Tech bets checked

Tech bets checked

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

FTSE 100 Index called to open -30pts at 7365 (-ex-div -1.5pts), having extend yesterday’s retreat to test 7350 support. Bulls hope the overnight bounce from 7360 has legs, Bears that yesterday’s breach of 7390 has triggered a bearish flag to 7200. Bullish 7390, Bearish 7360.

Calls for a negative open stem from yesterday’s US tech fuelled sell-off (worries of overvaluation, rotation into banks) spreading to Asia overnight on scepticism over US tax reform, while GBP has strengthened further on hopes of the UK being able to move on with Brexit negotiations. Mitigating this is solid China PMI readings buoying metals prices, confidence in OPEC announcing a production cut extension though end-2018 and solid UK house price data.

In corporate news GlaxoSmithKline starts ViiV Phase 3 HIV prevention study in women. Aviva upgrades growth, cash and dividend targets. BAE Systems updates on impact of IFRS15 accounting transition on timing of revenue and profit recognition. Grainger FY profits up on growing rental income. Wizz Air acquires additional slots at Luton. ShipbrokerClarkson hit by cyberattack.

Lamprell issues a profits warning due to additional costs related to East Anglian wind-farm project, on which it will book a significant loss. Greene King says H1 was challenging, Pub Company trading improved since period end, Christmas bookings +3%. Go-Ahead confident in meeting FY expectations, but first half bus profits lower. Marstons posts slower profits growth than revenues, highlights political and economic uncertainty.

US equity markets saw significant divergence overnight, as the Dow Jones climbed to a fresh record closing high thanks to UnitedHealth and JP Morgan gains, while the Tech-focused Nasdaq dropped well over 1% as the sector saw significant declines across the board. Large cap stocks such as Netflix (-5.5%), Facebook (-4%) and Google (Alphabet; -4%) suffered as US Q3 GDP was revised higher, seeing investors shy away from the sector that has already seen an impressive return this year in favour of other risk assets.

Crude Oil benchmarks are fluctuating ahead of today’s crucial OPEC/non-OPEC production cut extension talks in Vienna. While a deal is widely expected to be reached, the question of how long and how deep the extension will be will drive sentiment today. Global benchmark Brent has rallied from overnight lows of $62 to a high of $62.8, while its US counterpart is attempting to regain a $57.5 handle having dipped below $57 after yesterday’s US EIA inventories release.

Gold remains close to 1-week lows after US Q3 GDP was revised upwards, trading in a tight $1282-1285 range overnight. The precious metal fell over $10 yesterday afternoon after the key data release, as investors shunned safe-haven assets in favour of more risky assets such as equities. The greenback will remain a key driver of sentiment for Gold today as Republican lawmakers  look to push key tax reform plans through the Senate.

In focus today will be the OPEC/non-OPEC production cut extension talks in Vienna, where we expect to hear of an extension of production cuts through 2018 with the usual regular reviews along the way. Datawise, German Unemployment (8:55am) is seen unchanged at 5.6%, a feat likely to be repeated by the Eurozone equivalent (10am), while CPI is expected to tick to a 6-month high of 1.6%.

This afternoon, US Personal Spending (1:30pm) is expecting to fall sharply in October, while Income dips marginally. The Fed’s preferred inflation measure Core PCE is seen ticking higher to 1.4% in October. Finally, the Chicago PMI (2:45pm) is expected to retreat to a 3-month lows of 62.5.

Speakers of note today include the ECB’s Mersch (8am) opening the ECB’s “Digital transformation of the retail payments ecosystem” conference, ECB Chief Economist Praet (10am) delivering a lecture in Brussels, Trump-nominated Fed Governor Quarles (5:30pm) discussing payment systems at a Cleveland Fed fintech event and the Fed’s Kaplan (6pm) takes part in a moderated Q&A in Dallas.

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