28.11.14 Friday Morning

Brent Crude Oil
This week was of big significance for oil, in all the wrong ways. As the commodity fell lower and lower at the start of the week, OPEC readied itself for its summit on Thursday. Leading up to the event, the various members of the cartel seemed unwilling to budge on production, with Saudi Arabia being the main opponent to a cut. After a meeting between Saudi Arabia and non-OPEC member Russia failed to yield any change, things looked grim for oil. This proved to be true, as OPEC decided to make no cut to production, causing Brent Crude to rapidly approach the $70 per barrel level.

The short term future for oil does not look good; there is no economic event on the calendar that could cause a reversal of fortune. The USA announce another crude oil inventory figure next week; considering that America’s increase in production has been a major worry for OPEC, and a main cause of sinking oil prices, the number released could spell more bad news for the commodity.

Gold
Gold has been having an (almost) equally bad time as oil, as it has been victim to dual strength of Dow and dollar. Gold has struggled to maintain levels above $1200 per ounce, and this week has been no different. The yellow metal received a minor boost when China cut interest rates, but this wasn’t enough to inspire any significant rally. Gold’s equivalent of the OPEC summit occurs this weekend, as Switzerland holds a referendum on whether to increase gold reserves or not. The success of the ‘yes’ would be a vote of confidence for gold; however polls are indicating that the ‘no’ vote is the most likely outcome, an outcome that will not result in a positive reaction for gold come Monday.

USA
The USA had a shortened week this week; this didn’t stop the Dow from continuing its record run. However, more so than at any point since the start of the run, the Dow is beginning to flag, as it had to bear the weight of a weak set of US data. Thursday saw the markets rest due to Thanksgiving, and Friday sees reduced hours. Due to this, the effect of oil’s slump is currently unconfirmed, as is any upswing from Black Friday.

Next week should see a better indication of Black Friday and Cyber Monday on the US markets, as the US sees another important set of figures. Friday sees the non-farm employment change numbers, an important indicator of the health of the US economy, and a major instigator of volatility on the markets. This figure will be joined by the trade balance, as well as the general unemployment rate.

Europe
At the start of the week there was a tale of two fortunes in Europe, as the DAX continued to soar on the wings of ECB President Draghi’s encouraging comments at the end of last week, whilst the euro declined against the dollar for exactly the same reason. However the DAX’s run could not last forever, and the low oil prices dragged the German index down as the week closed out, despite further reassuring comments from Draghi’s on Thursday. As the DAX as declined, the euro has begun to grow again; for the moment these two markets seem carefully entwined.

Next week sees the ECB meet next Thursday, a meeting that should yield more concrete action in terms of economic stimulus in the Eurozone. Regardless, the European markets will be very receptive to the comments that arise out of this meeting, whether it results in an actual intervention or not.

UK
The FTSE started the week poorly, and failed to buck the trend as time went on, closing out the week straining under the weight of multiple haemorrhaging energy companies. The UK index was massively hit by the oil slump due to the prevalence of major oil companies like Royal Dutch Shell and Premier Oil, who both suffered after OPEC’s decision. Whilst GDP figures were good for the UK, they couldn’t help the FTSE match the seven-week high it reached last Friday. Next week sees the UK announce its manufacturing PMI on Monday, and the Bank of England release the official bank rate on Thursday. With few economic figures next week, the FTSE may be reliant on outside news for any movement.

Japan
The Nikkei had a relatively flat week after its largely dramatic November. There was no news from Japan on par with the Bank of Japan’s QE decision, its slide in recession or Prime Minister’s Abe’s announcement of a snap election. This resulted in a fairly stable week once the index opened in earnest following a bank holiday on Monday. The Nikkei was one of the few indices to react well to the oil slump, as large airlines like Nippon Airway and Japan Airlines were themselves boosted by cheap oil. Next week sees a lack of Japanese figures, so the Nikkei will look to US data to dictate its movement.

Trading announcement: due to a shift in the opening times of the underlying market, our FTSE contracts will now only be tradable between 8am to 9pm.

Stock of the week: Thomas Cook Group

Thomas Cook was expected to announce profits of around £323 million this week, 23% higher than the same time in 2013. And they did; profits came in on target, and there were no nasty figures to announce. However, the shock decision by chief executive Harriet Green to step down spooked investors. At its worst on Wednesday share prices fell by 25%. After closing Tuesday at 137.7, Thomas Cook hit a low of 104.65 following the departure announcement. By the end of the week the holidaymaker had recovered slightly to reach 120.2. However this is still a significant step down from its pre-full year earnings release price.

Economic Diary: 

Monday:

1.00am – CNY Manufacturing PMI

1.45am – CNY HSBC Final Manufacturing PMI

8.15am – EUR Spanish Manufacturing PMI

8.45am – EUR Italian Manufacturing PMI

9.30am – GBP Manufacturing PMI

3.00pm – USD ISM Manufacturing PMI

Tuesday:

12.30am – AUD Building Approvals m/m

1.30am – JPY Average Cash Earnings y/y

8.00am – EUR Spanish Unemployment Change

9.30am – GBP Construction PMI

Wednesday:

12.30am – AUD GDP q/q

1.00am – CNY Non-Manufacturing PMI

1.45am – CNY HSBC 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 Manufacturing PMI

3.30pm – USD Crude Oil Inventories

Thursday:

12.30am – AUD Retail Sales m/m

12.30am – AUD Trade Balance

9.00am – GBP Halifax HPI 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

Friday:

7.00am – EUR German Factory Orders 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:

Monday:
Aberdeen Asset Management PLC – Full Year 2014 Earnings Release

Tuesday:

GW Pharmaceuticals PLC – Full Year 2014 Earnings Release
ITE Group PLC – Full Year 2014 Earnings Release
Ford Motor Co – November 2014 Sales Release
OmniVision Technologies Inc – Q2 2015 Earnings Release

Wednesday:

Innovation Group PLC - Full Year 2014 Earnings Release
Brewin Dolphin Holdings PLC - Full Year 2014 Earnings Release
Abercrombie & Fitch Co – Q3 2014 Earnings Release
Synopsys Inc – Q4 2014 Earnings Release

Thursday:

Barnes & Noble Inc – Q2 2015 Earnings Release
Betfair Group PLC – Half Year 2014 Earnings Release
Greene King PLC – Half Year 2014 Earnings Release

Friday:

Berkley Group Holdings PLC – Interim Results Announcement
Big Lots Inc – Q3 2014 Conference Call