Morning Editorial : Dangerous driving from Trump?

Calls for a flat open follow losses in Asia as car-markers reacted to President Trump ordering a national security investigation into the importation of car parts (Germany’s DAX likely sensitive today).

Morning Editorial : Dangerous driving from Trump?

FTSE 100 Index called to open flat at 7780, within a new 7765-7800 range following yesterday’s breakdown; from an 8-week rising channel, and back below Jan’s 7805 peak. Bulls need a meaningful break above 7800; Bears require a breach of yesterday’s 7765 lows. Watch levels: Bullish 7805, Bearish 7765.

Calls for a flat open follow losses in Asia as car-markers reacted to President Trump ordering a national security investigation into the importation of car parts (Germany’s DAX likely sensitive today). This is on top of aggressive rhetoric from North Korea ahead of the June summit and China saying it has yet to agree to any trade figures with the US.

The above countered modest gains on Wall St following dovish FOMC Minutes  which highlighted concerns about trade wars on business sentiment and the fact it might have to let inflation run above target for a while. This dampened the odds of anther 3 rate hikes this year, albeit still >75%, taking USD off its highs to the benefit of GBP, thus hampering the FTSE.

Miners may be undecided, with a weaker USD helping metals, but trade talk not, while the stronger GBP is a hindrance from a translational standpoint. It’s a similar case for Energy, which may be impacted by the triple-whammy of oil prices off their highs following yesterday’s disappointing EIA data, OPEC potentially increasing output to make up for Venezuelan declines and a stronger GBP being less than flattering.

In corporate news this morning, The Economist reports that GlaxoSmithKline may examine merger options for its Indian unit to avoid a 40%/$1.6bn tax bill from the sale of its Horlicks brand. Mediclinic FY operational results marginally ahead of expectations , div maintained 4.7p, trading in-line, guidance unchanged.

B&Q owner Kingfisher Q1 sales -3.7% (-5.4% like-for like/constant FX), hurt by harsh Feb/March weather. Sales improved April/May, expect to grow full year group gross margins (excl. clearance costs), Markets remain mixed, UK uncertain, France volatile, Poland supportive.

United Utilities outperforming regulatory contract for 2015-20 period, allowing it to fund additional investment for the benefit of customers. Final div +2.2%. Intertek Jan-April organic revenues -3.0% (+4.0% at constant FX), Products -0.5%, Trade -6.1%, Resources -6.4%, on track for 2018 targets “good organic revenue growth at constant FX, moderate margin expansion, strong cash conversion.”

Serica Energy provisionally awarded 3 new exploration licence areas on UK Continental Shelf. TalkTalk to sell B2B to Daisy Group for £175m. Tate & Lyle FY adj. profits +13%, div +2.5%, plans $100m savings over 4 years,

In focus today will be will be UK April Retail Sales (9.30am) for both its read on consumer confidence and its inflationary read-across. Especially after another weak UK inflation print added to arguments against a summer rate hike from the Bank of England. Growth expected to have extended its slowing from the beginning of the year  (0.2% YoY vs 1.1% prev. vs 1.6% in Jan). Watch the Retail sector, GBP and the potential knock-on for the FTSE100.

This afternoon, US Housing (2pm and 3pm ) will be looked to for clarity following yesterday’s mixed read on new home sales, although growth is expected slower. The Kansas Fed Manufacturing (4pm) may offer evidence on growth sentiment although consensus is for a slight pullback.

Several important Central Bank speakers will come into focus today, with Fed’s Dudley (8am, hawkish, voting) appearing in morning at the Markets Forum in London alongside BoE Governor Carney (9am, centrist). Fed’s Dudley will speak once again at 9:15am on Reference Rate Reform.

Late on we move on to ECB speakers, with Chief Economist Praet speaking in Brussels at the Institute of International Finance Spring Meeting(9:30am) and European Business Summit (11:30am). Praet’s speeches will be in advance of ECB Monetary Policy Minutes (25-26 April meeting) published at 12:30 to give insight into ECB’s outlook on inflation, interest rates and quantitative easing.

Later in the day, Fed’s Bostic (3:35pm, centrist, voter) will be discussing technology-enabled disruption. The BoE Governor Carney will return to the stage at 6pm to speak once again in London. Rounding out the day will be Fed’s Harker (7pm, centrist, non-voter) speaking on technology’s impact on labour market.

A few remaining US retailers will report quarterly results, including BestBuy, Gap and Sears.

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Tags: FTSE 100, news

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