Mike van Dulken and Artjom Hatsaturjants at Accendo Markets, commented to clients this morning:
FTSE 100 Index called to open -3pts at 7310, still impeded by both horizontal resistance around 7310 and an intersecting trendline of falling resistance at 7320. Bulls need a break above that 7320 hurdle while Bears require a breach of 7290 rising lows. Watch levels: Bullish 7320, Bearish 7290.
Calls for a negative open are in spite of a largely positive session in Asia, sentiment boosted by hopes of a fresh round of US-China trade talks led by US Treasury Secretary Mnuchin. Australia is the negative outlier, although dual-listed FTSE Miners traded higher on the positive trade talk news. Note US Tech weak after underwhelming Apple product launch.
GBP holds recent gains ahead of the Bank of England policy decision, injecting a small dose of negativity into the FTSE’s heavyweight internationally-exposed stocks. A Telegraph report that the UK is not prepared to further compromise on Brexit talks, and put EU chief negotiator Barnier “on notice”, is adding to downbeat sentiment.
Oil prices pared some of their mid-week gains with Brent Crude rolling back below the psychologically significant $80 mark having been boosted by US stockpiles, Iranian sanctions and, of course, Hurricane fears. Metals fallen overnight amid USD strength before US inflation data, potentially limiting upside for Miners despite the positive US-China trade news.
In corporate news this morning Comcast has extended its 1475p/share offer for Sky until 6 Oct having received acceptances from just 0.29% of Sky shareholders. This follows an FT report that we may be headed for sealed bids if neither Comcast nor Fox, which owns 39% of Sky and is bidding 1400p for the rest, makes a final offer by 22 Sept.
Morrisons H1 revs +4.5% and underlying pre-tax profit +9% in-line; H1 like-for-like sales ex-fuel/ex-VAT +4.9%, Q2 +6.3% (9-year high). Interim div +11.4%, special interim div 2p (vs 4p in Q2). To hit £700m annualised wholesales supply sales target before year-end. In response to media speculation, Sports Direct does not intend to make an offer for Debenhams.
Legal & General completes £4.4bn buy-in with British Airways' pension scheme for nearly 22K pensioners, the largest UK bulk annuity transaction to date. GVC H1 pro-forma net gaming revs +8%, underlying op profits +17%, swings back to pre-tax profit, div +9.6%; on track for double-digit annual online rev growth and profits in-line with guidance.
Oxford Biomedica H1 gross income +118% YoY, EBITDA recovered from a loss. Sees an increase in bioprocessing income and future royalties. Biffa H1 trading in-line with expectations. Recycling division continues to stabilise with evidence of some price recovery. FY guidance unchanged.
Ophir Energy H1 net loss widens by 4x; aims to minimize frontier exploration, selective opportunities for consolidation, consider options to unlock LNG value, cut costs. EnQuest ended plans to sell 20% Kraken stake, as debt deadline approached, opting to secure $175m loan instead, says Reuters. Amerisur Resources H1 revenues +93%, Adj. EBITDA +219%, net cash +60%.
In focus today will be a pair of monetary policy decisions from the Bank of England (12pm) and European Central Bank (12:45pm). Neither is expected to deliver interest rate changes which means that the tone of statements and voting patterns will have the market’s undivided attention in order to gauge attitudes towards the economy, inflation and trade, and fresh forward guidance.
In terms of macro data, the highlight of the day will be US Consumer Price Inflation (1:30pm). The headline figure is expected to have slowed down to 2.8% YoY (from 2.9% in July), though the more closely watched Ex-Fuel/Transport core metric is forecast unchanged at 2.4% YoY. With core inflation running above the Fed’s 2.0% target and the US economy posting solid growth figures, the case for more interest rate hikes remains, despite opposition from the White House’s property mogul resident.
In terms of speakers today, the focus will undoubtedly be ECB President Draghi’s (1:30pm) press conference. Traders are looking for reaffirmation of ECB plans to half QE asset purchases at the end of the month and to end them by year-end. The topic of Draghi’s replacement may also be broached, especially with Germany’s Weidmann now looking to be out of contention.
In the afternoon, we have a few Fed speakers, including Fed Governor Quarles (3pm, centrist, voter) testifying on consumer protection before the US Senate Banking Committee and colleague Bostic (6:15pm, dovish, voter) who gives a speech on monetary policy.