A fairly flat to negative start to proceedings this morning with some profit taking and perhaps a little caution starting to set in amongst risk assets ahead of the US labour report tomorrow. Early macro data releases have not been conducive to upside.
‘’Data dependency’’ is the single most used expression by many FOMC members but choppy global conditions have led markets to maintain the view that a rate hike in the near term is unlikely. US macro data has for the most part been fairly decent with the notable exceptions being housing starts and manufacturing output. Services PMI also switched into contraction mode last month. Equally, as many ramp up expectations for what Mario Draghi will, or indeed possesses the mandate to do next week is also bestowing a degree of caution. The euro is remains reasonably elevated and we are likely witnessing some some position unwinding ahead of the meeting next week. Eurozone services PMI were fairly weak across the board too. Whether or not one believes that the markets have suffered from ECB mal-communication in the past, Draghi has managed to disappoint recently and this is ultimately borne out in the fairly latent strength of the single currency despite diverging monetary policies.
UK services PMI failed to meet expectations also – falling to its lowest in almost 3 years and ultimately indicating that economic growth in Britain is likely to slow in this quarter particularly when taken in juxtaposition with the weaker manufacturing and construction surveys lately.
A few companies trade ex-div this morning which already trims some 11 points from the FTSE 100. Persimmon, RSA Insurance, Hargreaves Lansdowne and Ashmore Group all trade near the bottom of the index.
The mining sector, much maligned over the past few months appears to be gathering some steam and is outperforming the broader index in early trade sending with Glencore (+2.81%) back near the top of the FTSE.
Copper prices appear to be stabilising, having gained over 12% since the lows on January 20. From a technical standpoint the metal price may have further to run having established price action above the 100 day moving average. A lot will depend on dollar strength as to whether or not this stretch higher can be sustained so we look to US unemployment claims later for some confirmation that yesterday’s much better than expected ADP data was more than a flash in the pan.
Dollar strength will also be a driver for oil prices which have extended gains to 8 week highs but indicate some weakness this morning owing to the incredibly large inventory build announced yesterday. The consensus once again underestimated the supply which came in at 9.9million barrels but must be taken in context-US oil production has declined for the 6th consecutive week and we may well see additional steps in the near term to deal with the global supply glut.Whitbread (-3.63%)
said it expects to report profit for the year ended March 3 in line with its previous guidance after strong performances from both Premier Inn and Costa Coffee. The company reported growth in sales in both the 11 weeks and 50 weeks to February 11. Admiral Group (+5.34%)
announced 6% increase in full year 2015 pre-tax group profit to £377 million from £357 million pounds a year ago. Earnings were up 4% to 107.3p on a per share basis. Turnover for the period increased by 13% to £232 million. The company also proposed a final dividend of 63.4p, payable June 3.CRH (+4.27%)
saw pre-tax profits jump 36% to €1.03 billion last year with US sales benefitting from a weaker euro. Revenues for the year rose by 25% to €23.6 billion on the back of “positive momentum” in the Americas against more mixed market conditions in Europe. The company also recently acquired assets from rival firms Lafarg and Holcim which delivered better-than-expected profits.Schroders (3.38%)
Michael Dobson, who headed up fund manager Schroders for 14 years, has announced he is stepping down as chief executive, to be replaced by the firm's head of investment. Schroders recently reported an 8% rise in pre-tax profits to £609.7m for the year to the end of December. The company, which recently overtook Aberdeen Asset Management to become the UK's biggest listed fund manager, now has a £313.5bn of assets under management, up from £300bn in 2014.Imperial Brands (-1.8%) cut to neutral at Goldman Sachs, credit outlook increased to stable from negative from Fitch.SSE (+2.26%)
Upgraded to buy v hold at Investec. PT at 1500p.
We call the Dow flat at 16895.