Mike van Dulken and Artjom Hatsaturjants at Accendo Markets, commented to clients this morning:
FTSE 100 called to open +20pts at 7055, extending its January bounce and breakout from August’s 6-month falling channel. Bulls need a break above 7070 overnight highs to extend the uptrend towards 7200. Bears require a breach of 7040 for a reversal to re-test 7000. Watch levels: Bullish 7070, Bearish 7040
Calls for a positive open come after Wall St traded higher, with Tech sector leading the way. After hours, FAANGS pared some of the gains after Alphabet beat consensus on profits/revenue, but investors worried about a chunky $25bn R&D investment bill (+40% QoQ, +90% YoY) echoing big spending by peers which may be a sign of it becoming more expensive to keep growing so fast.
Asia trading was more subdued, China/HK still closed for New Year celebrations. Australia’s ASX was the regional outperformer, with dual-listed miners surging after the Brazilian government ordered a halt to mining dams that contributed to Vale’s latest disaster (RIO +3%, BHP +1%).
Company news this morning BP Q4 underlying recoverable cost profit +65% YoY to $3.4bn, beating $2.9bn consensus, underlying op. cash flow +14.5% also beat. Upstream profit +74.8%, downstream +47.1%, Rosneft +34.2%. Upstream production +1.8%. Dividend +2.5%. Expects FY’19 underlying production higher, but Q1 expected flat as North Sea/Alaska divestments offset by BHP asset acquisitions.
Ocado FY18 Retail revs +12%, Solutions +15.8%, Costs +19.1%, Retail EBITDA +4.2%, Group EBITDA -20%; Net loss quadruples; Partner Fees +37%, Cash +174% (now net cash); FY19 retail revs seen +10-15% further Retail EBITDA growth, CAPEX £350m (+66% vs +33% in 2018). No CFCs opening in 2019, Solutions revs growth to be ahead of Retail, but decline in EBITDA due to £15-20m extra op costs.
Indivior denied rehearing by US Court of Appeals after CAFC vacated preliminary injunction against Dr Reddy’s. Indivior intends to file emergency motion, assuming Dr Reddy’s and Alvogen will resume launches of generic sublingual film in US once CAFC issues mandates on 11 Feb and 31 Jan, respectively. Indivior branded version could lose 80% of market.
FTSE Retailers could be sensitive to BRC like-for-like sales +1.8% YoY, the most in nearly 6 years, beating expectations of a -0.2% drop, and after -0.7% in Dec. That said, festive three month sales Nov-Jan (+0.8%) were weaker than last year (1.5%), and just +0.1% on a like-for like basis.
AstraZeneca granted fast-track breakthrough therapy designation by US FDA for MEDI8897 antibody treatment for lower respiratory tract infections (already has EU fast-track designation) after P2b 2 trial showed significant reduction in observed cases in healthy infants.
DCC Q3 gross op profit in-line, significantly ahead of last year, in spite of milder winter. LPG, Retail & Oil, Healthcare and Tech all delivered strong op. profit growth, in-line. Guidance unchanged.
St Modwen Properties FY NAV/share +4.3% (missing 5% consensus), ERPA NAV/share +2.7% YoY, adj. ERPA earnings +7.8%, total accounting return flat, profit flat, see-through loan-to-value -7.3pts to 16.9%, dividend +13%. Chairman Bill Shannon to retire at the upcoming AGM.
In focus today will be Eurozone PMI Services (8.15-9am) for January, with all but Germany forecast to confirm a worsening, including the region as a whole. France expected even deeper into contraction (47.5 vs 49), Italy flirting a fresh with breakeven.
UK PMI Services (9.30am) is nonetheless seen flat at 51 although Eurozone Retail Sales (10am) may show weak December growth, falling negative to reverse a solid October and November.
This afternoon’s US PMI Services (2.45pm) is foreseen delivering a very respectable 54 in Jan, but confirm a third straight month of slowing. ISM Non-Manufacturing (3pm), is likely to have given up more ground since the Sept/Oct/Nov peak.
Bucking the US trend may be US IBD/TIPP Economic Optimism (3pm) for Feb, forecast bouncing from its Dec/Jan trough.