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Morning Report - 19 July 2018

Yesterday’s UK 100 Leaders Close (p) Chg (p) % Chg % YTD
Hargreaves Lansdown 2110 65 3.2 17.1
Evraz 538.2 15.6 3.0 58.3
BHP Billiton 1668.6 44.6 2.8 9.6
Johnson Matthey 3756 89 2.4 22.2
Ashtead 2412 53 2.3 21.1
Yesterday’s UK 100 Laggards Close (p) Chg (p) % Chg % YTD
Smiths Group 1627 -122.5 -7.0 9.2
Royal Mail Group 467.5 -22 -4.5 3.3
Ocado 1048.5 -23.5 -2.2 164.0
GVC 1090 -17 -1.5 17.8
Sainsbury 324.4 -4.2 -1.3 34.4
Major World Indices Mid/Close Chg % Chg % YTD
UK UK 100 7,676.3 50.0 0.65 -0.2
UK 20,984.2 112.9 0.54 1.2
FR CAC 40 5,447.4 24.9 0.46 2.5
DE DAX 30 12,765.9 104.4 0.82 -1.2
US DJ Industrial Average 30 25,199.3 79.3 0.32 1.9
US Nasdaq Composite 7,854.4 -0.7 -0.01 13.8
US S&P 500 2,815.6 6.1 0.22 5.3
JP Nikkei 225 22,784.6 -9.6 -0.04 0.1
HK Hang Seng Index 50 28,098.6 -18.8 -0.07 -6.1
AU S&P/ASX 200 6,267.1 22.0 0.35 3.3
Commodities & FX Mid/Close Chg % Chg % YTD
Crude Oil, West Texas Int. ($/barrel) 68.74 0.93 1.36 14.4
Crude Oil, Brent ($/barrel) 72.77 0.87 1.21 9.2
Gold ($/oz) 1222.97 -3.04 -0.25 -6.1
Silver ($/oz) 15.49 -0.11 -0.71 -8.2
GBP/USD – US$ per £ 1.3071 -0.06 -3.2
EUR/USD – US$ per € 1.1645 0.00 -2.9
GBP/EUR – € per £ 1.1228 -0.03 -0.3
UK 100 Index called to open flat 7675

UK 100 : 1-week, daily

Click graph to enlarge

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

UK 100 Index called to open flat at 7670, back from 4-day horizontal resistance at 7686, but holding 3-day rising support at 7668 as traders eye another attempt to regain July 7718 highs. Bulls need a break above 7686. Bears require a breach of 7666 overnight lows. Watch levels: Bullish 7690, Bearish 7665

Calls for a flat open come after a muted trading session in Asia, where markets lost steam from a largely positive close on Wall St. Financials propped up the S&P 500 as Banks continued to beat earnings expectations, while a slight pullback in Tech left the Nasdaq flat. Fed Chair Powell  maintained his positive assessment of the US economy, beating off persistent questions from US lawmakers that increasing short-term bond yields could signal an upcoming recession.

The Trade war story continues its slow burn, with the European Commission now planning counter measures if/when the US imposes tariffs on EU car exports, as well as provisional safeguards to limit excess steel imports. In a welcome bit of news for UK businesses, negotiators in Brussels signalled they might consider extending the Article 50 Brexit deadline, if a workable deal looked in sight.

USD mostly flat, though off overnight lows, versus GBP in particular, giving no support to the UK Index ’s army of globally-exposed names. Oil prices lower, pressured by increased supply from major producers and larger crude inventories. Gold back lower largely tracking the USD.

Corporate news this morning includes; Unilever H1 underlying sales +2.5% (vs 3% in 2017), profits -2.3%; Emerging market sales +4.1%, Operating margin +80bp; reiterates +3-5% sales guidance. Babcock backs profits guidance but reduces sales guidance from low-mid single digit to low-single digit underlying growth; Defense revenue to be hit by restructuring and delays.

Anglo American Q2 copper production +12%, Diamonds +3%, Metallurgical Coal +33%. Iron Ore +2% but Kumba guidance cut by 2.2%. All guidance unchanged except Export Thermal Coal cut marginally and Platinum increased. Sports Direct revenues grow less than expected, pre-tax profit -72% (+12% underlying) on losses from Debenhams stake and 2017 flattered by JD Sports and Dunlop sales.

SSE expects £80m/4.4% hit to FY adj. op. profit. Q1 weather impacted renewables production (Hydro & Wind 20% and 15% lower than planned), Gas consumption 10% lower than planned, Electricity Transmission & Distribution hit by high gas prices, lower output and lower consumption,  

WPP may be sensitive to French advertiser Publicis reporting a 2% Q2 sales drop after steep underperformance in US healthcare communication, currency swings and GDPR. Moneysupermarket.com H1 pre-tax profit +4.4%, boosted by energy switching.

In focus today will be UK Retail Sales (9.30am) for its read-across to both inflation (especially after yesterday’s soft CPI prints) and consumer confidence. Month-on-month growth is expected to drop sharply, to +0.2/0.3% after two strong consecutive reads (+1.8%, +1.3%), while annual growth of 3.7% should holds close to last month’s 3.9% spike to its best since April 2017. Watch GBP, UK Index and UK Index Retailers.

This afternoon the US Philly Fed (1.30pm) is forecast a touch better than last month’s lowest since Dec 2016 (21.5 vs 19.9) while the US Leading Index (3pm) may accelerate to 0.5% from 0.2%. Note the Fed’s Quarles (2pm, voting, centrist) delivering pre-recorded introductory remarks at the Alternative Reference Rates Committee Roundtable in New York. Watch USD.

Big name US corporates reporting today include Bank of New York Mellon (11.30am), Philip Morris (midday) this morning and both Capital One and Microsoft after the US market close.

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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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