Market buzz: GKN grandstanding dismissed, manufacturing mixed

1655: Spotify reportedly set to start trading at between $160 to $165 per shares, versus an initial reference price of $132.

"Spotify looks to be starting its first day of trading with a reasonable gain, and in this environment that counts as a definite win. A range of $145 - $155 has been cited for the open, and it will be closely watched for the rest of the day. The IG grey market had been expecting a market cap of $29 billion by the end of today, around $161 per share, ahead of the first indications, so given a burst of optimism further into the session this could be hit," adds IG's Chris Beauchamp.

1558: In remarks to CNBC, the White House's trade adviser Peter Navarro has expressed 'puzzlement' with US central bank forecasts calling for more interest rate hikes in 2018. Inflation, he said, was likely to remain tame given the positive supply-side effects expected from tax cut induced gains in productivity and investment.

"I was a little puzzled when the Fed announced three rate hikes before the end of the year because when I look at the chessboard I don’t see any inflation to speak of in the economy," he said.

Navarro goes on to say that the 'smart money' will 'buy [the stockmarket] on the dips'.

1430: Credit Suisse cuts target price for Meggitt from 390p to 365p, citing the likely launch by Boeing of its New Midmarket Airplane before year-end (preceded by an announcement possibly as soon as this next summer). With Meggitt expected to participate in equipments and engine components for the NMA, the resulting investment was likely to weigh in its free cash flow generation, the Swiss broker says.

1253: It seems that the weekend headlines about potential government intervention in Melrose's takeover of GKN "are more borne of political ambition than a genuine threat to the transaction", say analysts at Olivetree Financial, playing down the likelihood for any disruption.

Publications have alluded to divisions in the cabinet, with Defence Secretary Gavin Williamson under pressure to intervene in the deal as GKN is a supplier to the Ministry of Defence, with implications suggested about potential national security issues. to a change of ownership.

The whole defence arm of GKN Aerospace only employs around 750 people, Olivetree notes, with only the Luton site likely to carry any degree of political sensitivity from a national security perspective – "but this is a small operation" with around 340 people out of the 52,000 currently employed by GKN, with low volumes and basically insignificant revenues and yet is the only part that it is really possible to argue there is any national security element surrounding. A sale of the entire site "would be more that conceivable if this became a sticking point for the whole transaction – it is small fry to GKN".

1121: Investors in collapsed drinks supplier Conviviality are "considering the possibility" of legal action against the company's board, according to newspaper reports, while a buyer could be found before the administrators are called in. After the AIM-listed company said last week that it would call in the administrators, The Times reports multiple buyers interested in the business.

Also, investors may launch a claim that they were misled over the health of the business’s finances, particularly in relation to the £30m issue of new shares in December at 375p a share to fund the £25m acquisition of 109 stores and 19 franchise rights from the collapsed wholesaler Palmer & Harvey.

1105: De La Rue, which is formally appealing to the High Court against the decision to award the £490m blue passport contract to a French-Dutch company, has received support from trade unions. Unite national officer Louisa Bull said: “Unite strongly supports De La Rue’s legal challenge on the grounds of jobs and protecting communities.

“There is also the issue of national security. Our current passports are technically secure to a high standard and need to remain so, when concerns about national security continue to be a priority."

1049: Weakness in the dollar on account of uncertainty over the US-China trade skirmish is helping the EUR/USD and GBP/USD, notes David Madden at CMC Markets after a weak eurozone data print.

Eurozone manufacturing activity has sunk to an eight-month low last month, Markit's PMI survey shows, which Madden cites as evidence the region is continuing to come off the boil. "The currency bloc has been undergoing a slide in the growth rate recently, and it could encourage the European Central Bank to keep their policy loose. The British manufacturing sector also slipped back to an eight-month low, but the UK economy as a whole has been broadly performing well, and talk of an interest rate hike from the Bank of England next month is still doing the rounds."

1031: Commenting on UK manufacturing numbers, Howard Archer, chief economic advisor to the EY ITEM Club, says despite the resilient performance in March, "the overall impression is that the manufacturing sector had a decent first quarter but has lost some momentum compared to the strong performance seen through the second half of 2017".

Overall, the PMI averaged 55.1 in the first quarter of 2018, which was down from 56.8 in the fourth quarter of 2017 and was the weakest quarterly average since the first quarter of 2017.

He said a slowdown in new orders seems to be largely due to a softening in domestic demand although the export orders balance fell slightly to a five-month low.

"The outlook for manufacturing looks decent on the foreign demand side, but domestic conditions could prove challenging over the coming months."

1002: Randgold Resources says intermittent industrial action by the workforce of its mining subcontractor was having "some" impact on operations at its Tongon gold mine.

0949: UK manufacturing output unexpectedly picked up last month but new order growth slowed, according to a survey of the sector by IHS Markit.

0941: A big mover on the AIM market is Weatherly International, where its shares have plummeted after the copper miner agreed a new debt repayments schedule.

0858: Steel and iron ore stocks should benefit from reports of Chinese production cuts, reckons Goldman Sachs.

Commenting on Anglo American's pipeline suspension report this morning, Goldman analysts noted a Reuters report late last week that the city of Handan in Hebei province had ordered steel mills to cut production by around 25% as part of new measures to curb pollution from April to mid-November.

"This is positive for iron ore and steel sentiment and we note that Vale traded up ~2% in trading on Monday and would expect the steel and iron ore stocks (including Anglo) to respond positively to this news, which could offset any negative impact of the Minas Rio news," the analysts wrote.

0844: Investors who were hoping that the volatility of the first quarter was behind them with the start of April have been left sadly disappointed, says Rebecca O’Keeffe, head of investment at broker Interactive Investor. US-China tariff tensions and tech turmoil saw US markets tumble, the VIX soar, the S&P fall below technical levels to five-month lows, but O'Keefe said the slight relief is that US markets bounced off yesterday’s lows into the close and futures are pointing to a positive session in the US today, which means the falls and associated contagion have been moderated.

"However, with the traditional safe havens failing to live up to their billing, there are limited places to hide and the question that investors need to work out is what next for markets? Is this the beginning of a bear market, or simply a revaluation of markets which had gotten ahead of themselves, but which have inherent upside through tax cuts, deregulation and growth in corporate profitability?

"The major fear for markets is that the imposition of retaliatory import tariffs by China could just be the tip of the iceberg and will cause a chain reaction that drags more sectors and countries into the dispute. In a world where China is not willing to turn the other cheek and where President Trump likes to get the last word, the situation is set for further turmoil and the danger for investors is that this will escalate into a broader battle, which could leave few sectors immune to trouble."

0835: Tuesday's London open market report finds stocks down in early trade following the heavy losses overnight on Wall Street on the back of weakness in the technology sector and renewed concerns about the US-China trade dispute.

The FTSE 100 was down almost 0.6% to 7,014.07, while the pound was up 0.2% against the dollar at 1.4077 and flat versus the euro at 1.1418.

0828: Overnight the S&P 500 index fell 2.2% and ended the day more than 10% from the record high set in January – entering correction territory for the second time this year.

Analysts at Rabobank note that for the first time since June 2016 the S&P 500 index also closed below its 200-day moving average. "While it is a bearish technical signal, it is also worth pointing out that the trendline support from the 2016 low was penetrated as well.

"The price action so far this year implies that we are witnessing an ABC correction: the sell-off at the end of January/beginning of February was the initial leg lower (A) followed by a corrective rebound (B) to the March high before another move lower (C) started. Based on this bearish technical scenario the next important level to watch on the downside will be at around 2,485 followed by the August 2017 low at 2,417.35. The first important resistance comes at around 2,700, but a far stronger rebound above the 2,800 level would have to unfold to declare with confidence that the bulls have regained initiative."

"It would be reasonable to expect the US dollar to appreciate as demand for safe haven assets rises as reflected in falling US Treasury yields with the 10-year breaking well below the 2.80% pivot last week. But, the DXY dollar index seems to be firmly anchored to the 90-level at this stage."

0821: In just over an hour UK manufacturing PMI is due. The consensus forecast is for the index to fall to 54.7 from the 55.2 a month ago.

Deutsche Bank said activity in March will have fallen marginally due to adverse weather conditions disrupting factory output and supply chains. "This recent dip in manufacturing activity was corroborated by the BoE's latest business conditions survey, released this past week. Overall, however, despite weakened domestic demand, we anticipate the manufacturing sector to remain relatively strong this year, fuelled by global growth and trade."