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Morning Market Pulse - A long week, and it ain't over yet

Morning Market Pulse - A long week, and it ain't over yet

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


FTSE 100 called to open +45pts at 6750, after a 135pt rebound from another fresh 2yr low (6670) yesterday, but still hampered by a falling channel. Bulls need a break above 6790 to escape said channel. Bears require a breach of 6750 to extend it. Watch levels: Bullish 6790, Bearish 6750


Calls for a positive open come after a rollercoaster session on Wall St, where the Dow made close to a 1500-point roundtrip managing to close the day just shy of flat. After a revival of trade war concerns battered markets sentiment improved sharply on news that the Fed could slow its rate hikes, offering a life-line to seesawing equity markets.


Asia mixed overnight as traders weigh hopes of trade war progress (Trump still “full of confidence”) with unhelpfully negative headlines, including the arrest of Huawei’s CFO and uncertainty regarding OPEC production targets. Oil prices continue to slip as oil-producing nations held off on announcing production cuts, trying to convince ally Russia to follow suit.


In corporate news this morning Berkeley Group ups FY19 pre-tax profit guidance by 5%+, reiterates guidance for next 2 years; NAV +8%, net cash +25%; Forward sales -14%; £280m per annum in buybacks/dividends extended to 2025. Good start to year, short term outlook uncertain on Brexit + other headwinds in London/SE.


AB Foods 8-week sales and profits in-line. FY guidance unchanged. November Primark trading challenging. Expects Grocery profits growth after higher Aus/UK margins, sees Sugar profits significantly lower due to effect of EU sugar prices.


S&P cuts GlaxoSmithKline long term outlook to Negative (from Stable; affirms A+/A-1 rating) after it GSK agreed to buy Tesaro for £4bn and said pharma margin will be squeezed by 300bp in 2020; S&P says leverage could exceed 3x 2019-20 due to debt +£4bn and lower profits. AstraZeneca’s Imfinzi cancer treatment misses Phase III EAGLE trial primary end-point.


Standard Chartered issues ¥111bn (£770m) fixed-rate bonds due 2023. Land Securities acquires 1.6-acre site in Southwark for £87.1m. Unilever Chief Marketing Officer of 35 years Keith Weed retire. Shell confirms sterling Q3 dividend of 36.77p (1.6% quarterly yield; annual forecast 6.4%). RELX completes £700m 2018 share buy-back; will buy back another £100m 2 Jan-18 Feb 2019.


Premier Oil sells interest in Babbage Area to Verus Petroleum for £30m, proceeds to pay down debt. Production update: Nov and Dec above forecast (92K barrels); reiterates FY guidance of 80K. McCarthy & Stone appoints Nigel Turner (ex-Kier executive director) and Mike Lloyd (ex-AA chief commercial officer) as dual COOs, starting 1 Jan.


Games Workshop H1 trading in-line. H1 sales estimated ~£124m, op. profit ~£41m. Declared 30p/share dividend, to be paid 25 Jan (20 Dec ex-div). Genus successfully raised £68m in a share placing at 7.8% discount to 6 Dec closing price.


In focus today will be, you guessed it, more (day 3) Brexit debate in Parliament. With the 11 Dec Meaningful vote day fast approaching, informal alliances in the Commons and on 10 Downing Street continue to evolve. The stakes grow day by day, both for PM May and the country.


In terms of macro data, UK Halifax House Prices (9:30am) are expected weaker in November (+1% YoY est. vs 1.5% prev.). Nationwide House Prices beat expectations last week, could Housebuilders benefit from another upside surprise? The third estimate for Eurozone Q3 GDP (10am) is likely to confirm slower growth of 1.7% YoY (Q2: 2.2%).


The highlight of the day though will be US Non-Farm Payrolls (1:30pm) and wages growth. Market projections are for jobs adds of 200K in November, down from 250K in October but still very respectable. Average Hourly Earnings growth, meanwhile, is expected unchanged from last month at 3.1% YoY, well above the Fed’s 2% inflation target. Lastly, US Michigan Consumer Sentiment (3pm) is forecast pulling back to 97 in December for a 4th consecutive declines.



Outside of UK Brexit soundbites, scheduled speakers comprise the ECB’s Cœuré (8:30am) giving opening remarks at a meeting of the Euro Cyber Resilience Board and the Fed’s Brainard (5:15pm) who speaks on financial stability before a Peterson Institute for International Economics lunch.

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