Wednesday preview: US-China trade, Glencore in focus

The market spotlight on Wednesday will continue to be very much on the US-China trade war, with investors likely to be scanning the headlines for any sign of further escalation from either Washington or Beijing amid a degree of concern that previously scheduled talks in September might be called off.

Chinese foreign exchange reserve figures for July would likely also keep the topic of China's foreign exchange policy on the front burner.

In the UK, mortgage lender Halifax's July house price index is the only major economic report set for release on Wednesday.

Across the Channel meanwhile, industrial production data for June in Germany are likely to come under scrutiny.

No major economic releases are scheduled in the US either.

Further afield, monetary policy announcements were scheduled from central banks in New Zealand, India and Thailand.

For Glencore, Deutsche Bank's Liam Fitzpatrick is anticipating first half earnings before interest, taxes, depreciation and amortisation of $6.0bn or down by 26.0% in comparison to a year earlier, on the back of lower base metal and thermal coal prices, provisional pricing adjustments and non-cash mark-to-market losses in marketing.

Cobalt would account for the bulk of the latter, Fitzpatrick said.

Working capital movements may also be "material" on the heels of a larger than expected build in the back half of 2018, he said.

No changes or top-ups in the dividend payout were anticipated, nor to buybacks "given lack of divestments to date and pressure on cash flows from lower coal and metal prices."

Group copper guidance meanwhile was seen declining to roughly 1.4m tonnes of output and net unit costs in copper were seen rising by about US10 cents per pound as a result of lower cobalt prices.

Marketing meanwhile was set to incur in a $250.0-300.0m MTM charge due to the impact of the roughly $30,000 per tonne drop in the price of cobalt over the first six months of 2019 on the value of the company's estimated 10,000 kilo tonnes of unhedged cobalt stockpiles.

Fitzpatrick pegged Glencore earnings before interest and taxes in Marketing at flat year-on-year with no major changes to its industrial capital expenditure budget plans for 2019 and 2020.

Wednesday August 07

INTERIMS

Bank Pekao SA GDS (Reg S), Glencore , Hill & Smith Holdings, Legal & General Group, Morgan Sindall Group, Pagegroup, Phoenix Group Holdings , Spirax-Sarco Engineering, Standard Life Aberdeen, Ultra Electronics Holdings

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