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Market Report: 14 August 2017

There was very little in terms of economic data releases of much significance to drive market sentiment last week. We had UK Industrial and Manufacturing data that were both slightly better than expected while the US inflation data rose marginally from the previous month but still remains worryingly low. Instead most attention went to the political tensions building up between North Korea and the rest of the world. Donald Trump’s rhetoric on the matter did nothing to calm markets and as a result the developed world equity markets had their biggest downward movement for some weeks, sending the Vix volatility index up by roughly 50%, albeit off its ultra-low levels and still below its longer term average. Safe haven assets such as gold, treasuries and the Japanese yen became more appealing and strengthened.

No doubt the North Korea situation will still be a key driving force this week as well as neither the North Koreans or Trump seem keen on toning down the war of words. However, this week we do have more material economic data releases and the week started off with very good Q2 GDP from Japan, up 1% versus 0.4% in Q1 and well ahead of expectations. Economists suggest this was mostly down to consumer consumption some of which may be fuelled by the wealth effects of a high stock market.

From the UK, we have inflation data being published on Tuesday with the annual rate expected to come in at 2.6%, the same as the previous month and still ahead of the Bank of England’s desired 2% target. The on Wednesday we will have the latest jobs data where the unemployment rate is expected to stick to a lowly 4.5% but the focus will be on the meagre rate of wage growth which is set to be below the rate of inflation again and further ignite the debate on falling real incomes. Further evidence of the pressure on consumer will be published on Thursday with July’s Retail Sales figures, expected to drop from the 0.6% growth rate in June which were bossed by very good weather, to 0.3%.

Outside the UK, we have the second estimate of Eurozone GDP and the inflation rate for July and from the US we have Industrial and Manufacturing production data which could show a modest slowdown in the latest month.

Author: Helal Miah, Investment Research Analyst

The Week Ahead

Important economic releases & events this week:

Date Country Event Period Actual Consensus Prior
Mon JP GDP SA Q/Q (Preliminary) Q2 1.0% 0.60% 0.40% R
Mon JP GDP Y/Y (Preliminary) Q2 2.0% 1.3% 1.5% R
Mon CN Industrial Output NSA Y/Y JUL 6.4% 7.1% 7.6% R
Mon CN Industrial Output (Cumulative) Y/Y JUL 6.8%   6.9% R
Mon CN Retail Sales NSA Y/Y JUL 10.4% 10.8% 11.0%
Mon EUZ Industrial Production SA M/M JUN   -0.50% 1.3%
Mon EUZ Industrial Production WDA Y/Y JUN   2.9% 4.0%
Tue JP Industrial Production SA M/M (Final) JUN   1.6% 1.6%
Tue JP Industrial Production M/M (Final) JUN   4.9% 4.9%
Tue JP Retail Sales NSA Y/Y (Final) JUN   2.1% 2.1%
Tue UK CPI Core NSA Y/Y JUL   2.5% 2.4%
Tue UK CPI EU Harmonized NSA M/M JUL   0.0% 0.0%
Tue UK CPI EU Harmonized NSA Y/Y JUL   2.6% 2.6%
Tue UK Retail Price Index NSA M/M JUL   0.10% 0.20%
Tue UK Retail Price Index NSA Y/Y JUL   3.5% 3.5%
Tue US Retail Sales SA M/M JUL   0.40% -0.20%
Wed UK Claimant Count Change SA JUL   5.0K 5.9K R
Wed UK Claimant Count Rate JUL     2.3% R
Wed UK Employment Change SA JUN   100.0K 175.2K
Wed UK ILO Unemployment Rate 3-M JUN   4.5% 4.5%
Wed UK Average Weekly Earnings excl. bonuses 3-M/Y JUN   1.9% 2.0%
Wed UK Average Weekly Earnings incl. bonuses 3-M/Y JUN   1.8% 1.8%
Wed EUZ GDP SA Q/Q (Second Preliminary) Q2   0.60% 0.60%
Wed EUZ GDP SA Y/Y (Second Preliminary) Q2   2.1% 2.1%
Thu UK Retail Sales SA M/M JUL   0.30% 0.60%
Thu UK Retail Sales SA Y/Y JUL   1.4% 2.9%
Thu EUZ CPI Core NSA Y/Y (Final) JUL   1.2% 1.2%
Thu EUZ CPI NSA M/M JUL   -0.50% 0.0%
Thu EUZ CPI EU Harmonized Y/Y (Final) JUL   1.3% 1.3%
Thu US Capacity Utilization NSA JUL   76.7% 76.6%
Thu US Industrial Production SA M/M JUL   0.30% 0.39%
Thu US Manufacturing Production M/M JUL   0.15% 0.19%

Companies reporting this week:

Date Ticker Company Name Event Description
Mon CKN-GB Clarkson Plc Q2 2017 Earnings Release
Tue HL-GB Hargreaves Lansdown Plc Q4 2017 Earnings Release
Wed LOOK-GB Lookers Plc Q2 2017 Earnings Release
Wed ADM-GB Admiral Group Plc Q2 2017 Earnings Release
Thu HIK-GB Hikma Pharmaceuticals Plc Q2 2017 Earnings Release
Thu KGF-GB Kingfisher Plc Q2 2017 Sales and Revenue Release - Trading Update

Author: Helal Miah, Investment Research Analyst

Glossary

PMI: Purchasing Managers Index

CPI: Consumer Price Index

GDP: Gross Domestic Product

BOE: Bank of England

ECB: European Central Bank

FOMC: Federal Open Market Committee

BOJ: Bank of Japan

ISM: Institute for Supply Management

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