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Morning Market Pulse - Market mood turns more sombre-ro

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

 

Markets Overview:

 

FTSE 100 called to open -45pts at 7175 after a sharp pullback from 7230 which negated yesterday’s breakout above 7200. Bulls need a break back above 7200, for another attempt to make headway towards 7315; Bears require a breach of 7170 for a retest of Wednesday’s 7150 lows, if not mid-May lows of 7130. Watch levels: Bullish 7205, Bearish 7170

 

Calls for a negative open come after a mixed session, countering a positive Wall St close. The risk-off mood stems from Trump imposing yet more tariffs, this time on Mexico (all goods!), rather than China, although its dispute with the latter remains just as newsworthy and market-moving. Safe havens like Gold finding renewed interest.

 

Disappointing China PMI Manufacturing hasn’t helped sentiment either, contracting more than expected, denting sentiment towards Miners (RIO, BHP) in Australia overnight. Copper understandably weak, extending declines. Worse than expected Nationwide House Price data may also impact FTSE house builders.

 

Oil prices extend their pullback amid trade concerns, to their lowest since mid-March. This may see higher-beta oil plays like Explorers/Services underperform the Majors whose up and downstream activities offer an element of protection from oil price volatility.

 

In corporate news this morning;

 

Legal & General to sell General Insurance business to Allianz for £242m with potential further payments over 3 years. Group Solvency Ratio to rise by circa 2%.

 

Balfour Beatty joint venture (45% share with Flour Corp) secures $1.7bn US contract from Texas Dept of Transport for reconstruction and widening of Interstate 635 LBJ East in 2020-24.

 

Rank Group confirms it is in advanced discussions with Stride (£89m mkt cap) regarding a possible 151p/share all cash offer (28% premium to yesterday’s closing price).

 

Wizz Air upgrades profits guidance after FY Revenues +19.6%, Passengers +16.7%, EBITDAR +8.9%, Continuing ops profits +6.9%; Revs per avg. seat KM +2.3%, Ancillary +18%;  Costs per avg. seat KM -0.9% (excluding fuel which is +19%); Cash +34%, load +1.5pts, fleet +20.4%.

 

Capital & Counties notified by TFL of independent valuation by JLL of underlying property interests held by Earls Court Partnership. Implied value of property interests at 31 March -10.5% like-for-like versus 31 Dec which would reduce FY EPRA NAV by approx 2%.

 

Lookers Q1 New Cars turnover +3%, gross profit +4% (flat like-for-like, beat a negative market); Used car turnover +8%, gross profit +2%; After sales turnover +11%, gross profit +9%, growth in all divisions; performance in-line with expectations since end-March.

 

Fitch affirms British American Tobacco at 'BBB'; Outlook Stable; “underpinned by strong business (largest industry player, regional & brand diversification, scope to grow next-gen products, exposure to wide range of mature, cash generating and emerging markets. Constrained by financial risk following integration of Reynolds American. Stable Outlook assumes steady deleveraging to 2022”

 

In focus today:

 

Digestion of weak China PMI Manufacturing overnight with a bigger than expected drop back into contraction, albeit no worse than the lows of earlier in the year. Also those new Mexico tariffs from Trump 

 

UK Mortgage Lending (9.30am) may impact FTSE Housebuilders after this morning’s worse than expected Nationwide House Price data. Watch GBP too.

 

This afternoon, US Personal Income & Spending (1.30pm) could deliver mixed messages should it delivers on consensus expectations for a bounce in income, but a big pullback spending. That said., the former may be bouncing off lows while the latter normalises from last month’s jump to a 7yr best.

 

 

PCE Inflation could also influence expectations about Fed monetary policy. The Chicago Fed (2.45pm) may improve along with Consumer Confidence (3pm). Watch USD.

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