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

UK 100 Index called to open +5pts at 7691, having extended yesterday’s rally to test 7705 late June highs overnight. Bulls need a break above 7712 overnight highs. Bears require a breach of 7680 rising support.  Watch levels: Bullish 7712, Bearish 7680

Calls for a positive open are supported by bullish trading on Wall St and in parts of Asia (though Chinese and Australian indices are lower), where markets appear poised for a promising start to another quarterly earnings season. Healthy inflation data from China (consumer prices in-line with expectations, producer prices beating consensus) could provide a boost to UK Index Mining stocks (up in Australia overnight). Higher oil prices could do likewise for Energy shares.

Risk appetite is back on the menu as safe-havens (JPY, gold, US government bonds) are all lower. The USD is marginally stronger versus peers (with corresponding GBP weakness on the back of UK Foreign Secretary Boris Johnson’s resignation) to give more upside potential to globally-oriented UK Index names. Note UK BRC Sales posted a fall in June (+1.1% vs. 2.8% in May), another potential worrying signal for UK retailers.

In corporate news this morning, Takeda gets unconditional clearance from US Federal Trade Commission proposed acquisition of Shire. The FT reports that Fox is preparing a revised higher bid for Sky in order to both satisfy investor pressure and to outbid rival Comcast.

UK Retail names may be sensitive to UK BRC Sales growth having slowed to 1.1% (Like-for-like) +YoY in June from 2.8% in May.

Ocado H1 Retail revenues +11.7% vs 10-15% consensus, Group revenues +12.1%; Retail EBITDA +0.7%, Group EBITDA -13.9%, Group PBT swings to loss; net cash after equity raise. Confident in 10-15% FY retail revenue growth and £210m CAPEX but EBITDA (Retail & Solutions) to reflect higher costs/investment, albeit improving significantly in H2.

TP ICAP reports H1 -2% YoY (+3%  at constant FX), in-line with March guidance (unchanged); cost headwinds to hit profits; EPS seen slightly below consensus; annual synergy targets cut by 25%. Softcat says performance since end-May has been exceptional, market conditions favourable, growth accelerated; Expects 2018 operating profits materially ahead of prior expectations.

Kier underlying profit and earnings forecast in-line with expectations, higher net debt due to winter weather; secures 3yr extensions on Highways England Areas 3 and 9 contracts; total value c.£250m/year.

Tesco CEO of UK & ROI changes role (health reasons) to lead Booker integration, replaced by Chief Product Officer. Vodafone launches first wearable products for SOS and Kids. Dechra Pharma FY trading strong and in-line with expectations. Stobart to start search for new chairman and CFO.

In focus today will be UK May GDP growth (9:30am), with Manufacturing Production, Industrial Production and Construction Output all seen rebounding on a monthly basis (after disappointing in April) while simultaneously accelerating year-on-year.

The Office of National Statistics (ONS) will, from today, publish monthly UK GDP, while quarterly data will become a rolling 3-month figure, to avoid any big revisions. The new figures are expected to show UK economic growth near zero in the Feb-Apr period, but improving Mar-May.

Following UK data, markets will look to German ZEW Surveys (10am), with economic sentiment in Europe’s largest economy continuing to worsen. Economists project  another drop in sentiment, for a 4th straight month in the red, driven largely by trade war worries and weak economic growth.

This evening Oil traders and Energy investors will watch the private API Oil Inventories (9:30pm) report for oil price direction. After several weeks of large drawdowns, markets expect another, albeit smaller, 2.4m draw, which could be a precursor for tomorrow’s official EIA report.

A few Central Bank speakers feature today, with the ECB’s Angeloni (5:30pm, supervisory board member) speaking at a Central Banking seminar in Frankfurt and colleague Lautenschläger (6pm, hawkish) giving a dinner speech, “20 years of ECB statistics: What’s next?".

With a new quarterly reporting season starting in the US, soft drinks giant PepsiCo (11am) reports Q2 earnings results mid-morning.

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