Financial market research and analysis

With a week heavy on both macro and corporate data, it’s all about PMI readings today and so far the manufacturing sector has not exactly given much to cheer about. In China, the manufacturing PMI fell to 49.4 in January, its lowest since August 2012 and a sixth consecutive reading below the 50 marker, but new orders sub-index improved to the highest in 7 months according to Caixin. Shanghai’s Composite fell by 1.78%.

German manufacturing has also cooled dropping to 52.3 from 53.2 in December. Slightly better than expected and with a small bright spot in that some panellists reported that the weaker euro had helped secure new demand from the US which positively affected new export orders.

UK manufacturers have been struggling with the strong pound but UK PMI surprised to the upside coming in at 52.9 in January against an expectation for 51.6. Much can be attributed to an increase in domestic demand. Despite the fact that EURGBP stands around 0.7600, issues remain with Eurozone trade flows.
10 year gilts have extended their decline on the back of this – the yield now stands at 1.6%. The pound has pushed through the $1.43 against the dollar but it’s now a matter of whether it can stay there as the potential for dollar strength increases as equity markets continue to look soft.

The FTSE started well but has run out of steam at 6100 led by the energy sector as oil, despite a 33% gain from last month’s lows and 5 consecutive days of gains, once again flounders. This is in spite of the fact that net long contracts in WTI have jumped higher with bullish oil bets increasing by the most since 2010 according to the CFTC. We await more news from OPEC members, but sources have stated that ‘’everyone must co-operate’’ when it comes to production cutting.

Equity highlights:

AstraZeneca (-1.16%) shares have lost 9% over the past 12 months and is set to report earnings later this week. Consensus expects a 24% rise in EPS for Q4. The strong dollar is likely to weigh however.

Barclays (+1.18%) may agree to $70million fine for US 'dark pool' misdemeanours. The UK-based bank has been accused of not making it clear to its clients that particularly aggressive traders, known as high-frequency traders, were using the private platform.

Ryanair (+1.02%):The airline doubled fiscal third quarter earnings and will return some €800m to investors via a share buyback programme. Profit before tax was €103m in the 3 months to end December 31 – somewhat short of the €118.2m expected. The buyback commences on Feb 5th and will span 9 months.

Premier Oil (+100%) resumed trading today and gained over 100% in early trade. Initially suspended from trading when the company said it had agreed to buy the North

Sea assets from Eon, the group has agreed to ‘’reduce the completion adjustment to $15 million and the aggregate consideration for the transaction payable by Premier to $135 million. This is a result of an increase of the dividend paid to E.ON prior to completion. The sale and purchase agreement has been amended to reflect the revised agreement.’’

Intercontinental Hotels (1.48%) Set to announce a $1bn share buyback at annual results next month according to the Sunday Times.

BP plc (-1.08%) said to sell Australian NW shelf. Price target reduced by research analysts at Deutsche Bank from 450p to 445p.

Sky (+0.65%) raised to add v reduce at Alphavalue.

BT (+1.35%) Profit tops estimates. Profit before tax £862m, and year to date profit up 18% to £2.14bn. Good customer growth in broadband, TV and mobile helped to grow ARPU by 7%.

Later this afternoon sees US ISM Manufacturing PMI released. In contraction and expectations are not great but are expected to build slightly on last month’s 48.2 print.
Janet Yellen’s favourite metric the Core PCE Price Index is unlikely to be the reason for any additional monetary tightening. It’s expected to rise 0.1% on the month.

Despite the fact that EURUSD has been trading in a fairly uneventful range for the past while, many will be eager to hear what Mario Draghi has to say as he testifies about the 2015 ECB Annual Report before the European Parliament, in Strasbourg at 4pm.

The FOMC’s Fischer is also due to speak about the US economy and monetary policy at the Council on Foreign Relations, in New York at 6pm.

We call the Dow lower to 86 points lower to 16380.