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Morning Market Pulse - Morrisons' mixed messages

Morning Market Pulse - Morrisons' mixed messages

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

 

FTSE 100 called to open +5pts at 6815, holding just below the mid-point of a 2-day 6780-6880 range. Bulls need a break above 6845 overnight highs if they are to challenge 1-month falling highs resistance at 6880. Bears require a breach of 6805 overnight lows for a revisit of Friday’s breakout zone. Watch levels: Bullish 6845, Bearish 6805

 

Calls for a positive open come after a Wall St rally led by Tech (Netflix +6%, Amazon +3%, but Apple struggled) and Pharma (more M&A). US-China trade talk optimism also helped, sending Miners and financials higher in Australia although Japan was mixed after Samsung forecast a rare drop in profits, echoing Apple’s recent warning.

 

UK PM May is said to be in secret last-minute talks with EU leaders over the possibility of extending the 29 March Brexit deadline, according to The Telegraph report. This is just days ahead of a next week’s meaningful parliamentary vote.

 

The Dollar is recovering from recent “patient Fed”-inspired weakness, with GBP off its overnight highs after a strong rally on Monday which kept FTSE under pressure. Oil prices are off Monday highs, taking a breather in a 4-day rally, despite reports of Saudi Arabia planning deeper export cuts.

 

In corporate news this morning Morrisons 9-week like-for-like sales (ex-fuel) +3.6% vs +4%e (2.9-5% range), with Retail +0.6% (lowest since Q1 2016/17) beating +0.5%e (0.2-1%) but Wholesale +3.0% missing +3.5%e (2.3-5%. Like-for-like transactions -0.9%, but items per basket +0.8%; “change in consumer behaviour during period...strong offer...trading business hard for customers”; Backs FY guidance.

 

Ferrexpo Q4 iron pellet production +1.6% YoY (+7.2% QoQ), FY’19 production expected in-line with 2018 due to ongoing maintenance. Average price +9%, but FY production cost expected +33% on higher energy/mining costs. Net debt -15.6%. Shire takeover by Takeda now effective.

 

SSE appoints E&Y as new auditor, replacing KPMG. National Grid agrees to 5.5 year employment terms/conditions contract with Massachusetts Gas unions for 1,250 workers. WANdisco launches new joint engineered solution with IBM to support relational database technology.

 

Greene King 9M like-for-like sales +3.2% YoY after record Christmas trading (+10.9%) ahead of consensus. Cost mitigation programme on track to limit cost increases to £10-20m. Bought back £62m of Spirit A4 bonds. Confident in FY outlook despite Brexit uncertainty.

 

Footasylum warns of lower FY margins after higher promotional/clearance; 18-wk revenues +14% (stores +5%, online +28%), slower than 44-wk (+16%, +9% and +28%, respectively). Joules sales +11.7% in 7 weeks to Jan 6, boosted by online (half of sales); reiterates FY expectations.

 

SIG cites challenging market conditions and lower trading revenues in H2; H2 like-for-like growth worsened since Jul-Oct update (20 Nov); points to full year pre-tax profit (incl. property gains) -5.3%.

Abcam expects H1 like-for-like revenue +10% YoY and remains on-track to reach FY targets.

 

Safestore FY underlying revenue +10.4% YoY, EBITDA +11%, EPRA NAV/share +22.2%, final dividend +13.8% (H1 +21%). Closing occupancy +2.7pts to 76.6%, average occupancy +4.8%, but average storage rate -3.3%, diluted by Alligator M&A and new store openings (both trading in-line).

 

Norwegian Petroleum Directorate lowered reserve estimates for Faroe Petroleum’s Oda field by 30.7% to 32.7m boe. Takeover predator DNO raised concerns over transparency and future production, saying Faroe’s independent valuation was based on higher reserve estimate.

 

In focus today will be digestion of US-China trade talks. With the first day of talks producing no major headlines, traders are looking to a potential post-talks soundbites to feel the pulse of both sides. Chinese Vice Premier and President Xi’s top economic advisor Liu He was among the negotiators, underscoring how seriously Beijing was taking this first round of talks.

 

Macroeconomic data today is limited to UK Halifax House Prices (8:30am), markets expecting a bounce back in December (watch housebuilders) and Eurozone December sentiment indicators (10am), with economists seeing another weak across-the-board batch of data to echo slowing GDP.

 

 

From the US, we have the November Trade Deficit (1:30pm), which is expected to narrow slightly (-$54bn est. vs. -$55.5bn prev.), potentially smoothing some of the US-China trade discussions. There is also JOLTs jobs survey for November (3pm), which although lagging raw payroll data, provides additional statistics about the state of the US labour market.

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