Mike van Dulken and Artjom Hatsaturjants at Accendo Markets, commented to clients this morning:
FTSE 100 called to open +55pts at 6750 with an overnight rebound from 6675 lows extending to a test 6760 resistance (both horizontal and falling) since 20 Dec. Bulls need a break above 6765 to overcome said resistance. Bears require a breach of 6745 to signal potential for a retrace. Watch levels: Bullish 6765, Bearish 6745
Calls for a positive open come thanks to much stronger China Caixin PMI Services (53.9 v 52.9e v 53.8 prev.) and Beijing pledging more stimulus (lower tax/fees, another reserves requirement [RRR] cut for banks) to increase business financing and help growth.
After an ugly start to 2019 for equities, growth concerns abound, the China Services update (and stimulus pledge) helps cushion Manufacturing contraction this week, and confirms Monday’s official data suggesting Services in ruder health.
With an American trade team China-bound for talks next week to avoid, or at least calm, a Sino-US trade war, might FTSE Miners, which found a smidgen of support yesterday, get a boost today? Note copper up another 1%, taking its rebound to 2.5% from yesterday’s 18-month lows.
Asia bourses, nonetheless, mixed overnight with China higher, Australia lower and Japan offside, playing catch-up from holidays, reacting to Tech sector weakness which saw Wall St close lower as investors digested Apple’s China-inspired revenues, and thus surely profits, warning.
Oil prices are bouncing back, with Brent Crude back around $56 after a larger than expected fall in API Oil Inventories (-4.5m vs. -2.3m est. vs +6.9m prev.) although stocks of other products (gasoline, distillates) climbed, smothering some of the positive effect of the Oil drawdown.
In corporate news this morning, AstraZeneca has had its Fasenra asthma medication approved by UK health regulator NICE, reversing an earlier decision, after resolution of a pricing dispute. New price confidential, but negotiated down from £1,955/dose list price.
BHP’s Saraji coal mine restarted operations after a site death on 31 Dec. FTSE Housebuilders may be sensitive to Nationwide House Prices data (-0.7% MoM; +0.5% YoY vs. +1.5% est.)
DNO raises stake in hostile takeover target Faroe Petroleum to 30.6%, buying at 147-152p/share ( in-line with 152p offer). 43.8% stake when combined with 13.1% shareholder acceptances. McColl’s Retail appoints Robbie Bell (ex-Screwfix CFO, ex-Welcome Break CEO) as new CFO.
In focus today will be US December Non-Farm Payrolls (1:30pm). After ADP beat estimates yesterday (271K job adds vs 178K est.), hopes are high for a strong NFP today (est. 177K vs. 155K prev.) to revive bullishness. As always, Wage growth (3.1% est. vs 3% prev.) could steal the show given its inflationary read-across for the Fed.
With financial markets now pricing in no further interest rate hikes in 2019, perhaps even a cut, and Kaplan suggesting no action/wait and see, all eyes on Fed Chair Powell (3:15pm) this afternoon where he participates in a panel interview alongside predecessors Yellen and Bernanke.
US Unemployment is expected unchanged at its 50-year low of 3.7%, however Services PMI (2:45pm) is anticipated weaker in December. Note some US macro data has been delayed due to the US government shutdown, but key labour data should be unaffected.
Data closer to home includes UK Net Lending to Individuals (9:30am), forecast higher in November, although Mortgage Approvals are expected lower (watch FTSE Banks, Lloyds in particular, and Housebuilders). UK Services PMI may have accelerated (50.7 vs 50.4 prev.), echoing Wednesday’s Manufacturing print.
On the continent, Eurozone Inflation (10am) is expected slower (1.8% YoY vs 1.9%) due to lower energy prices, hitting a 7-month low. The Core metric is expected unchanged at 1%. Services PMIs (8:15-9am) are all anticipated weaker, France falling into contraction.
US Oil Inventories (4pm), delayed from Wednesday for New Year celebrations, are projected to show a drawdown last week, potentially supporting battered oil prices and Energy names. Note API delivered a 4.5m drawdown last night to reverse some of the prior fortnight’s 10m build.