Morning Market Pulse - no impact from Brexit uncertainty, not bidding for Thomas Cook Airlines


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


Markets Overview:

FTSE 100 called to open +30pts at 7237, rebounding off overnight lows of 7212 within a 3-day 7210-7280 range. Bulls need a break above 7250 to get into the upper half of the range, if not above 7280 to escape said channel. Bears require a breach of 7212 overnight lows. Watch levels: Bullish 7250, Bearish 7210


Calls for a positive open come despite US-China trade talks failing to deliver a hoped-for breakthrough. Asian mostly mixed, opening higher but reacting negatively/losing steam after the threatened tariff increase on Chinese imports was delivered.

Gold ($1286) remains equally and surprisingly range-bound $1280-1290 having already priced in the risk of trade talks faltering. Oil ($71.2), is also seeing a modest increase as investors hedge out out of equities for the time being. GBP still sluggish hovering around the $1.30 due to market uncertainty and upcoming UK GDP data.


In corporate news this morning;


BA-owner IAG: Q1 Passenger revenues +5.2% YoY, Operating Profit -60%; Capacity +6.1%, Passenger revenues available seat KM -0.8%; Fuel unit costs +15.8%; Cash +€1.2B, net debt down. CEO says not bidding for Thomas Cook Airlines. No impact from Brexit uncertainty on bookings.


IAG April passenger +7.3% Month-on-Month/+6.5% Year-on-Year; Revenue Passenger KM +7.7% MoM/+6.8% YoY; Capacity +5.8% MoM/+6% YoY; Load factor +1.5pts MoM/+0.5pts YoY.


Lonmin H1 swings back to operating profit; Gross cash +47% YoY; Q2 Platinum sales +4.2% YoY, H1 flat. Q2 platinum production +16% YoY, H1 +1%. H1 Production Costs +5.6% but unit costs +15.5%. Traditionally expect H2 output above H1, but given production losses during H1, as well as transaction with Sibanye-Stillwater, expect sales for full year at lower end of sales guidance range.


Infratil confirms possible acquisition of Vodafone New Zealand. Talks with Vodafone and financiers ongoing but incomplete, other parties involved. Australian Financial Review suggests deal could be worth A$2.50bn ($1.75 bn).


AstraZeneca pooled analyses of roxadustat global Phase III trials allows talks to begin with US FDA for regulatory submission in second half.


Bunzl finance director to retire, leaving Feb 2020, to be succeeded by CFO of Inchcape.


NSF says Provident Financial claims about NSF’s capital position are unfounded, based on false premises, founded on incorrect assumptions and designed to provoke doubt and fear.


Provident Financial says met with 36% of shareholders; notes latest acceptance report from NSF suggests 96% of Provident shareholders not yet backed deal.


Millennium & Copthorne Q1 RevPAR  +2.2% (-0.9% at constant FX); Like-for-like RevPAR -0.8%; pre-tax profit -57.7% negatively impacted by two major refurbishments. First 21 days of April, show like-for-like Group RevPAR +2.2%. Read-across for InterContinental Hotels?


Morgan Advanced Materials Q1 Trading Sales +2%. Carbon & Ceramics division sales +7% while Thermal Products sales -3%. Outlook unchanged.


In focus today:


US-China trade talks. Deal, or no deal? Retaliation for Trump raising tariffs again? Risk-on or risk off for markets into the weekend?


The preliminary reading for UK GDP (9.30am) is forecast firmer in Q1, rebounding/re-accelerating from its Q4 slowdown. March was likely flat on account of Brexit uncertainty. Watch GBP and its impact on the FTSE.


UK Industrial and Manufacturing Production  (9.30am) is forecast weaker in March (close to flat), albeit continuing to climb on a year-on-year basis. Further strengthening in UK Construction Output may cheer industrials and Housebuilders. UK Business Investment, however, likely stayed in contraction due to Brexit uncertainty.


US April Headline Inflation (1.30pm) may have ticked over the Fed’s 2% target, while the Core metric remains above it, keeping us believing the FED won’t be any position to hike rates again anytime soon.

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