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Morning Market Pulse - RB-S for special div

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Mike van Dulken and Artjom Hatsaturjants at Accendo Markets, commented to clients this morning:

 

FTSE 100 called to open -15pts at 7180, extending its pullback from 7230 highs, albeit still very much in the upper half of the 6850-7250 post-Christmas rebound channel. Bulls need a break back above 7200, to revive the Feb uptrend, while Bears require a breach of 7165 rising support to put it at risk. Watch levels: Bullish 7200, Bearish 7165

 

Calls for a negative open come after global equity markets edged lower with traders more pessimistic about a US-China trade deal before 1 March, extending the uncertainty. Negotiators in Beijing remain far apart with no apparent progress made. Overnight, the weakest China Consumer inflation since Jan ‘18, missing consensus (1.7% YoY vs. 1.9% est/prev) also hampered sentiment.

 

The US political crisis also reached boiling point, with President Trump expected to sign a compromise spending deal passed by Congress, but at the same time declare a national emergency allowing him to appropriate as much as $8bn for his border wall project.

 

In the UK, GBP is rebounding from overnight lows following PM May’s latest Brexit Plan B defeat in Parliament. Oil prices and gold extend gains as the US Dollar struggles following yesterday’s dismal US Retail Sales figures (note the UK offering its Retail update today).

 

Company news this morning RBS Q4 op profit £572m, net profit £286m (rebound YoY but down QoQ), final divi 3.5p+7.5p special takes FY yield to 5.3%; No extra PPI provision; Q4 net interest margin +2bp, FY -15bp; 2020 sub-50% Cost-to-Income target (Q4 80%, FY 72%) is challenging; political/geopolitical uncertainty could up 2019 credit losses, increasing impairments; Op expenses to fall by another £300m/3% but strategic costs +50% to £1.5bn.

 

Mondi ups FY guidance before 28 Feb results, expecting underlying EPS +25-29%. IAG faces more criticism from Brussels for saying it will continue to regard UK shareholders as EU investors in its post-Brexit ownership plan, even in the case of a no-deal Brexit; 50%+1 share ownership required to retain flying rights.

 

Royal Dutch Shell’s Nigerian unit SNEPCo invites contractors to tender for development of 150K barrel/day Bonga South West Aparo oil field, including a new Floating, Production, Storage and Offloading vessel, more than 20 deep-water wells and related subsea infrastructure.

 

Segro plans to raise £450m via share placing to fund development pipeline. FY adj. pre-tax profit +24.4%, portfolio value +10.7%, ERPA NAV/share +16.9%, net borrowing +11.4%, loan-to-value -10bps to 29%, FY div +13.3%. Secured 75% of £46m rent expected to be generated in 2019 from projects under construction. Plans 2019 capex -12.7%.

 

Centamin reports Côte d'Ivoire drilling programme resulted in a doubling of mineral resource (Indicated gold resource +55%) and budgeted another drilling programme for 2019.

 

Millennium & Copthorne Hotels FY like-for-like total revenue +1% (Q4: +1.1%), Hotel rev. +0.6% (Q4: +2.6%), RevPAR +0.7% (Q4: +3.9%), pre-tax profit -26.4% (Q4: -76.7%). Final div -51% to 2.15p. Expects another challenging year in 2019 with significant capital projects underway.

 

Fitch affirms Whitbread long term debt rating at 'BBB', with a Stable outlook. Premier Foods says present business climate will not result in satisfactory sale of Ambrosia brand.

 

In focus today will be UK Retail Sales (9:30am), growth expected to accelerate to 3.4% in Jan (from 3% prev.) matching Nov levels. After US Retail Sales disappointed yesterday, with a big consensus miss, will the UK’s high street offer a brighter spot for investors and the economy?

 

In the US, both Import and Export Prices (1:30pm) are expected just shade off unchanged, after several months of oil-inspired contraction. Empire State Manufacturing is forecast rebounding in January, though still below 2018 average. Industrial and Manufacturing Production (2:15pm) are seen broadly unchanged. Michigan Consumer Sentiment (3pm) is seen staging a recovery in Feb after a steep Jan fall.

 

In speakers, we have the ECB’s Cœuré (1pm, exec. board, hawkish), speaking on international economics at the Council on Foreign Relations in New York. Fed’s Bostic (2:55pm) is scheduled to speak on "Workforce Development" in Alabama. ECB’s Angeloni (3:45pm) will speak at a finance conference in Italy (“The Future of Banking: Will European Banks Survive?”).

 

Bank of England will also release the text of a 22 Nov speech on creativity and the economy by BoE Chief Economist Haldane (11am, hawkish) at the Glasgow School of Art, though the speech’s data might be somewhat out of date.

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