Markets Overview

UK 100 called to open flat at 7135, holding rising lows support from last Thursday but held back by falling highs resistance since Feb’s mid-month peak at 7260. Bulls need a break above 7165 to revive the up-channel. Bears require a breach of 7100 rising support to fall back towards the 7000 channel floor. Watch levels: Bullish 7170, Bearish 7100

Calls for an uneventful open come after a weak Wall St close and mixed Asian trading as China lowered its 2019 GDP growth target to 6-6.5% (from 6.5% last year) and China Caixin PMI Services missing consensus (51.1 vs. 53.8 est./53.6 prev.), diverging from manufacturing which improved in Feb and plunging back close to October’s 12-month lows.

In the UK, BRC retail sales growth fell -0.1% YoY in Feb, missing consensus expectations of +0.1% and down sharply from 1.8% a year ago, sending GBP to 7-day lows but helping stabilise the UK Index . That said, oil prices are weaker on the back of China growth worries, so watch the UK Index ’s heavyweight Energy names.

In corporate news this morning, GVC 2018 pro-forma net gaming revs +9%, gross profit +7%, underlying EBITDA +13% (lower end of guidance), underlying operating profit +19%; final div +3.8%; backs FY guidance after Jan-Feb net gaming revs +11%; will operate EU business from Malta, locate servers in Ireland post-Brexit.

Vodafone to raise €4bn via 2-3yr convertible bonds to fund acquisition of Liberty Global assets. Considering buybacks to mitigate share dilution. NMC Health signs JV docs with Hassana (investment arm of Saudi Arabia’s Social Insurance); will own 52% of JV, contributing 5 existing Saudi assets + cash.

Ashtead Q3 underlying rental revenue +19% YoY, EBITDA +21%, pre-tax profit +17%, capex +50%, acquisitions +55%. Sees FY capex at upper end of guidance (~£1.6bn), similar next year. Interim div +18%; buybacks to continue £125m/quarter. FY guidance unchanged.

Direct Line 2018 Gross written prems -5.3% (exited Sainsbury, Nationwide; own brands +1.8%); operating profit -6.4%, pre-tax profit +8.1%, combined operating ratio -90bp, final div +2.9%, special div -44.7%; trading in-line, reiterates 2019 financial targets.

Ratings agency Moody's upgrades Anglo American’s debt ratings to Baa2 with a Stable outlook. It also upgraded Pearson’s outlook to Stable from Negative, affirming its Baa2 rating.

Barclays may welcome a US federal judge dismissing a case (without even sending to jury) against a former senior FX trader accused of illegally trading ahead of a major client deal.

Anglo American’s De Beers rough diamond sales -2% cycle-on-cycle, -13% year-on-year; overall demand for lower value round diamonds still subdued, but increased re-stocking demand from India.

Intertek FY revenue at constant FX +4.7% (+3.7% organic), pre-tax profit +8.3%, final dividend +40.5% (FY: +39%). Expects good organic rev. growth in 2019 with moderate margin expansion.

Phoenix Holdings 2018 cash generation +1.7%, exceeding 2yr target; operating profit +92%; solvency surplus +28%; AUM down, but UK-EU net inflows positive; final div 3.5%; issues new cash targets; increases Standard Life cost/synergy target by 70%; Brexit preparations complete.

Interserve is considering an updated proposal from largest shareholder Coltrane Asset Management, which has objected to a debt-reduction plan via a highly dilutive share issue.

Elementis revenues +5%, adj. op. profit +8%, adj. Pre-tax +3%, adj. op cash flow -27%, net debt +71%, div +4%; global conditions remain challenging, expect progress on self-help and deleveraging

Ibstock FY revenue +7.9%, adj. EBITDA +4.1%, pre-tax profit +19.1%, final dividend unchanged (FY: +4.4%). Trading in-line with expectations, continued cash generation from sale of US assets.

BBA Aviation FY underlying revenue +20%, EBITDA +2%, pre-tax profit +3%, free cash flow +2%, final dividend +5%. Expects continued US market outperformance in 2019 and targets $100m EBITDA by end-2021.

In focus today will be final February PMI Services for major economies (Tues, 8:15am till mid-afternoon). Italy (8:45am) is expected to remain in contraction while the UK (9:30am) slips into contraction, although France (8:50am) should recover closer to breakeven. Both Germany (8:55am) and the US (2:45pm) should show growth accelerate strongly back towards summer levels. Similarly, US ISM Non-Manufacturing PMI (3pm) is expected to accelerate in Feb from Jan’s 6-month lows.

The BoE’s Financial Policy Committee (9:30pm) will release a statement from its 26 Feb meeting.

In terms of speakers, we have Bank of England (BoE) Governor Carney (3:35pm) at a House of Lords Economic Affairs Committee hearing, as well as the Fed’s Rosengren (12:30pm, “current economic landscape in the US and abroad”) and colleague Barkin (4:30pm, “Moving the Needle in Rural Communities”).

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