Come on Arlene

Come on Arlene

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

FTSE 100 Index called to open flat at 7340, extending yesterday’s late bounce from 7300 to break above Sunday falling highs resistance. Bulls need a break above yesterday’s late 7350 highs, Bears a break below intersecting rising support at 7335. Bullish 7355, Bearish 7330.

 

Calls for a flat start come after a very mixed finish on Wall St where US tax cut inspired sector rotation saw further dumping of Technology – profit taking, less perceived benefit – in favour of more growth sensitive and value names including Banks, Retail and materials.

 

This mixed performance was echoed in Asia overnight, where even improved China PMI data failed to boost sentiment, commodity prices pressured by China growth curbs and a USD Index off its lows. Brexit uncertainty buoying the FTSE via fresh GBP weakness, but oil lower weighing amid continued selling since last week’s OPEC/NOPEC extension agreement.

 

In corporate news, Ferguson Q1 revenues +10% with growth across all units and geographies, profits and margins rise, growth in-line since end of quarter, reiterates guidance. John Wood wins multi-million contract with GlaxoSmithKline subsidiary. Vodafone enters strategic alliance with SoftBank. UK FCA launches investigation into Provident Financial car finance unit Moneybarn. Cineworld to pay $23 cash for each Regal Entertainment common share, 43.2% premium. Victrex profits grow faster than revenues, div +15%. Northgate continues to expect our profit this year to be skewed towards the second half.

 

US equity markets saw a significant swing in sentiment yesterday as a broad-based Tech sell-off offset positivity after Senate Republicans passed their tax reform bill over the weekend. The Dow Jones was the only index to hold onto gains, closing at a fresh record 58 points stronger having traded as much as 300 points higher in the session. The S&P 500 and Nasdaq both closed lower, the former touching an intraday high before closing with small losses, while the latter underperformed the wider market.

 

Crude Oil prices have extended their retreat from Friday’s OPEC/non-OPEC production cut extension highs as the US continues its move higher. Brent Crude falls to a 1-week low of $62.7, while its US counterpart has pared Friday’s gains, falling to $57.2. Gold continues to trade sideways after the Senate Republican tax reform bill was passed, awaiting a cue from the US dollar to break out of its current $1271-1277 range.

 

In focus today will be the fallout from yesterday’s failed Brexit talks as PM Theresa May tries to salvage a deal with the EU before the all-important 14-15 summit. Having seen the DUP party scupper a deal at the 11th hour yesterday on concerns of regulatory divergence between Northern Ireland and the rest of the UK, May now needs to head back to the table with her ‘supply and confidence’ partner to hash out differences before a potential return to Brussels tomorrow. Expect soundbites and Twitter reports aplenty, as was the case yesterday, as the complicated border talks continue.

 

Data-wise, a range of Service PMI prints headlines proceedings. Kicking off in Europe, mainland countries (Spain, Italy, France, Germany and headline Eurozone) are all seen further in November, while the UK retreats. This afternoon, the US equivalent is expected to be confirmed marginally higher in November. Other releases include Eurozone Retail Sales (10am), expected to retreat from a 2-year high, alongside US ISM Non-Manufacturing (3pm) falling back from a 13-year high.

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