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Morning Market Pulse - Correction: Full-time, half-time or extra-time?

Morning Market Pulse -  Correction: Full-time, half-time or extra-time?

Mike van Dulken and Artjom Hatsaturjants at Accendo Markets, commented to clients this morning:


FTSE 100 Index called to open +45pts at 7055, extending last night’s 130pt rebound from 6-month lows. Bulls need a break above yesterday’s afternoon’s 7077 peak, before being able to challenge October falling highs. Bears require a breach of 7035 to overcome rising support and open the door for another downside test. Watch levels: Bullish 7077, Bearish 7035


Calls for a positive open come as Asian markets stage a tentative rebound from yesterday’s sell-off. China September trade data suggests resilience to Trump tariffs. The Washington Post reported Trump and Xi agreeing to a side-lines meet at next month’s G20 summit, fuelling hopes for a trade war truce to offset rising bond yields mounting pressure on the US economy.


The FT reports That UK PM May spoke with her inner cabinet late yesterday about an imminent Brexit deal, although there are plenty of dissenters in the ranks (i.e. DUP, Tory Eurosceptics) who could scupper any progress made on Customs and/or Irish border. GBP flat on the news (been here before?), neither helping, nor hindering the FTSE.


Oil prices are also rebounding from this week’s sharp sell-off (growing crude inventories, and concerns about global growth and rising borrowing costs hindered Energy names), with Brent recovering from a brief test of $80. Gold off overnight highs, having benefited from market sell-off.


In corporate news this morning, FTSE Miners (higher in Australia) may be sensitive to China Trade data overnight, where the Trade Surplus expanded ($31.7bn vs $27.9bn prev.) thanks to an acceleration in exports growth (14.5% YoY vs 9.8% prev.), although Imports slowed (14.3% vs 19.9% prev.). Norway’s Kongsberg Gruppen confirms plans to raise $608m via fully underwritten rights issue to part finance £500m acquisition of Rolls-Royce Commercial Marine.


Man Group Q3 assets under management $114.1bn (+0.4% QoQ, +4.6% YTD, +10.2% YoY), Net inflows +$0.4bn (incl. $2.2bn infrastructure redemption); Investment +$0.9bn, FX -$0.7bn; mixed performance; new governance and corporate structure, group holding company in Jersey; no change to listing. Ashmore Q1 AUM $76.4bn, net inflows slow to $1.9bn from $2.6bn prev.; Debt +4-8%, Equities -5%, Alternatives +13%; investment perf +$0.3bn, acquired AUM +$0.3bn. Expects mispricing around elections in US and several Emerging Markets to present more opportunities to buy attractively-valued assets.


Tritax Big Box gets approval for new National Distribution Centre at Midlands Logistics Park; Pre-let to Bosch; £89m investment with net yield of 5.2%. Great Portland Estates signed a revolving £450m 5-year credit line with 6 banks, extending October 2014 deal. Sports Direct buys several Glasgow properties for £95m cash and discloses 26.16% stake in French Connection. Note Comcast has acquired 95.32% of Sky shares, crossing the threshold where the takeover offer becomes unconditional. Compulsory purchase of remaining shares to begin shortly.


In focus today will be continued analysis of this week’s market correction as well as potential for an imminent Brexit deal breakthrough.


On the data front., Eurozone Industrial Production (10am) is forecast to post an August  rebound but contracting further on an annual basis. US Import/Export Prices (1.30pm) could impact the stateside inflation outlook, with a knock-on for Fed rate hike expectations and the USD.


October US Consumer Sentiment (3pm) is seen slightly better along with Current Conditions although lower in terms of Consumer Expectations. With Oil off its highs, the Baker Hughes US Oil Rig Count may find renewed interest.


Speakers today include the Fed’s Evans (2.30pm, dove, non-voter) and Bostic (5.30pm, hawkish, voter). Should they deliver a similar ‘strong economy’ message to that of Chair Powell last week, this could add fuel to the fire of fears that more rate rise expectations could put growth at risk.

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