Mea Saudi Culpa?

Artjom Hatsaturjants at Accendo Markets, commented this morning:

Mea Saudi Culpa?

FTSE 100 Index called to open +4pts at 7033, extending the rebound from October lows and testing a breakout from 2-week falling highs resistance. Bulls require a breach of 7043 overnight highs to cement the breakout. Bulls requires a breakdown back below the 7016 falling highs resistance. Watch levels: Bullish 7060, Bearish 7000

Calls for a positive open come in spite of a late-session Tech sell-off on Wall St (where the likes of Netflix and Apple were hurt by broker downgrades from Goldman Sachs pointing to lower Chinese demand), though sentiment recovered into the Asian session. China’s consumer price inflation reached 7-month highs (2.5% YoY, in-line with consensus), driven by higher food and energy prices, though producer prices beat expectations (3.6% vs. 2.5% est.)

GBP is flat amidst Brexit uncertainty, as EU President Tusk warned that a no-deal Brexit was more likely than ever before, but PM May and French President Macron tried to sound conciliatory notes ahead of the leaders’ summit on Wednesday.

Oil prices are higher as CNN reported overnight that Saudi Arabia might be prepared to admit its involvement in the death of Saudi journalist Khashoggi (Kingdom to point to “rogue” operatives), heating up the US-Saudi diplomatic confrontation. Markets are looking to see if President Trump will follow on his earlier threats of “punishment” against the world’s premier oil producer.

In corporate news this morning, BHP Billiton announced it purchased additional 100m shares in smaller miner SolGold, paying 45p/share (20% premium to SolGold’s latest closing price), and bringing BHP stake to 11.2%. SolGold controls a major Cascabel copper-gold deposit in Ecuador.

Rio Tinto Q3 copper production +32% YoY, iron ore -3%, bauxite -1%, aluminium -1%, titanium -9%. FY copper and iron ore guidance expected in upper end of previously-announced range, bauxite guidance improved, aluminium guidance lowered. Anglo American announced that De Beers sold $475m worth of diamonds in 8th 2018 cycle, sees steady overall demand for rough diamonds and diamond jewellery in the US.

British American Tobacco said it’s confident in 2018 earnings growth, expects beat its EPS target of high-single-figure growth. However, revenue guidance from tobacco and vapour products has been cut to £900m (from £1bn) due to US recall of Vuse Vibe e-cigarette and a planned cut to year-end stocks in Japan. Company expects a 7% FX headwind to FY earnings.

AstraZeneca announced that the US FDA granted orphan drug designation to Lynparza treatment for pancreatic cancer, qualifying it for various tax incentives. Diageo launched a €2bn fixed-rate bond (tranches ranging from 0.25% to 1.5% coupons).

Bellway FY revenue +15.6% YoY, pre-tax profit +14.3%, dividend +17.2%, completions +6.9%. Order book +7.9%. Notes that whilst Brexit continues to be a risk to confidence, conditions remain robust and company can further increase output in the year ahead.

Meggitt Q3 organic group revenue +8% YoY, civil original equipment +4%, aftermarket +10%, defence +8%, energy +17%. Now anticipates higher FY organic growth (7-8%, up from 4-6%) across all sectors except Energy. Iberdrola agreed to sell its Scottish Power Generation business to Drax Group for £702m (Drax to finance acquisition with debt).

Merlin Entertainments Q3 like-for-like revenue +1.4% YTD, trading in-line. Expects FY results in line with expectations (+4.9% FY consensus). Sees some “early signs of recovery” in London tourism market, but notes cost pressures due to tighter labour market. 3i Infrastructure moved its tax residence to the UK from Jersey on 15 Oct. Now approved as an investment trust.

In focus today will be the UK’s wages and employment data (9:30am), with the headline Unemployment Rate expected unchanged at 4% for the third month running. Average Earnings (excl. bonuses) are likewise forecast unchanged, maintaining a steady 2.9% YoY growth.

European sentiment indicators at expected later in the morning. ZEW Economic Sentiment (10am) is seen worsening both in Germany and in the Eurozone as whole amidst global trade and political tensions, while Current Conditions in Germany are also expected weaker in October.

In the afternoon, it’s turn for some US macro data. Industrial production (2:15pm) looks to be slowing down in September, while the NAHB Housing Market Index (3pm) stays unchanged in October. API Oil Inventories (9:30pm) could be especially relevant this week given recent Saudi-US political tensions.

In terms of speakers, we have ECB’s Chief Economist Praet (8:30am, dovish) giving a keynote speech at “La Caixa” conference in Madrid. The BoE’s Cunliffe (2:15pm, dovish) appears before the Parliament’s Treasury Committee for a re-appointment hearing, while the Fed’s Brainard (5:10pm, dovish) speaks at a fintech conference in Boston.

Enter your e-mail address to receive updates straight to your inbox

My Newsletter

You can easily unsubscribe at any time by clicking on the unsubscribe links at the bottom of each of our emails
Categories: News
Tags: FTSE 100

About Author