Mike van Dulken and Artjom Hatsaturjants at Accendo Markets, commented to clients this morning:
FTSE 100 called to open -25pts at 6945, back from a flirt with 7000, retracing Friday’s 6940 breakout, but for now holding the level. Bulls need a break above 6960 while Bears require a breach of 6940. Watch levels: Bullish 6960, Bearish 6940
Calls for a negative open stem from Asia slipping on global growth concerns after another IMF cut to global growth forecasts, having already done so in October. Comments from China’s state planner that its labour market is being affected by a slowing economy also weighed on sentiment.
Combined with a stronger USD, worries over global demand are straining the commodity space, with oil, copper and even gold (typically a safe-haven) down overnight. Weaker GBP, hampered by lack of Brexit progress after PM May’s Plan B, is failing to support FTSE international names.
In corporate news this morning, Banks may be sensitive to UBS missing Q4 profits estimates, forecasting a rocky road ahead. Net fund outflows hit profits for its flagship wealth management business and lower profits for Investment banking echoed its US counterparts.
BHP Q2 petroleum production -2% YoY, copper -3% (miss), iron ore -6% (miss), metallurgical coal +6%, energy coal -9%. FY guidance for petroleum, iron ore and coal reiterated, copper raised; H1 productivity hit by outages, $600m impact. FY productivity guidance under review. Shares -1.3% in Australia.
easyJet Q1 revs +13.7% YoY (psgr revs +12.2%, ancillary +19.9%); psgrs +15.1%, seats +18.2%, load -2.4pts, Avg seat KM +16.5%, Rev per seat -3.8% (-4.2% before FX; underlying +1.5%), cost per seat -4.3% (-2.2% before FX); underlying growth offset by last year’s one-off benefits (competitor troubles), dilutive Tegel and new accounting (delayed rev recognition); £10m cost from Gatwick drones. H1 Bookings encouraging despite Brexit (Q2 40%) but rev per seat expected down mid-high single digits (before FX); H2 bookings ahead; FY pre-tax expected broadly in-line (cost per seat ex-fuel flat) with consensus; FY capacity expected up circa 10%, H1 circa 15%
Dixons Carphone 10-week Christmas like-for-like group revenue +1% YoY, UK/IRL electricals +2%, UK/IRL mobile -7%, International +5%. Peak trading in-line, with record sales against a “tough backdrop”. Gross margins stable. FY £300m pre-tax profit guidance unchanged. Pets at Home 3Q revenues +6.3% YoY (+5.1% like for like, retail like for like +4.7%); reiterates guidance for £80-85m, FY underlying pre-tax and cash flow of at least £55m.
Land Securities is launching a flexible office space provider Myo to compete with fast-growing WeWork start-up, offering shorter-term 1-3-year leases and targeting mid-to-upper market tier. Close Brothers H1 performance “solid” despite difficult trading conditions. Banking in-line, loan book +7.1% YoY (+3.1% since August). Winterflood volumes and trading income “significantly lower”. AUM -3% YoY, total client assets -4%. Expects “solid” outcome in H1 results.
Apollo private equity group in “advanced talks” to acquire RPC for more than $3.8bn, with the deal potentially announced as soon as today, according to The WSJ. Kier Group H1 trading in-line, on track to meet 2019 guidance with results weighted toward H2, average month-end net debt -9.7% following the rights issue. Infrastructure Services and Buildings won a number of contracts and has 100% 2019 revenue visibility, order book of more than £10bn.
Jupiter Fund Management CEO Maarten Slendebroek to step down on 1 Mar, replaced by Andrew Formica (ex-Co-CEO of Janus Henderson). Coats Group sold its non-core North America Crafts business to Spinrite Acquisition for $37m, sale proceeds to be used to reduce net debt. Just Eat bought out Time Out Group’s majority stake in Flyt online takeaway marketplace for £9.6m.
Sirius Minerals: stage 2 financing making progress towards commitments from lenders; significant Q4 construction; Procurement completed for construction to support stage 2 financing; completed Cibra strategic investment; on schedule for first polyhalite and commercial production. Cairn Energy FY production of 17.5K from Catcher and Kracken, with H2 at lower end of 20.5-22K consensus; lower end of 19-22K 2019 guidance may be below consensus.
In focus today will be the start of the World Economic Forum in Davos, Switzerland, this year’s theme being “Globalization 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution”. Expect plenty of high-level commentary even if there are some notable absentees.
In terms of macro data points, UK Wages and Employment (9:30am) is expected to show December Average Wage growth matching November’s +3.3% YoY, while the Unemployment Rate holds at 4.1%. UK Government borrowing should drop in December, due to seasonality.
ZEW Surveys (10am) are projected to show a slight improvement in Eurozone economic sentiment, while Germany’s likely worsens. US Existing Home Sales (3pm) should pull back in December from November’s 3-month high.