EU CONSUMER CYCLICALS: Rentokil; $ FINAL pricing
(RTOLN; NR/BBB/BBB)
• Well covered books, pricing was inside Sodexo $31s but still +40 wide of $-Moody's.
• Bears will point to cash px (priced below par, CoC at 101) for $ being able to head tighter than €/£.
• As we said LBO rumours have long since been dismissed.
• We are bit disappointed it has brought net supply of $550m/+0.5x when it was well outside leverage target (2.9x vs. 2.0-2.5x) - S&P has commented since and seems fine with it.
• We still see some value on the € high-cash px lines though above has weakened it. US skewed exposure but can be diversified through services peers like Elis (no US).
- $750m 5y UST +115
- -30 from IPT, books $2.6b
- $500m 10y UST +135
- -35 from IPT, books $3.0b
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MNI: US FEB NEW HOME SALES +1.8% TO 0.676M SAAR
- MNI: US FEB NEW HOME SALES +1.8% TO 0.676M SAAR
- US JAN NEW HOME SALES REVISED TO 0.664M SAAR
EQUITY TECHS: E-MINI S&P: (M5) Holding On To Its Recent Gains
- RES 4: 5970.87 61.8% retracement of the Feb 19 - Mar 13 bear leg
- RES 3: 5924.59 50-day EMA
- RES 2: 5864.25 Low Jan 13 and a recent breakout level
- RES 1: 5834.00 Intraday high
- PRICE: 5819.25 @ 13:48 GMT Mar 25
- SUP 1: 5650.75/5559.75 Low Mar 18 / 13 and the bear trigger
- SUP 2: 5483.50 2.00 proj of the Dec 6 ‘24 - Jan 13 - Feb 19 swing
- SUP 3: 5396.00 2.236 proj of the Dec 6 ‘24 - Jan 13 - Feb 19 swing
- SUP 4: 5341.87 2.382 proj of the Dec 6 ‘24 - Jan 13 - Feb 19 swing
The trend condition in S&P E-Minis is bearish and the latest recovery appears corrective. MA studies are unchanged - they remain in a bear-mode set-up, highlighting a dominant downtrend. However, this week’s gains have resulted in a breach of the 20-day EMA, at 5803.08. This signals scope for a continuation higher near-term - towards 5864.25, the Jan 13 low. A reversal lower would refocus attention on 5559.75, the Mar 13 low and bear trigger.
GBP: Most Analysts See Risks Tilted to EURGBP Strength
- SocGen believe that GBP positioning sits uncomfortably with the parlous state of the UK’s public finances. They state there’s a good case for being long EUR/GBP here, regardless of yesterday’s stronger PMI data, and remain bearish GBP vs. the Scandies.
- ING have noted the gilt market will be on the lookout for any missteps in the very tight room for fiscal manoeuvring, and the bar for a negative reaction either in bonds or a meaningful repricing lower in growth expectations both have the potential of hitting sterling. They see upside risks to EUR/GBP extending beyond the recent 0.845 highs this week.
- BBVA have said that with a challenging domestic environment and subdued growth outlook, they believe sterling will weaken for the rest of the year, particularly against EUR.
- JP Morgan’s technical team stated that GBPUSD’s decelerating rally triggered a cluster of their pattern-base sell signals, which increase the probability for a near-term pullback within the developing bull trend. JPM believe that EURGBP is about fair; however, there is room to overshoot fair value if fiscal concerns intensify. Notably, they have entered a EUR/GBP & EUR/CHF topside dual digital.
- Separately, Rabobank say EUR’s recent loss of momentum has allowed EUR/GBP to edge lower towards its average level of the past 6-month. Rabo see scope for the EUR to give back some more of its recent gains in Q2 and they retain their forecast of EUR/GBP0.83 on a 3-month view.
