Financial market research and analysis

The FTSE stocks extend gains in London; the UK’s insurance companies and banks are leading the gains as the FCA considers imposing a deadline for claiming the mis-sold PPI.

Lloyds, Barclays, HSBC, Standard Chartered RBS added circa 20 points to the FTSE in London.

Standard Chartered (+3%) Also raised to buy at Maybank Kim Eng

Lloyds (+2.65%) On Nomura’s list of preferred banks which have circa 30% additional upside to price targets

RBS (+2.19%)

Barclays  (+1.76%)

The banking sector, which is likely to stay under the Bank of England’s low rate pressure, could at least applaud FCA’s intention to impose new limits on PPI compensation claims. According to the FCA, a high size of customers is tempted to bring old cases on table, a situation which distorts provisions in banks’ balance sheets and weighs on liabilities at times of tight revenue margins. Mis-sold PPI claims costed a sizeable £20 billion to the banks so far. Provisions for the major banks is around £26.7bn in total.

Hence, a deadline could do no harm on banks’ pockets, which could take advantage of customers that took too long to bring up their claims. It is however rather likely that there will be some pushback to these developments from consumer groups.

EXPERIAN (-4.56%) The world's biggest consumer credit monitoring firm, on Thursday disclosed a massive data breach that exposed sensitive personal data of some 15m people who applied for service with T-Mobile US.

H&M (+0.09%) To open first store in India Friday with people queuing up since last night.

VW (-1.18%) As claims against Volkswagen AG for selling “clean diesel” cars that cheated their way past emissions tests pile up across the U.S., the key question for lawyers is which court will wind up hearing them. (BB) VW CEO, EPA called to testify at House Committee on Emissions Scandal.

VODAFONE (1.42%): UBS consider the recovery underestimated and  expect VOD to deliver a solid quarter with +0.7% organic service revenue growth for Q2-16.

Schroders: (+2.55%) Raised to buy at Numis. Average 12 month target price at 3318p

The UK construction sector bloomed in September, suggesting that UK’s economic recovery has a potential to spread beyond the services sector. This is good news for the UK’s labour market. UK’s manufacturers announced their decision to cut jobs in a report yesterday, to scale down capacity and to adopt to weak investment, sluggish export and lethargic consumer demand. In this context, the expansion in the construction sector could be a good sponge in the job market.

The NFP day in the US

Today’s key macro highlight is the US jobs data. Wednesdays’ ADP employment report printed 200K new private jobs in the US in September, better-than the 190K expected. The strong ADP read revived hopes for a positive Friday payrolls report. As discussed before, the 12-month correlation between the ADP and NFP numbers is roughly 50%, meaning that a better NFP number could not be taken as given for Friday’s release. The consensus is 200K (vs 173K a month ago). Currently, the market gives no more than a 45% chance for the first rate hike before the end of the year following the Fed’s recent exercise in holding back.

Gold broke the 1115 /1112 support (50dMA / Fib 61.8% retrace on Aug rise).  The MACD is comfortably in the bearish zone warning there is potential for further sell-off. Wednesday’s strong ADP read reinforced the appetite in USD, if the NFP beat estimates today, the $1100 mark could well come under threat. On weekly basis, the $1135 pivot still distinguishes between a sell-off below $1100 and a recovery back to $1155 (last week high).

The WTI futures made a quick, short-lived attempt above the September triangle ceiling because of hurricane Joaquín strengthening. Forecasters are not sure if it hits US yet so it’s unclear whether this bounce will turn out to be a temporary event. Energy traders watch Atlantic hurricanes as they can lead to precautionary shutdowns of Gulf of Mexico oil and gas platforms or, in exceptional cases, damage energy infrastructure. On top, news that Russia has launched air strikes in Syria for a second day, saying that Islamic State (IS) had been targeted also benefitting oil prices.

This morning, we are back in the narrowing range $45.00/45.75. The direction is expected to be USD related henceforward. A breakout in either way of the triangle (44.35/46.20) should give a clearer direction: stronger dollar could enhance the selling pressures and push prices toward $42.00/41.80 while softer USD could be supportive of a recovery to $48.