BARC bites back?

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

BARC bites back?

FTSE 100 Index called to open +45pts at 7000, back up around 7000 but overnight highs unable to better yesterday’s 7029 peak. Coupled with overnight lows of 6994, this puts the index in a tight 35pt range offering breakout opportunities. Bulls need a break above 7030 for upside to 7100. Bears require a breach of 6994 for downside to 6930. Watch levels: Bullish 7035, Bearish 6990

Calls for a positive open come after Wall St rebounded from dramatic intraday sell-off lows (Dow was -500pts) to finish just shy of flat, though traders still worried about global economy after disappointing results from Caterpillar and 3M. Asian markets extended global equity rebound (ex-Australia; see below) into positive territory, with Energy lagging).

Oil prices are rebounding after last night’s outsize build in private API Oil Inventories (9.88m crude build vs 3.69m estimate) that saw Brent Crude slip below $77/barrel. FTSE Energy companies could be vulnerable ahead of today’s official DOE report especially after Australian counterparts hampered the ASX overnight.

In corporate news this morning, Barclays Q3 results beat consensus; net operating income £4.875bn vs £4.69bn est; pre-tax profit £1.54bn (excl. litigation/conduct) vs £1.33bn est; CT1 ratio 13.2% vs 13.1% est; dividend 2.5p vs 1p prev; on track to meet targets; PPI provisions appropriate; to redeem $4.65bn of dollar preference shares and AT1 securities.

Antofagasta Q3 copper production -4% YoY (+15.4% QoQ), gold -30.1%. Net cash costs +16.4% YoY. Outlook positive despite trade fears. 2018 copper production guidance narrowed to 705-725Kt, with strong Q4 increase; Capex lower. 2019 guidance increased to 750-790Kt. Fresnillo Q3 total silver production +6.3% YoY (expectations miss), gold -3.5%, lead +4.8%, zinc +29.7%. FY gold prod. guidance improved to 920-940 koz (from 900-930 koz), silver guidance down to 62-64.5 moz (from 64.5-67.5 moz) due to challenges at Saucito and Fresnillo mines.

Stobart H1 revenues +21.4% YoY, pro-forma EBITDA +10.4% (Aviation +14.6%, Energy +88.8%; Rail & Civils posts loss); Southend passengers +37%, net debt doubled vs. turn of year.; Internal investigation concludes no bullying culture. Metro Bank Q3 total revenues +34% YoY (+7.1% QoQ) , underlying pre-tax profits +110% YoY (+7.1% QoQ); Net interest margin -17bp YoY (-8bp QoQ); Deposits +8% QoQ, Loans +9% QoQ; competitive trends in mortgage market persist.

In focus today will be Manufacturing and Services PMIs from Europe (8:15-9am) and the US (2:45pm). Eurozone member figures are expected to show continued growth (above the 50-point expansion/contraction threshold) but still struggling to distance themselves from 2018 lows. US manufacturing is forecast to hold 4-month highs while Services improves from the lowest since Jan. Closer to home, UK Housebuilders/Banks could be moved by UK Mortgage Approvals (9.30am).
US New Home Sales growth (2pm) may have accelerated slightly in September on the back of improved housing supply. Weekly DOE Oil Inventories (3:30pm) could deliver another build, albeit smaller, although last night’s API report showed a surprisingly big build of almost 10m barrels. This could put additional pressure on oil prices and FTSE Energy shares.

In terms of speakers, we have more Fed members making appearances, including Bullard (4:30pm, non-voter, dovish), Mester (5:30pm, voter, hawkish) and Bostic (7pm, voter, dovish). US companies continue reporting quarterly results. The long list includes the likes of AT&T, Barrick Gold (watch M&A target Randgold Resources for read-across), Boeing, Ford (watch the Dax and German automakers), Freeport-McMoRan (watch Miners, especially those exposed to Copper) and Microsoft (tech was weak in Europe yesterday).

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