Mike van Dulken and Artjom Hatsaturjants at Accendo Markets, commented to clients this morning:
FTSE 100 called to open flat at 7235, holding a 7-day 7200-7280 rising channel, itself at the upper end of the longer 6900-7270 post-Christmas rising range. Bulls need a break above 7260 to test the ceiling again. Bears require a breach of 7230 to retest the floor. Watch levels: Bullish 7260, Bearish 7230
Calls for a tepid open come in spite of a strong start to the week on the Asia markets, as official optimism over US-China trade negotiations (“very productive”, according to Pres. Trump) is helping traders overlook the reported lack of progress on some of the key trade issues.
Oil prices continue a 5-day winning streak, with Brent Crude trading 3-month highs, after OPEC+ pledge to cut output last week. Other commodities (e.g. copper, gold, platinum) also benefit from US Dollar weakness, as the market is now considering the higher likelihood probability of no Fed interest rate hike, or even a potential cut, in 2019.
Company news this morning includes Barclays shares may be sensitive to an FT report that US hedge fund Tiger Global has sold down its entire 2.5% stake. UK Housebuilders may react favourably to a rise in UK Rightmove House Price growth accelerating Feb (0.7% vs 0.4% prev.), although annual growth slowed further (0.2% vs 0.4% prev.).
Reckitt Benckiser (continuing ops) Q4 net revenues +2% (+4% at constant FX & like-for-like). FY +10% (+15% at constant FX, top of guidance; +3% like-for-like, also top of guidance but a shade below 3.3% consensus). Rest of Health +3.1% like-for-like beats 2% est., Total Health +2% misses 3.7% est.; Hygiene & Home +4% beats 3% est.; Adj. op profit +8% (+12% at constant FX). Net income +7%/+11%; final div +3%; Targets 3-4% net rev growth in 2019, adj. op margin maintained.
Spirax-Sarco in exclusive talks to buy Thermocoax for €158m (3.2x revenues, 12.2x EBITDA), to be financed with cash and debt, subject to regulatory approval. Coca-Cola HBC to buy Serbian confectionary brand Bambi for €260m, paying 0.3x revenues for a business with profit margins almost three times higher than itself.
Galliford Try says final section of Aberdeen Western Peripheral Route (AWPR) is complete and will fully open to traffic tomorrow. Galliford also signed £275m deal with Ealing council for 470 new homes (50% affordable) and new council buildings.
Pearson sells US K12 school courseware business to Nexus Capital Management for $250m ($25m upfront, $225m over 3-7 years). To receive 20% of all future cash flows and 20% of net proceeds in the event the business is sold again. Deal to complete by end-Q1. HICL Infrastructure increased its stake in a road concession in Ireland to 50%, paying €23m.
Petra Diamonds H1 production +9.5% YoY, revenue +7.9%, adj. EBITDA -6.4%, after lower value Cullinan product mix. Net debt +7.4%, capex -41.5%. FY production guidance unchanged. Expects FY net debt unchanged. Appoints Richard Duffy (ex-Anglo American/AngloGold Ashanti) new CEO.
McColl’s Retail FY like-for-like sales -1.4% YoY (Q4 flat) due to supply chain disruption following Palmer & Harvey's entry into administration, pre-tax profit -57%. FY dividend -61%. Early 2019 trading improved (Q1’19 +1.2% YTD).
In focus today, likely quietened with US markets closed for Presidents Day Holiday, will be Germany’s Bundesbank report (11am) and European Central Bank’s Enria (4.15pm) on a panel entitled "Banking Union - Challenges Ahead" at the 2019 European Parliamentary Week.
In speakers, ECB Bank Supervisor Enria (4:15pm) speaks at a European Parliament panel (“Banking Union - Challenges Ahead”) in Brussels.