Morning Market Pulse - The hunt for Red October


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


FTSE 100 Index called to open -100pts at 7045, down sharply from yesterday’s close, extending the October correction and breaching April and 2016 rising support, but 30pts off 7015 overnight lows. Bulls need a break above 7085 overnight highs for hopes of recovery. Bears require a breach of 7015 overnight lows for more downside. Watch levels: Bullish 7085, Bearish 7015


Calls for a sharply lower open come after an aggressive Wall St sell-off, which saw the Tech-heavy Nasdaq post its worst day in 7 years amid fresh worries about whether the strength of the upcoming corporate earnings season can justify lofty valuations, as rising interest rates/bond yields, trade war fears/slower growth and higher input/borrowing costs threaten profit margins.


The US sell-off continued into Asian overnight, battering tech names and basic materials (dual-listed Miners down 3-4% in Australia). All we need now is poor results from the US banks tomorrow and we might need to keep our tin hats on a while longer while the correction runs its course.


In corporate news this morning, Hargreaves Lansdown Q1 AUM +3% QoQ (+14.7% YoY, +9.4% YTD), net revenues +16% YoY, new clients slowed to +29K; uncertain markets, weak investor sentiment, slower net retail flows. Mondi Q3 EBITDA +30% YoY (+4% QoQ); Going into Q4 continue to benefit from stable pricing in key fibre-based products, but expect impact from shut-downs/ramp-up/restructuring/cost pressure.


IAG and European peers may be sensitive to the UK’s competition watchdog CMA launching a competition review of transatlantic flight deals ahead of Brexit. Royal Dutch Shell shuts down Texas refining facility for repairs after small leak.


CYBG gets IRB accreditation for mortgage and corporate portfolios from PRA; allows it use internal risk models, lowering debt issuance requirements; allows it target new segments of lending market. Hays Q1 like-for-like net fees +9% YoY (UK +3%, DE +13%, Aus +7%, RoW +14%). Headcount +7%. Estimates £5m FX headwind in 2019 (£8m reversal from previous guidance).


WH Smith FY revenues +2% but pre-tax profits -4% due to one-off costs from Retail review. Travel still strong (50% sales; ⅔ profits) but Retail in decline. Final dividend +13%. Uncertainty in economy but pleased with start to new year in both Travel and Retail.


In focus today will be the global market sell-off as investors price in the smorgasbord of higher bond yields, rising interest rates and waning central bank stimulus, whilst simultaneously reappraising equity valuations and factoring in threats to global trade and national issues such as Brexit and the Italian budget, amongst others.


In terms of data, however, we have only US Consumer Price Inflation (CPI; 1.30pm) to look forward to, although should it prove stronger than expected it may simply add fuel to the fire of US rate rise expectations merely strengthening USD and send US bond yields even higher.



With oil already off recent multi-year highs, amid global growth and supply uncertainty, US EIA inventories (4pm) may put it under further pressure should the report echo last night’s much bigger than expected 9.75m barrel build in API (est. 2.6m), not dissimilar to last week’s surprise 8m EIA rise.

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