Mike van Dulken and Artjom Hatsaturjants at Accendo Markets, commented to clients this morning:
FTSE 100 Index called to open flat at 7235, holding yesterday’s bounce off 7189 (mid-April lows and 2016 rising support), giving hopes to the Bulls that a 4.8% correction from September highs will suffice for a market correction. Bulls need a break above yesterday’s 7250 highs. Bears require a breach of 7217 overnight lows. Watch levels: Bullish 7240, Bearish 7215
A flat opening call comes amid mixed global trading. Wall St extended its losing streak despite bond yields easing on global growth fears (IMF cut estimates) and Trump criticising a hawkish Fed, dragging USD back from 7-week highs. Asian bourses, whilst choppy, showed signs of finding their feet after the recent sell-off, although trade fears remain to the fore after US Treasury Secretary Mnuchin renewed a US warning to China not to engage in competitive currency devaluation.
GBP, JPY and gold have benefited from dollar weakness, encouraged by speculation of progress on Brexit negotiations (trade deal almost done? Irish border resolution found?) and risk-off sentiment favouring traditional safe-haven assets. GBP further supported by reports of 30-40 Labour MPs, fearful of a hard Brexit, prepared to break ranks and support the PM’s Chequers deal. Beware FX moves hampering FTSE.
In corporate news this morning, HSBC agrees $765m settlement with US DoJ over claims of 2005-2007 mis-selling of US residential mortgage backed securities (RMBS). In a similar vein, Standard Chartered says seeking “acceptable resolution” with US over historic sanctions breaches (Iran 2007-2012), expected to result in $1bn+ fine.
CMA confirms provisional approval of SSE/Npower following final review. Shell plans 250 new gas wells in Eastern Australia 2019/2020, connecting to existing QGC gas-processing plants. British American Tobacco Chief Marketing Officer to step down end-December, replaced by current regional director for Americas and Sub-Sahara Africa.
PageGroup Q3 gross profit +17.2% YoY (UK +0.8%; RoW +20-25%), Permanent +23%, Temp +17%; 2018 operating profit expected marginally ahead of consensus. Genel Energy expects 2018 average net production slightly above guidance (exit rate production considerably higher); expects record Q4 receipts and cash flow, costs below guidance, capex at lower end.
Polymetal upgrades estimate for Prognoz silver deposit to 256 Moz of silver equivalent. Following new review, pure silver contained -19%, but avg. silver grade +25% and avg. vein width +15%. Domino's Pizza makes interim CFO David Bauernfeind permanent. International Public Partnership announces £75m raising (1.4% discount to yesterday’s close) to pay down debt.
Marston’s FY revenues +15% YoY after strong World Cup and warm summer, total pub sales +3.2% (like-for-like +0.6%). Like-for-like Taverns +3.8%, Destination & Premium -1.2%, Marston’s Beer volumes +47% (after CWBB acquisition). Margins to fall on higher interest charges. Last 10 week like-for-like sales +1.6%
Telford Homes: focus on affordable protects from Brexit uncertainty; sales at consistent rate in last few months, helped by Help to Buy; sales >£600K more challenging, not expected to improve in short term. Expects fewer completion in H1 than H2, profits also lower, but up vs prior year. No reason to change targets, assuming market doesn’t worsen as Brexit approaches.
In focus today will be the UK August Trade Balance, the latest Monthly GDP growth as well its Manufacturing and Industrial Production. Whilst the trade deficit may re-widen, and GDP growth slow (0.1% MoM vs 0.3% prev.), Manufacturing is expected to rebound (0.1% vs -0.2%) and Industrial hold firm (0.1%).
All the above could move GBP with a knock-on for the FTSE before Bank of England Chief Economist Haldane (10am) speaks at the ACAS Future of Work Conference in London while the UK NIESR Monthly GDP Tracker (2pm) could sway GBP further this afternoon.
This afternoon comprises US Producer Price Inflation (PPI; 1.30pm), likely rebounding in September with the annual pace still supportive of further Fed rate hikes. Wholesale Inventories (3pm) growth will probably be confirmed and the Fed's Evans (5.15pm) gives a speech on the US economic outlook, with audience Q&A. US API inventories (9.30pm) were delayed by a day for the Columbus Day holiday.