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Morning Report - 13 November 2018

Yesterday’s UK 100 Leaders Close (p) Chg (p) % Chg % YTD
Informa 732.8 22.2 3.1 1.5
Shire 4702.5 90 2.0 20.6
Schroders 2200 30 1.4 -12.3
AstraZeneca 6251 79 1.3 22.1
Bunzl 2255 23 1.0 8.8
Yesterday’s UK 100 Laggards Close (p) Chg (p) % Chg % YTD
British American Tobacco 2962.5 -352 -10.6 -41.0
Ocado 798.4 -54.2 -6.4 101.1
GVC Holdings 788 -50 -6.0 -14.8
Just Eat 572.8 -34.2 -5.6 -26.7
Kingfisher 241.3 -13.8 -5.4 -28.6
Major World Indices Mid/Close Chg % Chg % YTD
UK UK 100 7,053.1 -52.3 -0.74 -8.3
UK 18,811.6 -295.0 -1.54 -9.2
FR CAC 40 5,059.1 -47.7 -0.93 -4.8
DE DAX 30 11,325.4 -203.8 -1.77 -12.3
US DJ Industrial Average 30 25,387.3 -602.0 -2.32 2.7
US Nasdaq Composite 7,200.9 -206.0 -2.78 4.3
US S&P 500 2,726.2 -54.8 -1.97 2.0
JP Nikkei 225 21,810.5 -459.4 -2.06 -4.2
HK Hang Seng Index 50 25,620.1 -13.1 -0.05 -14.4
AU S&P/ASX 200 5,834.2 -107.1 -1.80 -3.8
Commodities & FX Mid/Close Chg % Chg % YTD
Crude Oil, West Texas Int. ($/barrel) 59.13 -1.63 -2.67 -1.6
Crude Oil, Brent ($/barrel) 69.38 -1.47 -2.08 4.1
Gold ($/oz) 1202.71 -1.40 -0.12 -7.7
Silver ($/oz) 14.10 -0.04 -0.28 -16.5
GBP/USD – US$ per £ 1.2878 0.19 -4.6
EUR/USD – US$ per € 1.1237 0.12 -6.3
GBP/EUR – € per £ 1.1459 0.04 1.8
UK 100 Index called to open +25pts at 7078

UK 100 : 1-month, daily

Click graph to enlarge

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

UK 100 Index called to open +25pts at 7078 after yesterday’s sell-off found overnight support at last week’s 7032 lows. Bulls need a break above 7100 to extend the rebound. Bears require a breach of 7070 rising support for a retrace to 7032. Watch levels: Bullish 7100, Bearish 7065.

Calls for a positive start are in spite of bruising losses on Wall St (down 2-3%) and most of Asia following suit, bar. China. Tech suffered most after Infineon dealt chipmakers a blow with a poor outlook, matters made worse by several suppliers to Apple signalling slower iPhone demand. Financials were pressured by Goldman Sachs’ involvement in a Malaysian bribery scandal.

Industrials were damaged by General Electric debt woes and Bloomberg reporting the White House preparing a new draft of auto tariffs (watch DAX and German automakers).

The Dollar continues its strong run, helped by Fed rate hike expectations and trade restrictions, though the greenback is off overnight highs. Corresponding GBP weakness (Brexit talks faltering) is buoying the UK Index in spite of global equity uncertainty. Oil off its lows but remains under the cosh.

In corporate news today, Vodafone Q2 organic service revenues +0.5% beats consensus -0.6% (Q1 revised up to +1.1% from +0.3%). FY19 underlying organic adj. EBITDA growth narrowed to 3% (from 1-5%); Free cash flow now seen €5.4B (from “at least €5.2B). Interim div flat at 4.84c; Creating virtual internal tower company across European operations, reviewing best strategic and financial direction for these assets. To lower European Net Operating Expenses by >€1.2B by FY2021.

AstraZeneca sells US rights to respiratory-infection drug Synagis for initial $1.5bn ($1bn cash, $500m shares) and up to $470m in sales related payments.

Taylor Wimpey order book +9.1% (upper end of expectations), sales rate firm, underlying prices in-line with H1, on track for FY expectations. Reiterate 2019 dividend target of +20%. “Mindful of wider political and economic risks, and potential impact on customer confidence”. Expect 2019 volumes broadly flat, with potential for significant growth from 2020

Melrose Q3 trading in-line, with strong revenue in Aerospace (+6%) and Powder Metallurgy (+9%), but Automotive flat with lower margin. Nortek sales flat after US tariffs impact, but effect confined. On track for FY objectives in all divisions and confident in GKN improvements.

IQE confirms, following announcement by major chip company in VCSEL supply chain, that chip company received notice from one of largest customers for 3D sensing laser diodes that they would  materially reduce shipments for current quarter. Cuts FY revenues and profits guidance.

Land Securities H1 revenue +10.3% YoY, pre-tax profit +23.5%, dividend +14.7%, EPRA NAV -1.4% due to negative retail sentiment; valuation deficit falls to £188m from £19m. Sees steady occupational demand and move to quality, but second-hand demand below average.

DCC H1 revenue +24.7% YoY (+15.4% ex-LPG/Retail/Oil), pre-tax profit +17.2%, dividend +10%, Op. cash flow +206%, adj. net debt +211% (due to record M&A). FY profits guidance reiterated. Aggreko trading in line (9M underlying revenues +11%, reported +7%); on track for FY guidance despite increased FX headwinds (“pre-tax profit in line with 2017, excluding currency effects”).

Experian H1 organic revenue +8%, pre-tax profit +10% (at constant FX), dividend +4%. Expects FY organic revenue growth in-line with H1 and at top of prev. guidance range. FX headwinds remain, but constant FX pre-tax profit growth expected above revenue growth.

FirstGroup H1 trading in line (revenues +19.2%, adj. pre-tax profit +63.4%); FY outlook unchanged for broadly stable operating earnings; appoints Matthew Gregory CEO immediately; Greyhound review complete and plan underway

McCarthy & Stone Recent trading impacted as expected by organisational design changes within sales. FY19 out-turn (14 months to 31 Oct 2019) expected in line with expectations; reiterates expected savings of c.20-30% of FY21 targeted P&L saving of c£40m, mainly gross profit.

In focus today will be UK Wages and Unemployment (Tues, 9:30am). Unemployment is expected flat at 4% for a fourth month running, while earnings growth incl. bonuses likely accelerated to 3% YoY in from 2.7%, ex-bonus unchanged at 3.1%.

German ZEW Surveys (10am) are expected to continue showing a slide in German economic sentiment, while Eurozone’s economic conditions are seen slightly rebounding from 6-year lows, though still in negative territory.

In speakers, the ECB’s Chief Economist Praet (8am) speaks at the UBS European Conference in London, while colleagues Lautenschläger (8:45am) and de Guindos (7pm) give remarks on the occasion of the Euro Finance Week in Frankfurt. There are also a few Fed members speaking, including Kashkari (3pm), Brainard (3pm), Harker (7:20pm) and Daly (10pm).

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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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Prepared by Michael van Dulken, Head of Research
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