Trump backtracks but Dollar marches on

Calls for a positive start come in spite of mixed trading in Asia which followed a similarly mixed close on Wall St. While the S&P500 and Nasdaq closed positive, helped by Tech sector strength and M&A (21st Century Fox, Disney), the Dow was down due to the spectre of a US-China trade war looms.

Trump backtracks but Dollar marches on

FTSE 100 Index called to open +30pts at 7657, holding rising support since Monday but equally off its overnight highs, hampered by week-long falling resistance. The result is it trending towards the apex of a narrowing pattern, the break from which will dictate the next move up or down. Bulls need a break above 7683 overnight highs. Bears require a breach of rising support at 7650. Watch levels: Bullish 7685, Bearish 7635.

Calls for a positive start come in spite of mixed trading in Asia which followed a similarly mixed close on Wall St. While the S&P500 and Nasdaq closed positive, helped by Tech sector strength and M&A (21st Century Fox, Disney), the Dow was down due to the spectre of a US-China trade war looms (China equities weak overnight).

The main impetus for FTSE upside likely derives from fresh GBP weakness ahead of the crucial (it always is, n’est ce pas?) Bank of England monetary policy update. The key interest rate is expected unchanged, amidst weak UK economic data and inflation, but a more hawkish outlook could spice things up.

That said, GBP weakness likely derives from hawkish chat from Fed Chair Powell which has strengthened the USD index, keeping a lid on commodity prices like Copper, safe-haven Gold, and, of course, Oil, itself sensitive to expectations that OPEC will be reversing crude production cuts this weekend. Watch FTSE Energy and Mining heavyweights.

In corporate news this morning, BP pulls out of A$1.8bn purchase of Australian petrol/convenience stores businessWoolworths after pushback from competition regulators. CRH completes $3.5bn acquisition of US cement manufacturer Ash Grove.

Dixons Carphone full-year like-for-like revenues +4%, pre-tax profits -24%, dividends flat, FY 2018/19 headline pre-tax profit expected ~£300m, with similar cash conversion. Investing £30m in staff;  UK electricals market to contract with cost increases, Mobile gross margins to be hurt by lower inflation.

Saga in-line for first four months; branded retail policies +1% YoY (new motor +30%, new home +14%), Total retail flat. Markets competitive, direct marketing = majority of new business; motor claims costs in-line; 2019/20 Tour bookings flat; Cruises >55% of sales target.

Chemring swings back to pre-tax profit in the first half (underlying +31%), citing stronger markets, which it expects to continue strengthening as impact of higher US defense budget starts to flow through; interim dividend +10%; FY guidance unchanged;

In focus, today is the Bank of England monetary policy update (12pm) and corresponding meeting minutes. Whilst the headline 0.5% interest rate is expected unchanged, traders will again look to the MPC vote (7-2 to hold policy last time) for any clues about an increase in hawkishness that may suggest a rate hike (already delayed several times) could be looming.

In the afternoon, focus shifts across the pond with the release of June’s Philly Fed Manufacturing Index (1:30pm), seen falling after a surprisingly large jump in May. FHFA April House Prices (2pm) are forecast to have rebounded a little March’s sharp slowdown.

Finally, Euro Area Consumer Confidence (3pm) may fall negative again after its first positive read in 6 months, reflecting growing concerns about global instability and eurozone growth prospects.

Many Central Bank speakers are rostered today, but the big one is surely BoE Governor Carney and UK Chancellor Hammond speaking (9:15pm) at the annual Mansion House dinner, giving their outlook on Brexit, UK economic growth, and financial services regulations.

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Categories: Analysis, News
Tags: BoE, FTSE 100

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