The Monday Report

This story features OZ MINERALS LIMITED, and other companies. For more info SHARE ANALYSIS: OZL

By Greg Peel

Greece has been out of the headlines since a tenuous government was able to be formed post the second election, but we can start worrying again about our old friend the original euro-crisis catalyst this week as troika officials descend on Athens to assess whether the country has met the commitments required in order to be granted its next tranche of bail-out funds. These assessments never go smoothly, and just to add fuel to the fire, the ECB has at least temporarily refused to accept restructured Greek bonds as collateral. The move is seen to be one of turning the screws to ensure commitments are met.

Indeed Europe in general has been out of the headlines for a couple of weeks but we all knew it could be no more than a lull, and sure enough on Friday night the Spanish state of Valencia approached the Spanish government for a bail-out. Spanish bond yields jumped again as a result, and the ten-years are back above 7%. The selling came despite the ratification by the eurozone finance ministers of the proposed E100bn loan to Spanish banks, although that was always expected to be a formality.

So Friday night was a risk-off session. The euro fell to below US$1.22 and the US dollar index shot up 0.75% to 83.50. US bonds were rushed once more, with the ten-year yield falling 6bps to 1.46% – just a tick above the all-time low.

With Europe back in the frame it was going to take something pretty special from the US earnings season to provide a counter, but it wasn't to be. The highlight of the session was General Electric (Dow) but the conglomerate managed only to match expectations with its profit reduction, while Microsoft (Dow), which reported on Thursday evening, failed to inspire.

The theme for the season to date is one of missing on the revenue line, and nowhere was this more apparent than in Friday night's result from burrito chain Chipotle. Chiplote posted a big slowdown in earnings growth and saw its shares trashed by 21%, while on the other side of the ledger, flash memory specialist SanDisk beat the Street for a 10% gain.

There was not enough on the US domestic front to stem the tide of the renewed risk-off trade, and as such the Dow fell 120 points or 0.9%, the S&P fell 1.0% to 1362 and the Nasdaq lost 1.4%.

A risk-off session is bad news for commodities, hence base metals all fell around 2% in London. Brent crude lost US97c to US$106.83/bbl while West Texas fell US$1.10 to US$91.56/bbl. Gold managed to put on its safe haven hat for once, rising a couple of dollars to US$1584.00/oz despite the big jump in the dollar index.

And speaking of safe havens, once upon a time if the US dollar index were to jump 0.75% you could kiss the Aussie goodbye, but on Friday the Aussie only slipped  0.25% to US$1.0400.

The SPI Overnight fell 22 points or 0.5%.

We might as well settle in now for another week of Europe-watching. The troika's visit to Athens will no doubt provide headlines but it is Spain providing most of the angst at present. With the Spanish yield once again above 7%, it's time again for European officials to react, but as to how they will is anyone's guess.

This week will also bring the wider global economy into focus again, with flash estimates of manufacturing PMIs due for China on Tuesday and both the eurozone and US on Tuesday night. The influential German IFO business sentiment survey will be released on Wednesday night and the UK will provide its first estimate of June quarter GDP just as the torch is making it's final push towards the cauldron.

Housing will again be under the spotlight this week in the US. Tonight we have the Chicago Fed national activity index, then on Tuesday its the FHFA house price index along with the Richmond Fed manufacturing index and the flash PMI. On Wednesday it's new home sales, Thursday pending home sales along with durable goods, and on Friday the US will also provide a first estimate of June quarter GDP. Economists are expecting growth of 1.5%, down from 1.9% in March.

There's not a lot in the way of economic data releases this week in Australia, but what there is will be important. Today sees the June quarter PPI and Wednesday the CPI. The RBA will be watching closely given the seeming anomaly of the March quarter GDP result, which at present is holding the central bank back from further rate cuts until a clearer June quarter picture is known.

It will be busy on the local stock front this week as the ongoing full swing of resource sector production reports meets the first trickle of six-monthly earnings reports, which signal the gradual start of our own results season. Production report highlights this week include Oil Search ((OSH)) on Tuesday, OZ Minerals ((OZL)) on Wednesday and Newcrest ((NCM)) on Thursday, while Alesco ((ALS)) today and GUD Holdings ((GUD)) and ERA ((ERA)) on Thursday provide the earnings highlights.

Woolies ((WOW)) will release its June quarter sales figures today and the figures for the various Wesfarmers ((WES)) businesses will follow on Thursday. Macquarie Group ((MQG)) will hold its AGM on Wednesday at which guidance is invariably updated. There has been little relief from low-volume markets for Australia's investment bank.

On the US earnings season front, this week will see reports from Dow components AT&T, DuPont, Boeing, Caterpillar, Ford, 3M, Exxon, Chevron, Merck and United Technologies as well as Apple, Amazon, Starbucks, ConocoPhillips and Credit Suisse.

Rudi has commitments in Melbourne this week and as such will not be appearing on your screens.

 For further global economic release dates and local company events please refer to the FNArena Calendar.

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