Morning Market Pulse - Ker-Powell! Holy dot plots Batman!


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


FTSE 100 called to open -95pts at 6670 extending leg two of December’s sell-off, and the 2018 downtrend, with another fresh low for the year overnight. Bulls need a break above 6675 to extend the bounce, Bears require a breach of 6650 to reverse it. Watch levels: Bullish 6675, Bearish 6650


Calls for a negative open come after sharp losses on Wall St, which is having its worst December since the Great Depression, and Asian bourses following suit overnight.


The driver was not so much the Fed’s decision to hike interest rates (expected) more it’s more downbeat projections for 2019 economic growth and inflation and, perversely, its updated forecast of just 2 hikes next year (prev. 3). A dovish hike, but not enough to halt the current market sell-off.


While USD spiked on the Fed news, it has since retraced most of its overnight gains. Corresponding Sterling strength is adding to FTSE woes. Oil prices have also given up most of their Wednesday rally, with Brent/WTI both trading near 14-month lows amid investor concerns about global growth.


In corporate news this morning Shire to be replaced on FTSE100 by generic drug-maker Hikma Pharma from 24 Dec, ahead of Shire’s $60bn takeover by Takeda in early January. Kier Group raises net £250m from 33-for-50 409p/share rights issue (6% premium to yesterday’s close). However, it only received 37.66% acceptance for the fully underwritten rights issue.


AstraZeneca (& Merck) gets US approval for Lynparza for advanced ovarian cancer; cut progression/death by 70% vs placebo, after platinum chemotherapy; Results from another PIII trial expected H2 2019. PIII trials for Roxadustat (kidney disease patients with anaemia) also positive. Ratings agency Moody's says GlaxoSmithKline’s consumer JV is credit negative for Pfizer. Moody's also downgrades SSE to Baa1 with Stable outlook.


Londonmetric Property places £150m of notes at 3.5% fixed coupon, 12yr average maturity. Empiric Student Property refinances £86.1m of debt with new fixed 3.196% 10yr loan facility. Greencore to return £509m to shareholders via tender offer at 195p/share (17.5% premium to yesterday’s close); to run until 29 Jan, with any unrealised funds to be returned via special dividend.


Greencoat UK Wind acquired 45MW Douglas West wind farm for £45m (sale and completion costs). Construction to commence in 2019, with operations scheduled for July 2021. Shell New Energies and EDF Renewables form 50/50 JV to co-Develop Wind Energy off New Jersey coast.


Stagecoach to sell North American unit to private equity firm Variant for $271.4m ($207m cash, $64.4m net debt transfer); proceeds to pay down debt. Faroe Petroleum publishes rejection circular in response to unsolicited 152p offer from DNO ASA.


In focus today will be the Bank of England (BoE) monetary policy update (12am). No press conference scheduled and market expect a unanimous decision to leave interest rate changes.


The meeting minutes, however, will be scrutinised for policy direction with voting patterns a potential measuring stick for the BoE’s pulse and outlook. Will all 9 committee members have voted to keep rates unchanged, in line with the policy normalisation course? Might some more dovish members (Cunliffe?) actually vote for a cut amidst Brexit uncertainty and uninspiring economic data?


In other macroeconomic news, keep an eye on UK Retail Sales (9:30pm) where markets expect another weak print (+1.9% sales growth in November, lowest since April), echoing recent warnings from major FTSE Retailers, Sports Direct’s/Debenhams’ Mike Ashley being the most outspoken. In the US, the Philly Fed Index (1:30pm) is seen rebounding after a consensus miss in November.

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