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

UK 100 Index called to open +5pts at 7335, holding yesterday’s break above 7315, exiting a 9-day consolidation channel, giving hope to Bulls of a reversal and retrace of the Aug/Sept declines. Bulls need a break above 7350 overnight highs. Bears require a breach of yesterday’s 7315 breakout. Watch levels: Bullish 7350, Bearish 7315

Calls for a positive open come after an encouraging Wall St lead, helped by an upbeat banking sector (Goldman Sachs, JP Morgan), though Tech was hurt by news Amazon is under EU anti-trust investigation over its use of merchant data.

Asia mixed with Japan higher and Australia lower, China also lower after Chinese Premier Li said China was facing “greater difficulties” in keeping its economy stable, planning a broad import tax cut as soon as October to counteract new tariffs. Fears of economic malaise could impact China-sensitive UK Index Miners, although news from Rio Tinto (see below) may help overpower macro background noise.

In corporate news this morning Aston Martin prices London IPO at 1750-2250p, giving it a £4-5bn valuation, selling 25% of shares, trading to commence 3 Oct.

Rio Tinto to buy back $3.2bn shares, returning proceeds from coal asset sales (Rio +2.6% in Australia overnight). Glencore sells another $125m in zero-coupon 7yr 2025 non-dilutive convertible bonds, adding to the $500m sold in March.

Diageo trading in-line but increasing volatility in some markets; 2019 organic net sales growth to be in-line with 2018 and operating margins in-line with 2016-19 expansion target; FX impact expected. IG Q1 revenues -5% reflecting EU regulation changes; Clients +3%, Rev per client -7.7%.

Kier Group FY revenues +5% YoY, pre-tax profit +9%, dividend +2%, targets £30-50m sale of non-core businesses. Order book +7.3% since H1 report. Reiterates FY guidance. Sky News reports that British American Tobacco’s CEO will retire next year. Inmarsat to become Panasonic Avionics’ exclusive partner in Ka-band in-flight connectivity (IFC) for commercial aviation.

In focus today will by August UK Retail Sales (9:30am) with growth expected to slow to 2.3% YoY (3.5% prev). The less volatile ex-Fuel metric is seen slightly stronger at 2.5% YoY, though also slowing from strong Summer readings.

That said, yesterday’s stronger than expected UK inflation data heightened Bank of England rate hike expectations, giving the Banks a fillip, so be prepared for an upside surprise on Retail Sales that further fuels those expectations.

US Philly Fed index (1:30pm) forecast rebounding from the prior month’s disappointing 2-year low while US Existing Home Sales (3pm) deliver modestly positive growth after 4 straight declines.

In terms of speakers, listen out for the Head of State press conference after the EU meeting in Salzburg (1pm). With PM May rejecting the EU’s Irish border compromise, traders will be looking for any fresh signs of progress. Watch GBP and its impact on the UK Index and its FX-sensitive members.

Central bankers giving remarks include the ECB/Bundesbank’s Weidmann (4:15pm, hawkish) on "Perspectives for the euro area and Europe”, while ECB colleague, Chief Economist Praet (7:20pm, dovish) talks about challenges to monetary policy normalisation.

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