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Morning Market Pulse - MPs hostile towards Melrose

Morning Market Pulse - MPs hostile towards Melrose

FTSE 100 Index called to open +55pts at 7170, extending yesterday’s bounce from 7065 to make a bullish test of overnight resistance at 7160. Bulls hope this will open the door for recovery to recent 7340 highs. Bears need a drop back below 7160. Watch levels: Bullish 7180, Bearish 7160

Calls for a positive open derive from strong gains in Asia overnight that echo an equally upbeat close on Wall St last night. This as concerns over Trump tariffs and the risk of a trade war ease amid Republican backlash, while USD consolidation buoys the commodity sector to help metals off their lows and extend oil's reaction to yesterday's IEA report highlighting the possibility of a supply crunch. FTSE higher thanks to GBP weakness, a product of out-sized EUR strength, although this isn't hindering the German DAX, the index recovering, having been spooked about trade wars given its heavy export exposure as well as uncertainty about the outcome of coalition talks following populist success in Italian elections.

Corporate news this morning: UK MPs are trying to block Melrose’s £7bn hostile takeover of GKN according to the FT. Smurfit Kappa rejects bid (cash + minority holding) from International Paper Co. William Hill sells Australian unit to CrownBet for A$313.7m.  Ashtead 9M underlying rental revenues +21%, op profit +22%, pre-tax +24%, expects CAPEX at upper end of guidance and  similar in 2018/19; FX headwinds persist, but mitigated by strong US., reiterates 2018 guidance, finance director to step down. McCarthy & Stone H1 completions +16%, average selling price +14%, trading resilient but margins expected lower as guided.

easyJet Feb passengers +4% YoY, load +1pt, rolling 12M +9.2%, load +1.6pt. Just Eat FY revenues +45% (Int. +75%), +30% organic, orders +26%, underlying EBITDA +42%, BUT statutory pre-tax loss after big Australasia impairment and plans to invest more. Intertek FY revenues 7.9% (+3% constant FX, +2.1% organic), margins expand, div +14.3%, targets increased pay-out ratio. Aggreko 2017 pre-tax profit falls, div flat, 2018 pre-tax seen flat and  H2 weighted. Anglo American reports $555m rough diamond sales (De Beers’) in 2018 2nd cycle sales, -17.5% vs Q1, flat YoY.

US equity markets finished another choppy session higher, having recovered from earlier losses as some fears over an emerging trade war abate. The Dow Jones swung by 500 points to eventually close 1.4% higher, with the Industrial names under pressure since the end of last week (Boeing, Caterpillar) recovering somewhat alongside Goldman Sachs, while the S&P 500 climbed 1.1% as Utilities outperformed. The Tech-heavy Nasdaq underperformed, up 1.0%.

Gold is trading at the ceiling of a 2-week falling channel, however is yet to make a comprehensive breakout of falling highs resistance. Having retreated from a test of the ceiling yesterday morning, the precious metal was back testing $1324 overnight, however has edged back from the key level ahead of the London open as the US dollar consolidates. Any greenback weakness today could see a further test of resistance made. Crude Oil benchmarks have consolidated gains having powered higher yesterday on strong demand forecasts from the IEA. Helped by a sideways trading US dollar, Brent crude has maintained gains around $65.7 having retreated from overnight highs of $65.9, while US crude trades around $62.7 from overnight highs $62.9.

In focus today will be US January Factory Orders (3pm), forecast -1.3%, in stark contrast to the last two months’ +1.7%. However, the ex-Transport metric may be more helpful, already in decline from October’s peak.  US IBD/TIPP Economic Optimism (3pm) for March is expected to climb for a third straight month to 58.2, its best since Summer 2004 as it extends an uptrend from a Summer 2017 trough. Final reads for Jan US Durable Goods Orders are still forecast weak, but perhaps less than prior reads. As always, US API Oil Inventories (9:30pm) will serve as a bar for tomorrow’s official EIA report and could move oil price overnight.


Speakers today are headlined by a couple of appearances from Fed voting members ahead of the FOMC’s next meeting in a fortnight’s time. NY Fed head Dudley (12:30pm; centrist) visits the US Virgin Islands, while notable dove Brainard (10:30pm; dove) speaks about the economic and monetary policy outlook at the "Money Marketeers Forum". Note also the Bank of England’s chief economist Haldane (6:15pm; centrist) delivers a keynote speech to the the Royal Society for the encouragement of Arts, Manufacturers and Commerce Citizens’ Economic Council.

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