Oh yes EU have! Oh no we haven’t!

Oh yes EU have! Oh no we haven’t!

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

FTSE 100 Index called to open -25pts at 7435, back from yesterday’s 7470 highs, settling in a 7430-45 consolidation channel overnight. Bulls need a break above overnight resistance to regain yesterday’s highs. Bears require a breach of overnight support to trigger another leg lower.  Bullish 7445, Bearish 7430.

Calls for a negative open stem from a sharp rally by GBP following news late yesterday of the EU and UK all but agreeing a Brexit settlement figure, although the government is suggesting otherwise this morning. While this would of course remove a significant element of Brexit uncertainty, breaking the negotiation deadlock, but weighs on the UK Blue-chip index by reducing the value of internationally denominated profits and dividend income. This is outweighing positivesteps towards US tax reform (vote early as Thurs?) which helped US markets to fresh highs, and markets shrugging off yet another North Korean missile launch. This  means the UK index underperforms both US equity futures and the German DAX, the latter embracing a weaker EUR even if it is already well off its worst levels.

In corporate news the LSE announces CEO Xavier Rolet will step down with immediate effect. Pennon H1 profits rise, ups dividend. Stagecoach and FirstGroup welcome UK Department for Transport’s new strategic vision for UK railways. HSS Hire returns to profitability.  Tullow Refinances $2.50bn in credit facilities. ZPG to acquire Calcasa, leading provider of residential property market analysis in Netherlands, for up to €50m. Cineworld confirms in advanced discussions with Regal Entertainment. Ithaca Energy successfully refinances bank debt. Faroe Petroleum commences Iris/Hades (Aerosmith) exploration well, 6506/11-10.

US equity markets closed at record highs after the Senate Republican tax reform bill received approval for a full vote in the upper house, which saw Financial stocks surge. The Dow Jones climbed over 200 point as JP Morgan and Goldman Sachs lead risers, with only Apple declining by a meaningful amount. The S&P 500 enjoyed its best day since 11 September as Financials outperformed, while the Tech-heavy Nasdaq also climbed by 0.5% to a fresh record closing high.

Crude Oil benchmarks are rallying from rising lows support ahead of tomorrow’s OPEC/non-OPEC meeting, having retreated overnight on a disappointing API inventory data release. Hopes for an extension of the current production cut deal have helped to keep both Brent and US benchmarks within $2 of recent highs, with the global benchmark holding above $63 while its US counterpart is supported above $57.5. Gold has been subject to increased volatility given the steady stream of major news overnight, however remains rangebound between $1291-1298, just shy of Monday’s 6-week high of $1299. Having retreated to lows of $1291 as US Republicans saw their senate bill approved for a full vote, the announcement of another North Korean missile test has seen the precious metal recover to an overnight high of $1296.

In focus today will be US GDP (Q3, 2nd est, 1.30pm), forecast stronger, close to the growth levels posted in Q2, with an acceleration in Personal Consumption. With the Fed hiking rates to normalise policy, Inflation components should also confirm a pick up (same for German CPI at 1pm, watch EUR and DAX), while US Pending Home Sales (3pm) could surprise to the upside, with an even bigger rebound, in light of Monday’s New Home Sales beat and the Fed Beige Book (7pm) will give us the latest assessment

UK Consumer borrowing and Mortgage approvals (9.30am) could have a bearing on the UK Housebuilder and Retailer sectors, as well as GBP, with a knock on for the FTSE100. US Oil inventories (3.30pm) will be looked to, especially ahead of tomorrow’s OPEC meeting and  after last night’s US API data showed a Crude build rather than a drawdown. Although Gasoline delivered a drawdown rather than a build, Distillates showed the biggest build in months.

Events/Speakers include the Fed’s Dudley discusses the “Prospects for the National and Regional Economy” (1.30pm), while Bank of England Governor Mark Carney speaks at the FICC Markets Standard Board (2pm) before his outgoing US counterpart Janet Yellen appears before the Congressional Joint Economic Committee in Washington (3pm). TheECB’s German hawk Weidmann discusses “New Perspectives for the Eurozone and the EU” (5pm), shortly followed by2018 FOMC voting member Williams, who delivers a keynote address at an Economic lunch (5:45pm).

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