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

UK 100 Index called to open +35pts at 7095, continuing the recovery from last week’s sell-off, testing a break above last Thursday’s 7077 highs. Bulls require a break above 7100 to maintain momentum. Bulls requires a breach of 7070 to one again try for October lows. Watch levels: Bullish 7090, Bearish 7065

Calls for a positive open come after Wall St enjoyed its best session since March, as a broad rally swept the market, led by the Tech sector, where Netflix came out with excellent Q3 subscriber growth numbers, while big US Banks reported healthy investment banking results.

The green wave continued well into Asian trading, with China being the lone laggard after S&P reported worrying levels of local government debt, with $6tn figure reportedly having gone unreported, creating significant credit risks for the world’s 2nd largest economy.

Last night’s unexpected 2.13m crude build in API Oil Inventories (markets expected a 2m barrel draw) is helping oil prices extend their rebound from Friday’s lows and potentially supporting UK Index ’s Energy heavyweights ahead of closely watched DOE inventory figures later today.

In corporate news this morning, BHP Billiton Q3 copper production +1% YoY (-12% QoQ due to maintenance operations), iron ore +10%, metallurgical coal -2%, energy coal -1%, conventional oil -1%. FY production guidance unchanged for oil, iron ore and coal, but reduced by 3% for copper due to plant outages.

Barratt Developments reports good market conditions with strong customer demand and confident in good FY performance. Maintains intention to increase volumes by 3-5% p.a. Total sales +12.4% YoY, with private -5% YoY, affordable +44%, wholly owned +8%.

Pearson says it is on track to meet FY expectations, total revenues flat due to declines in US education. North America sales flat YoY, core +2%, growth -4%. Reiterates FY £520-560m profit guidance and plan to deliver £300m in annual cost savings starting end of 2019.

Segro Q3 new headline rent +43%, total rent +42%, completed new space -30%, vacancy rate 5.2% (up from 4.8% prev. quarter), optimistic for the rest of 2018 and into 2019 thanks to structural trends in e-commerce and urbanisation creating demands for warehouse space.

Crest Nicholson warned on lower FY pre-tax profit (down to £170-190m range) and profit margins due to market environment in London and South of England being more difficult than previously anticipated.

ASOS FY like-for-like revenue +24% YoY, UK sales +23%, international retail +24%, pre-tax profit +28%, gross margin +130bps. FY 2019 guidance unchanged. Hochschild Mining Q3 total silver production -5.4% YoY, gold -5.5%. Revised overall 2018 production target of 520K gold equivalent ounces. Mediclinic H1 revenue -1% YoY (+2% at constant FX) as regulatory changes hit earnings in Switzerland. Revenue per bed -2.8%. Expects to deliver modest FY revenue growth, with EBITDA margin around 16%. Sees lower-than-expected revenue growth in the Middle East next year.

Softcat FY revenue +29.9% YoY, adj. op. profit +36.9%, final dividend +44.3%, special dividend +11.9%. Benefited from exceptional market conditions in 2018 and confident in achieving further growth in 2019. Trading in the first 10-weeks of the new year has been encouraging. Capita extends and expands its existing contract with Europe’s largest telecoms provider for 4 more years, in a deal worth £300m.

In focus today will be the UK’s inflation (9:30am). Headline consumer prices are expected to slow to 2.6% YoY in September (from 2.6% prev.), while core inflation likewise slows to 2% YoY. While price growth appears to be in line with the BoE’s 2% target, weaker figures could lower the case for the next Bank of England interest rate hike. Watch UK Index Banks and Housebuilders for reaction.

Eurozone offers a different picture, as final consumer price inflation (10am) is expected to have accelerated there to 2.1% YoY in September, confirming preliminary figures.

In the US, Building Permits (1:30pm) are seen expanding in September, while Housing Starts stay roughly unchanged. The DOE oil inventory report (3:30pm) is forecast to show another build in crude stocks, though much smaller than the outsize build last week, potentially hurting Energy names.

The Fed will release its latest FOMC meeting minutes at 7pm, with markets looking for indications of policy outlook amidst tensions between the Fed and Trump’s White House over interest rate hikes. Watch USD pairs and UK Index for read-across.

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