30.05.16 Monday Morning

The markets received a surprise boost last week, with investors really taking to news of Greek bailout progress despite the scepticism surrounding the deal. This week attention turns to the rate-hike-eying US, the start of a new month bringing with it the latest US non-farm jobs report.

UK
Despite a weak GDP report (the first quarter figure remained unchanged at 0.4%, but with the annualised number revised lower to 2%) the FTSE still managed to surge to a 3 week high as it benefited from the run-off Greek-goodwill wafting over from the Eurozone.

Turning to this week and after taking Bank Holiday Monday off, the UK index eases back into trading on Tuesday with an effectively empty economic calendar. Things pick up, however, from the middle of the week (and therefore June) onwards as the UK reveals its latest manufacturing, construction and services PMIs on Wednesday, Thursday and Friday respectively. All three measurements have been worrisome of late, with the manufacturing sector in particular slipping into negative territory. Any improvement from the PMIs, then, will likely dictate the FTSE’s ability to hold onto its recent highs as the week goes on.

In terms of earnings the UK offers up a pretty meagre selection of interesting names this week; bike-retailer Halfords reveals its full year update on Wednesday (see below), while speciality chemical giant Johnson Matthey posts its annual statement on Thursday.

US
Pushing above 17800 by the end of the week the Dow Jones, like the FTSE, benefited from the investors-optimism sparked by the Greek deal. It helped that the US Q1 GDP figure was revised up to 0.8% in its annualised form, though rate-hike fearing investors were likely not pleased by the extra muscle this gives to the Fed’s hawks.

The state of the central bank’s mind will be in focus this week, with things building to the all-important non-farm jobs report figures on Friday. Before all that, however, the US has plenty for investors to process; following Memorial Day on Monday the personal spending and core PCE price index numbers are released on Tuesday, the latter reportedly a favourite of the Fed. Thursday then sees the ADP non-farm numbers sandwiched between the Markit and ISM manufacturing and services PMIs on Wednesday and Friday respectively.

Eurozone
Firmly at the forefront of investors’ minds last week the Eurozone indices surged thanks to the success of the latest Greek bailout talks. Of course that success comes with major caveats, namely the can-kicked nature of any serious debt relief discussion, and the lack of involvement in the deal by the IMF. Nevertheless the DAX and CAC hit May highs in the aftermath of Eurogroup meeting, all the while helping inspire a global rally.

While it may not have anything quite as important as the ongoing Greek issues this week, the Eurozone still has plenty of data to try and fight for investors’ attention with. Spanish and German inflation figures kick things off on Monday, before the latest region-wide CPI reading arrives on Tuesday. Wednesday then sees a flurry of final manufacturing PMIs from the Eurozone as a whole, before wrapping up the week with the services PMIs on Friday. The main event, however, will be the ECB press conference on Thursday, investors looking out for the usual hints from Draghi about any potential stimulus in the future.

Stock of the week: Halfords Group PLC – Full Year Update
Having fallen sharply across the second half of 2015 Halfords had a rather big price rebuild on its hands as the New Year began. Yet it has managed to spend most of 2016 on the path to recovery thanks to a couple of positive trading updates.

In January the company promised to hit its full year profit targets thanks to robust cost-cutting measures, while in April it revealed a 2.6% rise in like-for-like sales across the quarter alongside 1.7% jump for the year as a whole. The thrust of the company’s growth came from its travelling (camping accessories and equipment) and motoring (car cleaning products, dashboard cameras etc) sectors, somewhat compensating for a 0.9% drop in like-for-like cycling revenue. Since then Halfords has been busy, recently announcing it had bought Tredz and Wheelies Direct for £18.4 million, which combined produced £32 million in revenue and £2.4 million in profits last year.

In terms of the company’s full year figures Halfords is expecting to post pre-tax profit between £78-82 million, compared to the £80.8 million seen last year.

 
 

(Source: IT-Finance.com 27/05/2016)