Morning Market Pulse - BHP sails out of Storm and into Bluewater


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

FTSE 100 called to open +15pts at 7210, extending yesterday’s bounce from 7160. Bulls need a 7230 breakout to revive the 3-month up-channel towards 7500 and to disprove Bears’ theory that recent sideways activity is the pause within a bearish flag pattern towards 7040 Feb lows. For this, Bears still require a breach of 7165 rising support. Watch levels: Bullish 7230, Bearish 7160


Calls for a positive open come in spite of a lower close on Wall St and more mixed trading in Asia after worries over slowing global growth and dovish central bank commentary fuelled demand for safe-haven assets, including government debt. Bond yields, which move inversely to prices, on 10-year US Treasuries fell to 15-month lows, making equities less attractive.


GBP recovered part of its overnight declines after UK lawmakers’ failed to give majority support to any of the “indicative Brexit votes”, despite the PM promising to resign in turn for hardliner backing of her deal. If the PM can’t get her deal ratified (meaningful vote 3 imminent?) this means the legal default remains a No-Deal Brexit on 12 April, and thereafter probably a General Election.


Note that the motions which attracted most backing last night were actually a Customs Union and a Referendum on the final deal, highlighting the indecision which continues to paralyse Westminster. Another reduced round of indicative votes could take place Monday, trying again to find consensus.


In corporate news this morning;


BHP is said to be one of the potential bidders for Bluewater, a Gulf of Mexico-focused oil-exploration company valued at c. $1.5-2bn, according to a Bloomberg report. Separately, Australian bank Macquarie says BHP could miss FY iron-ore shipment guidance after tropical cyclone Veronica forced closure of several key export ports.


The UK's NHS is set to offer AstraZeneca's cancer drug Imfinzi for non-small-cell lung cancer.


SSE FY trading in-line, backs guidance for mid-single digit growth in Networks, a “significant” reduction in Wholesale and Business flat. Final dividend +2.8%. Expects 64-69p adj. EPS and £1bn cash from disposals. Energy Services still profitable, but adj. op. margin seen lower this year (2-3% vs. 6.8% prev.) due to Default Tariff Cap & less customers. Still assessing options.


BAE Systems gets $41.8m contract from US Navy for routine maintenance and modernization of amphibious transport dock ship USS Anchorage. Worth $48.4m if options exercised. Meggitt won a $37m contract from General Dynamics to provide cooling and power systems for the Abrams tank.


Debenhams gets requisite consent from bondholders for amendments allowing securing of new credit facilities and restructuring, all of which Mike Ashley prohibited in his 5p/share offer.


Johnson Matthey hits two major milestones in commercialisation of eLNO (ultra-high energy battery cathode materials)’; site for construction of expandable commercial plant in Poland; signed 10yr lithium-containing raw materials supply agreement. Commercial production to begin 2021-22.


Derwent London has fully let all office space at its 243,000 sq ft Brunel Building in Paddington before completion at 2.4% more than its December  estimated rental values.


Avon Rubber gets first order, worth $20.2m, under M53A1 mask and powered air system framework contract with US DoD. Premier Oil sold its Pakistan business to Al-Haj Energy for $65.6m.


UK regulator CMA to carry out a full market investigation of the funeral sector. Dignity welcomes the news and plans to continue engaging with the regulator.


Gulf Keystone Petroleum full year revenues +45.3%, EBITDA +43%, net profit +466%, cash balance +84%, expects to be fully funded for all phases of Shaikan expansion. Production -10%, at upper end of guidance; Confirms future div policy.


Mitie expects FY revenues +7-8% (+4% underlying), order book to decline c. 10%. Overall FY op. profit (est. £84-87m) expected lower due to unfavourable contract mix.


In focus today:


Aside the latest on Brexit and Westminster, attention today may fall on US-China trade negotiations, with US Trade Rep. Lighthizer and Treasury Sec. Mnuchin in Beijing for another round of talks with China’s Vice-Premier Liu. Both sides have expressed cautious optimism, but many thorny issues remain unresolved. Watch China-sensitive names, including FTSE Miners.


For macro data, focus will be on US Q4 GDP (2pm), growth expected to slow to 2.4% from Q3’s 3.4% (and 4.2% in Q2), and below the 2.6% preliminary figure. Elsewhere, we get Eurozone sentiment indicators (10am), with Business Confidence potentially at 2.5-year lows, and Consumer Confidence boasting a slight improvement to -7.2. German Inflation (1pm) likely accelerated in March to 1.6% YoY (from 1.5% prev.), although the EU Harmonised variant probably slowed a touch.


In terms of speakers, we have ECB’s Villeroy (1:40pm, opening remarks), IMF chief Lagarde (2pm, keynote address) and Fed Vice Chair Clarida (2:30pm, “Coping with global shocks”), all speaking at a Paris conference (“The Euro Area: Staying the Course through Uncertainties”).


We’ll also hear from ECB VP de Guindos (8:10am, “Financial Intermediation, Regulation and Economic Policy”) while there is a smorgasbord Fed speakers including Quarles (11:15am), Bowman (2pm), Bostic (3:30pm), Williams (5:15pm) and Bullard (10:20pm), with topics comprising economic outlook, banking and monetary policy.

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