Morning Market Pulse - JD Weather Cools


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


FTSE 100 called to open -25pts at 6875, although off overnight lows thanks to a bounce off January rising support. Bulls need a break above 6900, to revive the uptrend towards 7000, while Bears require a breach of rising support at 6855. Watch levels: Bullish 6900, Bearish 6950


Calls for a negative open stem from Wall St’s rally stalling amid economic growth concerns, exacerbated by reports that President Trump rejected Chinese a proposal for preparatory talks ahead of high-level trade negotiations next week. The White House issued a swift denial, but the damage was already done, with even more Chinese stimulus (liquidity) failing to revive sentiment.


Oil prices are on the rebound after falling back to test Jan rising support. In FX, the Japanese Yen is weaker despite risk-off sentiment, after the Bank of Japan left negative interest rates unchanged and cut its inflation outlook. GBP, meanwhile, is showing signs of strength amid hopes an extension to the Brexit Article 50 deadline.


In corporate news this morning, Vodafone to explore strengthening of UK network partnership with Telefonica; aims to enhance existing joint-owned passive tower infrastructure to include 5G.


Fresnillo FY Silver production +5.3% to 61.8moz (Q4: flat QoQ -3.2% YoY) lower than anticipated due to lower grades and operational issues, 2019 production expected lower (58-61moz); FY Gold production +1.3% to 922.5oz (Q4: +3% QoQ, flat YoY), 2019 production seen flat (910-930oz).


Antofagasta Q4 copper production +3% YoY (top end of guidance), gold -1.1%, net cash costs +3.2%. Copper prices -6.3%. Expects 2019 copper production +3-9%, gold +15-25%, molybdenum down 8-15%. 2019 net cash costs in-line with 2018, $100m op savings to offset higher input costs.


Burberry Q3 like-for like-retail revenues +1% (bottom of 1-3% consensus); -1% incl. FX, -2% at constant FX. Mainland China “up mid-single digits”. 2 net store closures (space -1%). FY guidance (ex-FX) reiterated with £100m cost savings. FX hit to adj. operating profit in-line at c. £25m.


Metro Bank FY underlying pre-tax profit +138% (softening over last quarter), assets +32%, loans +48%, deposits +34%. Q4 echoed prior quarter trends, adding 100K new customers.


JD Wetherspoon 12-wk sales +7.2% like-for-like, +8% total; 25-wk sales +6.3% LFL, +7.2% total. FY net debt expected a shade higher; costs higher, especially labour (+£30m), but also interest, utilities, repairs and depreciation. Pre-tax profit for first half expected lower; FY expectations unchanged.


RPC recommends 782p per share takeover offer (£3.3bn) from Apollo private equity. Represents 15-25% premium vs. last September, when talks first began, and a 7.6% premium to yesterday’s close when factoring in 8.1p interim dividend to be paid 25 Jan.


WH Smith 20-wk like-for-like sales flat YoY (reported +6%). Travel like-for-like +3%, with gross margin in-line. InMotion integration progressing well. High Street like-for-like sales -2%, on track to deliver £9m in FY cost savings. Notes broader uncertainty in the economic environment.


G4S to settle California employee class action suit for $100-130m; relates to claims for meal and rest breaks under local law for 13,500 employees 2001-2010. Brewin Dolphin says Q1 characterised by lower market levels and ongoing macro-economic uncertainty; net discretionary inflows ahead of 5% target, but intermediary activity slowed.


In focus today will be more soundbites from the World Economic Forum in Davos, Switzerland as well as the fallout from conflicting overnight messages about US-China trade talks which further dented sentiment following the IMF’s cuts to global growth forecasts.


In terms of data listen out for UK Jan/Q1 CBI Trends (11am; orders expected lower again, optimism still depressed) and Eurozone Consumer Confidence (3pm; expected further negative).


From across the pond, where most official data is delayed by the Government shutdown, the US House Price Index (2pm) is forecast a shade stronger in Nov although the US Richmond Fed (3pm) is expected further negative.


US API Oil Inventories could help oil prices regain the highs of early this week, matching December’s best, if we get a drawdown, although a build could put 8 Jan rising support in risk.


US companies reporting quarterly results include Abbott Labs, Comcast, Ford, Kimberly-Clark, Procter & Gamble, Royal Caribbean Cruises, Texas Instruments, United Rentals and United Technologies.

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