Mike van Dulken and Artjom Hatsaturjants at Accendo Markets, commented to clients this morning:
FTSE 100 Index called to open +10pts at 7130 (ex-div 6pts), back from overnight highs of 7165 testing yesterday’s 7133 breakout. Bulls need a break above 7145 to overcome overnight falling highs resistance. Bears require a meaningful breach of 7125 zone for further downside towards 7100. Watch levels: Bullish 7145, Bearish 7125
Calls for a positive open come after Wall St rallied on the prospect of fresh US political gridlock being good for business (checks and balances) and Republican President Trump offered an olive branch of bipartisanship, willing to work with Democrats on things like infrastructure spending - maintaining at least some stimulus - trade and drug prices.
That said, is the latter another case of Trump deflection aimed at offsetting his firing of the Attorney General, another attack on the media and warning the opposing party about confrontation with his Administration now they have a fresh majority in the lower house.
Asia markets higher on a bullish US lead, helped by China reporting stronger than expected growth in both exports (+15.6% YoY vs 11% est.) and imports (+21.4% YoY vs. 14% est.), demonstrating resilience to US trade war restrictions (exports to the US +13.2%), although still Trump won’t like the rise in China’s “unfair” trade surplus.
USD strong versus major peers, recovering from November lows ahead of tonight’s Fed monetary policy update. Note Brent Crude Oil price at a 2.5-month low, though off its worst yesterday following a larger than expected build in official US oil inventories. Gold pulled back as risk-on sentiment (and preference for USD) dents demand for the safe-haven.
In an extremely busy morning for corporate updates we have identified;
AstraZeneca Q3 revenues $5.34B beats $5.31B consensus (product sales +8% boosted by new medicines and emerging markets); core operating profit $1.32B beats $1.15B est.; Core EPS 71c beats 65c est.; Backs FY 2018 Product Sales and Core EPS guidance.
Sainsbury H1 underlying pre-tax profit £302M (+20.3%) beats £278M consensus; Underlying group sales +0.6% like-for-like (Q2 1% vs Q1 0.2%); Q2 Grocery stronger, Gen Merch slower, Clothing negative; Argos synergy target hit early; Net debt -40% = temp; Backs FY guidance (£643M underlying pre-tax); consumer outlook uncertain, all areas highly competitive and very promotional.
Burberry H1 like-for-like revenue -2% YoY (+4% ex-Beauty wholesale on strength of Asia travel retail), adj. op. profit +8%, free cash flow -73%, dividend unchanged, FY guidance reiterated incl. £100m in cumulative cost savings.
National Grid H1 op. profit -6% YoY (Electricity +3%, Gas -37%, US -17%, NG +31%.), pre-tax profit -4%, capex +7%, interim div +3.8%. UK business on track to outperform by 200-300 bps, sees 7%+ asset growth in next 2 years and at top of 5-7% range in med-term.
BHP Billiton CEO says no plans to alter dual-listed structure, working to restore Australian iron-ore rail operations disrupted by this week’s train derailment. BAE Systems FY outlook unchanged. Expects 2018 EPS in line with 2017, with small FX tailwind. Typhoon production stabilised following £5bn Qatar contract. Brexit near-term impacts likely limited.
Coca-Cola HBC Q3 like-for-like net sales +4.5% YoY (established markets -0.5%, developing +14.1%, emerging +4.8%). Quarterly volumes +4.2%. Remains confident in delivering FY growth. Tate & Lyle H1 sales -1% (+2% at constant FX); adj. operating profit -2% (flat at constant FX); in-line with expectations, backs FY guidance, dividend +2.4%.
Inmarsat Q3 revenues $369M in-line, EBITDA $206.5M beats $184.7M consensus; 2018 Revenue, EBITDA (excl. Ligado) to be at least in line with consensus; Med-term group guidance unchanged (mid-single digit % rev growth on average over next 5 years, EBITDA and cash flow improving steadily.
Inchcape Q3 like-for-like revenue +2% YoY (distribution +3%, retail +1%). Central American M&A contributed 2% to revenue. Retail margin pressure persists. Expects “resilient” FY performance and some easing of market pressures in 2019. Expects an FX headwind in Australasia over the year.
Hikma Pharmaceuticals raises FY guidance after profitability improved more than expectations. Injectables rev. now expected $825-850m (39-40% margin), Generics rev. now expected $675-700m (low teens margin). Branded FY guidance unchanged in mid-single digits growth. Agrees with Vectura to global development/commercialisation of generic versions of GSK’s Ellipta.
Superdry Q2 revenue +3.1% YoY (wholesale +7.8%, ecommerce +6.9%, store -2.3%),, global brands (excl. China) +6.4%, avg. retail space +9.4%. Yet to see sustained period of cold weather, to which it is heavily reliant.
In focus today will be the Fed’s monetary policy update (7pm), delayed from its usual Wednesday slot by the US elections. Market expects the FOMC to hold the federal funds rate target unchanged in a 2-2.25% range; no press conference scheduled. Look out for USD, as it works to regain some lost ground after the midterm elections.
Elsewhere, we’ll hear from the ECB, which publishes its Economic Bulletin (9am), and the European Commission, which will release its quarterly forecasts (10am). Assessments of the current state of the US-EU trade war, Italian budget crisis and Brexit could have an impact on the EUR (with some potential FTSE read-across).
In speakers, the ECB’s head Draghi (3:20pm) addresses the Irish Parliament in Dublin, while colleague Cœuré (2:15pm) speaks on “green finance” at a conference in Berlin.