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Morning Report - 20 April 2018

Yesterday’s UK 100 Leaders Close (p) Chg (p) % Chg % YTD
Shire 3975 221 5.9 1.9
Rentokil Initial 285.2 12.3 4.5 -10.3
WPP 1156 40 3.6 -13.8
NMC Health 3596 96 2.7 24.6
Ferguson 5558 142 2.6 4.3
Yesterday’s UK 100 Laggards Close (p) Chg (p) % Chg % YTD
British American Tobacco 3650 -209.5 -5.4 -27.3
Standard Life Aberdeen 367 -13.8 -3.6 -15.9
Imperial Brands 2355 -70 -2.9 -25.6
Lloyds Banking 66.09 -1.5 -2.3 -2.9
Unilever 3861 -85.5 -2.2 -6.4
Major World Indices Mid/Close Chg % Chg % YTD
UK UK 100 7,328.9 11.6 0.16 -4.7
UK 20,147.2 135.2 0.68 -2.8
FR CAC 40 5,391.6 11.5 0.21 1.5
DE DAX 30 12,567.4 -23.4 -0.19 -2.7
US DJ Industrial Average 30 24,665.0 -83.0 -0.34 -0.2
US Nasdaq Composite 7,238.1 -57.2 -0.78 4.9
US S&P 500 2,693.1 -15.5 -0.57 0.7
JP Nikkei 225 22,186.5 -4.7 -0.02 -2.5
HK Hang Seng Index 50 30,537.4 -171.0 -0.56 2.1
AU S&P/ASX 200 5,865.1 -15.9 -0.27 -3.3
Commodities & FX Mid/Close Chg % Chg % YTD
Crude Oil, West Texas Int. ($/barrel) 68.13 -1.14 -1.64 13.3
Crude Oil, Brent ($/barrel) 73.62 -1.05 -1.4 10.5
Gold ($/oz) 1342.87 -1.33 -0.1 3.1
Silver ($/oz) 17.25 0.04 0.24 2.2
GBP/USD – US$ per £ 1.4076 -0.05 4.3
EUR/USD – US$ per € 1.2343 0.00 2.9
GBP/EUR – € per £ 1.1404 -0.05 1.3
UK 100 Index called to open +20pts at 7350

UK 100 : 3-.5 month, daily

Click graph to enlarge

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

UK 100 Index called to open +20pts at 7350, holding yesterday’s break above 7340 to keep alive the prospect of a continued reversal towards 7340, or better. Bulls need a break above 7360 to clear overnight highs. Bears require a breach of 7330 if not rising support at 7320. Watch levels: Bullish 7360, Bearish 7330

Calls for a positive open are in contrast to slippage in Asia overnight where Tech was spooked by major chipmaker Taiwan Semiconductor warning of lower smartphone demand and Qualcomm cutting jobs. This added to a negative close on Wall St after tobacco giant Philip Morris warned on a slower uptake of cigarette alternatives, although M&A (Shire) is helping support sentiment to prevent against more meaningful declines.

Whilst both British American Tobacco and Imperial Brands (5% of the UK 100 ) were hit yesterday, and there is potential for further weakness today, this might be offset by comments from Bank of England Governor Mark Carney late yesterday that, in light of recent data (mixed bag) an interest rate hike in May wasn’t a given. This sent GBP back even further helping sentiment towards the many internationally-exposed UK bluechips.

Oil prices further consolidated this week’s gains, edging ever so closely to the 4-year high water mark of $75/bl. Brent crude finished at $73.51 (-0.25%) in last night’s trading, as tightening supplies send the oil rally to a 50% growth over the course of last year. A ministerial meeting, scheduled for today in Jeddah, is set to once again pair OPEC and some non-OPEC nations (mainly Russia) on a road for more voluntary production cuts. It remains to be seen whether OPEC+ agrees to extend previous cuts, or whether a completely new agreement will come into force, but a cap of some sort is seen as inevitable, given Saudi and Russian need for more fiscal freedom of movement.

Other commodity prices provided a mixed bag of signals, as continued supply woes sent aluminum up (+6.7%), while nickel was down 3.4%, extending a 1.3% fall on Thursday. Russian miner Rusal was said to be stockpiling large amounts of aluminum at one of its Siberian plants after losing access to some of its Western export markets, according to sources within the giant firm. Gold prices edged slightly lower, setting at 1341 (-0.28%), as USD gained ground.

In corporate news this morning, Allergan now confirms that it does not intend to make an offer for Shire, which puts the ball back in Takeda’s court. Reckitt Benckiser says Q1 revenues +2% like-for-like and it backs FY guidance (net revs +up 2-3% like-for-like). Royal Mail CEO Moya Greene to Retire, Rico Back appointed internally. Taylor Wimpey appoints new finance and operations directors. UK FCA and PRA won’t take enforcement action against Barclays in whistleblower case, CEO Jes Staley still fit to serve but will pay financial penalty.

In focus today will be events and speeches rather than data, with only Eurozone Consumer Confidence (3pm) on offer this afternoon, expected to fall back negative, reversing a brief 4/5-month flirtation with neutral/positive territory to fall back in the red, where it has been since the turn of the millenium.

Events/speeches include the latest OPEC/Non-OPEC meeting from which a production cut extension is viewed as inevitable, especially given Saudi appetite for $80/bl, which is only $5 higher, then where we trade and the agreement’s success thus far while the IMF Spring meetings continue in Washington. Te oil price is likely to be sensitive to media sound-bites from the from the meeting.

Speakers today include the Bank of England’s Saunders (10.30am; hawkish, voter), and it’ll be interesting to hear what he has to say after Governor Carney’s dovish comments yesterday. German Bundesbank President and ECB Governing Council member Weidmann (12.30pm; hawkish).

Across the pond, the Fed’s Evans  (2.30pm; non-voter, dovish) talks about  current economic conditions and monetary policy while San Fransisco Fed President Williams (4.15pm; voter, hawkish) chats at the UC Berkeley Fischer Center for Real Estate and Urban Economies.

In terms of Q1 earnings season, major US corporates reporting today include General Electric, its oil production subsidiary Baker Hughes, oil services company Schlumberger, Honeywell and Procter & Gamble (reporting Q3 earnings) the latter having potential read-across to London-traded Unilever.

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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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