.50am – JPY Retail Sales y/y

8.00am – EUR Spanish Flash CPI y/y

9.30am – GBP Net Lending to Individuals m/m

3.00pm – USD Pending Home Sales m/m

 

Tuesday 30^th June

12.05am – GBP Gfk Consumer Confidence

2.30am – JPY Average Cash Earnings y/y

8.55am – EUR German Unemployment Change

9.30am – GBP Current Account

9.30am – GBP Final GDP q/q

10.00am – EUR CPI Flash Estimate y/y

10.00am – EUR Core CPI Flash Estimate y/y

10.00am – EUR Unemployment Rate

2.45pm – USD Chicago PMI

3.00pm – USD CB Consumer Confidence

 

Wednesday 1^st July

2.00am – CNY Manufacturing PMI

2.00am – CNY Non-Manufacturing PMI

2.45am – CNY HSBC Final Manufacturing PMI

8.15am – EUR Spanish Manufacturing PMI

8.45am – EUR Italian Manufacturing PMI

8.50am – EUR French Final Manufacturing PMI

9.00am – EUR German Final Manufacturing PMI

9.30am – GBP Manufacturing PMI

1.15pm – USD ADP Non-Farm Employment Change

2.45pm – USD Final Manufacturing PMI

3.00pm – USD ISM Manufacturing PMI

3.30pm – USD Crude Oil Inventories

 

Thursday 2^nd July

8.00am – EUR Spanish Unemployment Change

9.30am – GBP Construction PMI

12.30pm – EUR ECB Monetary Policy Meeting Accounts

1.30pm – USD Non-Farm Employment Change

1.30pm – USD Unemployment Claims

1.30pm – USD Unemployment Rate

1.30pm – USD Average Hourly Earnings m/m

3.00pm – USD Factory Orders m/m

 

Friday 3^rd July

All Day – USD Bank Holiday

2.45am – CNY HSBC Services PMI

8.15am – EUR Spanish Services PMI

8.45am – EUR Italian Services PMI

8.50am – EUR French Final Services PMI

8.55am – EUR German Final Services PMI

9.00am – EUR Final Services PMI

9.30am – GBP Services PMI

10.00am – EUR Retail Sales m/m

 

Earnings releases, 29^th June to 3^rd July

 

Monday 29^th June

N/A

 

Tuesday 30^th June

Ladbrokes PLC – Business Review

Northgate PLC – Full Year 2014 Earnings Release

Imagination Technologies Group PLC – Full Year 2014 Earnings Release

 

Wednesday 1^st July

Anite PLC – Full Year 2014 Earnings Release

Serco Group PLC – Half Year 2015 Trading Statement

Greene King PLC – Preliminary 2014/15 Final Results Announcement

 

Thursday 2^nd July

Persimmon PLC - Q2 2015 Trading Statement

 

Friday 3^rd July

N/A