SVS Early Robin 09/07/2019


  • SVS expects the FTSE 100 to be 15 points weaker in early trading this morning.
     
  • The FTSE 100 recovered the worst of its mid-morning losses yesterday.
     
  • The three US major averages drifted low on Monday.
     
  • Asian markets remained in a lacklustre mood on Tuesday, with traders trying to second-guess the Fed Chair’s Congressional speech scheduled for tomorrow and Thursday.
     
  • Today’s UK financial updates include finals from: Adept Technology, Collagen Solutions, Knights Group, Photo-Me and Synnovia, interims from Amino Technologies, K3 Business Technology Group, Micro Focus International, Ocado and RM plc, with a trading announcement from Robert Walters and Annual General Meetings scheduled for Brown Group, Capital Gearing, Chariot Oil, Keystone law, Kingfisher, Marks & Spencer, Mountfield, Worldwide Healthcare trust and Young & Co.

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Global Market Movements

Global Market Indices
FTSE 100 7,549.27 -3.87 -0.05%
FTSE 250 19,581.47 -73.80 -0.38%
Xetra DAX 12,543.51 -25.02 -0.20%
CAC40 5,589.19 -4.53 -0.08%
EuroSTOXX50 389.90 -0.21 -0.05%
Dow Jones 26,806.14 -115.98 -0.43%
Nasdaq 8,098.38 -63.41 -0.78%
S&P500 2,975.95 -14.46 -0.48%
Nikkei 225* 21,547.21 12.59 0.06%
Hang Seng* 28,106.22 -225.47 -0.80%
Shanghai* 2,916.78 -16.59 -0.57%
Sensex50* 38,492.43 -237.86 -0.61%
Foreign Exchange (Majors)
USD/JPY 108.73 0.00 0.00%
EUR/USD 1.1218 0.0003 0.03%
GBP/USD 1.2511 -0.0007 -0.06%
EUR/GBP 0.8965 0.0005 0.06%
Crude Oil
Nymex 57.44 -0.22 -0.38%
Brent 63.93 -0.18 -0.28%
Gold (USD/ounce)
Spot 1,395.64 0.11 0.01%
Futures 1,398.00 -2.10 -0.15%
Bond Yields (10 year)
U.S 2.036 -0.015 -
German -0.364 -0.002 -
*figures correct as of (06:00 – GMT)

Today's key Economic/Political events

Time (GMT) Event Expected Previous
10:00 US NFIB Business Optimism Index (Jun) - 105
12:55 US Redbook Index (YoY, Jul 5) - 5.5%
14:00 US JOLTS Job Openings (May) 7.479M 7.449M
20:30 US API Weekly Crude Oil Stock (Jul 5) - -5M

Today's Market Call

  • SVS expects the FTSE 100 to be 15 points weaker in early trading this morning. Weakness amongst the overnight markets continued to reflect concerns that opportunity for an aggressive rate cut by the Fed has receded. Sterling also remained a casualty with Brexit rumblings continuing as the currency closed in on the lows reached against the US$ back in February 2017 once again ahead of this evening’s televised debate between PM contenders, Boris Johnson and Jeremy Hunt. Meanwhile one rather distant hope re-emerged overnight regarding the apparently almost defunct US-China trade talks, with senior officials from each side, including Robert Lighthizer, the U.S. trade representative, scheduled to speak later this week, which could in turn lead to a formal meeting in Beijing. Whatever, traders appear to have accepted that such talks now are set for the long-haul, rather than a simply, overnight agreement.
     
  • The FTSE 100 recovered the worst of its mid-morning losses yesterday to finish the day down just 0.05%, with most of its European peer markets also ending softer. Monday’s Asian sell-off set the early tone, as rate cut expectations were broadly reset. Meanwhile Brexit remained a key talking point with the chair of Ford Motor Co of Europe issuing a fresh warning that a No-Deal Brexit would be a "catastrophe" for the industry, while Brexit Secretary Stephen Barclay warned the UK must reopen the withdrawal agreement reached with EU so as to avoid a "disruptive" divorce. Amongst individual shares, Online grocery delivery company Ocado was the day's biggest faller on the blue-chip index, losing 4.5%, as recent profits were locked in ahead of tomorrow’s anticipated half-year earnings release, while retailer JD Sports also was hit 2.9% as traders locked in the stock’s exceptional recent performance. Tobacco stock Imperial Brands topped the list of best performers, rising 2.2%. European markets were also declining, with the Stoxx Europe 600 fluctuating either side of unchanged for most of the session before closing off under 0.1%; Deutsche Bank tumbled 5.4% after its weekend release of a major restructuring that will affect 18,000 jobs in total as it significantly reduces the scale of its operations and balance sheet in the face of aggressive US competition.
     
  • The three US major averages drifted low on Monday, as expectations for a larger than 25bp cut evaporated following Fridays stronger than expected Non-Farm Payrolls report. With expectations regarding US-China trade deal negotiations now just about off the table, traders are instead awaiting more insights from Fed chairman, Jerome Powell's testimony on Wednesday and Thursday, possibly together with a response to recent aggressive criticism launched by President Trump, expressing his frustration with the other major trading blocs, like China and Europe, that he believes purposely devalue their currencies to improve competitivity against his country. Taking this on board, Fed Futures by the time of the European close were discounting over a 90% chance of a 25bp rate cut at the Reserve’s July 31 meeting but now just a 7% chance of a 50bp cut, much below the 39% expectation registered during June. The Dow Jones Industrial Average remained weak over the session, to drop 0.43% by Monday’s close, while the S&P 500 fell 0.48% and the tech-heavy Nasdaq Composite slid 0.78%. Tech shares were targeted by investors already overweight in the sector as they faced up to the pain that the indefinite imposition of hefty tariffs and Chinese export restriction will have on the majors. Apple was one such casualty, falling 2.1% a broker downgraded the Company and forecast slowing profitability over the coming year, Google also lost 1.4% while Boeing lost 1.3% after a Saudi airline deal worth more than US$5.5bn was cancelled in favour of Airbus instead. Benchmark bond prices gained from safe-haven investment, taking the 10-year Treasury yield down to 2.032%, after being 2.044% at the end of last week.
     
  • Asian markets remained in a lacklustre mood, with traders trying to second-guess the Fed Chair’s Congressional speech scheduled for tomorrow and Thursday, as the US and China tentatively move to recommence trade talks once again. Recognising that much of the region’s June rally was in anticipation of the Jerome Powell’s willingness to rapidly move, his willingness to make at least two cuts between now and the year-end, in turn prompting China’s central bank to follow suit by trimming its own benchmark rate for the first time in four years, is key to continued market confidence. Beijing’s move would be partly to cope with an evidently slowing economy that may now be hindered by US tariff impositions for an extended period and partly to ensure the Yuan remains competitive against the US$. Concerns that the US rate cut(s) will now not as large or be delivered as early as the optimists have been hoping continued to pressure the markets, with Hong Kong’s Hang Seng losing -0.77% in late Tuesday trading, while the Shanghai Composite was also down -0.51%. Japan’s Nikkei 225, however, was +0.11% firmer as the Yen slipped to its lowest since late May, South Korea’s Kospi drifted down -0.22% and Australia’s S&P/ASX 200 trimmed -0.25%.
     
  • Today’s UK financial updates include finals from: Adept Technology, Collagen Solutions, Knights Group, Photo-Me and Synnovia, interims from Amino Technologies, K3 Business Technology Group, Micro Focus International, Ocado and RM plc, with a trading announcement from Robert Walters and Annual General Meetings scheduled for Brown Group, Capital Gearing, Chariot Oil, Keystone law, Kingfisher, Marks & Spencer, Mountfield, Worldwide Healthcare trust and Young & Co. From the US, scheduled quarterly earnings announcements include Century Bancorp, Golden Valley Bank, Griffin Industrial Realty, Saratoga Investments, Surge Components, Vita Entertainment and VOXX International.
     

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