Markets Overview:

UK 100 called to open -26pts at 7328, off its overnight highs having encountered resistance from the old February range floor. That said, this week’s uptrend remains intact. Bulls need a break above yesterday’s 7360 peak. Bears require a breach of 7310 to negate yesterday’s breakout for a further retrace towards 7129 lows. Watch levels: Bullish 7365, Bearish 7300

Calls for a negative open come after a mixed session in Asia despite global optimism about an easing in trade tensions which boosted sentiment yesterday helping the S&P 500 to its first 3-day winning streak this month.

Gold ($1287) has pulled back from $1300 in response to risk appetite. Brent Crude Oil ($72.9) off its highs, but still in an uptrend, supported by US-Iran tensions. Copper ($2.73) retracing yesterday’s rally despite lower US-China tensions. GBP ($1.27) back testing Feb lows on Brexit concerns (cross party talks collapsed?).

In corporate news this morning:

easyJet H1 in-line; Revenues +7.3%, Pre-tax loss widens to £275m; Rev per seat -6.3%, Cost per seat -3.9%; Passengers +13.3%, Capacity +14.5% (+7% ex-Berlin), Load factor -1%; Expectations for FY pre-tax profit unchanged, in-line with consensus. Q3 72% sold (-3pts YoY), Q4 34% sold (flat YoY). H2 capacity seen +7%, Rev per seat seen slightly down, Costs expected lower; FY Fuel bill expected +£25-60m but FX may deliver £10m pre-tax profit boost.

Ocado and joint-venture partner Marks & Spencer may face stiff competition from Ocado’s current grocery supplier Waitrose which has tapped up an Ocado co-founder to boost online sales from £320m to more than £1bn. The current Ocado-Waitrose tie-up, 20 years old, ends Sept 2020, and there are worries that customers who like Waitrose products will not stay with Ocado when it moves over to M&S.

Sage: H1 organic recurring revenues +10.2%, organic op. profit -0.8% (23.2% margin, -160bp), div +2.4%; Expect FY19 organic recurring revs at top end/slightly above 8-9% guided; expect SSRS and processing revenue at lower end/below flat to mid-single digit decline guided. Overall, FY revenue expectations unchanged along with guidance for 23-25% organic operating profit margin.

Metro Bank raises £375m at 500p/share (6.8% discount) to strengthen balance sheet after incorrectly risk-weighting loans; Identified £70-75m cost savings by 2022 (£15-19m this year); now forecasts more modest 2019 deposit growth; cost-to-income ratio at upper end of 85-90% guidance.

Hikma Pharmaceuticals reiterates full year guidance. Injectables performing well. Generics also had strong start to year. Branded delivering good growth.

Cairn Energy says 4M production in-line, on-track to meet full year guidance; update on production later in the year. No meaningful update on dispute with Indian tax authorities.

Restaurant Group says that it’s recent Wagamama acquisition has contributed to a 57% rise in total sales in Q1. Group like-for-like sales +2.8%.

In focus today:

Eurozone Inflation (10am) data is expected to confirm an improvement to 1.7% YoY from 1.4% in April, a rather more appealing figure for the ECB’s governing council, a bit closer to its “at or just below 2%” target. Similarly, Core Inflation of 1.2% could be back to its strongest since summer 2017. Anything hotter than these levels could fuel a rally in Euro.

Listen out for any chatter from the EcoFin meeting due tomorrow, with the economic health of the Eurozone being discussed.

US Michigan Consumer Sentiment is expected to show a small rise in consumer confidence to 97.5 from 97.2 in May. Any higher reading could be bullish for the dollar.

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