27.02.15 Friday Morning

Europe
Yet again Greece dominated much of the discussion in the Eurozone this week. After last Friday’s tentative 4 month bailout extension agreement, the country snuck its compulsory reforms list in just under the wire on Monday night. By Tuesday afternoon the Eurogroup had approved the measure, but with some ominous caveats. The sentiment in the region is one of doubt about how well Syriza will implement these reforms, with the IMF and ECB especially dubious over the breadth, depth and intent behind the list. The German parliament are to vote on the issue on Friday morning; the likely ‘yes’ consensus will put Greece one step closer to the extension becoming reality.

The markets were buoyed by the promise of hope, growing steady as the week went on. Things were capped off by a string of positive data from the region on Thursday, with German unemployment at record lows of 6.5%, whilst Eurozone consumer sentiment reached a 7 year high. This saw the DAX reach, break, and reach once more new record highs as the week progressed, and its set to end the month with an incredibly impressive performance overall.

Looking to next week, apart from the continued fallout of the Greek issue, the Eurozone will see a flurry of manufacturing and services data as well as the region wide unemployment rate; given the strength of its February, a repeat performance in March would be a tantalising, if difficult, prospect. Yet with the Greece situation appearing to reach its (current) crescendo, and ECB QE to officially start next month, there could be more good news on the horizon for the Eurozone.

US
For once the Eurozone wasn’t the only region with major news. The focus in the USA this week was on Federal Reserve chair Janet Yellen, who testified in front of the Senate and the House. The response to her comments was mixed, with opinion split on whether she was dove or hawk. She emphasised patience, stating that job growth was positive but needs to make more progress, and that the Fed won’t act to raise rates until they are confident inflation is on its way to 2%. None of what Yellen said would exclude a rate rise in June, but yet neither did it suggest that was a definite date: regardless, the US markets reacted extremely positively.

The Dow Jones is constantly hitting new records and is on track for a 1000 point month, whilst the S&P500 also reached fresh highs and the NASDAQ got closer to 5000 after a 10 day consecutive run of gains. And following the news that core CPI grew more than expected, reflecting the drag oil prices are having when you compare this to the news that January saw the worst overall CPI drop since December 2008, the dollar ran rampant over the euro and the pound.

Next week’s US focus will be on the all-important non-farm data. Following a 3 month run of strong results, and even stronger revisions, the hawks will be anxiously anticipating signs that the jobs recovery is continuing, especially considering jobless claims grew unexpectedly this week.

UK
The UK had a quiet week, even if the FTSE reached an all-time intraday high following positive news from the US and the Eurozone. In comparison to its index peers the FTSE has struggled to make the robust gains seen elsewhere, with a lack of UK data hurting its chances of a boisterous run. There was interesting news from the UK’s banking sector: Royal Bank of Scotland managed to shrink its losses in 2014 but still has a long way to go, with job cuts likely amidst changes at the top. However the most damning news was that Coutts, RBS’ private banking arm, is being investigated for the same Swiss tax evasion issues that have plagued HSBC of late. Lloyds Banking Group, in contrast, saw £1.8 billion in pre-tax profits and resumed its dividend payments for the first time since August 2008. 

Hopefully next week can see bigger growth by the UK index, with manufacturing, construction and services PMI alongside the (unlikely) chance for the Bank of England to shock everyone with its official bank rate.

Commodities
Brent Crude spent yet another week rising and falling away from $60 per barrel, with its latest push seeing it reach $61. February has been a very strong month for the commodity, especially when compared to recent months it has had. The longer this relative stability continues, the more likely it is that we have seen oil’s floor. 

With KAZ Minerals announcing worse than expected net losses, but claiming it is still on track for its macro-aims, copper saw another choppy week. However, the metal is currently on the upswing, and after stroking $2.70 per pound on Thursday is currently trading around $2.67, still a healthier position that it was in its January nadir. For gold there was no such recover, as the precious metal remains languishing around $1205 per ounce with no let up from the strengthened dollar.

Stock of the week: AO World
The relatively nascent stock AO World, who’s IPO was only in 2014, saw a 36% fall on the markets as investors were spooked by a profit warning from the company. The online domestic retailer expressed fears that it couldn’t reach its expected targets as it feels the post-IPO publicity gains it made skewed the company’s current ability to grow. The stock is now trading at £1.81 from starting the week at £2.87.

(Source: IT-Finance.com)

Economic Diary, 2^nd to 6^th March 2015

 

Monday 2^nd March

1.45am – CNY HSBC Final Manufacturing PMI

7.00am – GBP Nationwide HPI m/m

8.15am – EUR Spanish Manufacturing PMI

8.45am – EUR Italian Manufacturing PMI

9.00am – EUR Final Manufacturing PMI

9.30am – GBP Manufacturing PMI

9.30am – GBP Net Lending to Individuals m/m

10.00am – EUR CPI Flash Estimate y/y

10.00am – EUR Unemployment Rate

1.30pm – USD Core PCE Price Index m/m

1.30pm – USD Personal Spending m/m

3.00pm – USD ISM Manufacturing PMI

 

Tuesday 3^rd March

1.30am – JPY Average Cash Earnings y/y

8.00am – EUR Spanish Unemployment Change

9.30am – GBP Construction PMI

 

Wednesday 4^th March

1.45am – CNY HSBC Services PMI

8.15am – EUR Spanish Services PMI

8.45am – EUR Italian Services PMI

9.30am – GBP Services PMI

10.00am – EUR Retail Sales m/m

1.15pm – USD ADP Non-Farm Employment Change

3.00pm – USD ISM Non-Manufacturing PMI

3.30pm – US Crude Oil Inventories

 

Thursday 5^th March

7.00am – EUR German Factory Orders m/m

12.00pm – GBP Official Bank Rate

12.45pm – EUR Minimum Bid Rate

1.30pm – EUR ECB Press Conference

1.30pm – USD Unemployment Claims

1.30pm – USD Revised Non-Farm Productivity q/q

3.00pm – USD FOMC Member Williams Speaks

3.00pm – USD Factory Orders m/m

 

Friday 6^th March

7.00am – EUR German Industrial Production m/m

1.30pm – USD Non-Farm Employment Change

1.30pm – USD Trade Balance

1.30pm – USD Unemployment Rate

1.30pm – USD Average Hourly Earnings m/m

 

Earnings releases, 2^nd to 6^th March 2015

 

Monday 2^nd March

Trinity Mirror PLC – Full Year 2014 Earnings Release

Thorntons PLC – Half Year 2014 Earnings Release

Sotheby’s – Q4 2014 Earnings Release

Salix Pharmaceuticals Ltd – Q4 2014 Earnings Release

 

Tuesday 3^rd March

Moneysupermarket.com Group PLC – Full Year 2014 Earnings Release

Travis Perkins PLC – Full Year 2014 Earnings Release

Direct Line Insurance Group PLC – Full Year 2014 Earnings Release

Best Buy Co. Inc – Q4 2015 Earnings Release

TiVo Inc – Q4 2015 Earnings Release

 

Wednesday 4^th March

ITV PLC – Full Year 2014 Earnings Release

Standard Chartered PLC – Full Year 2014 Earnings Release

Greggs PLC – Full Year 2014 Earnings Release

PetSmart Inc – Q4 2014 Earnings Release

 

Thursday 5^th March

Costco Wholesale Corp – Q2 2015 Earnings Release

Adidas AG – Full Year 2014 Earnings Release

Admiral Group – Full Year 2014 Earnings Release

 

Friday 6^th March

Foot Locker Inc – Q4 2014 Earnings Release