27.06.14 Friday Morning

The week started well for Asian equities, the Nikkei and China’s Schenzhen trading higher on Monday morning, buoyed by news of China’s Purchasing Managers’ Index beating expectations. The FTSE 100 and Germany’s DAX fell in early trading but recovered some of the losses later in the day, poor European data announcements leaving markets unimpressed.

Continued uncertainty over Ukraine and Iraq helped gold maintain levels reached at the end of last week. Brent futures fell as the US made strong statements backing the Iraqi government in the fight against ISIS, somewhat quelling worries about supply from the region. Positive data announcements from the US on Monday afternoon failed to counter sentiment, Wall Street had a relatively negative day, but encouraged strong performance in Asian markets overnight. The Nikkei bucked the trend, losing ground as investor sought to lock in profits.

European equities were flat in Tuesday trading, failing to recoup losses made on Monday, whilst gold continued to strengthen, exchanging hands for around $1320. New US home sales and consumer confidence figures followed Monday’s better than expected existing home sales, also beating predictions. This increased downward pressure on cable and pushed US markets higher in the early afternoon. Tensions in the Middle East continued to hurt markets as investors sought to reduce exposure to risk and Wall Street fell before the end of trading.

Wednesday morning saw a continuation of this trend as the FTSE and DAX also traded down on the previous day as investors’ appetitive for risk fell. Market sentiment towards Brent crude oil and gold appeared to change as both were also lower in morning trading. Worse than expected US GDP figures pushed futures lower prior to the market open but the Dow Jones regained ground into the late afternoon. European markets continued to lag but pulled back slightly on the US market open.

Wednesday night saw strong performance in Asian markets following the positive trading day on Wall Street, which closed up 49 points. Japans’s Topix and the South Korean Kospi made gains and Hong Kong’s Hang Seng rose 0.9%. Gold continued to trade around the $1315 level as the market appeared to be treading water.

The FTSE was fairly stable as it opened early on Thursday morning with little new information to act on. Bank of England governor Mark Carney spoke on UK monetary policy later in the morning, boosting the pound to near six year highs against the US dollar. GBP/USD reached a high $1.7040 before dropping off slightly.

The afternoon saw comments from the president of the Federal Reserve Bank of St. Louis James Bullard suggesting interest rate rises could come before the markets expect. Wall Street fell sharply on open in reaction to the comments, also dragging down European markets, before recovering later on in the trading day. Negative sentiment also hit Asian markets overnight, the Nikkei falling 1.5%. The markets seem to be reacting to recent data from the US calling into doubt the health of the US economy.

Stock of the Week – Barclays Plc

Shares in Barclays fell around 6.5% on Thursday as news broke of the New York Attorney General’s filed a fraud lawsuit over ‘dark pool’ trading activities, wiping around £2.5bn off the bank’s market cap.

It is alleged that the bank falsified documents and misled clients, including large institutional investors, over the benefits they were offering. ‘Dark pool’ trading supposedly allowed clients to trade large volumes of shares whilst keeping prices private. It is claimed that Barclays were allowing high-frequency traders into its supposedly safe ‘dark pools’ to take advantage of ordinary investors.

Shares in other European banks also fell on fears they could also be targeted for prosecution. Barclays could face significant fines if misconduct is proven. These allegations follow other fines levied on the bank for attempting to fix the price of gold and LIBOR and misleading mortgage lenders Fannie Mae and Freddie Mac.

Next Week’s Data

Monday 30 June

10:00 EUR CPI Flash Estimate
1:30 CAD GDP m/m
3:00 USD Pending Home Sales m/m

Tuesday 1 July
9:30 GBP Manufacturing PMI
10:00 EUR Unemployment Rate
3:00 USD ISM Manufacturing PMI

Wednesday 2 July
9:30 GBP Construction PMI
1:15 USD ADP Non-Farm Employments Change
4:00 USD FED Chair Yellen speaks at IMF

Thursday 3 July
9:30 GBP Services PMI
12:45 EUR Minimum Bid Rate
1:30 EUR ECB Press Conference
USD BLS Non-Farm Employments Change
Trade Balance
Unemployment Claims and Rate
3:00 USD ISM Non-Manufacturing PMI

Friday 4 July
USD Independence Day – National Holiday
9:10 EUR Retail PMI

Next Week’s Earnings

Wednesday 2 July
ARPR.L  Ashcourt Rowan PLC (Wealth Management) Preliminary 2013 Earnings Release
AIE.L  Anite PLC (Wireless Software)   Preliminary 2013 Earnings Release

Thursday 3 July
NCCG.L  NCC Group PLC (Information Assurance)  2013 Full Year Earnings Release