easyJet guidance may “fuel” concern

Mike van Dulken and Artjom Hatsaturjants at Accendo Markets, commented this morning:

easyJet guidance may “fuel” concern

FTSE 100 Index called to open -10pts at 7536, back from yesterday’s highs after extending its 8-day reversal from 5-month lows to 317pts/4.4%. Note a revisit of late-Aug highs would take said reversal to 412pts/5.7%. Bulls need a break above 7559 overnight highs, to extend the rally. Bears require a breach of rising support (and yesterday’s 7522 breakout) for more downside. Watch levels: Bullish 7560, Bearish 7520

Calls for a negative open to the last session of the month and quarter come in spite of bullish trading in Asia that built on a positive Wall St close which snapped a week-long losing streak, heavyweight Tech-sector names doing the heavy lifting. Japan and China have followed suit with risk-on sentiment following solid Japanese macro data that has sent the Nikkei to 27-year highs.

FTSE buoyed by weaker GBP but Retail and Housebuilders could be pressured by UK Gfk Consumer Confidence missed expectations (-9 vs. -8 est.). That said, Energy and Miners strong in Australia overnight helped by higher oil prices and metals (e.g. copper) off lows even if USD strengthened.

In a busy morning for corporate news, budget airline easyJet says FY pre-tax profit expected in upper half of guidance; passengers +5.4%, capacity +4.2%, load +1pt, costs +3.8%, rev per seat +6.5% (excl. Tegel); expects FY19 capacity +10% (half Tegel/H1 weighted), expects H1 rev per seat down low to mid-single digits; FY19 costs (ex-fuel) seen flat, but fuel bill +25%.

United Utilities trading in-line after exceptional water demand following prolonged hot weather. Expects to invest £80m (£40m capex, £40m expenses). Expects higher H1 revenue and profits if new tariff proposals approved by Ofwat. Ofgem rejects request by National Grid to recover £123m from customers to maintain gas compressors (allowed to recover £500k for compressors, £111m to replace a gas pipeline). Additional £96m recovery allowed to improve security and compensate landowners.

RSA Insurance reports disappointing Q3 results (international strong, but UK made underwriting loss of ~£70m due to lower premiums). Net Written premiums +1% YoY net of re-insurance changes (-2% headline). 9-month pre-tax profit lower due to higher weather costs. Shire: Takeda sets 19 Oct record date for Extraordinary General Meeting (EGM) of shareholders, to vote on the necessary matters relating to the proposed acquisition. Serco expects FY results ahead of market consensus (revenues at top end, profits 12-18% above, debt at lower end).

Games Workshop former Chairman Kirby sells 1.7% stake (still owns 4.8%) at 3650p/share, a 7.6% discount to Thurs close. Shaftesbury reports robust summer trading, “despite well-publicised uncertainties affecting business confidence nationally, London’s West End economy continues to be resilient.” Grainger FY like-for-like rental growth accelerates to 4%, Private Rented Sector (PRS) homes +3.1%.

In focus today will be the final reading for UK Q2 GDP (9:30am), set to confirm acceleration to 1.3% annually (from 1.2% in Q1; lowest since Spring 2012). This could give fresh impetus to GBP, which remains a Brexit-negotiation-punchbag, by giving ammunition to a Bank of England (BoE) in the early stages of a post-crisis rate-hiking cycle, lagging the Fed but ahead of the ECB.

Eurozone Inflation (10am) is forecast stronger in September, the headline figure edging above the ECB’s 2% target to 2.1% YoY (vs 2% in August), although the less volatile core metric likely continues to trail as 1.1% (vs. 1% prev). From the US, Personal Income & Spending (1:30pm), should show Income growth accelerating in August, but Spending cooling a smidge.

In terms of speakers, we have ECB Chief Economist Praet (1:35pm, dovish) speaking at a panel discussion on macroprudential policy in recovering economies (3rd Annual ESRB conference, Frankfurt). Elsewhere, the Fed’s Barkin (1:30pm, voter, hawkish) speaks at a banking forum (North Carolina), while BoE Deputy Governor Ramsden (2:20pm, dovish) will make remarks at the Society of Professional Economists Annual Conference (London).

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