SVS Early Robin 11/07/2019

  • SVS expects the FTS100 to open around twenty points higher this morning.
  • The UK FTSE 100 closed only 6 points higher yesterday with investors digesting a positive performance from Boris Johnson in a televised debate.
  • US markets closed 77 points higher as investors looked to regain previous market highs after the positive employment date from last week. Powell spoke yesterday with a very dovish tone that opened up the possibility of a fed rate cut sending US markets initially higher.
  • Asian markets traded broadly mixed overnight, as investors were cheered by the sentiment of Powell and his openness to a rate cut in order to help drive growth in the US.
  • In the UK we expect finals from Dart (DTG.L), Ilika plc. (IKA.L) and Reneuron (RENE.L) as well as trading updates from Kier (KIE.L). In the US be on the lookout for quarterly earnings updates from MSC Industrial Direct, Emergent Capital and Service Team Inc.

Global Market Movements

Global Market Indices
FTSE 100 7,530.69 -5.78 -0.08%
FTSE 250 19,419.38 -47.99 -0.25%
Xetra DAX 12,373.41 -63.14 -0.51%
CAC40 5,567.59 -4.51 -0.08%
EuroSTOXX50 387.15 -0.77 -0.20%
Dow Jones 26,860.20 76.71 0.29%
Nasdaq 8,202.53 60.80 0.75%
S&P500 2,993.07 13.44 0.45%
Nikkei 225* 21,645.65 111.99 0.52%
Hang Seng* 28,539.74 335.05 1.19%
Shanghai* 2,924.85 9.55 0.33%
Sensex50* 38,710.45 152.59 0.41%
Foreign Exchange (Majors)
USD/JPY 107.96 -0.50 -0.46%
EUR/USD 1.1278 0.0028 0.25%
GBP/USD 1.2533 0.0033 0.26%
EUR/GBP 0.8997 -0.0002 -0.02%
Crude Oil
Nymex 58.62 0.78 1.37%
Brent 64.77 0.61 0.95%
Gold (USD/ounce)
Spot 1,391.73 -5.88 -0.42%
Futures 1,395.00 -5.40 -0.39%
Bond Yields (10 year)
U.S 2.077 0.0095 -
German -0.352 0.0117 -
*figures correct as of (06:00 – GMT)

Today's key Economic/Political events

Time (GMT) Event Expected Previous
- UK NIESR GDP Estimate (3mth, Jun) -0.1% 0.1%
07:00 EU Non-Monetary Policy ECB Meeting - -
08:30 UK Manufacturing Production (YoY, May) 1.0% -0.8%
08:30 UK Industrial Production (YoY, May) 1.1% -1.0%
08:30 UK Total Trade Balance (May) - £-2.74B
08:30 UK Trade Balance, non-EU (May) £-4.700B £-4.595B
08:30 UK Gross Domestic Product (MoM, May) 0.3% -0.4%
14:00 US Fed Chair, Jerome Powell Speech - -
14:30 US EIA Crude Oil Stocks Change (Jul 5) -3.567M -1.085M
15:00 US Wholesale Inventories (May) 0.4% 0.4%
18:00 US FOMC Minutes - -
23:01 UK RICS Housing Price Balance (Jun) -12% -10%

Today's Market Call

  • SVS expects the FTSE 100 to be roughly unchanged in this morning’s early trading, albeit continuing to gain supported from Sterling weakness. Rather uninspired performances from the US last night and again in Asian this morning sets the UK up for another quiet mid-summer day trading, holding its breath until Jerome Powell delivers the first of his congressional speeches this afternoon. Coming after the UK opposition party pledged to challenge the Tories by conditionally backing the holding another Brexit referendum, in which it would formally support remaining in the EU for the first time, leadership contenders Boris Johnson and Jeremy Hunt appeared in their only scheduled, televised encounter to limited new revelation last night. The casualty of such ongoing indecision, of course, remains Sterling which having dropped to a 2-year low of US$1.244 yesterday is likely to remain under pressure for some time to come.
  • The FTSE 100 and other principal London markets continued their slide downward yesterday, although the blue-chip index (which takes around 80% of its revenues in foreign currencies) was lent some protection from the continued slide in Sterling, which fell to a 2-year low versus the US$. Having been knocked back by Friday’s stronger than expected jobs data, nervous eyes have fallen on Fed Chair, Jerome Powell, who may give some policy clues in his scheduled congressional testimony which starts today and concludes on Thursday. The FTSE 100 index accordingly ended off 12.80 points, or 0.2%, at 7,536.47, while the mid-cap and more domestic FTSE 250 was down 0.6% and the AIM All-Share finished 0.3% lower. Taking their hint from the overnight markets in the US and Asia, the FTSE 100 fell from the start of trading to reach its low point mid-morning before recovering as lunchtime approached sufficiently to bounce momentarily into the positive before following a negative US start to end in the red. European equities suffered similarly, with the STOXX Europe 600 falling -0.51%, with the CAC 40 in Paris closing down 0.3% AND Frankfurt’s DAX 30 in Frankfurt tumbling 0.9% following a profit warning from Chemicals giant, BASF (-3.4%), which noted that "Significantly weaker-than-expected industrial production negatively impacted volumes and margin development”. This news knocked on UK peers including Croda (-2.5%) and Johnson Matthey (-0.7%), while Micro Focus (-5.3%) declined on a drop in half-yearly revenues and Melrose Industries (-4.2%) ran into profit taking. Topping the list of gainers, however, was Ocado (+6.5%), which released interims detailing a continued strong rise in revenues.
  • UK Labour opposition party drew swords with the Conservatives yesterday by conditionally calling for a second Brexit Referendum. Eurosceptic Jeremy Corbyn finally bowed to pressure from his Unions and also within his own party by conditionally putting his name to a further Brexit vote for the first time understanding that it will be recommending staying in the EU. As a result, it will challenge the new Tory PM, presumably Boris Johnson, to put any deal his own party strikes with the EU to a final referendum while campaigning for ‘remain’.
  • The principal US market indices end modestly mixed on Tuesday, with the tech heavy Nasdaq putting in the best performance. Ahead of the first day of Jerome Powell’s semi-annual monetary policy testimony to congress, the Dow industrials fell 0.1%, pushed down by BASF’s warning earlier in the day and knocking the likes of Dow Inc. (-1.3%) and 3M Co. (-2.1%), while the S&P 500 index managed to rise +0.1% after paring earlier losses and the Nasdaq Composite put on 0.5%. Technology and consumer services led the S&P sectors, with L3Harris Technologies chalking up the best gain, with its shares up 3.6%, while Advanced Micro Devices also put on 3.5%. While Fed-funds futures suggest high conviction that the Reserve will cut interest rates by 25bp at its end-July meeting, expectation that a more aggressive 50bp reduction is now put at less than a 4% chance, one-tenth of what it was back in June. Traders will be listening carefully for any policy clues along with any statement regarding the central bank’s continuing independence, given the recent onslaught from President Trump criticising its relatively tight stance and US$ strength.
  • Asian stocks are mostly edged higher in Wednesday’s late trading, despite China's producer price index missing expectations for June principally due to lower crude and metals prices and its consumer price inflation held steady. Recently this left the Shanghai Composite roughly flat at -0.09% and the more domestic Shenzhen Composite similarly -0.02%, while Hong Kong’s Hang Seng index was firmer, +0.40%. Elsewhere, South Korea’s benchmark Kopsi is +0.56%, while Australia’s ASX 200 is +0.35% as the Westpac-Melbourne Institute’s Index of Consumer Sentiment showed a decline of 4.1% to 96.51 for July, down from 100.66 in June, while New Zealand’s NZX50 is +1.06% this morning with traders now discounting an anticipated rate cut by the country’s central bank in August.
  • Today’s UK financial updates include finals from: Superdry and Yourgene, quarterly results from Dunelm, trading announcements from Barratts Developments, BT Group, PageGroup, J. SainsburyTen Entertainment and Wetherspoon with Annual General Meetings scheduled for Biffa, Digitalbox, Mycelx Technologies and Summit Properties. From the US, scheduled quarterly earnings announcements include AngioDynamics, Aura Systems, CHS, KushCo, MSC Industrial Direct and Service Team.

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