This Week in the Markets  

The name is Bond – Eurobond, and of course given the clear and present danger of Greece exiting the Euro next month, the concept of a common bond to go with the common currency is back on the agenda.

Well, that is for most in Europe apart from the most important play and veto holder, Germany. 

In fact, looking back at the foundation of the single currency, a fair chunk of the problems faced by Europe since the financial market crisis began would simply not have materialised had the Eurobond existed from Day 1. 

The U.S. Credit Agency trio of Fitch, Moody’s and S&P wouldn’t have been able to take pot shots at PIIGS nations every other week, neither would speculators have been able to relentlessly short the bonds of the downgraded nations, thereby sending the yields to unaffordable levels and leading to ballooning debt. 

Now Europe has reached the tipping point, in order for the Eurozone dream to survive, a single bond will have to be created. Ironically, the cost to the Germans of a higher yield on a common bond might be rather less than its share of the odd €100bn here and there to periodically bail out Club Med. 

In the aftermath of G8 – a talking shop of the highest quality, the ball has been put firmly back in the EU court by Prime Minister David Cameron, with calls from him to ‘make up or break up’. 

At least for stock market bulls, the Eurobond idea has to be taken as not only the solution of last resort, but also the put option that could ensure the May sell off in equities was merely a ‘seasonal’ event.

Closer to home, while Mr Cameron was keen to provide guidance to fellow EU nations, so in turn the International Monetary Fund was happy to tell us how to go about our business. The message from IMF boss Christine Lagarde is that we should find a ‘Plan B’, although arguably this is wholly inappropriate given that ‘Plan A’ led to a ballooning deficit and a double dip recession. 

The Week Ahead:

Key Companies Reporting: May 28th – June 1st

Monday - Finals: Gulf Keystone Petroleum (LON:GKP)

Tuesday - Finals: De La Rue (LON:DLAR), Pennon Group (LON:PNN) Interims Britvic (LON:BVIC)

Wednesday - Finals: Severn Trent (LON:SVT)

Thursday - Finals: Halfords (LON:HFD) Trading Announcement Kingfisher (LON:KGF) 

Friday - No significant corporate announcements due

As we edge into June at the end of the week, there is already a sense that the stock market is easing into summer mode due a dearth of major corporate announcements.

Those chasing M&A stocks will eagerly be awaiting finals from Gulf Keystone (LON:GKP) as the Northern Iraq focused oil explorer attempts to distract the hot money away from recent bid speculation and towards the positive progress on its drilling programme. 

The explorer’s Shaikan block in the Kurdistan region of Iraq has independently audited volumes of between 8bn barrels to 13.4bn barrels of oil, which would mark the shares out as a win – win buy situation whether or not any takeover offer reappears.  In the meantime investors may be eyeing up the Investec target of 232p for the stock given at the end of last month.

News of sharp 2.8% plunge in UK April Retail Sales vs. the March rise to 1.8% will doubtless be of concern for bikes to auto parts group Halfords (LON:HFD) as we come to its finals. 

The like-for-like sales decline slowed vs. last year but were still down -2.3% in April vs. the -2.7% drop for the 2011 equivalent. Nevertheless, the fundamental headwinds affecting the company continue to blow, and observers will be looking to see if growth areas such as the Autocentres business can take up any of the slack.

In contrast, B&Q owner Kingfisher (LON:KGF) walks on fundamental water, a point underlined once again at the end of March when the group revealed like-for-like sales had risen 1.3%, while adjusted pre-tax profit rose 20.4% to £807m from £670m the previous year, just above market expectations. 

The Kingfisher share price is now some 15% off the peak seen at the time of the update, so there may be an opportunity to buy the dip if another solid performance is reported.

Major Economic Data:  May 28th – June 1st       

Monday – No significant economic data due

Tuesday – Germany: May Harmonised Index of Consumer Prices. U.S.: March S&P/Case-Shiller 20-City Composite, May Conference Board Consumer Confidence.

Wednesday –. EU: May Economic Sentiment. U.S.: April Pending Home Sales.

Thursday – Germany: May Unemployment Rate. EU: May Harmonised Index of Consumer Prices. U.S.: May ADP National Employment Report, May Chicago PMI, Q1 GDP.

Friday – UK: May Manufacturing PMI. EU: April Unemployment Rate. U.S.: April Personal Income, Personal Spending, May ISM Manufacturing.

Not a big week on the Economic Data front, but some key numbers to take note of nevertheless, especially the big U.S. Non-Farm Payrolls number on Friday where a slight improvement over the past couple of months is expected. The May number is called at 140,000 vs. the 115,000 gain in April. 

Also worth noting from across the pond are April Pending Home Sales where a drop to just +0.8% from 4.1% is due.

Moving to the troubled Eurozone and plenty of attention will be paid to the April EU Unemployment Rate and the May equivalent for Germany, with previous 10.9% and 6.8% figures for comparison. 

At home, May Manufacturing PMI tops the bill, especially for those double dip recession doubters who have been hoping that the initial Q1 reading was a blip, although 50.5 last time shows how borderline the position is.

Main Markets Outlook

FTSE100: 

Apart from being extremely impressed at how well our ‘Sell In May’ strategy has fared this month, the question is how much of this pain will spread over into June? 

From a charting standpoint, the singular hope for the bull argument is a line of support from August last year running through 5,200. While this would be a very deep retracement, such a last chance saloon rebound is possible and for many investors essential given that a sub-5,000 probe might for many be the last straw. 

At this stage, only back above this week’s early resistance at 5,408 would remove the immediate prospect of a 5,200 or less destination for leading UK stocks, and with the threat of much worse to come.

Sterling / Dollar:

The $1.5800 level came into play as support at the beginning of April, with the 200-day moving average at $1.5810 also a temporary support for this market after the retreat from early May $1.600 plus peaks. 

Sterling / Dollar has been the preferred cross vs. the ailing Euro over the past week, but some of the mud from across the English Channel is sticking to our currency too. Even more so considering the real safe haven of 2012 to date has not been Gold, but the U.S. Dollar. Without a swift implementation of Plan B it could very well be that the beginning of June sees a retest of the March floor for this market just above $1.56.

Gold:

After a brief spurt towards $1,600 when it appeared that the yellow metal had finally shaken off the doldrums, after bouncing $5 higher than the $1,522 December intraday low, once again the post autumn malaise for this market has reappeared. 

The ongoing strength of the U.S. Dollar is coupled with the fact that a risk off trade in the Euro is seen as a reason to sell the risk friendly Gold price. 

While this market remains a proxy to the single currency, (currently at its lowest level since 2010), December support looks certain to not only be retested, but broken. Sub $1,522 points to the July $1,478 floor.

This Week in the Markets:

Now more than ever Greece is the word (with Grexit the buzzword) for the financial markets. Fears that the cash-strapped Southern European nation would exit from the Euro have been around for a few years since the first once and for all bailout, but now it looks as though things are coming to a head in rather dramatic fashion. The latest catalyst has of course been the indecisive election result earlier this month that left the politicians enjoying their days in the limelight, arguably at the expense of the financial plight of their citizens and their country. Currently, the only upside to emerge from the extended procrastination is that until the June 17th elections deliver a clear cut result (if indeed they do) the likelihood is that a caretaker Government will be able to tap the troika for any payments that are due in the meantime. Of course, if Greece eventually leaves the Euro it is likely that these loans will become parting gifts. 

But in fairness to Greece, it has never really been a significant player in the financial markets, so any collateral damage to the Eurozone and the UK is likely to be limited, and indeed few expect a Greek exit if it actually happens to tip the world back into recession. What has taken the FTSE 100 and indeed, Gold and the Euro itself back to December 2011 lows and lower is the prospect of a domino effect, as a Greek Euro exit then raises the possibility that Spain, Italy and other PIIGS nations could follow. An infinitely larger sum of money will be required to fill the fiscal hole of either Spain or Italy, and the consequences here hardly bear thinking about.  Perhaps it is worth taking note of comments from our very own Sage of Threadneedle Street, Mervyn King, the Governor of the Bank of England. He has observed that it is not a liquidity crisis that is being faced (the former Credit Crunch), but actually a solvency crisis.

In fact, Sir Mervyn has been busy in helping us understand the consequences of the forthcoming meltdown on the other side of the English Channel too. The result has been a downgrade of economic growth forecasts for 2012 and 2013 from 1.2% to 0.8% and 3% to 2% respectively. His big warning though, is that growth will not return to pre-crisis levels until 2014. Given that we still do not know the extent to which the Eurozone could unravel, making any call on growth in the near term is almost an impossible task..

The Week Ahead: 

Key Corporates Reporting:  May 21st - 25th        

Monday- Finals: BTG (LON:BGC), Mitie Group (LON:MTO).

Tuesday- Finals: Big Yellow Group (LON:BYG), Intermediate Capital Group (LON:ICP) Vodafone (LON:VOD) Interims Paragon (LON:PAG).

Wednesday- Finals: Burberry (LON:BRBY).

Thursday – Finals: Asos (LON:ASC), Cable & Wireless Communications (LON:CW.), QinetiQ Group (LON:QQ,), SABMiller (LON:SAB), United Utilities (LON:UU.) Interims Daily Mail & General Trust (LON:DMGT).

Friday – No significant corporate announcements due.

The big UK corporate guns are out in force this week. Leading the way, (and certainly by way of market capitalisation) is mobile phone giant Vodafone (LON:VOD), one of the more attractive FTSE100 dividend plays. Recent fundamental highlights include a buy rating from broker Nomura in April, which said it expected a 100bp gain to 1.9% in Q4 reflecting reduced MTR (mobile termination rate) pressure in Germany, Netherlands, Portugal, Spain and even Greece. This is worth noting given that Vodafone itself is only counting on a 70-80bp gain. The good news could be extended with a bounce in Verizon Wireless in the U.S. in which Vodafone is a major shareholder, along with an update on the recently agreed £1bn takeover of bombed out telco Cable & Wireless Worldwide (LON:CW.).

Luxury goods group Burberry (LON:BRBY) remains something of a recession defying phenomenon, especially in the Far East, and as such this best of British brand has become something of a barometer for the health of China, the world’s second largest economy. The bull case received a boost in March as reports came from China that it would reduce taxes on luxury imported goods, something that caused the share price of Burberry to spike. However, there are still fears that the group’s valuation at £14 plus a share and on 23 times earnings is rather rich in the current climate. Much will depend on the forthcoming outlook from Burberry, although it is likely the retailer will find it tough to project continued outperformance for the rest of 2012.

In some ways it was curious that SABMiller (LON:SAB) decided to go for a multibillion purchase of Australia’s Fosters brand when the driver of growth in the past year has clearly been of the emerging markets variety, especially in Latin America. It will be interesting to see whether what looks like something of a trophy purchase can pay off near term? Observers will also be looking to see whether the Q4 metrics have been beaten by organic growth. Lager volumes were 3% ahead of the previous year for both the quarter and the year, with soft drinks volumes 7% higher year on year, and 12% up in the final quarter. 

Major Economic Data:  May 21st - 25th        

Monday – No significant economic data due

Tuesday – UK: April Consumer Price Index. U.S.: April Existing Home Sales.

Wednesday – UK: May Bank of England Minutes. EU: March Industrial New Orders. U.S.: March FHFA House Price Index, April New Home Sales.

Thursday – UK: Q1 GDP, April Retail Sales. EU / Germany: May Services / Manufacturing PMI, German Ifo Business Climate. U.S.: April Durable Goods Orders.

Friday – U.S.: May University of Michigan Consumer Sentiment.

The latest UK Q1 GDP revision due out on Thursday will show whether or not we really are in a double dip recession. Just as important of course is what the policy makers may decide to do about our economic plight, something to be revealed in May’s MPC minutes. There are other important statistics to watch out for, in particular the April Consumer Price Index, which came in at 3.5% the previous month and April Retail Sales, which may have suffered due to record rain. Further afield the key German Ifo Business Climate number is due, (last at 109.9), and the U.S. May University of Michigan Consumer Sentiment figure expected to hit 77.8 and still very much on an upward path. April U.S. Durable Goods Orders are called to flip around as well with a 1% rise compared to the previous 4% decline.

Main Markets Outlook: 

FTSE100: 

The idea that the main 200-day moving average technical support on the FTSE 100 now at 5,550 would deliver the final rebound for leading UK stocks in May seems almost quaint given the events of recent days, and of course the price actions they have triggered in the financial markets. Hopes are now being entertained that too much pessimism over Greece and the EU crisis have been factored in, so key to this over the next week is whether the index can hold a line of support at 5,420 from August 2011, the last time the FTSE 100 went into a tailspin. So far the level has held on an end of day close basis, but if there is sustained sub 5,420 price action and we accelerate further south towards the November 5,075 intraday low, a very painful and very swift rout for this market will most likely ensue. All that stands between business as usual for the stock market and a return to the price action of the 2007 – 2008 crisis is the relatively tenuous zone between 5,420 and December’s 5,328 intraday low.

Sterling / Dollar: 

Despite all the uncertainties over the UK economy for the first half of 2012, there were enough doubts over our EU partners to qualify Sterling and the UK as a “safe haven.” As a result Sterling / Dollar managed to reach the dizzy heights of $1.60 plus for much of April. But with the escalation of the Greek crisis this week, it appears that the safe haven status of the UK currency is giving way to the greater appeal of the U.S. Dollar, especially as this week will tell us whether or not the double dip recession was just a temporary aberration. Technically, a minimum test of the still falling 200-day moving average on the daily chart at $1.5825 looks likely, although only a weekly close below this feature is likely to rule out the prospect of a retest of the intraday resistance of 2012 to date at $1.63 plus.

Gold: 

It now seems like an eternity since Gold took centre stage as the definitive one way bet off the back of EU zone uncertainties and a widespread rush towards competitive devaluation among developed economies. Adding insult to injury for the yellow metal, over the course of May the U.S. Dollar has assumed the mantle of the premier refuge against risk. The only real positive in this market was a higher low of $1,527 vs. the intraday low of December, something which when accompanied by the way oversold Relative Strength Index well below 30 / 100, which implies that a dead cat bounce is overdue. Even so, only sustained price action back above the former initial December intraday support of $1,560 will be enough to suggest a bear trap or lasting low is in place.

This Week in the Markets:

Just as in 2011, the old “Sell In May” stock market adage has drawn blood again in 2012. Clearly though, with the Q1 reporting season done and dusted and the end of the financial year balancing of the books completed, it is probably fair to say that most investors have decided not necessarily to sell, but hold fire on buying. Adopting such a strategy seems wiser than ever in 2012 given official confirmation of a double dip recession in the UK, a continually deteriorating position for the PIIGS nations, and of course the political turmoil on the Continent culminating in the exit of President Sarkozy and an anti-austerity driven wrestling match between various political parties in Greece. Indeed, the ‘A’ word seems to be biting hard at all levels on the political front given the body count for heads of state in recent months. Perhaps most telling though is the indisputable fact that since the Sovereign Debt crisis began some 5 years ago, very few nations have been able to successfully introduce even a modicum of cuts.

In the UK, the Coalition Government are having to regroup after a massive slap in the face courtesy of the local elections, while the Conservatives are having to deal with rumours that the Liberals are considering breaking the pact so as not to suffer a total disaster at the next election. But at least for those still viewing this country as a safe haven from toxic Europe, Sterling has thus far remained at its recent peak vs. the Euro, and is holding above the key $1.60 level. 

In contrast, leading UK equities have found it tough to stand up to the bear offensive, especially as so many FTSE 100 constituents are mining stocks - ultra sensitive to economic concerns. Add in the recent sharp losses for precious metals such as Gold, and the fall of Crude Oil back below $100, and many in the market will no doubt be wishing that they had heeded the traditional ‘Sell In May’ message and returned to the table at the beginning of September. Such a strategy might do away with the sleepless nights endured by so many throughout the EU crisis, but in the style of Warren Buffett, (be fearful when other are greedy – be greedy when others are fearful) the darkest days on the FTSE 100 tend to be the best dips to buy into for those seeking bargain basement stocks. Certainly traders who set any store by the 200-day moving average and its importance for key participants such as fund managers may wish to take heed of this notion.

The Week Ahead: 

Key Corporates Reporting:  May 14th - 18th        

Monday- Interims: Diploma (LON:DPLM), Lonmin (LON:LMI).

Tuesday- Finals: Babcock International Group (LON:BAB).

Wednesday- Interims: Compass Group (LON:CPG), Q1: New World Resources (LON:NWR).

Thursday – Finals: 3i (LON:III), Invensys (LON:ISYS), Investec (LON:INVP), National Grid (LON:NG.), SSE (LON:SSE).

Interims: Euromoney (LON:ERM), Grainger (LON:GRI), Marston’s (LON:MARS).

Friday – Interims: Mitchells & Butlers (LON:MAB).

A mix of key corporate news and numbers are due this week. Wednesday sees catering giant Compass Group (LON:CPG) reports interims, as it attempts to appeal to customers delivering their own brand of austerity whilst ensuring its own margins continue to grow. Recent trading updates have revealed the extent of the challenge, something the company has tackled through a series of acquisitions in areas as diverse as the Czech Republic, Japan and South Africa. In so doing Compass looks to be turning into something of an emerging markets play with relatively defensive qualities – an attractive combination. In March, Compass maintained full year profits guidance despite a prediction of slowing H1 growth, so if this is maintained at the interim stage, the share price should continue with the recent outperformance.

Utilities stocks are likely to be more in the spotlight for their defensive attractions this week if the FTSE 100’s decline continues. Finals are due from both National Grid (LON:NG.) and Scottish & Southern (LON:SSE). In the case of the former, observers will be looking for any update on January’s promise of 4% dividend growth from the start of 2013, particularly given the recent share price rise. With SSE, news that its customers are cutting back on gas and electricity usage has been offset by the promise in March to raise its dividend by up to 2% above the RPI.

Understandably, macro economic uncertainties as well as recession have taken their toll on private equity group 3i (LON:III) - factors certainly evident in both the November and January updates. A £500m plus loss was reported in the 6 months to September last year, with the only plus points being the reduction in group debt by over £100m to £395m in January and new investments holding steady near the previous £510m level in 2011. However, with the current chaos in Europe it is difficult to believe that 3i can do anything more than tread water for the rest of this year.

Major Economic Data:  May 14th - 18th        

Monday – EU: March Industrial Production.

Tuesday – UK: March Trade Balance. German / EU: Q1 GDP, German May ZEW Economic Sentiment. U.S.: April Retail Sales, Consumer Prices Index, May NY Empire State Manufacturing Index.

Wednesday – UK: March Unemployment Rate, Q1 Bank of England Quarterly Inflation Report. EU: April Harmonised Index of Consumer Prices. U.S.: April Housing Starts, Building Permits, Industrial Production, FOMC Interest Rate Decision.

Thursday – U.S.: April Conference Board Leading Indicators, May Philadelphia Fed Index.

Friday – German: April Producer Price Index.

With the U.S. FOMC interest rate result and the Bank of England’s Q1 Inflation report due this week, the current volatility in the financial markets will see traders hanging onto the edge of their seats on at least a couple of occasions over the next few sessions. Also in the UK, the March Unemployment Rate is on tap with the figure, with 8.3% from last time the number to beat. On the Continent, the all-important German May ZEW Economic Sentiment gauge is due, with expectations that last month’s 23.4 level may be tough to beat. In the U.S. apart from the FOMC the April Retail Sales figure is expected to hit 0.3%, significantly lower than the 0.8% March number. A slight drop in the Consumer Price Index to 0.2% from 0.3% is also forecast.

Main Markets Outlook: 

FTSE100: 

The 200-day moving average on the FTSE 100 daily chart has dominated the price action one way and another since the start of 2012. It featured highly in the jump for leading UK shares at the start of January, and last month delivered a blink and you missed it rebound off the 200-day line then at 5,576 which took it to 5,800 plus. It seems though that May 9th is third time unlucky as the index fell below 5,480 on EU jitters. This leaves the ‘Sell In May’ bears very much in charge unless or until we see a sustained break back above the 200-day line over the next few sessions. Even if leading stocks do recover in coming weeks, there is a real risk of a test of December intraday support towards 5,328, but with the overall floor of an August rising trend channel running above 5,400, December support should currently represent the worst case downside scenario for blue chips.

Sterling / Dollar: 

Sterling has without question been the great ‘safe haven’ against the Euro, with a gap through €1.24 the result. However, the picture against the greenback is more complicated given that both are effectively ‘safe haven’ currencies, with the dollar naturally gaining ground backed by the larger economy. Although the Pound surged to 8-month highs in April above $1.6301 on risk appetite and a thumbs up for the Coalition Government’s austerity moves, it all changed after a second disappointing U.S. non-farm payrolls number at 125,000, which pointed to possible QE3 economic stimulus from the Federal reserve just as the Bank of England seemingly decided to put its money printing on hold. But a poor local elections result for the Coalition as well as the clear need for it to reaffirm strategy has created a bull trap back below $1.6166 October resistance. Sustained price action will be needed back above this level to avoid at least a retest of the 200-day moving average at $1.5831.

Gold: 

Supposedly Gold is helped by inflation and should be a safe haven in times of crisis, but the yellow metal has not demonstrated any of these qualities of late. It is currently struggling below the $1,612 April intraday low, seemingly making a beeline for December $1,522 support after the failure to regain the 200-day moving average support level, now at $1,699. Fundamentally, the factors supporting Gold are in place with the anti austerity votes in Europe, but so far the U.S. Dollar seems to be the safe haven of preference. More significantly, any sustained break of $1,522 could signal the beginning of the end of a 10-year bull run.

This Week in the Markets:

The May Day holiday for much of Europe, (ours is on May 7th) gave the markets an all too brief respite from EU jitters, especially with the current focus on Spain and its massive unemployment problem. At the end of the day, it remains to be seen whether enough money can be thrown at the Sovereign Debt problem to see nations such as Spain through to a happy conclusion or at the very least a brighter outcome than the abyss scenario currently facing the PIIGS nations. 

When you add to this crisis the battle for the French Presidency that incumbent Nicolas Sarkozy appears to be losing, it is little surprise that at least against Sterling the Euro is back at post August lows above €1.23. The problem though, is that this particular currency battle looks to be a lose-lose situation - the Institute for Supply Management’s (ISM's) factory index jumped to 54.8 in April from 53.4 the previous month, (comfortably above the 50 growth line) which contrasts with the precipitous decline for the Eurozone’s Markit manufacturing Purchasing Managers Index to 45.9 in April from 47.7 in March. This more than anything illustrates a dramatic divergence in relative performance on either side of the Atlantic, giving speculators every reason to gravitate towards the U.S. Dollar. Even “safe haven” Sterling, was also under attack from the multiple headwinds of tight lending conditions, higher mortgage rates and slowing manufacturing. 

What may ultimately prove to be the deciding factors for the financial markets over the Spring and going into Summer 2012 are the prospects for any further QE in the U.S. and investor perception of the relative value or otherwise of the stock market. Ironically, considering his alleged role in the asset bubble of the 2000s, the once venerated former Chairman of the Federal Reserve Alan Greenspan has observed that U.S. equities look “cheap.” This is possible to believe given that the S&P is trading on 14 time earnings, but stocks must now seem less of a bargain following the Dow’s close at its highest level since 2007. As things stand it seems unlikely that the current powers that be at the Fed will consider any further QE measures for the U.S. economy.

Closer to home on the UK corporate front, SocGen has pulled out all the stops to get ailing hedge fund manager Man Group (LON:EMG) in play as a bid target. The French broker has backed Man on the basis that its share price has fallen too far too fast and offers real value at sub 100p. Given the lack of bid fever in the market so far in 2012, full marks should go to SocGen for trying to liven up a stodgy performance from the blue chips.

The Week Ahead: 

Key Corporates Reporting:  May 7th - 11th        

Monday- No significant corporate announcements due.

Tuesday- No significant corporate announcements due.

Wednesday- Finals: Sainsbury (LON:SBRY). Interims: EasyJet (LON:EZJ), Sage (LON:SGE). Q1: Inmarsat (LON:ISAT).

Thursday – Finals: Experian (LON:EXPN). Trading Announcement: Dixons Retail (LON:DXNS).

Friday – Q1: International Consolidated Airlines (LON:IAG).

The early May Bank Holiday hints at a quiet week in prospect until the eagerly awaited Finals results from supermarket Sainsbury (LON:SBRY) on Wednesday. Observers will be looking for the key like for like sales number and to see whether the UK’s number three grocer will follow arch rival Tesco (LON:TSCO) and its recently announced £1bn revamp. Some might suggest that simply lowering prices for cash strapped UK shoppers is the best way forward to ensure further progress over and above the 2.1% rise in like for like sales reported over the previous year in March. Certainly, given such statistics it is not difficult to understand Galvan Research’s recent April 13th recommendation that Sainsbury remains the favoured sector alternative to struggling Tesco.

Experian (LON:EXPN) enjoys a commanding position in the credit checking market, a sector that has moved acutely into focus in the wake of the Credit Crunch. Just as important as the defensive attractions of its non-cyclical business are the growth prospects associated with its exposure in emerging markets such as Latin America. Boosted by this, the group announced constant exchange rate organic revenue growth of 7% for Q3, with expectations for the full year for this outperformance to continue. Just to make sure, Experian also announced acquisitions in Japan and the U.S. presumably in order to turbo charge earnings going into the new financial year.

The International Consolidated Airlines (LON:IAG) Q1 update comes the day after the same update from discount carrier EasyJet (LON:EZJ). The fact that the former Iberia / British Airways flag carrier is struggling to add to its own no frills offering thanks to industrial action could ensure that at least for the near term EasyJet continues to deliver the type of 4% rise in year on year passenger numbers reported in April. But IAG recently received a fundamental boost from Credit Suisse, which upgraded the stock from neutral to outperform despite expectations of a Q1 operating loss of €239m, which it says should be outweighed by an encouraging outlook for summer pricing.

Major Economic Data:  May 7th - 11th        

Monday – Germany: March Factory Orders.

Tuesday – Germany: March Industrial Production.

Wednesday – U.S.: March Wholesale Inventories.

Thursday – UK: March Industrial Production / Trade Balance, Bank of England Interest Rate / QE Decision. U.S.: March Trade Balance, April Federal Budget Balance, Import Prices.

Friday – UK: April Producer Price Index. Germany: April Harmonised Index of Consumer Prices. U.S.: April Producer Price Index, May University of Michigan Consumer Sentiment.

A lighter calendar is in prospect this week, although in the UK with fears of a worsening recession, all eyes will be on the March Industrial Production number, (previously a small 0.4% rise). Leading the domestic macro economic data pack is the May Bank of England interest rate / QE announcement, where the smart money is looking for no change given the April minutes. Nevertheless, the BoE could still decide that a move is needed on QE, if only to show that something is being done. In Europe the German March Industrial Production figure is the key number, with hopes for an improvement on the 1.3% fall last time. The HICP for April is expected to fall slightly to 2.2% from 3.2% last time. Stateside, the March Trade Balance forecast is expected to widen to -$48bn and the May University of Michigan Consumer Sentiment is expected to fall fractionally to 76 from 76.4.

Main Markets Outlook: 

FTSE100: 

It was the usual pinch and a punch on the first day of the month for FTSE 100 bears, especially for those adhering to the “Sell in May” mantra. But whether the initial momentum of May 1st, following the pattern of recent months when initial fund buying boosted stocks, can be maintained remains to be seen, particularly given this supposedly difficult period of the year. Technically the charting picture has been rather open since the January, but the April rebound for the FTSE 100 off its 200-day moving average at 5,570 now provides a buy signal, especially while recent support towards 5,710 – a March uptrend line remains in place. While this two-month line remains unbroken, there is every reason to expect that the existing 2012 intraday high at 5,989 can be retested over the next few weeks.

Sterling / Dollar: 

The 6,000 level still remains as elusive as ever for the FTSE 100, but its nominal equivalent $1.60 on Sterling / Dollar has not only been broken, but passed through with relative ease. This despite the fact that the UK economy has at least nominally dipped back into recession, and that Government borrowing isn’t showing the kind of austerity measures that it took flack for over the past few years. Key over the next few sessions is the former October resistance at $1.6166, because any sustained price action back below this level risks rendering the April $1.6301 intraday high as merely a bull trap. Nevertheless, should late 2011 resistance become established as new support there, a best-case scenario points to a top of January price channel target of $1.65. 

Gold: 

While we are assured that central banks of solvent nations continue to hoard Gold given the demise of fiat currencies, this has yet to initiate a turnaround the post September decline for the yellow metal. The view at this point seems clouded by likely disillusionment over the lack of progress in this market for the “hot” money that bought into the “supercycle” argument. More time specific factors in the past week have been the contrast between a jump in U.S. manufacturing data, a decline in employment and economic strength in the EU zone. The consequential dollar strength has capped Gold, and while this state of affairs continues and the 50-day moving average at $1,672 caps the price of the metal, there is a risk of a retest of December support at $1,522, especially if the latest $1,640 - $1,650 support band starts to crumble.

This Week in the Markets:

As the Daily Telegraph pointed out, the last time the UK was in a double dip recession the film Jaws had just been released, and even more unbelievably, a football club called West Ham won the FA Cup. At least now, calls by the media that the 2007 financial crisis is the worst since the 1970s have attained a semblance of credibility: the 1930s was really the last comparable period in terms of the dire economic situation and extended strife. But in spite of the hype and furore surrounding these developments and the red faces of the Prime Minister, the Chancellor and the Treasury, the FTSE 100, Pound and Gilts have taken the news in their stride even though the double dip was not forecast. The 0.2% decline for the Q1 2012 certainly doesn’t make for good reading, but as with last quarter of 2011, many revisions to this number are expected and numerous observers actually expect the flash estimate to be revised back into narrow expansion. Politically though, the damage is done, despite the rhetoric that “austerity has to continue.”

In fact, the UKs big economic bombshell was probably the only event big enough to overshadow the troubles in the EU. Last weekend saw French President Sarkozy’s decimation by socialist Francois Hollande, who beat him soundly in the first round, and at the very least triggered uncertainty and at worst may get market participants shorting French bonds even more than they have of late.  But even more unsettling was a development that took place in the Netherlands, as the Dutch Government collapsed - unable to agree on an austerity budget. As the markets have just now learned to live with the prospect that the “weak” PIIGS nations are most likely to exit the Euro first, the Dutch developments point to the possibility of stronger members exiting first, something which could literary shake the single currency to its core.

Closer to home, a UK stock still something of a UK proxy for continental European woes is RBS (LON:RBS), which has passed into banking folly folklore given its now famous top of the market deal to buy ABN Amro. This week after all the bailouts and the bonuses the saga seemed to reach a fresh low point with the warning from the CEO Stephen Hester suggesting that £20bn could be wiped off the value of RBS if reforms proposed by the Independent Commission on Banking (ICB) are ratified.

The Week Ahead: 

Key Corporates Reporting:  April 30th – May 4th         

Monday- No significant company results due.

Tuesday- Finals: N Brown (LON:BWNG). Interims: Imperial Tobacco (LON:IMT). Q1: BP (LON:BP.), CSR (LON:CSR), Reckitt Benckiser (LON:RB.). 

Wednesday- Finals: Home Retail Group (LON:HOME).

Thursday– Interims: Aberdeen Asset Management (LON:ADN). Q1: BG Group (LON:BG.), Randgold Resources (LON:RRS), Reed Elsevier (LON:REL), Smith & Nephew (LON:SN.). Trading Announcement: Carphone Warehouse (LON:CPW).

Friday – Trading Announcement: Rentokil (LON:RTO).

Of all the Q1 updates worth noting, cigarette giant Imperial Tobacco (LON:IMT) still looks in good shape in the wake of the update at the end of March where it forecast that first half reported tobacco net revenues (at constant exchange rates) are expected to increase by around 3%. Stick equivalent volumes are expected to decline by around 4% compared with a 7% year-on-year fall in stick equivalent volumes in the 3-months to the end of December, and a 1% fall in net revenues. This may not sound like something to set the stock market on fire, but in the current jittery macro economic climate Imperial is likely to be offering enough to live up to the defensive reputation its sector is known for.

Argos owner Home Retail Group (LON:HOME) has had its position challenged by the online discounters especially U.S. giant Amazon (NASDAQ:AMZN), so unsurprisingly the group has recently hired U.S. retail industry veteran John Walden in an attempt by the company, (which also owns Homebase) to turn itself around. He came on board in March so it may be a tad early for any positive effects, but at least there was some comfort for shareholders in March as the company predicted 2011/2012 results would be in line with expectations.

It feels like another era when mobile phones retailer Carphone Warehouse (LON:CPW) did brisk enough business to raise profits guidance in May last year. Since then despite the latest iPhone / iPad releases the going has been less than easy, with its Best Buy UK venture suffering losses, although cash was returned to shareholders after the business was reorganised in November. For 2012 to date the group have reiterated guidance even though the Pay-as-you go market remains weak, offset by solid growth for products other than mobile phones.

Major Economic Data – April 30th – May 4th

Monday – EU: April Flash HICP, U.S. March Personal Income / Spending, April Chicago PMI. 

Tuesday – U.S.: March Construction, April Manufacturing PMI, ISM Manufacturing. 

Wednesday – EU / German: April Manufacturing PMI / Unemployment Rate. U.S.: April ADP Unemployment, March Durable Goods / Factory Orders.

Thursday – UK: April Services PMI, EU ECB Interest Rate Announcement. U.S.: April ISM Non Manufacturing Index.

Friday – EU: March Retail Sales, EU / German April Services PMI. U.S.: April Non Farm Payrolls / Unemployment Rate.

U.S. April Non Farm Payrolls, the biggest economic number on the calendar is on tap to end the week, along with the Unemployment Rate. Expectations are for a rebound from the surprisingly low 120,000 gain for March with the level on this occasion back up to 170,000, although 200,000 plus would be needed regularly for the market to regain lost confidence. The Unemployment Rate number is thought to be around the previous 8.9%. Second to the U.S. jobs data is the result of the latest ECB Interest Rate meeting. Otherwise it may be worth noting the data where significant deviations are expected from the previous releases. For instance the EU Services PMI is pencilled in to fall to 47.9 from 49.2, with the U.S. March Durable Goods Orders called to swing sharply to the downside, from +1.9% to -1.1%.

Main Markets Outlook: 

FTSE100: 

The question as we head into May for the FTSE 100 is whether the index is heading into a traditionally weaker time for stocks (sell in May) and whether the technical glass is half empty or half full? To date 2012 has been dominated by a 5,600 - 6,000 range, with this month seeing a rebound off the floor backed by the all-important 200-day moving average. At least for now the initial jump for the index above this trend-determining feature has been vindicated, with not even the latest decline to an economic recession able to dent the positive bias. Indeed, the likelihood is that an end of day close back above the late March 5,726 is all that it will take the get the bulls back on the front foot to start the new month, given how “difficult” it is for the 200 day line to be broken under normal circumstances.

Sterling / Dollar: 

While the financial press and the Government may view the UK’s return to recession as a big deal, the FTSE 100 and Sterling seemed to have take a rather more stoical view, certainly as far as the price action has been concerned. Against the U.S. Dollar, Sterling has squeezed higher above the key $1.60 level, and since this long held resistance broke on April 18th on a closing basis, the impression given is that it may actually hold as support for quite some time. Helping drive this view along from a technical perspective is the 50 / 200-day moving average cross, leaving a target of $1.63 plus on the basis of a January resistance line projection.

Gold: 

Perhaps rather against the odds amidst all the EU turmoil, the French Presidential election and with the IMF gathering its strength with an additional a further €430bn war chest, Gold has managed to spend much of the past week within a $10 range either side of $1,640. From a technical perspective this isn’t too surprising given that this level is nominally where a December line of support runs through on the chart. While there have been probes intraday towards $1,610 it may be worth giving this market the benefit of the doubt when it comes to holding the 5 month uptrend holding even though after such an extended period of consolidation the risk is that it could give way to deliver a “final” test of late 2011 support down to $1,522 before the ongoing uptrend resumes.

This Week in the Markets:

EU zone stresses and strains may temporarily fade from the headlines, but they are bubbling under the surface and as has been seen over the past 18 months, when trouble returns the virulent Sovereign Debt virus returns with a vengeance. On this occasion the jitters have been transferred from Greece to Spain, ironically due to what was initially seen as a reasonable way of containing the contagion, the LTRO (Long Term Refinancing Operations). Both in the first wave of ultra cheap lending during December and then again in March, the number one customers for the cheap cash turned out to be the Spanish banks. This move has backfired, creating jitters over the nation’s financial plight and causing its bond yields to soar, and for the near term means that jitters will hit the equity and currency markets on every Spanish and Italian bond auction. 

Luckily for stock investors, more angst is being expressed over the depreciation of the Euro, (falling temporarily below $1.30 and hitting €1.22 plus vs. the Pound) rather than for any decline in indices. The start of April saw a surge in buying from funds, (and they came back for more mid month too) providing enough momentum for the FTSE 100 to build on recent gains to push through 5,750. For the time being at least it looks as though blue chips are living up to their name, and their case has been strengthened by the first fall in UK unemployment since May 2011, which increases hopes that the dreaded double dip recession, (still very much in the balance) may not occur after the narrow Q4 2011 GDP contraction by -0.3%. Perhaps the most telling positive for the current position is the manner in which the Pound rallied after the latest MPC minutes, which revealed that only one member had pushed for more QE thereby implying that fears of recession are on the back burner. The prospect of no near term QE may be just as well given that the surprising upswing in jobs was to a degree offset by news that inflation had rebounded in March. Swollen by higher food prices the Consumer Prices Index hit 3.5%, up from 3.4% the previous month.

Presumably, having to pass on higher food prices, or at least deal with the consequences was yet another issue that the UK’s number one grocer Tesco (LON:TSCO) is having to face in what is already its annus horriblis. This looks set to continue given the confession in its latest update that its U.S. operations are set to breakeven later than expected, and given the £1bn revamp announced to address the issue of its “industrial” looking supermarkets

The Week Ahead: 

Key Corporates Reporting:  April 23rd – 27th          

Monday- No significant corporate announcements due.

Tuesday- Interims: AB Foods (LON:ABF). Trading Announcement: Carpetright (LON:CPR).

Wednesday- Finals: Polymetal International (LON:POLY). Q1: ARM Holdings (LON:ARM), GlaxoSmithkline (LON:GSK), Talvivaara Mining (LON:TALV), Virgin Media (LON:VMED).

Thursday – Finals: Whitbread (LON:WTB). Q1: AstraZeneca (LON:AZN), Royal Dutch Shell (LON:RDSB), Shire (LON:SHP), Unilever (LON:ULVR). Q3: Aquarius Platinum (LON:AQP).

Friday – Trading Announcement: WPP (WPP).

This week is dominated by the FTSE100 threesome of drugs giants, AstraZeneca (LON:AZN), GlaxoSmithkline (LON:GSK) and Shire (LON:SHP). AstraZeneca (LON:AZN) has been most in focus - in the wars after it abandoned work on its anti-depressant treatment TC-5214, the formulation patent protecting its Seroquel XR product was deemed invalid by the High Court in the UK and a U.S. court dismissed AstraZeneca's lawsuit against the Food and Drug Administration (FDA) which sought to delay the marketing approval of generic copies of the quetiapine drug. Rather surprisingly all these slings and arrows have been absorbed rather well by the share price, suggesting that unless there are no fresh nasties revealed in the Q1 update we may have seen the worst in the near term, particularly as Astra said it intends to make $4.5bn worth of share buybacks this year

Associated British Foods (LON:ABF), the Ikea of the clothing sector offers up its interim results this week. There should be little to fear as the owner of High Street star Primark said at the end of February that it expected this week’s results would be in line with expectations, with revenue growth served up across all divisions. However, it was revealed that due to a mild autumn Primark had a slow start in the group’s financial year. Nevertheless, the expectation is for a 2% like for like sales growth over 2010 / 2011.

It would appear that very little can stand in the way of a very big 2012 for global advertising group WPP (LON:WPP) given its recent developing / emerging markets acquisition spree, and that it is in pole position for mega media events such as the U.S. Presidential Election, The Olympics and Euro 2012. The only real fundamental question mark that needs to be answered in the forthcoming trading statement is how much fall out the group is experiencing as a result of the EU Sovereign Debt Crisis, even though as we are seeing, there is an ongoing attempt to diversify away from this zone geographically speaking.

Major Economic Data – April 23rd – 27th

Monday – EU / German: April Services / Manufacturing PMI.

Tuesday – EU: Feb New Industrial Orders. U.S.: April Conference Board Consumer Confidence, March New Home Sales.  

Wednesday – UK: Q1 GDP. U.S.: Durable Goods Orders, FOMC Interest Rate Decision / Press Conference.

Thursday – Germany: April Harmonised Index of Consumer Prices. EU: April Economic Sentiment / Business Climate. U.S.: March Pending Home Sales.

Friday – German: May GfK Consumer Confidence. U.S.: Q1 GDP Price Deflator, Annual Q1 GDP, April University of Michigan Consumer Sentiment.

While the usual spread of international economic data is on tap this week, the big nail biter for most UK and EU traders will be the latest UK Q1 GDP number. Most observers are expecting a mild expansion, (with a +0.6% consensus), although a flat or negative number is still a distinct possibility.  For the U.S. there is rather less suspense in terms of its annualised Q1 GDP figure, although anything worse than an expected fall to +2.5% from +3% when coupled with the March Non-Farm Payrolls jobs miss would be quite a blow to the markets. The April University of Michigan Consumer Sentiment number is also on tap, with the consensus a slight fall from 76.2 to 75.7. In the EU it is likely that Economic Sentiment and Business Climate data for April will be most in focus, with the previous levels 94.4, and -0.3 respectively.

Main Markets Outlook: 

FTSE100: 

One of the biggest and best technical signals for any stock or market is a rebound off the 200-day moving average. Given the uncertainties regarding the macro economic area both inside and outside the UK at the moment, the fact that April to date has delivered a 200-day moving average bounce is a major achievement. Perhaps just as important, while above the 200 day line now at 5,578 the implied upside for leading UK stocks should be the initial 5,890 April high as soon as the end of April. Fundamentally, the relative stability of the UK’s fiscal position vs. the southern state of the EU, with a quarterly fall in unemployment, and only one MPC member panicking on the need for further QE should combine to allow a further squeeze back towards 6,000. For now it seems the “Sell In May” adage may have come and gone a month early.

Sterling / Dollar: 

The main Sterling / Dollar conundrum year to date is whether the cross can end the extended consolidation either side of the key $1.60 and deliver a sustained break to the upside? The answer may have come courtesy of the April MPC minutes in which only one panel member backed the idea of further QE. With further money printing / currency value dilution now unlikely for quite some time, on April 18th, (the day of the minutes) Sterling made a decent push through $1.60. Ideally, the rest of the Spring will see further positive consolidation for this market between the current position of the 200-day moving average at $1.5840 through $1,60, for an extended stay above what has been troublesome resistance.

Gold: 

While equity markets were soothed by the result of the April 17th Spanish auction, despite the much higher yields paid than even in March, Gold has chosen to follow the Euro lower. The yellow metal has also been hurt by a lack of interest ahead of the upcoming monthly options expiry and a fall in physical demand from the world’s main buyer off the back of a weaker Rupee. To add to the suspense Gold is hanging on “final” near term charting support at a December uptrend line at $1,640 – one that has been broken intraday, but remains the main barrier between the bears and the December low of $1,522. As things stand, given the recent Japan and UK contributions to bailing out ailing EU zone members, it is difficult to see what additional drivers can arrive to get the Gold rally back on track. Meanwhile, there is a real risk of a swift $100 fall to retest the late 2011 low.

This Week in the Markets:

After a textbook bull-market start to 2012 thanks to a solid Q1 performance from UK blue chips, it seems as though all the good work has simply whittled away within the first two Easter reduced trading weeks of Q2. Apart from reminding us that the stock market generally falls much faster than it rises, a fresh dose EU zone jitters have emerged to shake investors, although this time the rot seems to be heading west through Italy and Spain. 

It is equally of note that the outperforming U.S. stock market has put such concerns on the back burner, as the sheer gains, (the best performance to start any year since 1998) meant that the temptation to book profits after the Dow hit 13,000 plus and the S&P at 1,400 proved too much to resist. Of course, the shock March U.S. Non Farms Payrolls data, an event that for keen traders was worth interrupting their Good Friday holiday for, came as a body blow given that the figure of 120,000 came in a long way below the 200,000 plus gain expected. The miss was such a deviation from the consensus and came as such a surprise, that for adventurous traders there was plenty of opportunity and leeway to go short of either the Dow or S&P on the day, or as it turned out until Tuesday’s U.S. close when a bounce finally set in. 

Of course the $64,000 question now is whether it the shock number was a one-off blip, which means a buying opportunity, or whether the issue becomes academic in the midst of soaring bond yields for the remaining un-bailed out PIIGS nations prompting stocks to sink Stateside just as they have on this side of the Atlantic. Much will depend on whether the ECB will intervene in the securities markets to prop up PIIGS bonds, as is the current belief. In some ways it appears that speculators are daring the central bank to make such a move, and may not stop shorting bonds until it does.

In fact for the UK there was at least a modicum of good news, with the OECD taking the view that a double dip recession will be avoided, which was also supported by better-than-expected March retail sales. They were apparently boosted by the mild weather to reach a gain of 1.3%.

The Week Ahead: 

Key Corporates Reporting:  April 16th – 20th          

Monday- No significant corporate announcements due

Tuesday- Trading Announcements: Burberry (LON:BRBY), Marks & Spencer (LON:MKS)

Wednesday- Finals: Tesco (LON:TSCO). Interims: Spirit Pub Company (LON:SPRT). Trading Announcements: Daily Mail & General Trust (LON:DMGT).

Thursday – Interims: Debenhams (LON:DEB), WH Smith (LON:SMWH). Trading Announcement: SAB Miller (LON:SAB).

Friday – Q1: African Barrick Gold (LON:ABG).

After a dearth of big name corporates in the first half of April, we are relatively spoilt for choice this week. Leading the way by a mile, if only on the basis of the January warning is the UKs biggest supermarket, Tesco (LON:TSCO). The giant has rebounded 10% from the 311p intraday low on January 16th, but much of this gain has been eroded to start April as traders most likely square off their positions in order to prevent a repeat of the black swan events of three months ago. This may be just as well given that in the interim the UK head of operations has resigned and the group has abandoned its used car venture Tesco Cars. It remains to be seen whether the rebranding of its Value range isn’t too little, too late.

Of course Tesco woes provided ample opportunities for its rivals to steal a march, and in this regard Marks & Spencer (LON:MKS) will be aiming to prove that the steady Christmas performance which left broker recommendations and profits forecasts on the stock unchanged, was the correct way to go. In fact, the bias both on the stock price and the fundamental front has been to the upside since then, culminating in broker UBS raising its full-year pre-tax profit forecast by 3% to £690m and hiking the target price from 325p to 410p at the end of February.

Those who have had their fill of the High Street may wish to indulge in some alcoholic refreshment from brewing giant SABMiller (LON:SAB), especially in the wake of the recent Foster’s purchase where news as to how the new acquisition is bedding in is eagerly awaited. In fact, at the end of February, Nomura was happy to downgrade the shares on the basis that too much of the benefit of the Australian purchase was already in the price. But with EU zone worries currently to the fore it may be that Jefferies early April price target hike from 2,725p to 2,850p on the back of SAB’s emerging markets growth attractions is the view that wins the day in the wake of the forthcoming trading announcement.

Major Economic Data – April 16th – 20th

Monday – EU: Feb Trade Balance. U.S.: Feb Business Inventories, March Retail Sales, April NY Empire State Manufacturing Index.

Tuesday – UK: March Consumer Price Index. EU: March Harmonised Index of Consumer Prices, EU German ZEW Economic Sentiment. U.S.: March Housing Starts, Building Permits, Industrial Production, Capacity Utilisation.  

Wednesday – UK: Feb Unemployment Rate, April Bank of England Minutes, EU Feb Current Account.

Thursday – U.S.: March Conference Board Leading Indicators, Existing Home Sales, April Philadelphia Fed Index

Friday – EU: German March Producer Price Index, April IFO Business Climate.

It is unlikely that this week will match the drama of the March U.S. Non Farm Payrolls jobs miss, but investors will be mindful that the deterioration on the employment front could be mirrored in other areas. For instance, March Leading Indicators are expected to decline from 0.7% to 0.3%, with Feb Business Inventories also expected down from 0.7% to 0.5%. Perhaps worst of all March Retail Sales are due to decline from 1.1% to just 0.5%. At home, minutes from the April meeting of the Bank of England are due where yet again the issue will be the division between those on the MPC panel wanting greater QE and those who wish to stay pat. Otherwise the Unemployment Rate is most in focus, with the previous Feb number at 8.4% the one to beat. This is closely followed by the Consumer Price Index, at 3.4% in Feb. For Europe it will probably be the key German IFO and ZEW surveys that are best at moving the price action.

Main Markets Outlook: 

FTSE100: 

One of the classic technical set ups is for a stock or market to find support with an initial dead cat bounce at its 200-day moving average followed by a resumption of the ongoing uptrend, or a major top in the market if the 200-day line is not held. Reassuringly, the FTSE 100 has bounced off its 200-day moving average at 5,580, which may explain the near feverish buying by UK index bulls at the open of Wednesday April 11th and why to date there has been no end of day close below the 200-day line. An equal charting argument says that the start of 2012 was dominated by a rolling top for this market between 5,900 and 6,000, and that unless former March support 5,726 is regained an extended topping out process would appear to be in place. 

Sterling / Dollar: 

The start of 2012 has witnessed some technical correlation between the FTSE 100 and Pound / Dollar, and this seems to be continuing. Both $1.60 and 6,000 are acting as key resistance areas, with interplay between near term price action and the 200-day moving average on the daily chart currently at $1.5840. So far this key feature has held, generally being the level above which the cross closes on an end of day close. While this is the case and especially above a line of support from January at $1.58, the buy argument should get the benefit of the doubt leading to further forays above $1.60, especially if the situation in the Eurozone continues to deteriorate, highlighting the UK’s “safe haven” status.

Gold: 

Just for a change, the near term price action for Gold shows the yellow metal has outperformed rather underperformed expectations. Following the early April sell off in equity markets, the liquidation in stocks has tended to trigger sympathetic selling of Gold, so the rebound from as low as $1,613.4 – the initial April low would suggest that reports of strong physical demand in India, as well as the hope that the ECB will intervene in the EU bond markets make for a decent fundamental combination of bullish factors. On the technical side the recovery of the March $1,628 intraday low gives speculators a bear trap to jump on, with the implication that this could at least lead to an attempt at recovering the 200-day moving average zone of $1,696 currently – the first step in the rehabilitation of last year’s record bull run.

This Week in the Markets:

The main holiday periods of the year can be a particularly dangerous time for the financial markets according to famous author Mark Twain. While his comments that other times of the year are equally dangerous can probably be taken with a pinch of salt, there is no doubt that a combination of low volumes and lack of fresh newsflow can promote what would usually be back page stories to centre stage, thus creating seemingly disproportionate market movement. This has been well illustrated this week as jitters over the solvency of PIIGS nations have emerged again, with bears apparently unwilling to concede the idea that these nations will be queuing again for further bailouts, and exiting the single currency along the way. 

The bull argument, as much as there is one, would be that an exit of PIIGS nations from the Euro would actually increase its value as an “averaging up” effect would result from the remaining incumbent “super-euro” nations. But in the meantime soaring Spanish, Italian and Portuguese bond yields effectively renders the actions taken by the ECB, IMF and EU this year as little better than sticking plaster actions, that have “kicked the can” further down the road. The problem is that on each occasion the a greater amount of money is required to kick an increasingly larger can, with progressively less effect.

To further perplex the Easter conundrum for investors, the markets have also wobbled after the US central bank, (the Fed) indicated on Tuesday that it was not considering a further round of quantitative easing (QE).

Back in Blighty, and in spite of a weakening stock market after the initial April surge the pre Easter fundamentals appear to have rebounded after March closed under the shadow of a double dip recession forecast from the OECD. As the UK is undergoing transformation from a nation of shopkeepers to that of a more broad based services sector, news of a better than expected rise in the PMI to 55.3 in March from 53.8 in February compares even better when set against economists’ forecasts of 53.4. Even better is the implication from this that a recession will be avoided for Q1 2012. Sentiment was also helped this week with news that house prices rose 2.2% in March and the associated construction sector has posted its best performance for nearly two years. It is perhaps unfortunate for the Coalition Government that these glad tidings were not on tap a couple of weeks ago at the time of the Budget.

On the corporate front the stock market saying that bad news comes in threes on the stock market rang true for troubled supermarket Tesco (LON:TSCO), which has had to abandon its used car venture, Tesco Cars, as well as its £1bn Value range promotion. Presumably, with these two pieces of newsflow the trio of mishaps has been completed.

The Week Ahead: 

Key Corporates Reporting:  April 10th – 13th         

Easter Bank Holiday Monday- Wednesday - No significant companies reporting. 

Thursday – Finals: JD Sports Fashions (LON:JD.). Interims: Punch Taverns (LON:PUB). Trading Announcement: Mothercare (LON:MTC).

Friday – No significant companies reporting.

Although the post Easter week is quiet on the corporate newsfront, a trio of stocks are worth looking at in the holiday-shortened week. Sports fashion retailer JD Sports (LON:JD.) remains one of the exceptions that has proven the rule in terms of the sector woes, a point underlined by the newsflow in recent months. Overall, like-for-like sales improved from H2 2011 onwards, but the real acceleration for the fundamentals and the share price came from the Christmas trading last year. JD fans will be hoping that the like-for-like sales jump of 1.6% and net LFL sales rise of 0.1% will be achieved in the period covering the start of 2012, particularly after the acquisition of the trading assets and trade of the fallen Blacks Leisure Group.

Pub group Punch Taverns (LON:PUB) will no doubt want to forget 2011, although going into the second quarter of 2012 it is yet to be established whether any sort of recovery is underway. The main issue currently is to prove that last August’s demerger to create the Spirit Pub Company (LON:SPRT), (where the share price chart does at least sport a reasonably straight uptrend) was the right decision. As much as anything else, investors will be seeking a sense of improvement at Punch, a point underlined in December when in the 16 weeks to December 10th, pubs in its core estate saw like-for-like net income fall 1.5% suggesting that the rate is at least slowing..

Child and baby retailer Mothercare (LON:MTC) did appear relatively immune to the effects of the financial crisis until its H1 update in November. That month saw the company report a pre-tax loss of £4.4m, with a substantial dividend cut upsetting the share price. This shock is going to be hard to recover from, and it is likely to take months before investors regain confidence in what appeared to be a relatively resilient niche player. So far the UBS November sell note and 100p price target looks to be on the money.

Major Economic Data – April 10th – 13th

Monday – EU: April Sentix Index.

Tuesday – U.S.: Feb Wholesale Inventories. 

Wednesday – U.S.: March Import Prices, April Beige Book.

Thursday – UK: Feb Trade Balance. EU: Feb Industrial Production. U.S.: Feb Trade Balance, March Core Producer Price Index, Producer Price Index.

Friday – UK: March Producer Price Index. EU: German Harmonised Index of Consumer Prices. U.S.: March Core / Consumer Price Index, April University of Michigan Consumer Sentiment.

We have a “thin” set of economic data to focus on for the Easter Bank Holiday shortened week, and while no really big numbers are due, there are still some indicators worth watching closely. The April Beige Book survey from the U.S., the February Trade Balance and Producer Price Index are due, with the latter two expected to remain flat on the -$52.6bn and 0.2% figures. For Germany the Harmonised Index of Consumer Prices is expected to fall slightly to 2.3% from 2.5%, while in the UK the March Producer Price Index steals the show, with traders hoping for an improvement on the previous 4.1% figure.

Main Markets Outlook: 

FTSE100: 

It may well transpire that the initial April 2nd rally for this market towards 5,900 was the last chance for leading UK shares to hit and sustain the 6,000 plus zone for the near future. Indeed, the way that the index has fallen away since this now customary fund induced monthly opening spike suggests that we may have seen a last gasp buy for the near term. There are financial year-end factors to consider that take the momentum away from the bull argument, as well as the need for fresh fundamental drivers such as M&A speculation or more concrete evidence that the UK can avoid any extended double dip recession. Technically, there is March neckline support for the FTSE 100 just below 5,730, with the risk that any sustained price action below last month’s support will leads to a rather painful test of the 200-day moving average currently just under 5,600. 

Sterling / Dollar: 

$1.60 is finally hit on Sterling, but while not quite a “blink and you missed it” event as in the recent past, courtesy of the Federal Reserve it does appear that once again the range high for this cross has been hit. Indeed, as things stand the best technical description of Sterling’s price action is that of a 3-day bull trap above the former February intraday peak of $1.5992. An end of day close back above 2-month resistance will be needed if the Pound is to continue/maintain the $1.53 - $1.61 range of the post February period. What remains to be seen is whether the latest better-than-expected services PMI will drive buyers to Sterling, even though a lack of QE3 from the Fed should be helpful to the U.S. Dollar. Above the 200-day moving average at $1.5846, the benefit of the doubt may go to the UK currency.

Gold: 

Although the run up to the April 3rd Fed announcement on U.S interest rates led to something of a flurry towards the $1,700 an ounce level for Gold, the bullishness was effectively snuffed out as it became clear that the recent mild recovery Stateside would mean no further QE3 stimulus any time soon. With the argument for recovery in the metal thus punctured, it may be that the 200-day moving average currently at $1,691 becomes the near term end of day close high, and that while this caps the price action there is an increasing risk of a retest of the December $1,522 intraday low, especially if the fast disappearing daily chart support line running through $1,655 is not reinstated swiftly. The risk is that having topped out near $1,700, the bottom of a September price channel at $1,450 becomes the worse case scenario target for Gold over the next 4-6 weeks.

This Week in the Markets:

It is probably just as well for the Coalition Government that the prospect of a fuel strike and VAT on the humble pasty, (courtesy of the Budget) look more likely to grab the headlines than the latest downward revision of Q4 GDP to a 0.3% contraction. Presumably the ongoing EU zone woes will be blamed, although worryingly the real issue apart from lowering the 50p tax rate to 45p and shaving a little off corporation tax is what else the authorities can actually do over and above the ongoing QE program? The answer is probably not a lot except to hope that a feel good factor associated with the Diamond Jubilee and the London Olympics will trickle down into the UK economy, along with some positive spin-off from the U.S. Presidential Election year.

Indeed, after the dark days that followed the August 2011 loss of the triple ‘A’ credit rating, it seems that all of a sudden the U.S. is the economy is emerging from the extended darkness of the Sub Prime crisis. Even so the Federal Reserve still has some major issues to contend with, as outlined by comments from Chairman Ben Bernanke to economists in Virginia that the U.S. jobs market remains under pressure despite strong hiring to start 2012. At least this problem means he is accommodative to further QE, something that gave the markets a brief but welcome fillip.

This seems to be the recurring theme as Q1 2012 comes to a close. Everything conventional and even unconventional (taxing hot pasties) has been done to try to prevent economic recession and maintain growth. On the equity front, while investors are aware that holding cash at present is almost as bad as holding Gold, with the U.S. benchmarks back at post crisis levels, (and in the case of the Nasdaq post Dotcom bubble highs) the thought among many is to lighten the load on the long side ahead of the end of the financial year.

Perhaps one of the more intriguing developments to hit the newswires in recent days was once again related to crisis-wracked RBS (LON:RBS). It seems that the Government has decided to take a reality check over the part nationalised group, and rather than “average down” on an investment that has nearly halved since the taxpayer bailed the group out, sell it on to Middle East investors, most likely investors from Abu Dhabi.

The Week Ahead: 

Key Corporates Reporting:  April 2nd – 5th         

Monday - No significant companies reporting

Tuesday- No significant companies reporting 

Wednesday - No significant companies reporting

Thursday – Interims: Victrex (LON:VCT). Trading Announcement: Booker (LON:BOK), Halfords (LON:HFD).

Unsurprisingly, the shortened week going into Easter is somewhat thin on the ground for corporate updates, with a smattering of second liners on Thursday. Plastics group Victrex (LON:VCT) said at the start of February that the de-stocking seen in the last quarter of 2011 among its customers had reversed in a positive way, with sales bouncing back strongly – albeit still around 100 tonnes (at 582 tonnes) less than over the same period last year. But there has clearly been a squeeze higher for the shares after the warning from Victrex in its December full year outlook, something that suggests that investors expect the improvement to continue.

As long ago as October, broker Peel Hunt highlighted a potential recovery story at cash and carry operator Booker (LON:BOK). The broker raised its target price from 65p to 70p after what were described as excellent first half results that triggered a full-year profit hike of 3%. In fact, the shares have put on 10% plus since then backed by a strong January update driven by demand for fresh produce. This led to a 6.7% overall like for like sales growth number for the final quarter of 2011 - a great outperformance compared to many High Street names. If Q1 2012 has continued in this vein, Booker stock may well continue its recent breakout.

A High Street name that has struggled of late is bikes and motor parts group Halfords (LON:HFD). A sharp fall in Q3 retail sales worsened in the period leading up to Christmas, as reported on in early January. Apart from cash strapped shoppers, mild weather was blamed for a 4.4% fall in revenues, primarily due to a poor performance from the car maintenance division. The only bright spot was the Autocentres division where revenues grew by a sixth, so clearly the market will be hoping for news of an improvement in overall revenues in the latest trading announcement.

Major Economic Data – April 2nd – 5th

Monday – UK / EU / German: March Manufacturing PMI. EU: Unemployment Rate. U.S.: Feb Construction Spending, March ISM Manufacturing.

Tuesday – EU: Q4 GDP, Feb Producer Price Index. U.S.: Feb Durable Goods Orders, Factory Orders, March FOMC Minutes.

Wednesday – UK / EU / German: March Services PMI. EU: Feb Retail Sales, ECB Interest Rate Decision. U.S.: March ADP National Employment Report, ISM Non-Manufacturing Index

Thursday – UK / German: Feb Industrial Production. UK: Bank of England Interest Rate Decision. 

Friday – U.S.: March Unemployment Rate, Non Farm Payrolls.

UK traders wishing to gain exposure to the market moving excitement of the biggest economic number on the calendar will have to interrupt their Good Friday holiday at 1.30pm in order to find out whether expectations of a 230,000 monthly gain in the U.S. Non Farm Payrolls can be achieved. The Unemployment Rate Stateside is pencilled in at 8.3% - unchanged from Feb, which compares with the last reported EU Unemployment Rate for Jan of 10.7% - with the Feb number unlikely to be any better. Closer to home, the latest is due from a Bank of England MPC somewhat split on interest rates and QE, with the question being whether the downward revision of Q4 GDP is enough to strengthen the hand of those on the committee looking for a stronger dose of money printing. Also on tap domestically are the late March Services and Manufacturing PMI - 53.8 and 51.2 respectively in February.

Main Markets Outlook: 

FTSE100: 

It could perhaps have been expected that completing the latest Greece bailout would push the FTSE100 above the 6,000 benchmark and beyond, but with the index losing both its 50-day moving average now at 5,863 and perhaps more importantly, the 5,800 support from earlier in March although a sharp sell off looks unlikely, a correction is very much on its way. Leading UK shares simple seem incapable of soaring higher in the way that their U.S. counterparts have in recent weeks, and while a new leg down would not fall much lower than the March intraday low of 5,755, the risk is that an early April dip towards the current position of the 200-day moving average – a key trend determinant, will be seen at 5,579. At least while this market holds above the 200-day line, the price action remains in line with an overall recovery. 

Sterling / Dollar: 

$1.60 remains just as elusive for Sterling / Dollar as the 6,000 benchmark has been for the FTSE 100 and given the 0.3% GDP contraction for Q4 2011 Sterling looks unlikely to hit this resistance for a while yet. Even though we have the 2012 Olympics in the UK, the U.S. will be generating a massive feelgood factor in its economy during Presidential year, something no amount of Gold medals here can surpass. On the technical front the longs can still console themselves as the cross holds the 200-day moving average currently at $1.5847. The risk is that even if the Pound can take out $1.60 plus during April, it will need to test the floor of a January price channel at $1.5700 first.

Gold: 

The continuing underperformance of Gold stands in stark contrast to the rise and rise of the equity markets, and not even EU zone money printing and bank bailouts have been able to kick start the New Year bull run for the yellow metal. Given the latest technical bull trap through $1,687, (the 200-day moving average), Gold bulls will clearly have to wait a little longer for salvation. The latest fundamental developments deliver little near term promise, given a lack of reported physical buying and a strike by Indian retailers due to an increase in duty on imports and sales, something that is causing great concern given that the country is the world’s top importer. The risk on the technical front is that no swift weekly close back above the 200-day moving average could lead to an April test of December intraday support at $1,522.

This Week in the Markets:

With Greece no longer making the headlines, the financial press attempted to create a story with a sense of urgency, or at least tension over what the Chancellor of the Exchequer might or might not do in this week’s Budget. Certainly March 21st 2012 was George Osborne’s last chance to be brave before the General Election and deliver a policy full of dynamism and creativity. Well, it was a nice try, but as we are all acutely aware of the trials and tribulations of Coalition Government, in the end what was offered up was no more or less what was expected given the pressroom leaks in the run up to the Budget speech. Arguably this form of Government offers a Chancellor even less wiggle room on policy than that of a single party with a narrow majority. 

Nevertheless, shaving the contentious 50p top rate of tax to 45p is a milestone. HMRC had moaned that the 50p rate had created “massive distortions” as most high earners found ways around it, but perhaps now any losses now will be offset by a more effective tax, that of stamp duty rising to 7% on mansions. Mansions are properties officially worth £2m or more, and the loophole of buying them via a company to lower the tax liability has been closed. 

No less controversial though is the alleged £3bn pension raid from tax allowances previously available to older tax payers – citizens who not only have paid their dues but have already suffered in the wake of the moral hazard antics of the past few years where savings rates have been decimated. That said, against the £83 a year loss for pensioners we have an estimated 24m people better off by £220 a year as the tax free personal allowance rises by £1,100 from April 2013. 

Perhaps of a more substantive nature than the swings and roundabouts of tax cuts and hikes in the Budget are the growth forecasts released at this time. With a recovery from the flatlining, rolling stagnation of the post banking collapse period still 2 or more years away, the Chancellor now estimates that growth will hit 3% by 2015 / 16. The business community may feel that the only real driver pushing companies to growth in this Budget was the cut in corporation tax which will reduce to 22% by 2014.

The Week Ahead: 

Key Corporates Reporting: March 26th –30th            

Monday- Finals: Lamprell (LON:LAM), Salamander Energy (LON:SMDR) Interims BowLeven (LON:BLVN).

Tuesday – Finals: 888 Holdings (LON:888), EnQuest (LON:ENQ), Kazakhmys (LON:KAZ), Resolution (LON:RSL). Interims: Bellway (LON:BWY), Wolseley (LON:WOS). Trading Announcement: Compass Group (LON:CPG).

Wednesday- Finals: Evraz (LON:EVR), Hansteen Holdings (LON:HSN), JKX Oil & Gas (LON:JKX), Petropavlovsk (LON:POG). Trading Announcement: Topps Tiles (LON:TPT).

Thursday– Finals: Bwin.party Digital Entertainment (LON:BPTY). Trading Announcement: Imperial Tobacco (LON:IMT).

Friday – Trading Announcement: Electrocomponents (LON:ECM).

With mining stocks facing not inconsiderable challenges as metal prices fall, FTSE 100 mining giant Kazakhmys (LON:KAZ) reports finals, where despite the back track in the Copper price, the Copper miner has withstood the pressure and is seeking to ramp up production. Indeed, at the start of March the miner said that it had actually been higher Copper prices last year that had helped to maintain the bottom line, with lower sales meaning that profits overall were only up slightly at $1,959m versus $1.932m previously. Kazakhmys expects output for 2012 to be similar to 2011, and will focus on improving margins, as well as health & safety aspects in the production process.

Gold miner Petropavlovsk (LON:POG) sees its shares near post November support just above the 600p zone, a factor most probably due to the relatively strong newsflow since the turn of the year – especially since the appointment of a new CEO at the end of December. At the end of January the company revealed that 2011 production was up by nearly 25% compared to the year before – enough to compensate for any near term metal price weakness. Things looked even better at the end of February as Petropavlovsk raised its Gold ore reserves estimates by 11% as of the start of 2012. It also reported a 6% increase in total mineral resources from 21.2m oz to 24.5m oz, with the reserves estimated using a very conservative Gold price of $1,000 per oz.

A couple of blue chip trading announcements are due from Imperial Tobacco (LON:IMT) and Compass Group (LON:CPG). Broker Nomura lit a fire under the Imperial bull argument in the near term by suggesting that the company is “susceptible to a takeover.”  In the case of Compass, the catering giant has been active on the acquisition front in recent weeks and months as it looks to drive growth. This was certainly an important part of the Q1 update at the beginning of February where organic revenues grew 4%, but the fundamentals were pressured by the macroeconomic environment. 

Major Economic Data: March 26th– 30th                      

Monday – EU: German March IFO Business Climate. U.S.: Feb Pending Home Sales

Tuesday – UK: Q1 Bank of England Quarterly Bulletin. EU: German April Gfk Consumer Confidence. U.S.: March Conference Board Consumer Confidence.

Wednesday – UK: Q4 GDP EU German March Harmonised Index of Consumer Prices. U.S.: Feb Durable Goods Orders

Thursday – EU: March German Unemployment Rate. EU: March Business Climate / Economic Sentiment. U.S.: Annualised GDP / GDP Price Deflator

Friday – EU: March HICP. U.S.: Feb Personal Income / Personal Spending, March University of Michigan Consumer Sentiment.

Given the ongoing divisions at the Bank of England’s Monetary Policy Committee, there will perhaps be more interest than usual in the Quarterly Bulletin from the BoE. Interestingly enough the Bulletin quoted what was to be a correct call on further QE stimulus by the end of Q1, (£50bn actually delivered in February) although the consensus expected £75bn. The latest UK GDP numbers are due and are expected to contract by -0.2% vs. a previous 0.5% gain. Clearly, the Government does not want a Q2 growth contraction, here’s hoping the Olympics will tip the balance in a positive way. In Europe, the German IFO Business Climate Survey is due with the German Unemployment Rate. In the U.S. the latest GDP number tops the bill, with the annualized growth rate for Q4 2011 expected to hit 3%, up from 1.8%.

Main Markets Outlook: 

FTSE 100:

Although the FTSE 100 has got tantalisingly close to cracking the all-important 6,000 benchmark, given the progress made by U.S. markets in recent weeks, UK stocks have chronically underperformed, probably due to the fact that so many are linked to precious metals prices and the health of the Chinese economy. At least the run up to the Budget provided a modest excuse for traders to hold off hitting the buy button. From a charting perspective, we are probably due a 50-day moving average retest similar to March, although given the rising moving average of late the rebound on this occasion could occur near the line at 5,839, rather than the sub 5,750 level last time. The upside while the 50-day line remains as support should deliver another test of the intraday March peak to date as high as 5,989.

Sterling / Dollar:

Foreign Exchange traders seem to have focused positively on Sterling in the run up to the Budget, perhaps aware that the UK’s plight remains rather better, or at least rather more straightforward than the Eurozone conundrum. Added to this, the Federal Reserve reiterated its extended low interest rates policy – now knocking on the door of 2015. From a Sterling / Dollar charting standpoint, a relatively aggressive attempt is being made to establish support at the 200-day moving average at $1.5860, and even a weekly close above this potentially trend changing (to the buy side) feature could see an extended trip through the all-important $1,60 resistance zone. Indeed, the top of a January rising price channel on the daily chart suggests $1.62 by the end of April.

Gold:

The ongoing disappointment for Gold looks set to continue to at least the end of Q1 2012, quite a result given the Greece bailout, ECB banking bailout and the U.S. easing policy.  And with even the China growth slowdown upsetting the Gold bulls, it is difficult to see what fresh fundamental drivers might emerge for the metal given the money printing excesses. The technical picture points to a market struggling to establish support at the floor of a December rising trend channel at $1,640 - below that a retest of the $1,522 intraday low of that month could arrive quickly. Primary support comes from the 200-day moving average at $1,684, although that said cautious bulls would be looking for a weekly close back above this feature to kick start price action back on the long side.

This Week in the Markets:

Thankfully, for once it seems that we can complete our weekly investment journal and skip over the ongoing events across the EU and Greece. Our focus shifts closer to home, where UK Chancellor George Osborne has come up with the idea of issuing a 100 year Gilt (Government Bond). The idea behind this is to take advantage of the current low interest rate environment, although long-toothed observers out there may instead take the view that the idea is also unwittingly calling the low in interest rates, rather in the way that the sale of the UK Gold reserves by then Chancellor Gordon Brown just over 10 years ago called the bottom in the metal and the “death” of inflation. 

While the 100 year bond may be a once in a lifetime event, more usual fayre has been provided by the latest UK employment data, which provided a marked contrast with the better than expected U.S. non-farm payrolls number at 227,000 – the third straight month of solid improvement. Hopefully Prime Minister Cameron picked up a tip or two on this area, as well as basketball and hotdogs on his U.S. visit to President Obama. Indeed, UK unemployment data hitting a 17 year high goes hand in hand with the spike in public sector job losses resulting from austerity measures. Unfortunately, we currently seem to have the worst of both worlds in that spending remains high, and unemployment higher.

In contrast, the U.S. seems to be following the traditional script of a strong stock market in a Presidential Election year, as well as a rather glossy looking economy. The latest from the FOMC underlined this view with moderate growth, and inflation expected to top out after the initial pressure from rising fuel costs. Major indices such as the Nasdaq reached fresh highs as the Federal Reserve’s policy making committee promised to continue to deliver the present ultra-low interest rate policy until at least the end of 2014. Speaking of the Nasdaq, its key component Apple (AAPL) remained in focus following last week’s new iPad launch with Morgan Stanley (MS) joining the stampede to upgrade the tech giant’s prospects. U.S. banks were also in focus as JP Morgan (JPM) hiked its dividend and announced a $15bn share buyback. And the announcement by the Federal Reserve detailing the results of its banking sector stress test were also well timed – the Fed are evidently unaware that on this side of the Atlantic such tests are not held in high regard following the aftermath of equivalent EU tests. Citigroup (C) was one of those who failed to make the grade.

The Week Ahead: 

Key Corporates Reporting: March 19th – 23rd            

Monday- Finals: Exillon Energy (LON:EXI).

Tuesday – Finals: Cairn Energy (LON:CNE), Gem Diamond (LON:GEMD), Mears Group (LON:MER).

Wednesday- Finals: Eurasian Natural Resources (LON:ENRC). Trading Update: Sainsbury (LON:SBRY).

Thursday– Finals: Kingfisher (LON:KGF), Next (LON:NXT), Premier Oil (LON:PMO). Trading Update: United Utilities (LON:UU.).

Friday – No Significant Companies Reporting.

Cairn Energy (LON:CNE) was until a couple of week ago one of the FTSE 100’s better share price performers of 2012, even though the keenly awaited results from its great prospects in Greenland have yet to really make the grade. The reason for the big bull run from under 270p to 350p plus was the positive effect of the Cairn India sale to Vedanta Resources (LON:VED) and the multi billion Pound special dividend associated with this event. Part of the sale proceeds has been invested into Greenland, so most investors will probably feel it really is high time for some positive news on the exploration front. 

The January bombshell from market leader Tesco (LON:TSCO) has clearly set the bar of expectation that much lower for Sainsbury (LON:SBRY) in the run up to its latest trading announcement. Many expect that the UK’s number two grocer will continue to play catch up with Tesco after a best ever Christmas update and after a February Kantar Worldpanel survey suggested that Tesco’s market share had fallen below 30% for the first time in nearly 7 years. While Sainsbury shares have now squeezed back above 300p, (top of the recent range) the markets will want further assurance on like for like sales before bidding the shares higher.

In contrast to their struggling rivals, both B&Q owner Kingfisher (LON:KGF) and fashion retailer Next (LON:NXT) have delivered steady and impressive returns. Kingfisher is currently on 52 week highs in the aftermath of the February’s 13 week update where total like for like sales grew 2.2% year on year. For this to be justified we would probably wish to see the 1.9% sale decline for Ireland turned positive – quite a tall order. Where France proved to be the unlikely saviour for Kingfisher in terms of growth, the Next Directory Unit is currently driving growth at the fashion retailer, and it is worth noting that the shares have reached a new peak above 2,800p despite the cautious outlook delivered just after Christmas. 

Major Economic Data: March 19th – 23rd                     

Monday – EU: Jan Eurozone Current Account. U.S. March NAHB Housing Market Index.

Tuesday – UK: Feb Consumer Price Index. EU: German Feb Producer Price Index. U.S.: Feb Building Permits / Housing Starts.

Wednesday – UK: March Bank of England Minutes. U.S.: Feb Existing Home Sales

Thursday – UK: Feb Retail Sales. EU: Jan Industrial Orders. EU / German March Services / Manufacturing PMI. U.S.: Jan FHFA House Price Index, Feb Conference Board Leading Indicators.

Friday – U.S.: Feb New Home Sales.

The Bank of England Minutes due this week could very well reveal a lasting split on strategy and a bearish economic indicator for UK traders. With unemployment continuing to soar and GDP growth no better than flat, one would think that most of the MPC panel will want to deliver additional QE over and above the Feb dose of £50bn. Also due are Feb Retail Sales and Consumer Price Index which last stood at 3.6%, (and should fall soon say the BoE), while on the continent, German and EU Services and Manufacturing PMI top the bill, (all just either side of the 50 level in Feb), with the German Feb Producer Price Index not expected to beat the Jan 3.4% reading. In the U.S., Feb New Home Sales will be compared with the initial 321,000 gain to start 2012, with hopes high that Feb’s Housing Starts will also beat the Jan 699,000 figure.

Main Markets Outlook: 

FTSE 100:

Although late night spreadbetters of the FTSE 100 may have experienced a “blink and you missed it” touch of 6,000 by the FTSE 100, thus far main session resistance has come in just shy of the level. While the exact fundamental reason for the bullishness may be somewhat imprecise (U.S, economic growth hopes?), whatever the path of leading UK stocks is for the rest of the year, the initial journey is to tackle 6,000 – a pivotal level for this market for over a decade. The main positives in the near term have been the early March bear trap below the 50-day moving average currently at 5,810 and the way that even at present range highs the RSI indicator is barely scraping 60 – well off overbought levels through 70. On this basis one would suggest that while there is no end of day close back below the 50-day line, the UK index could not only take out 6,000, but also the top of a rising trend channel from November as high as 6,200 by the end of April.

Sterling / Dollar:

To some extent, Sterling has benefitted vs. the struggling Euro as the ECB prints out billions on demand to its ailing banks, but against the U.S. Dollar progress has been rather more challenging. A strong February jobs report, as well as an upward revision of GDP growth has resulted in the $1.60 level for Cable becoming even more difficult to crack than the 6,000 level on the FTSE 100. Ironically, rather like the FTSE, the pound/dollar cross has delivered a bear trap below the 50-day moving average so far this month, and while there is no end of day close back below the intraday low of March so far at $1.5603, the upside should be towards the falling 200-day moving average at $1.5866, although we are really in need of a weekly close above this key trend changing feature before it a lasting break to the upside can materialise.

Gold:

With Gold mooted as one of the great hopes of 2012 on the basis that the price had readjusted itself over autumn 2011, and that a combination of QE and LTRO / PIIGS bailout action would seriously undermine of paper currencies, contrary to expectations the yellow metal has been beaten down just like a currency. So far this year it seems to be tracking the Euro lower, so investors have gone for blue chip stocks as the “safest” hedge against risk and uncertainty. Technically the big blow for March has been the loss of the 200-day moving average now at $1,681 and if there is any sustained price action below this, it can be argued that the trend for Gold has changed from buy to sell. Ideally, the 200-day line would be recovered with a matter of days to avoid a retest of the December $1,522 intraday low.

This Week in the Markets:

While the worst of the tension over the Greek (default) crisis has passed for now, it can hardly be said that the issue has gone away. The latest twist involves a deadline for Private Investors to decide whether or not to accept a debt exchange which will require them to take a 53.5% haircut on their holdings, and in the process save Greece around €100bn. The view from Athens is that around 75% of investors will participate, although 90% is needed to avoid collective action clauses. Clearly, this is a story set to run, with deadlines coming and going in a fashion that has typified the entire crisis. 

Away from Greece, and the UK stock market has endured something of a setback after the so called “calm rally” since December. Most observers are taking the view that the blame lies with Federal Reserve Chairman Ben Bernanke and his testimony to Congress on February 29th. In the wake of a better than expected Q4 U.S. GDP growth performance, he effectively closed the door on further QE measures, and since that time the markets have drifted lower, seemingly with a sense of uncertainty and lack of direction. Meanwhile, the Fed are attempting to create something akin to a perpetual motion machine in the form of a new kind of bond-buying programme that will simultaneously try to limit inflation. By printing new money to buy Treasury bonds, the inflationary effect of this money will be limited as the Fed will “borrow it back” for short periods at low rates. At first glance this sounds like a scheme that will potentially store up problems for the future, but for now at least the prospect of this new approach could be enough to underpin the stock market at or just below current levels, provided that February jobs data (expected to come in at +210,000) passes off without incident. 

Of course the UK still has its issues to deal with, but in contrast they are very much a storm in a teacup in nature, despite the divisions revealed by our disgruntled Business Secretary Vince Cable in his “private” letter to the Prime Minister and Deputy Prime Minister. Cynics could argue that if Mr Cable felt that strongly enough that the Government’s “piecemeal” industrial and economic strategies were going so awry he might have offered to resign in protest. Ironically though, the only points he appeared to concede on were that the austerity measures designed to reduce the national debt are proceeding to plan. Regardless of his posturing though, the UK’s sovereign debt has gone up over 10% to £1tln since the Coalition Government came to power.

The Week Ahead: 

Key Corporates Reporting: March 12th – 16th           

Monday- No significant companies reporting.

Tuesday – Finals: Antofagasta (LON:ANTO), Computacenter (LON:CCC), G4S (LON:GFS), Inchcape (LON:INCH), Standard Life (LON:SL.).

Wednesday- Finals: Ferrexpo (LON:FXPO), Greggs (LON:GRG), Hikma Pharma (LON:HIK), SIG (LON:SHI), Tullow Oil (LON:TLW), Yule Catto (LON:YULC). Interims: Smiths Group (LON:SMIN). Trading Announcement: Marstons (LON:MARS).

Thursday– Finals: Aegis (LON:AGS), Premier Farnell (LON:PFL). Trading Announcement: Home Retail Group (LON:HOME)

Friday – No significant companies reporting.

Heading the corporate announcements on Tuesday is Copper miner Antofagasta (LON:ANTO), one of the FTSE 100’s most volatile plays. In the last major update at the beginning of Feb, the group revealed that FY production targets had been beaten with output up nearly a quarter. Ironically, the share price has actually topped out from the 1,400p level at the time of the raised full year profits guidance. Bulls of the stock will be hoping for a fresh squeeze higher for Antofagasta shares in the run up to and after the finals.

Shares of security group G4S (LON:GFS) gave its followers something of a rollercoaster ride in the last quarter of 2012, plunging after news emerged of a planned £5bn bid for a Danish cleaning group in early October. This week though, the markets will be focused on the aftermath of a rather more humble example of M&A, the purchase of Chubb Emergency Response. Elsewhere, medical devices and airport scanners group Smiths (LON:SMIN) delivered a big update last Sept when the initial buzz of excitement over a possible offer for part of the company was offset by a rather mixed bag performance from the diverse business units. Of note this time is whether the interims will show an improvement from the laggard Smiths Detection business.

On the High Street, observers will be looking for signs of recovery after a bleak Christmas at Argos owner Home Retail Group (LON:HOME). The mail order unit underperformed, but at least the Homebase DIY business proved rathermore resilient. Optimists will be hoping that the U.S. turnaround specialist John Walden, brought in at the beginning of last month will have already started to make a positive impression. 

Major Economic Data: March 12th – 16th                     

Monday – U.S.: Feb Federal Budget Balance. 

Tuesday – EU: German March ZEW Economic Sentiment. 

Wednesday – U.S.: Feb Retail Sales, FOMC Interest Rate Decision.

Thursday – EU: Jan Industrial Production, Feb Harmonised Index of Consumer Prices. U.S.: Feb Import Prices

Friday – U.S.: Jan Net Long-Term TIC Flows, Feb Core / Producer Price Index, March NY Empire State Manufacturing Index, Philadelphia Fed Index.

Although the week is relatively light on economic data and events, all eyes will be on the latest from the FOMC on U.S. interest rates in the aftermath of Fed Chairman Ben Bernanke’s hints on QE3 (or the lack of) and rumours of a nil-inflation QE vehicle doing the rounds. Apart from this late Wednesday announcement (UK time), Feb Import Prices are due, expected up 0.1% to 0.4%. But Friday is the big day Stateside, with U.S. Retail sales / Retail Sales ex Auto, both expected to dip slightly vs. Jan at 0.6%. With no significant data due in the UK, focus shifts to the German March ZEW Economic Sentiment survey to start the week, with EU Jan Industrial Production and the Feb Harmonised Index of Consumer Prices (expected to rise to 2.7% versus 2.6%) due midweek. 

Main Markets Outlook: 

FTSE 100:

The first triple digit fall for the Dow since November was matched by a near 2% decline for the FTSE 100 to start off the first full trading week of March. However, rather than a major negative change, most observers view the movements as “pack shuffling” ahead of February U.S. employment data, and of course yet another “do or die” deadline in the Greek debt saga. The FTSE also tested its 50-day moving average currently at 5,775 for the first time since the week before Christmas, a sign of the incredible recent technical strength of the index that should send a warning to bears that any pullback is likely to be both shallow and limited in duration. Indeed, it could very well be that a swift recovery of the mid February neckline support at 5,829 on an end of day close basis could provide a relatively straightforward trigger for a fresh assault on the still virgin (for 2012) 6,000 level.

Sterling / Dollar:

Sterling / Dollar price action has remained rangebound between the 50 and 200-day moving averages on the daily chart, currently between just under $1.57 and $1.59. The cross is also frustrating for the bulls as the RSI oscillator on the cross is below the neutral 50 level suggesting, along with the falling 200-day line that the market is effectively a sell into strength. Thus, only a weekly close back above the intraday of February at $1.5992 would be enough to signal a new lasting buy phase for the UK currency. Fundamentally the position is weak, thanks to criticism of Government fiscal policy by none other than Business Secretary Vince Cable, a run of recent negative economic newsflow such as a sharper than expected fall in UK house prices in February and a weak Services Sector PMI last month.

Gold:

Is the decade long rally in Gold finally running out of steam? After a very strong technical buy signal going into the end of Feb, (when Gold was trading near to $1,780) in the form of a golden cross between the 50 / 200 day moving averages, the market has fallen back over $100 to the position of the 200-day moving average at $1,677. Clearly buyers will be hoping that the recent setback is over, but fundamentally attempts to arrange an “orderly” default for Greece, and massive ECB moves to offer billions to save the liquidity position of Eurozone banks seem to have been largely priced in. As much as anything else China’s move to cut its growth target to the lowest in 8 years has perhaps cooled off the inflationary fears that Gold bulls thrive on, at least for now.

This Week in the Markets:

Given the EU overload that traders and investors have had to grapple with even before the start of 2012, there is a palpable sense of relief that at least for now most of the stress and angst over whether Greece would actually default or receive a bailout is out of the way. But even in the week just gone, the ongoing battle in Germany as Chancellor Merkel attempted to justify why and how billions of funds are continuing to pour out of Europe’s largest economy towards the ailing Mediterranean nation, acted as a stark reminder that the crisis is always going to be just under the surface. So far Ms Merkel has had her way in keeping the Eurozone dream alive, but it is clear to see that there is ever increasing resistance from her opposition who feel good money is being thrown after bad.

While on the subject of good money being thrown after bad, the ECB are in the firing line this week after providing a €500bn round of funding to bailout as many as 800 distressed banks across Europe. This comes after a similar move to ease liquidity last December, ostensibly to prevent another banking crisis / Credit Crunch. As of yet though there is little evidence that the so called “big bazooka” blast of money is releasing cash into the Eurozone economies via loans or funding for businesses.

Indeed, here in the UK the Governor of the Bank of England, Sir Mervyn King, has pointed the finger at Britain's banks who he says have been trying to profit at the taxpayer's expense by rigging the Treasury's attempts to boost small business lending. Clearly, it has been more tempting for banks to invest in Government bonds than in new businesses during a period of economic contraction. 

But while Bank of England boss has been pointing the finger, he has also had his fair share of critics in relation to the latest measures from the central bank to kick start the UK economy. Indeed Peter Sands, the CEO of Far East focused UK bank Standard Chartered (STAN) has suggested that the QE strategy may have unpredictably negative consequences in terms of laying fresh seeds for the next crisis – an argument that should be taken seriously given that his bank is one of the few that didn’t overextend during the bubble years of the 2000s,. Perhaps the most obvious problem in the near term is that the lending freeze actually prevents the current rolling stagnation from doing anything more than bumping along in the 0%-1% GDP growth zone.

The Week Ahead: 

Key Corporates Reporting: March 5th – 9th           

Monday- Finals: Amlin (LON:AML), Glencore International (LON:GLEN), Intertek (LON:ITRK), Petrofac (LON:PFC).

Tuesday – Finals: Inmarsat (LON:ISAT), Meggitt, Michael Page International (LON:MPI), Pace (LON:PIC), Tullett Prebon (LON:TLPR), Wood Group (LON:WG.). Q3: Ashtead (LON:AHT).

Wednesday- Finals: Admiral Group (ADM), Hardy Oil & Gas (LON:HDY), Jupiter Fund Management (LON:JUP), Legal & General (LON:LGEN).

Thursday– Finals: Aviva (LON:AV.), Balfour Beatty (LON:BBY), Cobham (LON:COB), Hunting (LON:HTG), Morrison Supermarkets (LON:MRW), Schroders (LON:SDR), Spirax Sarco (SPX).

Friday – Finals: Aggreko (LON:AGK), Old Mutual (LON:OML). Interims: JD Wetherspoon (LON:JDW).

Insurers dominate the corporate headlines this week, and most newsworthy of the recent past is arguably motor insurer Admiral Group (ADM) where a share price recovery was triggered by news that it is extending its existing UK car insurance reinsurance partnerships with Hannover Re, Mapfre Re, New Re and Swiss Re until 2014. Credit Suisse also upgraded the stock from neutral to outperform in the run up to the March 7th full year figures, and suggested that the results “represent the first step for Admiral towards regaining market confidence in that bodily injury challenges are being resolved.” Credit Suisse forecasts pre-tax profits to hit £295m, up 11% year-on-year and close to the 10% growth guidance provided at the Q3 stage.

Shares in Aviva (AV.) are up more than 20% since the November update, but there is still plenty to prove on the fundamental front, especially given that the weakness in the stock over H1 2011 was due in greater part to fears over the insurer’s exposure to toxic debt in the EU. The worldwide sales decline of 5% in the 9 months to the end of September was also a blow, as was the fall in the solvency surplus figure to £2.7bn, down on the equivalent 2010 £4bn and a sign that the problems in the EU had been manifestly negative. Conversely, general insurance is seeing profitable growth and its life business continues to generate strong profits and cash flows.

Three weeks ahead of its finals, broker Nomura said it regarded Legal & General (LON:LGEN) as the pick of the insurance sector, on the basis of the higher yields offered compared to peers such as Aviva (LON:AV.), Prudential (LON:PRU) and Standard Life (LON:SL.). The big attraction is the cash yield of 10% measured against the broker’s FY 2011 cash earnings forecasts.  It also suggested that L&G's growth prospects are the strongest in the sector, as it is the best-positioned amongst its peers in the wake of the product and distribution changes resulting from the FSA’s Retail Distribution Review. 

Major Economic Data: March 5th – 9th                     

Monday – UK: Feb Services PMI. EU: Jan Retail Sales, EU / German Feb Services PMI. U.S.: Jan Durable Goods Orders, Factory Orders, Feb ISM Non-Manufacturing Index.

Tuesday – EU: Q4 GDP

Wednesday – EU: German Factory Orders. U.S.: Feb ADP National Employment Report.

Thursday – UK: Bank of England Interest Rate / QE Decision, ECB Interest Rate Decision.

Friday – UK: Jan Industrial Production, Trade Balance, Feb Producer Price Index. U.S.: Non-Farm Payrolls, Unemployment Rate, Jan Trade Balance.

Most of the big economic events and numbers are out this week, led by Feb U.S. non-farm payrolls and employment figures. Presumably the better than expected revision to the Q4 GDP number to 3% has made traders less jittery over jobless numbers, but any significant miss on the expected 200,000 level (vs. the January 243,000 level) would as always cause the equity markets to sell off – at least initially. Just below the U.S. payrolls level of importance come the latest central bank decisions in the UK and the EU. Presumably the BoE will let it ride after the £50bn QE injection in Feb, which did not go down well in all quarters – some regarding it as too little and other a dangerous panic move. As far as the ECB is concerned, while no change is expected from the current 1%, this rather pales into insignificance next to the €500bn LTRO handouts both in Feb and Dec, and what the end game for this strategy may be.

Main Markets Outlook: 

FTSE 100:

While the bears may have been licking their lips waiting for an imminent breakdown for leading UK stocks, remarkably the bulls have largely defied both gravity and the sellers to date. That said, the best the index has delivered is 5,964, a couple of points shy of the last July 5,966 resistance, and of course the big 6,000 benchmark. Although 6,000 seems out of reach for now, there is hefty chart support from 5,829 to 5,864 so it is difficult to see this market continuing to consolidate near the best levels of 2012 while this apparently strong band remains in place. There is still a better than average chance of the FTSE embarking on the kind of stellar run currently seen from the likes of the S&P, Dow and Nasdaq in the U.S.

Sterling / Dollar:

Even though the 200-day moving average level can act as something of a magnet from both below and above, the fact that Sterling / Dollar has been able to reach and even breach the key feature now at $1.5898 on its daily chart has been quite an achievement. So far the $1.60 level has been missed by just 8 pips, although at least while the cross remains above the 200-day line a successful $1,60 assault looks imminent. The fundamental drivers for Sterling in most major crosses comes from a spill over of safe haven buying amid ongoing EU zone uncertainties, but also doubts over economic recovery Stateside provide support, at least until the Q4 GDP from the U.S. came in stronger than expected at 3% versus 2.8% consensus.

Gold:

Even though major commodities such as Gold and Crude Oil should in theory be less volatile and more predictable than say, obscure agricultural plays such as Soybean Meal, in February this was most certainly not the case, with seemingly every chance of Gold “turning on a dime” as any other market. Indeed, the Leap Day decline at the end of the month to leave the metal down on February seemed to defy both the recent technical buy signal – a golden buy cross between the 50 / 200 day moving averages, and the €500bn handout by the ECB to distressed EU banks. While it may be easiest and most sensible to suggest that the recent rally towards $1,800 had factored in the bull argument for this market, it is not difficult to see a test of the last January support zone below $1,650 to give the bulls enough time to present fresh cash for a retest of the best levels of last year above $1,900 an ounce.

This Week in the Markets:

Once confirmation of a second Greek bailout for €130bn had been confirmed on Monday, the markets became noticeably less volatile for the trading week of February 20th – 24th. Of course, for many in the financial markets, apart from the déjà vu of yet another cash injection from the Troika to keep Greece from going (even more) bust, the scepticism and the conspiracy theories continue to reverberate, with a leaked Troika report suggesting that the deal may fail the latest doing the rounds. Added to this, the Greek Parliament still needs to approve another €3.3bn in spending cuts in order to complete its side of the bargain. In the meantime the austerity protests continue to such an extent, that what has been achieved seems to be little more than a cross between a poison chalice and a cure that could be worse than the bankruptcy itself.

All this has left traders somewhat suspicious of the sharp stock price gains in recent weeks, but luckily a surge in M&A activity has provided a welcome distraction. Vodafone (LON:VOD) set the ball rolling as it approached ailing telecoms group Cable & Wireless Worldwide (LON:CW.), followed by software group Misys (LON:MSY), which moved into play as Vista Equity Partners attempted to muscle in on its agreed merger with Tenemos. But perhaps what traders have really been looking for is action in the resources area to add some sparkle to their portfolios, and right on cue speculation is rife that Mozambique focused miner Kenmare Resources (LON:KMR) could be on the receiving end of a bid from sector giant Rio Tinto (LON:RIO).

Certainly, the strangest aspect of the bull run to start 2012 is that it was apparently powered solely by Greece bailout hopes. It has certainly not been fuelled by economic recovery hopes in the UK, although perhaps the prospect of QE from the Bank of England may have provided some support even though the latest minutes from the MPC of the BoE showed that the panel was split at its February meeting over whether the latest QE should be of £50bn or £75bn.  The effect on Sterling was for a near instant one cent decline vs. the U.S. Dollar, leaving those in the currency markets betting on more QE as soon as May.

The Week Ahead: 

Key Corporates Reporting:  February 27th – March 2nd          

Monday- Finals: Bovis Homes (LON:BVS), Cookson (LON:CKSN), HSBC (LON:HSBA), Pearson (LON:PSON), Ultra Electronics (LON:ULE). Trading Announcement: Associated British Foods (LON:ABF).

Tuesday – Finals: CRH (LON:CRH), GKN (LON:GKN), Molins (LON:MLIN), Moneysupermarket.com (LON:MONY), Persimmon (LON:PSN), Provident Financial (PFG), Rotork (LON:ROR), Serco (LON:SRP). Trading Announcement: Whitbread (WTB).

Wednesday- Finals: Carillion (LON:CLLN), Henderson Group (LON:HGG), International Consolidated Airlines (LON:IAG), ITV (LON:ITV), National Express (LON:NEX), Restaurant Group (LON:RTN), Standard Chartered (LON:STAN), Taylor Wimpey (LON:TW.), Weir Group (LON:WEIR).

Thursday– Finals: Man Group (LON:EMG), WPP (LON:WPP).

Friday – Finals: IMI (LON:IMI), Laird (LON:LRD), Rentokil (LON:RTO).

While the predicted moral hazard associated with bailing out the UK banking sector 4 years ago continues with bonuses today, arguably those that didn’t overextend during the boom times, and didn’t require taxpayers’ funds to survive will presumably get by without such a rumpus over executive pay. In this regard, rumours has it that HSBC (HSBA) is to issue tens of millions of pounds of new shares to allow it to pay cash bonuses worth more than £50,000. At the same time the Far East focused bank has had to address the fallout from the long term care bonds mis-selling scandal which cost it a £10.5m fine. At the time of the last major update in November, pre-tax profits fell 53% in Q3, while bad loan provisions increased to $3.89bn from $3.15bn, largely due to the U.S. part of the business.

Fellow emerging markets focused bank Standard Chartered (LON:STAN), may be tarred with the same brush, but the “bad” news revealed at the beginning of December was that net income for 2011 was now expected to grow at just below double digits – a problem that part nationalised plays RBS (LON:RBS) and Lloyds Banking (LON:LLOY) would just love to have. Indeed, this view was echoed by broker Nomura who said it was actually encouraged by the pre close trading update from StanChart, given the current challenging global trading environment.

Moving away from one part of the financial spectrum to a company that specialises in reporting on it, Financial Times owner and educational publisher Pearson (PSON) has so far proved to be a post Credit Crunch outperformer, managing to dodge the bullets of the volatility in the finance zone, as well as austerity measures. Indeed, even more than a cursory glance at the newsflow from the group in recent months will reveal that it has made quite a habit of upping its profits guidance. While it may be too much to expect another guidance hike on this occasion, it will be interesting to see whether the strong finish to 2011 has been maintained. 

Major Economic Data – February 27th – March 2nd          

Monday – U.S.: Jan Pending Home Sales.

Tuesday – EU: Feb Economic Sentiment / Business Climate. EU: German Feb Harmonised Index of Consumer Prices. U.S.: Jan Durable Goods Orders, Feb Conference Board Consumer Confidence.

Wednesday – EU: Jan Harmonised Index of Consumer Prices. EU: Feb German Unemployment Rate. U.S.: Q4 GDP (Annualized) Feb Beige Book.

Thursday – UK: Feb Manufacturing PMI. EU: Jan Unemployment Rate. EU: Harmonised Index of Consumer Prices. EU: German Feb Manufacturing PMI. U.S.: Jan Personal Spending / Personal Income, Construction Spending Feb ISM Manufacturing

Friday – EU: Jan Producer Price Index.

Recently there has been quite a pickup in U.S. housing market sales and volumes, based largely on increasing numbers of distressed sellers hitting the market. But while we have yet to see the end of the downturn in prices, the beginning of the end of a multiyear downturn may be coming to an end. U.S. Jan Pending Home Sales should provide further pointers, with a rise of 1.5% expected vs. the 3.5% decline seen in Dec. Wednesday though will be the biggest day for U.S. data with the Q4 annualised GDP number taking centre stage, and expected to deliver a 2.8% jump, which compares favourably with 1.8% in the past quarter, and may explain why the U.S. stock market is currently standing at 4 year highs. In the UK, in a quiet week for economic data, Feb Manufacturing PMI data is due on Thursday, (Jan came in at 52.1). In the EU the unemployment rate tops the bill, with the last number of 10.4% likely to be beaten.

Main Markets Outlook: 

FTSE100: 

Although there may be plenty of traders looking for a top in leading UK stocks, so far it is likely that they will have been disappointed. While the bear argument may rest on the approach of 6,000, so far not even the July 5,966 intraday peak has been hit during main market hours, and this lack of upside after one of the best starts to the stock market in two decades could mean this benchmark is still a peak too far. Technically, the UK index remains underpinned by the initial January break of the 200-day moving average then near 5,600 and the February cross to the upside for the 50 / 200-day lines. Unless or until we see an end of day close back below the 10-day moving average now at 5,898, it seems almost wrong to even consider the bear argument or a sub 6,000 level for this market. 

Sterling / Dollar: 

With Sterling / Dollar failing at the 200-day moving average, (now at $1.5907) the issue now is whether the key 50-day moving average at $1.5617 will be the next stopping point for the cross, in what has been a surprisingly weak new phase. Clearly, Sterling has been supported in recent weeks by Greek bailout uncertainties, and it now appears that some of the safe haven players have headed for the hills. Additionally, the apparent division at the MPC of the Bank of England over how much QE is needed to get the economy growing again is perplexing, with so few solid recovery signa|s there for guidance. The risk that a break of the 50-day line could lead to a retest of January support sub $1.53 is certainly a clear and present danger.

Gold: 

All of a sudden things seem to be shaping up in a very positive way for Gold, after nearly 6 months on the back foot after a sharp decline from an all-time peak through $1,900 in September. The immediate aftermath of the €130bn Greece bailout is of course seen as inflationary, but the technicals of this market are heating up too. What should help the price action here in the near term is the run up to a golden cross buy signal between the 50 and 200-day moving averages, especially because the last time this signal was delivered in January 2009 this market rose over 10% from $900 to $1,000 an ounce. At this stage only back below a December line of support running through $1,730 would even begin to delay the prospect of a relatively “easy” assault on the $1,800 plus zone last seen at the beginning of November.

This Week in the Markets:

While the build up to the passing of the Austerity Bill in Athens on Sunday was par for the course given the posturing and bickering to date from Greece and the Troika, the post “deal” period has morphed into something quite unusual. There is widespread scepticism in the markets that Greece will actually get the €145bn it allegedly needs for its second fiscal rescue, but there are also doubts as to whether the austerity measures required will be carried out. With this backdrop, it is quite possible that the March 20th payment deadline for debt repayment will come and go while yet more behind-the-scenes negotiations over haircuts continue. Even the result of a General Election in Greece is casting a shadow. The need for the latter is all the more surprising given that the Opposition have already sworn to back the very unpopular austerity measures if elected. 

In the meantime the ongoing indecision and uncertainty are creating far from ideal conditions in the markets, and could cause the recent stock market rally to unravel, even after the promise by the People’s Bank of China to provide support by continuing to buy Eurozone bonds.

On the subject of unravelling, a somewhat surprising candidate for the next Sovereign debt victim could now be in the sights of bears looking for the next piece in the post Credit Crunch domino. While the UK was something of a unique case given the turmoil it experienced in its banking sector in 2007-2008, since then this “safe haven” nation has been able to pride itself on staying out of the ongoing nightmare that is the single European currency. This meant that when the U.S. and France lost their AAA ratings, the UK seemed to be impervious and isolated from such indignities, and accordingly was able to increase the cost of financing its debt due to self imposed fiscal prudence. Together with the sporadic QE measures to stimulate the economy such as the latest £50bn of asset purchases in February, the Chancellor George Osborne and the Bank of England were clearly confident that the Great British AAA Credit Rating would be maintained. The shock news that the UK’s AAA credit rating had been put on negative watch by Moody’s was never meant to have happened in this particular economic cycle, but with the wheels now set in motion there could be even more of a headache for leading members of the Coalition to deal with later in the year, even though CPI is now down to 3.6%.

The Week Ahead: 

Key Corporates Reporting:  February 20th – 24th         

Monday- Finals: CSR (LON:CSR). Interims: International Ferro Metals (LON:IFL).

Tuesday – Finals: AMEC (LON:AMEC), Drax Group (LON:DRX), Segro (LON:SGRO).

Wednesday- Finals: Logica (LON:LOG), Rexam (LON:REX), St James’s Place, Travis Perkins (LON:TPK). Interims: Barratt Developments (LON:BDEV), Hays (LON:HAS).

Thursday– Finals: British American Tobacco (LON:BAT), Capita (LON:CPI), Capital Shopping Centres (LON:CSCG), Centrica (LON:CNA), Royal Bank of Scotland (LON:RBS), RSA Insurance Group. Interims: Go Ahead Group (LON:GOG).

Friday – Finals: Berendsen (LON:BRSN), Hammerson (LON:HMSO), Lloyds Banking (LON:LLOY), Rightmove (LON:RMV), William Hill (LON:WMH).

It’s another bumper week on the corporate reporting front, with a clutch of big names stepping up to the podium on Thursday. Given the great row over the stripping of former RBS (LON:RBS) Sir Fred Goodwin’s knighthood for “services to banking”, after no wrongdoing, no censure, as well as the seemingly never ending rumpus over bonuses, it is likely that the forthcoming finals from the UK People banks, Lloyds (LON:LLOY) and Royal Bank of Scotland are likely to be scrutinised even more closely than ever, with the focus on executive pay probably taking precedence over the actual numbers.

That said, RBS may be able to swerve too many uncomfortable bonus questions ahead of the forthcoming IPO of its Direct Line insurance arm, one of the UK’s largest players in the sector and big enough to enter the FTSE 100 in its own right. The reason that RBS is likely to make this move is due to the ruling of the EU on competition grounds as part of the conditions the bank had to meet in order to receive a £45bn bailout three years ago. Looking at the more everyday issues, it will be interesting to see whether broker Nomura’s negative call on the recent rally in both the share prices of it and rival Lloyds will be proven correct. Profits for 2011 are expected to come in at £3,368.77bn versus a £399m loss the previous year for RBS. Lloyds in contrast is expected to swing to a £355m loss vs. a £281m profit in 2010, which goes to explain the senior management shakeup and the axing of 1,000 jobs or so over the past few weeks.

Sticking with the financial sector, and insurer RSA (LON:RSA) will be reporting its finals alongside RBS on Thursday. Of key interest here is whether the growth reported from all its major regions, (rather surprisingly led by Ireland) will have been maintained to start 2012. Management certainly set the bar high in terms of expectations in the autumn by forecasting double digit growth in international / emerging market regions.

Major Economic Data – February 20th – 24th         

Monday – No significant economic data due

Tuesday – No significant economic data due

Wednesday – UK: Bank of England Minutes, EU Dec Industrial New Orders. EU / German: Feb Manufacturing / Services PMI. U.S.: Jan Existing Home Sales

Thursday – EU: German Feb Ifo Business Climate. U.S.: Dec FHFA House Price Index.

Friday – UK: Q4 GDP. EU: German Q4 GDP. U.S.: Jan New Home Sales, Feb University of Michigan Consumer Sentiment.

Economic data kicks off on Wednesday in the UK, with the Bank of England minutes hopefully providing some clues on the £50bn QE stimulus announced earlier this month. EU PMI numbers are due, with the main figure to note whether or perhaps more accurately, by how much, manufacturing PMI is below the 50 plus growth zone. Last month it stood at 48. But Q4 GDP numbers for both the UK and Germany top the bill, especially here in the UK after Moody’s AAA downgrade threat. For the U.S, expectations are that the latest Jan Existing Home Sales will be a touch up on the previous month at 4.7m versus 4.61 in Dec. New Home Sales are called up 8,000 at 315,000. The key University of Michigan Consumer Sentiment measure is due to fall modestly from 75 to 72.5.

Main Markets Outlook: 

FTSE100: 

Although the FTSE 100 is consolidating in the 5,840 – 5920 zone, it still looks unlikely that this is the end of the golden start for the UK stock market to 2012. The stumbling blocks if they can be so described are the former 5,966 July intraday high and of course the big psychological 6,000 level. If the latter were hit over the next couple of weeks it would certainly be difficult to suggest that blue chips remain in a bear market. However, it cannot be denied that investors have so far squeezed stocks higher on assumptions that are rather optimistic ones, such as the Greek bailout going ahead without further incident. That said the missing technical ingredient for the FTSE 100 over the past week has been a proper test for support between former 5,820 initial February highs and 5,840 seen in recent sessions. It is fair to say that especially if there is to be a new leg higher, a quick test or shakeout is due. 

Sterling / Dollar: 

While the game may not yet be up for bulls of Pound / Dollar, at least on the basis of the technical, February has seen this market reaffirm its bearish credentials in classic fashion. A peak just below the 200-day moving average then at $1.5930, has reversed back off this zone in similar fashion to that seen at the end of October / November. Adding to the misery for buyers has been an seeming acceptance of levels back below December’s $1.5770 plus intraday highs, which suggests that unless this market can muster an end of day close back above the 2 month peak, the downside on offer could be a return to the initial January base for the cross just under $1.53. At this stage it seems that the combination of falling inflation and the threat of an AAA Credit Rating loss has been more than enough to keep the Pound on the back foot.

Gold: 

Although Gold is a classic hedge against inflation and calamity of most kinds, the past week it has become something of a victim itself. While the Greek bailout was supposedly on its way and relatively hitch free, there are an increasing number of speculators who feel that the deal which would be taken as a money printing, inflation boosting and Gold friendly exercise, might not now actually happen. Also unhelpful is that scepticism regarding Greece’s salvation has not only taken the Euro back in the direction of $1.30 but also kept a lid on Gold well below post November $1,750- $1.760 resistance. While it is difficult to see either a Greek bailout or a Greek default being bad for the metal, ahead of the result it can be expected that the price action here will be confined to recent $1,710 -$1,740 ranges

Galvan's Week-Ahead: Title stripping to appease mob bloodlust.

This Week in the Markets:

Although not strictly speaking a stock market event, the title stripping of Sir Fred Goodwin the former CEO of Royal Bank of Scotland (LON:RBS), has undoubtedly been a major talking point in the City of London and beyond. The move has been described by some as little more than the appeasing of a mob bloodlust, and by others as the final cathartic event that draws a line under the banking sector contribution to the financial crisis - now nearly 5 years old. Unsurprisingly, so far this year leading banking stocks such as RBS (LON:RBS), Lloyds Banking (LON:LLOY) and Barclays (LON:BARC) have been leading the great rally of 2012. It is also clear that a wall of worry regarding the possibility of the break up of the Euro has been successfully climbed, with apparently little in the way to sour the mood of investors. 

Perhaps part of the explanation has been the rather repetitive nature of bailouts, summit meetings, Greek default deadlines and Credit Agency downgrades, all of which have come and gone in a regular cycle without the world ending. The bluff may be called at some point, but those shorting stocks or indices hoping for something to crack have so far found to their cost that the pockets of the ECB, whether with printed money or not, are deeper than their own. 

Apart from the Knighthood issues in the UK, there is clearly still a desire to re-ignite the now flat lining economy, which is doubtless going to struggle to avoid to negative quarters on GDP if the forecast February cold snap lasts for any extended period of time. The suggestion from the Institute for Fiscal Studies is that the Chancellor of the Exchequer George Osborne should opt for a so called Plan B economic stimulus package. This would involve a £20bn cash injection should the EU zone break up – enough it is hoped to prevent what would be a severe recession in this country. Some observers are already arguing that such a plan is needed anyway, even in the absence of a fully-fledged disaster on the Continent. 

There were several corporate highlights of note this week. U.S. tech giant Apple (AAPL) has called upon the services of Dixons (LON:DXNS) retail maestro and CEO John Blowett, appointing him the Senior Vice President of Retail operations and in turn knocking the stuffing out of the recent share price rally at the UK electronics retailer. Also in retailing, Tesco (LON:TSCO) COO Noel Robbins who sold 50,000 shares just before last month’s profits warning, has been moved out of his job to work under CEO Philip Clarke directly.

The Week Ahead: 

Key Corporates Reporting:  February 6th – 10th         

Monday – Finals: Randgold Resources (LON:RRS)

Tuesday – Finals: BP (LON:BP.), GlaxoSmithKline (LON:GSK). Q1: Tui Travel (LON:TT.) Trading Announcement: Bellway (LON:BWY).

Wednesday – Finals: International Power (LON:IPR), Reckitt Benckiser (LON:RB.). Interims: BHP Billiton (LON:BLT), Dunhelm (LON:DNLM).

Thursday – Finals: BG Group (LON:BG.), Catlin Group (LON:CGL), Rio Tinto (LON:RIO), Rolls Royce (LON:RR.), Shire (LON:SHP). Interims: Aquarius Platinum (LON:AQP), Diageo (LON:DGE), Hargreaves Lansdown (LON:HL.), Rank (LON:RNK). Q3: British Land (LON:BLND).

Friday – Finals: Barclays (LON:BARC).

The nature of the corporate calendar is sometimes reminiscent of London buses in that while one can be waiting an extended period for big gun companies to report, all of a sudden there are three, or in the case of this week several coming through at the same time. We start with BP (LON:BP.), which at the start of January was claiming $60bn back from its contractor Halliburton (LON:HAL) - the bill for the cleanup of the Gulf of Mexico following the April 2010 oil spill. But by the end of January a court judgement left BP itself at risk of having to indemnify its oilfield services company Transocean. As far as the actual oil business is concerned, broker Credit Suisse downgraded many leading oil stocks, and cut BP’s fourth quarter EPS estimate by 9% whilel reiterating its outperform recommendation on the stock.

From one oil & gas giant to the next. BG Group (LON:BG.) has enjoyed a great run after announcing in December that it was to receive $3bn in return for reducing its stake in the Karachaganak gas field in Kazakhstan by 10%. The oil giant said at the end of that month that its vast assets offshore Brazil were nearing production, and at the beginning of January reported that it had received six to seven preliminary bids for its 65% stake in India's Gujarat Gas in a deal valued at about $900m. Full year numbers are eagerly anticipated.

Switching from oil & gas to mining, and both Rio Tinto (LON:RIO) and BHP Billiton (LON:BLT) are reporting this week, but finals from the former should ensure it takes centre stage. The Q4 update from last month should help underpin expectations as the group continued to bounce back from a weather-blighted H1. Iron ore in particular was a standout as production was reported to have hit record levels. And changing tack again, banking giant Barclays (LON:BARC) will no doubt raise the contentious issue of bonuses again on Friday when it reports full year numbers.

Major Economic Data – February 6th – 10th

Monday – EU: Dec German Factory Orders

Tuesday – EU: Dec German Industrial Production.

Wednesday – No significant economic data due.

Thursday – UK: Dec Trade Balance, Industrial Production, Bank of England Interest Rate Decision / QE Announcement. EU: ECB Interest Rate Decision / Press Conference. U.S.: Dec Wholesale Inventories.

Friday – UK: Jan Producer Price Index. EU: Jan German Harmonised Index of Consumer Prices. U.S.: Dec Trade Balance, Feb University of Michigan Consumer Sentiment, Jan Federal Budget Balance.

There is no longer any excuse for central banks to sit on their hands as they wait and see how active consumers have been over the Christmas period. The Fed have committed to extended low interest rates, but it is now the turn of the Bank of England to attempt to stimulate the economy, and for the ECB to pull the correct economic strategy out of the hat to prevent a two tier EU from fragmenting. All will be revealed in both instances on Thursday. Economic data announcements at home feature the Jan Producer Price Index, which came in at 4.8% the previous month, as well as the Dec Trade Balance (-£8.6bn in Nov) and Dec Industrial Production (-0.6% in Nov). In the U.S., the Dec Trade Balance is due, and forecast to be just a fraction worse than the -$47.75bn of Nov, with the University of Michigan Consumer Sentiment figure for Feb called a point down on Jan at 74.

Main Markets Outlook: 

FTSE100: 

Since the start of the Christmas rally for leading stocks, experts both fundamental and technical have warned that the move higher is unlikely to last. These siren calls continue despite the best start for many leading world indices, including the FTSE 100 for over 20 years. Adding to the bullishness is the traditional rule that whatever way the stock market swings in January, it will do for the year-end. At this juncture, it will take a quite massive turnaround to prove the doomsters correct. Technically, the UK index starts February with a bear trap rebound back above 5,700 and the 20-day moving average at 5,694. The likelihood is that the longer the 5,700 zone remains in place the upside for the index should be back towards the former July resistance as high as 5,950 plus. 

Sterling / Dollar: 

The Sterling / Dollar cross offered resistance at $1.5730, but this has melted away as the U.S. Dollar’s safe haven role seemed less important to start February as stronger than expected Chinese Manufacturing PMI numbers emerged. This also boosted the Euro, and generally improved prospects for the toxic debt ridden Eurozone, largely off the back of the German economy where unemployment has fallen to just 5.5%. At home, hopes are that the 8 month high PMI number for January at 52.1 might be the start of a domestic recovery, to let the bulls resume command of the UK currency. So far the intraday peak is just shy of $1.59, but it appears that above former December $1.5774 resistance, the upside for the cross should at least hit the 200-day moving average at $1.5953, a feature last seen in late October.

Gold: 

From a $1,564 start to 2012, it is clear that now nearly $200 ahead, Gold is nearly keeping pace with the growth in the stock market. Massive injections of cash into the EU banking system by the ECB, and the Federal Reserve’s promise to keep its interest rates at ultra low levels for at least the next two years, have served to remind us that there is a massive liquidity injection and money printing programme at work as part of the general competitive devaluation of leading currencies. The technical position for Gold may look somewhat stretched after the sharp rise of the past month, but with all the near term moving averages rising, a test of November resistance at $1,802 looks almost imminent. At this stage only an end of day close back below the 10-day moving average at $1,704 would even begin to suggest any extended consolidation is due for this market

Galvan's Week-Ahead: The “Phoney Rally” of 2012 continues.

This Week in the Markets:

In spite of the warnings and doom-laden forecasts from many leading technical analysts and experts, the “phoney” rally of 2012 looks set to continue. Apparently hundreds of billions of Euros in outstanding Sovereign Debt may be in need of refinancing this year, but at least for now the antidote and current occupation for investors is seeking out consistency and more importantly the dividends of leading blue chips. This activity has been enough to drive the FTSE 100 back above its 200-day moving average at 5,600 this year – normally an event that would be taken as a sign that a bull market is about to begin.

Clearly, the Credit Ratings agency Standard & Poors wanted to test the resilience of the equity markets on Friday 13th of all days, when it removed France’s AAA rating and slashed at the ratings of several EU nations. However, if S&P were anticipating the same effect as the U.S. AAA downgrade last August when stock indices fell some 20% in a month, it will have been disappointed. This time round the U.S. benchmarks such as the Dow and S&P are maintaining 5-month highs. No finer example exists to illustrate the cliché of stocks climbing a wall of worry than the January 2012 rally. In addition, if the ‘January Effect’, another favoured phenomenon pans out, by the end of this month, we should be looking at an up year for stocks.

Back down to the realities of leading companies though, and it may be some time before UK investors get over the profits warning from number one supermarket Tesco (LON:TSCO). While it already looks as though the dip in the shares that accompanied the downbeat Christmas trading announcement may be one to buy into, the effect on sentiment could take longer to cure. Quite simply, logic dictates that if times are tough for a leading player, for lesser sector constituents, conditions could be described as mission impossible. Ironically now, with most of the post Christmas trading updates now out, the companies where genuine fears over the outcome have been to the fore in the form of an already depressed share price, invariably the results have been best. This was certainly the case for online grocer Ocado (LON:OCDO) where the stock jumped over 30% in a day, and even for Dixons (LON:DXNS) where the like for like sales drop was less bad than feared, with the shares up nearly 20% in a couple of days. If an illustration of how much expectation plays a part in the way the market treats corporates, we have seen some of the very best examples over recent days.

The Week Ahead:

Key Corporates Reporting:  January 23rd – January 27th    

Monday – Interims: City of London Investment Group (CLG).

Tuesday – Finals: Chemring (CHG). Interims: PZ Cussons (PZC).

Wednesday – Interims: Renishaw (RSW).

Thursday – Finals: Gem Diamonds (GEMD). Trading Announcements: Petropavlovsk (POG).

Friday – No significant corporate announcements due.

With most of the retail sector having reported on Christmas trading, there is something of a lull on the corporate front this week. Nevertheless, we have an interesting spread of sectors represented over the next few sessions, with the second liners largely in charge, and led by mining group Petropavlovsk (POG).  While the share price was knocked with the rest of the sector following the September plunge for Gold, the picture brightened for the Russian focused miner as Rouble weakness and bumper production offset adverse precious metals prices. Added to this, the appointment of a new CEO at the end of December is an event that could kickstart a new era for the company.

Sticking with precious objects, Gem Diamonds (LON:GEMD) shares have suffered a rather wide and volatile range between 180p and 250p since the summer. Arguably the fundamentals don’t warrant this sort of white-knuckle ride even though the price of diamonds has fallen from the summer 2011 peak. In the November update, the group said it remained confident in the medium to long term, off the back of recovering 82,584 carats, a 20% rise on the previous year.  It also helped that the grade per carat increased 39% to 1.63 carats per hundred tons and that the company is sitting on a cash pile of group of $128.4m.

Precision tools maker Renishaw (LON:RSW) has in its time experienced the full gamut of positive and adverse reactions to its trading updates. In July the share price collapsed despite the group reporting an 11% rise in full year profits and hiking its dividend. Perhaps on this basis it was only fair that in October when it admitted that Q1 revenues had missed their target the shares remained relatively stable and have since rebounded. Indeed, the problem going into the latest interims is that after a 20% rebound from November lows it may be difficult for traders to resist taking some profits regardless of what Renishaw reveals.

Major Economic Data – January 23rd – January 27th

Monday – No Significant Economic Data Due

Tuesday – EU: Nov New Industrial Orders, Jan Manufacturing PMI. EU: German Jan Services / Manufacturing PMI.

Wednesday – UK: Q4 GDP. EU: German Jan IFO Business Climate. U.S.: Nov House Price Index, Dec Pending Home Sales, Federal Reserve Interest Rate Decision.

Thursday – EU: German Feb Gfk Consumer Confidence, Dec Durable Goods, Conference Board Leading Indicators, New Home Sales.

Friday – EU: Dec M3 Money Supply. U.S.: Q4 GDP Price Deflator, Annualised Q4 GDP, Jan University of Michigan Consumer Sentiment.

A decent mix of economic data is on offer this week, although the highlight will be the result of the Jan FOMC meeting to decide on U.S. interest rates.  No change is expected from the present 0.25% level, although as usual the wording of any statement accompanying the announcement will be eyed carefully. Also of importance Stateside is the final revision of the University of Michigan Consumer Sentiment reading, as well as the annualised Q4 GDP number. The latter is due to come in at 3% vs. 1.8% last time – so quite an improvement. In the UK we are also waiting on GDP data, this time for Q4 2011, with the consensus being a 0% / flat growth reading. Clearly a negative number, even by a fraction of a percentage point would be very damaging to the markets and the Government.

Main Markets Outlook:

FTSE100:

The plot thickens as regards the price action of the FTSE 100, particularly in regard to the direction it will take in the first part of 2012. While the fundamentals, and particularly the state of the EU instinctively suggest a short position, blue chips jumped out of the gate on January 3rd and have kept charging higher ever since. Indeed, with a successful test of the 200-day moving average at 5,600 under its belt, under almost any other circumstances we should be in bull market mode. So the fact that “leading” chartists and technical analysts are looking for the FTSE 100 to retest the December support zone sub 5,400 seems all the more strange given that the brief dip below 5,600 was a quick, “blink and you missed it” event. On the upside the most obvious destination is the former October peak at 5,747. Any sustained price action above this level could trigger accelerated gains.

Sterling / Dollar:

Rather against the odds, Sterling / Dollar touched a January intraday low of $1.5233, 39 pips below the former October intraday low as foreign exchange traders fretted over a larger than expected UK trade deficit. But as is often the case this dip was an example of a narrow bear trap on this cross, with a reasonable bounce since. Indeed, there has now been an end of day close back above the December support of $1.5362 – enough to suggest a further recovery is on its way for this market. While there is no end of day close back below December support, the 50-day moving average on the daily chart at $1.5581 makes for a reasonable end of January target, but only sustained price action above the 50-day line would suggest that the post November decline here is finally at an end.

Gold:

Gold finally made a technical breakthrough back above the rising 200-day moving average on its daily chart. This runs at $1,636, the support zone for this market in recent days – and a positive sign given that the 200-day line is rising. The technical view would be that the longer this market can sustain / consolidate at and above $1,636, the greater the chances of a resumption of the great bull run that paused so dramatically last September. An additional fundamental boost to this market has come off the back of talk that the International Monetary fund intends to boost it capacity for bailout facilities to distressed countries such as Greece. An apparent softening of Credit Agency Fitch’s attitude to Italy has also been seen as a boost.

This Week in the Markets:

The financial marketplace is a difficult beast to tame at the best of times, and of late, whatever the prevailing sentiment may be, the prices of stocks and indices have had a rather nasty tendency to head in the opposite direction to accepted logic. The start of 2012 provides no better example of this conundrum: the expert consensus view said that any initial rally for the FTSE 100 / Dow Jones should be viewed as an initial flip higher before retesting the worst levels of the autumn. Thus far the markets continue to power higher, confounding the expert consensus, although certainly the more successful EU and ECB tactics to deal with the debt crisis and underwrite the debts of the hundreds of ailing banks on the continent have been a significant driver. Added to this the assurance from Credit Ratings agency Fitch that France’s AAA was safe until at least the end of this year has also removed some of the downward pressure. But while both are welcome developments, it could be argued that they only take us back to where we were a couple of months ago before the jitters over the Italian economy began. And the Fitch announcements contained a sting in the tail, as the Credit Agency urged the European Central Bank to support Italy and accelerate its purchase of government bonds in order to prevent a “cataclysmic euro collapse.”  

So with the FTSE 100 above 5,700 and well clear of its 200-day moving average at 5,600, plus the Dow and S&P back at 6-month highs, all would be vulnerable to setbacks if the only focus of the stock market was the issue of Sovereign Debt. But as we’ve already seen in 2012, key UK blue chips, especially supermarkets Sainsbury (LON:SBRY) and Morrison (LON:MRW) and perennial outperformer fashion chain Next (LON:NXT) have all delivered reasonable Christmas trading statements, which gives reason enough for cautious optimism from the bulls, especially as some of the better announcements have come from multinational corporates diversified away from Eurozone uncertainties. 

Less easy to ignore over coming months is something of a curve ball from the political landscape, which will if nothing else provide a degree of fundamental volatility that few were expecting even as recently as before Christmas. The vote for a referendum on Scotland remaining in the UK was planned for some 2 years hence, but with Westminster dictating terms and very heart of the issue north of the border, this could reach a climax sooner than many expect, thus creating a new wave of volatility.

The Week Ahead: 

Key Corporates Reporting:  January 16th – January 20th         

Monday – Trading Announcements: Bovis Homes (LON:BVS).

Tuesday – Interims: IG Group (LON:IGG). Trading Announcements: Burberry Group (LON:BRBY).

Wednesday – Trading Announcements: Hochschild Mining (LON:HOC), JD Wetherspoon (LON:JDW), Man Group (LON:EMG), Tullow Oil (LON:TLW).

Thursday – Trading Announcements: ASOS (LON:ASC), Premier Oil (LON:PMO), SABMiller (LON:SAB), William Hill (LON:WMH).

Friday – Trading Announcements: Close Brothers (LON:CBG).

The raft of trading announcements at this time of the year are mainly focused on how well or otherwise groups have done over the Christmas period. Leading the way this week is luxury fashion accessories group Burberry (BRBY) where observers will be looking for a recovery or otherwise in sentiment from the wobble in the stock last September when it appeared that the retailer’s key Chinese market may have topped out. In fact, while some of the premium rating veneer for Burberry shares eroded at that point, they remain almost exactly in the middle of a post August 1,100p – 1,300p range, something which suggests the market feels this retailer is by no means an ex growth situation.

Sticking with retailing, and bargain hunters have returned in droves to online clothing group ASOS (LON:ASC), helped out by a recent Peel Hunt upgrade to buy on valuation grounds. This is hardly surprising given that the stock had more than halved since September from 1,100p plus. The problem over the past year has essentially been a crisis of expectation rather than in sales, and the markets have been fussy enough to look at the rate of sales growth rather than the 60% rise in half-year profits reported in November. Key factors to watch this week will once again be sales growth as well as the ratio of demand between the UK and high growth overseas markets.

Brewing giant SABMiller (LON:SAB) decided to quench its thirst for Australian counterpart Fosters in a multibillion pound deal in 2011 to consolidate its overseas earnings. The latest from SAB is that a £4.5bn bond issue is needed to cover part of the £6.5bn Aussie deal. But aside from this investors will also want to know how the latest purchase is being integrated into the UK group and whether there is any prospect of revenues being driven from their rather pedestrian levels in developed markets, once the any benefits of synergies have been taken into account.

Major Economic Data – January 16th – January 20th

Monday – EU: Dec Harmonised Consumer Prices

Tuesday – UK: Dec Consumer Prices. EU: Jan German ZEW Survey. U.S.: Jan NY Empire State Manufacturing Index.

Wednesday – UK: Nov Unemployment Rate. U.S.: Dec Industrial Production, Capacity Utilisation, Core Producer Price Index, Jan NAHB Housing Market Index.

Thursday – EU: Nov Current Account. U.S.: Nov Core / Consumer Price Index, Housing Starts, Building Permits, Jan Philadelphia Fed Index

Friday – UK: Dec Retail Sales. U.S.: Dec Existing Home Sales.

There are still some noteworthy key indicators in an otherwise reasonably quiet week. The UK Nov Unemployment Rate number is due on Wednesday and this remains an ongoing challenge for the Government to tackle. It is difficult to see that any improvement will be forthcoming over the previous 8.3% level. UK Dec Retail Sales are on tap, with the Nov 0.4% drop the figure to beat. The Dec Consumer Price Index will also be eyed (Nov came in at +4.8%) to see whether all the Bank of England’s QE measures are really delivering is higher inflation rather than higher growth. We are lead to believe from the BOE that inflation is soon to peak. Further afield, EU Dec Consumer Prices are expected to fall to 2.8% from 3%, while in the U.S. Dec Existing Sales will be in the limelight. The forecast is for a small rise to just over 4.5m from 4.42m in Nov.

Main Markets Outlook: 

FTSE100: 

Most financial market years start with a flurry to the upside, if only on the basis that funds are allegedly allocating their fresh cash. 2012 was no exception, although ironically while the consensus seems to be preparing for a sharp pullback for leading stocks, all we have seen so far is apparently base building for the FTSE 100 at and above 5,600. While it may be wrong to project this market too high too soon, the prospect of at least a retest of the October 5,747 does seem to be on the cards, even if this is not sustained. The big prize for the bulls though would be sustained price action through 5,747, which would then bring the long lost 6,000 2011 resistance zone back into play. But with sentiment so fragile and at odds with the price action, it may very well be that those on red alert for a break below the 200-day moving average at 5,600 will be in line for the greatest reward – certainly if this feature breaks anytime soon. 

Sterling / Dollar: 

Sterling / Dollar price action remains something of a puzzle given that traders are weighing up the pluses and minuses of the UK and U.S. economies and deciding which are lesser of two evils. But there really is only one winner: the U.S dollar remains the world reserve currency whereas the Pound only has such status against the Euro. However, there may be a rather surprising explanation as to why Sterling / Dollar has just fallen toward 3-month lows under $1.53. A looming and eminently possible constitutional crisis involving a referendum on Scottish independence may not on some levels be unhelpful to the UK economy, but the uncertainty created could rival the ongoing Eurozone woes inspired volatility if things blow out of control. Technically, traders want to see this cross delivering sustained price action back above the 10-day moving average at $1.5490 to provide a reasonable excuse to bottom fish this market.

Gold: 

Last week it was all about the 200-day moving average as a key trading indicator, and as such this position remains unchanged. The trend indicator is currently rising through $1,635, so any sustained price action here would imply that this market had returned to a new rally. The risk though is that unless we see at least a couple of days or even a weekly close back above the 200-day line, a “final” retest of the post September support zone under $1,530 may be required. The fact that even after the 20% plus decline from the record high above $1,900 last year we have not seen the Gold bugs dampen their enthusiasm for the metal might suggest that there is still a while to go before the worst of the bubble conditions finally subside. Nevertheless, it may be that a test of the former November $1,666 low is possible while this market consolidates.

This Week in the Markets:

The days following the much-hyped EU Summit saw many old clichés emerge in the press, from papering over the cracks to the kicking the can down the road. The underlying inference though is that problem of EU Sovereign Debt is apparently too big to cure. The main issue even over and above the financial black hole is that no one in the Eurozone political arena wishes to see the Euro dream end on their watch, and it was perhaps this as much as anything that UK Prime Minister David sensed when he delivered the now famous EU treaty veto. Unsurprisingly at the time this didn’t go down well with his counterparts in Europe, but in the days following the treaty there are already cracks starting to appear in the ‘unity of 26 nations’ as some express reservations over the finer print. So in retrospect, David Cameron’s move to put clear blue water between the position of the UK and mainland Europe, (where things seem to be spiralling out of control) does seem to have paid off.

As the markets enter the final straight before Christmas what would normally be seen as either an incomplete package or even worse irreconcilable differences over the roles of the respective nations with regard to the “deal” of December 8th – 9th, has been largely accepted by the markets. Nevertheless, just as the camera is said not to lie, so the currency markets have a nasty habit of revealing the bare bones of a situation via price action. The victims in the recent past have been PIIGS nation’s bonds; with the Italian bonds hitting the “default” level of a 7% yield last month. But now it is the Euro itself which is under attack and indeed under the psychologically important $1.30 mark. This puts the single currency at a new low for 2011, as it is hurt by bond yields in Italy rising to 14 year highs amid doubts that the kind of fiscal union the EU is looking for to solve the crisis would actually work, even if it could get off the ground in the first place.

Closer to home, and in addition to the splash Prime Minister Cameron made with his EU treaty veto, there were a couple of other statistics to grapple with. The first is that the UK’s contribution to the IMF bailout fund for the EU could be as much as £30bn, and the second came with the latest ONS numbers showing that unemployment is at a 17 year high, with female unemployment the worst for 23 years. Overall there was a 0.4% rise in the jobless rate to 8.3%. Although some of this can be blamed on the EU crisis, a major proportion of the blame lies with domestic policy.

The Week Ahead: 

Key Corporates Reporting:  December 19th – 23rd      

Monday – Trading Announcement: Aggreko (LON:AGK).

Tuesday– Trading Announcement: National Express (LON:NEX), WSP Group (LON:WSH).

Wednesday – Friday - No significant company announcements due.

As can be seen from the smattering of companies reporting this week we are very much in Christmas / festive mode on the corporate front. However, we have at least a couple of major companies to focus on that would be followed with interest at any time of year. Aggreko (LON:AGK), the temporary power supplier is one of the FTSE 100’s newer entrants and is something of a blue chip rising star. It does of course help that the group has reported annual profits up by 30% and more over each of the past five years. Helping it along is the way that most of the recent large worldwide sporting events have used its services, with London’s 2012 Olympics the next on the list. As if anyone had missed how well Aggreko is doing, it raised profits guidance twice in August and October, with the latter hike achieved despite a dip in profits at the half way stage of the financial year due to a lull in the flow of sporting events. It will be interesting to see whether the latest trading update can match the optimism of the last two.  

Bus and rail group National Express (LON:NEX) is also in the frame with a pre Christmas trading announcement. The fact that transport groups have been feeling the positive effects of commuters ditching cars in favour of public transport along with other moves to drive growth over recent months certainly creates a level of expectation for the National Express statement. In particular, it was announced in September that the UK group had bought the fifth largest U.S. student transportation group for $200m, which should go some way to offset the rather pedestrian performance of the UK bus business. Although the group as a whole boasted a 5% hike in Q3 revenues at the beginning of last month, this couldn’t offset the sell off in the stock from 260p since the summer. Bulls of this company will be hoping that it can once again demonstrate its ability to outperform in a period of economic stagnation. 

Major Economic Data: December 19th – 23rd           

Monday – UK: Rightmove Dec House Prices, Bank of England Quarterly Bulletin. EU: Oct Current Account. U.S.: Dec NAHB Housing Market Index.

Tuesday – EU: Nov German PPI, Dec German IPO Business Climate Survey. U.S.: Nov Housing Starts, Building Permits.

Wednesday – UK: Dec Bank of England Minutes. U.S.: Nov Existing Home Sales.

Thursday – UK: Final Q3 GDP. U.S.: Final Oct FHFA House Price Index, Q3 GDP (Annual) Nov Conference Board Leading Indicators, Dec University of Michigan Consumer Sentiment.

Friday – UK: Oct Visible Trade Balance, Nov Producer Price Index Input / Output / Core. EU: German Dec PMI. U.S.: Nov Durable Goods Orders, Personal Income, Personal Spending, New Home Sales.

In the UK, online estate agent Rightmove publishes its take on Dec house prices, while the Bank of England will issue its Quarterly Bulletin and an update on the UK’s monetary policy operations. But of rather more importance will be the latest minutes from the BoE Dec meeting on interest rates, where the unity or lack of it between those on the panel will be scrutinised as usual. Thursday will reveal one of the major indicators on the health of the UK economy with a consensus expectation of 0.5% growth as compared to 0.2% in Q2. The EU calendar centres around the Oct Current Account number, previously €0.5bn, Germany’s IFO Business Climate Survey (106.6 last time) and the Producer Price Index for Nov, (5.3% in Oct). U.S. Nov Housing Starts and Building Permits are due and expected to come in close to the previous numbers of 653,000 and 628,000 respectively. New Home Sales for Nov are expected to remain near the last 312,000 level, with the final Dec reading from University of Michigan Consumer Sentiment expected to add 3 points to last month’s 64.1 level

Main Markets Outlook: 

FTSE100: 

Going into the last “proper” trading week of the year many participants would have hoped for a rather easier ride for leading UK stocks and the FTSE 100. With year end “window shopping” thin on the ground, the uncertainties over the EU zone, UK GDP growth and unemployment mean that there is not too much to drive prices higher even if the worst has already been factored in. Technically, the key issue for the FTSE 100 will be whether key 5,350 support can be held, above which it is still perfectly possible to call this market back up to the October resistance zone at 5,700. If we lose 5,350, the autumn set up renders a potentially even more volatile pattern than that seen in the past few weeks. 

Sterling / Dollar: 

Once again, compared to the Euro, Sterling still retains a safe haven glow, and even though there has been pullback versus the U.S. Dollar, the UK currency is still within recent ranges. From a charting perspective, post June support down to $1.53 is holding, and looks very difficult to break unless a fresh and unanticipated new bear factor materialises. This apparently does not include soaring unemployment, and a lack of progress in cutting the budget deficit, but may be focused on inflation having peaked, and even the benefits of the UK distancing itself from the EU fiscal nightmare. Going into 2012, the likely price action of the Pound will see it break its 50-day moving average at $1.5780 for a return to H2 2011 resistance above $1.60 at end of Jan.

Gold: 

The fall and fall of Gold, especially since the September record was set has come as a nasty surprise to most bulls of the yellow metal. The latest stage of the decline from $1,900 plus to less than $1,600 was triggered by an apparent lack of EU money printing to bailout its ailing members, and a refusal by the Federal Reserve to even hint at when any fresh stimulus might arrive. This together with the sharp decline in the Euro has most likely led to forced liquidation of long Gold positions as well. The disappointment is all the more acute as we have been led to believe that emerging markets central banks have been taking up the slack as Gold has fallen. Clearly, any such activity has fallen woefully short of expectations, and with Gold back below its 200-day moving average now at $1,618 for the first time since the beginning of 2009, the blow to the bubble in this market may take much of 2012 to repair.

This Week in the Markets:

Even though Christmas is fast approaching, it has yet to provide enough of a distraction for those in the markets to put aside some of the year’s most difficult issues in the financial markets, such as inflation, recession and of course the EU crisis. In regard to the latter issue in particular, it seems that every week we have a new deadline to deliver the latest cure for sovereign debt malaise, and even though we have been told on several occasions that the chances of a magic bullet / big bazooka cure appearing are remote, stocks have started December by rallying at the fastest pace for three years.  Even if this is merely a painful squeeze for traders, the significance of the gains is difficult to ignore and the markets should be watched carefully over the next few weeks to see whether the EU crisis will fade into a typical end of year window dressing for blue chips.

Key to successfully reading the efforts to resolve the crisis is the language of those involved in trying to hammer out a deal, especially given the latest threat of a region-wide downgrade from Credit Ratings Agency S&P. And given that the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM) seem like sticking plaster solutions for a multiple fracture, anything more would almost certainly require fresh ratification or a new EU referendum, something that would almost certainly be shot down by the voters. A taste of this came from PM David Cameron as he threatened to veto any new treaty unless there are safeguards for the City of London. The idea of the fiscal union required for such a treaty is highly controversial even on the other side of the English Channel. In the meantime the City and traders have largely given the benefit of the doubt to prospects for some kind of EU salvation deal, even though we have already been warned it is unlikely anything will be finalised in time for the EU Summit starting on December 8th. 

Away from the EU the focus remains on the state of the UK economy and consumer sentiment. Retail sales sinking to a six month low and a slow start to the Christmas shopping season have certainly dampened sentiment, although the FTSE 100 has been driven higher by the initial December moves to flood the money markets with cash from the central banks. This has resulted in banks, financials and mining stocks remaining near their best levels since the late October spike – then also on PIIGS bailout hopes. In spite of this seemingly strong position, the latest fundamentals are creating a sinking feeling, and not only on the High Street. The latest housing survey from the Halifax revealed a 0.9% decline in prices in November, with Industrial Output down more than twice the amount expected at 0.7% in October – vs. a fall of -0.3%.

The Week Ahead: 

Key Corporates Reporting:  December 12th – 16th     

Monday – No significant company announcements due.

Tuesday– Interims: Carpetright (CPR), Imagination Technologies (IMG). Trading Announcements: Go Ahead Group (GOG), Petrofac (PFC).

Wednesday – FY Results: Thomas Cook (TCG) (delayed).

Thursday– Interims: Sports Direct International (SPD). Trading Announcement: Keller Group (KLR), Senior (SNR), Serco Group (SRP), Wood Group (WG.).

Friday – No significant company announcements due.

A seasonally patchy selection of companies reporting this week includes bus & rail company Go Ahead Group (GOG), which delivers its trading announcement at a time when sentiment is generally positive towards transport groups as cash strapped consumers ditch their cars for public transport. The buy argument was backed by the late October Q1 update in which the company reported a solid performance across all business, enough to reiterate full year 2012 forecasts. The share price has drifted since the update, so it may very well be that traders need a reminder of the attractions of Go Ahead before going long again.

This year may have been tough in terms of cashflow for many leading UK companies, but this was anything but the case at oilfield services specialist Wood Group (WG), which returned £1bn cash to its shareholders. Clearly, the fundamentals at the FTSE 250 group are strong, with revenues rising and a strong pipeline of new orders. This point was underlined at the October update in which the company said that the overall performance for the year to date has been in line with expectations. Shares are back towards the top of the recent 500p – 700p range, no doubt boosted by contract wins such as the £500m North Sea maintenance services deal announced on November 15th. 

One of the big questions, and to some a mystery, is whether the climate of austerity on both sides of the Atlantic can affect an outsourcing giant such as Serco (SRP). The initial reaction saw the Serco share price marked down, but the reality is that the challenging conditions mean that austerity does not necessarily have to mean adversity. Back in August the group revealed a 12% rise in adjusted pre-tax profits for the half year, driven by the international portfolio. Of critical importance going forward will be how many new contracts such as a £100m win announced with Peterborough City Council in October can be unveiled over the next few months. 

Major Economic Data: December 12th – 16th          

Monday – UK: RICS House Price Balance. EU: ECB 7 Day / 1 Month Tender. U.S.: Nov Monthly Budget Statement.

Tuesday – UK: Oct Average Weekly Earnings, Nov Core / CPI. EU: Eurozone Oct Industrial Production, Dec German ZEW Survey. U.S.: Nov Retail Sales FOMC Interest Rate Decision.

Wednesday – UK: Oct Quarterly ILO Unemployment Rate, Nov Retail Sales. EU: Oct German Industrial Production, Eurozone Nov Core / CPI, Q3 Unemployment ECB Dec Monthly Report. U.S.: Oct Consumer Credit, Nov PPI, Industrial Production, Q3 Current Account Balance.

Thursday – UK: Nov Jobless Claims Change / Claimant Count. EU: Oct Trade Balance. U.S. Nov CPI.

Friday – UK: Oct Visible Trade Balance, Nov Producer Price Index Input / Output / Core. EU: German Dec PMI. U.S.: Nov PPI, Industrial Production Dec NY Empire State Manufacturing Index, Philadelphia Manufacturing Survey, Q3 Current Account.

It is a surprisingly busy week on the economic calendar, a veritable traffic jam of information to hit the market before the Christmas holidays. UK November Consumer Prices kick off the week, with Bank of England Governor Mervyn King hoping for a cooling off from the previous month’s 5% level. November Retail Sales and the latest Unemployment Rate will also be keenly eyed. Further afield, Tuesday’s FOMC interest rate announcement by the U.S. Federal Reserve will most likely cause a lull in trading that evening London time. No changes are expected, although it may very well be that some reference is made to the impact of the EU crisis on the U.S. economy and whether this may require further stimulus Stateside. In the EU, the latest November CPI data comes with German Industrial Production and PMI numbers. Any sign that the German announcement is likely to make it more difficult for the largest economy in on the continent to bail out its southern neighbours is not likely to be well received

Main Markets Outlook: 

FTSE100: 

Given the Russian Roulette uncertainty posed by the EU and with the verdict on the Christmas shopping season still weeks away, the FTSE 100 has put in a relatively robust performance. Technically, the key 200-day moving average at 5,634 has capped the index almost exactly since the early August U.S. AAA downgrade, and it is difficult to imagine that any traders with even half an eye to technical analysis will not be looking to the recent strength of the FTSE 100 as an opportunity to go short, even for a swing trade of 50 – 100 points. The traditional late December upswing / year-end rally could still arrive, but it is equally likely that at current levels we have already seen the best of the festive cheer. Such a view would only be changed on any weekly close back above the 200-day line, a move that currently looks problematic. 

Sterling / Dollar: 

While the EU authorities scramble to save the Euro, ‘safe haven Sterling’ looks to be in the driving seat, and despite signs that the U.S. economy is actually starting to rebound slightly ahead of expectations, (slightly better than expected Non Farm Payroll and ISM numbers) it looks strong against even the U.S. Dollar. Although Sterling has thus far delivered higher November / December support above the sub $1.53 October bear trap lows, only an end of day close back above the 50-day moving average at $1.5765 would be a strong enough buy trigger to deliver a return to October / November resistance through $1.60.

Gold: 

Gold has been a frustrating market for much of the post September period after the $1,900 plus all time record was set. From the technical perspective it is still former August intraday support at $1,703 which is in play, particularly as it coincides with the current position of the 50-day moving average and an uptrend line from September. While there is no weakness below this combination, the former November $1,802 intraday high can be viewed as a minimum December target. The initial central bank liquidity boost for December and the run up to the EU Summit on the 8th are seen as supportive to the fundamentals of the metal.

This Week in the Markets:

As the Eurozone crisis lurches on, many have been nursing somewhat forlorn hopes that a so-called big "bazooka", (€1tn plus bailout fund) to deal with the debt contagion once and for all will materialise. But even now the crisis appears to be spiralling out of control, the latest round in an apparently interminable series of crisis meetings between EU ministers and officials concluded that the biggest bazooka that could be put together is a mere €700n package. Although this is an improvement on the current €440bn facility, if as revealed in a secret document obtained by the Guardian newspaper, Italy is about to go insolvent to the tune of €2tn, the bazooka measure is clearly woefully short.

To add further pain, alongside the sovereign debt issue we appear to be commencing a rerun of the 2007 Credit Crunch, resulting in a panic exit from the Euros by leading banks and financial institutions in the EU zone. The obvious problem is a lack of counter parties willing to deal with them given the current extremely negative newsflow, which has prompted a U.S. led action by central banks to make Dollar swaps cheaper and easier to obtain. Arguably though, simply gagging the Credit Ratings agencies might have been more effective, although this event still saw the stock market soar on renewed appetite. 

Notwithstanding this bold action by central banks, these events show that fears for the imminent collapse of the Euro are at heightened levels. When you add to this the view held by many that a credit rating downgrade of France from its AAA status is a foregone conclusion by the end of the year, clearly the authorities had to do something of a substantial nature – and quickly. The question is whether after a one or two day wonder bear squeeze for shares, the same old jitters won’t return within a very short period of time? Combine this with the Chinese move to lower interest rates for the first time in three years, and it could be argued that the latest "good" news may merely be preparing the markets for a nasty shock just around the corner. 

Coming in the day before the Dollar swaps news was a rather less dramatic event in the UK known as the Chancellor’s Autumn Statement. The highlight, if you can call it one, were Chancellor George Osborne’s attempts to prove that his hands are not totally tied by a combination of budget cut delays and economic growth downgrades. The resulting announcement by him to cap rail travel cost increases and a delay in hiking fuel duty are not going to be seen by many as making the difference between recession and economic growth.

The Week Ahead: 

Key Corporates Reporting:  December 5th – 9th     

Monday – Finals: Aberdeen Asset Management (LON:ADN), Tui Travel (LON:TT).

Tuesday– Interims: Northgate (LON:NTG).

Wednesday – Interims: DS Smith (LON:SMDS), Kesa Electricals (LON:KESA), Micro Focus International (LON:MCRO), Stagecoach (LON:SGC). Trading Announcement: Carillion (LON:CLLN).

Thursday– Interims: Ashtead Group (LON:AHT), Mulberry Group (LON:MUL). Q3: Premier Farnell (LON:PFL). Trading Announcement: Standard Chartered (LON:STAN).

Friday – No significant company announcements due.

Although most corporate reporting takes a back seat in the run up to Xmas, there are still enough updates to whet the appetite. Travel group Tui (LON:TT) will struggle to put a positive spin on its outlook given the recent near demise of rival Thomas Cook (LONTCG), so it needs to convince the markets that with Thomas Cook weakened by bad publicity, more customers will be flowing its way. This may be what the stock market already believes given the 10% plus rise in the shares over the past week, and in the wake of the group’s September prediction that full year results would be in line with expectations despite Arab Spring disruption in North Africa.

Even now, most private investors remain focused on the performance of part nationalised banks such as RBS (LON:RBS) and Lloyds Banking (LON:LLOY). Also noteworthy is that sector players taking an austere and cautious line during the 2000s asset bubble have yet to be rewarded in terms of rating and sentiment. Far East focused bank Standard Chartered (STAN) is a case in point, and while broker Evolution has been pointing out the risk of slowdown in outperforming markets such as India, Nomura have gone the other way and underlined the prospect of double digit revenue growth for 2011, something which may seem even more realistic in the wake of the surprise China rate move to stimulate economic growth. 

It hasn’t all been plain sailing for bus & rail group Stagecoach (LON:SGC), even though the firm is supposed to be one of the winners of the economic crisis as cash strapped commuters have taken to public transport. Stagecoach was beaten to the East Anglian franchise at the end of October, while most recently it sold the Wisconsin U.S. school bus business for $47m. Austerity fears have overshadowed leading support services sector players over the past year, but construction group Carillion (LON:CLLN) has stood firm, thanks to ongoing contract wins such as the two announced at the beginning of November worth a total of £450m. 

Major Economic Data: December 5th – 9th         

Monday – UK: Nov Purchasing Manager Index Services. EU: Euro-Zone Retail Sales. U.S.: Oct Factory Orders, Nov Non-Manufacturing Composite.

Tuesday – EU: Euro-Zone Q3 GDP, Household Consumption, Oct German Factor Orders.

Wednesday – UK: Oct Industrial Production, Manufacturing Production, Nov NIESR GDP Estimate. EU: ECB Calls for Bids in 3-Month Dollar Tender, Oct German Industrial Production. U.S.: Oct Consumer Credit.

Thursday – UK: Interest Rate / QE Announcement. EU: ECB Interest Rate Announcement.

Friday – UK: Oct Visible Trade Balance, Nov Producer Price Index Input / Output / Core. EU: Oct German Trade Balance, Nov German Consumer Price Index, ECB Dec Monthly Report. U.S.: Oct Trade Balance, Preliminary Dec University of Michigan Confidence.

In many ways, economic data is taking a back seat as attempts by the financial authorities around the world to stave off a recession take centre stage. In the U.S., a slightly softer preliminary Michigan Confidence figure of 63 versus 64 last time is expected, with the Oct trade balance up by $1bn compared to the previous month’s $43.1bn. Oct Wholesale Inventories and Consumer Credit are expected to hold flat. The start of Dec sees the latest on interest rates from the Bank of England and the ECB, with both expected to maintain current 0.5% and 1.25% levels. The BoE is not thought to be moving on QE until February. Other standalone highlights on the calendar this week are EU zone Oct Retail Sales. They fell 1.5% in September and it is difficult to imagine where any improvement will come from. The same may be said of EU zone Q3 GDP, especially after the Q2 numbers for France and Germany were among the factors that led to the near 20% post August decline for the stock market.  In the UK, the Nov NIESR GDP estimate could make waves if it comes in appreciably lower than the previous 0.5%.

Main Markets Outlook: 

FTSE100: 

Rather like the October bear trap rebound, stocks have bounced back after a sub 5,080 dive. On this occasion support came from a line coming in at 5,100 from August, as well as hopes of an EU cure / traditional post Thanksgiving rally to back up the gains. However, it may be the case that cynical traders are still arguing that leading UK stocks remain vulnerable without any positive drivers on the domestic economic front and without a resolution of the PIIGS crisis.  That said, sustained price action back above former initial November support at 5,335 looks to be enough for now to hint that worries have been cast aside in favour of some genuine year end buying to target October 5,700 plus resistance. 

Sterling / Dollar: 

Even before the coordinated central bank action to provide cheap U.S. Dollars to the financial system, Sterling appeared to build a base in the post December 2010 support zone just below $1.54. Indeed, going into the end of November, a higher low appeared vs. an initial October bear trap just below $1.54. The position in the wake of renewed risk appetite for the currencies should be a return towards the 200-day moving average zone and 2-month resistance at $1.61 by the end of 2011. The obvious drag on progress will be the initial aftermath of the Autumn Statement and the dampening both of economic growth and public spending cut expectations. However, neither of these events can have been a surprise to most in the markets.

Gold: 

Comparatively speaking, Gold price action has been sluggish compared to the pre September record-setting run up, so understandably any new leg will remain on hold unless fresh drivers for a new rally can be “confirmed.” Ideally, this will be a €1tn (or two) bailout fund for the EU zone, or further aggressive QE to stimulate ailing Western countries. In fact, in the end it may be the first China relaxation of fiscal policy in three years that finally tips Gold back into rush mode. From a technical perspective we have seen repeated tests for support down to the $1,670 zone overlapping the former August low of $1,703. The initial target while this level is held would logically be November $1,800 plus intraday highs.

This Week in the Markets:

The losing streak for the FTSE100 has now hit 8 days and counting, and if this continues (which well it might), traders will no longer be turning to the IMF, ECB, Congress or the Treasury to save the day if the Sovereign Debt situation takes a fresh and unexpected turn for the worse, but Santa Claus himself. The current consecutive losing streak for the FTSE100 is the worst since 2003, and there are many who believe a Christmas bounce back is long overdue. It may also be the case that the late November clean out for stocks and a £104 billion haircut off the value of blue chips is part of the traditional pre end of year rally slap for the FTSE 100, before the rebound finally comes. 

The bears have been roaring this week after the near disastrous German bond auctions, an event which takes the Sovereign Debt crisis out of the periphery and into the heart of Europe. This coincided with the revelation that the EU’s largest economy is suffering near stagnant growth, as the Eurozone itself is seeing a slump in industrial orders. Of course, the litany of negative newsflow has leaders scrambling for solutions, with the obvious Eurobond “cure” back in the picture via Jose Manuel Barroso, head of the executive EU Commission. The attraction of the Eurobond concept is that it would effectively end speculative shorting of the bonds of the weakest EU nations, and also prevent the pushing up of yields and consequential bailouts. The downside is that Germany and France would be averaged up in terms of the interest they would have to pay on their debt, but on the upside, this may be the only way to keep the EU going in its present form. But as the bickering and debate continues, the common bond idea may only get off the ground after too much damage has been done – something that Spanish bond yields hitting the 7% “bailout level” illustrates only too well.

Unfortunately, the current crisis is not confined to Western economic headaches. The Indian stock market has managed to beat the indices of “submerging” economies back to the lows of 2011, while China seems to be entering a post bubble mode after its factory sector contracted more than at any other time in nearly 3 years. Given that the BRIC nations cushioned the blow in the aftermath of the 2007 – 2008 Credit Crunch, if they now join the ongoing race to recession along with the rest of the G20, then we really are in trouble.

The Week Ahead: 

Key Corporates Reporting:  November 28th – December 2nd         

Monday – No significant corporate announcements due.

Tuesday– Finals: ITE Group (LON:ITE), Topps Tiles (LON:TPT) Interims Quintain Estates (LON:QED).

Wednesday – Finals: Britvic (LON:BVIC), Marstons (LON:MARS) Sage (LON:SGE). Q1: Sportingbet (LON:SBT).

Thursday– Interims: Greene King (LON:GNK). Trading Announcement: Kingfisher (LON:KGF).

Friday – Interims: Berkeley Group (LON:BKG). Trading Announcement: SThree (LON:STHR).

The unfolding crisis at travel agent Thomas Cook (LON:TCG) as it delays the November 24th trading announcement and attempts to reorganize its finances has dominated the week. Less fraught fundamentally is DIY retailer and B&Q owner Kingfisher (LON:KGF), which has proved to be a steady pair of hands despite the downturn. The September update revealed a 1.6% hike in like for like first half sales up 1.6%, with total sales up 3.8% and more than 1,200 new jobs created in the UK via expansion of B&Q and Screwfix operations. In October Singer Capital Markets raised its target on Kingfisher from 260p to 270p – around 10% above where the stock is going into the forthcoming trading announcement.

Sticking with retail, tile and wood floor specialist Topps Tiles (LON:TPT) reports full year results after an August profits warning where group revenues fell 10.4% on a like-for-like basis in the first seven weeks of Q4. Since then trading has been described as in line with expectations, although this has not been enough so far to halt the ongoing share price slide. Elsewhere, accountancy software group Sage (LON:SGE) reports finals during a slide in the markets and the share price despite the ongoing share buyback program. The abandoned bid for Australian peer MYOB is adding to the hangover, along with the October downgrade for Sage by UBS from buy to neutral on a lack of positive share price drivers. 

While calling top in the UK housing market is a nigh impossible task, property prices in London and the South East have remained firm throughout the financial crisis to date. We will find out more in housebuilder Berkeley Group’s (LON:BKG) interim update. Helping soothe any sense of share price vertigo in September was news that conditions were strong enough in the four months to the end of August to deliver forward sales of £850m. 

Major Economic Data: November 28th – December 2nd        

Monday – UK: Nov Hometrack House Prices Survey, CBI Reported Sales. EU: Dec German GfK Consumer Confidence Survey. U.S.: Oct New Home Sales.

Tuesday – UK: Oct Net Consumer Credit, Mortgage Approvals, Nov Nationwide House Prices, Autumn Statement. EU: German Oct Retail Sales, Nov German Consumer Price Index,  Euro-Zone Business Climate Indicator Sept, House Price Index, November Consumer Confidence.

Wednesday – UK: Nov GfK Consumer Confidence Survey. EU: Euro-Zone Consumer Price Index Estimate, Unemployment Rate, German Nov Unemployment Rate / Change. U.S.: Oct Pending Home Sales, Nov ADP Unemployment Change, Federal Reserve Beige Book.

Thursday – UK: Nov Purchasing Manager Index Manufacturing. EU: Nov German  Purchasing Manager Index Manufacturing. U.S.: Oct Construction Spending, Nov ISM Manufacturing.

Friday – UK: Nov Halifax House Prices, Purchasing Manager Index Construction. EU: Oct Euro-Zone Producer Price Index. U.S.: Nov Non Farm Payrolls, Unemployment Rate.

The first week of Dec offers up a deceptively busy few days of data to digest. The usual combination of Non Farm Payrolls and Unemployment end the week, with Nov Non Farms forecast at 116,000 vs. October’s 80,000, but even if these numbers are met, it will be relative small fry. Back in the UK, and the housing market is in focus with the Nov Halifax House Prices survey. There may be more interest / concern here than usual after the revelation recently from the online estate agent that asking prices have been cut by the most in three years, falling over 3% in the last month. Rather helpfully, Nationwide and Hometrack will also be providing their take on property prices. Chancellor George Osborne has to grapple with all this when he delivers his Autumn Statement. This could not come at a more difficult time given the damage the EU crisis is doing to the UK’s attempt at recovery, plus the jury is still out over whether the Bank of England’s QE2 stimulus is having the desired effect.

Main Markets Outlook: 

FTSE100: 

The current problem for the FTSE 100 is that with the loss of former twice tested November support at 5,335, there is wide open space between that level and the October closing low of 4,944. While it could be argued that an uptrend line at 5,100 may delay a seemingly obvious retest of the sub 5,000 zone, the combination of U.S. budget wrangling, an ongoing EU crisis and downgraded growth forecasts / public spending cut delays in the UK leaves little upside apart from hopes for a sentiment based traditional year end rally. Even so, there is little reason to bottom fish the index to 5,000 unless or until 5,335 broken support is recovered. 

Sterling / Dollar: 

Sterling / Dollar was always something of a surprise candidate as a “safe haven” trade, clearly a result of the weakness of others, notably the U.S. losing AAA and the EU disintegrating. In recent weeks though, events have combined to maintain the recent strength of the currency and perhaps cynics could argue that this has been a deliberate policy in order to attempt to boost the competitiveness of exporters. Technically, Cable looks set to retest the former October intraday low of $1.5272, especially while the October 18th $1.5632 support now caps the price action on an end of day close basis. What is interesting currently is that below last month’s support level there is no obvious chart support for 10 cents and the May 2010 floor.

Gold: 

In the space of a few weeks, Gold has gone from being one of the most reliable financial markets to the least dependable, doubly confusing given that many of its credentials as a buy are crystal clear and beyond doubt. September’s 10% correction has struggled to recover, and over recent sessions the bulls have been undermined by the loss of the $1,800 benchmark level. The risk now is that while below the former August support / 50-day moving average at $1,703, this market could deliver a partial or even full retest of the September low at $1,533, all without meaning that the 10-year plus bull run is under threat. Sell-off price action drivers include the rise of the U.S. Dollar / fall in the Euro, liquidation associated with falling stocks and options expiry. Conversely, total holdings of Gold traded ETFs tracked were up 2 million ounces in November, the biggest inflow since the 2.95 million ounce net rise in July.

This Week in the Markets:

Perhaps mercifully for once, the financial markets seemed to all but ignore failed attempts by the EU / ECB / IMF et al to deliver the magic bullet for solving the crisis in Southern Europe. Germany’s confession that it may be ready to cede more sovereignty in order to “cure” the crisis has so far gone by relatively unnoticed. Indeed, so did the latest clash between Germany and France over the degree of intervention the ECB should deliver to the countries that are in trouble.

Nevertheless, the fact we are now in the run up to Thanksgiving holiday in the U.S. market is a good thing, as it is generally a relatively benign and benevolent period for the markets. At least for now the markets are giving the benefit of the doubt to the Government change in Italy and Greece with hopes that both nations will secure the mandate to deliver the necessary austerity measures and budget cuts. It may also help that the Italians have an economist installed as the new PM, although as of yet this has only taken a fraction of a percentage point off Italian bonds, which still yield more than the 7% panic level that led Portugal and others to seek bailouts. Even if the situation has been stabilised, it certainly doesn’t appear sustainable.

Closer to home and there was plenty of market action and opinion to follow, as Bank of England Governor Mervyn King offered his views on the EU situation and predictions on the economy over here. He stated that the ECB had been correct in its reluctance to bailout countries directly unless it had too, and made it clear that the fate of the Eurozone will have the greatest effect on the performance of the UK.  Linked to this was the Bank of England’s Inflation Report, which featured the good news that inflation is expected to fall sharply over the next few months, possibly reaching a target of 2% sooner than most observers believe. Conversely, Mervyn delivered a bombshell in the form of an economic growth downgrade, with 2011 growth marked down to about 1% from the August forecast of 1.7%. The forecast growth is now 1% for 2012, down from 2%, and 2.5% in 2013, also clipped by 0.5% from the previous estimate.

The Week Ahead: 

Key Corporates Reporting:  November 21st – 25th        

Monday – Interims: Mitie Group (LON:MTO).

Tuesday– Finals: Enterprise Inns (LON:ETI), Mitchells & Butlers (LON:MAB), Paragon (LON:PAG). Interims: Big Yellow Group (LON:BYG), Halma (LON:HLMA), Homeserve (LON:HSV), Intermediate Capital (LON:ICP), Telecom Plus (LON:TEP).

Wednesday – Finals: Compass Group (LON:CPG). Interims: QinetiQ (LON:QQ.), United Utilities (LON:UU.).

Thursday– Finals: Grainger (LON:GRI), Thomas Cook (LON:TCG). Interims: Dixons Retail (LON:DXNS), Pennon Group (LON:PNN), Severn Trent (LON:SVT). Q3: Antofagasta (LON:ANTO).

Friday – No significant corporate announcements due.

We are off to the pub to start the week with both of the companies reporting Enterprise Inns (LON:ETI) and Mitchells & Butlers (LON:MAB) having made quite a splash in the financial pages over the past year, although for different reasons. Enterprise has been hit by crippling debt levels as well as the consumer downturn and even adverse weather conditions last winter. In contrast, it has been a hectic autumn to date for Mitchells & Butlers after billionaire shareholder Joe Lewis officially withdrew his takeover, and the boardroom squabbling culminated in the appointment of a new Chairman.

Switching sectors and catering group Compass (LON:CPG) will reveal whether the difficult economic conditions are pressuring its margins and volumes. True, it was hurt earlier in the year by the earthquake / nuclear accident in Japan, but the Q4 update at the end of September delivered organic revenue growth of 4% despite pressure on volumes. But the bigger picture is of a cash generating FTSE 100 giant, and the prospect that some of this may be returned to shareholders – the run up to which may be supportive of the stock. 

2011 was the year when the stock market finally came to grips with the issues at travel agent Thomas Cook (LON:TCG), effectively coming to the conclusion that this stalwart of discretionary consumer spending is not as immune to the effects of an economic slowdown as previously thought. Even as recently as September it was forced to axe the dividend due to tough market conditions, and last month was able to renegotiate its banking facilities in order to give itself more time to restructure the business. The forthcoming finals should reveal any progress as a result of this breathing space. 

Major Economic Data: November 21st – 25th        

Monday – UK: Oct Rightmove House Prices. U.S.: Aug Personal Income, Federal Reserve Beige Book Survey, Oct Existing Home Sales.

Tuesday – UK: Sept Nationwide House Prices, Sept Halifax House Prices, GfK Consumer Confidence, Oct Public Sector Net Borrowing. EU: ECB Monthly Report, German Aug Retail Sales, Manufacturing Orders, Sept Harmonised / CPI. U.S.: FOMC Minutes, GDP Q3 2nd Est.

Wednesday – EU: Aug Current Account. U.S.: Oct Personal Spending, Personal Income, Durable Goods Orders, Nov University of Michigan Sentiment Index.

Thursday – EU: German IFO Business Climate. U.S.: Thanksgiving.

Friday – EU: Oct German Import Prices.

Although U.S. markets are winding down ahead of Thanksgiving, there is still plenty of Stateside economic data due this week. Ahead of the festivities we have Existing Home Sales as well as the FOMC minutes regarding the last interest rate / QE position from earlier in the month. Also focusing the mind will be last month’s Personal Spending, Personal Income and Durable Goods orders. The biggest market mover could however be the University of Michigan Sentiment Index. In the UK the housing market is in the spotlight given that the big three surveys from the Halifax, Nationwide and Rightmove are due in the first half of the week.  Otherwise it will be the October Public Sector Net Borrowing figure to be watched, (September stood at just over £11bn). In the EU the ECB’s Monthly Report tops the bill, although the German IFO Business Climate survey will also be eagerly awaited.

Main Markets Outlook: 

FTSE100: 

With just over a month to go to Christmas and any traditional year end rally for the stock market, most in the market will be hoping for some relief from what has been a very volatile period for the FTSE100 with the AAA rating downgrade for the U.S. and the EU Sovereign Debt crisis dominating. What has been noticeable about the UK’s leading stocks is that despite the EU uncertainties, through November the FTSE100 has held the bulk of its post October bear trap gains from just below 5,000. The line in the sand for support remains near 5,350, and while there is no weekly close back below this zone, a fresh leg higher to test the October 5,747 intraday peak should be on its way well before December is over. 

Sterling / Dollar: 

Although the Sterling is viewed as very much a safe haven vs. the Euro, against the U.S. Dollar things have not been so easy. The latest Bank of England growth forecast downgrade, and rising unemployment has reminded forex traders that while the UK may not have the problems we are seeing on the Continent, the economic position is still rather fragile. This leaves Sterling / Dollar now once again well down on the pivotal $1.60 level, which on a charting basis looks distant given the falling 200-day moving average at $1.6130. Unless or until fresh support comes in for the cross at the 50-day moving average at $1.5780, a sustained top on this market and a retest of sub $1.54 October support by the end of 2011 looks likely.

Gold: 

Although the September decline to $1,533 was overkill on the downside, Gold’s recent November impasse within a relatively tight range continues, albeit without much progress. There is also a so-called contagion effect on Gold as profits on long positions are liquidated by some players in order to cover losses elsewhere. In addition, Gold tends to lose out when the Euro falls given that a stronger U.S. Dollar erodes its relative value. There is quite a two-way tug of war between EU worries and the latest news that hedge fund legend John Paulson has sold a third of his holding in the SPDR Gold Trust. This is clearly likely to be a weight on the metal in the near term, although it has been noticeable that the price action mostly remains at or just above the 10-day moving average – a show of strength. The obvious buy trigger remains a weekly close back above November resistance at $1,800.

This Week in the Markets:

Just for around 48 hours between the fall of Greek PM George Papandreou and the announcement by his Italian counterpart Silvio Berlusconi that he would resign, the markets in their wisdom decided to climb the wall of worry and buy the dip, rather than take the view that this could be a trigger for another lurch to the downside in the ongoing 3-year plus saga of the financial crisis. But the weight of concern and indeed, uncertainty is simply too great for traders to ignore. It seems that as soon as one hole in the good ship Eurozone is plugged, another appears which makes the metaphor of rearranging deckchairs on the Titanic an uncannily and increasingly accurate depiction of the chain of events and prospects for the region. 

Moves by the ECB to cut interest rates and then to frantically snap up Italian bonds couldn’t prevent the yield from soaring above the 7% danger zone. A happy ending for a problem that positively dwarfs that of Greece is now looking more remote than ever, and if nothing else, investors looking to bottom fish either the Euro or equities may decide to sit it out until the end of the year. Compounding the uncertainty is the failure of the latest G20 summit to agree on any united solution, which means that attention now shifts to Germany, and a response from Chancellor Merkel and her Government to save monetary union that may never come.

Closer to home, although many observers may feel rather smug over the decision by the UK in the late 1990’s to become a semi detached member of the EU, UK Plc could still rue being so distant from the heart of Europe, not only because we could still be in line to make bailout contributions to the IMF fund, but also because of the potential damage caused by exposure to beleaguered Eurozone economies. Right in the firing line in this respect are leading UK banks and insurers holding European bonds, and of course with Italy the UK’s 8th largest trading partner, the effects of the current fiscal and political uncertainty are obvious. The banking sector is viewed as the most vulnerable, and the poor sentiment surrounding the sector will doubtless be further damaged by the prospect of HSBC (HSBA) leaving the UK due to the increased capital requirements in the wake of the EU disaster, and Lloyds Banking (LLOY) potentially set to receive a ratings downgrade after reporting a £3.9bn loss for the first 9 months of 2011 along with the loss of its CEO for health reasons.

The Week Ahead: 

Key Corporates Reporting:  November 14th – 18th        

Monday – Interims: Cranswick (LON:CWK), Electrocomponents (LON:ECM).

Tuesday– Finals: EasyJet (LON:EZJ). Interims: Burberry (LON:BRBY). Trading Announcement: Micro Focus International (LON:MCRO).

Wednesday – Interims: ICAP (LON:IAP), London Stock Exchange (LON:LSE).

Thursday– Interims: WS Atkins (LON:ATK), BTG (LON:BCG), Investec (LON:INVP), SABMiller (LON:SAB).

Friday – No significant corporate announcements due.

Luxury retailer Burberry (LON:BRBY) has lost a little of its stock market darling status on fears of a slowdown in the Far East – especially China, and after broker UBS cautioned on how much the scope for structural improvement is already in the share price. Burberry shares lost some 400p from their 1,500p September peak in just a few weeks, especially after mid October’s revelation that sales growth had decelerated across all divisions in Q2. Even worse, a significant slowdown was predicted for wholesale, which accounts for over a quarter of group revenues. It is difficult to imagine that the intervening 4 weeks will have seen the outlook improve.

Discount airline EasyJet (LON:EZJ) has dodged a series of fundamental bullets in the form of volcano ash, rising fuel prices, and the ongoing wrangling between the current manager and founder Sir Stelios which has tended to overshadow day to day operations.  Offsetting the negativity, the September update from the no frills airline revealed raised profits guidance despite rising fuel costs, and an 8% rise in passenger numbers for that month and October. An ongoing desire for thrift among financially hard-pressed consumers should ensure that EasyJet can maintain a bullish stance on its prospects with its year end update. 

Brewing giant SABMiller (LON:SAB) updates on its recent £6bn acquisition of Australian counterpart Fosters on Thursday. The reason for the takeover became apparent at the time of the first half update from the UK giant as it revealed a slowdown in the U.S. market, something that the Foster’s move was no doubt designed to fill.  But given the steady share price of the FTSE 100 firm in recent weeks, it appears that the Australian acquisition has been enough to soothe the bears at least for now. 

Major Economic Data: November 14th – 18th        

Monday – EU: Sept Industrial Production. U.S.: Sept Consumer Credit.

Tuesday – UK: Oct Nationwide Consumer Confidence, Consumer Price Index.  EU: German / EU Q3 GDP German ZEW Survey. U.S.: Sept Business Inventories, Oct Producer Price Index, Advance Retail Sales.

Wednesday – UK: Sept Average Weekly Earnings, Unemployment Rate Oct Claimant Count, Jobless Claims. EU: Oct Eurozone Core / Consumer Price Index. U.S.: Oct Consumer Price Index, Industrial Production.

Thursday – UK: Oct Retail Sales. U.S.: Oct Housing Starts, Building Permits

Friday – EU: Oct German Produces Prices Index. U.S.: Leading Indicators.

With the Eurozone crisis remaining centre stage and the “surprise” interest rate cut to 1.25% to start November from the ECB, the latest economic data from this region will be very much in focus. The Oct EU Consumer Price Index is due out on Wednesday and comes a day after the equivalent figure in the UK and a few hours before the update in the U.S. However, it may be that the most influential release will be GDP numbers given that the main concern among traders and investors is the influence of the Euro crisis on economic growth and the risk of a double dip recession. At home, adding to unemployment currently at its highest level since the early 1990s, an update on this and the claimant count is due this week – it came in at 5% last month.  5% plus was also the level of the Consumer Price Index in Sept, and there are hopes for a reduction here. Stateside, the prediction is that the monthly Oct change will go to flat from a 0.3% reported in Sept, but this is really the most bullish slant on consistently bearish data.

Main Markets Outlook: 

FTSE100: 

One of the most important charting / technical interactions is the relationship between the price of a stock / market and its 200-day moving average. The best buy signals come with rebounds off the 200-day moving average level, with the most negative events, deflections or bull traps through this indicator. The announcement of an EU debt deal on Oct 27 led to a brief spike for the FTSE 100 back above 5,700 and above the then position of the 200 day line. However, EU / banking sector woes have since delivered a sharp decline back below 5,500 for the UK index. The risk is that a weekly close back below an August uptrend line at 5,400 could see the bottom of the post summer range under 5,000 revisited in coming weeks. 

Sterling / Dollar: 

To start November, ‘safe haven’ Sterling surged against the Euro, and rocketed through the psychologically important $1.60 level vs. the U.S. Dollar to hit a best towards the 200-day moving average just above $1.60 on the daily chart. Nevertheless, unless or until there is tangible progress on the Eurozone crisis, Sterling is likely to remain second choice to the U.S. Dollar as a ‘flight to safety’ instrument. Fundamentally, Sterling newsflow has been somewhat better than expected and this should provide a floor in the near term. Particularly helpful was news that High Street inflation fell to its lowest level of the year in October, and that industrial production was back at flat after falling 0.3% the previous month.

Gold: 

In spite of the escalating EU crisis, the price of Gold is still well over $100 an ounce off its early September peak through $1,900. While the explanation may be no more sinister than profit taking, the assumed retest of record 2011 levels may not be the foregone conclusion that the fundamental drivers would have us believe. Indeed, it could also be that the rumoured liquidation by traders both on the retail and institutional side to cover losses in bonds and equities is dampening the speed of upside progress. The other theory which could explain the current price action of the metal is that when conditions in the market are at their most uncertain, it is the U.S. Dollar and not Gold which is favoured, especially given that a rise in the Dollar tends to cool the greenback denominated commodity. As far as the price action is concerned over coming days, any sustained delay in conquering $1,800 resistance could lead to another test of the former August support at $1,703..

This Week in the Markets:

The crisis in the Eurozone continues, and with it come yet more warnings. Last week Angela Merkel warned that the Euro failing would undermine Europe itself, while this week EC President Jose Manuel Barroso has suggested that it would be best if the Greek Parliament backed the crisis plan as a “fate worse than austerity” beckons otherwise. By definition though, the prospect of democracy being given a voice via a referendum in the troubled Southern European nation is viewed by most as too extreme a gamble, given the likely outcome.

The stock market reaction to the proposed €1 trillion expansion of the EFSF, the 50% haircut for Greek bondholders and European banks having to find an extra €106bn to recapitalise themselves, has been a rather ragged one. The near 10% rally from initial October lows now looks way too optimistic, while the prospect of further gains looks increasingly remote. Even as the initial gloss came off the deal and the prospect of a referendum in Greece was raised, investors seemed to be either in denial or had perhaps already factored the worst-case scenario. But certainly over the next few weeks, uncertainty over the outcome rather than reality is likely to cause the most jitters over and above the warning from the IMF that there will be no bailout cash without a yes vote in Greece.

In fact, the plan had been that the three pronged EU deal should have been completely wrapped up just in time for the G20 summit in Cannes on November 3rd. Now the picture looks just as confusing as the time prior to the construction of the Eurozone “salvation” plan.

But perhaps to the relief of some the focus hasn’t all been about the woes of continental Europe. There was an echo of the drama of 2008 and the fall of Lehman Brothers, (albeit on a lesser scale) as MF Global became the eighth largest ever U.S. bankruptcy. Even worse it was the failed bets it had made via Eurozone debt derivatives that led to its downfall, with no rogue trader to blame this time either. Clearly there is a double worry associated with this event: firstly that Wall Street is by no means immune to the fallout from the EU’s debt crisis, and secondly that if MF Global can fall so easily, how many other financial black swans are lurking in the shadows. Interestingly enough, the share price of hedge fund manager Man Group (LON:EMG) was marked down nearly 10% at one stage purely on the basis that MF Global used to be a subsidiary

The Week Ahead: 

Key Corporates Reporting:  November 7th – 11th        

Monday – Trading Announcement: Rentokil (LON:RTO).

Tuesday– Finals: AB Foods (LON:ABF). Interims: Babcock International (LON:BAB), Carphone Warehouse (LON:CPW), Marks & Spencer (LON:MKS), Vodafone (LON:VOD).

Wednesday – Finals: Fenner (LON:FENR). Interims: First Group (LON:FGP), Sainsbury (LON:SBRY), SSE (LON:SSE). Q3: Talvivaara Mining (LON:TALV). Trading Announcement: Supergroup (LON:SGP).

Thursday– Finals: Euromoney (LON:ERM). Interims: Experian (LON:EXPN), Halfords (LON:HFD), Land Securities (LON:LAND), Vedanta Resources (LON:VED).

Friday – Interims: Hornby (LON:HRN).

Retailers figure highly in terms of the companies reporting this week, with flagship retailers Marks & Spencer (LON:MKS) and Sainsbury (LON:SBRY) reporting. With Sainsbury going head-to-head with sector leader Tesco (LON:TSCO) and its Big Price Drop, observers will be looking to see if the Q2 sales growth of 7.6% has subsequently been eroded. M&S will need to show whether Q2 organic sales have managed to withstand the effects of the Indian summer.

Sticking with retail, and food producer to discount clothing group AB Foods (LON:ABF) has enjoyed double benefits as firm commodity prices continue to support sugar production, and as cash strapped consumers keep the Primark brand growth on track. Trendy fashion firm Supergroup (LON:SGP) flipped from stock market hero to zero as shares declined from 1,100p to 600p in less than 8 weeks over sales growth concerns in the spring and warehouse problems adding to the problems since the summer. Clear assurance over sales is will be needed to change sentiment. 

Rat catcher Rentokil (LON:RTO) kicks off a relatively busy period and reporting week for companies. Investors will be hoping that the promised improvement for Q4 at its troubled parcels division City Link will have materialised. The problem is that the shares are languishing close to their lows of the year at 65p having fallen over 30% in 12 months. Rentokil will have to deliver some soothing words for any positive reversal to be seen near term. 

Major Economic Data: October November 7th – 11th

Monday – UK: Oct RICS House Prices Survey. EU: Sept Eurozone Retail Sales, Nov Sentix Investor Confidence. U.S.: Sept Consumer Credit.

Tuesday – UK: Sept Industrial / Manufacturing Production, Oct NIESR Q3 GDP Estimate. EU: Sept German Trade Balance. U.S.: Sept Construction Spending, Oct ISM Manufacturing.

Wednesday – UK: Sept Visible Trade Balance. U.S.: Ben Bernanke speech at Fed Conference on Small Business.

Thursday – UK: Bank of England Interest Rate Decision / QE Level. EU: Oct German Consumer Price Index / EU Harmonised, ECB Nov Monthly Report. U.S.: Sept Trade Balance, Oct Monthly Budget Statement

Friday – UK: Oct Producer Price Index Input. U.S.: University of Michigan Consumer Confidence.

In the UK, last week’s well-received Q3 GDP gain of 0.5% from the ONS is followed by a NIESR estimate of the economy over the same period, (Q2 was also 0.5%). The RICS House Price Balance for Oct is due with the markets looking for an improvement on -23% reported last time. Also noteworthy are the Sept Industrial and Manufacturing Production data which previously came in at +0.2% and -0.3% respectively. Of course, the lead event will be the latest from the MPC of the Bank of England after the £75bn QE injection. At least for now the panel will probably be biding its time to see what the effects are. In the EU, the Nov Monthly Report from the ECB is due, and there are hopes for an improvement in German CPI data and Eurozone Sept Retail Sales. In the U.S. a keynote speech from Federal Reserve Chairman Ben Bernanke could be a market-moving affair, although it is probably the latest University of Michigan Consumer Confidence survey that will make the biggest splash.

Main Markets Outlook: 

FTSE100: 

The FTSE 100 has been marched up and down in the wake of the EU debt “deal”, but as things stand currently it is neither up nor down. The index is showing remarkable resilience after the initial post debt deal relief rally evaporated as the prospect of a Greece referendum took centre stage. Technically, the FTSE 100 mid October support at 5,350, (roughly in the middle of the 3 month range) is relatively strong and represents what can be regarded for now as a “half full” position for the bulls. While there is no sustained price action below this zone it could be sensible to look at the prospects for blue chips as positive, if only on the potential for a retest of the late October spike through the all important 200-day moving average at 5,714. 

Sterling / Dollar: 

Just for a change the view that UK and Sterling should be regarded as a safe haven took root this week as the prospects of a Greece referendum was enough to get Sterling on the front foot against the Euro. Vs. the U.S. Dollar, Sterling was boosted by a better than expected 0.5% rise in Q3 GDP, which could mean that forex traders will be able to banish all thoughts of the UK entering a double dip recession for now. Nevertheless, some of the shine was taken off the gains for the cross through $1.61 after October manufacturing orders showed their worst decline for two years. But even this wasn’t enough to prevent Sterling remaining in a relatively tight trading range either side of $1.60 for much of the period, and there is always the chance that this could be the springboard for further gains later in November.

Gold: 

Throughout tough periods for the stock market, traders have contended with the ever-present phenomenon of forced liquidations of profitable long Gold positions to cover losses in other markets. This was almost certainly in effect after the immediate aftermath of the EU debt deal, with various intraday probes below $1,703, (also the former August support level). However, the zone has been held thus far, backed by the idea that eventually inflation inducing money printing will be the only lasting solution to the problems of PIIGS and beyond. Those looking for a fresh buy trigger point on Gold would probably regard an end of day close back above the October intraday high as their favoured charting signal. The only question mark currently is why the journey back to retest September’s all time high through $1,900 an ounce is taking so long.

This Week in the Markets:

“If the Euro fails, Europe fails”. This is German Chancellor Angela Merkel’s sound byte of the moment as she tries to rouse the German Parliament into backing her attempt to save the EU dream. But rather than using grand words to appease her domestic audience, the ailing PIIGS economies need financial action – and fast. Rather strangely October 26th became D Day for the Sovereign Debt / Banking crisis in Europe and for the financial markets as a whole, as traders and observers trod water waiting for the unveiling of a grand scheme. It is hoped the scheme will be one that solves a multitude of problems at a stroke, and indeed the EU self-imposed deadline aims to have the matter resolved before the G20 at Cannes. Even more intriguingly, stock markets have risen around 10% from their lows of the month – factoring in what we all hope will be good, positive news. In fact, so far it is difficult to pin down exactly what the plus points have been apart from German MPs backing the idea of boosting the EU bailout fund. Even this will be something of a damp squib given that the nation’s contribution will be no more than the €211bn bailout funding contribution already agreed.

But the real issue may be not whether funds are available to support stricken Greece. Instead, it could be down to agreeing how much is actually owed. The key here are the bondholders – mainly the troubled banks who understandably are none too happy about taking so called haircuts (losses) on these investments. As things stand, if the IMF has its way the banks face losses of as much as 70 – 75% on these deals, just about the last thing the sector needs at the moment given that the banks themselves also need to be recapitalised.

Nevertheless, putting a positive spin on the events of October 26th, with the positive German vote, further Italian reforms, and perhaps most important – bank money to be raised in the markets and not via bailouts, and ongoing ECB bond buying, the EU situation seems to have stabilised even if no magic bullet has materialised. Presumably traders anticipated as much and therefore a “work in progress” rather than an outright cure has been enough for now.

Closer to home, and on the corporate front the heavyweight update came from drugs giant GlaxoSmithkline (LON:GSK), which beat stock market expectations via a jump in Q3 revenues largely powered by emerging markets growth.

Key Corporates Reporting:  October 31st – November 4th       

Monday – Interims: Berkeley Group (LON:BKG). Q3: Centamin Egypt (LON:CEY).

Tuesday– Finals: Imperial Tobacco (LON:IMT). Q3: 888 Holdings (LON:888). Trading Announcement: Stagecoach (LON:SGC).

Wednesday – Q3: Inmarsat (LON:ISAT), Randgold Resources (LON:RRS).

Thursday– Interims: ASOS (LON:ASC), C&W Communications (LON:CWC), Invensys (LON:ISYS), Man Group (LON:EMG), Tate & Lyle (LON:TATE). Q3: Unilever (LON:ULVR).

Friday – Q3: Smith & Nephew (LON:SN.).

Medical supplies group Smith & Nephew (LON:SN.) is a perennial takeover target, but has so far managed to avoid the clutches of larger rivals. In fact, the August update from the group showed why the speculation never quite goes away, as invariably there seems to be an element of disappointment in the fundamentals. The recent higher revenues reported by S&N were offset by pressure on margins due to what it described as increasingly challenging conditions. The way the shares have been treading water for most of the intervening period implies that investors wish to see fresh earnings drivers before going long once again.

In fact, household products group Unilever (LON:ULVR) could well be a logical suitor given the recent Reckitt Benckiser (LON:RB.) / SSL International takeover. But at least the Anglo Dutch group has emerging market growth to offset pedestrian prospects in developed markets. Indeed, Unilever clearly realises the benefits of seeking out new sources of growth as we have seen this month with the acquisition of Russian beauty firm Concern Kalina for £440m. The likely rationale behind the purchase is that it offsets the negative impact of input inflation, a real drag on margins, especially in the less well performing geographical areas such as Western Europe. 

Shares in hedge fund manager Man Group (LON:EMG) plummeted nearly 30% after the late September update, as the relative underperformance of its long only funds took a beating in the August sell-off. Such was the impact of this relative failure that even healthy growth at the flagship AHL diversified futures fund couldn’t offset the shock underperformance. Man shares remains near year lows towards £1.50 despite the recent stock market rise, so the company certainly has its work cut out in winning back the affections of battered investors. The Goldman Sachs price target cut from 280p to 230p on October 12th clearly didn’t help either.

Major Economic Data: October 31st – November 4th   

Monday – UK: Sept Consumer Credit, Oct Nationwide / Hometrack Housing Survey. EU: Oct Consumer Price Index Estimate. U.S.: Oct Chicago Purchasing Manager

Tuesday – UK: Oct Purchasing Manager Index – Manufacturing. Q3: GDP EU Oct Eurozone  / German Purchasing Manager Index – Manufacturing. U.S.: Sept Construction Spending, Oct ISM Manufacturing

Wednesday – UK: Oct Halifax Oct House Prices, Purchasing Manager Index – Construction. EU: Oct German Unemployment Change / Rate. U.S.: Oct ADP Employment Change, FOMC Interest Rate Decision / Ben Bernanke Press Conference

Thursday – UK: Oct Purchasing Manager Index – Services. EU: Oct Eurozone / German Purchasing Manager Index - Composite, ECB Interest Rate Decision. U.S.: Sept Factory Orders Oct ISM Non-Manufacturing Composite

Friday – EU: Oct German Consumer Price Index. U.S.: Oct ICSC Chain Store Sales, Non Farm Payrolls, Unemployment Rate. Average Hourly Earnings.

In contrast to the focus on EU woes in recent weeks, attention moves Stateside and still the biggest number on the economic calendar, the U.S. non-farm payrolls. The Sept number of 103,000 was enough to soothe fears of an immediate slowdown in the world’s largest economy, but more of the same will be needed (a 6 figure gain) in order to keep the bears at bay. Last month’s unemployment rate remained stubbornly strong at 9.1%. Wednesday sees the FOMC interest rate meeting and further insight into Operation Twist, which started last month. The Eurozone interest rate decision is due, along with possible fresh policies to prevent the strongest economies in the group – France and Germany sinking into recession. It will not be an easy task. In the UK, the housing market update comes with the latest October surveys from Hometrack, the Nationwide and Halifax. The latter was the most bearish of the trio in September unveiling a 0.5% monthly prices drop.

Main Markets Outlook: 

FTSE100: 

Thus far, the October trading range for the FTSE 100 has fallen quite neatly between former summer 2010 support at 5000, and the old lows of March 2011 around 5600. Given that the UK index has so far managed to shrug off the worst of the Eurozone crisis, 5600 could well be taken out, and further progress seen towards the now near mythical 6000 level. Nevertheless, the buy argument would be undermined by any sustained price action below the mid-October lows just above 5350. All in all though, it has to be admitted that blue-chip stocks continue to perform better than might have been expected. 

Sterling / Dollar: 

Sterling is seemingly still enjoying an Indian summer as a safe haven compared to the Euro. There has been help on the economic front with a better-than-expected balance of payments number, although a weaker than expected industrial trends survey from the CBI and predictably poor amounts of bank lending emphasised the way that if this currency is on top at the foreign exchange desks it is merely winning the battle of the minnows. Technically, further upside towards the 200-day moving average at $1.6130 looks likely, although this is only valid while the 50-day moving average $1.5870 remains unbroken on an end of day close basis.

Gold: 

Gold bulls must be wondering what happened to the best of the decade-long bull run in this market after the $300 pullback from the initial record highs early September above $1900. On a technical level, the former August low at $1703 has effectively capped the price of the metal, indicating that new resistance was coming in the below former support, a configuration normally only seen in a more negative of situations. But after the somewhat questionable outcome of the October 26th EU debt deadline, gold has recovered to $1703, off the back of perceived money printing - value destroying bailouts waiting in the wings. Now is that while there is no end of day close back below the old August low, a retest of the resistance on the way down between 1800 and $1810 in mid-September is on the cards.

This Week in the Markets:

Rarely can Slovakia ever have been regarded as at the heart of Europe, and even less frequently as a pivotal player in the financial markets, but for a couple of days this week the tiny East European nation took centre stage. A yes vote from the Slovakian Parliament would have finally ratified an expansion of the €440bn European Financial Stability Fund, but the surprise initial no vote caught those who viewed the event as something of a rubber stamp on the hop. Luckily, the recent history of such setbacks to the EU dream shows us that if first there a yes vote does not succeed, the body in question can keep on voting until there is one. Seemingly this is the prevailing if cynical view adopted by traders over the latest twist to the debt crisis and the ongoing saga of the Greek bailout money. 

In fact, it wasn’t just Greece in need of more cash. The fall of French / Belgian bank Dexia led not only to a €4bn rescue, but also highlighted the need for a general recapitalisation of banks across Europe. This development was particularly alarming given that the last round of so called stress tests in the summer gave Dexia a clean bill of health. As has been the trend with other worrying issues we have faced before, French and German leaders agreed that they would underwrite the €200bn plus required to get the financial sector back on its feet and do whatever else is needed.

Therefore with the markets two main bugbears apparently “dealt with” for now, the recovery trend in leading indices such as the FTSE100 has continued towards post August collapse levels at 5,400 plus, with of course the Bank of England addressing double dip recession fears to start October with a larger than expected £75bn dose of QE2. It will be interesting to see for how long the latest sticking plasters keep the jitters at bay.

It may not be too long, at least in terms of the domestic economic scene. This was blighted by a 178,000 increase in unemployment for the quarter to the end of August – taking it to the worst levels seen since 1992. Adding salt to the wound, Barclays Capital noted that with inflation running at 5% and real wages falling for the 17th month in a row, there is every prospect of the number of jobless continuing to rise. Indeed, on this basis it was hardly surprising that Bank of England MPC members such Dale and Posen have warned about economic growth prospects as well..

The Week Ahead: 

Key Corporates Reporting:  October 17th – 21st   

Monday – No significant company reports due.

Tuesday– Finals: Bellway (LON:BWY).

Wednesday – Interims: Home Retail Group (LON:HOME). Q1: BSkyB (LON:BSY).

Thursday– Finals: Debenhams (LON:DEB), Punch Taverns (LON:PUB). Trading Announcement SABMiller (LON:SAB).

Friday – Trading Announcement: Rank Group (LON:RANK).

The highest profile group reporting is this week is brewing giant SABMiller (LON:SAB) which last month agreed to buy Australian counterpart Foster’s. While there was initially a dip for SAB shares by some 10% to below £20 a share, they have since bounced back to stand higher than they were at the start of September as the market gives the thumbs up to the deal. Positive comments have come from broker Investec, which suggested SAB shares remain a buy given that the 12.6x prospective EV:EBITDA is in the range of historical M&A in the sector. Traders will be looking for fresh insights into its prospects following the completion of the Australian deal.

In contrast a gloomy picture emerges from the fundamentals at High Street giant and Argos owner Home Retail Group (HOME), as the catalogue based group suffers both the effects of consumers tightening their financial belts and heavy competition from internet discounters. To attempt to address this issue the group decided to buy into designer brand Habitat, presumably where margins are less fraught. Certainly in the run up to the interims, Home shares have been squeezed higher as much on the hopes that the recent sales plunge may be slowing, as on rumours that a break up bid could be forthcoming. 

As far as the stock market is concerned in 2011, the big story that will be remembered probably more than any is the debacle between hacking-blighted News Corporation and its attempt to takeover pay TV group BSkyB (BSY). In fact, it is likely that the latter will once again remind the market of how resistant it has been to the effects of the financial crisis as consumers decide to sit at home in front of their HD TV sets in order to save money. The end of July saw the group so cash rich that it was able to return £1bn to shareholders, and despite the regulatory risks of having such a commanding position in its field, the Q1 update is likely to be a very positive one

Major Economic Data: October 17th – 21st   

Monday – UK: Oct House Prices Rightmove. U.S.: Sept Industrial Production.

Tuesday – UK: Sept Nationwide Consumer Confidence, Sept Core / Consumer Price Index, Retail Price Index. EU: German Oct ZEW Survey. U.S.: Sept Producer Price Index, Federal Chairman Bernanke Boston Speech.

Wednesday – UK: Bank of England Minutes. U.S.: Sept Consumer Prices Index, Housing Starts, Building Permits, Federal Reserve Beige Book.

Thursday – UK: Sept Retail Sales. EU: Sept Consumer Confidence, Sept German Producer Prices. U.S.: Sept Leading Indicators, Existing Home Sales, Oct Philadelphia Fed.

Friday – UK: Sept Finances, Net Borrowing. EU: Government Debt / GDP Ratio, Oct German IFO Business Climate. U.S.: Sept Advance Retail Sales, Oct University of Michigan Consumer Confidence, Aug Business Inventories.

Last month, UK online estate agent Rightmove reported a 0.7% rise in house prices, and this month if anything the market would probably be looking for a slightly softer number. High Street Retail Sales figures will show whether the bigger players are also starting to feel the pinch in the wake of September’s 0.1% decline However, the release of the Oct Bank of England MPC meeting minutes which resulted in a £75bn QE boost will be centre stage at home, with observers looking for prospects of any further moves and detail on the rationale behind the £75bn package rather than the £50bn expected. German sentiment IPO and ZEW surveys are on tap, and considering that Europe’s largest economy is currently having to dig deep to keep weaker counterparts and the banking sector afloat, there will be plenty of interest here. Also key is the latest Euro-Zone Government Debt-GDP Ratio, which last stood at 85.1%, but may be expected to deteriorate as growth in key economies has slowed markedly. In the U.S., the latest view from Fed Chairman Ben Bernanke on the economy is eagerly awaited, as are any developments around Operation Twist.

Main Markets Outlook: 

FTSE100: 

Some two months after the Aug collapse for the FTSE 100 and an intraday low of 4,791, the UK index has delivered an extended basing either side of 5,000 for much of last month. The big technical achievement so far in Oct is the break above the 50-day moving average now at 5,234 for the first time since the beginning of Aug when it was up at 5,800. This is clearly a bull signal, but the fate of the optimists as the FTSE 100 pushes through 5,400 and equals the Sept 5,449 high will depend on whether most of the negatives associated with near zero economic growth, soaring unemployment and the debt crisis are truly factored in at current levels. 

Sterling / Dollar: 

The low point for Sterling / Dollar for October came in the immediate aftermath of the Bank of England’s QE2 move, with the level of $1.5272 creating a narrow bear trap below the Sept intraday low of $1.5329. As may have been expected, there has been quite a rebound from this charting trap, with the UK currency now coming up against the former July support level of $1.5781. Any sustained price action above the former support could flag the start of a “surprise” recovery versus the U.S. Dollar, as Sterling regains the “safe haven” status acquired earlier this year. Whether this can be maintained will depend on how the highest level of unemployment in two decades is viewed, and whether the next UK GDP number is negative.

Gold: 

There are fears in some quarters that we have been witnessing a Gold bubble every bit as painful as in the winding down process seen in the housing market and equities. However, the technical picture does show that support on the dip for Gold last month came in at $1,533 above the then rising 200-day moving average  / positive trend indicator as it has since the beginning of 2009. This would suggest that rather as in the case of equities, with many stale / weak bulls out having bailed out, there may be little to resist a resumption of the uptrend. The favoured buy trigger currently would be sustained price action back above the former Aug intraday support at $1,703, especially with so many inflation-friendly bailouts underway in ailing Western economies.

This Week in the Markets:

Given October’s historical reputation for delivering stock market crashes, (albeit decades apart), those looking for any semblance of stability in the financial markets in recent days will have been disappointed thanks to a familiar cocktail of banking scares, courtesy of French / Belgian giant Dexia, and a Sovereign Debt downgrade for Italy to A2 from Moody’s. But as things stand, so far this month, (and for the year to date) equity indices have managed to find support at, (or in some cases just below on an intraday basis) existing 2011 lows. For stock bulls in particular, there seems to be some substance to the argument that at least the prospect of Greek debt default has been priced in.

The problem is that no one is ringing a bell to sound either the FTSE 100 low or perhaps the big new gripe among traders, the start of a double dip recession after comments from the IMF that it cannot rule out the prospect of a recession, particularly in Europe. This fear was certainly one of the main factors driving the initial August dive for shares, with both Germany and France dipping close to zero GDP and wrong-footing those who had backed the long road back to economic recovery. How precarious the situation is has just been underlined by the UK’s Q2 GDP performance, which shows a gain of just 0.1%. But after such a close brush with a fresh period of economic contraction, the general sitting on hands approach over providing new stimulus from the Coalition Government and Bank of England should finally end. The latest data from Hometrack showing that September delivered a fifth consecutive month of falling house prices this may be the catalyst that finally triggers the next phase of QE.

But it really is the Eurozone dominating the minds of traders at the moment. Europe awaits a cohesive, region-wide solution to the debt crisis, especially for the banking sector where it has been estimated that as much as €200bn is needed for recapitalisation. But to date there seems to be too many logistical and even administrative issues to tackle in too short a space of time, and all the while the clock is ticking for Greece, which could run out of cash as soon as November. Ideally, by this time a tighter approach will be in place, rather than simply periodically expanding the European Stability Mechanism, currently standing at €440bn. This would involve formalising the deep pockets of the ECB into the rescue process as well as the introduction of a Eurobond.

The Week Ahead: 

Key Corporates Reporting:  October 10th– 14th  

Monday – No significant company reports due.

Tuesday– Interims: N Brown Group (LON:BWNG).

Wednesday – Trading Announcement: Burberry (LON:BRBY).

Thursday– Finals: WH Smith (LON:SMWH). Interims: Booker (LON:BOK).

Friday – Trading Announcement: Asos (LON:ASC).

Luxury goods group Burberry (LON:BRBY) saw its prospects expand rather than contract during the financial crisis, benefiting from exposure to the Far East, and China and Japan in particular. In fact, sales in China were until the middle of last month the main reason the shares were outperforming both their sector and the stock market as a whole. Perhaps the high watermark for the fundamentals came as recently as September 15th when rumours that the Chinese were to reduce taxes on luxury goods saw the shares gap higher towards 1,500p. Fears that its star markets are about to cool off, has seen the shares bomb 20% in a matter of days, so shareholders will be looking for reassurance in the forthcoming trading announcement.

Shares in online fashion retailer Asos (LON:ASC) have also suffered from that sinking feeling of late, with the heady share price levels of 2010 a dim, distant memory. While much of the decline from 2,400p plus to under 1,400p this year can be blamed on bulls getting ahead of themselves, the read across from High Street rivals where business conditions remain challenging has to be taken into consideration, although Danish stakebuilding and soaring profits driven by overseas sales mean that Asos fundamentals should not be underestimated. The next trading announcement could be just the tonic for this former dot com darling. 

Some may think that the traditional kind of retailing from newsagent WH Smith (SMWH) will be suffering in the age of the iPad and when consumers are hard pressed financially. But the name of the game for Smiths is specialising in small ticket items where margins have been maintained and even increased. This was the message at the time of the July update where lower sales were offset by better margins. The likelihood is that reassurance over sales and the ongoing share buyback program will be enough to sustain WH Smith shares near the top of their 450p – 520p 2011 trading range

Major Economic Data: October 10th– 14th  

Monday – UK: Sept RIC House Price Balance. EU: Aug German Trade Balance, Eurozone Sentix Investor Confidence. U.S.: Aug Construction Spending, Sept ISM Manufacturing.

Tuesday – UK: Aug Industrial / Manufacturing, Sept NIESR GDP Est. U.S.: FOMC Minutes.

Wednesday – UK: Quarterly Unemployment Rate / Claimant Count. EU: Aug Eurozone Industrial Production.

Thursday – UK: Aug Visible Trade Balance. EU: Sept German Consumer Price Index, ECB Oct Monthly Report. U.S.: Aug Trade Balance.

Friday – EU: Sept Euro-Zone Core / Consumer Price Index. U.S.: Sept Advance Retail Sales, Oct University of Michigan Consumer Confidence, Aug Business Inventories.

The UK housing market according to the RICS survey starts the week, and after mixed news at best for this key part of the economy, a positive slant will be much sought after. The Aug balance on prices was -32%, and ahead of the Sept number it is difficult to see where improvements could come from.  Hot on the heels of the weaker than expected Q2 GDP number from ONS, the NIESR estimate for Sept is due, but big day for the UK’s statistics this week will be the unemployment numbers due on Wednesday. Across the pond, the latest FOMC minutes take centre stage, while on the data front, Aug Construction Spending and Sept ISM Manufacturing are due. The Oct University of Michigan Survey will indicate the strength of the U.S. economy and whether the “Twist” is starting to do its job. In the Eurozone, CPI, (up 0.2% last month) is due, along with Aug Year on Year Industrial Production, (which hit an encouraging 4.2% in July), as well as updates over the ongoing regional fiscal nightmare.

Main Markets Outlook: 

FTSE100: 

While the FTSE100 falling below 5,000 has been on the cards since July 2010, the bigger question is whether this event to start October is actually a capitulation point for the bulls, or whether it marks the point at which investors have finally factored in such horrors as a Greek default and a double dip recession. At close to 5,000, the view that the UK index is bumping along the bottom is given some credibility by the regular, sharp rebounds from this zone since the beginning of August, and that most recently in the latest approach to year lows, the bounce was from 4,868, some 70 points above the summer’s worst intraday level. Even so, only sustained price action for the first part of October both above the 5,000 mark as well as the 10-day moving average now through 5,130 is likely to be enough to boost confidence for another retest towards 5,400. 

Sterling / Dollar: 

It is perhaps a sign of the jittery state of the financial markets that even a computer trading program can suffer from a “fat finger” and cause Sterling to fall a cent in an instant. This happened after the latest UK manufacturing data was released as an algorithm apparently gave the instruction to go short at $1.5480 rather than $1.5580 – undermining the price of Pound / Dollar. In fact, the $1.55 plus zone has so far proved to be the top of the near term range for the UK currency, as indicated by the presence of the 10-day moving average at $1.5543. And with quarterly UK GDP down to 0.1%, the clock is now ticking on QE action by the Government / Bank of England, strengthening the U.S. Dollar’s somewhat surprising safe haven status. All of which means little if any significant upside for Sterling against any of the major currencies.

Gold: 

After last month’s extremely sharp sell off, Gold bulls are returning in force, backed by a technical line of support from the start of the year running through $1,600 – a feature which has so far been held on an end of day close basis. What is interesting is that this “new” support is represented by an uptrend line from January on the daily chart at some $65 above the September intraday low, and the main 200-day moving average support at $1,535. Normally, a retest of this zone would be on the cards before the ongoing bull market continues in earnest. Fundamentally, the latest comments by Fed Chief Ben Bernanke dampened growth, and hence inflation expectations in the U.S., all of which kept a lid on the yellow metal. This market now looks to be on the back foot, capped by August support at $1,703.

This Week in the Markets:

The Greek Sovereign Debt saga has not only remained centre stage, but has arguably reached a point of no return, and perhaps more importantly a stage where to use the cliché of the moment, it is not possible to kick the can down the road any further. Certainly for most observers, Greece is in default in all but name, but judging by the rebound for leading indices in recent days there is little in the position of the Southern European nation to scare traders at this stage. What may be more of a concern is the waiting game before the issue is resolved, and the reactions to any leaks emerging from behind the closed doors of the financial authorities both in Europe and the U.S over and above the meeting between German Chancellor Merkel and Greek Prime Minister Papandreou. Global markets are currently in a no man’s land of uncertainty, as hopes for an increase in the €440bn Eurozone bailout fund to €1trn depend on whether or not Chancellor Merkel loses the vote in Parliament which would enable the fund to be boosted. 

Although this issue is centre stage, the picture away from the debt crisis isn’t much better. Economic doomster Nouriel Roubini who called the Credit Crunch correctly judges Europe and the U.S. to already be in recession, which may explain Germany’s reaction to the ill-timed advice and yet another faux pas from U.S. President Obama on how to handle the debt crisis, when it is clear the super power first needs to get it’s own house in order. Indeed, the fear of a double dip recession is currently dominating the newswires as central banks grapple with how to stimulate growth when financial ammunition and options are fast running out. 

In the UK the focus has been on whether the Bank of England will finally be persuaded to implement further QE measures, after hiding behind the excuse that it wants to keep inflation in check. MPC members Broadbent and Miles have come out in favour of QE, although it is noticeable that former MPC member and hawk Andrew Sentance is still rejecting the idea on the basis that the current gloom regarding growth is overdone.

On the corporate front, a nasty surprise from hedge fund manager Man Group (EMG) saw it’s stock fall by a fifth of the day it announced understandable losses for its long only funds, and less funds under management as investors headed for the safety of cash. And after years of attempting to find a suitable merger partner the London Stock Exchange (LSE) looks as though it may have find the right candidate as it enters exclusive talks with LCH Clearnet.

The Week Ahead: 

Key Corporates Reporting:  October 3rd – 7th    

Monday – Finals: Avanti Communications (LON:AVN). Trading Announcement: Electrocomponents (LON:ECM).

Tuesday– Finals: Wolseley (LON:WOS).

Wednesday – Finals: Sportingbet (LON:SBT) Interims Tesco (LON:TSCO). Trading Announcement: Marston’s (LON:MARS), Sainsbury (LON:SBRY).

Thursday– Interims: Ted Baker (LON:TBK). Trading Announcements: Halfords (LON:HFD).

Friday – No significant company reports.

Supermarket giants Tesco (LON:TSCO) and Sainsbury (LON:SBRY) dominate the corporate scene this week, and are both important as key gauges of consumer sentiment and spending. Tesco (LON:TSCO) shareholders will be glad to hear that billionaire investor and U.S. tax hike crusader Warren Buffett has increased his stake in the group. Promises to dominate the domestic market with a £500m “Big Price Offensive” instead of gaining a foothold in Japan are probably the reasons for the Buffett stake build, while the prospect of lower prices has certainly upset sector rivals

Sainsbury (LON:SBRY), which delivers its latest trading statement after Tesco on Wednesday, saw its shares punished in June after revealing a 12 week like for like sales jump of 4.8%, but a disappointing non fuel growth rate of 1.9% vs. expectations of as much as 2.3%. Without the warm Spring weather and the Royal Wedding boost, and with a price war with Tesco on the horizon, on this occasion it could very well be that the 5 month slide in the stock continues apace. 

Bikes to auto parts group Halfords (LON:HFD) has rather lost its way as the initial view that it could be a winner in the economic downturn as consumers took to two wheels and stuck with their existing cars failed to materialise. The rot started in April as Halfords forecast a tough trading environment after a sharp like for like sales drop. In September broker UBS downgraded its profits forecast and share price target, the latter by more than a fifth. At least in the past couple of weeks the stock price has bounced back above 300p, suggesting that for the time being the gloom at Halfords has been overdone

Major Economic Data: October 3rd – 7th

Monday – UK: Sept Hometrack Survey, Purchasing Mgr Index Manufacturing. EU: Sept German Purchasing Mgr Index Manufacturing. U.S.: Aug Construction, Sept ISM Manufacturing

Tuesday – UK: Sept Halifax House Prices, Purchasing Manager Index Construction. EU: Aug Producer Price Index. U.S.: Aug Factory Orders, Fed Chairman Bernanke Testifies To JEC.

Wednesday – UK: Sept Purchasing Manager Index Services, Official Reserves, Q2 GDP, Current Account. EU: Aug Retail Sales. U.S.: Sept ISM Non-Manufacturing Composite, ADP.

Thursday – UK: Bank of England Interest Rate Decision / Asset Purchase Announcement. EU: Aug German Factory Orders, ECB Interest Rate Decision.

Friday – UK: Sept Producer Price Index Output / Core EU Aug German Industrial Production. U.S.: Sept Non-Farm Payrolls, Unemployment Rate.

The Bank of England will gain further perspective for any decision over further QE measures thanks to the economic numbers due ahead of the interest rate announcement on Thursday at 12pm. These include the Sept Purchasing Manager Index for the Services sector, and both the Halifax and Hometrack surveys on the housing market, (Halifax noted a 1.2% decline in August). Otherwise U.S. events will steal the limelight, with U.S. non-farm payrolls and unemployment centre stage. A flat August figure no doubt prompted the Fed’s “Operation Twist” in September, but expectations for a 73,000 rise could further boost the recent stock market recovery if it arrives. Elsewhere Fed Chairman Ben Bernanke will tell the Joint Economic Committee of Congress how he plans to steer the U.S. away from a double dip recession.

Main Markets Outlook: 

FTSE100: 

Although the FTSE 100 has traded in a 5,000 – 5,400 range since the early August breakdown, traders have had to deal with as much confusion and volatility as seen during the darkest days of the financial markets at the time of the Lehman Brothers collapse. In particular the index has delivered bull and bear traps either side of the range, reflecting hope and despair over the unfolding Eurozone debt crisis and the U.S. credit rating downgrade. The weighting of banking and mining sectors, respectively responding to the adverse fate of the EU and precious metals prices has also been a factor. But at least going into October these negatives have been factored in to such an extent that the UK index shouldn’t stay below recent intraday sub 5,000 for any length of time. Conversely, an extended period below 5,000 would imply that the market has been painfully optimistic regarding macroeconomic factors at the start of autumn 2011. 

Sterling / Dollar: 

The idea that the BoE will implement QE2 looks increasingly likely given the recent IMF downgrade to its GDP growth targets and as the CBI reports the biggest fall in retail sales in more than a year. MPC member Ben Broadbent gave some clues when he reaffirmed the current low interest rate strategy on the back of economic weakness, although August CPI at 4.5% isn’t exactly the perfect indication of prices being under control. Nevertheless, the September MPC minutes hinted that the tide is turning in favour of further QE, and as the EU zone is a major influence and market for UK business, this is likely to come sooner rather than later. Technically, while there is no end of day close back below the 10-day moving average at $1.5623 the upside for the cross could be towards former July $1.5781 support.

Gold: 

Expectations of a parabolic move to the upside for Gold lay in tatters after the yellow metal declined from $1,816 to $1,533 in 4 days, although with all important 200-day moving average at $1,528, chartists will view the decade long rally as still intact. However, the real world explanation for the “unthinkable” fall is the move by the Chicago Mercantile Exchange to raise its margins (the amount of money per contract to hold a position) by 21%. Interestingly enough, while the price of Gold fell by more than 10% in just a few sessions, the open interest in this market was off by just 2% indicating that there may have actually been a sea change in opinion, and not just a kneejerk reaction to an “artificial” influence. Even though Silver fell even more dramatically than Gold, both have since rebounded on reported physical buying / bargain hunting, driven as ever by the ongoing Sovereign debt saga.

This Week in the Markets:

The markets this week seem to be at something of a crossroads – potentially faced with what could be the beginning of the end of the EU sovereign debt crisis, and at the same time faced with the prospect of it ballooning into something even more disastrous than had been feared at the time of the August stock market sell-off. The beginning of the end could occur when Greece finally throws in the towel and defaults on its debt, should the Germans turn their backs on any further bailout. 

Also ensuring this crisis is ever foremost in investor’s minds, the latest Moody’s downgrade of leading French banks this week is a stark reminder that Europe’s largest economy may need to stump up further bailouts all on it’s own in order to help save the Euro. Even so, it doesn’t necessarily have to be that difficult. If a Eurobond were introduced, the PIIGS nations wouldn’t then be vulnerable to the aggressive shorting of their bonds that has consistently pushed up borrowing rates and created a financial nightmare. While France and Germany have thus far rejected this relatively simple idea on the grounds it would put their financing costs up, the President of the European Commission Jose Manuel Barroso has put his weight behind launching this concept. This along with Italy passing a €54 billion austerity package and rumours that China may actually be prepared to step in and buy Italian bonds gave stock market indices the level of cheer totally at odds with the approach of the September futures and options expiry.

Closer to home, the UK banking sector took centre stage as a result of proposals from the Independent Commission on Banking that they should separate retail and investment banking arms. Even with both businesses paired as they are currently, the chief sector players are hardly flourishing, so it is difficult to see how they have the chance of success as two new rump businesses. Unsurprisingly, shares of RBS (LON:RBS), Barclays (LON:BARC) and Lloyds Banking (LON:LLOY) have all been trading at fresh year lows before the FTSE 100 bounced back from below 5,100 and Moody’s suggested that the ICB report would not trigger any fresh downgrades for UK banks.

On the domestic economic news front, the fresh rise in CPI inflation on higher utility bills came as no surprise, but there was other significant negative news for the market to digest. Unemployment revealed the highest jump in two years over the three month to July, with 77,000 out of 80,000 described as from the “youth demographic”.  Part of the explanation for this was July’s trade data, which revealed a significant fall in demand according to the Office for National Statistics.

The Week Ahead: 

Key Corporates Reporting:  September 19th – 23rd  

Monday – Finals: International Ferro Metals (LON:IFL). Interims: French Connection Group (LON:FCCN). Trading Announcement: Dairy Crest (LON:DCG).

Tuesday– No significant company reports.

Wednesday – Trading Announcement: Imperial Tobacco (LON:IMT).

Thursday– Trading Announcements: Euromoney Institutional Investor (LON:ERM), Tui Travel (LON:TT), United Utilities (LON:UU).

Friday – No significant company reports.

A relatively light week in reporting terms is offset by a diverse sector offering. The Imperial Tobacco (LON:IMT) year to date has been split in two, with the first few months highlighting a lack of momentum in developed markets offset by growing demand in Africa, Asia and emerging nations. However, although Imperial cut its forecasts for the Spanish market in June, broker Credit Suisse actually raised its forecasts for 2012 – 2013, an good call after the tobacco group managed to force price rises in the Spanish market, but the stock has been on the back foot since a Goldman Sachs downgrade to neutral on consumer demand fears 

A collapse in the share price of Thomas Cook (LON:TCG) since the July profits warning had an obvious negative read across for sector rival Tui Travel (LON:TT). However, fundamentals were underpinned by the May trading update where the group revealed it was set to deliver on full year profits expectations, and raised the dividend. The month after the Thomas Cook warning, Tui once again reassured by maintaining full year guidance and grew Q3 operating profits. What is interesting in the run up to the next trading update is that Tui shares have just bounced off the lows of the year at 140p, showing that the market is braced for the worst and if this is not forthcoming a positive re-rating may follow. 

For United Utilities (LON:UU), the headwind of price regulation has meant that profits wise the group has been running to stand still. Even the sweetener of a 30p dividend, 2% above inflation for year one of the new five year regulatory period has not been enough to propel the shares any higher than sideways since the start of the summer.

Major Economic Data: September 19th – 23rd

Monday – UK: September Rightmove House Prices. EU: July Construction Output. U.S.: NAHB Housing Market Index.

Tuesday – EU: August German Producer Prices. EU: September ZEW Survey. U.S.: August Housing Starts, Building Permits.

Wednesday – UK: Bank of England Minutes, August Public Finances, August Public Sector Net Borrowing. U.S.: August Existing Home Sales, FOMC Interest Rate Decision.

Thursday – EU: July Industrial New Orders, September Consumer Confidence. U.S.: July House Price Index, August Leading Indicators.

Friday – UK: August BBA House Purchase Loans. EU: September Eurozone PMI Composite / Manufacturing. EU: September German PMI Manufacturing / Services.

The promise from Fed Chief Ben Bernanke at Jackson Hole last month that September 21st could be the day when all is revealed regarding QE3 will have the attention of the Western World come Wednesday. Certainly, there has been little to suggest that a new round of fiscal stimulus is not needed, while the stock market seems to be rallying in anticipation of more money printing. Closer to home, the latest minutes from the Sept Bank of England meeting will reveal how many members either called for an interest rate hike, (unlikely), or a fresh round of Quantitative Easing, (likely, although the BoE will probably wait for the Fed to act first). The first indicator of house prices change in September is due from Rightmove, the year on year change last month was -0.3%. August public spending / borrowing numbers will confirm the success or otherwise of the Government’s austerity policy, currently coming under severe pressure.

Main Markets Outlook: 

FTSE100: 

The relative stability seen in the first half of September for the FTSE 100 may be as much to do with the approach of the month’s futures and options expiry at the end of last week, as any real confidence in the state of the financial markets on the part of its traders. The standout pattern from the FTSE 100 daily chart is the line of support held, that runs through 5,100 from August lows, a feature that was only broken briefly intraday. This action left the impression that only a daily or even weekly close back below 5,100 would be enough to trigger a retest of the worst levels of 2011 back below 4,800. That said, even after all the expiry related squeezing has been completed it is difficult to picture higher levels on the FTSE 100 near term than the combination of initial September resistance / 50 day moving average currently just above 5,400. 

Sterling / Dollar: 

While Euro / Dollar has fallen into a new trading range well below July intraday support at $1.3837, the Sterling / Dollar issue is rather more fudged technically speaking. Although its “safe haven” status continues, the greenback has so far this month enjoyed a general recovery, ironically in the run up to a possible round of QE3 to be announced or otherwise on Sept 20th. As a result, Sterling is currently trading either side of its July intraday low of $1.5781, as traders digest what impact a winter of discontent and industrial action may have on the marginally positive GDP data to date. Against this the latest push for CPI inflation to 4.5% implies that while the BoE may enjoy inflating away the UK’s debt, the time for taking action and raising interest rates is closer, which could limit the downside for the cross the - U.S. Dollar’s general strength notwithstanding

Gold: 

Since the latest all time high of $1,920 an ounce on September 6th, consolidation has been the name of the game for Gold, with relatively predictable price action to boot. The $100 plus retracement has been in accordance with previous pullbacks, and Gold has so far bounced off the near term uptrend line from July now at $1,800. In the event of no end of day close back below the 2-month support feature, there should be at least a retest of this month’s all time high. Fundamentally, unless or until the detail on QE3 or the feared Greek debt default plays out, then Gold will continue to take up the slack of the recent rally. The resurgence of the U.S. Dollar also has to be accounted for, as it effectively keeps a lid on the relative price of the metal given that this is the currency it is most widely quoted in.

This Week in the Markets:

Investors wishing to learn from the current market movements should at least have established by now that climbing a wall of worry is what the stock market does best, and has effectively been doing since March 2009 when it plumbed the depths below 3,500. Taking into account the mauling that blue chips sustained in August from a lethal cocktail of a U.S. debt downgrade, EU zone GDP growth plunge and the potential break up of the Eurozone, the FTSE 100 has by now climbed a veritable mountain or worry, and is already over 10% off the worst levels of last month.

Yet another example of near catastrophe aversion came with the ruling in favour of bailouts by the German Constitutional Court this week. Had the country’s contributions to bailout weaker EU nations been ruled illegal, a painful and chaotic unravelling of the European and hence Western financial systems would have been triggered, led by the banking sector and with UK players such as Barclays (LON:BARC), RBS (LON:RBS) and Lloyds Banking (LON:LLOY) in line for a battering. Even basking in the aftermath of the ruling few would argue these banks are in for a tough ride through the autumn. The spectre of the U.S. commencing litigation over the mis-selling of mortgage backed securities follows hot on the heels of the ruling against the banks over the mis-selling of payment protection insurance. It is difficult to imagine that there aren’t any other skeletons lurking in the closet.

On a macroeconomic level, a mixed picture emerged from the latest data releases. August U.S. non-farm payrolls stagnated, and while this was essentially bad news it could have been interpreted as good, by forcing the hand of the Federal Reserve to deliver QE3 stimulus. Closer to home, Sterling fell not only off the back of the ailing UK banking sector, but also on the revelation that industrial production continues to struggle. July saw a 0.2% decline vs. June, against an expected 0.2% rise. Rather like the U.S. employment numbers though, so far traders have chosen to regard this “bad” news as good on the basis that it will lead to the Bank of England extending its asset purchases to encourage growth.  What may be more difficult to address though is the apparent topping out of the UK housing market as the Halifax reported a 1.2% fall in prices, with signs even that the aftermath of the riots has taken some of the gloss off Prime London house prices. 

Nevertheless, there was some outright positive news to be found this week, although one had to look harder than usual. The Australian economy grew by 1.2% in Q2 - its fastest pace in four years, and head and shoulders above the performances of other leading Western economies.

The Week Ahead: 

Key Corporates Reporting:  September 12th – 16th 

Monday – Trading Announcement: AB Foods (LON:ABF).

Tuesday– No significant company reports.

Wednesday – Finals: Barratt Developments (LON:BDEV). Interims: Next (LON:NXT).

Thursday– Finals: Dunhelm (LON:DNLM) Kier Group (LON:KIE). Interims: Kingfisher (KGF).

Friday – Interims: Uniq (LON:UNIQ).

While the summer holidays are already well back in the rear view mirror for many stock market participants, a relatively light company diary this week gives the impression that we are not yet quite back at full swing. A trio of big FTSE100 players from the High Street report this week. Primark owning sugar producer AB Foods (LON:ABF) remains a big post Credit Crunch winner, with its discount offering as popular as ever even after the group sought to cool expectations regarding the full year outlook in April. While profits are expected in line with previous expectations, the key for any improvement to the bottom line will be the effect of rising commodity prices on margins 

Rising cotton prices along with the effect of the January VAT rise to 20% at the turn of the year were of concern at the March update from fashion retailer Next  (LON:NXT). But happily since then the group has benefitted from warm Spring weather and the Royal Wedding. This is likely to mean there will be more consumer downturn defying messages from the retailer at the latest interim update, with the tone set by the early August update on H1 where it reported a 3.2% hike in sales, with the star area of business being it’s Directory. 

DIY retailer Kingfisher (LON:KGF) was also a winner from warm Spring weather, with shares peaking above 280p at the beginning of June. But this turned out to be as good as it got, with a poor performance from the French businesses acting as a drag on the fundamentals. This leaves shares in Kingfisher some 20% off their best levels of the year, with perhaps the only support coming from unchanged broker forecasts for full year profits. This is clearly quite miraculous, given that conditions in the High Street are described as challenging to say the least.

Major Economic Data: September 12th – 16th

Monday – UK: Nationwide Consumer Confidence, RICS Housing Survey, August / Yearly CPI.

Tuesday – UK: August / Yearly / Core CPI. U.S.: Monthly Budget Statement.

Wednesday – UK: Unemployment Rate, Claimant Count, Average Weekly Earnings. EU: July Industrial Production. U.S.: August PPI, August Advance Retail Sales.

Thursday – UK: August Retail Sales. EU: August Core / CPI. U.S.: August Core / CPI, Industrial Production, Philadelphia Fed.

Friday – U.S.: University of Michigan Confidence.

It has to be said that the Consumer Price Index gauge had rather more meaning when rising prices were seen as the greatest threat to a developed economy. With the focus now on the need to avoid recession, this week’s CPI revelations from the UK, EU and U.S. may not be quite the big headline grabbers they used to be. Nevertheless, as we approach the likely dawn of a fresh bout of QE in the U.S. and UK, all eyes will be on this data - if only so we get an idea of how much money the Fed and the Bank of England can print without inflation getting out of control. UK August retail sales, (covering the riot period) will be in focus, where the level of impact on High Street names will be revealed. Given that unemployment has to be a factor in the latest bout of civil unrest, the latest jobless number and claimant count will be eyed just as keenly. A quiet week in the U.S. should end with some action after the University of Michigan Confidence number is leased, especially if it slips below the previous 55.7 level.

Main Markets Outlook: 

FTSE100: 

It may be tempting fate to say this now, but it does appear that the FTSE 100 is finding lasting support near the 5,000 level. The price action on and just after Labor Day in the U.S. bears this out, as the UK index hit a 5,086 low to start September, around 70 points above the last August low and far stronger than last month’s start below 4,800. Only an end of day close back below the 5,086 swing low would be enough to delay a retest of the initial September 5,449 high, just shy of the 5,469 50-day moving average level. In fact, a break of the current September resistance opens up the prospect for a return to former March support at 5,591, but even more intriguingly would mean that the early August “crash” was a rather cruel false breakdown. 

Sterling / Dollar: 

Despite all the talk of how well the UK’s austerity measures are going, with the UK a “safe haven” compared to the Eurozone and in the run up to QE3, Sterling has dipped back below the $1.60 on an intraday basis. Over the course of 2011, such levels have signalled a buying opportunity, but the triple top for this market over $1.65 since the Spring as well as the loss of the all important 200-day moving average at $1.6124 suggests that it may be quite a challenge for the bulls to get back in business. Only a weekly close back above the 200-day line can apparently prevent a retest of the July support $1.5781. The risk is that any sustained price action below 2-month intraday lows would deliver a lasting top in this cross, unwinding the rally from $1.40 which accompanied the election of the Coalition Government last year. 

Gold: 

With plenty of comment from City experts predicting that Gold will double or go higher still on its seemingly meteoric journey to the upside, and with $2,000 practically viewed as a done deal, the yellow metal has retreated from $1,920 this week, still some way off the big round number. With global stock markets apparently over any jitters regarding money printing to avert a double dip recession, and perhaps more immediately a German court ruling against an attempt to block the bailout out of weaker EU neighbours, it could be argued that the “weight” of such a big number on the horizon will lead to some semblance of consolidation. Technically, while Gold remains below the initial $1.912 intraday peak, there will probably be a test of a July support line at $1,770 before the fabled $2,000 plus zone materialises.

This Week in the Markets:

The final day of the Great British Summer of 2011 saw the FTSE 100 make a brave attempt to close above 5,350 and thereby prevent August becoming the worst monthly performance by leading stocks since the darkest days of the financial crisis three years ago. Of course, even if the bulls do regain control in the autumn, there are still plenty of issues to be tackled both on a corporate and macro economic level. 

The deadly combination of rising unemployment and rock bottom consumer confidence means that a long drawn out process of recovery is now generally accepted, a point driven home by August Consumer Confidence falling for a third consecutive month to its lowest level since April. Unsurprisingly, this went hand in hand with the latest data from the CBI that showed retail sales had delivered the biggest fall for more than a year.  Indeed, the only real positives over the past week have been the 0.2% positive reading for Q2 GDP and the greatest number of July mortgage approvals for 14 months. 

But clearly the mixed bag of domestic data is still good enough to support the newly acquired “safe haven” status for UK Plc, given the performance of Sterling, the housing market and the FTSE 100. Further afield the rumblings over the huge EU financial hole continue, with the German Parliament voting to enhance the scope and size of the European Financial Stability Fund, something rather at odds with the recent noises that many in Europe’s largest economy were not willing to sign a blank cheque for struggling PIIGS nations. Added to this, any further contributions from France to the EFSF could potentially risk its AAA Credit Rating. 

As far as the position of the U.S. is concerned, August was the month where the pristine AAA rating was lost, along with more than a sprinkling of national pride. The weeks since the S&P move have seen a degree of regrouping and reshuffling, with traders taking a positive view of the likelihood of further QE3 in mid September, rather than focusing on the divisions at the FOMC and plunging August consumer confidence. And the fact that the conflict in Libya, (which had appeared to be mired in stalemate) had by the end of the month become something of a victory run for anti-Gaddafi rebels has also resulted in further stability.

The Week Ahead: 

Key Corporates Reporting:  September 5th – 9th

Monday – Finals: Kofax (LON:KFX).

Tuesday– Finals: Genus (LON:GNU). Q1: Ashtead (LON:AHT).

Wednesday – Finals: Thorntons (LON:THT). Trading Announcement: Supergroup (LON:SGP).

Thursday– Finals: Redrow (LON:RDW) Interims Morrison Supermarkets (MRW), Premier Farnell (LON:PFL). Trading Announcements: Atkins (LON:ATK), Home Retail Group (LON:HOME).

Friday – Finals: JD Wetherspoon (LON:JDW).

Leading companies on the agenda this week are skewed towards the High Street, an area which has had everything from a VAT hike to riots to contend with in 2011. Supermarket Morrison’s (LON:MRW) is at the lower end of the market, but is viewed as a winner for customers trying to count their pennies. The Royal Wedding effect in April powered progress ahead of rivals, as total sales excluding fuel during the quarter to May 1 grew by 4.2% from the same period a year ago. When this is added to the group’s expansion plans, share buyback and the fact that falling consumer sentiment over the summer will have tightened purse strings still further, we are likely to see another positive update from the grocer. 

In fundamental contrast, Argos owner Home Retail Group (LON:HOME) is a real loser when viewed against the revolution in internet shopping, with the catalogue shopping experience now seeming rather quaint and old fashioned. The April profits warning followed by an 8.1% quarterly sales decline in June triggered a sharp gap down for the share price, and while there may be short covering ahead of the September Trading Announcement, even the recent purchase of the Habitat chain is unlikely to provide any additional recovery drivers in the current High Street environment compared to the FTSE 100 as a whole. 

Trendy fashion chain Supergroup (LON:SGP) also updates the markets. After a glittering start to its life on the stock market, the 50% May / June decline in the stock bought traders down to earth with a bump as the company bungled the launch of the summer range. But provided that there are no further unpleasant surprises, interest in the big 2011 growth story that is Supergroup could be rekindled in the run up to Christmas

Major Economic Data: September 5th – 9th

Monday – UK: Aug Services PMI. EU: Aug PMI. EU: Sept Sentix Investor Confidence. EU: July Monthly Retail Sales.

Tuesday – EU: Q2 GDP, July German Factory Orders. U.S.: Aug ISM Non Manufacturing Composite.

Wednesday – UK: July Manufacturing / Industrial Production. EU: July German Industrial Production. U.S.: Beige Book Survey.

Thursday – UK: Aug NIESR GDP, Est Bank of England Interest Rate Decision. EU: ECB Interest Rate Decision. U.S.: July Trade Balance / Consumer Credit, Federal Reserve Chairman Bernanke addresses Economics Club in Minnesota.

Friday – EU: German Aug Yearly / Monthly CPI. UK: Aug Monthly / Yearly Producer Prices Input / Output, July Visible Trade Balance. EU: July PPI. U.S.: July Wholesale Inventories.

Presumably the Bank of England will be too scared to even hint when the next interest rate rise might be in the wake of the August financial markets meltdown. For the ECB, after a brutal month in which it had to support the EU dream by buying Spanish and Italian bonds, the early summer aggression in fighting inflation with higher interest rates now looks misplaced. In consequence, some backtracking is expected at the news conference after the “no change” announcement on September 8th.  Elsewhere, the NIESR will guesstimate the UK GDP number over the past quarter, a thankless task given that continental Europe – especially Germany, is on the cusp of recession. In the U.S., the Federal Reserve’s Beige Book survey and its Chairman’s Economics address in the run up to any QE3 later this month will take centre stage.

Main Markets Outlook: 

FTSE100: 

During the second half of August, the FTSE 100 daily chart clearly showed the formation of the right hand side of a W shaped reversal formation – one of the stronger technical buy signals. The implication of such patterns is that a break of the middle of the W is regarded as a buy signal, one that could signal a fresh leg higher equivalent - in this instance to the near 500 point gains off the intraday low of August so far at 4,791. Of course, this is largely at odds with the multiple technical headwinds that traders / investors are grappling with going into the autumn, but even so, only sustained price action below the 10-day moving average on the index, still well below 5,200, would be enough to trigger a fresh sell signal. 

Sterling / Dollar: 

Expectations of another round of QE from Fed Chairman Ben Bernanke at Jackson Hole should have seen Sterling making healthy progress against the U.S. Dollar. However, while this was true to a limited extended with a spike towards $1.65, the Fed Chief effectively dampened down expectations of stimulus in the most effective way possible – suggesting that the situation is not dire enough to require it. At the same time the prospect of any action has also been delayed to the middle of September meaning that those short of the greenback would be looking to cover their positions. But at least the 200-day moving average continues to be supportive and rise through $1.61 on the daily chart of Pound / Dollar, with an uptrend line from the beginning of the year at $1.62 currently holding well. At least for now the ongoing $1.60 - $1.65 range appears to be one that most can set their watches to. 

Gold: 

If equity and currency markets finally shook off double dip recession fears and reverted to summer mode, Gold this time round became the Jitterometer of choice. The 3-day decline of $200 from the all time intraday peak of $1,912 on August 23rd was followed by a $150 bounce that was nearly as swift. This action suggests not only that the bears could have their work cut out in coming weeks, but that most of the “sensational” predictions regarding how high this market can go could come to pass. Clearly the $2,000 an ounce level is the one that makes the most logical and emotive target to shoot for by the end of 2011, but would-be buyers should watch for the type of $100 plus flash declines seen all the way up in the decade long rally.  While the 50-day moving average at $1,687 is held as support, the upside for Gold points towards a July price channel top of $1,950 on a 4-6 week timeframe

This Week in the Markets:

After the weeks of uncertainty and turmoil that have thus far dominated August, this week saw the financial markets recover some lost ground and seemingly recover a degree of stability. 2011 has certainly been one of those years when a well-deserved August holiday would also have been well timed and perhaps the best play for those traders less than inclined to short equities and EU bonds. Indeed, perhaps the worst aspect of the 20% at worst declines for leading indices was the uncertainty over the exact causes. 

A mixture of U.S. recklessness over a default or otherwise, followed by the loss of its AAA Credit Rating was certainly the initial driver. Ultimately though, it does appear that the sheer anticipation of a double dip recession in all its grim havoc-wreaking glory after the initial 2007 – 8 crash prompted the majority of the selling, driven by news that French and German economies had flatlined during Q2. And given that the Eurozone is so reliant on the ability of these two economies to bailout out their weaker Southern European counterparts, the prospect of France and Germany falling into a double dip recession is at present a doomsday scenario that most in the markets are trying to ignore. 

So going into the final full week of August, the markets only had one real plus point on the horizon, that of a message of salvation and QE3 from Federal Reserve Chairman Ben Bernanke in his Jackson Hole address on August 26th. Such an injection of stimulus may have prompted stocks to pause on the downside, but the obvious problem is that with QE1 and QE2 only delivering mixed results at best, any QE3 is likely to lift the U.S. back to modest growth at best, but at the same time triggering higher inflation. This factor alone explains the spectacular late August rally for Gold, as it hit $1,900 oz.  It certainly looks as though sparks will be flying once the bulk of the trading community gets back behind its desks in the first week of September. 

In the UK, still in something of a post riots state of flux, there was rather less drama, as befits its newly acquired “safe haven” status. This point was underlined by a surprise development at Cambridge based software giant Autonomy (LON:AU.), a company recently unloved and under rated by domestic investors for the best part of a decade, but apparently just the ticket for troubled PC focused Hewlett Packard (LON:HPQ) of the U.S. as it looks to make an exit from computer hardware and up into the new growth zone of cloud computing. The £6bn offer for Autonomy arguably saved the FTSE 100 from sustained price action below 5,000, and also highlighted that amidst all the bearishness, value lies just beneath the surface – a view also borne out by the sharp rebound in selected financials and banks share prices in the run up to Jackson Hole.

The Week Ahead: 

Key Corporates Reporting:  August 29th – September 2nd

Monday – UK: Bank Holiday.

Tuesday– Interims: Afren (LON:AFR), Bovis Homes (LON:BVS), Bunzl (LON:BNZL), Computacenter (LON:CCC). Lamprell (LON:LAM), Perform Group (LON:PER).

Wednesday – Interims: Bwin.party Digital Entertainment (LON:BPTY), JKX Oil & Gas (LON:JKX).

Thursday– Finals: Go Ahead Group (LON:GOG), Hargreaves Lansdown (LON:HL.), Hays (LON:HAS). Interims: Restaurant Group (LON:RTN) Trading Announcements: Punch Taverns (LON:PUB), Spirit Pub Company (LON:SPRT).

Friday – No major companies reporting.

Events in the corporate area this week are somewhat curtailed by the August Bank Holiday and the usual winding down which occurs in the diary and in newsflow at this time of year. Even so FTSE 250 IT infrastructure services provider group Computacenter (LON:CCC) is at the Zeitgeist following the recent bid action associated with Hewlett Packard’s (LON:HPQ) bid for UK software group Autonomy (LON:AU.). The mooted £6bn deal was clearly a boost for all members of the tech sector with a positive spill over in sentiment and share price initially noted for Computacenter. But with the domestic performance badly hit by Government spending cuts, all eyes will be on the impact on group performance overall. 

Bus and rail group Go Ahead Group (LON:GOG) seems to be a genuine winner from the financial crisis slowdown thanks to the Great British public opting for public transport services and ditching cars to save on spiralling fuel costs as revealed in both May and June updates. February also saw Go Ahead raising its full year profits guidance, and this level of confidence will probably explain why the shares have recently recovered to sit just 10% off the best levels of the year towards 1,600p – a great outperformance compared to the FTSE 100 as a whole. 

A less happy scene is presented by financial services group Hargreaves Lansdown (LON:HL.). This relatively new FTSE 100 constituent has been undermined by changes from the Financial Services Authority in banning payments by product providers to platforms as cash rebates to consumers. While Hargreaves Lansdown suggested that this would have little effect on the business, the general decline for the stock market since the FSA announcement at the beginning of August and concerns over capital inflows to the wealth fund manager stalling have caused the shares to fall by more than a fifth

Major Economic Data: August 29th – September 2nd

Monday – EU August German CPI, U.S. July Personal Income, Personal Spending.

Tuesday – Mortgage Approvals, EU August Euro-Zone Consumer Confidence, U.S. August Consumer Confidence, Federal Reserve Minutes.

Wednesday – UK GfK Consumer Confidence Survey, EU August German Unemployment Change / Rate, EU August Unemployment Rate, CPI estimate, U.S. July Factory Orders, August ADP Unemployment Change.

Thursday – UK August PMI Manufacturing EU, Q2 German GDP, EU August German PMI Manufacturing, U.S. July Construction Spending,  August ISM Manufacturing.

Friday – EU July PPI, U.S. Aug Non-Farm Payrolls, Unemployment, Average Hourly Earnings.

There are few UK economic pointers to start Autumn, with only August PMI manufacturing, GfK Consumer Confidence and Mortgage Approvals on tap to make an impact. In contrast the EU provides a retake on the all-important German GDP position, with German and EU unemployment figures also set to make a splash, although they will of course play second fiddle U.S. non-farm payrolls, the biggest stat on the calendar. The July figure of 117,000 was largely overlooked even though it was better than expected, and with the August number expected to weigh in at 95,000, if correct it will be mildly bullish, but not enough to prevent siren calls for further measures to boost the economy. With this in mind, observers will be looking for any of the already well publicised split in at the Federal Reserve between Chief Ben Bernanke and members of his panel over the past course of policy and what should be done next.

Main Markets Outlook: 

FTSE100: 

While the FTSE 100 remains above 5,000, it is not in “emergency” mode even if traders remain jittery under the surface. The problem is whether any intermediate calm and stability is merely an opportunity to go short into strength, or whether it is actually the start of a sustained rally? This was the case in November, March and even June, which all delivered V shaped rebounds from lows, leaving the bears with burnt fingers. This could very well be the situation again – especially the general view that stocks at current levels are “cheap.” The technical picture helps too: August to date has delivered five intraday bounces at 5,000 and just below, with the lowest intraday point a higher low by a single point vs. the July 2010 intraday floor at 4,791.  At this stage it seems logical to assume that while there is no end of day close back below 5,000, the upside for the UK’s blue chip index will be the 5,377 mid August peak of 5,377. 

Sterling / Dollar: 

The apparent build up to QE3 should in theory represent “party time” for Sterling bulls, particularly as UK Plc seems to have positioned itself as a relative safe haven – semi detached at least from the woes in the Euro Zone. At least while the Union Jack is backed by the much sought after AAA rating, foreign investors do not seem to be too concerned either by inflation near 5% or mammoth monthly trade and spending deficits. Ironically, the latest July public sector borrowing number impressed, as higher taxes ensured an impressive turnaround to £20m from a whopping £3.5bn in July 2010. This will however be difficult to maintain given the lack of any let up in the social security bill. From a charting perspective, the cross looks set to “slow burn” higher as the likelihood of another round of easing in the U.S. gives it the whip hand, and the longer price action remains above a broken May resistance line at $1.64, the greater the prospect of a year to date intraday high of $1.6746 is during September. 

Gold: 

The abject panic selling that characterised the great August 2011 crash (as stocks and markets flirted with bear market status 20% off 2011 peaks), was in marked contrast to Gold, the market that has eclipsed all others. The hitherto “exponential” rise for the yellow metal has put on over $400 trough to peak from the start of July hitting a best level intraday at $1,923 on August 23rd. Technically the metal Gold is well into overbought territory with bearish divergence as far as the RSI, so be on guard for the all too familiar $50 - $100 retracements this market has served all the way up. Even so, with U.S. QE3 and the Eurozone sovereign debt crisis, it is difficult to view any declines for Gold as anything other than dips to buy into.

This Week in the Markets:

It now appears that the one-week maelstrom in the financial markets in the week of the U.S. Debt Ceiling agreement and subsequent S&P downgrade has disappeared nearly as quickly as it arrived. Many in the market still don’t know whether they should still be ducking for cover or filling their boots with high yielding blue chip stocks. Now with the FTSE 100 in the low 5,000s, the Sage of Omaha – Warren Buffett says he has been enjoying the Summer Sale in the stock market to add to his holdings. Others like George Soros and many leading U.S. CEOs have apparently been doing the same. 

But although some of the fundamental dust has settled and ratings agency Fitch have thoughtfully reiterated the AAA status of the world’s largest economy, in some ways the rebound for stocks seems a little too good to be true. Part of the recovery was based on the ECB buying the next line of toxic bonds in the EU zone – those of Italy and Spain, widely regarded as the next two nations in line for a bailout. The difference between bailing out Greece and its larger PIIGS peers is that this time massive amounts of cash will be needed. This would of course be acceptable if the main paymasters in France and Germany were enjoying decent GDP growth. However with flat Q2 growth in France and a paltry 0.2% from Germany compared to 0.5% previously, these numbers should have shaken the markets much more than the U.S. AAA debacle. Initially, hopes that a Eurobond might resolve the Euro crisis ensured a degree of stability, but given the relatively low volume and jittery holiday conditions it is easy to see wild indices swings continuing until the first week of September when most players return. And the fact that Merkel and Sarkozy not only blew out the Eurobond idea, but also threw a financial transaction tax into the mix, (just about the only thing that most people trading the markets can agree on currently), will no doubt act as a further negative influence in the short term. 

Happily, despite the recent rioting, the UK stock market has been sitting comparatively pretty, outperforming its continental European rivals, and being the proud owner of Sterling - a well regarded currency that cannot be kicked out of any monetary system. Not that the UK is without hiccups, as the 4.4% CPI number will see Bank of England Governor Mervyn King pick up his pen for the seventh time and write to Chancellor George Osborne to explain why the 2% limit has been exceeded. Given that CPI is predicted to hit 5% before the end of the year, the BoE Chief will need to keep plenty of stationary to hand. 

On the corporate front the big splash came at the start of the week as recruitment agency Michael Page International (MPI) reported a slump in H2 profits, resulting in a 10% share price decline as its key banking sector experienced a slowdown, a point underlined by recent 5 figure redundancy figures by leading companies such as Lloyds (LON:LLOY) and HSBC (LON:HSBA)

The Week Ahead: August 22nd – 26th 

Monday – Interims: Amlin (LON:AML), Essar Energy (LON:ESSR), Petrofac (LON:PFC).

Tuesday– Interims: Antofagasta (LON:ANTO), Cairn Energy (LON:CNE), G4S (LON:GFS), John Wood Group (LON:WG.), Persimmon (LON:PSN).

Wednesday – Finals: BHP Billiton (LON:BLT) Interims Admiral Group (LON:ADM), Carillion (LON:CLLN), Serco Group (SRP), Tullow Oil (LON:TLW), WPP (LON:WPP).

Thursday– Interims: Diageo (LON:DGE) Interims: Aggreko (LON:AGK), AMEC (LON:AMEC), Glencore International (LON:GLEN), Hunting (LON:HTG), Kazakhmys (KAZ), Premier Oil (LON:PMO).

Friday –  Interims: Yule Catto (LON:YULC).

Mining giant BHP Billiton (LON:BLT) has been busy over the past month, with the push into the oil & gas sector via the $12.1bn (£7.5bn) purchase of Texas and Louisiana-focused Petrohawk. Later in July Billiton reported another iron ore output record for the year ended 30 June, and said that annual production records were achieved across four commodities and ten operations as a result of its strategy to invest throughout the economic cycle. However, this seemed to leave the market somewhat confused with Citigroup toasting a solid quarter with a buy rating and a 3,000p target, while Credit Suisse reduced its rating on BHP to neutral albeit with a higher price target than Citigroup at 3,166p. 

Diageo’s (LON:DGE) position in the beverages industry may have been overshadowed by the ongoing SABMiller (LON:SAB) & Foster’s takeover action, but the expansion into Turkey in order to offset slowing European sales was a well regarded move by group to start 2011. Indeed, despite the sleeping giant impression that the group gives off, Q1 2011 did actually deliver 7% organic sales growth as improved performances in Russia and North America outweighed the sluggish showing in Europe. But it is likely that the shares will only start to head back to year highs if Diageo can convince the market that it is able to deliver growth in emerging markets such as China and Africa. 

India focused integrated energy group Essar Energy (LON:ESSR) came to the London market last year, and reports interim results this week. Unfortunately the share price has halved since the 600p plus peak in December, and with net debt in Q1 2011 rising to $5.5bn from $4.75bn there will have to be a significant improvement in energy generation, (certainly more than the 10% reported last time) to convince a sceptical market

Major Economic Data: August 22nd – 26th

Monday – U.S.: July Chicago Fed Nat Activity Index

Tuesday – UK: July BBA Home Loans. EU: Germany August ZEW Survey, August Euro-Zone Consumer Confidence. U.S.: July New Home Sales

Wednesday – EU: Aug Euro-Zone Purchasing Mgr Index Composite, Aug Germany IFO - Bus Climate Survey. U.S.: July Durable Goods Orders, June / Quarterly House Prices Index

Thursday – UK: August Nationwide House Prices

Friday – EU: Germany GfK Consumer Confidence Survey, Q2 GDP. U.S.: Q2 GDP, Personal Consumption, University of Michigan Confidence Survey.

Observers will be looking to see whether the near 20% dip in the stock market during the first week of August after the U.S. Credit Rating debacle will have an impact on the sentiment surveys such as the IFO / GfK in Europe and the University of Michigan in the States. The latter was already at rock bottom levels - the preliminary number released earlier in the month showed the third worst figure in the history of the survey. The latest data from the Eurozone, is equally important, especially as German GDP is only 0.1% away from recession. In this regard the UK and U.S. GDP numbers on Friday 26th will also be on everyone’s radar. Key to lasting economic recovery in both in the UK and the U.S. is the housing market. The Nationwide reports on UK property, and observers will be looking to see if the survey backs up a sharper drop in prices noted by Rightmove in the ultra strong London market.

Main Markets Outlook: 

FTSE100: 

It is likely that the FTSE 100 price action since the August 2011 intraday low of 4,791 was made, (compared to the 4,790 low of July 2010) will have many traders scratching their heads. Bears of the index were expecting a retest of the sub 4,800 zone or even a break lower, while at 500 plus points off the lows, bulls have missed out on the best of the blue chip bargains. Even so, if there is no subsequent dive to 4,800, this would suggest that the great August 2011 stock market dive, (one of the sharpest ever) was just a vast rug pulling event of volatility for its own sake during the quiet summer lull. The question still remains how the many smoke without fire events that had been feared, (like the alleged collapse of SocGen) have somehow been defused behind the scenes. In the meantime while the FTSE 100 holds above the 5,262 neckline resistance zone made the day after this month’s low, further progress towards the next price action zone from March at 5,600 is on the cards. 

Sterling / Dollar: 

Among the market chaos, Sterling / Dollar traded a $1.61 - $1.64 range, which is only slowly giving way to the upside following the Federal Reserve’s promise to keep rates on hold for as much as 2 years at record low levels, and after the “surprise” rise in UK inflation in July. And ironically, following the Fitch reiteration of the U.S. AAA rating, the U.S. Dollar is heading back to the lower end of its recent ranges vs. Sterling. Now, while the overall uptrend since the start of the year remains unbroken and there is no sustained break of the rising 200-day moving average at $1.61, the UK’s status as a “safe haven” even in the aftermath of the inner city rioting will remain in place as far as its currency is concerned, and in the run up to a much delayed interest rate hike to curb rising prices coming in no earlier than Q1 2012. 

Gold: 

Despite all the stock market turmoil, Gold has surged $100 - $150 in a matter of days, followed by retreats of $50 - $100, with the usual result being a trail of higher highs and lows. The fact that the falling stock market, (one of the original triggers to push investors into Gold) has rebounded seems to have made little difference in the wake of the latest stunning halt to GDP growth in Germany over the past quarter. This implies that the ability of Europe’s strongest economy to save the Eurozone is increasingly in doubt, and this when combined with the blame game in the U.S. over the political haggling which led to the loss of the AAA rating from S&P, the yellow metal remains fully underpinned on fundamentals. Technically, a retest of the initial August peak at $1,814 is on the cards while there is no end of day close back below the 10-day moving average now rising at $1,728.