FTSE 100 Index called to open -35pts at 7110, off its overnight lows of 7070 but still very much under a trend of falling highs since yesterday morning’s near-7200 peak. Bulls need a break above 7140 falling highs if they want to see 7200 again. Bears require a breach of 7090 to allow for another test of recent 7065 support. Watch levels: Bullish 7140, Bearish 7090
Calls for a negative open come after Asian markets balked at the resignation of President Trump’s chief economic advisor Gary Cohn, a hitherto figure of White House calm and stability who had been resisting plans for US trade tariffs on steel and aluminium. The departure of a pro-market member of the US administration saw the US dollar retreat sharply, and reversed a positive Wall St close, however there has been little reciprocal benefit for commodities (dual listed Aussie/FTSE Miners lower) as concerns about a global trade war remain.
Corporate news this morning: Legal & General FY operating profits +32% (cont. ops +12%), thanks to slowing improvement in life expectancy, div +7%, one-off tax benefit, solvency ratio rises. Rolls Royce FY underlying organic revenues +6%, pre-tax profit +25%, div flat, expects 2018 mid-single-digit revenue growth, higher operating profits and free cash flow thanks to restructuring, 787 engine issues fixed by 2020.
Paddy Power Betfair FY Revenues +13%, EBITDA +18% (above guidance), EPS +20%, Free Cash Flow +57%, Div. +21%; Sporting results favouring bookies has reduced customer activity. DS Smith trading in-line with expectations, paper price rise recovery progressing well, box volumes strong; H2 profitability to beat H1, helping FY in-line with last year. NMC Health FY revenues +31.3%, EBITDA +43.3%, adj. net profit +43.2%; expects another successful year in 2018, despite challenging environment, div +22.6%.
US equity markets, closing before Trump adviser Cohn’s resignation, finished higher in yet another session which saw indices swing from sharply negative earlier in the session to a positive close. The Dow Jones underperformed, closing just above breakeven, as gains for Goldman Sachs and Caterpillar offset Boeing losses, while General Motors helped the S&P 500 to rise 0.3%. The Tech-heavy Nasdaq outperformed, closing 0.6% higher.
Gold, having benefited from both US dollar weakness and safe-haven seeking in the wake of Trump adviser Cohn’s resignation, has retreated from resistance around late February highs of $1340 to overnight lows of $1332. The continued reaction of the US dollar and US investors to the departure of the key pro-trade adviser will be critical to the performance of the precious metal today.
Crude Oil benchmarks have extended their decline from yesterday afternoon’s highs, falling back to their lowest level since Monday’s IEA report-induced rally, after API reported a much larger than expected in crude oil inventories. Brent crude is back trading just above resistance-turned-support at $65.1, while US crude has made a tentative bounce from intersecting support at $61.9.
In focus today will be the reaction to the resignation of President Trump’s head economic adviser Gary Cohn overnight, with US futures called sharply lower. Seen as a key pro-market and pro-trade proponent (and calm figure) within the administration, his departure adds to White House instability and susceptible to more populist elements consolidating power.
In terms of data, Halifax House Prices (8.30am) could move the house-builders given consensus expectations for a rebound in Feb (0.4% v -0.6% prev.), although the 3-month annual rate likely slowed (1.6% vs 2.2% prev.). Eurozone GDP (10am) is forecast confirmed a smidge slower in Q4 at 0.6% QoQ 2.7% YoY, down from Q3’s five-year peak.
This afternoon, US ADP (1.30pm; warm-up for Friday’s Non-Farm Payrolls) is expected to pull back from Dec/Jan’s 235K to revisit November’s 200K, denting the 230K average of the last four months. However, with US wage growth still in focus for its inflationary read-across, confirmation of a Unit Labour Cost rebound may prove more influential.
US EIA Oil Inventories (3:30pm) have potential to move oil prices, although last night’s surprisingly big API Crude build may have set the bar low.
Speakers today are once again dominated by the US Fed, with voters Dudley (12:30pm onwards) and Bostic (1pm) sharing their views. Dudley continues a tour of American territories, today holing up in Puerto Rico, while Bostic speaks to a business leaders’ workshop in Florida.
Note, UK Chancellor Philip Hammond will outline a plan to give UK financial institutions access to Europe after Brexit, however this plan is expected to be almost instantly rebuffed by both Brussels and Paris, with EC President Tusk and French finance minister Le Maire suggesting financial services cannot be covered in a free trade agreement.