6th May 2008
Week Just Gone
Equities continued their strong advance, boosted by signs that the US economy was slowing by less than first feared. The US Federal Reserve cut interest rates by 0.25% to 2%, indicating that rates could now stay on hold for some time.There were concerns over a further fall in house prices in the US and UK, with the latter now showing consistent falls over the past year. But these were outweighed by data showing that jobs and growth in the US weren't as dire as predicted. Further central bank injections of liquidity helped sentiment, but a Bank of England report suggesting the worst of the credit crunch was over was treated with scepticism.
The better mood was reflected in equities rising to their highest levels since early January. Indices in the US and Japan rose by around 1%, the FTSE and Dax faired better, ending the week 2% higher. The US Dollar was flavour of the month and consequently oil and gold both fell over the week.
FX
The slide in the Euro gathered momentum, partly due to demand for the Dollar. The Euro ended the week at EURUSD 1.5410 and EURGBP 0.78. Sterling weakened marginally against the Dollar to $1.9720.
Commodities
Oil touched a new high on Monday as worries over disruption to supplies continued. But the stronger Dollar hit commodity prices, sending Brent Crude a couple of Dollars lower on the week, at $114.56. Gold fell to a 4-month low and is now struggling to hold support at $850.
Corporate
A string of earnings announcements nudged the market better, despite further poor news from the banking sector. Siemens, SAP, General Motors, Procter & Gamble, BSkyB and Kellogg were just some of the companies that beat analyst expectations. On top of good results, an optimistic outlook allowed Whitbread to raise their dividend by 21%. BP and Royal Dutch Shell benefited from the soaring oil price, but their US counterpart, Exxon Mobil failed to meet expectations. HBOS confirmed its £3 billion rights issue, Countryside Financial results were even worse than expected and Deutsche Bank made its first quarterly loss in 5 years. On the M&A front the prospect of chocolate chewing-gum improved as Mars made an offer for Wrigleys. Hornby made a model takeover of Corgi and Xstrata hitched up its skirt and said, "Come and get me, if the price is right." Microsoft lost patience and waved goodbye to Yahoo. Smith & Nephew shares tumbled on the discovery that a subsidiary may have lied about its sales figures.
Week To Come
Although attention will be focused on interest rate decisions from the UK and European central banks, the consensus is for rates to hold steady. There's little in the heavyweight division of economic data this week and the US earnings season is starting to trail off. Look out for earnings from BAT, Unilever, HSBC, Lloyds TSB, Deutsche Telecom and AIG. In Ireland watch out for reports from United Drug, Anglo Irish Bank, Smurfit Kappa and C&C.
Monday
Public HolidayTuesday
Economic Indicators
UK: 09.30 Services PMI
IRE: 08.30 Services PMI
EU: 09.00 Services PMI, 10.00 Producer Prices
Results
UK: HSBC, Lloyds TSB, Rangold Resources quarterlies, Xstrata trading update
IRE: United Drug interims
EU: Adecco, Adidas, Hypo Real Estate, Lagadere, Swiss Re, UBS
US: Cisco Systems, Disney, Fannie Mae
Wednesday
Economic Indicators
UK: 00.01 Nationwide Consumer Confidence, 09.30 Industrial & Manufacturing Production, 10.30 BRC Retail Prices
EU: 10.00 EU Retail Sales, 11.00 German Factory Orders
US: 13.30 Quarterly Non-farm Productivity, 15.00 Pending Home Sales, 15.30 Oil Inventories
Results
UK: Easyjet interims, BAT, Intercontinental Hotels, Liberty quarterlies, Cobham, Rolls Royce, WSP trading updates
IRE: Anglo Irish Bank interims, CRH agm
EU: Aegon, Alstom, Cap Gemini, Commerzbank, EDF, France Telecom, Henkel, Lafarge, Swisscom, Total
US: Devon Energy, Marsh & Mclennan, News Corp
Thursday
Economic Indicators
UK: 00.01 NIESR April GDP est, 12.00 Bank of England interest rate decision
IRE: 11.00 CPI
EU: 07.00 German Trade Balance, 11.00 German Industrial Production, 12.45 European Central Bank interest rate announcement, followed by press conference at 13.30
US: 13.30 Weekly Jobless
Results
UK: Lonmin, Sage interims, Unilever quarterlies, Close Bros, Costain, International Power, Kazakhmys, Next, Old Mutual, Provident Financial, RSA trading updates
EU: Deutsche Telecom, Munich Re
US: American Insurance Group (AIG)
Friday
Economic Indicators
IRE: 11.00 Industrial Production
EU: 07.45 French Industrial & Manufacturing Production
US: 13.30 Trade Balance
Results
UK: Cattles
IRE: C&C finals, Smurfit Kappa quarterlies
EU: Ahold, Linde, Telecom Italia
Press Roundup
There wasn’t much excitement in the weekend press ahead of this week’s interest rate decisions in Europe and the UK. The general feeling was that there will be no change in either rate. However, the Sunday Times reflects the tight vote of its pretend Monetary Policy Committee, which voted 5-4 for no change.
Barclays is under growing pressure to explain its capital raising strategy. The bank’s capital ratios mean that it will have to raise money; the question is whether it will go cap in hand to its largest sovereign wealth fund shareholders, rather than launch a discounted rights issue. In contrast, the Scotland on Sunday reports that Lloyds TSB, who report on Tuesday, have a healthier balance sheet and are in no need of a rights issue.
The Independent reports on a kick up the backside for New Star; the investment management company could potentially lose £1.7 billion of assets if performance doesn’t improve. The Family Investments Company is said to be getting itchy feet and has looked at the possibility of moving its funds.
The Sunday Telegraph reveals Wal-Mart as the sneaky whistle-blower behind the investigation into price fixing of supermarket goods. Wiley Wal-Mart has spilled the beans on its competitors whilst guaranteeing immunity from any fines for its Asda stores.
The bidding deadline for British Energy is fast approaching, and the Scotland on Sunday reckons Gaz de France is back in the race. The paper also expects a few late contenders from the US to pitch up against the likes of EDF, RWE and Centrica. The Sunday Times reveals a tie-up between Centrica and EDF to make an £11 billion bid, though both sides are keeping their options open.
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