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Morning Report - 9 October 2015

UK 100 Leaders Close (p) Chg (p) % Chg % YTD
Fresnillo PLC 704.5 28.5 4.2 -8.0
BHP Billiton PLC 1145 37.0 3.3 -17.5
Burberry Group PLC 1492 37.0 2.5 -8.8
Tesco PLC 201.75 4.8 2.4 6.8
Whitbread PLC 4768 109.0 2.3 0.0
UK 100 Laggards Close (p) Chg (p) % Chg % YTD
Inmarsat PLC 939.5 -36.5 -3.7 17.5
Glencore PLC 120.65 -3.4 -2.7 -59.6
Wolseley PLC 3695 -55.0 -1.5 0.2
Marks & Spencer Group PLC 491.9 -7.2 -1.4 2.7
Aviva PLC 475.6 -6.6 -1.4 -1.8
Major World Indices Mid/Close Chg % Chg % YTD
UK UK 100 6,374.8 38.5 0.61 -2.9
UK 17,003.8 -27.4 -0.16 5.7
FR CAC 40 4,675.9 8.6 0.18 9.4
DE DAX 30 9,993.1 22.7 0.23 1.9
US DJ Industrial Average 30 17,050.8 138.5 0.82 -4.3
US Nasdaq Composite 4,810.8 19.6 0.41 1.6
US S&P 500 2,013.4 17.6 0.88 -2.2
JP Nikkei 225 18,403.0 261.9 1.44 5.5
HK Hang Seng Index 48 22,688.7 333.7 1.49 -3.9
AU S&P/ASX 200 5,279.7 69.3 1.33 -2.4
Commodities & FX Mid/Close Chg % Chg % YTD
Crude Oil, US Light Sweet ($/barrel) 50.50 0.85 1.7 -6.0
Crude Oil, Brent ($/barrel) 53.86 1.31 2.49 -6.5
Gold ($/oz) 1146.85 6.55 0.57 -3.1
Silver ($/oz) 15.75 0.06 0.37 0.4
GBP/USD – US$ per £ 1.537 0.13 -1.3
EUR/USD – US$ per € 1.129 0.02 -6.7
GBP/EUR – € per £ 1.362 0.11 5.8
UK 100 called to open +60pts at 6435

UK 100 (UKX): 1-week chart (Source: IT-Finance)

Click graph to enlarge

Markets Overview: (Source: Bloomberg, FT, Reuters, DJ Newswires)

UK 100 Index called to open +60pts at 6435, with the 6300 breakout getting a second wind late yesterday helping us break above 6400 after a brief pause. With support likely moved up to 6400 the chances of a 6600 revisit remain strong, especially if the recent pause around 6300 was merely half-time for the 10% rebound from September lows. Note, however, 50% Fibonacci retracement of April-Aug declines looms large at 6445 (the 38.2% retrace was a hurdle at 6285 and 61.8% equates, interestingly, to 6600). New watch levelsBullish 6460, Bearish 6390.

The positive opening call comes thanks to another positive US close (highest since Aug) which spilled over into Asia extending recent gains as investors add to risky bets on expectations of prolonged easy monetary policy. This can be attributed to US Fed FOMC minutes offering a dovish message, interpreted as any rate hike being delayed until global risks recede, suggesting no move until 2016 which helps reduce uncertainty about a move by year-end.

Asian stocks set for their best week since 2011 helped by Fed message and steep gains by oil ushering Energy names higher. After a muted return from Golden Week, Chinese stocks still rising on hopes of more government intervention to bolster a slowing and troubled economy while the Fed holding off means no start of a post-crisis rate rise normalisation cycle which many worry could stifle global growth.

US bourses back to levels last seen in August (Dow >17000, S&P >2000) helped again by the Biotech sector and dovish Fed minutes still concerned about slowing global growth led by China and a strong USD. Evidently the market worries trump US jobs progress. Much as we have maintained. Add to this dovish BoE minutes and the Fed’s Kocherlakota (renowned dove) saying negative rates should be considered we have a very downbeat message and outlook. What next, talk of QE4?

Note aluminium giant Alcoa kicked off US earnings season with a miss from aerospace and automotive segments unable to counter low commodity prices, while Glencore has announced it is cutting zinc production, scaling back supply by about a third to buoy the price and put an end to a rout by leaving it in the ground. If only the Saudis/OPEC would do the same for Oil. Nah. They want the US to buckle first.

In focus today; UK Construction Output seen rebounding in August, although Greek CPI still deflationary and Industrial Production declines in Greece and Italy likely worsened. In the afternoon, US Import Price Index set to improve (less bad) but highlight continued importation of the pricing pressure (commodities) which is hindering US inflation. US Wholesale Inventories seen flat and Baker Hughes Rig Count eyed for assumptions on US Oil production (very low count last week). Fed’s Evans and Lockhart speaking.

Gold has ticked up on dovish minutes, helped by the weaker USD rather than risk aversionalthough uncertainty still very much to the fore, and likely to be for a good while longer. Will the Fed move by year end or not? Yellow metal still within a $1110-1150 narrowing pattern.

Oil is continuing to gain helped by a weaker USD, geopolitics (Russia’s involvement in Syria) as well a tailwind from those OPEC/Shell price spike comments earlier in the week. Crude above $50 for the first time since July as the break from a six week sideways shift persists.

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UK Company Headlines: (Source: Reuters/DJ Newswires/Bloomberg)

  • UK government cuts stake in Lloyds to below 11%
  • National Grid sets initial conversion price for bonds due 2020
  • Synectics FD to retire at end of current financial year
  • Ladbrokes signs £1.35bn facility to fund Coral merger deal
  • RBS says plans to convert UK government B – shares in ordinary shares
  • Glencore cuts zinc metal production
  • Vedanta says focused on optimising operating, capital expenses
  • Vedanta Confident About Debt Covenants After Boosting Output, Cutting Debt
  • Petrofac Cuts Short ZPMC Contract to Build Offshore Services Vessel
  • UK Treasury to convert its RBS shareholding

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This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.

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