Morning Market Pulse - Santander a preview for UK banks?


FTSE 100 called to open +30pts at 6865, up off yesterday’s lows to maintain the uptrend from December’s trough towards a confluence of resistance (both falling and rising) around 7000. Bulls need a break above 6880, to regain the upper half of a 1-month rising channel, while Bears require a breach of yesterday afternoon’s 6825 lows. Watch levels: Bullish 6880, Bearish 6825


Calls for a positive open come in spite of mixed overnight trading on Wall St, the Nasdaq losing ground ahead of Tech sector results. Apple’s earnings after the bell beat expectations (shares +5.7% after-market) which were already cut following its Dec profits warning. While not as dire as feared, Apple’s Q2 outlook guidance still points to weaker China demand.


GBP is off overnight lows after sustaining sharp losses following the defeat of Brexit-delaying amendments in Westminster and the EU’s stark refusal to renegotiate the Withdrawal Agreement. Pound weakness and higher oil prices, boosted by US sanctions on Venezuela, is helping the FTSE extend this week’s gains.


In corporate news this morning, Burberry may be sensitive to strong results from luxury peer LVMH overnight, with full year sales +10%, profits +18% and div +20%, yet to be hurt by a China slowdown or trade war.


Banks may be sensitive to Santander Q4 pre-tax profits +5% YoY, but net loan loss provisions +13%. Note the UK arm’s pre-tax profit fell 20% after a big rise in provisions (UK bank levy, consumer credit) and a 60bp drop net interest margin. No extra PPI.


Wizz Air Q3 revenues +21.2% YoY, EBITDAR +2%, Rev. per ASK +5.6%, Cost per ASK +9.3% (+4.3% ex-fuel), fuel +21.6%, staff +22.2%, load +2pts to 91.4%. FY guidance unchanged, but where in range depends on March yield pressures, affected by Easter timing and Brexit uncertainty.


3i Infrastructure Q3 performance in-line, delivering “good level of income”. On track for 8.65p/share FY dividend. To use existing £142m cash and £283m debt to acquire Tampnet offshore telecom operator for ~£196m. Renewi expects strong Q4, confident on FY guidance.


London Stock Exchange acquires 4.92% stake in Euroclear for £241.9m, funded with existing cash and debt. Inmarsat inks deal with Garuda Indonesia airline for in-flight broadband on >175 aircraft.


Ophir Energy recommends 55p per share/£391m takeover by PT Medco Energy (+66% prem. to 28 Dec first approach). Expected to close H1. RhythmOne confirms advanced discussions about all-share takeover by Taptica Int. to create a leading US video advertising company. Deadline for offer 26 Feb. Combined market cap £260m.


In focus today will be this evening’s Fed monetary policy update (7pm; no changes expected) as well as the start of the latest round of US-China trade talks.


We’re also sure to get deliberation ad infinitum about what next in the Brexit saga. This after last night’s parliamentary amendment votes which look set to send the UK PM back to Brussels to renegotiate a deal that Brussels insists it will not reopen. In terms of macro data at home, UK Consumer Borrowing (9:30am) may show December mortgage approvals pulling back to their lowest in a year.


On the continent, Eurozone consumer confidence (10am) is likely to confirm a bounce from December lows although business metrics are expected worse. German Inflation (1pm) is seen continuing to weaken, to just 1.6% YoY in January, back at April levels.



In the US, Pending Home Sales (3pm) may rebound from a very weak October and November while EIA Oil Inventories (3.30pm) could alter sentiment on oil prices. Quarterly results season trundles on in the US, with the likes of McDonald's, Tesla, Visa, Facebook and Microsoft reporting earnings.

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