When is a hike not a hike?

When is a hike not a hike?

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

FTSE 100 Index called to open -15pts at 7470, having extended its retreat from 7500 to find support at 7450 overnight to keep the rising trend from mid-September alive. Bulls will want to see a bounce above 7475 overnight highs. Bears need a test of 7450 to jeopardize the uptrend.  Bullish 7475, Bearish 7450.


Calls for a negative open come after a mixed US session was echoed by Asia overnight, Tech giving up some gains and due to a weaker USD after the Fed held pat and ahead of the new Chair nomination. The GBP has retreated despite expectations of a BoE rate hike this afternoon, although this is not helping the index, which is seeking solace in  oil holding around fresh highs, helping Energy.


In corporate news this morning, Royal Dutch Shell 3Q net income of £4.1B looks to have beaten consensus $3.64B. BT 2Q Revs -1%, just shy of flat consensus; adj. EBITDA -4% in-line; backs 2017 guidance Randgold Resources on track for 2017 guidance. Morrisons Retail like-for-like sales growth of 2.1% is shy of +2.4% consensus.


Credit Suisse reports better than expected Q3 profits, +90% YoY. RSA Insurance profits up YoY but less than targeted, amid weaker underwriting. Acacia Mining CEO and CFO leave.


US equity markets finished mixed on the first trading day of November, as both the Dow Jones and S&P 500 recovered some lost ground on the Tech-focused Nasdaq after its recent results-inspired outperformance. The Dow outperformed after a broad-based rally led by Goldman Sachs, Disney and Intel helped to offset Apple weakness, while the Energy sector helped the S&P higher.


Note Facebook overnight comfortably beat market expectations for both revenues and profit, although the company warned that protecting itself from political abuse could hurt profitability.


Crude Oil prices have regained some poise overnight having fallen over $1.50 from yesterday morning’s multi-month/year highs to an overnight low of $60 (Brent) and $54 (US). Both major benchmarks have enjoyed some support thanks to a retreating US dollar, aiding a return to Monday’s highs of $60.6 and $54.5 for Brent and US crude respectively. The US dollar and any further comment on a possible OPEC production cut extension will likely drive sentiment today.


Gold is retreating from fresh 1-week highs traded overnight as traders await multiple key central bank announcements today. Having traded an overnight high of $1281.5 as the Federal Reserve held rates steady, the precious metal is back testing rising low support from yesterday’s lows at $1278. Both the Bank of England policy statement and the Fed Chair announcement will likely influence the non-yielding asset today.


In focus today is the Bank of England’s ‘Super Thursday’ (12pm) where we expect the first UK rate hike in 10 years. But it won’t really be a 25bp hike, more a reversal of last year’s referendum-inspired cut. As much as UK inflation is blowing too hot (3% vs 2% target), this is highly unlikely to signal the start of a Fed-like series of increases, normalising policy from crisis enforced extremes. Not with the uncertainty of Brexit hanging over the UK economy. As always the 12.45pm presser will  be fun, with Governor Carney put through the ringer.


On the other side of the pond, President Trump is expected to announce that Fed Governor Jerome ‘Jay’ Powell will become the next head of the Federal Reserve, ending weeks of speculation about the identity of the next Chair and ultimately ending with the continuity candidate winning out ahead of more hawkish outsiders. Media reports citing multiple White House sources have suggested that Trump favours Powell for the powerful position, although, as is always the case with the President, he reserves the right to change his mind (and tweet) at the last minute. An announcement is expected at 7pm today (3pm ET).


Data of merit today includes European October PMI Manufacturing prints (8.15-9.30am) with continued improvements forecast for Spain, Italy, the Eurozone and the UK, but Germany cooling further from recent highs. US Non-Farm Productivity and Labour Costs (12:30pm) may suggest improvement, supporting the Fed’s steady as she goes message of improving economy meriting gradual policy normalisation.


Speakers today comprise, curiously, the Fed’s Powell (12.30pm) and colleague Dudley (4.20pm) who delivers closing remarks at an Alternate Reference Rates Committee Roundtable event in NY.

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