China exports less phones, but more bad data

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

China exports less phones, but more bad data

FTSE 100 called to open -35pts at 6885, have retraced almost all of Thursday and Friday’s 6860-7000 gains. Bulls need a break back above 6900 while Bears require a breach of 6860 which was Thursday’s lows support since late Tuesday. Watch levels: Bullish 6900, Bearish 6860

Calls for a negative open come after Asia (ex-Japan) reacted negatively to disappointing China Trade data for December: exports -4.4% YoY (vs. +3% est.) and imports -7.6% (vs +5% est.), the slowest in 2 years, which may dent FTSE Miners (BHP and RIO down in Australia overnight).

This comes hot on the heels of already poor PMIs and warnings from Apple/Samsung. It is also sure to raise hopes of more stimulus to support a slowing Chinese economy. Ironically for President Trump, China’s trade surplus grew (import spending slowed more than export earnings), likely dented by a protracted US-China trade dispute and slower growth elsewhere in the world.

GBP is holding steady ahead of tomorrow’s Brexit vote, with PM May looking no closer to securing enough votes to pass her EU Withdrawal deal. There is robust demand for safe-haven assets (gold, Japanese Yen), while Brent Crude Oil has retreated back below $60 on global growth worries, exacerbated by that China trade update.

In corporate news this morning, Rio Tinto has declared force majeure on some iron-ore contracts after a fire out at the Cape Lambert port facility in Australia on 10 Jan. Other shipments unaffected. AstraZeneca’sChief Medical Officer, Sean Bohen, is leaving amid a transition to a new organisational structure, according to Bloomberg.

Acacia Mining FY gold production -32% YoY (Q4: -12%), but ahead of earlier production guidance (FY: 521K ounces vs. 435-475K est.) after reduced operations at Bulyanhulu and Buzwagi stockpile processing. Ended year with $88m net cash. FY sales in-line with production. Dechra Pharma H1 trading strong, in-line; net revenues +18% (EU +17%, US +20%); preparations progressing well for Brexit; continue to deliver above market revenue growth.

JD Sports 48wk total sales growth +15% or >5% like for like, with consistently positive Black Friday and Christmas; gross margins maintained by no unnecessary short-term reactive discounting. Encouraged by new US openings/conversions. Confident in headline pre-tax profit at upper end of published market expectations (£325-£352m).

Page Group Q4 like-for-like gross profit +15.4% YoY to £815m (a group record), with all regions delivering growth. FX headwinds hit gross profit by ~£10m. Improved the ratio of fee earners to support personnel to 79/21. Mindful of the heightened uncertainty, which has the potential to hit client and candidate confidence, but expects FY operating profit in-line with £141.8m consensus.

Norway’s DNO declares Faroe Petroleum 160p/share takeover offer wholly unconditional after securing 74.17% of shares through direct ownership and acceptances. Ophir Energy board unanimously rejects Medco’s 11 January offer of 48.5p/share (trading update tomorrow).

In focus today, a quiet one for major data, will be digestion of that weak overnight China Trade data as well as US banks kicking off the US Q4 reporting season. Citigroup, today, is followed by JP Morgan, Goldman Sachs, Bank of America and Morgan Stanley on Tues-Thurs. Watch for read-across to UK and European banks.

Tomorrow we have the much anticipated House of Commons Brexit vote. Two days of debate culminate in the “meaningful vote” itself tomorrow evening. Unofficial vote tallies aren’t favourable for PM May and a government defeat on Brexit could set the stage for a formal vote of no-confidence.

Watch GBP and the Brexit-sensitive usual suspects (Housebuilders, Airlines) which may react in the run-up to the vote tomorrow, as well as in reaction to the result on Wednesday morning.

In other key data, UK Inflation (Weds, 9:30am) is projected slowing to 2.3% YoY in December (weakest since Jan 2017), possibly due to falling energy prices in late 2018, although the less volatile Core metric is seen unchanged at 1.8%, just below the BoE’s 2% target.

At the end of the week, pay attention to UK Retail Sales (Fri, 9:30am), bookending most of the recent key corporate updates from FTSE Retailers. Economists expect monthly sales to pull back in December (-0.5% MoM ex-fuel). If confirmed, Black Friday may be the main culprit, with consumer spending shifting to November. Annually, Retail Sales are still expected +4% in Dec vs. Nov +3.8%.

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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