Morning Market Pulse - Equities hold bounce into trade talks


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


FTSE 100 called to open +15pts at 6855, holding Friday’s break above 6800. That said, overnight highs of 6885 correspond with shallow intersecting falling highs resistance since 4 Dec. Bulls need a break above those 6885 highs. Bears require a breach of 6825 to extend the pullback. Watch levels: Bullish 6885, Bearish 6825


Calls for a positive open come after strong start to the week in Asia, with Japan rebounding from Friday’s catch-up losses, embracing the Fed Chair’s “patient” comments (which saw US markets surge on Friday), decisive China stimulus and a strong US Jobs report. Chinese markets are higher on US-China trade talks optimism.


USD is weaker, holding close to week lows, helping the commodity space, with both oil and metals prices higher today. Dual-listed Miners rallying +2-3% on commodity strength and trade optimism in Australia overnight. GBP remains strong, but not hindering FTSE.


In corporate news this morning Smith & Nephew says trading in-line with FY 2018 guidance (Results 7 Feb). Presents today at JP Morgan Healthcare Conf in San Francisco (4.30pm GMT). GVC announces cancellation of contingent value rights ("CVRs") linked to Ladbrokes Coral acquisition which have zero value after UK government cut maximum gaming machine stakes.


Ophir Energy says notified by Equatorial Guinea Ministry of Mines and Hydrocarbons that Block R Licence, containing Fortuna gas discovery, will not be extended following 31 Dec expiry. Bowleven says board approved £50m/15p per share special dividend


Reuters reports Morrisons cutting prices on almost 1,000 products by an average 20% to compete with discount chains Aldi/Lidl, with the cuts expected to hold for 12 weeks. LondonMetric Property sells 3 shorter let warehouses for £24m (4% above book value), for a blended net yield of 5.4%


Dunelm Q2 like-for-like revenues +9% YoY (stores +5.7%, online +37.9%). Gross margin +190bps. Sees H1’19 pre-tax profit of £70m (+16.6%) after £3.8m Fogarty impairment charge. Cautious FY outlook on Brexit uncertainty; expects FY pre-tax profit “modestly” ahead of top range of consensus.


Equiniti selected to run Ofcom Claims Management Service, supporting clearance of 700 MHz radio spectrum before release for new mobile services. Avon Rubber gets sole source max $93m 7yr contract to supply US Department of Defense with M69 Joint Service Aircrew Mask for Strategic Aircraft, related accessories and engineering support.


In focus today will be the start of fresh US-China trade talks. Hopes are high for a long-term deal after weeks of optimistic tweets from President Trump, although an existing 3-month/early-March truce deadline could reduce the need for urgency and the 2-day meeting in Beijing is relatively brief.


Macro data of note includes November Eurozone Retail Sales (10am), forecast slowing to a more pedestrian 0.1% from 0.3%. US Factory Orders (3pm) are expected to bounce back moderately after falling 2.1% in October, thanks to a helpful burst of aircraft orders. ISM Non-Manufacturing PMI is seen still growing strongly, albeit more modestly (59.1 est. vs 60.7 prev.).


In terms of speakers, the Fed’s Bostic (5:40pm, centrist, voter) speaks on the economic outlook and monetary policy at a fireside chat hosted by the Rotary Club of Atlanta.



The rest of the week could be eventful, with Fed (Weds, 7pm) and ECB (Thurs, 12:30pm) monetary policy meeting minutes, China Inflation (Thurs, 1:30am, exp. slowing to 2.1% YoY from 2.2%), UK GDP (Fri, 9:30am, forecast +1.3% YoY in Nov after +1.5% in Oct) and US Inflation (Fri, 1:30pm, core holding steady at 2.2%, though headline likely slows down after lower energy prices in Dec).

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