Markets Overview: (Source: Bloomberg, FT, Reuters, DJ Newswires)

UK 100 Index called to open -50pts at 7125, having extended the recent downtrend/channel, breaking below 7140 overnight and seeing the level serve as resistance since. Bulls need a break above 7150 for confidence in a breakout. Bears are looking for another test of last night’s 7100 lows. Watch levels: Bullish 7140, Bearish 7110

Calls for a negative open derive from a sharply lower close on Wall St that flowed into Asia overnight after President Trump sparked concerns of a protectionist trade war with China and the EU by announcing his intention to impose import tariffs on steel and aluminium. This added to concerns of Fed overtightening, although it took USD off its 6-week highs, meaning an unhelpful  reciprocal bounce for GBP and EUR to dent the UK Index and DAX, while Oil prices turned back lower.

Corporate results keep flowing in and UK PM May delivers another key Brexit speech this afternoon (1.30pm) which could move both GBP and the UK Index significantly.

Corporate news this morning: GKN confirms discussions with Dana Inc about a combination with its GKN Driveline using mostly equity. GKN also agrees extra £160m pension contribution with trustees. Land Securities’ Chair of 9 years Alison Carnwath to step down. Mondi H2 Revenues +5%, Underlying Op Profit +13%, PBT +18%, Final dividend +12%, €1 special dividend, outlook positive, upward momentum on pricing, cost pressure manageable, FX headwinds.

London Stock Exchange FY Total Revenues +17% (+10% organic), adjusted Op Profit +18%, adj EPS +19%, dividend +19%, strong financial markets, good progress on CEO replacement with strong field of candidates. Just Eat appoints Mike Evans Chairman, non-exec Chairman at ZPG since 2014 and ASOS seeks a new CFO.

IMI FY Revenues and Op Profit +6% (flat organic), PBT +8%, Op cash flow -11%, Div +2%, acquires Bimba for £148m, Sees H1’18 stronger, H2 normal. Spire Healthcare FY revenues +1% organic, underlying EBITA -4.7%, adj EPS -25%, div flat, 2018 seen in-line with 2017, CFO steps down.

US equity markets closed sharply lower overnight in reaction to President Trump imposing a 25% tariff on steel imports with further threat of a 10% aluminium tariff, raising concerns about a US-China trade war. The Dow Jones bore the brunt of the sell-off, closing 1.7% lower having been positive earlier in the session with losses for Boeing and Goldman Sachs. The S&P 500 finished 1.3% lower as industrials led losers, while the Tech-heavy Nasdaq also closed 1.3% offside.

Gold has benefited as the US dollar sharply retreats from 6-week highs in reaction to US President Trump’s metals tariffs. Amid fears of a global trade war, the global reserve currency pared yesterday afternoon’s gain, benefitting USD-denominated commodities such as Gold. The precious metal bounced from a 2018 low of $1303 to test support turned resistance at $1321, however has been unable to overcome the key mark.

Crude Oil benchmarks have traded sideways overnight as the benefit of a weaker US dollar fails to offset concerns about rising US production. Having traded a 2-week low of $63.3 overnight before recovering to a high of $64.5, global benchmark Brent has traded around the $64 mark for much of the Asian session, while US crude recovered from lows of $60.3 to trade a $61.6 high, before consolidating around $61.

In focus today will be a duo of speeches, first from Bank of England Governor Mark Carney (10am) and second a key Brexit speech by UK Prime Minister Theresa May this afternoon.

Carney (weather permitting) will be addressing the inaugural Scottish Economic Forum, where traders will closely scrutinise the central bank chief’s remarks for any hints as to changes in monetary policy stance, most notably interest rates after several members of the Bank’s MPC turned more hawkish.

This afternoon, UK PM May will deliver the final in a series of six government speeches on Brexit. Entitled “Our Future Partnership”, the PM will outline the government’s preferred post-Brexit agreement with the EU days after members from the European side published their detailed withdrawal bill including a contested fall back arrangement for the Northern Irish border issue. Even members of May’s cabinet have doubts over the speech, which will address key sector alignment with the EU. The immediate reaction to the PM’s speech will be shown in GBP movements during and after the address.

On the data front, Italian GDP (9am) is likely confirmed a shade slower in Q4, before UK Construction PMI  (9.30am) bounces from a 4-month low. With price growth so key for the ECB, a drop in Producer Price Inflation (10am) to just 1.6%, back below 2% target, and the lowest since Jan 2017 may be a worry for Draghi and Co.

This afternoon, Canadian GDP (1.30pm) may have slowed on a monthly basis and thus probably annually too, however the annualised quarterly metric is forecast higher, like the US  University of Michigan Consumer Confidence (3pm), although US ISM New York (1.45pm) may well pull back after last month’s spike to a 10yr high.

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