European markets opened flat before heading a shade lower but generally lacked direction on Monday as we look ahead to another round of trade talks. Last week’s talks in Beijing seem to have been broadly positive and there is hope that as the circus moves to Washington there will be more progress. Equity investors seem to be buying this positive outcome story, but I would still be cautious. Donald Trump says ‘big progress being made on sooo many different fronts’.
The FTSE 100 remains in a broad uptrend still and is testing the top of the channel. Look for resistance above at 7300, the 200-day moving average. Support seems to be found around 7222, the 50% retracement of the May-through-Dec decline.
Investors are also looking at rising oil prices, which as expected have driven higher after breaking through the neckline on that inverse head and shoulders we highlighted last week. At send time Brent was pushing up past $66.50 – hitting a fresh 3-month high. Look for bulls to drive this up to $68.57, the 50% retracement of the sharp Q4 decline. Having just about broken the 100-day line on $66.21, look for this to offer support although we will need a close above this level today, or we must see it as a resistance point.
It looks like OPEC cuts are working, with high compliance with production curbs so far in 2019. Moreover, as previously noted, Saudi Arabia has said it’s prepared to cut harder. Meanwhile the rebound in stocks and improved risk sentiment seems to be helping on the demand side.
Barclays – big investor Tiger Global has apparently sold off its stake in the bank. This is likely bad news for Jes Staley as he seeks to defend his strategy against activist investor Edward Bramson. FY results are due on Thursday and it will be interesting to see if there is any shift.
Reckitt Benckiser – shares up 1.7% as Q4 net revenues came in at £3.34bn, with FY operating profit at £3.36bn. Q4 LFL sales were up +4, ahead of the expectations for a 3.3% gain.
BAE Systems – stock was lower by around 1% amid reports that Germany’s ban on exports to Saudi Arabia was preventing it from completing the sale of 48 Typhoon aircraft to Riyadh.
Convatec – shares +2% after being upgraded at Barclays to equal weight with a price target of £1.30. After last week’s share price collapse this is no great shakes.