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Morning Market Pulse - Morrisons & Ocado: No longer exclusive

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Mike van Dulken & Vlad Totia at Accendo Markets, commented to clients this morning:

 

Markets Overview:

FTSE 100 called to open -29pts at 7242, continuing its downside since it breached support two days ago. Bulls need a break above yesterday’s 7270 high to create some momentum for an upside. Bears require a breach of 7215 multi-day lows. Watch levels: Bullish 7275, Bearish 7210

 

Calls for a negative open come as markets are preparing for the eleventh hour trade talks between the US and China due starting today and going through tomorrow. As was the tone of this week, Asian markets were all firmly in the red overnight throughout trade talk uncertainties. The US session didn’t manage to hold on to the little gains it made in the wake of Donald Trump accusing China of backtracking on assurances made during negotiations.


Gold ($1282) is moving to the tone of the market’s concern, having retraced 0.7% since yesterday’s highs. Oil ($70.2), is also factoring in economic ambiguity as it is moving within a 1.9% range for the past two days. GBP edging alongside its $1.30 floor with lIMIted upside as investors are facing away from risk this week.

 

In corporate news this morning;

 

BT FY revenues -0.9%, slightly better than forecast; adj. EBITDA -2%; profit before tax +2%, in-line, net operating cash inflow -14%. Net debt +15% Dividend unchanged. Outlook for 2019/2020, adjusted revenue -c.2%, capital expenditure up.

 

Barratt Developments FY outlook modestly above the Board’s previous expectations. Total Forwards Sales + 2.4%; Continue to expect to grow volume towards lower end of medium-term target range, in-line with current market expectations.

 

Morrisons Q1 like-for-like sales ex-fuel +2.3% YoY misses 2.5% est; Retail +0.2% (vs 0.6% in Q4, 1.3% in Q3) misses 0.5% est; W’sale +2.1% (vs 3.2% in Q4, 4.3% in Q3); Expects market to remain competitive/challenging; Q2 should annualise last year's good summer weather and World Cup.

 

Ocado reached agreement with Morrisons for temporary suspension of capacity at newest Customer Fulfilment Centre in Erith, SE London to mitigate impact of Andover fire. Mutual relaxation of certain exclusivity provisions, in-line with terms with our existing international clients.

 

BAE Systems Q1 in line. Despite geopolitical uncertainties, EPS and 3yr cash generation target guidance unchanged. Operating cash flow expected H2 weighted as usual.

 

Melrose Industries trading in-line; progress being made to deliver operational improvements and achieve GKN margin objectives. CEO of 9 years David Roper to step down end-May 2020.

 

Rio Tinto CEO: China slowdown not hurting sales; 'No doubt' there will be a mine at Winu copper deposit; 'Lots of uncertainty' around future Vale iron-ore supply; Continue to prioritize value over volume in iron ore. AutoHaul completed >3m km in driverless mode; rejects AGM resolution for detailed emissions targets throughout mining supply chain because limited control over customers.

 

GSK-Pfizer Healthcare deal not opposed by Australian regulator; won't substantially lessen competition; Pfizer's Advil has limited brand recognition, market share in Australia.

 

RSA Q1 in-line; premiums +3% YoY (underlying flat; Canada +8%, Scandi +3%, UK & Int -5%); Op profit up at constant FX, in-line reported (down?). Loss/expense ratios improved; market conditions unchanged. Pricing competitive. Financial markets produced headwinds (yields, spreads, FX).

 

Mondi Q1 strong, EBITDA +16% YoY (+6% QoQ) driven by higher average selling prices (offsetting marginally lower like-for-like sales volumes), strong operational performance, acquisitions, CAPEX and less maintenance. Strong cash generation

 

Beazley Q1 investment return +2%, gross written premiums +16% YoY, premium rates on renewal business +3%. Marine, property and reinsurance still weighing with high levels of claims.

 

IMI Q1 mixed results with organic revenue -2%, H1 organic revenues and profit expected to be lower.

 

Wood Group wins $1bn 20yr UK nuclear decommissioning contract; Appoints Roy Franklin as Chairman from 1 Sept to replace retiring Ian Marchant.

 

Acacia Mining says still early in Q2 but pleased with improved production levels now being achieved and remain confident of delivering against our FY production guidance of 500-550 Koz.

 

In focus today:

 

Any US-China trade talk chatter could keep markets on edge. Especially after Trump’s threats and subsequent tweets. Could a Washington-Beijing deal actually be imminent this week? Watch USD and commodities.

 

Macro-economic data of interest today is limited to US Producer Price Inflation (PPI; 1.30pm), forecast to continue its bounce from Feb lows (Headline and Core) which could bolster USD. Wholesale Inventories (3pm) are expected flat in March, their weakest since last May. Watch USD.


Other than that, speakers include Fed Chair Powell (1.30pm; "Renewing the Promise of the Middle Class"), Bostic (3.45pm; economic outlook and monetary policy) and Evans (6.15pm; “Renewing the Promise of the Middle Class"). Watch USD and knock-on to commodities, GBP and FTSE members.

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