No Brexit stress for UK Banks?

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

No Brexit stress for UK Banks?

FTSE 100 Index called to open +35pts 7040, adding to the rally from last Friday, although already off its 7075 highs after encountering shallow falling resistance from mid-month. Bulls need a break above 7050 for another challenge of 7075. Bears require a breach of 7030 resistance-turned-support if they are to worry the 7000 zone again. Watch levels: Bullish 7075, Bearish 7030

Calls for a positive open come after Wall St surged (Dow +2.5%; strongest one-day rally since March) after traders interpreted comments from Fed Chair Powell as implying US interest rates close to neutral (neither helping nor hindering) and thus the Fed close to slowing, perhaps even pausing, its increases after next month’s widely expected hike.

A weaker USD on dovish Fed comments and hopes for a Sino-US trade ceasefire ahead of Trump-Xi G20 meeting. Dollar weakness is propping up GBP limiting FTSE gains. Oil prices continue to slide, trading 13-month lows as crude inventories rose for a 10th straight week and Saudi Arabia refused to cut production unless its OPEC/non-OPEC allies joined in with supply caps.

In corporate news today FTSE Banks all passed 2018’s Bank of England stress tests, modelling for a global recession/house price crash/inflation spike more severe than a disorderly Brexit and 2008 financial crisis. RBS fared much better than last year, among the best, but Lloyds and Barclays among the worst. Room for higher dividends, special dividends or share buybacks?

British American Tobacco and Imperial Brands may react to an FT report that Marlboro owner Atria in on-off talks vaping start-up Juul (75% market share) about acquiring a stake. Rio Tinto shares +2.6% in Australia after approval for a $2.6bn investment at its Koodaideri iron ore mine (W. Australia) to make it its most high-tech yet, aiming for production by late 2021.

Unilever CEO of 10 years Paul Polman to retire 1 Jan; replaced by Alan Jope (head of Beauty & Personal Care). Ashtead CEO Geoff Drabble to retire 1 May, replaced by COO Brendan Horgan. Dignity may react to CMA consulting on major investigation into funeral price rises.

IAG may react to the UK and US agreeing a new Open Skies agreement to give each other commercial overflight rights after Brexit. Thomas Cook, following Tuesday’s profits warning, confirms FY revenues +6.4%, underlying profit -23% (-18.8% like-for-like), swings to pre-tax loss. Brookfield consortium says does not intend to make an offer for INTU Properties, due to uncertainty over macro conditions and potentially volatility across markets.

Phoenix Group 11-month cash generation +1.6%, beating upper end of target range. Delivered £400m in capital synergies from Standard Life Assurance acquisition vs £440m target. AUM flat.Polymetal consolidated stake in Nezhda gold mine (now owns 100%), paying $185m, and paving the way to start construction in Q1 2019. Hammerson completes sale of 50% stake in Highcross shopping centre for £236m (5% discount to Dec 2017 value) to Asian investor.

Tullow Oil expects growth across portfolio and pay no less than $100m in semi-annual dividends, with additional returns during periods of strong cash flow. Cancelled undrawn $350m credit facility. Will operate 3 offshore oil developments in Indian Ocean with Discover Exploration.

Britivic FY revenues +5.1% (+2.7% organic, constant FX), adj. EBIT +5.4% (+4% organic), final dividend +5.2%; Free cash flow to increase materially in 2019 as CAPEX normalises. Greene King H1 revenues +1.9% (Pubs +2.7% like-for-like vs. market +1.1%; Brewing & Brands +7.5%, Pub Partners less negative), adj. pre-tax profits +0.2% (statutory +3.2%), dividend flat; Xmas bookings well ahead; on track to limit full year net cost inflation to £10-20m.

In focus today – a very busy day for macro data – will be the latest Fed FOMC Meeting Minutes (7pm). After Fed Chair Powell’s market-boosting speech last night, traders will be attentive to any further insight about a potential rate hike “pause” given the central bank’s determination to remain data-driven, all the while maintaining its traditional independence in the face of political pressure.

BoE Consumer Credit (9:30am) could move banks and Housebuilders should consensus be correct about a slight pull-back in October Lending and Mortgages. From the Eurozone, economists are looking for another weak Consumer/Business Sentiment report (10am), to confirm the worst consumer confidence levels since March 2017. German Inflation (1pm) is expected to slow,

Over the pond, US inflationary measure Core PCE Prices (1:30pm) is seen remaining at 2% YoY (in-line with the Fed’s inflation target) while US Personal Income (1:30pm) growth accelerates in October but Spending is unchanged.

In terms of speakers, the ECB’s De Guindos (8am) gives opening remarks on macroeconomics at the Global Research Forum, while colleague Angeloni (1:15pm) participates in a panel discussion at the Italian Banking Conference. We also have a few Fed members speaking at a ‘Collaboration for Inclusive Economic Development’ forum, including Mester, Evans, Harker, Kashkari, Rosengren and Kaplan (6:30pm).

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Accendo Markets

Accendo Markets is an online trading services provider, offering CFDs, spread betting and forex to retail (private) clients. Accendo Markets was established in 2007 and has since gone on to win various awards including ‘2018 Winner of Best CFD provider’ at City of London Wealth Management awards and 2017 & 2018 Best CFD Research Service in ADVFN’s International Financial Awards Accendo Markets Ltd. is authorised and regulated by the Financial Conduct Authority (FCA). For more information, visit www.accendomarkets.com