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

UK 100 Index called to open -50pts at 7080, in retreat from yesterday afternoon’s breakout highs of 7160. Bulls need a break above 7100 to inspire confidence in a resumption of the recovery rally. Bears require a meaningful breach of rising support at 7075, although a fall below 7055 is likely necessary to return the index to its recent falling channel. Watch levels: Bullish 7105, Bearish 7070

Calls for a negative open come in spite of upbeat trading on Wall St, which ended October on a rather brighter note. Sentiment transferred to Asia (ex-Japan, hurt by Tech losses) where China’s Caixin Manufacturing PMI beat expectations of a contraction to get back above breakeven, just (50.1 vs 50 in Sept).

UK Index negativity derives from GBP strength after The Times reported UK negotiators securing agreement for a post-Brexit financial services relationship with the EU. While GBP strength drags on the UK Index the signs of an agreement could help UK Index Banks and Financials. Note Housebuilders may be sensitive to weaker than expected UK Nationwide House prices this morning.

In corporate news this morning BHP Billiton to return $10.4bn to shareholders, half of which stock buyback (only Aussie-listed shares for tax benefit; 10-14% discount) and half special dividend.  Randgold Resources merger with Barrick Gold gets clearance from South Africa Competition Tribunal.

BT H1 adj. revenues £11.6bn, -1%, beats £11.5bn est.; adj. EBITDA £3.7bn, +2%; pre-tax profit £1.34bn, +24% beats £1.25bn est.; Normalised cash flow -22%, net debt +25%; Consumer ARPU +1%; Interim div -4.7%; Reiterates FY guidance, sees adj. Ebitda in upper half of £7.3-7.4bn range.

Royal Dutch Shell adj. CCS earnings $5.6bn misses $5.7bn est. (gas +78%, upstream +335%, downstream -24%), operating cash flow +59%, dividend unchanged. Started second tranche of $25bn buyback ($2.5bn by 28 Jan). Q4 gas prod. outlook lower after disposals, upstream expected higher.

Just Eat Q3 like-for-like revenue +43% QoQ, orders +27% (UK +16%). On-track to meet FY expectations. FY revenue expected toward top of £740-770m range but EBITDA toward lower end of £165-185m range due to continued investment.

Admiral to book full year impairment charge after Diane Engelhardt invests $25m (15% discount) into Compare.com in return for a 17% stake (Admiral owns 59%). Smith & Nephew Q3 like-for-like revenue +3% YoY (US +4%, emerging markets +10%). Advanced Wound Bioactives continues to decline. FY guidance reiterated. Hilton Food performance remains in line with expectations.

Croda Q3 revenues +2.9% YoY (+3.4% at constant FX). Core Business +4.5% (vs +4.7% in first half); Industrial Chemicals weakens further, Personal Care slows, Life Sciences accelerates (all at constant FX); on-track for FY guidance.

Centamin Q3 revenue -35% YoY, pre-tax profit -69%, gold production -25%, gold sales -29%, average gold price -6%. QoQ figures more favourable; 480K FY production guidance (recently revised lower) unchanged.

In focus today will be the Bank of England (BoE) monetary policy update (12pm), followed by a press conference with Governor Carney (12:30pm). Traders overwhelmingly expect rates to remain unchanged at 0.75% (Bloomberg consensus: no hike until Q2-Q3 2019), with all nine committee members unanimously voting to hold given ongoing Brexit uncertainty and tepid economic growth.

In other UK data, October Manufacturing PMI (9:30am) is forecast weaker at 53 (from 53.8 in September), reversing some of last month’s bounce, but continuing to show expansion.

This afternoon US Q3 Unit Labour Costs (12:30pm) may reverse their Q2 dip (+1% vs -1%) which may have inflationary/Fed rate-hike read-across. October ISM Manufacturing PMI (2pm) is seen falling for a second straight month from August’s 61.3% peak, albeit to a still very healthy 59.

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