Morning Market Pulse - US data shines bright light on bond yields


Mike van Dulken, Head of Research at Accendo Markets, commented to clients this morning:

FTSE 100 Index called to open -30pts at 7480 (ex-dividends -7pts), back from yesterday’s late 7535 highs to confirm a trend of falling highs from late August that could keep the index under pressure. Bulls need a break above 7535; Bears require a breach of yesterday’s 7475 lows. Watch levels: Bullish 7535, Bearish 7475


Calls for a negative start stem from a another mixed session in Asia, in spite of a positive close on Wall St (more record highs). Whilst the US benefits from strong data (jobs, services), boosting USD (6-week high) and Treasury bond yields (well above 3%;7yr highs), the latter has pushed up global bond yields, weighing anew on Emerging Markets (and FX) and reviving trade war jitters.


Oil remains strong, holding multi-year highs, to the benefit of Energy names, even if after a surprisingly large 18-month high build in stateside stockpiles yesterday. Note Australia’s ASX outperforming overnight, boosted by Energy and Miners, which could help UK-listed  peers. GBP off lows vs USD and near highs vs. EUR, hampering FTSE.


In corporate news this morning BHP and JV partner Vale have reached a settlement in Brazil over some compensation for the 2015 Samarco dam collapse, moving forward the legal process. Comcast has agreed to acquire Fox’s 39.1% stake in Sky increasing its total stake to 75% stake.


Smiths Group acquires United Flexible (flex and rigid solutions for transfer of fluids and gases) for $345m (2x sales; 10.8x EBITDA). easyJet September passengers +14.2% YoY, load -0.8pts to 92.8%; rolling 12 months +10.2%, load +0.3pts to 92.9%). BTG ups sales guidance on better Pharma performance; Chairman to retire.


Electrocomponents H1 like-for-like revenues +10%, expects adjusted pre-tax profits +27%; on-track for cost savings; IESA acquisition delivered double-digit revenue growth, in-line. CYBG and Virgin Money get FCA and PRA approval for merger.


Ted Baker H1 revenues +3.5% -2% FX impact), pre-tax profits -3.2% (+3.5% excl. exceptionals); UK + Europe +1% vs. US & RoW +1.8%; internet +24.1%; Retail +1.1%, interim div +7.8%; second half to remain challenging. DFS Furniture FY18 revenues +14%, pre-tax profit -49% on higher costs and Q4 downturn; div maintained; markets recovered, but conditions to remain subdued 2019.


In focus today, a quiet one for data, will be US Durable Goods/Factory Orders (3pm) given US data continuing to shine, pushing equities, the USD and bond yields higher to mixed reception round the world. Speakers include the Fed’s Quarles (2.15pm) and the ECB’s Coeure (6pm) which could move both USD and EUR.



After its troubled market debut yesterday, Aston Martin is sure to garner yet more attention today, having closed down 3.8% vs. its 1900p IPO price, albeit well of the lows of 1750p (-7.9%), begging questions about bankers pushing for overzealous valuations. Can it recover any of that lost ground?

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