Mike van Dulken and Artjom Hatsaturjants at Accendo Markets, commented to clients this morning:
FTSE 100 called to open -30pts at 6830, testing this week’s 6840 support, in a downtrend from 11 Jan rebound highs having breached the floor of a 3-week rising channel. New falling channel? Bulls need a break above 6875 falling highs for a chance of reviving the rising channel. Bears require a breach of 6830 to revisit of 7 Jan lows of 6775. Watch levels: Bullish 6875, Bearish 6830
Calls for a negative open come in spite of a strong finish on Wall St, boosted by consensus-beating Bank results (Goldman Sachs, Bank of America). Gains in Asia were helped by Beijing injecting yet more liquidity into the system (on top of tax cuts), stimulus designed to prop up financial markets concerned about a slowing economy.
GBP steady after PM May’s government predictably won a no-confidence vote challenge by the Labour opposition. A wafer thin majority of 19, however, highlights how important the DUP (10 votes) is in propping up the government as a supply and confidence partner, from a geography that lies at the heart of the current Brexit impasse.
In potential blow to FTSE Housebuilders overnight, the UK RICS House Price Balance was a miserable -19 in December, worse than the -13 Reuters consensus and the weakest since 2012. Short-term expectations of -28 was the worst in 20 years, hampered by Brexit uncertainty.
In corporate news this morning AB Foods outlook unchanged (adj. profits in line with last year); Group Q1 sales (16 wks to 5 Jan) +1% YoY (+2% constant FX). Primark +4% (consensus constant FX +4.2%, actual FX +4.5%), UK +1% in down market, Eurozone +5%, Xmas better than expected; margins up, profits well ahead; modest decline in like-for-like sales (consensus -1.8%); Sugar sales -12% at constant FX (-14% actual), Grocery +3% (+2%), Agric +5% (+5%), Ingredients +6% (+1%).
Whitbread Q3 group sales +2.4% YoY (UK like-for-like -0.6%, UK total +2.5%). Premier Inn like-for-like -0.2% (+3.5% total), RevPAR -1.3% (London strong, regions weaker). Occupancy -140bps to 80.9%. Food & Bev -1.5% like-for-like (+0.5% total). Backs FY targets. Macro uncertainty means underlying 2020 pre-tax profit likely in-line with this year. £500m buyback starts today after Costa Sale.
Sage Group Q1 organic revenue +7.6% YoY (N America: +10.4%, UK/IRL: +5.9%, France: +5.8%). Recurring revenue +10.5%, with +27.7% subscription growth. Net debt -9.8% QoQ. FX tailwinds on weaker GBP. FY guidance unchanged.
Banks may be sensitive to reports that German regulators stepping up work on a potential merger of the ailing duo of Deutsche Bank and rival Commerzbank. Note also SocGen warning on Q4 saying results to be hit by €240m exceptional charge from disposals and challenging global capital markets; Q4 revenues expected -20% YoY, FY expected -10% YoY.
The Daily Mail reports Marks & Spencer planning to shut more than the 100 stores originally planned. Experian Q3 organic/total sales +9% (constant FX; +5% actual); FY guidance unchanged. GVC strong Q4 (Net gaming revenue +5%, online +15%, UK Retail -3% like-for-like, Europe retail -7%); expects FY pro-forma underlying EBITDA £750m-755m, ahead of consensus.
Game Digital 7wk Christmas like-for-like sales +2% (23wks +1%); UK Retail like-for-like -0.3% (+1.1%), Spain +4.8% (+2.1%). Total sales -0.5% over Christmas, -0.6% over 23 wks. Margin improved; Backs FY guidance
Ibstock FY trading in-line, expects FY adj. EBITDA in-line with consensus (low single-digit growth). UK Clay & Concrete revenue +8% YoY after price/volume growth in Clay. Net debt significantly lower after strong cash flows, expects FY net debt/adj. EBITDA ratio below 0.5x.
SSP Group Q1 like-for-like revenue +7.6% YoY (sales +2.5%, net contract gains +3.8% ahead of expectations, Stockheim M&A +1.3%). Continental Europe sales hit by French protests. UK, North America and RoW sales in-line with last year. FY sales growth expectations (+2-3%) unchanged, but 2019 net contract gains expected ahead of prev. ~3% guidance.
Beazley promoted Sally Lake to become the new group finance director, effective May 2019. In an interview with Dagens Industri, Astrazeneca CEO says dismal trend turning; to focus on growth over margin next 1-1.5 years.
Workspace Q3 enquiries +11.3% YoY, lettings per month +13.9%, net debt +24.2% QoQ. Tritax Big Box says that despite ongoing Brexit uncertainty, logistics lettings near record highs, underpinned by e-commerce. Investment remained high, outlook remains positive.
In focus today will be Eurozone Inflation (10am), expected to confirm further slowing in December (1.6% est. vs 1.9% prev vs 2.2% peak), while Core holds steady at 1% growth. The US Philly Fed Manufacturing (1:30pm) may grow to 10 from 9.4 after missing consensus 2 months in a row, but although Tuesday’s Empire State Manufacturing plumbed fell to its lowest since May 2017.
Discussion will continue on Brexit after UK PM May survived another no-confidence vote last night. Speakers today include Bank of England senior officials (3pm). Governor Carney and Deputy Governor Woods discuss Banking sector competition after a speech by Woods (“Secondary Competition Objective: 5 years on”).
Elsewhere, the ECB’s Lautenschläger (11pm, hawkish, exec. board) gives a lecture at a risk management conference in Dublin. In the US, the Fed’s Quarles (3:45pm, centrist, voter) participates in discussion “Insurance Regulation and Supervision” in New York.