Morning Market Pulse - Just retrEat


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


FTSE 100 called to open flat at 6970, holding most of Friday’s rally to flirt with 7000. The index is off its best levels, however, having encountered shallow rising highs resistance at the round number. Bulls need a meaningful break above 7000. Bears require a breach above 6945 resistance-turned-support from Friday. Watch levels: Bullish 7000, Bearish 6945


Calls for a flat open come after Asia began the week on a positive note despite China Q4 GDP growing to its slowest pace since the 2009 financial crisis (6.4% YoY, in-line, vs 6.5% prev.). Economic growth was, however, in-line with consensus and industrial production beat expectations (5.7% YoY vs. 5.3% est. vs. 5.4% prev.). Slight underperformance for Fixed Asset Investment (5.9% YoY vs. 6% est. vs 5.9% prev.) failed to dampen sentiment.


A measured reaction to China’s macro data demonstrates, perhaps, that Beijing’s latest stimulus measures (more liquidity, lower taxes) are having a positive effect. China’s economy is slowing - no news there - but markets anticipate a soft landing. Watch FTSE Miners for read-across.


GBP is flat ahead of today’s Brexit debate in Parliament after The Telegraph reported PM Theresa May is considering amending the 1998 Good Friday Irish peace agreement as a way to secure support for her Brexit Plan B in the House of Commons.


In corporate news this morning Just Eat CEO Peter Plumb steps down immediately; expects FY revenues ~£780m (vs. £770m prev,), narrows underlying EBITDA to £172-174m (from £165-185m); excl. Brazil & Mexico expects FY 2019 revenues £1-1.1bn, underlying EBITDA £185-205m suggesting further margin contraction.


William Hill FY adj. operating profit est. -15% YoY, in-line with guidance. Underlying op. profit, excluding US expansion and new online due diligence requirements, +4%. Good Online performance, but Retail profits lower on challenging UK high street. US business “broadly broke even”. Will remodel Retail in 2019 while building digitally-led international business.


GlaxoSmithKline Chairman Sir Philip Hampton to step down to make way for a replacement to oversee new successful strategy being led by CEO Walmsley. Standard Chartered’s largest shareholder, Singaporean investment fund Temasek, is demanding more frequent updates on turnaround plans, dissatisfied with Return on Equity (RoE) levels, according to FT report.

Meggitt signs 10yr $750m extension of contract with Pratt & Whitney to supply advanced engine composites for F135 and F119. The FT reports Rolls-Royce in talks to supply CGN Chinese Nuclear Plant In Essex.


The FT reports ITV selling its South Bank headquarters through Knight Frank for £150m (bought for £56m in 2013), with planning permission for a 31 story/213 apartment block. Sports Direct owner Mike Ashley placed a bid to buy music chain HMV, according to Sky News. Genel Energy to acquire stakes in Chevron operated blocks in the Kurdistan Region of Iraq.


Tech names may be sensitive to Apple-supplier Foxconn announcing December sales -8% YoY, hot on the heels of Apple’s own early-Jan profits warning, as iPhone sales slow. Foxconn Technology, separately listed unit which makes metal cases, reported December sales -60% YoY.


Sky News reports Flybe shareholder Hosking Partners (19% stake) looking to challenge discounted sale to Virgin Atlantic/Stobart consortium in court. WPP unit Grey NY chosen as agency of record for Douglas Elliman Real Estate.


In focus today will be UK Parliament’s Brexit Plan B deadline for PM May (2:30pm), although the Prime Minister is expected to merely attempt to offer reassurances on the Irish backstop. Additionally, pay attention to Asia-sensitive names after a barrage of disappointing Chinese data, including GDP.


Other macro data is limited to the Bundesbank Monthly Report (11am). In Brussels, ECB President Draghi and Cœuré participate in a Eurogroup meeting. Note US markets closed for Martin Luther King Jr. Day, so volumes could be reduced.


The rest of the week promises to be more eventul, with Tuesday marked by first day of the 4-day World Economic Forum in Davos, Switzerland. The US delegation will be conspicuously absent on account of the government shutdown, as will the UK PM, but most of the other global movers & shakers will be in attendance. Watch for headlines on global trade, economic growth and Brexit.


We’ll also be getting Monetary Policy Updates from the Bank of Japan (Weds, 3am) and the European Central Bank (Thurs, 12:45pm). Both are expected to leave rates unchanged, but President Draghi’s press conference (Thurs, 1:30pm) will be closely followed for his assessment on risks to Eurozone growth.



The latter will be particularly relevant following Jan’s Eurozone Manufacturing and Services PMI’s (Thurs, 8:15-9am), with Italy/France already in contraction in December, Germany’s factory gauge at 3-year lows and German GDP last week making a 6yr trough.

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