Morning Market Pulse - CMA to block SainSDA deal?


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


FTSE 100 called to open +5pts at 7185, up off yesterday’s 7162 lows but still hampered by this week’s falling highs at 7205, as the index pulls back from the ceiling of a 2-month 6900-7300 rebound channel. Bulls need a break beyond this week’s falling highs at 7205. Bears require a breach of yesterday’s 7162 lows to extend the decline. Watch levels: Bullish 7205, Bearish 7160


Calls for a positive open come after Asian markets followed Wall St higher, following strong earnings from giant retailer Walmart. Asian currencies strengthened following US demand that China keep the yuan stable. President Trump was more conciliatory on the trade talks, saying 1 March deadline wasn’t a “magical” date and US tariff hike on Chinese goods could be postponed.


The Pound is flat, unresponsive to the increasingly frantic political discussions regarding Brexit and ahead of UK PM May’s visit to Brussels to present new proposals to help resolve the Irish border backstop issue. She is hoping to win support for a written reassurance from the EU which would avoid reopening the withdrawal agreement, one of Brussels own red lines.


Lots of big company news this morning including;


Lloyds £1.75bn buyback (+75%; consensus £1.5-2bn) but extra £200m provision for PPI; 2018 underlying profit +6% to £8.1B, pre-tax +13% to £5.96B (consensus £5.7B), net profit £4.4bn +24% vs consensus £4.1B; Net interest margin 2.93% (+7bp YoY [Retail 2.68%, +8bp, Commercial 3.27%, -1bp); flat vs Q3;); Cost ratio -250bp to 49.3%; Final div 2.14p, +4.4%; Sees NIM ~2.9%, op costs <£8bn, a year earlier than expected, cost/income ratio to fall to low 40s%


UK regulator CMA says Sainsbury’s merger with ASDA could increase petrol prices, reduce quality and lessen competition. Concerns might be difficult to address. Looking at potential options, including blocking deal or requiring asset sales.


Glencore FY net income -41% on $1.4bn non-cash impairments at Mutanda & Mopani, adj. EBITDA +8%, op. cash flow +11%. $2bn buyback to run until end-2019. $0.20/share dividend unchanged, paid in two instalments. Investing in low-carbon economy, coal production to be limited to current levels. Expects higher 2019 production in all commodities.


Indivior launched authorised generic version of Suboxone sublingual film in US to compete with anticipated launch of competing generic products from Dr. Reddy’s and Alvogen. Flybe gets conditional proposal from Investor group led by Bateleur Cap, Mesa Air Group, supported by Andrew Tinkler, but doesn’t see it as executable, continues to support Connect Airways deal.


INTU Properties FY like-for-like net rental income +0.6% (headline -2%), occupancy -3bps to 96.7%, underlying earnings -3.9%. ERPA NAV/share -22.3%. Property revaluation swung to £1.4bn deficit. Property market value -13%. Expects 2019 like-for-like net rental income 1-2% lower.  Cat Rock Capital has 'strong support' for Proposals among other Just Eat shareholders about merger with peers.


Tritax Big Box REIT acquired a 87% stake in Symmetry in return for new issue of equity. Hochschild Mining FY revenues -2.5%, pre-exceptional pre-tax profit -18.1%, net debt -24.7%, dividends +17.6%; costs and production beat guidance; 2019 gold production lower, costs higher.


In focus today will be the Fed’s latest FOMC minutes (7pm). Markets want insight on a suprise policy u-turn, pausing interest rate hikes in favour of being more “patient”. Traders will also have an eye on any discussions about the “auto-pilot” Quantitative Tightening (QT) whivh is gradually reversing the Quantitative Easing (QE) bond-buying stimulus that bloated the Fed’s balance sheet to $4tn. Could this be paused too, make policy slightly more accommodative?


Otherwise, the day is fairly uneventful with regards to macroeconomic data, with only Eurozone preliminary Consumer Confidence (3pm) expected slightly improved in February, albeit still close to 18-month lows. We will also get the latest US private API Oil inventories (9.30pm).

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