Only registred members can create thier own customized alerts.
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.
Unemployment at six year low, and rising house prices show economic recovery gathering pace.July 19 2014, 7:00am
Galvan Week Ahead: UK Unemployment at six year low, and rising house prices show economic recovery gathering pace.
This Week in the Markets:
UK unemployment fell to a six-year low of 2.12m according to the latest figures from the Office for National Statistics (ONS). The rate of unemployment also fell again, to 6.5% from 6.6% in the three months to April. The number of people claiming jobseeker's allowance last month fell by 36,300 to 1.04m, the ONS added. Prime Minister David Cameron said this was now equal to the record rate of employment set in 2005. “Today’s figures show more people have the security of a job than ever before. Full employment is a key aim of our long-term economic plan,” he said.
Rises in food prices and delayed summer clothes sales by high street retailers lifted the UK’s inflation rate to a five-month high in June. Economists in a Reuters’ poll had forecast a small rise in inflation to just 1.6% but a combination of factors lifted inflation higher. The retail price index measure of inflation, which is broader and includes housing costs, also came in stronger than expected, rising to 2.6% from 2.4% in May. The bigger-than-expected rise in the consumer price index (CPI) measure of inflation to 1.9% in June from 1.5% in May will further cloud the picture for Bank of England policymakers as they weigh up price pressures in the economy and decide when to raise interest rates from their record low.
House prices in the UK rose by 10.5% in May according to the ONS - up from 9.9% in the previous month and the highest rate in four years. In London, house prices rose by a record 20.1% over the year, but excluding London and the South East, prices rose by 6.4% in the UK. The latest figures led the Governor of the Bank of England (BOE), Mark Carney to tell MPs on the Treasury Select Committee last Tuesday, that the threat of a property bubble was the “biggest risk” to economic recovery over the medium-term.
In corporate news, Sports Direct (SPD) founder Mike Ashley has decided to leave the company’s controversial bonus scheme despite winning shareholder approval. Ashley bowed to City pressure last Wednesday. Sports Direct shareholders voted earlier this month for a bonus plan that will give £200m worth of shares to 3,000 permanent staff, including Ashley, if earnings double by 2019. It was Sports Direct’s fourth attempt to push through a big payout for its billionaire founder, who owns 58% of the company and is deputy chairman. The full-year results on Thursday perhaps serve to illustrate why Ashley had been so keen on the scheme: Sports Direct reported a 15.6% increase in FY pre-tax profits to £239.5m, on revenues 23.8% ahead at £2.7bn. The group also reported accelerated European expansion including acquisitions in Austria and the Baltic region, and said that overall trading since the year-end has been in line with management's expectations with "some stronger weeks offset by England's disappointing World Cup matches."
Finally, an interim update from mining giant Rio Tinto (LON:RIO) helped to drive the FTSE100 higher on Wednesday. Rio reported a "very strong first half" with record iron ore shipments from its giant Pilbara mine and a 23% increase in copper production at the Oyu Tolgoi operation.
Key Companies Reporting July 21st – July 25th
Monday – Finals: Allocate Software (LON:ALL), CSF Group (LON:CSF), Schroder Real Estate IT (LON:SREI). Interims: Michelmersh Brick Holdings (LON:MBH), Microgen (LON:MCGN), W.H. Ireland Group (WHI). Trading Statement: Quindell (QPP).
Wednesday – Finals: ANGLE (LON:AGL), Renishaw (LON:RSW). Trading Statement: Brewin Dolphin Holdings (LON:BRW), Carphone Warehouse Group (The) (LON:CPW), Sage Group (The) (LON:SGE). Interims: Capita Group (The) (LON:CPI), GlaxoSmithKline (LON:GSK), Morgan Advanced Materials (LON:MGAM), Provident Financial (LON:PFG), Staffline Recruitment Group (LON:STAF).
Thursday – Trading Statement: Britvic (LON:BVIC), Close Brothers Group (LON:CBG), Electrocomponents (LON:ECM), easyJet (LON:EZJ), Halma (LON:HLMA), Kingfisher (LON:KGF), Marston’s (LON:MARS), SABMiller (SAB), Tate & Lyle (LON:TATE). Interims: CSR (LON:CSR), Hammerson (LON:HMSO), Howden Joinery (LON:HWDN), Lancashire Holdings (LRE), Nichols (NICL), Rathbone Brothers (LON:RAT), Reed Elsevier (LON:REL), Unilever (LON:ULVR).
There are a number of major companies reporting this week. On Tuesday, UK chip maker ARM Holdings (ARM) will release interims. Swiss bank Credit Suisse recently reduced its target price for the company from 1200p to 1125p, but it still maintains an “Outperform” rating. Back in April, the tech company reported weaker than usual royalty revenues in the first quarter, but strong levels of new customer licensing.
On Wednesday, global pharmaceutical giant GlaxoSmithKline(LON:GSK) will be reporting its interims. On a positive note, GSK has begun Phase III testing on a combined treatment for chronic obstructive pulmonary disease (COPD) with its US project partner Theravance. The global study is the first to evaluate the efficacy and safety of a triple combination of three drugs in 10,000 patients with COPD, all in a single “closed” inhaler device. In contrast however, the ongoing China scandal refuses to die down – it now seems that the UK drugs giant, still under investigation for bribery in China, fired employees in 2001 for similar behaviour.
On Thursday, low-budget airline EasyJet LON:(EZJ) will be releasing its trading statement. Broker Numis Securities has maintained a positive stance on the budget airline saying that it’s third-quarter update from should reassure investors. “The stock has been under considerable pressure of late (down 28% over three months) with the market concerned about a number of issues. There is quite a long list of worries, but we believe that the share price reaction has been overdone and expect a relatively reassuring Q3 update.”
Major Economic Data July 21st – July 25th
Monday – UK: Rightmove HPI, Public Sector Net Borrowing, CBI Industrial Order Expectations. EU: German PPI, Belgian NBB Business Climate.
Tuesday – EU: Italian Retail Sales. US: Core CPI, CPI, HPI, Existing Home Sales, Richmond Manufacturing Index.
Wednesday – UK: MPC Asset Purchase Facility Votes, MPC Official Bank Rate Votes. EU: Consumer Confidence.
Thursday – UK: Retail Sales, BBA Mortgage Approvals. EU: Spanish Unemployment Rate, French Flash Manufacturing PMI, French Flash Services PMI, German Flash Manufacturing PMI, German Flash Services PMI, Flash Manufacturing PMI, Flash Services PMI. US: Unemployment Claims, Flash Services PMI, New Home Sales, Flash Manufacturing PMI.
Friday – UK: Nationwide HPI, Prelim GDP, Index of Services, CBI Realized Sales. EU: German Ifo Business Climate, M3 Money Supply, Italian Monthly Unemployment Rate, Private Loans. US: Core Durable Goods Orders, Durable Goods Orders, Revised UoM Consumer Sentiment, Revised UoM Inflation Expectations.
A plethora of UK and US economic data is scheduled this week. Yet more house price data from property website Rightmove will be published on Monday. On Thursday BBA Mortgage Approvals and key Retail Sales figures are released. Observers will be looking to see whether this data is in line with recent ONS figures last week.
Stateside, on Tuesday a slew of CPI data may well serve to confirm recent concerns about the US economy expressed by the Fed’s Janet Yellen.
The UK’s leading benchmark index has been all over the place of late. Last Wednesday the FTSE 100 was lifted by positive Chinese data, an improvement in the UK unemployment figures and strong first half numbers from mining giant Rio Tinto, rising over 70 points.
Technically, the FTSE is in an erratic consolidation towards the lower end of its range, best described as sandwiched between the 20-day moving average (MA) at 6,770 and the 200-day moving average (MA) at 6,688. The easiest way forward in the light of this observation could be to wait on an end of day close outside these technical parameters and follow this market in the winning direction. The fact that the 200-day line is still rising implies that we could give the benefit of the doubt to the upside scenario for now.
Positive data out of the UK – CPI data on Tuesday temporarily helped lift sterling to almost a six-year high of $1.7192 against the struggling dollar. Last Wednesday, sterling slipped back against the dollar as UK unemployment data failed to add to signs of growing demand-led pressure on prices after a jump in inflation in June. According to Reuters, this serves to “muddy the outlook for a UK interest rate hike later this year.”
From a charting view however, Actionforex.com are still bullish. With $1.7058 support intact, they expect the recent rally in cable to continue higher, next target is the key long term fibonacci level at $1.7332.
The precious metal rose back above $1,300oz last Wednesday before dropping back again. However, Alastair McCaig, Market Analyst, IG said in a note: “An improving US economy and a central bank happy to cut back on stimulus takes away much of the rationale for being in gold. Only the onset of the traditionally strong August period for gold offers hope for the bulls, so they may yet have one more brief moment in the sun.”
IG technical analyst Chris Beauchamp said that Gold trading today (Thursday) below $1,300 marks the first time gold has opened below this key level in almost a month, but so long as the 200-DMA/$1,280 zone remains intact, the default view here is cautiously bullish in that small gains appear more likely than losses. However, a drop below $1,280 would seriously imperil any attempts to rally, with $1,260 then in focus.