Das Capita-l

Das Capita-l

Das Capita-l

Mike van Dulken and Artjom Hatsaturjants at Accendo Markets, commented to clients this morning:

FTSE 100 Index called to open +5pts at 7375, holding last week’s breakout but off its overnight highs flirtation with 7400 and now in a tight 7370-7380 range. Bulls need a break above 7378 to open the door for another attempt to clear the hurdle. Bears require a breach of 7370 overnight lows. Watch levels: Bullish 7380, Bearish 7370

Calls for a positive open are despite a mixed start to the week in Asia, echoing Friday’s losses on Wall St. Geopolitics still flavour of the month, with news reduced US-China trade tensions (US Treasury Secretary Mnuchin expected to visit Beijing for negotiations) and a potential breakthrough in North Korean de-nuclearization, buoying sentiment. Bullishness tempered, however, by President Trump already questioning Pyongyang’s commitment, US 10yr bond yields closing back on the key 3% level and now the US President ‘Twitter-interfering’ in oil markets.

Oil prices have held steady since last Friday ($74/$68), having rebounded from Trump’s-induced lows after he criticised OPEC for “artificially high” oil prices derived from successful production cuts, despite domestic US production continuing to rise and shale/frackers befitting from higher prices. Gold has added to its decline of late last week, dented by USD strength.

In corporate news, FTSE Banks may react to UBS Q1 revenues and pre-tax profits beating expectations, thanks to investment banking strength – echoing the trend reported by US peers, benefiting from market volatility and higher trading revenues, although not as strong.

Capita FY underlying revenues -4.3% (-0.6% like-for-like, -1.5% organic), underlying pre-tax profit +43% to £383m, (+23% pre significant new contracts & restructuring), £850m non-underlying costs including £560m goodwill impairment, Free Cash Flow from continuing operations -90%, update on strategy, fully underwritten £701m rights issue (70p/share; 34% discount); Expects 2018 underlying pre-tax profits £270-300m, no dividend due to outlook and debt situation.

BHP Billiton (and Vale, Samarco Minera, & federal Prosecutors) granted extra 66 days to discuss Public Civil case Claims for Samarco Dam Failure. Glencore evaluating recapitalisation options (debt-to-equity, debt write-off) for major copper project in DRC (Katanga) to resolve legal dispute with state-owned JV partner.

NMC Health offers $450m convertible 1.875% bonds due 2025. Morgan Advanced Materials is looking to exit composite and defense-systems segment. Great Portland Estates JV GHS secures substantial pre-let of Hanover Square. Petra Diamonds Q3 production +20%, revenues +44%, rough diamond prices +5% like-for-like.

In focus today will be PMI Manufacturing & Services figures from France (8am), Germany (8:30am) and the Eurozone (9:00am), with all expected to post small retreats in April, Eurozone Services potentially back at its lowest since August and Manufacturing since July.

This afternoon’s US PMI updates (2.45pm) are expected to show a pullback for Manufacturing (from last month’s best since early 2015) but Services unchanged while Existing Home Sales (3pm) posting slower growth after last month’s rebound. US Corporates reporting results today include Alphabet/Google (9pm), Halliburton (11.50am), Kimberly-Clark (12.30pm) and Whirlpool (9.30pm).

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Categories: Analysis, News
Tags: Alphabet, Capita, gold, oil

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