The East is red

Artjom Hatsaturjants at Accendo Markets, commented this morning:

The East is red

FTSE 100 called to open -25pts at 6752, rebounding a further 80pts away from last week’s 2-year lows. Bulls need a break above 6778 Friday’s close to gain more solid ground under their feet. Bears require a breach of 6715 overnight lows restart the downtrend. Watch levels: Bullish 6800,Bearish 6700

Calls for a weak start to the trading week come after stocks started on the back foot in Asia (equities down 1-2%) on growing concerns over global economic growth and the US-China trade relationship following the arrest of Huawei CFO in Canada. China’s inflation came in weak over the weekend, posting 2.2% YoY growth in November, missing expectations of 2.5% growth. Japan’s economy shrank 2.5% in Q3 on an annualized basis, adding further fuel to the fire that set the stock markets red.

USD is weak at the start of the week, with corresponding GBP strength weighing on the FTSE. Oil is up, still holding last week’s rebound following the OPEC decision to cut production, though crude prices are off their Friday highs. Even safe-havens of USD and gold are not immune to the risk-off sentiment, though fellow safe-haven Japanese Yen accumulated some strength.

In corporate news this morning NMC Health reports strong growth and reiterates FY 2018 (+24% YoY) and 2019 (+22-24%) financial targets. Saudi Arabia JV progressing well, final agreement expected in early Q1 2019. Signed new Operations & Management contracts with UAE.

BAE Systems, Babcock and Atlas Elektronik have been shortlisted for a £1.25bn contract to design and build 5 Type 23 frigates for the UK MoD. Companies awarded £5m to fund further R&D and advance to next selection stage. Meggitt signed a $15m contract with Turkish Technic for the supply of spares and maintenance services. Vodafone accepted early repurchase of £183.9m worth of zero-coupon equity-linked bonds.

IP Group’s subsidiary Avacta signed a $310m development alliance with LG Chem Life Sciences worth up to $310m ($180m upfront + £130m in option fees and milestone payments) to develop drugs based on proprietary Affirmer-technology. Greencoat Renewables acquired two wind farms in Ireland from BlackRock Real Assets for €88m

Photo-Me H1 like-for-like underlying revenue +2.7% YoY, pre-tax profit -20.4%, dividend unchanged. FY £44m profit guidance unchanged, but reliant on normalised trading in key markets. Hollywood Bowl FY total revenue +5.8%, adj. EBITDA +8.3%, pre-tax profit +13.4%, total dividend +16.6%. Average spend per game +6.1. On-track to outperform 3% ROI target.

Interserve announced a deleveraging plan with creditors. Likely to convert a substantial part of debt into equity, with final details announced in early 2019. Trading in-line with expectations.

In focus today will be the penultimate day of Brexit debates and political manoeuvring (2:30pm) before Tuesday’s Meaningful Vote. The preliminary pro-and-contra vote tallies do not bode well for PM May and the markets are now starting to weigh the probable next steps should the PM lose the Brexit vote (Tory leadership change, re-negotiation attempt, general election, second referendum?).

Adding further fuel to tumultuous Brexit headlines, European Court of Justice (8am) is due to rule of UK’s ability to unilaterally halt the Brexit process.

Macroeconomic data on Monday is also UK-focused. October’s UK GDP (9:30am) is seen growing at 1.6% YoY, accelerating from 1.5% in September. At the same time, Manufacturing Production is expected to slow down to flat, while Industrial Production actually falls (est. -0.2% YoY in October vs. 0% prev.). Meanwhile, October’s Construction Output could see a slight pick up to 3.2% YoY from 3% prev., to help the recently battered Housebuilder names.

Things are rather quiet in terms of scheduled speeches, with only ECB’s Angeloni (12:30pm) due to speak at a roundtable on “Balancing the Roles of the ECB” organized by the Monetary and Financial Institutions Forum in London.

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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