Morning Market Pulse - Christmas fails to rescue Sainsburys'


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


FTSE 100 called to open +55pts at 6915, holding the break above 6900 although back from 6945 highs. Bulls need a break above 6850 to stay on track for a 7000 challenge and 3 month falling highs at 7082. Bears require a break back below 6900. Watch levels: Bullish 6850, Bearish 6900


Calls for a positive open come after Wall St and Asia traded higher extending the global rally. Traders welcomed an extension of US-China trade talks to a third day. These have now now concluded and investors await a communique that points to a breakthrough. Watch FTSE Miners and risk assets such as financials.


Bloomberg reported that President Trump was eager to make a quick deal to bolster financial markets. The President’s decision not to declare national emergency over the US-Mexico border wall budget standoff added to market bullishness, although the government shutdown remains in place - now become the second-longest in US history.


Oil prices are higher, with US West Texas blend trading over $50 for the first time since mid-December (Brent above $59) following a bigger than expected crude oil inventory drawdown (API reported 6.1m draw vs. expectations of a more modest 3.3m decrease).


In corporate news this morning Sainsbury Q3 retail like-for like sales (ex-fuel) -1.1%, misses -0.3%e; Grocery +0.4% vs +0.8%e; General Merchandise -2.3% vs -0.6%e; Clothing -0.2% vs -2.1%e. Cautious consumer spending, reduced promotions; £200m cost savings on track.


Taylor Wimpey FY in-line after “stable” 2018 market. Completions +3% YoY (affordable +21.6%). Net private reservations +3.8%, cancellations +7.7% (to 14%), avg selling prices flat (+2% on private completions). Trading robust despite “customer caution” in London & SE. Order book +9.4%, build cost inflation in-line at 3-4%. Extra £15-20m exceptional charge for increased pension liabilities.


The FT reports the EU warning IAG that its no-deal Brexit operational strategy won't work. Stressing the domestic focus of IAG’s airlines (Aer Lingus, Iberia, BA) to keep them operating in the EU “isn’t a solution” according to an anonymous senior EU official.


Centamin Q4 gold production +17% QoQ, Full year -13%; Continued focus on operating controls and resource modelling. Majestic Wine says Christmas sales grew but retail margins declined; Mothercare UK 3Q like-for-like sales -11%, on track for cost savings guidance.


Greggs lifts full year profits guidance to £88m (from £86m prev.) after Q4 total sales +7.2% YoY, shop like-for-like sales +2.9% (H1: +1.5%, H2: +4.2%). Good sales momentum into the new year, with vegan-friendly sausage roll proving popular “with a broad range of customers”.


Ted Baker Christmas retail sales +12.2% YoY, with online +18.7%, average retail sq. footage +5%; gross margin in-line, FY guidance unchanged. External investigation into CEO’s “unwanted hugging” continues.


Fresnillo appointed André Sougarret Larroquete (ex-EVP of Chilean National Mining Company) as COO to replace retiring Roberto Diaz. Softcat says trading strong since last update (28 Nov), now materially ahead of where it expected to be as it approached end of first half.  


In focus today will be conclusion of US-China trade talks following a brief extension which had inspired hopes of a resolution to the dispute before the end of a 90 day truce end-Feb. This evening’s Fed FOMC minutes (7pm) will offer more detail on the direction of US monetary policy, with investors hoping they include the “patient” message Powell gave last week.


Data of note includes UK Labour Productivity (9.30am), forecast to confirm weaker growth in Q3 (-0.4% QoQ vs +0.5% prev.)  while Eurozone Unemployment (10am) holds firm at 8.1%. The US government shutdown continues to stifle stateside data publication, so EIA Oil inventories (3.30pm)  may or may not be available for comparison with last night’s API.


Speakers today include the Fed’s Bostic (1.20pm; Economic Outlook with audience Q&A), Evans (2pm; speech at Discover Financial Services Company Meeting, followed by audience Q&A) speech and Rosengren (4.30pm; Economic outlook) as well as Bank of England Governor Carney (3.30pm; online Q&A) 

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