More waffle from Brussels

Calls for a positive open are supported by gains on Wall St (led by Tech, Telecoms, and Financials), and Chinese stocks rebounding from the recent trade-war-inspired sell-off. UK banks passing Fed stress tests likely also helps after recent declines. Another EU summit fudge on migration may serve to calm things on the continent, although PM May was still criticised for lack of negotiation progress on Brexit.

More waffle from Brussels

FTSE 100 Index called to open +50pts at 7665, extending Monday’s rebound from April lows towards mid-June falling highs resistance. Bulls need a break above falling highs at 7682; Bears likely require a breach of 7630 rising support and overnight lows. Watch levels: Bullish 7682, Bearish 7630

Calls for a positive open are supported by gains on Wall St (led by Tech, Telecoms, and Financials), and Chinese stocks rebounding from the recent trade-war-inspired sell-off. UK banks passing Fed stress tests likely also helps after recent declines. Another EU summit fudge on migration may serve to calm things on the continent, although PM May was still criticised for lack of negotiation progress on Brexit.

FTSE gains are in spite of GBP strength, as the USD pulls back following a disappointing final read for Q1 GDP. USD weakness is helping metals (even safe-haven Gold, off its lows) and supporting Oil, but GBP strength may hamper stocks with international exposure, including Energy and Miners.

In corporate news, this morning British American Tobacco and Imperial Brands may be sensitive to Australia winning a victory at the WHO over its ban on the branded packaging that could lead to more such regulation worldwide. The results of theFed’s 2018 Bank Stress tests on proposals for capital returns (dividends, share buybacks) saw plans from Deutsche Bank’s US unit refused while there was no objection for the stateside units of Barclays, Credit Suisse, HSBC, Santander, and UBS.

After BAE Systems’ Australian A$35bn contract win, it updates on all contracts being pursued in H1 (Australia, Qatar, US) highlighting delay in Qatar jet payment: Q3 vs not later than mid-2018). Serco cuts guidance for revenues, but still on course for profits. BHP Billiton agrees to $211m in financial support for Samarco after 2016 dam failure ($158m offset against existing provisions). The UK CMA won’t refer CRH’s unit Tarmac Trading in its purchase of Alun Griffiths (contractors).

Indivior’s temporary restraining order against Dr. Reddy’s has been extended for an additional 14-days while the Court considers Indivior’s application and ultimately issues a ruling on patent infringement.

Elementis proposed the $600m acquisition of Mondo Minerals (13.1x EV/EBITDA) with the $280m rights issue. Reach (ex-Trinity Mirror) sees H1 comparable revenues -8% but full-year performance expected in-line with consensus. John Laing maintains £250m FY  investment commitments guidance.

In focus today, in terms of data, UK GDP (final read; 9.30am) is expected to confirm a cooling of growth in Q1, rather similar to what we saw from the US yesterday. The same may be true of UK Mortgage lending in May which may impact Housebuilders and Banks, the latter already under the cosh from flatter yield curves (smaller margin between short and long-term bond yields) pressuring profitability.

After the European Central Bank (ECB) suggested it might be in a position to increase interest rates from mid-next year, Eurozone Consumer Price Inflation (10 am) could call this into question should Core CPI (est. 1% vs 1.1% prev.) cool more than expected, still only half-way to the 2% target.

This afternoon, after that disappointing Q1 GDP figure yesterday, the latest on US Personal Income and Spending (1.30pm) could update us on US consumer confidence, along with inflationary metrics pointing to an acceleration in price growth, allowing the Fed to keep hiking interest rates.

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Categories: Analysis, News
Tags: FTSE 100, GDP

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