Another Trump in the road

Another Trump in the road

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

FTSE 100 Index called to open -5pts at 7535, having given back its overnight gains due to falling highs resistance since yesterday. With 6-week support still holding up, Bulls still say consolidation after December’s 3.9% bounce. Bulls need a break above 7550 to clear those falling highs if they want to engineer another leg higher. Bears are looking for a breach of rising support at 7525 to scupper the uptrend. Bullish 7550, Bearish 7525


Calls for a slightly negative start stem not just from a negative Wall St finish, but also from Trump’s tax bill encountering yet another bump in the road, rather echoing his summer troubles with healthcare reform. Despite gaining lower and then upper house approval overnight, a last minute Senate amendment to comply with strict budget rules means the revised bill must be voted by the House of Representatives again today. The USD is already off its highs, helping GBP bounce to hinder the FTSE. Index weakness is perhaps mitigated by higher oil prices (14% of FTSE) and gains in Asia. Japan’s Nikkei keeping its head dry thanks to Yen weakness, and gains for financials and consumer. It was a similar story for Australia’s ASX where Energy embraced oil price gains and financials welcomed US tax reform progress.


In corporate news, NMC Health maintains FY guidance, positive 2018 outlook. UK Competition and Markets Authority approves Tesco-Booker merger; Tesco expects March completion. Glencore, Apollo said to bid for Rio Tinto’s $1.5bn coal assets. Carillion says new CEO Andrew Davies to start Jan 22, two months early. SolGold says newly identified outcrop at La Hueca returned strongly mineralised rock chip results. William Hill appoints Roger Devlin as Chairman Designate. Drax says unplanned outage on rail unloading facilities means biomass deliveries currently restricted. Shaftesbury acquires six buildings on Neal Street, Seven Dials for £24.6m.


US equity markets retreated on Tuesday, snapping a two-day rally to fresh record highs, after Apple suffered only its third broker downgrade of the year and its first since June. Subsequent share weakness saw Tech underperform across indices, with the Nasdaq underperforming following recent strength while the Dow Jones saw further weakness from Goldman Sachs and Visa.


Crude Oil benchmarks have extended week-long gains overnight as the American Petroleum institute reported US inventories fell by 5.2m barrels last week, a bigger than expected drawdown. Global benchmark Brent is now challenging Monday morning’s highs of $64.15, while its US equivalent looks to overcome intersecting resistance at $57.8 and avoid a retrace to $56.8.Gold has continued to trade sideways overnight, retreating from yesterday’s one and a half week highs, however has found rising lows support overnight to remain in a tight $1259-$1265 range. Traders of the precious metal will be keeping a close eye on what is expected to be the final US House vote on tax reform and the subsequent reaction of the US dollar to the $1.5 trillion deal.


In focus today will be the US tax reform roller-coaster, Trump trying to get that elusive legislative win through before Turkey time. Having made significant progress yesterday, receiving approval from the Senate (51-48), it emerged that the House of Representatives vote would need to be repeated after budget discrepancies emerged. This vote is expected to take place this afternoon, and it will be interesting to see if the slim voting margin shifts much from yesterday’s 227-203.


Closer to home, the UK House of Commons will be participating in the eighth and final day of debate on the EU Withdrawal Bill, with the PM expected to avoid a second defeat in as many weeks by offering MPs the opportunity to temporarily delay Brexit subject to parliamentary approval, rather than enshrining the exact date and time of the UK’s exit into law.


On a quiet macro calendar, it’s slim pickings with UK CBI Retail (11am) forecast lower in December before US Existing Home Sales (3pm) extend their August rebound. US oil inventories will be looked to after last night’s API data signalled a bigger than expected Crude drawdown, another Gas build but a bigger Distillates drawdown, the aggregate helping oil prices higher overnight.
Speakers include the ECB Governing Council member and Bundesbank Head Jens Weidmann (1pm, “short- and long-term challenges of Eurozone economy”) and Bank of England Governor Mark Carney (1.15pm; Treasury Select Committee Hearing on November Financial Stability Report).

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