31.07.15 Friday Morning

UK
The FTSE deftly managed to escape a disastrous Monday, using a bumper week for UK earnings to end July in the green.

First things first; the biggest one-day sell-off on the Chinese markets for 8 years caused understandable havoc for the commodities sector at the start of the week, dragging with it the oil and mining stock heavy UK index. This helped compound a run of negative trading for the FTSE that had pushed it below its 2015 starting price.

However, a strong GDP figure on Tuesday gave way to a who’s who of earnings releases on Wednesday and Thursday. Impressive (or at least better than expected in some cases) figures from Sky, Barclays, GlaxoSmithKline, AstraZeneca, Foxtons and Shell helped overcome disappointments from stocks like BT and Thomas Cook, leaving the FTSE in a much healthier state than it was at the start of the week.

Without the same calibre of earnings next week, the FTSE is likely to become more susceptible to the erratic movements in the Chinese markets, and the subsequent ramifications such movements have on the commodities sector. To help it weather any potential storm, the UK reveals its manufacturing, construction and services PMIs, alongside a potentially interesting press conference from the increasingly hawkish Mark Carney.

US
It was a very busy, rate-hike relevant, week for the US markets. Strong durable goods orders on Monday were followed by a big miss in consumer confidence; these, however, were just side attractions to Wednesday’s main event, the second quarter FOMC statement. As has been the case recently, the Fed wasn’t exactly awash with firm comments on when and how a rate-hike would happen; however, cautiously optimistic comments about the strengthening jobs sector and healthy(ish) inflation meant that the path to a September (or December) lift-off was uninterrupted.

This sentiment was only aided with Thursday’s GDP figure; whilst it was slightly lower than expected at an annualised 2.3%, the upward revision for first quarter GDP from a 0.2% contraction to a 0.6% expansion confirmed the solidity of the USA’s 2015 economic performance. The lack of direct comment on a rate-hike meant that the Dow Jones could bounce away from the 5 month lows it hit on Monday, but with the dollar still showing glimpses of its trademark dominance as the week went on.

Whilst next week doesn’t have the centre-piece of an actual Fed statement, the markets are getting the second best thing. That’s right; it’s time for the latest non-farm employment change figures! In the run-up to that headline number on Friday, ISM manufacturing and non-manufacturing PMIs, trade balance figures, the ADP non-farm number and the usual unemployment claims data will give the US markets plenty to chew on.

Eurozone
For the first time in what seems like an age, the Eurozone took a backseat to the goings on in the UK and US. This is not to say there were not some juicy, and deal-threatening, details as the week went on. With technical talks finally beginning on Monday following the bizarre location-disagreements of the previous week, third bailout negotiations began in earnest. This left Alexis Tsipras free to try and deal with the rebellious members of his Syriza party; a dramatic central committee meeting on Thursday seems to have yielded an emergency party conference in September, an option preferable to the at-one-point rumoured party referendum on the bailout this weekend.

Yet for all the internal hubbub in the Syriza party, the defining moment of the Eurozone’s week came from the IMF; the Washington-based institution has said it will not participate in a third bailout without an ‘explicit and concrete agreement’ on Greek debt relief. In a month that has seen the issue gain momentum the IMF’s claim is perhaps the grandest, and potentially most game-changing, of them all.

It is one thing for Lagarde and the IMF to state, as they have in the past, that Greece desperately needs some kind of debt relief; it is another thing entirely to actually (sort of) act on that belief. It poses an interesting question for Wolfgang Schauble, who both wants the IMF involved and remains debt relief’s biggest obstacle, and leaves room for plenty of Greek fireworks in the coming weeks. Following those IMF comments the third bailout negotiations are likely to gain more prominence at the start of August; battling for attention will be a host of manufacturing and services data for the region, as well as dribs and drabs of country-specific figures.

Commodities
After a fairly severe drop off for most of the sector following the aforementioned Chinese market sell-off on Monday, the commodities have looked their usual flaccid self. However, following those start of the week events, flaccidity will likely be taken if it can provide a tourniquet for sector’s recently haemorrhaging prices. Brent Crude remained firmly at its 3 month, $53 per barrel, lows following a 3% fall on Monday, whilst copper clawed back all of its Monday losses on Tuesday and Wednesday, only to slip back to $2.36 per pound by the end of the week. Gold, meanwhile, remained firmly under $1100 per ounce, with the week’s losses capping off a truly dismal July for the precious metal.

Stock of the week: GlaxoSmithKline PLC
After circling 2015 lows at the start of the week, pharma-giant Glaxo was lifted to 6 week highs off the back of a better-than-expected set of second quarter results. A slide to 17.3p in core earnings per share was better than the 16.7p forecast, whilst sales rose 6% to £5.9 billion alongside a 4% jump in net profit to £936 million. Glaxo’s Advair problems may not be going away, with the asthma drug’s sales slipping by another 6% in the second quarter, but this report was enough to reassure investors for now.

(Source: IT-Finance.com 31/07/2015)

Economic Diary, 3^rd to 7^th August 2015

 

Monday 3^rd August

2.45am – CNY Markit Final Manufacturing PMI

8.15am – EUR Spanish Manufacturing PMI

8.45am – EUR Italian Manufacturing PMI

8.50am – EUR French Final Manufacturing PMI

8.55am – EUR German Final Manufacturing PMI

9.00am – EUR Final Manufacturing PMI

9.30am – GBP Manufacturing PMI

1.30pm – USD Core PCE Price Index m/m

1.30pm – USD Personal Spending m/m

3.00pm – USD ISM Manufacturing PMI

 

Tuesday 4^th August

8.00am – EUR Spanish Unemployment Change

9.30am – GBP Construction PMI

3.00pm – USD Factory Orders m/m

 

Wednesday 5^th August

2.45am – CNY Markit 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

1.15pm – USD ADP Non-Farm Employment Change

1.30pm – USD Trade Balance

3.00pm – USD ISM Non-Manufacturing PMI

3.30pm – USD Crude Oil Inventories

 

Thursday 6^th August

7.00am – EUR German Factory Orders m/m

9.10am – EUR Retail PMI

9.30am – GBP Manufacturing Production m/m

9.30am – GBP Industrial Production m/m

12.00pm – GBP BoE Inflation Report

12.00pm – GBP MPC Official Bank Rate Votes

12.00pm – GBP Official Bank Rate

12.00pm – GBP Asset Purchase Facility

12.00pm – GBP MPC Asset Purchase Facility Votes

12.45pm – GBP BoE Gov Carney Speaks

1.30pm – USD Unemployment Claims

3.00pm – GBP NIESR GDP Estimate

 

Friday 7^th August

7.00am – EUR German Industrial Production m/m

7.00am – EUR German Trade Balance

9.30am – GBP Trade Balance

1.30pm – USD Non-Farm Employment Change

1.30pm – USD Unemployment Rate

1.30pm – USD Average Hourly Earnings m/m

Earnings releases, 3^rd to 7^th August 2015

 

Monday 3^rd August

HSBC Holdings PLC – Half Year 2015 Earnings Release

Fidessa Group PLC – Half Year 2015 Earnings Release

Biomarin Pharmaceutical Inc – Q2 2015 Earnings Release

 

Tuesday 4^th August

Direct Line Insurance Group PLC – Half Year 2015 Earnings Release

Just Eat PLC – Half Year 2015 Earnings Release

Kellogg Co – Q2 2015 Earnings Release

Activision Blizzard Inc – Q2 2015 Earnings Release

 

Wednesday 5^th August

SOCO International PLC – Half Year 2015 Earnings Release

London Stock Exchange Group PLC – Interim 2015 Earnings Release

Time Warner Inc – Q2 2015 Earnings Release

CBS Corp – Q2 2015 Earnings Release

FitBit Inc – Q2 2015 Earnings Release

 

Thursday 6^th August

Zynga Inc – Q2 2015 Earnings Release

GW Pharmaceuticals PLC – Q3 2015 Earnings Release

Rio Tinto PLC – Half Year 2015 Earnings Release

RSA Insurance Group PLC – Half Year 2015 Earnings Release

Aviva PLC – Half Year 2015 Earnings Release

 

Friday 7^th August

Hershey Co – Q2 2015 Earnings Release

William Hill PLC – Half Year 2015 Earnings Release