UK 100 Index called to open -25pts at 7520, extending a short term corrective phase (falling channel) from recent 7570 highs, but still within a longer-term 7-week rising channel. Potential for pullback towards 7480/7500 before support resumes. Bulls need a break above 7535  to escape this mini down-channel. Bears require a breach of 7520 to extend the corrective phase. Watch levels: Bullish 7535, Bearish 7520

Calls for a negative UK Index open derive from mixed trading on Wall St and Asian bourses (excl. Japan, closed for holiday). This follows a Fed statement that was less hawkish than expected (initially sending USD crashing, through it later rebounded). GBP extending its rebound remains a hindrance.

A 13 June Fed rate hike is still expected as it continues to normalise policy, but the statement didn’t provide as much clarity on future rate hikes (3 or 4 this year?) as investors would have liked. Use of the word ‘symmetric’ may imply the Fed being prepared to allow inflation to both over- and under-shoot the 2% target, rather than consider it a concrete target.

US markets began to sell off late in the day (Telecoms and Healthcare leading the way), with only Energy ending the day positive (helped by higher oil prices). With US Treasury Secretary Steve Mnuchin expected in Beijing for trade negotiations, and UK/EU customs union talks ongoing, investors are looking for a clearer signal on global trade  disputes before committing their money. Tech week overnight after Spotify and Tesla disappointed, added to Snap’s drop yesterday.

In corporate news this morning, Smith & Nephew issues profits warning: FY guidance impacted by weaker Q1 (all FX, established markets underlying contraction), underlying revenue growth now expected 2-3%, trading profit margin at/above 2017’s.

Glencore Q1 production largely in-line with expectations across all commodities (Copper +7%, Zinc -13%, Lead -17%, Nickel +21%, Gold & Silver -11%, Ferrochrome -7%). FY guidance unchanged.  Wizz Air wins license for UK arm as Brexit insurance, considers asset purchases, would consider buying Norwegian or  AlItalia assets but not full entities.

Rolls-Royce: 2018 started well, trading in-line, simplified group to 3 divisions from 5. Two thirds of Trent 1000 inspections completed, hopes to prioritise spending to offset cost; reiterates FY profit and cash expectations (ex FX and acquisitions/disposals), profits H2 weighted.

Esure says Q1 severe weather led to claims above expectations. Centamin Q1 revenues +23% YoY/-9% QoQ. Gold +14/-15%, Gold prices +9%/-7%, EBITDA +71%-12%; Maintains FY production guidance. IMI: trading in-line with market expectations; Q1 perf shows continued improvement in momentum, but with uncertainty in some segments, reiterates FY guidance. InterContinental Hotels adds 13 luxury hotels to become UK’s largest luxury hotel operator.

Oil prices edged slightly higher to $67.85/73.18, despite yesterday’s report of a build in DOE crude oil (+6.22M) and gasoline (+1.17M) inventories, as the markets continued to nervously follow Middle East political developments. Fears that the White House was about to abandon nuclear deal with Iran drove the markets further up.

Gold was trading flat yet again, finishing the day at $1309 (+0.26%), as the USD kept yo-yo-ing while markets digested Fed statement on inflation targets.

In focus today, will be April UK PMI Services (9:30am), with consensus expecting an increase to 53.5, adding to better than expected PMI Manufacturing reported earlier in the week and helping restore GBP bullishness in the wake of last week’s poor Q1 GDP print.

Eurozone inflation (CPI & PPI; 10:00am) is expected to show Consumer Price growth largely unchanged at 1.3% (1% core) but an acceleration in Producer Price to 2.1% (vs 1.6% prev).

This afternoon, Q1 Non-Farm Productivity and Unit Labour Costs (13.30pm) are of interest ahead of tomorrow’s key US jobs report, the latter expected for its inflationary read across after a less hawkish than expected Fed statement last night.

This is followed by Durable Goods Orders and ISM Non-Manufacturing/Services (3pm),projected generally in line with March data.

Big name US companies reporting Q1 results today include CBS, DowDuPont, GoPro, Kellogg, and Xerox.

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