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Welcome to the Galvan Week ahead report with content supplied exclusively by Galvan. Here we preview the week’s events – both economic and corporate – drawing on the work of the broker’s experienced research and trading teams. It is a mix of fundamental data and technical analysis designed to provide Proactive readers an at a glance guide to what will unfold on the markets over the next five trading days.
Galvan Week Ahead: IMF provides a further boost for the UK economy as Yellen again reduces QE .April 12 2014, 7:00am
This Week in the Markets:
The International Monetary Fund (IMF) said last Tuesday that the UK & Britain will be the best performing of the world’s largest economies in 2014. Along with the US and Germany, the UK economy is now expected to steam ahead as consumer spending rebounds, inflation remains low and unemployment continues falling. In its World Economic Outlook (WEO), published ahead of its spring conference in Washington, the IMF said the UK’s GDP growth would soar to 2.9% this year before returning to its long-term trend of 2.5% in 2015.
The US Federal Reserve released minutes of the March meeting last Wednesday, providing details of the new round of tapering. Fed Chair Janet Yellen shaved off a further $10bn off monthly bond purchases, and also surprised the markets by announcing that the first rise in US interest rates could come six months after the end of quantitative easing (QE). If the Fed keeps up the current pace of asset buying reductions, the programme will end around October.
Business secretary Vince Cable has been recalled by MPs to appear before the business select committee on April 29th regarding the Royal Mail privatisation. A report from the National Audit Office (NAO) condemned the government for undervaluing the postal service and costing taxpayers £750m in a single day. The business secretary will have to answer claims that he botched the sale and allowed City traders to make instant profits at the expense of taxpayers.
In corporate news, the troubled Co-op Bank has delayed the release of its full year financial results for a second time in order to “finalise its accounts”. Last month, the lender was forced to halt the release of its annual report as it made a fresh £400m cash call and warned losses for 2013 could hit £1.3bn. The new fundraising came just months after the Co-op Bank completed a debt-for-equity swap that saw bondholders, including several major US hedge funds, take control of the bank from the Co-op Group.
In a trading statement on Thursday morning, blue-blooded retailer Marks & Spencer (LON:MKS) reported a 0.2% fall in Q4 like-for-like sales, although food sales rose by 0.1% over the same period. Total group sales rose by 1.9%, mainly boosted by a 4.7% hike in international sales, and 12% growth in online.
Key Companies Reporting April 14th – April 18th
Tuesday – Finals: Amara Mining (LON:AMA), JD Sports Fashion (LON:JD.), Manx Financial Group (LON:MFX). Interims: Debenhams (LON:DEB). Trading Statement: Aggreko (LON:AGK), e2v technologies (LON:E2V), GKN (LON:GKN), Hochschild Mining (LON:HOC), Immunodiagnostic Systems Holdings (LON:IDH), Michael Page International (LON:MPI), Rio Tinto (LON:RIO), SABMiller (LON:SAB).
Wednesday – Finals: Central Asia Metals (LON:CAML), Tesco (LON:TSCO). Trading Statement: Burberry Group (LON:BRBY), Evraz (LON:EVR), Fresnillo (LON:FRES), Hargreaves Lansdown (LON:HL.), Hunting (LON:HTG), Persimmon (LON:PSN), Reckitt Benckiser Group (LON:RB.), Telford Homes (LON:TEF).
Interims are scheduled on Tuesday for High Street retailer Debenhams, which has struggled of late after the departure of its Chief Financial Officer and a poor set of results over the Christmas period. The department store is now guiding to a pre-tax profit of just £85m for the six months ending March 2nd, down 26% on the £114.7m registered the year before. According to Reuters, analysts on average were expecting a figure closer to £112m for the first half. In mid-January, Sports Direct International (LON:SPD) bought and sold its 4.6% stake in the retailer replacing it with a put option over a larger shareholding.
One of the “Big Four” UK supermarkets will report finals on Wednesday. Tesco, like its rivals has been struggling for market share, losing out to discounters like Aldi and Lidl. In early April, the company confirmed that its CFO and Executive Director, Laurie McIlwee would both step down from the board and resign after the grocer posted a 2.4% fall in its like-for-like sales during the festive period. Analysts had expected falls in LFL sales of between 1-2%. Tesco expects to report full year profits within the range of current market expectations, between £3.16bn to £3.42bn.
Major Economic Data April 14th – April 18th
Monday – EU: Industrial Production. US: Core Retail Sales, Retail Sales, Business Inventories.
Tuesday – UK: BRC Retail Sales Monitor, CPI, PPI Input, RPI, HPI, Core CPI, PPI Output. EU: German ZEW Economic Sentiment, ZEW Economic Sentiment, Trade Balance. US: Core CPI, CPI, Empire State Manufacturing Index, TIC Long-Term Purchases, NAHB Housing Market Index.
Wednesday – UK: Claimant Count Change, Unemployment Rate, Average Earnings Index. EU: Italian Trade Balance, CPI, Core CPI. US: Building Permits, Housing Starts, Capacity Utilization Rate, Industrial Production, Beige Book.
Thursday – EU: German PPI, German WPI, Current Account. US: Unemployment Claims, Philly Fed Manufacturing Index.
Friday – No economic data scheduled.
UK economic data remains quiet this week in the run up to the Easter break and lower trading volumes in the European financial markets. PPI data is scheduled for release on Tuesday and the Unemployment Rate on Wednesday.
In contrast there is a slew of US data, ranging from Housing Starts on Wednesday and Unemployment Claims on Thursday. There has been mixed data of late from the US housing market, so any upsets here could produce a wobble or two in the markets.
After dipping into the red last Monday and Tuesday, weighed down again by the Ukraine crisis and fears of a slowdown in the Chinese economy, (the World Bank lowered its growth forecast for China), the FTSE rallied on Wednesday closing up over 40 points at 6,635.
Technically, the index presents a rather intriguing charting set-up, with a triangle formation across the daily timeframe. This has its parameters at 6,700 resistance. While the picture is biased towards an upside break, unless or until the RSI now at 44 trades above neutral 50 or the 6,700 level is broken, the position is very much in limbo and could turn either way.
Sterling gained as much as a third of a percent against the dollar last Monday, due mainly to a rise in the Euro against the Dollar. Monday’s move against the US currency came largely on the back of comments from European Central Bank (ECB) officials, which cooled any immediate prospects of easier monetary policy in the Eurozone and bolstered the Euro. On Wednesday, Sterling was again bolstered by positive manufacturing and industrial production data and forecasts from the IMF – sending cable through the $1.67 level.
Technically, ActionForex takes the view that the up trend from $1.4813 is resuming and a break of $1.6822 will confirm this bullish case to target 1.7043 key resistance. The outlook will stay bullish as long as $1.6683 resistance turned support holds.
The precious metal moved back above $1,300 level last Wednesday, a move not seen for two weeks, but that is most likely due to dollar weakness.
According to Brenda Kelly, Chief Market Strategist at IG: “It seems difficult to imagine that the yellow metal will sustain real gains from this point onwards. Those with longer memories will note that the second quarter of 2013 saw gold slump from $1,600 almost to $1,300, driven by a variety of factors. Although these are now absent, the prospect of Fed tightening during 2015 and the absence of fresh QE from other central banks means there is precious little reason for gold to be pushed here from current levels.”
Technically, FX Empire Analyst James Hyerczyk says the main trend is down on the daily chart, but last Tuesday’s surge suggests the market may be setting up for a rally into the retracement zone bounded by $1,334.80 to $1,348.55.