Financial market research and analysis

Decline in UK miners are damaging the FTSE this morning. BHP (-6.48%), Anglo American (-5.62%), Rio Tinto (-4.38%), Glencore (-4.10%) and Antofagasta (-3.71%) were aggressively sold in London. Worldpay (-6.10%) joined the biggest losers as it announced to not pay dividend for 2015.

Rio Tinto (-4.38%) said that iron ore supply could fall by a third to 75 million tonnes in 2016, while BHP Billiton () warned that a continued oversupply in the global iron ore markets could keep up pressure on smaller suppliers to the global sea-traded market.

Iron ore jumped by almost 18.59% overnight, but remained insufficient to enhance appetite in UK miners. Copper dropped 1.23%, nickel futures traded flat.

Brent hit $41 for the first time in three months, WTI traded above $38 yesterday. Although the worrisome trade figures from China curbed appetite earlier in the session, there seems to be potential for further recovery, along with the cheapening US dollar.

Worldpay’s (-6.10%) revenues rose by 9% in 2015, to £3.96bn from £3.63bn; operating profit rose to £166.9m from £125mn. Group CEO said ‘the group has made a good start to 2016, in line with expectations, and these results provide a strong platform for continued growth over the medium term.’ However, earnings per share declined -0.018p vs 0.067p estimated, surprisingly. The company recommended not paying a dividend for 2015, first expected for 1H, leaving investors with little appetite to invest today. The share price tanked to 269.60p, the lowest level in more than three months.

Burberry (+4.01%) surged on speculation of a takeover from an activist investor. FT reported that Burberry asked its advisers at Robey Warshaw to help them prepare for a bid after a mystery investor built up a stake of about 5%. Burberry’s share price recovered by about 38%, after it plunged to 1047p in January. Net income in 2016 is expected to drop by almost 30%. The average 12-month target price is 1353p, compared to 1423p as of today. Burberry could be an interesting target for activists looking to buy the famous luxury brand for a relatively cheap price, to consolidate business and management and to enhance revenues. If Burberry’s sales in China dropped recently, there is still a considerable market to be conquered with a solid business model.

This being said, Chinese exports slumped by a dramatic 25.4%y/y in February, the contraction in imports slowed less-than-expected (-13.8%y/y). Moody’s warned that the fall in oil prices and the slowdown in China means weaker global growth, but not recession.


ECB accelerates purchases

The Eurozone GDP expanded by 0.3%q/q in line with expectations. The year-on-year growth advanced to 1.6% from 1.5%. EURUSD recovered to 1.1045 on broad based USD weakness.

Euro traders remain focused on the ECB meeting scheduled for March 10th. The market expects at least a 10 basis points cut in deposit rates and a potential 10 billion euro expansion in ECB’s monthly bond purchases. The ECB’s money printing accelerated recently as it purchased EUR 13.238bn versus EUR 12.149bn on the previous week. The critical 200-day moving average (1.1046) is expected to shelter some offers before this week’s ECB meeting. At 1.1050-1.1100, vanilla calls would however be supportive of a further advance.