Every little helps

Every little helps

Mike van Dulken and Henry Croft at Accendo Markets commented to clients this morning:

FTSE 100 Index called to open -10pts at 7455, back flirting with steep rising support dating back to Thursday’s rebound and Friday’s breakout. Bulls need to get back above yesterday’s 7475 highs before being able to look to 7540. Bears require a breach of 7440 horizontal support to open the door for a retrace to 7340. Bullish 7480, Bearish 7440.


Calls for a slightly negative start (German DAX called higher, playing catch-up from holiday) come after yet more record closing highs on Wall St (44th for Dow 41st for S&P’s, 52nd for Nasdaq Comp) were followed by a mixed session in Asia overnight.


Australia’s ASX is once again the standout underperformer, with potential for read across to the UK FTSE, as API-inspired declines for Oil (big Gasoline stock build) continued to hurt Energy names and Miners suffer despite USD weakness, the latter on US debt concerns regarding tax reform/Puerto Rico write-off coupled with Fed leadership uncertainty.


While Japan’s Nikkei is flat with USD weakness translating to Yen strength to hold the index’s exporters back. With China absent for the Golden Week holiday, Hong Kong outperforms thanks to Chinese banks after a weekend cut to their reserve requirement ratio (RRR) buffer.


FTSE headlines this morning include Tesco which has resumed its interim dividend at 1p/share after almost a 3yr hiatus; H1 like-for-like sales +2.2%, pension deficit halved. Ultra Electronics wins $16.2m contract extension with US Navy. Balfour Beatty wins $260m contract for Miami property project. Topps Tiles FY17 Revenue Down, Earnings at Lower End of Guidance, profits warning.


US equity markets once again closed at record highs, with both large and small cap indices pushing higher. TheDow Jones notched its fifth consecutive record closing high, its 44th of the year, as 3M, UnitedHealth and Home Depot contributed the most gains, offsetting drag from Boeing. The S&P 500 and Nasdaq also finished at record closing highs, with Airlines outperforming on the former.


Crude Oil benchmarks remain under pressure as API inventory data overnight reported a large build in gasoline inventories which, if repeated in the official EIA figures (3:30pm), would mark its largest build since January. This has left Brent crude trading just above Monday’s $55.5 lows, while US crude trades a fresh 2-week low overnight after dipping below $50 a barrel.


Gold is continuing to bounce from mid-August lows of $1268, helped higher as the US dollar retreats from 3-week highs. Whilst it remains in a 1-month long downtrend from a 13-month high of $1360, the precious metal is now $10 off its lows, with a break above Monday’s $1277.4 highs needed for further gains. US Non-Farm Payrolls warm up ADP Employment Change (1:15pm) could impact Gold later today, with the US dollar likely to drive sentiment throughout the day.


In focus are more PMI Services updates. Consensus for the UK (9.30am) is for an unchanged print from August’s 2017 lows of 53.2, at odds with Manufacturing holding closer to 2017 highs.


In Europe (8.15-9am), Spain may show a third straight deterioration (55.5 vs 56 prev.), while Italy holds up at 54.9. France and Germany are both expected to confirm September surges (to 57.1 and 55.6, respectively) back towards highs, helping the Eurozone (55.6 vs 54.7 prev.) do the same. Eurozone Retail Sales (10am)  are forecast to have rebounded in August (0.3% vs -0.3%), but this likely did little for the 2.6% annual pace of growth.


This afternoon, September ADP Employment Change (1:15pm) likely to steal the show given potential read across for Friday’s US Jobs report, especially with such a weak figure forecast (138K vs 237K prev.), the weakest since Oct 2016, likely due to hurricanes and inclement weather. US PMI Services (2:45pm) is expected to confirm a September correction from August’s near 2yr highs. US ISM Non-Manufacturing (3pm), however, likely held up while US Oil Inventories (3:30pm) may add spice in light of a mixed API report last night (Crude stocks down, Gasoline up).


Speakers today include ECB President Draghi (5:15pm), although his opening remarks at the inauguration of the ECB Visitor Centre in Frankfurt may not see him stray too far into monetary policy debate. The same may be true of Fed Chair Janet Yellen (8.15pm) who delivers brief welcoming remarks at the “Community Banking in the 21st Century Research and Policy Conference”. Nor St Louis Fed boss Bullard (8pm) (dove, non-voter) who delivers opening remarks.

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