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Morning Market Pulse - White smoke from White Paper?

Morning Market Pulse - White smoke from White Paper?

FTSE 100 Index called to open +25pts at 7615, well off overnight lows after bouncing off 6-day shallow rising support at 7570. Bulls need a break above 7625 overnight highs; Bears require a breach of 7610. Watch levels: Bullish 7625, Bearish 7610


Calls for a positive open come courtesy of a rebound in Asia following yesterday’s global sell-off on renewed US-China trade conflict concerns, Trump’s confrontational attitude at NATO and a sharp decline in oil prices. Sentiment improved thanks to suggestions that US and Chinese officials are considering resuming trade negotiations, which might avoid a further escalation in harmful tariffs.


Major currencies are largely flat overnight with the weaker GBP benefiting the FTSE’s global players. Oil prices are off their overnight lows, paring some of yesterday’s losses which may help Energy equities, as supply imbalances round the world (large draw in EIA Oil Inventories vs. Libya reopening 4 major oil exporting ports and Saudis removing production caps) rocked commodities.


Copper well off lows should lows could offer support to Miners, though trade tensions with China are counterbalancing the effect of stronger commodities.


In corporate news this morning, note that Comcast has improved its bid for Sky by 37% to 1475p/share in response to Fox yesterday upping its bid to 1400p. Housebuilders may be sensitive to the RICS House Price Balance spending a sixteenth successive month in negative territory.


Capita awarded 6yr contract worth ~£109m by DfE's Standards and Testing Agency; Sells ParkingEye for £235m cash. Premier Oil leaves FY production guidance unchanged. Interserve wins £35m NHS contract. ASOS sales growth slows to 22%, cuts full year guidance to lower end of range; backs mid-term guidance.


Dunelm Q4 like-for-like store sales -4.6% YoY, down sharply from Q3; Online +41.8% accelerates. FY margins seen lower after clearance loss provisions; expects pre-tax profits -6.4% vs May guidance of “moderately below” last year. B&M Euro Value Retail Q1 group revenues +21.3%, UK +8.3% (+1.6% like-for-like, +3.6% organic).


Computacenter says strong Q1 momentum continued into Q2; considerable progress in adjusted profitability, even more in EPS thanks to buybacks; expects FY to comfortably beat guidance provided in late April. Renewi merger synergy and integration projects progressing well; on track to for FY savings of €30m. DFS Furniture warns of lower Q4 orders due to recent hot weather, and supply disruption from Far East; market to remain challenging.


In focus today will be digestion of final June headline Consumer Price Inflation (CPI) reads for Germany (7am) and France (7:45am) and the US. In Germany, price growth is expected to have softened (est. 2.1% YoY vs. 2.2% in May), while in France it may have ticked higher (2.1%  YoY vs. 2% in May). These should provide us with a hint about the print for the Eurozone as a whole next week. Watch EUR.


With Eurozone Core inflation still languishing around 1%, however, neither figure is likely to alter the assumption that the ECB is still nowhere nearer a hike. Not before next Summer anyway, as guided. Possibly not until Autumn, given the policy wording: low rates “through the summer” of 2019 and suggestions that committee member are divided on its meaning. Will the ECB minutes (12.30pm) shed any more light.


Across the Pond, however, where the Fed is still hiking interest rates, headline CPI (1:30pm) is forecast to have accelerated to 2.9% (from 2.8%). More importantly, however, the Core metric may show the same (2.3% YoY vs 2.2%), now well above the Fed’s 2% target, continuing to vindicate the additional hikes being guided to and forecast. Watch USD, knock-on for GBP and Commodities.


UK government is set to publish its Brexit White Paper today, giving a full run-down of its proposal for orderly divorce from European Union. The 100+ page document that is based on agreements reached by PM May’s cabinet in Chequers last week, should serve as a blueprint for future negotiations with Brussels.


The NATO summit in Brussels enters its second day, with Trump continuing to throw his hefty weight around (Presidential rather than body), stirring things up and lashing out. More of the same today?



In terms of speakers, the Fed’s Harker (5:15pm, dovish, non-voter) participates in a conversation and moderated Q&A at an Economic Summit in Idaho.

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