Morning Market Pulse - Oca-downunder


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

FTSE 100 called to open +10pts at 7185, extending its bounce from 7150 to keep a rising channel intact. Bulls hope the recent 3% sell-off was merely the latest bout of consolidation for 12% gains from Christmas lows. Bulls need a break above 7210 to confirm a bounce and revive the uptrend. Bears require a breach of 7150 for another leg lower. Watch levels: Bullish 7210, Bearish 7150


Calls for a positive open come in spite of an uneventful close on Wall St and mixed trading in Asia, where Japan bounced back 2% from Monday’s equally sharp losses, but China sank lower. GBP is off overnight lows, limiting the FTSE’s upside, following the UK PM’s defeat in Parliament last night on a motion to explore alternative Brexit outcomes.


In corporate news this morning;


Ocado signs exclusive deal with Coles of Australia for 2 distribution centres; Currently sells £555m online (2.5% of sales). Expected earnings negative in 2019 with no fees recognised until operations start. Minimal additional capex in 2019; majority of additional capex in 18 months prior to openings.


United Utilities FY trading in-line, awarded “fast track” status by Ofwat for 2020-25 business plan. FY adj. revenue and adj. op. profit to grow, infrastructure expense in-line with H1. Weather, pension equalisation and restructuring to hit FY statutory op. profit by £52m. Net financing costs seen £45m lower due to fall in RPI inflation. Expects small increase in FY net debt vs. H1.


Ferguson cuts FY guidance to +3-5% organic rev. growth, at lower end of guidance after strong H1 revenue growth moderated recently and. H1 ongoing revenue +8.1% (+6.5% organic), ongoing trading profit +7.7%, Interim dividend +10%. To move tax domicile from Switzerland to the UK.


Crest Nicholson says forward sales encouraging (secured >50% of open market sales); revenues and volumes to be similar to last year, with improved cash generation; Still faces dampened demand from political and macro uncertainties which is likely to continue. Appointed Peter Truscott (ex-Galliford Try) as new CEO, effective Sept.


Sports Direct considering all-cash offer for remaining 70.1% of Debenhams. Says proposed restructuring/refinancing has adverse outcomes for shareholders. Debenhams says will consider any full offer - deadline Apr 22 - but this must include a price, deal structure and debt repayment plan.


Rio Tinto says Robe Valley iron-ore operations resuming after cyclone. Staff returning to port and rail sites. Operations to resume once safe.


AG Barr FY revenues +5.6%, gross profit +4.6%, pre-exceptional pre-tax profit +2.5%; net cash +45%, final div +7.6%; Markets and strategy robust in the face of UK economic uncertainty. Fevertree FY revenue +40% (UK: +53%, US +21%, Europe +24%), adj. EBITDA +33.9%, net cash +64.2%, final dividend +34.5% (FY: +36.1%). 2019 trading in-line.


Vectura FY revenues +8.4%; Adjusted EBITDA +51.2%, operating loss +9.6%, operating cash +30%; expects 2019 updates on VR315 resubmission with Hikma, partnering of VR647, further progress on our new nebulised assets and Phase III study completion for QVM149.


Avon Rubber awarded sole contract by US Department of Defense for M53A1 mask and powered air system and related accessories; max value $246m over 7 years (five years extendable by two). Amerisur Resources says Calao-1X well encountered no hydrocarbons.


In focus today:


In focus today will be further Brexit developments in the UK Parliament following MPs overnight vote to take control of the Brexit process, with a series of indicative votes scheduled for Wednesday to find a consensus on all options (May’s Deal, No Deal, No Brexit, Norway, Customs Union, etc.)


In terms of macro data, UK Mortgage Approvals (9:30am) are expected to slip below 40K once again after last month’s strong bounce. Watch FTSE Banks and Housebuilders. Across the Pond, US Building Permits and Housing Starts (12:30pm) are both seen falling in February. US Consumer Confidence (2pm) may have firmed up in March, while the Richmond Fed Manufacturing Index likely moderated after a strong rebound last month.



In terms of speakers, the Fed’s Harker (7:45pm, dovish, non-voter) speaks on economic outlook before an ECB and German Bundesbank joint meeting, while colleague Daly (7pm, centrist, non-voter) discusses “Managing Inflation in the Current Economy”.

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