Mike van Dulken and Artjom Hatsaturjants at Accendo Markets, commented to clients this morning:
FTSE 100 Index called to open -30pts at 7110, back from Thursday’s 7170 highs but holding intersecting support (since 2 Nov) at 7100. Bulls need a break above 7125 to give confidence in a rebound, Bears a breach of 7103 before any decline towards Wednesday’s 7025 lows. Watch levels: Bullish 7125, Bearish 7100
Calls for a negative open come after Wall Street’s rebound stalled for a second day while investors digested a still hawkish Fed assessment of the US economy. This implies more rate hikes in the pipeline (markets prepared for December) in spite of trade war concerns and US political uncertainty.
Asian bourses added to bearish sentiment after China regulators signalled plans for minimum private lending quotas for banks, begging the question of a stimulus step too far to keep the economy growing. Data also showed October consumer inflation plateaued at a 6-month highs of 2.5% while producer prices fell to its slowest since March (3.3% vs 3.6% prev.).
USD back at November highs following an upbeat Fed update, although it did caution about a slowdown in fixed business investment. Dollar strength weighing on commodity prices, with Brent Crude and Copper both lower (Energy equities lower in Asia). Gold has surrendered more ground in spite of risk-off sentiment, as preference for fellow safe-havens USD and JPY proves stronger.
In corporate news today, Unilever is considering a $1bn bid for China's Weimeizi according to the South China Morning Post. SSE and Npower have delayed completion of their merger of SSE Energy Services and Innogy beyond Q1 2019 after changes to commercial terms including new UK government price caps, collateral requirements against credit and ability to retain appropriate credit rating.
Informa 10-month underlying revenues +3.9% (+4.1% excl. UBM merger) vs +4.3% in H1. Trading in-line with expectations, on-track for FY +3.9% target in spite of macro uncertainties. UBM integration largely complete, on track for 2019-2021 cost synergies. Preparing for Brexit.
Grainger acquired and forward-funded 108 build-to-rent homes in Tottenham Hale for c. £41m. Equiniti benefits from winning record number of share plan mandates (44; o/w/ 6 FTSE100) in last 12 months, and being registrar for 70% of UK IPOs.
AO World to acquire Mobile Phones Direct (FY17/18: £121.7m revenues, £5.5m EBITDA) for £38.1m (cash and debt free), paying £20.9m cash (+interest) using new £24m loan, and AO shares.
Morgan Advanced Materials 10-month organic constant FX sales +7.2% YoY (4-months to Oct: +6.4%) and 5.4% cxcl. additional ceramic armour sales within Seals & Bearings. Thermal Products +7%, Carbon & Technical Ceramics +9.2%. Trading in-line, FY guidance unchanged.
In focus today will be the UK Q3 GDP (9:30am), with growth forecast to accelerate to 1.5% YoY (vs. 1.2% in Q2). Manufacturing and Industrial production, however, are both expected weaker in September, close to 2018 lows, while Construction Output may rebound from August’s fall.
In the US, Producer Prices (1:30pm) are seen easing to 2.5% YoY in October (from 2.6% prev.), while flash Michigan Consumer Sentiment (3pm) is expected slightly weaker at 98 in November, for a third month of falling consumer confidence.
In terms of speakers today, we have several Fed members, including Williams (12:30pm, voter, hawkish), Harker (12:50pm, non-voter, dovish) and Quarles (1pm, voter, centrist) speaking at various venues on investment and financial regulation. Following last night’s hawkish FOMC statement, markets may be looking for more hints on the the next Fed meeting in December, widely expected to deliver another interest rate hike.