Mike van Dulken and Artjom Hatsaturjants at Accendo Markets, commented to clients this morning:
FTSE 100 called to open +35pts at 6890, helped by yesterday’s bounce from 6840 which extended the pre-Christmas rising channel towards 7075. Bulls need a break back above 6900 while Bears require a breach of 6870, if not recent lows of 6840. Watch levels: Bullish 6900, Bearish 6870
Calls for a positive open come after upbeat trading in Asian reversed Wall St’s negative close. This comes courtesy of the latest China economic stimulus measures; new tax cuts and targeted support for industries affected by the economic slowdown.
Bullish comments by Chinese officials, seeking a strong start to Q1 2019, have helped dual-listed Miners gain ground (no pun intended) in Australia. Note, however, Reuters reporting Beijing planning to trim 2019 economic growth target to 6-6.5%, the slowest pace in 28 years.
GBP remains strong, though still off Monday highs, in spite of the expectations that PM May’s Brexit deal will fail to pass Parliament. As some are putting it, the question is not whether PM May loses, rather how badly. Watch the Brexit-sensitive usual suspects (Housebuilders, Airlines, Banks).
In corporate news this morning, Persimmon expects FY pre-tax profit modestly ahead of consensus; FY revenues +3.9% (new housing +3.8%), legal completions +2.5% (H2 +3.8%), private sales +0.5%, average selling price +1.0%; forward sales +2.9%; cash -20% after dividends; market buoyant, mindful of Brexit.
Boohoo ups FY 2019 revenues ahead of guidance (+43-45% vs +38-43% prev.); narrows adjusted EBITDA margin target (9.25-9.75% from 9-10%), after four-month sales +44%. Hays Q2 like-for-like net fees +9% YoY (UK +3%, ANZ +8%, Germany +15%, RoW +10%). Good outlook across International markets. Estimates £1m FY19 FX headwind (vs £3m boost in FY 18).
Ashmore Q2 Assets Under Management +0.4%, net inflows +£0.5bn, investment performance -£0.2bn, reflecting weaker global markets in October, with positive performance in rest of quarter. Spirent Communications expects to exceed market profit expectations for financial year 2018; adjusted operating profit of $75-77m up circa 30%.
Reuters says HSBC has settled $250bn of foreign exchange trades with blockchain in last year. Savills anticipates underlying full year results in line with Board expectation but prospects for 2019 overshadowed by macro-economic and political uncertainties.
Flybe unable to meet conditions for secured £20m bridge facility from Connect Airways (JV of Virgin Atlantic, Stobart, Cyrus); board agrees £2.8m sale (up from £2.2m) to secure revised Bridge Facility of up to £20m (£10m released today) and commitment of £80m further funding.
Provident Financial expects 2018 profits towards the lower end of £151-166m market expectations after Vanquis Bank impairments modestly higher than expected because of continued increase in use of payment arrangements from enhanced forbearance measures.
Big Yellow Group Q3 like-for-like revenue +6.4% YoY, average quarterly net rent per sq. ft. +3%, maximum lettable area +1.7%, seasonally weaker Q3 occupancy -2.7% QoQ (improved from Q3’17 -3.7%), like-for-like closing occupancy +2.4pts. Expects to return to occupancy growth in Q4.
Games Workshop H1 like-for-like revenue +13.3% YoY (Retail +6.8%, Trade +26.4%, Online -3.6%), pre-tax profit +7%, royalties +52.7%. December trading in-line with H1. Declared a 25p/share dividend (-28.5% from 35p/share declared a year ago).
Ophir Energy FY production +72.6% YoY, FY guidance unchanged. Started to relocated corporate functions from London to SE Asia to achieve cost savings, but will book a $10m relocation cost.
In focus today will be the House of Commons meaningful Brexit vote. After two days of debate the PM is expected to face a meaningful defeat, which could lead to multiple scenarios: in order of likeliness; a no-confidence vote in the government (which could result in a general election), a no-deal Brexit crash out of the EU, a second referendum on Brexit and, maybe even no Brexit at all.
Hot on the heels of Citigroup yesterday, whose key Fixed Income revenues dropped 21%, the US Banks reporting today are JP Morgan and Wells Fargo (Goldman Sachs, Bank of America on Weds, Morgan Stanley on Thurs). Watch for read-across to UK and European banks.
Data of note today includes French and Spanish inflation, both expected slower in December (1.6% vs 1.9% and 1.2% vs 1.7%, respectively) adding to evidence of a slowing Eurozone, along with a slightly narrower Eurozone trade surplus.
From the US, December Producer Price Inflation is forecast stable at the headline (2.5% YoY) and stronger on a Core basis (2.9% vs 2.7% prev.), adding to inflationary pressures on the Fed, while the Empire State Manufacturing may have ticked up in January (11.25 vs 10.9 prev.).
In terms of speakers and events, focus today is on the UK House of Commons and the Brexit vote. Elsewhere, however, ECB President Draghi (3pm) participates in the European Parliament meeting to mark the 20th anniversary of the euro in Strasbourg, with MEP Q&A.
A few Fed speakers are making appearances, including Kashkari (4:30pm, non-voter, dovish), Kaplan (6pm, non-voter, centrist) and George (6pm, non-voter, hawkish), all speaking on economic and monetary policy outlook.