Morning Editorial: Who dares walks

Calls for a positive open are supported by a bullish start to the week in Asia, where investors were basking in the afterglow of Friday’s strong US jobs report and Chinese staged a rebound from last week’s lows.

Morning Editorial: Who dares walks

FTSE 100 Index called to open +30pts at 7645, having extended Friday’s rebound to 7660. However, it is off its highs having been knocked back by falling highs resistance since May’s record peak. Bulls need a break above 7660. Bears require a breach of 7620 overnight lows.Watch levels: Bullish 7660, Bearish 7620

Calls for a positive open are supported by a bullish start to the week in Asia, where investors were basking in the afterglow of Friday’s strong US jobs report and Chinese staged a rebound from last week’s lows.

While the FTSE is called positive, it is off its highs due to GBP resilience vs USD after Brexit secretary David Davis (and his deputy) resigned in protest at PM May’s new Brexit proposals. It’s unwelcome timing for the PM ahead of the UK’s white paper on Brexit, and before crucial talks with Brussels, but markets welcome the removal of a major impediment to a pro-business “soft-Brexit”.

Trade war-induced USD weakness (GBP flat vs USD) is hampering some of the FTSE’s global stocks, but the dollar-priced Resource sector could benefit. Oil and Copper prices are up, which should buoy Energy & Mining shares (up in Australia overnight). Global trade war fears are heating demand for gold (trading off lows at $1262, +0.5%), though fellow safe-havens JPY and USD show signs of weakness.

In corporate news this morning, Echostar abandoned its efforts to acquire Inmarsat just after the close on Friday. IQE says production qualification milestone hit for its Nanolmprint Lithography; first order received. Stobart re-elects Iain Ferguson; board removes Andrew Tinkler. Reuters reports BP in the lead to buy BHP Billiton’s US onshore Oil assets. The latter’s shares were +2.1% in Australia.

Cairn says final arbitration in case vs Indian Government against $1.6bn retrospective tax claim and for $1.3bn damages scheduled for two weeks from 20 Aug, in The Hague. Govt sold part of Cairn’s holding in Vedanta (3% stake remains) and seized another $216m proceeds.

Centamin Q2 gold production -25% YoY on lower pit grades, H1 -7% YoY but expected materially stronger in H2. Sirius Minerals signs materials handling agreement with Redcar Bulk Terminal for up to 10m tonnes/year along with a long-term lease. Unite reports USAF portfolio valuation +1.2% YoY and LSAV portfolio +2.5%.

In focus today will be the 9am announcement of a successor for UK Brexit Secretary David Davis, who resigned overnight. This is at odds with the Prime Minister’s apparent success last Friday in getting her Cabinet behind her Brexit plan and adds more unwelcome uncertainty, both within her own ranks (cabinet Crisis part 2?) and in terms of her negotiating hand with Brussels. Especially so late in the day, although Davis had been increasingly side-lined.

We have only Eurozone Sentix Investor Sentiment (9.30am) and US Consumer Inflation Expectations to get excited about in terms of data today. The former is seen giving up a little ground. There is no consensus for the latter but it remains around 3yr highs.

Data-wise this week Tuesday’s (10th) China Inflation and UK GDP could be significant for sentiment along with Thursday’s (12th) US Inflation and UK House Price data. Friday (13th) sees the US Banks kick off earning season, with potential knock-on for Europe.

Other major events this week include the Nato Summit in Brussels on Wednesday (11th) where Trump begins his European tour, visiting the UK on Thursday (meeting both the PM and Queen, but outside London to avoid protests) and a weekend of golf in Scotland before jetting off to see Putin in Helsinki next Monday.

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Categories: Analysis, News
Tags: Brexit, FTSE 100

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