Mike van Dulken and Artjom Hatsaturjants at Accendo Markets, commented to clients this morning:
FTSE 100 called to open +10pts at 6975, continuing its latest flirt with 7000 (unable to break above since 11 Jan) at the top end of a 5-week bullish rising channel rebound from late Dec 2.5yr lows. Bulls need a break above 6995, if not 7000. Bears require a breach of short-term rising support at 6960. Watch levels: Bullish 7000, Bearish 6960
Calls for a marginally higher open come after a positive finish on Wall St, although the Dow was just shy of flat after Amazon’s full-year results beat, but a softer outlook for Q1 sales growth was below analyst consensus. Shares -4.9% after-hours.
Markets turned more mixed in Asia after China’s SME-focused Caixin Manufacturing PMI fell to 3-year lows (48.3 from 49.5 est./49.7 prev.) echoing other recent official government readings which have spooked markets on growth but revived hopes of even more stimulus. Note South Korea’s PMI manufacturing also slipping into contraction and Japan slowing to just shy of breakeven. Regional slowdown?
US-China high-level trade talks concluded in Washington with no concrete resolution, China balking at compromising on key structural issues of technology transfers and state aid. President Trump, however, as usual noted progress being made and promised to send a delegation to Beijing in mid-February. Only 1 month until the trade war truce ends….
Company news this morning includes Mylan launching its generic version of GlaxoSmithKline’s Advair Diskus in the second half of February. The UK’s Consort Medical will produce the inhaler.
TalkTalk cuts guidance due to IFRS 15 timing adjustments and investment growth. Q3 total revenue +2.9% YoY (on-net rev. +4.3%), on-net ARPU -2% QoQ. Customer growth accelerating. Expects significant FY profit growth due to cost reductions, customer growth and stabilising ARPU.
Glencore Q4 Copper production +27% YoY, Cobalt +6% (stockpiled due to export ban for Uranium separation), Zinc +7%, Nickel +16%. FY19 guidance unchanged vs 3 Dec presentation. DRC halts development of Uranium-Cobalt ion separator which was expected to help resume cobalt exports.
FTSE Banks may be sensitive to troubled Deutsche Bank posting its first full year profit in four years, although its fourth quarter loss, and several other key metrics, missed consensus
Paddy Power Betfair acquires 51% stake in Georgian online betting/gaming company Adjarabet for £101m, with option to buy remainder. Informa divests Life Sciences Media Brands portfolio, previously part of UBM, to US MJH Associates for just over $100m.
SSE sold a 49.9% stake in Stronelairg and Dunmaglass wind farms to Greencoat UK Wind for £635m, with transaction expected to complete end-March. SSE will continue to operate both assets. Greencoat UK Wind to raise up to £131m through placement at 127p/share to finance part of deal.
WPP begins search for new CFO after Paul Richardson’s formal resignation. RPC (which has recommended a 782p bid from Apollo, but could receive another offer from Berry Global), Q3 organic sales +1.4%, growth tempered by weak Christmas, Operating profit flat; temporary headwind from polymer pricing. Planning for Brexit disruption
In focus today will be the US jobs report (1:30pm), with January Non-Farm Payrolls expected to pull back to 165K from last month’s very strong 312K, with the government shutdown likely taking a bite out of job growth. This would echo Wednesday’s ADP report (213K vs. 263K prev.) although ADP did beat 178K consensus. Average Earnings, meanwhile, are projected growing the same as December, at 3.2% YoY which has some inflationary read-across to Fed monetary policy.
Elsewhere, we have PMI Manufacturing with Germany (8:55am) possibly slipping into contraction (49.9 est. vs 51.5 prev.) while the UK (9:30am) falls back to 53.5 from 54.2 and the US (2:45pm) expands (54.9 vs 53.8). That said, US ISM Manufacturing index (3pm) may have pulled back slightly, to 54.2 from December’s 54.3.
US Uni. of Michigan Consumer Sentiment (3pm) is expected to confirm the preliminary reading of 90.7 in January, the lowest read since President Trump was elected, the government shutdown the likely culprit. Eurozone Inflation (10am) is expected weaker at 1.4% YoY (from 1.6% prev.), echoing yesterday’s slower GDP, but the more stable Core was probably unchanged at 1% for a 3rd month.
Speakers are limited to the Fed’s Kaplan (2:45pm, non-voter, centrist) and Kashkari (3:45pm, non-voter, dovish), both speaking at moderated Q&A sessions. Could either add more colour to Fed Chair Powell’s dovish “patient” U-turn? Listen out for quarterly results from US oil majors Chevron and Exxon Mobil, as well as engineering firm Honeywell and pharmaceutical giant Merck.