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Morning Market Pulse - Carve-outs after Cohn-out

Morning Market Pulse - Carve-outs after Cohn-out

FTSE 100 Index called to open flat at 7155 (ex-div 8.4pts), having traded in a narrowing range overnight that keeps it below resistance at 7200 and falling highs resistance since late Jan. Bulls need a break but a break above overnight falling highs at 7170 first, but still need to get above 7200 to overcome the two aforementioned hurdles. Bears need a breach of 7130 (yesterday’s breakout) to endanger rising support from Tuesday’s base at 7070. Watch levels: Bullish 7170, Bearish 7130

Calls for a flat open come thanks to an easing in US trade tariff concerns overnight after the White House suggested potential for exemptions/"carve-outs" for allies including Canada and Mexico, opening up the possibility of Europe too which would negate the need for retaliation from Brussels, thus reducing the chance of an all-out trade war when what President Trump is really focused on is China.  Miners mixed overnight after mixed China trade data. USD a shade weaker and thus GBP and EUR stronger to keep both the FTSE and DAX from making headway as we await the latest major central bank update form the ECB. Still lots of corporate results to digest too.

Corporate news this morning: Aviva FY Op profit +2%, EPS +7%, 50% pay*out = div +18%; 6 of 8 market growing profits double digits; 2018 plans to spend £2bn excess cash (£900m debt reduction; >£500m capital returns; £600m acquisitions). Upgraded and brought forward growth ambitions, now targeting >5% growth in op EPS from 2018. Lloyds Banking today starts £1bn share buyback. G4S FY revenues +3.2%, PBITDA +4.2%, profits +5.7%, final div +5%, leverage reduced, op cash flow falls; outlook positive. Capital & Regional FY net rental income +2.4%, adj. profit +8.6%, div +7.4% NAV -1.5%; retailing facing cyclical and structural issues, occupier failures present challenges to short term results, but high footfall locations and London bias means high demand from non-retail.

GKN Driveline presents further details on how it intends to transform the business through Project Boost with aim of £153m annual cash benefit. Randgold Resources says a meeting took place yesterday between President of Dem Rep of Congo and Mining industry to clarify new mining code. Domino’s FY sales +15.1% (UK & RoI +9.2%), underlying pre-tax profit +10.2%, div +12.5%; strong UK sales in first 8 weeks of 2018. Countrywide entered 2018 with pipeline significantly below 2017; H1 will see lower adj. EBITDA, unlikely to be recovered in H2, updated FY guidance at interim stage.

US equity markets endured a mixed session after Cohn’s resignation, however closed well off session lows as Trump administration officials struck a softer stance on tariffs. The Dow Jones underperformed, dragged 0.3% lower by losses for The Travelers, Caterpillar and Home Depot weighed, while the S&P 500 closed just below breakeven as the real estate sector weighed. The Tech-heavy Nasdaq outperformed, closing 0.3% higher.

Gold has bounced from shallow rising support overnight, stymieing a sell-off from yesterday’s 8-day highs as the US dollar recovers from its lows after the Trump administration took a more conciliatory position on tariffs, offering exemptions to key trading partners. the US dollar recovered from fresh 2-week lows, although with concerns about a trade war still rife, it has edged back from its highs, helping the precious metal rally from $1322 rising lows support. Crude Oil remains sharply lower after the US EIA reported that US crude oil inventories rose over the past week, seeing both major benchmarks fall up to 3.1% in the immediate aftermath. Brent crude trades off its EIA lows of $63.9, however remains a leg lower between $64.2-$64.7, while US crude has recovered from $60.4 lows, trading between $60.9-$61.4.


In focus today will be the European Central Bank (ECB; 12.45pm ) monetary policy update and subsequent presser from President Mario Draghi (1:30pm). Despite some speculation earlier in 2018 that the bank might discuss altering its current programme of QE tapering, recent market volatility may have postponed this all-important conversation until the Summer. Expect no change to policy (although growth forecasts may shift) however, Draghi’s press conference is sure to offer the usual detailed journalist questioning about bank’s decision-making going moving forward. Data-wise, the only release of note will be US Challenger Job Cuts (12:30pm), looking to emulate January’s highest reading since January 2017.

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