Morning Market Pulse - Royal Mail & Dominos fail to deliver


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


FTSE 100 called to open +25pts at 6775, up off yesterday’s lows but still hampered by a new falling channel towards early Jan lows, since the breach of that shallow rising channel. Bulls still need a break back above 6800 to signal bullish reversal. Bears require a breach of 6740 to extend the declines. Watch levels: Bullish 6800, Bearish 6740


Calls for a higher open is in spite of a negative Wall St close, investors spooked by warnings about China growth from Caterpillar and NVIDIA, though Asian markets pared losses to trade mixed.


US authorities have poured fuel on the fire by filing charges of corporate espionage and Iran sanction-busting by Chinese Tech giant Huawei. The latter has potential to spoil the US-China trade détente, as the WSJ reports the Chinese delegation offering to increase purchases of US farm products, while resisting demands for eliminating some industrial subsidies and state aid.


GBP is flat ahead of today’s House of Commons Brexit debate. Oil prices are rebounding from Monday’s steep losses, helped by the US slapping tough sanctions on Venezuela’s state oil company PDVSA over the political turmoil in the Latin American country.


In corporate news this morning, Royal Mail 9-month trading in-line, underlying group revenue +2% YoY, driven by parcels (+6%) and GLS (+8%). Narrows FY adj. operating profit (pre-transformation) guidance to £500-530m (from £500-550m). Business uncertainty hitting letter volumes (-6%). FY letters seen down 7-8%, worse than prev. guidance, while other targets unchanged.


Crest Nicholson FY revenue +9% YoY, pre-tax profit -14.8%, op. profit margin -360 bps, net cash -57.5%. Margins weaker on political uncertainty hitting London, cost inflation and pricing softness; weaker customer demand to continue. Dividend unchanged. Forward sales 11% ahead of last year, build cost inflation moderated and implementing plans to limit margin pressure over next few years.


Domino's Pizza strong UK & ROI (sales +6.2% organic) offset by weaker International progress (-2% / +1.6% organic) and business integration challenges in Norway: FY underlying pre-tax profit expected at lower end of consensus £93.9-98.2m.


Hargreaves Lansdown H1 net revenues +9% YoY, net new business -24%, AUM -0.2% (-6% QoQ), pre-tax profit +4%, interim dividend +2%. H2 traditionally stronger, but weak investor confidence and Brexit uncertainty “not helpful for predicting volumes”. Prepared to deal with any outcome.


BHP clarifies that Samarco operations (50:50 with Vale) will only resume if safe, economically viable, has community support and state/federal licenses granted; hasn't reached agreement on restructuring of financial obligations; no plans immediately to reopen.


Anglo American rough diamond Cycle 1 2019 sales $505m (-24.9% YoY, -7.1% vs Cycle 10 2018); sales lower due to strong Cycle 10 2018 and slow movement of lower value pieces through pipeline. Unilever acquires The Laundress, US maker of 85 eco-friendly laundry/cleaning products.


Ryanair Spanish cabin crew vote 99% for collective labour agreement; airline and unions hope to conclude by 30 April. French Oil major Total makes significant discovery (250m barrels) in Glengorm prospect of UK North Sea offshore.


Greencore Q1 sales +5.8%; reaffirms outlook. Risks from Brexit manageable in medium-term, but near-term challenges associated with a 'no deal’ are uncertain.


Ratings agency Moody's affirms “A3, Stable” senior unsecured debt rating of Lloyds Banking. Moody's also downgrades TP ICAP corporate family rating to Ba2 from Ba1, outlook Stable.


In focus today will be UK Parliamentary debate/vote on a host of Brexit amendments (14 so far, but final list to be decided) cantering around four themes: the Irish Backstop (alternatives, time limit), averting a No Deal option, extending Article 50 (prevent no deal, more time for debate) and, lastly, a Second Referendum (Brexit 2016 rather different 2.5 years on).


We also get quarterly results from iPhone maker Apple which, earlier in the month, warned about the impact of a slowing China on its revenues and profits. We have since had more poor data from Beijing and similar warnings from other in the tech sector.


Macro-economic data today includes US S&P/Case-Shiller Home Prices (2pm) which are still seen growing, but at a slower annual pace of 4.9% (new 2.5-year low). Elsewhere, US Consumer Confidence (3pm) is expected to fall further in January on account of the government shutdown.

Bank of England (BoE) Chief Economist Andy Haldane (5:30pm) speaks at a panel at the Society of Professional Economists event dedicated to “Women in Economics”.  Other US corporates report results, include eBay, Pfizer and Verizon.

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