The Week In Hindsight, 15 July 2014

Price action in European shares was dominated by renewed concerns over financial stability last week as Portugal’s largest listed financial institution (Banco Espirito Santo) delayed repayments on a number of its bonds, prompting a 17% decline in the group’s share price which preceded a regulatory decision to suspend the shares from trading.

As a result, markets spent from Wednesday onward under substantial pressure before concerns began to recede late into Friday. Last week’s events came amidst a quiet spell for in the economic data calendar whose main offering to investors over the period was French and German industrial production numbers, which surprised to the downside.

This week sees little improvement in terms of economic numbers due out, however; US econ data and an appearance before Congress from Janet Yellen each have the potential to move markets. Looking forward to the days ahead, we expect investors to approach European shares with caution given the potential for further developments in relation to Banco Espirito Santo and the downside potential which arising from US data and policy maker appearances.

European Indices (Dax, Black), (CAC 40, Red), (IBEX 35, Blue)