Markets Overview

UK 100 called to open +15pts at 7308, holding within a 3-day 7275-7350 sideways range. Bulls again need a break above 7320 to challenge this week’s 7350 6-month highs peak, in order to to resume the longer-term rising channel towards 7555. Bears still require a breach of 7280 to revisit the floor of said channel at 7170. Watch levels: Bullish 7320, Bearish 7280

Calls for a higher open come in spite of a mixed close on Wall St, supported by positive Asian trading following a dovish Fed update. As expected, the US central bank left interest rates unchanged. However, it now projects no hikes in 2019 and promised to halt its balance sheet reductions from September, effectively pausing its quantitative tightening (QT).

One black lining from the Fed’s dovish silver cloud was its cut to US 2019 economic growth forecasts from 2.3% to 2.1% (this sent the Dow Jones lower), but Asia cheered the news, expecting renewed appetite for riskier emerging markets assets.

The Dollar is just off its overnight Fed-inspired 4-week lows, with corresponding GBP strength, potentially, capping upside for internationally-exposed UK Index names. USD weakness is, however, helping the commodity space, with demand for oil and metals gaining traction and potentially benefiting Energy & Mining stocks. Dual-listed Miners +1.5% in Australia overnight.

In corporate news this morning;

Next FY Revenues £4.22B, +2.5% (top of consensus; Retail -7.9%, Online +14.7%, Brand +2.6%), Op profit £762.3m, +0.3% (mid-consensus; Retail -21%, Online +13.8%, Brand -0.6%), pre-tax £722.9m, -0.4% (low consensus); EPS +4.5% beats 3.6% guidance thanks to £325m of buybacks. Final div +4.7%, 2020 guidance reiterated. High street challenging, offset by Online strength.

Reuters reports the EU will give an antitrust warning about Vodafone’s €19bn acquisition of Liberty Global assets in Germany, Hungary, Romania and the Czech Republic.

The FT reports BT’s Openreach starting an industry consultation on retiring its copper network and spend up to £30bn on fibre. The government is pressuring BT to help the UK keep pace with other nations in the digital age, but such a move would result in forced migration of millions of customers.

Rio Tinto says the key W Australia export ports of Cape Lambert and Dampier are being cleared as a precaution ahead of cyclone Veronica. Other Pilbara mining operations unaffected.

Persimmon launches homebuyer “retention” plan, the first major housebuilder to offer a 1.5% retention of total home value by the buyer’s solicitor (£3.6K on average) until any build quality faults are rectified. New standard contract clause expected in place by end-June.

Ted Baker FY group revenue +4.4%, pre-tax profit -26.1% (-14.3% pre-exceptional). UK/Europe retail +4.6%, North America +4.7%, RoW +4.7%, Online +20.4%. Final dividend -6% (FY: +2.5%) Notes £12.1m exceptional items due to retail impairments, unrecoverable House of Fraser balances and costs of investigation against ex-CEO. 2019 store expansion capex expected +2.3%.

IG Group Q3 group revenue -12% YoY (UK -16%, EU -13%, US -11%, APAC -9%). Clients +1% YoY. ESMA Region Professional client revenue -20% (client numbers flat), Non-pro -4%. Reiterates FY guidance for lower revenues and flat costs. Expects to maintain flat dividend.

Halma sees FY adj. pre-tax profit in-line with expectations, with strong cash generation. Reports strong UK/US growth and more moderate Europe/Asia growth. Order intake ahead of last year. Notes some FX tailwinds in H2, offsetting H1 headwinds. M&A integration progressing well.

Renishaw cuts revenue guidance by 6-7% and adj. Pre-tax profit by 15-16%. H1 slowdown in Asian growth for encoder products and from large end-user manufacturers is expected to persist in H2. EnQuest FY production +48.2%, revenue +89.1%, pre-tax profit +513.1%, EBITDA +135.9, cash capex -40.1%, net debt +10.9%. Plans no dividend in the near future. Sees 2019 production +20%.

Ophir Energy says Coro Energy does not intend to make an offer in light of increased Medco bid. Game Digital axes first half dividend after revenues fall 4.7% and despite pre-exceptional EBITDA 22% and pre-tax profits +40.1%

In focus today:

The latest EU Summit will see the UK’s request for a short Brexit delay voted on by other members. France is playing hard ball; Germany more relaxed. Expect more Westminster pontificating and blame-gaming. All the while the sands of time fall towards the pre-existing 29 March Article 50 deadline for which, without EU approval for an extension or Commons approval of the PM’s deal, the legal default remains a hard Brexit.

Traders expect the Bank of England (BoE; 12pm) to leave interest rates unchanged in light of recent UK economic weakness, soft inflation and, above all, Brexit uncertainty. Comments on outlook and projections will, of course, be poured over.

UK Retail Sales (9.30am) are forecast weaker in Feb, likely normalising from January’s rebound, much like Public Sector Net Borrowing following January’s seasonal surge in tax receipts.

This afternoon, the US Philly Fed (12.30pm) is seen bouncing from January’s drop into contraction, to its weakest since early 2016. Eurozone Consumer Confidence (3pm) is likely to remain depressed, albeit continuing to improve from December’s lowest since March 2017.

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