1. NEFS Market Wrap-Up
1
NEFS Research Division presents:
The Weekly Market
Wrap-Up
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Contents
Macro Review 3
United Kingdom
United States
Canada
Eurozone
Japan
Australia & New Zealand
Emerging Markets 9
India
China
Russia & Eastern Block
Africa
Latin America
Equities 14
Financials, Technology
Consumer Goods & Services
Oil, Gas, Industrials & Basic
Materials
Commodities
Global Markets
17
Currencies 18
EUR, USD, GBP
Regulation & Tax
Global Markets
19

2. Week Ending 15th
March 2015
2
The Week in Brief
Euro falls to 12 year low
The weak European currency continued to fall this
week, on the back of renewed fears of a Greek
exit from the Euro. After promising bailout talks
last month, the Greeks have been dragging their
feet and this is worrying investors. Meanwhile the
dollar continues its steady climb, despite mixed
data releases in the US. The dollar and the euro
are approaching exchange rate parity – a situation
where $1 is worth exactly €1. The euro fell to a 12
year low against the dollar this week, with one
dollar now worth approximately €1.05. The pound
is fairly strong against the euro at the moment,
which is good for holiday makers to Europe. But
this strength is not seen elsewhere.
Mixed retail sales
Data released this week by the US Commerce
Department showed that retail sales fell for the
second month running, by 0.6% in February. This
comes despite low inflation, which casts a
worrying picture for first quarter GDP growth in the
US. Harsh weather conditions are being blamed
for the poor data. The UK saw a pickup in retail
sales however, with higher real wages supporting
consumers. With inflation expectations at their
lowest level in 13 years, this looks set to continue.
China continues to worry investors with below
forecast data, including retail sales this week,
although this could be put down to volatility during
the Chinese New Year celebrations.
Equities winners and losers
Plenty of movers this week in the equities market.
Netflix were a big loser, after rivals HBO
announced their new video streaming platform.
Snapchat unexpectedly announced a reshuffle of
their executive board, with well-regarded Emily
White resigning. Asos made its biggest single
jump for a decade this week, as it reported healthy
growth and sales figures. Meanwhile BHS was
sold for just £1 to little known firm Retail
Acquisitions Limited; some have accused owner
Phillip Green of mismanagement. Gold miner
Randgold Resources fell again this week, due to
falling gold prices on the back of a strong US
dollar. The dollar is usually inversely correlated to
commodity price movements.
No respite for Japan
Despite climbing out of recession in the final
quarter of 2014, growth figures have been revised
down, showing that the recovery is not as strong
as previously thought. %. This was due primarily to
much worse than expected inventory changes,
while consumption growth was actually revised up,
however the Yen fell to a 7 year low against the
dollar on the news. The Japanese stock market hit
a 15 year high this week as the Nikkei 225 index
closed above the 19,000 yen mark for the first time
since before the dot com bubble burst.
Josh Martin

3. NEFS Market Wrap-Up
3
Macro Review
United Kingdom
The British public's expectations for inflation over
the next 12 months fell to its lowest level in more
than 13 years last month of 1.9%. A Bank of
England report predicted that inflation could turn
negative in the coming months. The Bank of
England’s Monetary Policy Committee voted on
Thursday to keep interest rates at a record low of
0.5%, which has been for the past six years
since the depths of the financial crisis. Pay growth
overtook a dwindling inflation rate by the widest
margin since before the financial crisis in
December, giving many households a boost ahead
of elections on 7th
May.
British retail spending kept shops busy in what is
normally a quiet month in February, suggesting a
plunge in inflation has given consumers a boost.
In February 2015, when bad weather added to the
usual slowdown in shopping, retail spending was
1.7% higher than in 2014.
The UK said it will seek to become a founding
member of the Asian Infrastructure Investment
Bank (AIIB), a new regional body backed
by China that has raised concerns in the United
States about governance standards. The AIIB was
launched in Beijing last year to spur transportation,
energy, telecommunication and other investment.
Analysts have said it could challenge the Western-
dominated World Bank and Asian Development
Bank in the region. Britain will be the first major
Western country to apply to become an AIIB
member. Joining the bank could boost the UK’s
push to foster business and investment ties with
countries in the region, particularly China. Joining
the AIIB at the founding stage will create an
unrivalled opportunity for the UK and Asia to invest
and grow together.
With the current uncertainty of the UK elections
there is no clear answer to the three big issues at
the heart of the election battle: whether the UK
should remain a member of the EU; whether
Scotland should remain part of the UK; and how to
minimize the risks posed by the UK’s giant twin
deficits, a budget deficit of 5% of GDP and a
current-account deficit of 6% that leaves the UK at
the mercy of foreign lenders.
Some economists also argue that Conservative
plans for deficit reduction are economically and
politically unrealistic: these envisage a fiscal
adjustment equivalent to 5.3% of GDP over five
years and will require cuts to departmental
budgets of roughly 14%, or 26% if health,
education and overseas aid spending remain
untouched. Such rapid fiscal consolidation risks
unnecessarily hurting UK growth while also storing
up potentially severe long-term structural problems
for the economy.
Emily Levin

4. Week Ending 15th
March 2015
4
United States
The number of Americans filing new claims for
unemployment benefits fell more than expected
last week as it offered fresh signs of strengthening
demand for labour and a more flexible labour
market, responsive to such demands. Initial claims
for state unemployment benefits declined 36,000
to a seasonally adjusted 289,000 for the week
ending March 7th
, the Labour Department said on
Thursday. The decrease seems to unwind much of
the prior two weeks' increases in state
unemployment benefits, which had pushed claims
well above the 300,000 mark. Harsh weather is
being blamed for much of the volatility in claims
this year.
The US government reported last week that the
economy added 295,000 jobs in February, while
the unemployment rate fell to a more than 6-and-
a-half-year low of 5.5 per cent, as discussed in last
week’s Market Wrap Up. Yet, youth unemployment
is rising. The lack of experience is a common
blight for young Americans and such lack of
occupationally relevant human capital is keeping
young people out of work in the country.
In other news, import prices in the US rose in
February after a continuous seven months of
decline, as shown on the graph below. “Import
prices gained 0.4 per cent after a revised 3.1 per
cent plunge in January” the Labour Department
said on Thursday. Such increase in prices is
expected to have been caused by the rise in cost
of petroleum, but there is still little sign of any
imported inflationary pressures. The lack of
inflationary pressures reflects the dollar's strength
against the currencies of the country's main
trading partners, which is contributing to keeping
inflation below the Federal Reserve's 2 per cent
target.
And finally, US retail sales fell unexpectedly for the
third straight month in February. The Commerce
Department reported that retail sales “dropped 0.6
per cent after declining 0.8 per cent in January”, a
month earlier. The harsh weather conditions kept
consumers away from automobile showrooms and
shopping malls and this is projected to hurt the
growth prospects of the economy for the first
quarter. The so-called “core retail sales”
correspond most closely with the consumer
spending component of Gross Domestic Product
(GDP). The second straight month of weakness
suggests a marked slowdown in consumer
spending in the first quarter after the surge which
was seen in the fourth quarter of 2014.
Vimanyu Sachdeva

5. NEFS Market Wrap-Up
5
Canada
New data released this week revealed that
unemployment increased in February, although
the number of jobs fell by less than predicted. This
led to a fall in the exchange rate. Meanwhile the
central bank suggested that it would not
necessarily raise interest rates, should the US
Federal Reserve do so.
A report this week showed that the amount of jobs
in the economy fell by 1,000 in February compared
with a forecasted fall of 5,000. Statistics Canada
reported that 34,000 full-time jobs were created
while 34,900 part-time jobs were lost. The
unemployment rate, which is shown in the graph
below, rose 0.2 percentage points from 6.6
percent in January to 6.8 percent in February,
higher than the 6.7 percent predicted. Alberta was
particularly badly hit, losing 14,000 jobs in
February and seeing its highest jobless rate since
2011, as a result of the fall in oil prices; the natural
resources sector lost 7,000 jobs. Theophilos
Argitis at Bloomberg said that “the data suggest
the effects of falling prices for oil, Canada’s
biggest export, are beginning to show up in a labor
market facing a number of other headwinds such
as retail-sector firings and a stagnant
manufacturing base”. The biggest decline was in
manufacturing which lost 19,900 jobs nationwide.
The Canadian dollar fell to its lowest level against
the US dollar in six years on Friday after the new
jobs data was released. The Canadian dollar has
lost 5.2% since January, when the Bank of
Canada cut interest rates to 0.75 percent.
As a result of the fall in oil prices, the Royal Bank
of Canada Economics has downgraded its
forecast for growth in Canada in 2015. The bank
now predicts GDP to grow by 2.4 percent this
year, 0.3 percentage points below the forecast of
2.7 percent it made in December. The RBC said
that although the fall in energy prices has been
bad for the oil and gas sector, this should to a
large extent be offset by stronger consumer
spending and exports. Exports have been
performing well, increasing in volume by 5.4
percent in 2014.
On Thursday Rhys Mendes, a central bank
economist, said that the Bank of Canada wouldn’t
necessarily raise interest rates if the US Federal
Reserve were to do so. He said that “The bank
targets inflation in Canada and decisions regarding
monetary policy in Canada would be based on the
outlook for inflation”. The Federal Reserve is
expected to increase interest rates as soon as
June.
Nina Croock

6. Week Ending 15th
March 2015
6
Eurozone
This week the European Central Bank started its
bond buying scheme, commonly known as
quantitative easing. It intends to buy assets worth
€60 billion each month until 2017. The ECB has so
far purchased €9.8 billion worth of assets in the
first three days of the programme. A statement
from the ECB claimed that it had not had any
difficulty finding assets to buy and the ECB should
be on track for reaching its €60 billion target for
March. The argument made by the ECB for having
the specific target of €60 billion a month is that it
makes sure the programme is predictable and
regular, unlike the uncertainty that existed with the
US quantitative easing programme.
This aim of the quantitative easing is to increase
the liquidity in the European bond market and help
support the financial system. This seems to be
working, as the yields on sovereign bonds have
already dropped and are now at levels below the
previous all-time record low. For example the yield
on a benchmark 10 year is now at around 0.25%,
down from 0.5% at the beginning of the year as
can be seen from thee graph from CNBC Data.
This has led to the spread between the 10 year
German bond and the 10 year US bond to have
widened, highlighting the divergence in monetary
policy of the US and the Eurozone.
Mario Draghi, president of the ECB, conceded that
there will be some risk with the new quantitative
easing, but stated that so far these have been
contained and will continue to be, as the ECB
regulates the financial system through a macro-
prudential policy.
There are some complaints though, with the more
prudent heads of central banks of Germany and
the Netherlands highlighting the downsides of
quantitative easing. The lower yields caused by
quantitative easing allows for cheaper financing for
governments, which they argue might encourage
some countries to shirk unpopular reforms. This
comes after Italy, France and Belgium all
produced budgets this week that did not cut the
debts or deficits as fast as required. This amplifies
concerns that larger countries are being allowed to
miss targets and are given more freedom than
smaller countries.
However the potential benefits of quantitative
easing are numerous as it should help support the
financial system, stimulate growth and bring
inflation back up to the target level of around 2%.
Furthermore, with uncertainty about Greece’s
future in the Eurozone, quantitative easing is
helping to shield countries, such as Portugal, from
investor uncertainty and contagion
Matthew Batten

7. NEFS Market Wrap-Up
7
Japan
Japan’s economic performance for the fourth
quarter of 2014 was revised downwards this week,
from an annualised rate of 2.2% to 1.5%. This was
due primarily to much worse than expected
inventory changes, while consumption growth was
actually revised up. Nevertheless Japan still
managed to emerge from recession in the final
quarter following the two successive quarters of
contraction previously. The Bank of Japan
continues its monetary easing policy in an attempt
to stamp out deflation. Japan has been subject to
stagnant low inflation and deflation for many years,
most prominently during the “Lost Decade” in the
1990’s. Prime Minister Shinzo Abe has set out a
policy of aggressive monetary easing and fiscal
stimulus in order to bolster the economy and try to
prevent this from happening again. Indeed as a
result of the policies, the yen has fallen some 30%
since he came into power in late 2012.
The Yen has hit a seven and a half year low
against the dollar this week, amid the Bank of
Japan’s bond-buying initiative and positive news
on the US economic recovery. The weak yen
should help exporters by making their products
more price-competitive abroad, but on the
downside domestic companies have to cope with
the rising costs of imported materials. This is
having a negative effect domestically, as a report
released by the Finance Ministry showed a
deterioration in business sentiment among small
and medium sized firms. While higher import costs
should assist in its policy of raising inflation it also
puts extra strain on domestic companies,
especially when there is a lack of domestic
demand.
In other news the Japanese stock market hit a 15
year high as the Nikkei 225 index closed above
the 19,000 yen mark. This signals increasing
confidence in Japan’s economy as investors are
buying a greater and wider number of Japanese
shares. Also Japan has logged a current account
surplus for the seventh straight month, as exports
were led by a weaker yen and lower oil imports.
Overall outlook for the rest of the year remains
optimistic as the current low oil price coupled with
the weak yen and low interest rate should help
boost domestic consumption. The graph below
shows low inflation and rising wages, which point
towards good consumption growth.
Matteo Graziosi

8. Week Ending 15th
March 2015
8
Australia and New
Zealand
Risks of a recession loom in Australia despite the
fact that the unemployment rate fell 0.1% to 6.3%
this week. Due to the risks of the recession and a
potential future cut in the cash rate, the Australian
Dollar fell to an intraday low of 75.71 US cents.
Furthermore Australia’s economy is feeling the
effects of the decrease in prices for its key
commodities. Meanwhile the central bank of New
Zealand is looking at new tools to control rising
house prices, according to Prime Minister John
Keys.
Australia’s economy has been increasing at below
its trend growth rate for six of the past seven
years. Due to falling mining investment, which is
having a dampening effect on Australia’s
economy, policy makers are encouraging
spending by consumers and businesses. The
unemployment rate fell to 6.3% this week, down
from 6.4%, however many economists are
predicting that there will be a larger rise in the
unemployment rate later this year. Typically
employment tends to lag behind economic growth
and so any slowdown in growth takes a while to
affect employment.
The Australian Dollar traded at an intraday low of
75.71 US cents this week, down from 76.07 cents,
before closing at 76.332 on Friday. Most analysts
believe that this is pricing for two more cash rate
cuts with the Reserve Bank of Australia (RBA)
being forced to use monetary policy to stimulate
the economy later on in the year. The RBA chose
last week to keep the rate at 2.25% for March,
despite decreased annualised growth rate of 2% in
late 2014, below the long run trend rate.
Australia’s economy is being weakened by falling
prices in its key commodity exports with iron ore
falling by nearly half in 2014. Coupled with
weakening demand from China, the largest
importer of Australian goods, there is downward
pressure on the exchange rate of the Australian
Dollar.
The Reserve Bank of New Zealand (RBNZ) is
looking at new measures to control the rising
house prices, which can be shown on the graph
below. Recently there has been speculation of a
house price bubble forming in New Zealand, with
expansionary monetary policy being a blunt tool.
Raising interest rates would be detrimental to the
economy due to downward inflationary pressures,
with inflation already at a low rate of 0.8%. In
Auckland, New Zealand’s biggest city, a shortage
of houses saw prices rise 13% in the year through
February. Last week, the RBNZ said it was looking
at ways to reduce property investment loans, as a
way to curb rising house prices.
Jake Walker

9. NEFS Market Wrap-Up
9
Emerging Markets
India
According to JP Nadda, Union Minister of Health
and Family Welfare, the Indian Health sector is set
to grow at an annual compound growth rate of
17% during the period 2011-2020. This will
hopefully aid economic development in one of the
world’s fastest growing economies. This continued
growth will also allow for job creation in the health
sector.
In a strange turn of events, business friendly Prime
Minister Narendra Modi has demanded $1.6 billion
in tax from Cairn Energy, roughly their whole
market capitalisation. Cairn are not eager to pay
this fee as they believe they have followed
regulations closely during their 20 years of
operating in India and in that time have invested
over $5 billion into the country. This decision led to
a 15% fall in Cairn’s share prices.
In terms of sustainable development India are
often criticised for the amount of pollution emitted
from the country, with India ranking 155th
out 178
countries in the Environmental Performance Index
and Delhi being the most polluted city in the world.
That being said, Indian authorities have
announced that they will stop releasing raw
pollution data figures for Delhi. Instead the data is
to go through the Central Pollution Control Board
for analysis before being released to the people.
Environmentalists protested after hearing the news
as officials did not provide any reasons why these
changes were taking place and they believe that
this is just a way for the government to hide bad
news from the people.
In other news the Rupee rose in value to a peak of
62.36565 rupees against the dollar on Thursday,
before falling sharply on Friday to close the week
at 63.09343. This is down on the week from
62.79000 on Monday, and a continuation of a poor
month for the currency, shown on the graph below.
This continued fall in currency may have positive
effects for export revenues which may improve
India’s balance of payment deficit. Since exports
are responsible for 24.8% of GDP, a continued
depreciation in currency may also aid growth in
India. However, a continued depreciation in the
currency may have negative effects for firms which
rely on imports for factors of production, as these
firms may see a rise in factor costs.
Joshua Ogunmokun

10. Week Ending 15th
March 2015
10
China
A whole host of economic data painted a troubling
picture of Chinese economic prospects this week,
as good news regarding exports was
overshadowed by a worryingly slow start to the
year in the industrial sector. Indeed, exports
surged 48.3% higher in February compared with
the same month last year, boosting the trade
surplus to a record $60.6 billion. This came as a
surprise to many, with forecasts expecting a
surplus of around $7.8 billion. The increase in
exports is being put down to rising demand,
resulting from a strengthening US economy,
China’s largest export partner. China has based its
rapid development on export-led growth, but weak
global economic performance has dragged down
exports, undoubtedly contributing to the slowing
growth rate in the economy in recent times.
Therefore, this week’s news brings some hope
that growth can be restored through increased
exports to the recovering Western economies.
However, this week’s data does bring a reminder
of the ever-weakening domestic situation in China,
with imports falling by 20.5% compared with
February last year. Alongside this, there are
worrying signs for the industrial sector this week,
as industrial output, retail sales and fixed-asset
investment came in well below forecast. These
indicators are combined over January and
February to account for the Chinese Lunar New
Year, and so come as the first guide of industrial
performance in 2015, which has shown the
slowest start to a year since 2009. Indeed, this
week’s news hints that recent monetary
expansion, in the form of two interest rate cuts, is
yet to have the desired effect on the economy.
In fact, there are fears of deflation in China at
present, with the figure for Producer Price Index
PPI 4.8 percentage points lower than February last
year – the lowest reading since October 2009 –
highlighting persistent weakness within the
economy. Although the Consumer Price Index
rose 1.4% for the year up to February, as shown
on the graph below, the National Bureau of
Statistics commented that the New Year
celebrations were the main contributor to this
higher than expected measure, and expect annual
inflation to fall back to 1.0% in the coming months.
Therefore, with inflation in China well below the
newly revised-down inflation target of 3.0%
accompanied by a slow start to the calendar year,
as well as signs of a weakening internal economy,
further interest rate cuts later this quarter are to be
expected, alongside potential fiscal stimulus from
the government, once the dust has settled from
the New Year distortions.
Jack Millar

11. NEFS Market Wrap-Up
11
Russia and Eastern
Europe
The Russian Central Bank has this week decided
to reduce Russia’s interest rate to 14%, a
decrease of 1%. This a turnaround from December
2014 when they decided to raise the interest rate
from 11.5% to 17% to attempt to protect the falling
rouble. In January 2015 rates were decreased to
15%. Alongside this it has been announced that
the forecasted growth rates have been
downgraded to a contraction of between 3.5% and
4% in 2015. This has worsened since January
when the Russian economy was predicted to
contract by only 3%.
Some of the main Russian exports are oil and
natural gas, and as oil prices have been so low
recently, this has contributed to the downgrading
of Russian growth rates. Sanctions imposed on
the Russian economy by many Western
economies have also worsened the situation.
It has been suggested by some economists that
the cut in the interest rate may worsen already
relatively high inflation rates. In February inflation
rates hit 16.7% on the consumer price index, with
Russian food prices increasing by 23% alone.
In other news on the Russian economy the
Finance Ministry have announced that the Russian
government’s budget deficit more than doubled in
February of this year. In February the budget
deficit to GDP ratio increased to 10.5% from 4.2%
in January. Vladimir Kolychev, chief economist at
VTB Capital, has stated that this increase has
been caused by falling oil prices and a reduction in
the amount of tax revenue collected. He said that
“A faster-than-expected spending of military
expenses exacerbated the problem” and he added
“This could be a temporary development and the
budget deficit is likely to shrink in the second half
of the year”.
The Russian Finance minister Anton Siluanov has
suggested cutting spending by ministries and
departments by 10% to keep the budget deficit
from widening too much while oil prices hover
around $60 a barrel. This is alongside Vladimir
Putin enforcing a 10% decrease in state officials’
salaries last week. These are a number of
attempts at cutting the budget deficit.
Kelly Wiles

12. Week Ending 15th
March 2015
12
Africa
A recent report published by the United Nations
Environment Programme emphasised the huge
potential gains of a green economy Africa. The
continent has contributed less to greenhouse gas
emissions than any other, yet it is certainly the
region which suffers most from the consequences.
Several countries such as Ghana, Senegal and
South Africa already invest into areas such as
renewable energy export capacity and green
finance initiatives, which are expected to create a
significant amount of jobs. The potential of
investing into green industries in Africa is
considered to be huge; the report estimates that if
Kenya increased green economy investments it
could raise real GDP by 12% over the current
trend projection by 2030.
The president of South Africa, Jacob Zuma, has
called on the SA people to save energy to help the
country out of its energy shortage challenge.
Power cuts have continually disrupted output and
have dampened investor confidence. Efficient, a
financial services group, estimate that power
shortages have already cost the nation $25bn
since 2008. The energy provider Eskom –
responsible for providing electricity to most of the
nation – is currently under internal investigation for
the cause of capacity and cash-flow issues. The
SA government have identified energy security as
the most vital aspect to kick-start the continents’
most developed economy.
After a two week review of funding by the IMF in
Zimbabwe, staff said that the country needs to
step up its commitment to repay the $142 million
debt it owes. The chief of delegation described
Zimbabwe as currently making a “token payment”
of $150,000 per month. Despite having met all of
the targets under the supervised economic reform
programme, if it does not clear its ballooning debt
the institution will be unable to re-engage until
arrears are paid. Fresh funding has been denied to
the country for over a decade now, after President
Robert Mugabe started defaulting on its loans. The
accumulative debt has been preventing crucial
access to the funds needed for economic and
infrastructure development.
In other news, investors and foreign leaders are
closely monitoring the run up to Nigeria’s election
on March 28th
. The election has already been
postponed by the electoral commission on the
grounds of the insecurity created by Boko Haram
in the north-eastern region of Nigeria. Given the
tight presidential race, many consider the delay as
foul play and suspect vested interests. The
postponement has sparked outrage within the
country as well as from abroad. As Africa’s largest
economy and most populous country, the run-up
to the election and what follows will form
perceptions of whether democracy has found its
place in the continent.
Loy Chen

13. NEFS Market Wrap-Up
13
Latin America
This week, the Brazilian Central Bank revealed the
state of Brazil’s battle against inflationary
pressures, while the risks of political upheaval
seem to be on the rise. In other news, Peru kept
interest rates constant amid the recent volatility in
currency markets. Meanwhile, in Mexico, the
inflation rate fell to its lowest level in 9 years.
After the hike in the Brazilian interest rate,
mentioned in last week’s Market Wrap up, it
seems the pressures of inflation are likely to fall in
the next year. According to reports from the
Central Bank, the rate increases of the past two
years are likely to come to an end. The target rate
of inflation of 4.5% in 2016 is now looking credible.
However, concerns were expressed that inflation
will remain high throughout 2015, with high
salaries posing a threat for the target inflation rate.
As the belt-tightening measures of the government
still take effect, Brazil is in for a rough weekend.
Protestors are said to be on the streets of several
cities to express the views of the unpopular cuts in
entitlement.
Peru’s Central Bank held rates at a four year low
of 3.5% this week. The “weak economic cycle” has
been accompanied by low inflation as shown in the
diagram below, the lowest amongst the major
Latin American countries. This might suggest
lower rates are needed. However, lower interest
rates could cause further weaken the Peruvian sol,
which has been a priority in the currency market
recently. Inflation fell to 2.77% in February, and
disappointing exports data, coupled with the weak
currency, has kept consumers cautious.
Mexico’s inflation rate seems to have sustained
the view that interest rates will remain at the
record low level of 3% in the next few months to
support the sluggish economy. On Monday the
National Statistics Office released data showing
that inflation had eased to a figure of 3%, the
lowest since May 2006. However, the slump in the
value of the peso caused by the fall in oil prices
could add to the inflation rate.
Henna Patel

14. Week Ending 15th
March 2015
14
Equities
Technology and
Financials
Not more than two weeks after the technology
weighted NASDAQ fell one percent short of its dot
com era record, a progressive dollar and interest
rate doubts have left the index in a quandary. The
movement exposed fresh scares regarding
unpredictability as the volatility in the market
surged to 20%, the biggest increase of the year.
The repercussions of this began early in the week
when the index fell 82.64 points to 4,859.60 points
on Tuesday. Declining stocks led advancers by a
substantial 3.09 to 1, with 2099 decliners and 679
advancers for the day.
The S&P followed a similar trend on the Tuesday,
declining 19.03 points to close at 2044.16. The
index also has a high weighting in tech companies
at 20.00% which accounts for 19.30% of the
index’s operating earnings last year. The rising
dollar mentioned earlier hurts technology
companies disproportionately as it reduces the
value of foreign-currency earnings when they are
repatriated back to the United States. The biggest
weightings of the NASDAQ in Apple Inc., Microsoft
Corp. and Google Inc. generate more than half of
their revenues from markets overseas and new
projected profit growth of 4.7% for computer and
software makers, below estimates of 11% at the
start of 2015, have depressed the indexes further.
Amongst the most notable falls was experienced
by Netflix, whose share price retracted 6.13 points
on Monday and 3.02 points on Tuesday. The
situation was exacerbated further from an
announcement by HBO that its new standalone
video service ‘HBO Now’ would launch next month
for $14.99 per month.
The photo messaging application Snapchat made
headlines this week after an additional restructure
of its executive board. The well regarded former
Google and Facebook executive and the chief
operating officer of Snapchat, Emily White, is
departing the company after just over a year of
service, leaving behind an eclectic mix of roles
including advertising, sales, business strategy and
human resources. On the flip side, the firm has
undertaken several high profile hires which include
the recruitment of the former Credit Suisse tech
banker Imran Khan. Khan led Alibaba’s IPO last
year as chief strategy officer and experience within
the tech industry would hope to provide
unparalleled insight into Snapchat’s competition.
Coincidentally it was Credit Suisse that released
similar news this week in the financial industry.
Prudential’s chief executive Tidjane Thiam was
announced on Tuesday as the surprise successor
of Credit Suisse boss Brady Dougan, who held the
position for eight years. The new selection was
well received by shareholders of Credit Suisse,
who drove shares upward by around nine percent
on the day. Shares at Prudential had tripled during
Thiam’s CEO tenure at the firm. Following the
news of his departure, stocks dropped 3%.
Jonty Parsons

15. NEFS Market Wrap-Up
15
Consumer Goods &
Services
Asos made its biggest single jump for a decade
late this week as it reported healthy growth and
sales figures. Its shares catapulted up the
FTSE100 as overall sales increased by 19% to
£290.1m, following last year’s profit warnings and
costly warehouse fire. UK sales, up by 30%,
outperformed those of its nearest competitor,
Boohoo.com who also reported a 13% rise in
sales. Chief Executive Nick Robertson attributed
Asos’ drastic improvement to its price cuts, and
introduction of differential pricing, which has
proved difficult to implement in the past. However
its “zonal pricing” strategy has finally been rolled
out across all its sites which has seen overall
international sales grow by 12% to £163.5m.
The long awaited appointment of a new chief
executive breathed life into Mulberry shares which
finished the week at 863.00p. The luxury handbag
brand, which has been left captainless for more
than year, promoted its non-executive director,
Thierry Andetta, to its permanent leader position.
Mulberry has had to combat a decline in sales and
a failed repositioning into the premium market.
Andetta has held senior roles at Lanvin, Moschino
and LVMH and will be joined in the summer by the
group’s new creative director, Johnny Coca,
former head of accessories at Celine.
Home of the hangover breakfast, JD Wetherspoon
announced a full speed assault on the breakfast
market this week. Already serving 50m coffees
and 24m breakfasts annually, Wetherspoon aims
to slash the price of its filter coffee to 99p and offer
free refills to entice younger customers into its
pubs during the late mornings and early
afternoons. It has struggled to attract younger
customers amongst claims of its poor selection of
beers and corporate atmosphere. Its shares were
down by 3% to 788p after its CEO outlined the
plan to undercut the high street coffee chains.
John Lewis cut its staff bonus after the pre-tax
profits of its grocery subsidiary Waitrose declined
9% to £342.7m, falling for the second year
running. John Lewis itself fared much better with
profits up by nearly 11% and like-for-like sales up
2%. The groceries sector has seen its profits eaten
by falling food prices and supermarket price wars,
as well as the emergence of challenger German
discounters, Lidl and Aldi. “We are in a state of flux
in terms of the economics of food retailing.
Everything has changed,” stated managing
director, Mark Price. Waitrose was not the only
supermarket to tumble with both Morrison’s and
Sainsbury’s stock ending the week negatively, with
slight 2% decreases.
Nicknamed the poor man’s M&S and infamous for
its bargain bucket sales, BHS itself was scooped
up for a nominal £1 this week. The fading retail
conglomerate has been a rose in thorns to its
owner, Philip Green, who used it as leverage to
buy Arcadia in 2002. BHS reported a loss of £21m
last year and has had to battle with the rise of
value fashion retailers such as Primark. Bought for
£200m at the turn of the millennium, analysts are
suspicious of the real terms of the deal – Green
has been accused of a deliberate mismanagement
of the department store chain and harvesting its
most valuable assets, awarding himself and his
wife a £1.2bn dividend and jumping ship before
being forced to stump up for its large pension
deficit – BHS employs 11,000 people and has an
£100m pension shortfall.
Natania Duhur

16. Week Ending 15th
March 2015
16
Oil, Gas, Industrials
& Basic Materials
US crude settled at $44.84 per barrel on the close
of Friday 13th, dropping 4.7%, representing the
lowest close since January 28th
. This fall came
after the International Energy Agency said that a
global oil glut is building and oil production shows
no signs of slowing. The IEA said in its monthly
report that the US may soon run out of crude
storage, which would put further downward
pressure on prices. This is particularly bad news
for American energy companies, as in the long-run
worst-case scenario, someone, somewhere will be
forced to stop pumping and inevitably go out of
business. Crude stocks are at their highest level
for this time of year in at least 80 years, according
to Fortune.
In the Market Wrap Up of the week commencing
9th
February, Randgold Resources (LON: RRS)
was one of the week’s losers, falling 3.3%. The
main point of the previous review was that the gold
mining business had built up around a year’s
production worth of reserves. In the past month,
the share price has fallen 10.49% to close at
4,569p on Friday 13th
March. This follows a fall in
the price of gold of 11.12% since January 22nd
,
following the rise of the US dollar against most
currencies. Concern that the US Federal Reserve
is set to increase interest rates for the first time in
nearly a decade has helped lift the US dollar and
depress gold, which is bad news for the
profitability of gold miners, particularly with the
large reserves held up within Randgold.
Consequently, Deutsche Bank downgraded the
miner according to the research report released by
the firm on 9th
February.
Last week I reviewed the performance of the
Anglo-Swiss commodity trading and mining
company Glencore Plc. (LON: GLEN), who were
considering a takeover of Rio Tinto, in which
Glencore would become the world’s biggest miner.
This week, Rio Tinto (LON: RIO) have
experienced a 3.78% share price fall to a close of
2806.34p on Friday 13th
. Rio reported last quarter
earnings on February 12th
, displaying that the
miner is currently trading 28.06% below its 52-
week-high, underperforming the S&P 500 by 4.8%.
Combined with falling commodity prices, hundreds
of jobs are to be cut in order to “keep up returns to
investors and cut $750m in costs this year”.
Despite the London-based company taking out
almost $5bn of operating expenses since 2012,
this will certainly be one of its largest internal
restructurings since CEO Sam Walsh took charge
two years ago.
One to watch in the coming weeks is the Scottish
packaging and label company Macfarlane Group
(LON: MACF), who have attracted attention
recently. Shares have risen 8.1% over the past
month, closing at 41.51p on Friday 13th
. The
company announced results on February 26th
,
highlighting 14% full year earnings growth – the
second consecutive year of double-digit earnings
growth. The future looks encouraging; the core
packaging distribution area is thriving, with
Macfarlane currently having a 20% share of the
protective packaging market. February’s report
accompanied an announcement from Chairman
Graeme Bissett, who said "The board remains
committed to seeking out further profitable
expansion opportunities”. Given the strong
dividend cover of 2.29, combined with a yield of
almost 4%, this is surely worth keeping tabs on.
Alex Masters

17. NEFS Market Wrap-Up
17
Commodities
Global Markets
Oil fell towards $56 a barrel this week as oil
production in the US showed no sign of slowing. In
February alone, global supply increased by 1.4
million barrels a day. Due to the controversial
nuclear program in Iran however, sanctions have
been limiting Iranian oil exports. Investors are also
closely inspecting Libya, where fighting in the
country has slowed down the output of oil. In a
conflict between rival governments, fighting for oil
facilities continues four years after the fall of
Muammar Gaddafi. Overall, energy prices have
dropped significantly and the Bloomberg
Commodity Index, which is calculated based on
the trading volume and world production of
commodities, reached its lowest level since 2002
on Friday.
Whilst unpredictable factors such as nature,
changing regulations and geopolitical events all
affect the price of commodities, recent trends can
partly be explained by the strength in the US
dollar, which is generally negatively correlated to
commodity prices. Most raw materials are traded
in dollars and so when the dollar rises, less of
them are needed to invest in commodities. Also,
as commodities are traded on a global scale, a
strong dollar means that other currencies now
have more purchasing power for raw materials.
The strong dollar has led to more EU corn sales
into the US markets but analysts are wary of the
impact the weak foreign currencies will have on
America’s exports. The surge in the currency
means that commodities are now less expensive
to import, irrespective of where the commodity was
produced.
In other commodities, wheat futures fell with
declines in corn and soybeans leading the fallers
as expectations for rising global soy inventories
were confirmed by strong harvests in South
America. Copper increased on Friday as concerns
remain about falls in mining output in China.
Traders were also betting that easier lending in
China could increase demand for the metal; the
country’s banks have extended $162.87bn of new
loans in February which was well above market
expectations.
Peter Barron
(Inverse relationship between Bloomberg
Commodities Index and USD/EUR chart
for the last month)

18. Week Ending 15th
March 2015
18
Currencies
GBP, USD & EUR
The pound hit a new 7 year high against the euro
this week, after doing the same last week, by
smashing the €1.40 level on Tuesday and
accelerating to a peak of €1.42495 on
Wednesday. The move came after Eurozone
finance ministers called on Greece to "stop
wasting time" in the negotiations on the new
bailout, supporting persistent fears of a Greek exit
from the Euro. The Pound retreated on Thursday
with sizeable losses, and closed the week at
€1.40406. The past month is shown on the graph
below.
With the Pound so strong against the Euro at the
moment, UK holidaymakers to Eurozone countries
can benefit when buying their currency. Changing
£600 to Euros now will get you around €840,
which is significantly better than this time last year,
when the Pound was at about €1.20, so £600
would get you €120 less. Martin Lewis, founder of
moneysavingexpert.com, wrote on the topic this
week, noting that regardless of what prices do in
the coming months, the current rate is far better
than last year and still worth taking advantage of.
However I expect the Euro to continue to weaken
over the year, unless substantial positive moves
are made with Greece. Though in the short run the
UK Budget next week could see the pair reverse,
as Chancellor George Osbourne is expected to
stick to his growth limiting austerity.
However the strength of the Pound against the
Euro comes mainly from the weakness of the
Euro; the Pound itself isn’t that strong. How do we
know this? You’ve just got to look at the Pound
against the Dollar. The Pound dropped below
$1.50 for only the second time since July 2013 on
Wednesday, before hitting a near 5 year low of
$1.47082 on Friday. While data releases from the
US were generally poor this week, those from the
UK were worse! UK industrial output fell by 0.1%
in January compared with a month earlier, while
manufacturing output fell by 0.5%, figures from the
ONS showed this week.UK holiday makers to the
US won’t be benefitting here, although buying now
could actually prove worthwhile, since the Pound
is likely to drop further against the Dollar now that
the $1.50 support is broken.
With the Dollar strong against the Pound and the
Pound weak against the Euro, it’s no surprise that
the Euro is plummeting against the Dollar. The
Euro fell to a 12 year low of $1.05048 this week,
as exchange rate parity approaches fast. The
downward trend is clear, and this pair should
continue to move towards a situation where $1 is
worth the same as €1 in the coming weeks.
Josh Martin

19. NEFS Market Wrap-Up
19
Regulation & Tax
Global Markets
America’s highly controversial ‘Net Neutrality’ rules
have been released in a 400 page document,
outlining the rules for household consumers,
companies operating via the internet, and the
broadband service providers themselves. The
internet, which is now listed as a
telecommunications service, will have all its traffic
treated equally, so that companies such as Netflix
will no longer be able to pay internet service
providers more for their signals to be transmitted
faster. Thus, service providers will not be allowed
to slow or hasten signals from favoured content
suppliers to favoured areas. Also, broadband
providers no longer have the power to block or
restrain access to any lawful content on the net,
even spam. However, this raises questions of
efficiency as the internet service providers will
have to slow down all signals during congestion,
thereby disadvantaging all users; whereas, before
certain service signals would run faster and at
least a few would benefit.
Remotely Piloted Aircraft Systems (RPAS), better
known as drones, have been deemed as “exciting
new technology” by the EU Select Committee from
the House of Lords. The UK has already given out
600 permissions to use drones for commercial
purposes, for example in photography, however,
the committee highlights more uses such as
construction-repair work, search and rescue
operations, as well as deliveries – a vision
currently being pursued by Amazon. The
Committee called upon the drone industry, the
European Commission, and the UK to work
collectively in order to make regulations on the
standards and airworthiness of the drones. They
also hope to form a framework that allows drone
users to post route and altitude information to
avoid collision and inefficiency, and create a linked
tracking system for every drone. In addition, they
asked for an increase in the minimum insurance
amount of €660,000 that is to be paid by
commercial users for public liability, in case of
accident or damage.
The European Court of Justice has ruled France
as liable to pay over €10 million to all British and
non-French EU residents who owned properties in
France. After citizens claimed to be paying tax on
rental income and property in both their resident
country and France, the Court of Justice in
Luxembourg, ruled against France. This was due
to EU laws dictating that a resident of a member
state must contribute to the social security of one
member state only. The French Law is expected to
change by the end of this year, as it fears the
rising interest rates on any amounts it fails to
reimburse.
Sharmee Shah

20. Week Ending 15th
March 2015
20
About theResearchDivision
The Research Division was formed in early 2011 and is a part of the Nottingham Economics and
Finance Society (NEFS, formerly known as NFS and UNIS). It consists of teams of analysts closely
monitoring particular markets and providing insights into their developments, digested in our NEFS
Weekly Market Wrap-Up.
The goal of the division is both the development of the analysts’ writing skills and market knowledge, as
well as providing NEFS members with quality analysis, keeping them up to date with the most important
financial news.
We would appreciate any feedback you may have as we strive to grow the quality and usefulness of
weekly market wrap-ups.
For any queries, please contact Josh Martin at jmartin@nefs.org.uk.
Sincerely Yours,
Josh Martin, Director of the Nottingham Economics & Finance Society Research Division