Mike van Dulken and Artjom Hatsaturjants at Accendo Markets, commented to clients this morning:
FTSE 100 called to open flat at 7020, holding 7000, just shy of 7033 overnight 2-month highs, at the ceiling of a 5-week up-channel. Bulls need a break above the 7035 ceiling, if not 7045 October falling highs resistance. Bears require a breach of 6990 rising support since 30 Jan. Watch levels: Bullish 7040, Bearish 6990
Calls for a tepid open come after Asia started a new week positively, although volumes were lower due to China being closed for the week-long Lunar New Year Holiday. USD extended recent gains after Friday’s US jobs report, although GBP flat ahead of Bank of England policy update this week.
Japan trades higher despite electronics maker Sony warning on lower revenue (shares -8%) to add more fuel to the fire of economic growth worries. China proxy Australia was also higher after China Caixin Services PMI beat expectations overnight (53.6 vs. 53.3 est./53.9 prev.), albeit rolling over from 10-month highs.
Company news this morning: Ryanair Q3 total op. revenues (pre-exceptional) +9% YoY, op. expenses +20%, swings to €83.6m pre-tax loss (€22.1m loss pre-exceptional) vs £112.9m profit a year ago. FY guidance unchanged (“cannot rule out further cuts to air fares & slightly lower FY guidance in case of unexpected Brexit developments”). Will set out CEO succession plan before Sept ‘19 AGM. Jan passengers +11% (+8% rolling 12-months), load factor flat, Average fares -6%.
Wizz Air Jan passengers +10% YoY (rolling 12M +18.5%), capacity +9.5% (+17.2%), load factor +0.4pts to 88.1% (+1.1pts to 91.3%). Available Seat KM +13% (+18.8^%), Revenue Passenger KM +13.4% (+20%). Opened 14 new routes to SE Europe. Royal Dutch Shell said Friday that production started at Lula North deep-water project in Brazilian Santos Basin (25% stake)
Ferrexpo conducting independent review into unexplained accounting discrepancies on bank statements of the Blooming Land charity in Ukraine, to whom it donated $9.5m in H1’18. Board cannot guarantee review will be completed by 20 Mar for FY results, or complete favourably. Deloitte may qualify or otherwise modify audit opinion relating to FY 2018 accounts.
Serco signs £560m pact with Bupa to support Australian defence force, through the provision of National Garrison Health Services, from 1 July, initially for 6 years with the possibility of 4x 1-year extensions. Had said in negotiations on 14 Jan.
Indivior enters agreement with Alvogen preventing it from US use/offer/sale/importation of Indivior’s generic generic buprenorphine and naloxone sublingual film product unless/until preliminary injunction against Dr. Reddy's is lifted. Separately, Indivior to divest rights Sai Bo Song tablet (buprenorphine, naloxone) in China to Zhejiang Pukang Biotechnology for up to $122.5m
FlyBe confirms 1 Feb receipt of very preliminary, short and highly conditional contingency proposal from ex-Stobart CEO Tinkler envisaging capital injection and replacement of Virgin Atlantic/Stobart JV funding if deal doesn’t complete. Does not constitute formal proposal or offer for FlyBe.
In focus today will be Q4 earnings from Google’s parent company Alphabet, scheduled to be released after the bell in the US. Given recent US Tech sector troubles, including revenue warnings from Apple and Intel, how will Google fare in the face of China’s economic slowdown?
Data this Monday is limited to UK Construction PMI (9:30am), expected weaker in January, Eurozone Producer Prices (10am), slowing to +3.3% in January, and US Factory Orders (3pm), rebounding from a November fall. In terms of speakers, the ECB’s Mersch (exec. board, 8:30am) speaks at the Central Bank of Hungary.
Following a quiet Monday, the highlight of the week will be the Bank of England’s Super Thursday (Thurs, 12:00pm), its combined monetary policy update, minutes, press conference and Quarterly Inflation Report (QIR). Markets expect a unanimous decision to leaves interest rates unchanged.
The QIR’s economic projections, however, are more relevant than ever, given the proximity of Brexit and recent softening in price growth. UK headline inflation is currently at its weakest since Jan 2017, although the core metric is holding steady at 1.9%, just below the BoE’s 2% target.