Mike van Dulken and Artjom Hatsaturjants at Accendo Markets, commented to clients this morning:
FTSE 100 called to open -5pts at 7185, but trying to break back above the September 7185 support-turned-resistance trendline we tried to overcome yesterday. Still within upper half of 6850-725 rebound up-channel from Christmas. Bulls likely need a break above yesterday’s 7200 best. Bears require a breach of 7165 rising support. Watch levels: Bullish 7200, Bearish 7165
Calls for a mildly negative open come after positive trading on Wall St turned more mixed in Asia overnight as traders digested a Bloomberg report of a potential 60-day extension to US-China trade talks. Another 2 months of talks would avert higher US tariffs on $200bn of Chinese goods, but would also mean a solution to the dispute is nowhere near being in sight.
FTSE Miners may get a boost from January China Trade data which surprised to the upside despite the ongoing US-China trade spat; Exports rebounded (+9.1% YoY) versus expectations for less contraction (-4.4%e vs Dec -3.3%) while Imports contracted far less (-1.5%) versus consensus for a worsening (-10%e vs Dec -7.6%). That said, beware Lunar New Year frontloading distortions.
Company news this morning FTSE Miners may be moved by the positive trade data from China overnight (see above). BHP granted major-project status in South Australia, streamlining its application for 75% increase in production at Olympic Dam mine(mostly copper, also gold, uranium).
FTSE Banks could benefit from Credit Suisse swinging back to profit for the first time since 2014, despite tough markets, and beating market expectations (CHF 292m vs 242m est). France’s Credit Agricole echoed US rivals with a plunge in Q4 trading revenues, but profits/divi beat expectations.
Engine-maker Rolls Royce may be sensitive to Airbus’ ending production of the A380 super-jumbo from 2021, due to flagging demand and Emirates amended 70 existing orders in favour of smaller more efficient A330neo and A350-900 models. All 3 are powered by Rolls Royce engines..
AstraZeneca Q4 constant FX total revenue +14% (FY: -2%), core op. profit +23% (FY: -17%), both beating consensus. Tagrisso Q4 +98%, Nexium -6% (beat), Crestor -38% (beat), Symbicort -13% (miss), Brilinta +26% (beat). China sales +25%. FY dividend unchanged. FY’19 sales seen growing by high single-digit percentage and $3.50-3.70 core EPS.
Paddy Power Betfair to appeal legacy tax rulings of €40m against Betfair in Germany and €15m against paddypower.com in Greece, both well above what each brand ever generated there. easyJet in discussions with Italian state-owned rail operator Ferrovie dello Stato Italiane and Delta Air Lines to form JV for future operations of Alitalia.
Micro Focus extends buyback by $110m (+27.5%). Will return proceeds of $2.5bn SUSE sale. Pro-forma 12-month revenues -5.3% beats 6-9% guidance (Product portfolio -7.1%, expected to moderate to -4% to -6%) adj. EBITDA +9.2%, free cash flow +4.5%, annualised div +14.5%.
Coca-Cola HBC FY volumes +4.2%, constant FX revenue +6% (in-line), constant FX net sales per unit case +1.7%, comparable EBIT +9.6% (in-line), cash flow -13.1% after €49m increase in net capex. FY dividend +5.6%. FX headwinds slightly above expectations, sees ~€50m ‘19 headwinds. Expects low single digit rise in 2019 input costs per case. Restructuring to yield €23m in FY‘19.
Ashmore H1 revenues +8.4% YoY on higher net management fee income but pre-tax profits -6% on lower performance fees and mark-to-market of seed capital. Adj EBITDA +8%, AUM +10%, div flat. Moneysupermarket.com to return extra £40m to shareholders; 2018 revenues +7.9%, adj. EBITDA +1.7%, pretax profit +11%, div +6.5%, backs guidance.
ConvaTec reports “disappointing results”: FY revenues +3.8% (+2.7% constant FX, +0.2% organic) EBIT +8%, adj. EBIT -6%; 2019 guidance organic revenues +1% to +2.5%, adj. EBIT margin 18-20% (more contraction). Still looking for permanent CEO.
Indivior Q4 net revenues -11%, adj. operating profit +11%, adj. Net income +24%, cash higher; US market growth more than offset by US SUBOXONE Film share loss; Unable to provide guidance until May, given uncertainties over US market for SUBOXONE Film and generic alternatives.
In focus today will be the digestion of potential headlines from high-level US-China trade talks in Beijing, where US Treasury Secretary Mnuchin and Trade Representative Lighthizer are meeting China’s Vice-Premier Liu He, with the latest round of talks focusing on intellectual property rights.
For macro data, today will see latest revision to Q4 Eurozone economic growth (10am), with GDP expected to confirm a 5th straight quarter of slowing growth, down to 1.2% (from 1.6%).
US Retail Sales (1:30pm), meanwhile, are forecast up 0.2% again in December. US Producer Prices (1:30pm) are seen easing to 2.1% (from 2.5%), its slowest pace since mid-2017.
In terms of speakers, we have the Bank of England’s (BoE) Vlieghe (9:30am, hawkish) speaking on the UK’s and global economic outlook. In the evening, we also have the Fed’s Harker (4pm, centrist, non-voter), discussing “Approaches to Leadership” at an MBA student conference.