T-day for tariffs?

T-day for tariffs?

FTSE 100 Index called to open -10pts at 7373, up from yesterday afternoon’s 7360 lows, but also well back from 7410 overnight highs with Tuesday’s trend of falling highs keeping it under pressure. Bulls need a break above 7410, to clear overnight highs and overcome this week’s downtrend. Bears require a breach of yesterday’s 7360 lows. Watch levels: Bullish 7410, Bearish 7360

Calls for a negative open come courtesy of downbeat trading on Wall St, with the Tech sector sharply lower following testimony from Twitter and Facebook to US Congress. The turmoil within emerging markets also continues, widening from Argentina and Turkey, dampening global sentiment even further all the while we await the US decision on additional China import tariffs.

FTSE Banks could be sensitive to news late yesterday that Fitch Ratings lowered its outlook for five Italian banks, including UniCredit and Intesa Sanpaolo, from stable to negative, citing the high degree of political/budget uncertainty and Italy’s negative credit fundamentals.

The USD is trading off its overnight lows on the back of safe-haven demand, weakening the commodity space which could hurt Miners. Note Oil prices lower after last night’s API report delivered a smaller than expected Crude drawdown. Gold is holding below the $1200 mark, supported by physical demand in Asia, though preference for USD and JPY havens looks stronger.

In corporate news this morning GlaxoSmithKline is to cut 650 US jobs (100 back office, 450 sales) as part of global restructuring to save £400m annually, according to Reuters. easyJet August passengers +5.6% (+5.8% rolling 12 months), load factor +0.1pts to 96.4% (+1.2pts to 93.6%). OFGEM sets level of UK Energy price cap (£1,136 per dual fuel customer) to save customers £1bn, working to have it in place by year-end, until 2023 at latest. BCA Marketplace remains confident in its prospects for fiscal 2019, after a strong start to the year.

Bovis Homes H1 revenue +1% YoY (completions +4%, prices flat), pre-tax profit +41% (exp. beat), dividend +27%. Notes robust summer trading on lower proportion of higher-priced completions. FY profits expected at the top of guided range at record level. McCarthy & Stone FY revenue expected +1.3% (completions -7.3%, prices +10%) but operating profit -24% to -32%, in-line with guidance. Continuing economic uncertainty, softer pricing, market conditions challenging.

Melrose Industries says that although tariffs and raw material inflation may create some headwinds, it continues to trade in-line with the expectations for 2018 since GKN acquisition; significant progress made reducing central functions; no black holes found, interim dividend +11%. Dixons Carphone Q1 like-for-like revenues flat across most regions, online +13%, electrical flat, mobile -1%. Performance in-line with expectations, FY £300m profit guidance unchanged. Wood Group awarded non-exclusive 3yr contract by Hess Corp for support services in Gulf of Mexico.

Weir Group updates on North American Oil & Gas market, saying conditions in-line through mid-Aug but signs of aftermarket pricing pressure in second half of the month. However, considerable softening in demand for original equipment and some order book delivery deferrals. Sirius Minerals revises capital estimate for North Yorkshire Polyhalite Project, the Material Transport System (MTS) contract costing 13.5% more than previously announced ($4.2bn vs 3.7bn), increasing the stage 2 funding requirement from $3bn to $3.4-3.6bn.

In focus today will be the US ADP Employment report (1.15pm), oft considered a warm-up act for Friday’s’ keenly watched Non-Farm Payrolls. Whilst ADP is expected lower in August (190K vs 219K in July) this would still only take it back to the 5 month average.

Elsewhere, US Non-Farm Productivity (1:30pm) and Labour Costs could have both growth and inflationary read-across. Services PMI (2:45pm) should confirm a lower read for August but the ISM Non-Manufacturing/Services likely recovered some of July’s lost ground. Later in the afternoon DOE Oil Inventories (4pm), delayed from the usual Wednesday 3.30pm because of Monday’s Labour Day Holiday, are forecast to deliver a Crude drawdown, in-line with last night’s private API report, although API was lower than expected and less than last week.

In terms of speakers, the ECB’s Lautenschlaeger (12:45pm) speaks at the Eurofi Financial Forum in Vienna, while the Fed’s Williams (3pm) talks about the national economy in a fireside chat at the University of Buffalo. A few big name US companies are reporting earnings, including semiconductor developer Broadcom and PC manufacturer Dell, the latter potentially useful as a barometer for global economic growth.

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