Morning Market Pulse - No trade war calm after the storms


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

FTSE 100 Index called to open -15pts at 7290, continuing to trade sideways in a 7275-7324 channel range in place since last Wednesday. Bulls need a break above the 7324 ceiling while Bears require a breach of 7275 floor. Watch levels: Bullish 7324, Bearish 7275.


Calls for a negative open come after a mixed start to the week in Asia, although volumes are light with Japan closed for a public holiday and after a weekend of inclement weather in both the US and Asia. Chinese equities are lower under the shadow of US trade sanctions, with President Trump pushing for $200bn in new tariffs to be announced on Mon-Tue in spite of last week’s plans for fresh high level talks in Beijing.


The Wall St Journal, however, suggested the White House might be prepared to soften the blow with 10% tariffs instead of a more punishing 25%. With many consumer imports (electronics, white goods) in the crosshairs, this would go above and beyond the original industrial protectionism. FTSE Housebuilders may be sensitive to Rightmove House Price data suggesting a rebound in September prices and a re-acceleration in annual growth.


In corporate news this morning Prudential expects demerger of M&G Prudential to result in rebalancing of group debt capital with the latter holding €3.5bn of the group’s €10bn medium term notes with a 170% shareholder solvency ratio. In the FT this morning, Vodafone incoming CEO is said to be mulling a sale of tens of thousands of masts to cut its €31bn debt pile. Unilever’s HQ shift to the Netherlands is also opposed by #9 investor Aviva which says it will vote against.  


The US FDA suggests revisions to British American Tobacco's proposal to market Camel Snus (“no smoke, less risk” as less harmful than cigarettes in US advertisements.  Boohoo.com appoints John Lyttle as CEO (current Primark COO); Current joint CEO Kamani to become Chairman. Royal Dutch Shell says it will announce targets to manage emissions of greenhouse gas methane. BP has bought a 61% stake in the onshore Gobustan product-sharing agreement in Azerbaijan. Polymetal has been added to the Dow Jones Sustainability Emerging Markets Index (DJSI).


Sirius Minerals signed a 2.5 Mtpa POLY4 supply agreement with Cibra, Brazil’s 6th largest fertilizer distributor; takes 30% equity stake in Cibra in return for 95m Sirius shares. Kosmos Energy completes acquisition of Deep Gulf Energy for $1.225bn, adding deepwater Atlantic Margin assets to portfolio. Dairy Crest expects H1 revenues “slightly ahead” of last year’s, driven by strong demand in Cathedral City and Clover. Frylight expected weaker due to weather hitting oil usage, though trading is improving. Net debt significantly lower following May equity issue. FY guidance unchanged.


In focus today will be the Eurozone’s final Consumer Price Inflation (10am), where headline prices are expected to confirm an August slowdown to 2% annual growth (important ex-Fuel/Food metric likewise slowing to 1% YoY), though some improvement is anticipated on a monthly basis. With headline consumer prices matching the ECB’s 2% annual target, don’t expect any policy assistance from central bankers in the form of an interest rate hike until H2 2019 at the earliest (as per statement last week). Watch EUR pairs for potential moves.In other macro data, look to the influential New York’s Empire State Manufacturing Index (1:30pm). Economists expect another strong month in September, although figures are forecast below August’s 2018 record high.


In terms of speakers, we have a few ECB executive board members, including Cœuré (11am, hawkish), Chief Economist Praet (12:15pm, dovish), and Mersch (2pm, hawkish) speaking on various topics (with potential remarks on monetary policy, hence of interest to EUR traders). Also keep an eye on the German Bundesbank’s monthly report (11am) for important commentary on the Eurozone’s economic conditions and global trade.

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